Contents
Is indemnity subject to liability cap?
Are indemnities subject to contractual limitations of liability (including caps)? There is no general rule as to whether a clause limiting liability applies to indemnities contained within the agreement. It seems most likely that the wording “liability under this Agreement” would in fact cover indemnity claims.
Can an indemnity be capped?
Limitation of liability under an indemnity That is why the parties will often negotiate to limit the liability of the indemnifying party, by capping it to a certain amount or restricting it to certain circumstances.
Is an indemnity a liability?
In its widest sense, “indemnity” means recompense for a loss or liability. For example, the law of agency makes a principal liable to indemnify its agent as described in Practice note, Common law of agency: Duty of principal to pay the agent’s expenses and indemnify it against losses. …
What is indemnity against liability?
The word indemnity means security or protection against a financial liability. It typically occurs in the form of a contractual agreement made between parties in which one party agrees to pay for losses or damages suffered by the other party.
Why is an indemnity required?
Indemnity clauses are written into contracts to allow an indemnifier to take on any losses incurred by a party in the contract. They can also be used to absolve the indemnifier or the other party of liability if a breach of contract occurs, or damages/loss of goods are incurred.
What happens if no indemnity clause?
If there is no indemnification clause, then the parties will not be entitled to any contractual indemnification. This does not mean that a party may not be held liable towards another party in a court of law, it just means that contractually a party cannot claim compensation for specific damages or expenses.
Is there a limit to the indemnity cap?
Indemnity Cap. An Indemnifying Party will not have any liability under or be required to indemnify any Indemnified Party for an aggregate amount of Losses exceeding Five Hundred Seventy-Five Thousand and no/100 Dollars ($575,000.00) (the “Indemnity Cap”). Indemnity Cap.
When to ignore indemnities and limitations of liabilities?
Second, where there is an aggregate liability cap in the contract, the clause can be used to specify that payments made under the indemnity clause do not “count” for the purposes of that liability cap. If there are no indemnities in your contract, 11.2 (c) can be ignored.
Is there a cap on indemnification for sellers?
In negotiating an indemnification cap, a seller will clearly seek the lowest cap possible, while a buyer will seek a high cap or no cap at all. Buyers and sellers can negotiate different caps to apply to different types of losses.
How are indemnities used in the insurance industry?
As indemnities are usually used for specific risks which exceed the general liability cap, they should carry their own financial cap (or be unlimited). Risks identified as being suitable for an indemnity may be capped to the level of insurance carried by the indemnifying party.