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Richard
Richard, Attorney
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Experience:  Attorney with 29 years of experience.
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Is this a reasonable indemnification clause in a $15,000 professional

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Is this a reasonable indemnification clause in a $15,000 professional services contract?

INDEMNIFICATION

CONSULTANT has the contracted duty (hereinafter "the duty") to indemnify, defend and hold harmless, COUNTY, its Board of Supervisors, officers, employees, agents and assigns from and against any and all claims, demands, liability, judgments, awards, interest, attorney’s fees, costs, experts’ fees and expenses of whatsoever kind or nature, at any time arising out of or in any way connected with the performance of this Agreement, whether in tort, contract or otherwise. This duty shall include, but not be limited to, claims for bodily injury, property damage, personal injury, and contractual damages or otherwise alleged to be caused to any person or entity including, but not limited to employees, agents and officers of CONSULTANT.

CONSULTANT’S liability for indemnity under this Agreement shall apply, regardless of fault, to any acts or omissions, willful misconduct or negligent conduct of any kind, on the part of the CONSULTANT, its agents, subcontractors and employees. The duty shall extend to any allegation or claim of liability except in circumstances found by a jury or judge to be the sole and legal result of the willful misconduct of COUNTY. This duty shall arise at the first claim or allegation of liability against COUNTY. CONSULTANT will on request and at its expense, defend any action suit or proceeding arising hereunder. This clause for indemnification shall be interpreted to the broadest extent permitted by law.”
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good evening. It's not, in my experience, a reasonable provision to expect a Consultant to sign for a $15,000 contract. First, if they are going to require this, the client should increase the contract to allow the consultant to purchase liability insurance, including defense funds, to cover this risk. Second, it should exclude anything that also involves any acts of the representatives, employees, agents, contractors, etc. of the client. Third, it should be limited to willful misconduct or gross negligence, but not negligence. Fourth, it should require the willful misconduct or gross negligence to be proven, rather than simply alleged. Fifth, the limitations of damages should be limited to the total compensation received by the consultant.



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Customer: replied 3 years ago.

Point 1 - I think we are expected to come to this with approrpiate insurance. We maintain General Liability insurance with $2M limits and Professional Liability insurance with $1M coverage. Assume I cannot ask them for more funding.


Point 2 - That the contract should exclude acts of those representing the client, seems reasonable to me but is this stnadard language?


Point 3 - Excluding negligence, same as above. I guess I might be under a false impression that this is always in these contracts. Also assume that our PL insurance helps on this?


Point 4 - OK, good point but if misconduct is required to be proven, then who is defending ahead of this conclusion? In other words, are we on the hook for unlimited legal fees to defend against any allegation whether justified or not?


Point 5 - Limitations of damages, again I like this but have asked this before and been turned down. If our work causes say $1M damages to someone then how does this get reconciled against a $15K contract?


 


 


 


 


Good evening. It's not, in my experience, a reasonable provision to expect a Consultant to sign for a $15,000 contract. First, if they are going to require this, the client should increase the contract to allow the consultant to purchase liability insurance, including defense funds, to cover this risk. Second, it should exclude anything that also involves any acts of the representatives, employees, agents, contractors, etc. of the client. Third, it should be limited to willful misconduct or gross negligence, but not negligence. Fourth, it should require the willful misconduct or gross negligence to be proven, rather than simply alleged. Fifth, the limitations of damages should be limited to the total compensation received by the consultant.

Thanks so much for following up. I apologize for the delay...short dinner break. I appreciate your patience. I have responded to each of your points below in capitalized text.


Point 1 - I think we are expected to come to this with appropriate insurance. We maintain General Liability insurance with $2M limits and Professional Liability insurance with $1M coverage. Assume I cannot ask them for more funding. THIS SHOULD BE PLENTY AND YOU MOST LIKELY WILL NOT HAVE A PROBLEM. BUT, IN CONSIDERING THE CONTRACTED AMOUNT, YOU WOULD WANT TO CONSIDER SUCH COSTS AS THESE.

Point 2 - That the contract should exclude acts of those representing the client, seems reasonable to me but is this standard language? YES, IT IS STANDARD TO EXCLUDE CLAIMS, DAMAGES OR LIABILITIES CAUSED IN WHOLE OR IN PARTY BY THEIR PEOPLE.

Point 3 - Excluding negligence, same as above. I guess I might be under a false impression that this is always in these contracts. Also assume that our PL insurance helps on this? AS LONG AS YOUR INSURANCE COVERS YOU FOR NEGLIGENT ACTS, YOU SHOULD BE FINE. YOU JUST DON'T WANT TO HAVE A GAP.

Point 4 - OK, good point but if misconduct is required to be proven, then who is defending ahead of this conclusion? In other words, are we on the hook for unlimited legal fees to defend against any allegation whether justified or not? YOUR INSURANCE SHOULD COVER YOUR LEGAL COSTS.

Point 5 - Limitations of damages, again I like this but have asked this before and been turned down. If our work causes say $1M damages to someone then how does this get reconciled against a $15K contract. THESE ARE SITUATIONS WHERE YOU SIMPLY HAVE TO BALANCE THE RISK OF SUCH A CLAIM OCCURRING. IF YOU ARE OPERATING IN AN AREA WHERE THIS IS LITTLE RISK, THEN YOU PROBABLY NEED NOT WORRY. BUT, IF YOU'RE INVOLVED IN CONSULTING WHICH CARRIES A HIGH DEGREE OF RISK, THEN YOUR CONTRACT SHOULD BE INCREASED TO COMPENSATE YOU FOR THE RISK OF LOSS BEING SHIFTED TO YOU.
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