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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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- Wilmar Investment Holdings
- Orica Mining Services - Indonesia
- Larsen & Toubro Limited - India
- Global Coal Blending Company Limited - Australia
- Videocon Industries ltd - India
- Orica Australia Pty. Ltd.
- LBH Netherlands Bv - Netherlands
- Aboitiz Power Corporation - Philippines
- VISA Power Limited - India
- GAC Shipping (India) Pvt Ltd
- CIMB Investment Bank - Malaysia
- Meralco Power Generation, Philippines
- Heidelberg Cement - Germany
- TNB Fuel Sdn Bhd - Malaysia
- Sojitz Corporation - Japan
- Mercuria Energy - Indonesia
- Australian Coal Association
- Krishnapatnam Port Company Ltd. - India
- Kumho Petrochemical, South Korea
- Jaiprakash Power Ventures ltd
- Coal and Oil Company - UAE
- AsiaOL BioFuels Corp., Philippines
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Indonesian Coal Mining Association
- Kartika Selabumi Mining - Indonesia
- Aditya Birla Group - India
- Maheswari Brothers Coal Limited - India
- Xindia Steels Limited - India
- SN Aboitiz Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Minerals Council of Australia
- Altura Mining Limited, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Medco Energi Mining Internasional
- Renaissance Capital - South Africa
- MS Steel International - UAE
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- Ceylon Electricity Board - Sri Lanka
- Anglo American - United Kingdom
- Trasteel International SA, Italy
- Dalmia Cement Bharat India
- Ministry of Mines - Canada
- Coastal Gujarat Power Limited - India
- San Jose City I Power Corp, Philippines
- ICICI Bank Limited - India
- Barasentosa Lestari - Indonesia
- Karaikal Port Pvt Ltd - India
- Eastern Coal Council - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Metalloyd Limited - United Kingdom
- IEA Clean Coal Centre - UK
- Straits Asia Resources Limited - Singapore
- Thai Mozambique Logistica
- Georgia Ports Authority, United States
- Port Waratah Coal Services - Australia
- Vizag Seaport Private Limited - India
- Chamber of Mines of South Africa
- Independent Power Producers Association of India
- Ministry of Finance - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Malabar Cements Ltd - India
- Kepco SPC Power Corporation, Philippines
- The University of Queensland
- Mercator Lines Limited - India
- Sakthi Sugars Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Parry Sugars Refinery, India
- Semirara Mining and Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Price Waterhouse Coopers - Russia
- Banpu Public Company Limited - Thailand
- Indogreen Group - Indonesia
- Intertek Mineral Services - Indonesia
- The Treasury - Australian Government
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Central Java Power - Indonesia
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Salva Resources Pvt Ltd - India
- Interocean Group of Companies - India
- White Energy Company Limited
- Samtan Co., Ltd - South Korea
- Bhushan Steel Limited - India
- New Zealand Coal & Carbon
- GMR Energy Limited - India
- Therma Luzon, Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Asmin Koalindo Tuhup - Indonesia
- Australian Commodity Traders Exchange
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Africa Commodities Group - South Africa
- Planning Commission, India
- GVK Power & Infra Limited - India
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Gujarat Sidhee Cement - India
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- Essar Steel Hazira Ltd - India
- Singapore Mercantile Exchange
- Kobexindo Tractors - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Savvy Resources Ltd - HongKong
- Energy Link Ltd, New Zealand
- Pendopo Energi Batubara - Indonesia
- Kaltim Prima Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- SMC Global Power, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Siam City Cement - Thailand
- Attock Cement Pakistan Limited
- International Coal Ventures Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Ministry of Transport, Egypt
- Electricity Generating Authority of Thailand
- Indo Tambangraya Megah - Indonesia
- TeaM Sual Corporation - Philippines
- Energy Development Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- South Luzon Thermal Energy Corporation
- Electricity Authority, New Zealand
- SMG Consultants - Indonesia
- Binh Thuan Hamico - Vietnam
- Chettinad Cement Corporation Ltd - India
- PowerSource Philippines DevCo
- Globalindo Alam Lestari - Indonesia
- Coalindo Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Merrill Lynch Commodities Europe
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- Indian Energy Exchange, India
- Latin American Coal - Colombia
- Global Green Power PLC Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Agrawal Coal Company - India
- Sinarmas Energy and Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Economic Council, Georgia
- Borneo Indobara - Indonesia
- PNOC Exploration Corporation - Philippines
- India Bulls Power Limited - India
- Lanco Infratech Ltd - India
- Sindya Power Generating Company Private Ltd
- The State Trading Corporation of India Ltd
- Central Electricity Authority - India
- Vedanta Resources Plc - India
- CNBM International Corporation - China
- McConnell Dowell - Australia
- Bukit Makmur.PT - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- IHS Mccloskey Coal Group - USA
- OPG Power Generation Pvt Ltd - India
- Carbofer General Trading SA - India
- Miang Besar Coal Terminal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Rio Tinto Coal - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Commonwealth Bank - Australia
- Star Paper Mills Limited - India
- Power Finance Corporation Ltd., India
- London Commodity Brokers - England
- Ind-Barath Power Infra Limited - India
- Posco Energy - South Korea
- Bhatia International Limited - India
- Tata Chemicals Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- Bulk Trading Sa - Switzerland
- Thiess Contractors Indonesia
- Gujarat Electricity Regulatory Commission - India
- Bangladesh Power Developement Board
- Baramulti Group, Indonesia
- Semirara Mining Corp, Philippines
- Iligan Light & Power Inc, Philippines
- Parliament of New Zealand
- Standard Chartered Bank - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sree Jayajothi Cements Limited - India
- Marubeni Corporation - India
- Uttam Galva Steels Limited - India
- Romanian Commodities Exchange
- Directorate Of Revenue Intelligence - India
- Toyota Tsusho Corporation, Japan
- Gujarat Mineral Development Corp Ltd - India
- Sical Logistics Limited - India
- Mjunction Services Limited - India
- Billiton Holdings Pty Ltd - Australia
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Timah Investasi Mineral - Indoneisa
- Kideco Jaya Agung - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Grasim Industreis Ltd - India
- Goldman Sachs - Singapore
- Sarangani Energy Corporation, Philippines
- Cement Manufacturers Association - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- ASAPP Information Group - India
- Makarim & Taira - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement PLC, Thailand
- Maharashtra Electricity Regulatory Commission - India
- Mintek Dendrill Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- PTC India Limited - India
- Ambuja Cements Ltd - India
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