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Tuesday, 11 March 14
HOLD HARMLESS CLAUSES ARE NOT ALWAYS MUTUAL! - ITIC
 KNOWLEDGE TO ELEVATE
ITIC provides an insurance related contract review service to all of its members. As the leading professional indemnity insurer for the offshore and hydrographic sector, we are often asked to review contracts which contain a mutual hold harmless or knock for knock clause. We are usually told that the presence of this clause in a contract means the risk of a claim is either significantly reduced or even non-existent! No contract is completely risk free. However, if the clause is worded carefully, and is balanced between both contracting parties, it is good contractual risk management and can help to reduce the chance of a successful claim of negligence against you.
A mutual hold harmless indemnity regime provides that each party to the contract agrees to take responsibility for, and to indemnify the other, against injury and loss to its own personnel and property and its own ‘consequential losses’. This is intended to be effective even if the accident and related losses are caused by negligence.
The mutual hold harmless clause in the LOGIC standard form contracts, does seek to create balance. However, in many of the contracts we review, the party with the greater bargaining power will naturally seek to swing the balance back to their favour. Consequently, there are a number of pitfalls to consider. We shall provide a few of these below. This shall be viewed from an English law and a professional indemnity insurance perspective.
Insurance
First, when asked to review contracts with a mutual hold harmless clause, ITIC would suggest that your other insurers are notified. Potentially you are signing away the recovery rights of both your property and employers’ liability insurer. Therefore, you should seek authority from them before signing a contract containing a mutual hold harmless clause.
They may not be mutual
It is staggering how often we see contracts where “the consultant shall indemnify the company against any and all losses,” but there is no reciprocal benefit to the consultant. Furthermore, the clause can be more beneficial to one party, as one side may be carrying out all of the work, using only their employees and property. The clause should be read carefully to ensure there is a mutual provision.
Third party damage
The mutual hold harmless clauses seen by ITIC, although setting out the losses suffered to the property or employees of the contracting parties, will often leave the distribution of third party liabilities unclear. If, for example, you act as a hydrographic consultant on a survey vessel, you should be protected from third party claims arising from the operation of the vessel. The consultant should not be responsible for potentially multi-million dollar pollution liabilities, or collision damages to third party property. These should fall upon the party who has insurance for these liabilities, such as the vessel’s protection and indemnity or hull and machinery cover.
Gross Negligence
The hold harmless regime provides that neither party shall be liable to the other even where the loss occurred is due to the negligence of one party. However, in some cases we see the clause is amended to state this does not apply in instances of “gross” negligence. Therefore, if one of the parties is found to be grossly negligent they will not be held harmless. This might be fine if the contract was pursuant to Norwegian or US law.
Unfortunately, there is no true concept of gross negligence under English law. You should always operate under the assumption that you are negligent or you are not. Baron Rolfe, in - Wilson v Brett (1843) - stated that he “could see no difference between negligence and gross negligence; that it was the same thing, with the addition of a vituperative epithet.” In other words “gross” did not add anything to the standard negligence test. That being said, if gross negligence is included in a contract, a tribunal will attempt to interpret it. The leading decision comes from Lord Mance in - The Hellespont Ardent (1997) – in which he found that gross negligence: is “conduct so seriously negligent that the defendant should not be entitled to rely on the exemption clause.” He further added that it is “very much a matter of degree and judgment,” and, “all the circumstances must be weighed and balanced.” It should be pointed out that Lord Mance was interpreting a contract pursuant to New York law. Therefore, his words are not binding, and his interpretation on gross negligence may not be followed by subsequent tribunals.
The line between negligence and gross negligence can become blurred, and cases will turn on the facts and expert evidence. Moreover, tribunals may have differing opinions on how to apply the test against the facts, reaching differing decisions. On balance, the inclusion of gross negligence within a hold harmless clause in a contract pursuant to English law can lead to uncertainty and increased litigation costs.
Finally, it is understandable that contracting parties do not want the other to rely on a hold harmless clause, as a shield for reprehensible behaviour, beyond the ordinary test of negligence. However, as the line is blurred between that of negligence and gross negligence, a more delineated position to take, is between that of wilful default/misconduct and negligence.
Indirect damages
A further and final point we see, is how consequential or indirect losses are defined in the mutual hold harmless clause. It is usual that these losses are excluded under contract. However, the distinction between indirect and direct loss can be complicated. The famous case of Hadley v Baxendale [1854] found that direct losses were those which arise naturally from the breach of contract, and is therefore foreseeable and recoverable. Whereas, indirect losses were recoverable, but only if they were reasonably foreseeable by both parties, as a possible result of a breach, at the time of contracting.
A common misconception is that all “loss of profits” are indirect losses. This is wrong. Loss of profits can be either direct or indirect, depending on the facts of the case. The following is taken from the hold harmless clause of a contract we have reviewed recently:
“ The consultant nor the company shall be liable to the other… for any consequential indirect damage, that may be suffered by the other.”
