Joint Liability and Indemnity

1. Joint Liability and Indemnity • Several people or companies may contribute to one loss. • Each party will pay damages in proportion to the amount of their liability • Joint liability is extremely common in construction- each party pays according to their proportion of cause (arbitrator assigns percentage)

2. Joint Liability and Indemnity • Claim that the “most responsible” should pay is not a valid defense in U.S. • Indemnity and contribution define the terms of the settlement • Indemnity action- bringing in another party believed partly liable for some of the damages • Contribution action- one party has already paid and seeks recovery or reimbursement from another party believed partly liable

3. Joint Liability and Indemnity • Insurance companies represent liable parties, but are not parties to the suit. • Joint and severable liability- • each tortfeasor is jointly liable with other tortfeasors for the total damages AND • Each tortfeasor is also individually liable for all damages suffered should other parties not be able to pay (severability)

4. Joint Liability and Indemnity • Responsibility for contributory actions is on the other tortfeasors, not the damaged party • Law on settlement by a jointly liable party varies by jurisdiction- some make non-settlers pay more, others will use settlement as the anchor for other party damage assignments

5. Joint Liability and Indemnity • Indemnity clause- agreement that one party will bear all the risks for various events (wind, fire, risk, etc.) • Types of clauses • Limited- limited form indemnity clause restatement of the law- each party responsible for their share • Intermediate form indemnity clause- one party will pay for all damages if it is partly responsible (makes insurance easier and cheaper) • Broad from indemnity- one party will pay for all damages even if they have not caused any of the damages. Illegal in many states- under review

6. Joint Liability and Indemnity • Accepting liability (indemnifying others) is financially risky. Need to make sure insurance coverage is in place and high enough to cover potential loss • Insurance policy will usually have a clause preventing you from from indemnifying others without notification. Will pay more

7. Joint Liability and Indemnity • Additional insured- extends your insurance coverage to another party. Same effect as broad form indemnity, but not legally as troubling. Usually applies to specific acts or assets (like your car) • Insurance and broad form indemnity apply sometimes to officers of the company