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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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Wednesday, 12 June 24
CHINA ACCOUNTS FOR 16.3% OF AUSTRALIA'S COAL EXPORTS, FOLLOWED BY INDIA 14.4% - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels says Banchero Costa in its latest report.
...
Wednesday, 12 June 24
LNG NEWBUILDING VALUES AT RECORD HIGH: 78 NEWBUILD ORDERS PLACED IN 2024, DOUBLING 2023 - VESON NAUTICAL
The number of LNG newbuilding orders have more than doubled from the same period last year where 34 orders were placed, compared to 78 in the first ...
Monday, 10 June 24
CHINA'S MAY COAL IMPORTS RISE 11% ON LOWER DOMESTIC OUTPUT - REUTERS
China’s imports of coal rose 11% in May from a year earlier, customs data and Reuters records showed on Friday, as lower domestic output this ...
Tuesday, 04 June 24
HOW DO WESTERN SANCTIONS ON RUSSIA IMPACT THE GLOBAL METALS, MINING AND COAL MARKETS - WOOD MACKENZIE
The geopolitical landscape for Russia, as a major supplier of various commodities, has undergone a dramatic transformation since the invasion of Uk ...
Friday, 22 March 24
CASE STUDY: DANGERS OF COAL CARGO - SKULD
Recently, a bulk cargo vessel carrying coal from South Africa to Singapore suffered a fatal accident, resulting in the deaths of three crew members ...
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Showing 21 to 25 news of total 6871 |
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- Borneo Indobara - Indonesia
- Bhushan Steel Limited - India
- San Jose City I Power Corp, Philippines
- Bhatia International Limited - India
- Sarangani Energy Corporation, Philippines
- Antam Resourcindo - Indonesia
- SMG Consultants - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Attock Cement Pakistan Limited
- Port Waratah Coal Services - Australia
- Uttam Galva Steels Limited - India
- Latin American Coal - Colombia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Oldendorff Carriers - Singapore
- Energy Development Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Georgia Ports Authority, United States
- Tata Chemicals Ltd - India
- New Zealand Coal & Carbon
- Indonesian Coal Mining Association
- Iligan Light & Power Inc, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- Global Green Power PLC Corporation, Philippines
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- PTC India Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Independent Power Producers Association of India
- Eastern Energy - Thailand
- Dalmia Cement Bharat India
- Aditya Birla Group - India
- Orica Australia Pty. Ltd.
- Energy Link Ltd, New Zealand
- IEA Clean Coal Centre - UK
- Simpson Spence & Young - Indonesia
- Agrawal Coal Company - India
- Central Java Power - Indonesia
- Indo Tambangraya Megah - Indonesia
- Banpu Public Company Limited - Thailand
- Indian Oil Corporation Limited
- Petron Corporation, Philippines
- Central Electricity Authority - India
- Karbindo Abesyapradhi - Indoneisa
- Barasentosa Lestari - Indonesia
- White Energy Company Limited
- Kepco SPC Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- Marubeni Corporation - India
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- Thai Mozambique Logistica
- Chamber of Mines of South Africa
- Holcim Trading Pte Ltd - Singapore
- Kartika Selabumi Mining - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Vizag Seaport Private Limited - India
- Mintek Dendrill Indonesia
- Renaissance Capital - South Africa
- Larsen & Toubro Limited - India
- Gujarat Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Vedanta Resources Plc - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- India Bulls Power Limited - India
- Anglo American - United Kingdom
- Ambuja Cements Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Merrill Lynch Commodities Europe
- McConnell Dowell - Australia
- Wilmar Investment Holdings
- Minerals Council of Australia
- Intertek Mineral Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Timah Investasi Mineral - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Ministry of Transport, Egypt
- Meenaskhi Energy Private Limited - India
- Standard Chartered Bank - UAE
- Bharathi Cement Corporation - India
- Electricity Generating Authority of Thailand
- CIMB Investment Bank - Malaysia
- Cement Manufacturers Association - India
