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