This clause could pose problems in the event of a claim, as it only excludes “consequential indirect damages.” Following Hadley v Baxendale, dependant on the facts, loss of profit can either be a direct or indirect result of the breach. If, for example, a consultant was providing design work for sub-sea equipment and carried out the design negligently, not only could this cause damage to property, but also lost drilling time, leading to lost revenue and profit. In this example, a tribunal could find the loss of profit arose naturally from the breach, and therefore, is a direct loss not excluded under the above hold harmless clause. Taking into account the current day rates of drill rigs, this could form a substantial part of any claim.
The clause should be amended to state loss of profits are excluded, whether direct or indirect.
Conclusion
ITIC’s advice is that you carefully review your hold harmless clauses to ensure that they are actually mutual and of benefit to you.
Source: ITIC / Hellenic Shipping
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Friday, 28 June 24
INDIAN POWER STATIONS STOCKED WITH BUMPER COAL SUPPLY AS TRANSPORT WOES EASE - BUSINESS STANDARD
Even as power demand has touched a historic high of 250 gigawatts (Gw) amid sweltering heat this June, India’s power stations are stocked wit ...
Friday, 28 June 24
INDIA'S CY23 COAL USE LARGER THAN NORTH AMERICA, EUROPE COMBINED - THE HINDU
For the first time, India’s coal consumption surpassed that of North America and Europe combined in the calendar year 2023, said Energy Insti ...
Monday, 24 June 24
PLN'S FINANCIAL SUSTAINABILITY RESTS ON ACCELERATED COAL RETIREMENT AND RENEWABLES DEPLOYMENT - MUTYA YUSTIKA
On 28 May 2024, Indonesia’s national electricity utility, PT Perusahaan Listrik Negara (PLN), released its financial report for 2023. Althoug ...
Monday, 24 June 24
INDIA'S COAL-BASED POWER DEMAND AT ALL-TIME HIGH, GOVERNMENT SAYS - REUTERS
India’s demand for coal-based power has risen by 7.3% this fiscal year to an all-time high, the government said in a statement on Wednesday.
...
Monday, 24 June 24
CHINA'S COAL INDUSTRY TURNS GREENER THROUGH INNOVATIVE APPROACHES - PEOPLE'S DAILY
At an opencast mine operated by Inner Mongolia Pingzhuang Coal Group Co. Ltd., a subsidiary of CHN Energy Investment Group (CHN Energy), a 14-meter ...
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Showing 11 to 15 news of total 6871 |
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- Ministry of Transport, Egypt
- Leighton Contractors Pty Ltd - Australia
- Pendopo Energi Batubara - Indonesia
- Larsen & Toubro Limited - India
- Marubeni Corporation - India
- Minerals Council of Australia
- Star Paper Mills Limited - India
- Wood Mackenzie - Singapore
- Binh Thuan Hamico - Vietnam
- Formosa Plastics Group - Taiwan
- Sical Logistics Limited - India
- Timah Investasi Mineral - Indoneisa
- PetroVietnam Power Coal Import and Supply Company
- Holcim Trading Pte Ltd - Singapore
- Samtan Co., Ltd - South Korea
- Globalindo Alam Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- GN Power Mariveles Coal Plant, Philippines
- Xindia Steels Limited - India
- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indogreen Group - Indonesia
- Grasim Industreis Ltd - India
- Intertek Mineral Services - Indonesia
- Siam City Cement PLC, Thailand
- IEA Clean Coal Centre - UK
- Australian Coal Association
- Mjunction Services Limited - India
- Antam Resourcindo - Indonesia
- Kepco SPC Power Corporation, Philippines
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Indonesian Coal Mining Association
- Thiess Contractors Indonesia
- Australian Commodity Traders Exchange
- Jindal Steel & Power Ltd - India
- Sakthi Sugars Limited - India
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- Mercator Lines Limited - India
- Bayan Resources Tbk. - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Jaiprakash Power Ventures ltd
- MS Steel International - UAE
- Krishnapatnam Port Company Ltd. - India
- ICICI Bank Limited - India
- Bukit Makmur.PT - Indonesia
- Tata Chemicals Ltd - India
- The State Trading Corporation of India Ltd
- Bukit Baiduri Energy - Indonesia
- Economic Council, Georgia
- London Commodity Brokers - England
- Thai Mozambique Logistica
- Bangladesh Power Developement Board
- Gujarat Electricity Regulatory Commission - India
- Therma Luzon, Inc, Philippines
- Posco Energy - South Korea
- Siam City Cement - Thailand
- Bulk Trading Sa - Switzerland
- CIMB Investment Bank - Malaysia
- Karaikal Port Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Medco Energi Mining Internasional
- Metalloyd Limited - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- Karbindo Abesyapradhi - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bhoruka Overseas - Indonesia
- Simpson Spence & Young - Indonesia
- Directorate Of Revenue Intelligence - India
