Defense
Continued from Part 1.
A duty to defend another is a separate part of an indemnity provision. It requires the person giving the indemnity (the indemnitor) to pay for an attorney to defend the person receiving the indemnity (the indemnitee). A defense provision is important because of the cost of litigating a lawsuit. Sometimes the ultimate settlement of a matter is less costly than the overall expense involved in litigating the case.
The Timing of the Duty to Defend is Critical
When negotiating a defense obligation, it is important to specify when the duty arises. As the party receiving the promise to defend, the indemnitee wants the duty to defend to arise at the inception of any claim or even with the threat of litigation. The indemnitee also wants the defense to apply as broadly as possible, not just to a narrow set of circumstances. The indemnitor, on the other hand, may want the duty to defend to arise only in certain circumstances.
Inherent in an agreement to indemnify another is a statutory duty to defend the indemnitee. In order to trigger this duty, the indemnitee must tender (present) the claim or lawsuit to the indemnitor and request that the indemnitor defend the matter. Upon doing so, the indemnitor is obliged to assume the defense or contribute financially toward it under Civ. Code Section 2778(4). Crawford v. Weather Shield (2008) 44 Cal. 4th 541, 555. The Crawford case was discussed in an earlier blog here.
Concluding Thoughts
When reviewing a contract, consider each provision carefully. There is no such thing as a standard contract that cannot be improved through negotiation. Have an attorney review and explain the parts of a contract so that you understand them. Once the contract is signed, it will govern the rights and responsibilities of the parties.
With indemnity and defense, a contract should be negotiated to achieve clarity of expectations on both sides of the transaction before a dispute triggers those provisions. If you are giving the indemnity (you are the indemnitor), make sure you provide the contract to your insurance agent. Ask your insurance agent to confirm in writing that your insurance coverage complies with what the contract requires.
This information is provided for informational purposes only and should not be construed as legal advice. It should not be acted upon without consulting a licensed California attorney about the facts, particular needs and questions of the person or entity considering these issues. Contact our office for assistance in understanding, negotiating, or litigating indemnity and defense obligations.