We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
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
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Monday, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
|
|
|
Showing 16 to 20 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- ICICI Bank Limited - India
- Uttam Galva Steels Limited - India
- Wood Mackenzie - Singapore
- Jindal Steel & Power Ltd - India
- Australian Coal Association
- OPG Power Generation Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Kumho Petrochemical, South Korea
- Iligan Light & Power Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- San Jose City I Power Corp, Philippines
- Ambuja Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Sical Logistics Limited - India
- Larsen & Toubro Limited - India
- CNBM International Corporation - China
- Planning Commission, India
- PetroVietnam Power Coal Import and Supply Company
- Salva Resources Pvt Ltd - India
- Minerals Council of Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Independent Power Producers Association of India
- Asmin Koalindo Tuhup - Indonesia
- Wilmar Investment Holdings
- Kideco Jaya Agung - Indonesia
- Standard Chartered Bank - UAE
- PTC India Limited - India
- Aboitiz Power Corporation - Philippines
- Star Paper Mills Limited - India
- Directorate Of Revenue Intelligence - India
- Makarim & Taira - Indonesia
- Electricity Authority, New Zealand
- Toyota Tsusho Corporation, Japan
- AsiaOL BioFuels Corp., Philippines
- Orica Australia Pty. Ltd.
- GVK Power & Infra Limited - India
- Economic Council, Georgia
- Meenaskhi Energy Private Limited - India
- Electricity Generating Authority of Thailand
- Simpson Spence & Young - Indonesia
- Timah Investasi Mineral - Indoneisa
- Singapore Mercantile Exchange
- Indika Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Attock Cement Pakistan Limited
- Indian Energy Exchange, India
- PNOC Exploration Corporation - Philippines
- Georgia Ports Authority, United States
- Price Waterhouse Coopers - Russia
- Coalindo Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Tamil Nadu electricity Board
- Goldman Sachs - Singapore
- Ministry of Mines - Canada
- Jaiprakash Power Ventures ltd
- MS Steel International - UAE
- Coastal Gujarat Power Limited - India
- Ministry of Transport, Egypt
- Kepco SPC Power Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- London Commodity Brokers - England
- Parry Sugars Refinery, India
- Sinarmas Energy and Mining - Indonesia
- Trasteel International SA, Italy
- Cigading International Bulk Terminal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Power Finance Corporation Ltd., India
- Romanian Commodities Exchange
- Cement Manufacturers Association - India
- Chamber of Mines of South Africa
- Parliament of New Zealand
- Vedanta Resources Plc - India
- White Energy Company Limited
- India Bulls Power Limited - India
- Africa Commodities Group - South Africa
- Madhucon Powers Ltd - India
- Gujarat Sidhee Cement - India
- Maharashtra Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- Aditya Birla Group - India
- Sindya Power Generating Company Private Ltd
- Straits Asia Resources Limited - Singapore
- Karaikal Port Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Miang Besar Coal Terminal - Indonesia
- The University of Queensland
- The State Trading Corporation of India Ltd
- Mintek Dendrill Indonesia
- The Treasury - Australian Government
- TeaM Sual Corporation - Philippines
- Bulk Trading Sa - Switzerland
- South Luzon Thermal Energy Corporation
- Ministry of Finance - Indonesia
- ASAPP Information Group - India
- Thai Mozambique Logistica
- Indonesian Coal Mining Association
- Billiton Holdings Pty Ltd - Australia
- Semirara Mining and Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Deloitte Consulting - India
- Alfred C Toepfer International GmbH - Germany
- Krishnapatnam Port Company Ltd. - India
- Central Java Power - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Binh Thuan Hamico - Vietnam
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PowerSource Philippines DevCo
- Vijayanagar Sugar Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Sree Jayajothi Cements Limited - India
- Indogreen Group - Indonesia
- Global Business Power Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Interocean Group of Companies - India
- SMC Global Power, Philippines
- Videocon Industries ltd - India
- Kapuas Tunggal Persada - Indonesia
- Coal and Oil Company - UAE
- Globalindo Alam Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- GN Power Mariveles Coal Plant, Philippines
- Vizag Seaport Private Limited - India
- Essar Steel Hazira Ltd - India
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- Global Coal Blending Company Limited - Australia
- Orica Mining Services - Indonesia
- Baramulti Group, Indonesia
- Global Green Power PLC Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Australian Commodity Traders Exchange
- Mercuria Energy - Indonesia
- Metalloyd Limited - United Kingdom
- Jorong Barutama Greston.PT - Indonesia
- Agrawal Coal Company - India
- VISA Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Sakthi Sugars Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Eastern Coal Council - USA
- Commonwealth Bank - Australia
- Xindia Steels Limited - India
- Posco Energy - South Korea
- Thiess Contractors Indonesia
- Indian Oil Corporation Limited
- New Zealand Coal & Carbon
- Lanco Infratech Ltd - India
- Oldendorff Carriers - Singapore
- Energy Development Corp, Philippines
- Formosa Plastics Group - Taiwan
- SMG Consultants - Indonesia
- Intertek Mineral Services - Indonesia
- CIMB Investment Bank - Malaysia
- Latin American Coal - Colombia
- Mercator Lines Limited - India
- IEA Clean Coal Centre - UK
- Siam City Cement PLC, Thailand
- Rio Tinto Coal - Australia
- Bangladesh Power Developement Board
- Borneo Indobara - Indonesia
- Siam City Cement - Thailand
- Central Electricity Authority - India
- International Coal Ventures Pvt Ltd - India
- Carbofer General Trading SA - India
- Bukit Baiduri Energy - Indonesia
- Barasentosa Lestari - Indonesia
- Riau Bara Harum - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indo Tambangraya Megah - Indonesia
- Therma Luzon, Inc, Philippines
- Savvy Resources Ltd - HongKong
- Grasim Industreis Ltd - India
- Merrill Lynch Commodities Europe
- Bharathi Cement Corporation - India
- Sojitz Corporation - Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- Heidelberg Cement - Germany
- Bayan Resources Tbk. - Indonesia
- GMR Energy Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Marubeni Corporation - India
- Bhatia International Limited - India
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Energy Link Ltd, New Zealand
- Kartika Selabumi Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kobexindo Tractors - Indoneisa
- IHS Mccloskey Coal Group - USA
- Bhoruka Overseas - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Meralco Power Generation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Banpu Public Company Limited - Thailand
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Maheswari Brothers Coal Limited - India
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Anglo American - United Kingdom
- Medco Energi Mining Internasional
- Bhushan Steel Limited - India
- Samtan Co., Ltd - South Korea
- Petron Corporation, Philippines
- Tata Chemicals Ltd - India
- Renaissance Capital - South Africa
- Altura Mining Limited, Indonesia
|
| |
| |
|