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Orica Mining Services - Indonesia
- Kobexindo Tractors - Indoneisa
- PowerSource Philippines DevCo
- Altura Mining Limited, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Singapore Mercantile Exchange
- CNBM International Corporation - China
- Aboitiz Power Corporation - Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Global Business Power Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- Salva Resources Pvt Ltd - India
- Baramulti Group, Indonesia
- Bhushan Steel Limited - India
- Commonwealth Bank - Australia
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- SMC Global Power, Philippines
- PTC India Limited - India
- Aditya Birla Group - India
- Parliament of New Zealand
- Agrawal Coal Company - India
- Ministry of Mines - Canada
- Straits Asia Resources Limited - Singapore
- Energy Development Corp, Philippines
- Coal and Oil Company - UAE
- Sojitz Corporation - Japan
- Lanco Infratech Ltd - India
- SMG Consultants - Indonesia
- Independent Power Producers Association of India
- Vedanta Resources Plc - India
- Deloitte Consulting - India
- Wilmar Investment Holdings
- Power Finance Corporation Ltd., India
- Energy Link Ltd, New Zealand
- Oldendorff Carriers - Singapore
- Makarim & Taira - Indonesia
- Heidelberg Cement - Germany
- Uttam Galva Steels Limited - India
- Kumho Petrochemical, South Korea
- Kideco Jaya Agung - Indonesia
- Petron Corporation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Coastal Gujarat Power Limited - India
- Maheswari Brothers Coal Limited - India
- New Zealand Coal & Carbon
- Merrill Lynch Commodities Europe
- Vizag Seaport Private Limited - India
- PNOC Exploration Corporation - Philippines
- Semirara Mining Corp, Philippines
- Africa Commodities Group - South Africa
- Meralco Power Generation, Philippines
- Ambuja Cements Ltd - India
- Rio Tinto Coal - Australia
- Orica Australia Pty. Ltd.
- Directorate General of MIneral and Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- Indian Energy Exchange, India
- TeaM Sual Corporation - Philippines
- ASAPP Information Group - India
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Cement Manufacturers Association - India
- OPG Power Generation Pvt Ltd - India
- San Jose City I Power Corp, Philippines
- McConnell Dowell - Australia
- Banpu Public Company Limited - Thailand
- Kalimantan Lumbung Energi - Indonesia
- The University of Queensland
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Ind-Barath Power Infra Limited - India
- European Bulk Services B.V. - Netherlands
- The Treasury - Australian Government
- Sree Jayajothi Cements Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Global Coal Blending Company Limited - Australia
- Electricity Generating Authority of Thailand
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Maharashtra Electricity Regulatory Commission - India
- South Luzon Thermal Energy Corporation
- Indika Energy - Indonesia
- Carbofer General Trading SA - India
- Eastern Energy - Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- Billiton Holdings Pty Ltd - Australia
- Gujarat Sidhee Cement - India
- TNB Fuel Sdn Bhd - Malaysia
- Mintek Dendrill Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mercuria Energy - Indonesia
- Indo Tambangraya Megah - Indonesia
- Dalmia Cement Bharat India
- Gujarat Mineral Development Corp Ltd - India
- SN Aboitiz Power Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Global Green Power PLC Corporation, Philippines
- Planning Commission, India
- Latin American Coal - Colombia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Georgia Ports Authority, United States
- Edison Trading Spa - Italy
- Price Waterhouse Coopers - Russia
- Barasentosa Lestari - Indonesia
- VISA Power Limited - India
- Coalindo Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Interocean Group of Companies - India
- Tamil Nadu electricity Board
- International Coal Ventures Pvt Ltd - India
- Borneo Indobara - Indonesia
- Goldman Sachs - Singapore
- Essar Steel Hazira Ltd - India
- Videocon Industries ltd - India
- Kaltim Prima Coal - Indonesia
- Manunggal Multi Energi - Indonesia
- Standard Chartered Bank - UAE
- Port Waratah Coal Services - Australia
- Riau Bara Harum - Indonesia
- Madhucon Powers Ltd - India
- Sindya Power Generating Company Private Ltd
- White Energy Company Limited
- Meenaskhi Energy Private Limited - India
- Parry Sugars Refinery, India
- Toyota Tsusho Corporation, Japan
- Sinarmas Energy and Mining - Indonesia
- Romanian Commodities Exchange
- Eastern Coal Council - USA
- Vijayanagar Sugar Pvt Ltd - India
- Renaissance Capital - South Africa
- Trasteel International SA, Italy
- Chamber of Mines of South Africa
- Indian Oil Corporation Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Malabar Cements Ltd - India
- Bharathi Cement Corporation - India
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