Counsel to Counsel - September 2008 - (Page 24) in the spotlight trouble INdemNIty: common contract mistakes can land you in court By Steven Andersen ©iStockphoto.com/Pali Rao I t’s often the small things that come back to haunt you. And simple as it may seem, missing or insufficient indemnity clauses are among the most common triggers for routine business litigation. “You can’t overestimate the importance of how you handle indemnity clauses in dayto-day contracts,” says John H. Mahaney, a partner at Huddleston Bolen LLP “There are . so many ways a claim can arise, you can’t describe them all.” Indemnity clauses are all about allocating the risk of what happens when something goes wrong, whether it’s in construction, torts, supplier relationships or real estate deals. The challenge is foreseeing as many contingencies as possible and ensuring maximum protection under the law. “So often when you get a claim, a mass tort, for example, you find that there is some indemnity language, but it’s not as strong or as focused as you’d like, and it doesn’t take full advantage of the law,” Mahaney explains. “In those situations you’ll wish you had spent more time planning and scrutinizing your indemnity language on the front end.” “So often when you get a claim, a mass tort, for example, you find that there is some indemnity language, but it’s not as strong or as focused as you’d like, and it doesn’t take full advantage of the law. In those situations you’ll wish you had spent more time planning and scrutinizing your indemnity language on the front end.” Maximum Coverage It should go without saying that when drafting indemnity agreements, companies should seek as broad coverage as possible, but that’s often not the case. Parties often fail to take into account the fact that different states allow different levels of protection. “In some states you can indemnify yourself against your own negligence, in some states you can’t,” Mahaney says. “You have to pay attention to it on a state-to-state basis.” There also may be limitations by industry. For example, in the construction industry, some states maintain provisions for indemnity that are unlike those in other states. Without careful attention to the permutations in each jurisdiction, companies 24 LexisNexis® Martindale-Hubbell® http://www.iStockphoto.com/P
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