- Commonwealth Bank - Australia
- Sindya Power Generating Company Private Ltd
- Neyveli Lignite Corporation Ltd, - India
- Price Waterhouse Coopers - Russia
- Interocean Group of Companies - India
- CNBM International Corporation - China
- Aboitiz Power Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
- Thiess Contractors Indonesia
- Meralco Power Generation, Philippines
- Lanco Infratech Ltd - India
- Sojitz Corporation - Japan
- Posco Energy - South Korea
- AsiaOL BioFuels Corp., Philippines
- Kalimantan Lumbung Energi - Indonesia
- European Bulk Services B.V. - Netherlands
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- Medco Energi Mining Internasional
- Australian Coal Association
- Riau Bara Harum - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Malabar Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Bayan Resources Tbk. - Indonesia
- Africa Commodities Group - South Africa
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Siam City Cement - Thailand
- Videocon Industries ltd - India
- Pendopo Energi Batubara - Indonesia
- Therma Luzon, Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Altura Mining Limited, Indonesia
- PNOC Exploration Corporation - Philippines
- Wood Mackenzie - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Singapore Mercantile Exchange
- International Coal Ventures Pvt Ltd - India
- Coalindo Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Mjunction Services Limited - India
- Orica Mining Services - Indonesia
- PowerSource Philippines DevCo
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- GAC Shipping (India) Pvt Ltd
- The State Trading Corporation of India Ltd
- Indika Energy - Indonesia
- Indogreen Group - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Coal and Oil Company - UAE
- GVK Power & Infra Limited - India
- Ministry of Finance - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate Of Revenue Intelligence - India
- Parry Sugars Refinery, India
- Carbofer General Trading SA - India
- Bukit Makmur.PT - Indonesia
- Heidelberg Cement - Germany
- PetroVietnam Power Coal Import and Supply Company
- ICICI Bank Limited - India
- Binh Thuan Hamico - Vietnam
- Asmin Koalindo Tuhup - Indonesia
- SMC Global Power, Philippines
- Semirara Mining and Power Corporation, Philippines
- Siam City Cement PLC, Thailand
- Krishnapatnam Port Company Ltd. - India
- The Treasury - Australian Government
- Kobexindo Tractors - Indoneisa
- Baramulti Group, Indonesia
- Indian Energy Exchange, India
- Mercator Lines Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Kumho Petrochemical, South Korea
- Alfred C Toepfer International GmbH - Germany
- Eastern Coal Council - USA
- Formosa Plastics Group - Taiwan
- VISA Power Limited - India
- Bhoruka Overseas - Indonesia
- Essar Steel Hazira Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Savvy Resources Ltd - HongKong
- Globalindo Alam Lestari - Indonesia
- Makarim & Taira - Indonesia
- Kideco Jaya Agung - Indonesia
- GMR Energy Limited - India
- Ind-Barath Power Infra Limited - India
- Jaiprakash Power Ventures ltd
- London Commodity Brokers - England
- Sakthi Sugars Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Grasim Industreis Ltd - India
- South Luzon Thermal Energy Corporation
- The University of Queensland
- Leighton Contractors Pty Ltd - Australia
- Electricity Authority, New Zealand
- OPG Power Generation Pvt Ltd - India
- Global Business Power Corporation, Philippines
- ASAPP Information Group - India
- Coastal Gujarat Power Limited - India
- Economic Council, Georgia
- Gujarat Sidhee Cement - India
- Power Finance Corporation Ltd., India
- TeaM Sual Corporation - Philippines
- Ministry of Mines - Canada
- Planning Commission, India
- Xindia Steels Limited - India
- Australian Commodity Traders Exchange
- Trasteel International SA, Italy
- IHS Mccloskey Coal Group - USA
- Romanian Commodities Exchange
- Kohat Cement Company Ltd. - Pakistan
- Kaltim Prima Coal - Indonesia
- Parliament of New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Sical Logistics Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Salva Resources Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Goldman Sachs - Singapore
- Toyota Tsusho Corporation, Japan
- MS Steel International - UAE
- Bukit Asam (Persero) Tbk - Indonesia
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