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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, 22 March 24
INDONESIA APPROVES 922.14 MLN T COAL PRODUCTION QUOTA FOR 2024, ABOVE TARGET - REUTERS
Indonesia has approved coal production quotas totalling 922.14 million metric tons for 2024, Bambang Suswantono, a senior official at the mining mi ...
Friday, 22 March 24
CHINA COAL INDUSTRY GROUP EXPECTS OUTPUT GROWTH TO SLOW IN 2024 - REUTERS
China’s coal output is expected to increase 36 million metric tons, or 0.8%, to about 4.7 billion tonnes in 2024, a Chinese coal industry gro ...
Monday, 18 March 24
THREE KEY TAKEAWAYS FROM OUR EUROPE GAS MARKETS SHORT-TERM OUTLOOK Q1 2024 - WOOD MACKENZIE
European gas prices are currently back to pre-crisis levels, but with a complex series of factors affecting future supply and demand, are they set ...
Wednesday, 06 March 24
INDONESIA AIMS TO FINISH MINING OUTPUT QUOTAS APPROVAL BY END-MARCH, OFFICIAL SAYS - REUTERS
Indonesia’s has approved the mining production quotarequests from more than 120mineral companies and aims to complete the approval process th ...
Monday, 04 March 24
IS YOUR GUARANTEE A GUARANTEE? NOTE TO SHIPOWNERS - GARD
KNOWLEDGE TO ELEVATE
The law of guarantees is not always obvious or easy to understand without proper guidance. This article clarifies the dif ...
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Showing 26 to 30 news of total 6871 |
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- Sinarmas Energy and Mining - Indonesia
- McConnell Dowell - Australia
- Kartika Selabumi Mining - Indonesia
- Jaiprakash Power Ventures ltd
- Ind-Barath Power Infra Limited - India
- Parry Sugars Refinery, India
- Kobexindo Tractors - Indoneisa
- Goldman Sachs - Singapore
- Bangladesh Power Developement Board
- Altura Mining Limited, Indonesia
- Ministry of Transport, Egypt
- International Coal Ventures Pvt Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Asmin Koalindo Tuhup - Indonesia
- Central Electricity Authority - India
- GMR Energy Limited - India
- Sree Jayajothi Cements Limited - India
- Port Waratah Coal Services - Australia
- Global Coal Blending Company Limited - Australia
- Bhatia International Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- IEA Clean Coal Centre - UK
- Kepco SPC Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Latin American Coal - Colombia
- European Bulk Services B.V. - Netherlands
- Petron Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Intertek Mineral Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- Siam City Cement PLC, Thailand
- Savvy Resources Ltd - HongKong
- Salva Resources Pvt Ltd - India
- Malabar Cements Ltd - India
- CNBM International Corporation - China
- OPG Power Generation Pvt Ltd - India
- Australian Coal Association
- Vizag Seaport Private Limited - India
- London Commodity Brokers - England
- Medco Energi Mining Internasional
- Baramulti Group, Indonesia
- VISA Power Limited - India
- Indika Energy - Indonesia
- Standard Chartered Bank - UAE
- Grasim Industreis Ltd - India
- Orica Australia Pty. Ltd.
- Sical Logistics Limited - India
- Australian Commodity Traders Exchange
- Coalindo Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bayan Resources Tbk. - Indonesia
- ASAPP Information Group - India
- CIMB Investment Bank - Malaysia
- Energy Development Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- PNOC Exploration Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Singapore Mercantile Exchange
- Minerals Council of Australia
- Jorong Barutama Greston.PT - Indonesia
- Indonesian Coal Mining Association
- San Jose City I Power Corp, Philippines
- Gujarat Sidhee Cement - India
- India Bulls Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- Timah Investasi Mineral - Indoneisa
- Samtan Co., Ltd - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- Krishnapatnam Port Company Ltd. - India
- Tamil Nadu electricity Board
- Africa Commodities Group - South Africa
- Energy Link Ltd, New Zealand
- Global Business Power Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Eastern Coal Council - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- Cement Manufacturers Association - India
- Orica Mining Services - Indonesia
- Renaissance Capital - South Africa
- Lanco Infratech Ltd - India
- Aditya Birla Group - India
- Chamber of Mines of South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Dalmia Cement Bharat India
- Neyveli Lignite Corporation Ltd, - India
- Independent Power Producers Association of India
- Directorate General of MIneral and Coal - Indonesia
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Star Paper Mills Limited - India
- Karaikal Port Pvt Ltd - India
- Indian Oil Corporation Limited
- Bahari Cakrawala Sebuku - Indonesia
- Heidelberg Cement - Germany
- Sakthi Sugars Limited - India
- Semirara Mining and Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Mercuria Energy - Indonesia
- Thai Mozambique Logistica
- SMG Consultants - Indonesia
- Deloitte Consulting - India
- Siam City Cement - Thailand
- TeaM Sual Corporation - Philippines
- Formosa Plastics Group - Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Sojitz Corporation - Japan
- Parliament of New Zealand
- PTC India Limited - India
- White Energy Company Limited
- MS Steel International - UAE
- Holcim Trading Pte Ltd - Singapore
- Essar Steel Hazira Ltd - India
- The University of Queensland
- Metalloyd Limited - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Merrill Lynch Commodities Europe
- Videocon Industries ltd - India
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- PowerSource Philippines DevCo
- Posco Energy - South Korea
- Makarim & Taira - Indonesia
- Ministry of Mines - Canada
- Madhucon Powers Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- Mercator Lines Limited - India
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Ministry of Finance - Indonesia
- Bharathi Cement Corporation - India
- Eastern Energy - Thailand
- Power Finance Corporation Ltd., India
- Kaltim Prima Coal - Indonesia
- South Luzon Thermal Energy Corporation
- Simpson Spence & Young - Indonesia
- Kumho Petrochemical, South Korea
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The State Trading Corporation of India Ltd
- Mintek Dendrill Indonesia
- Straits Asia Resources Limited - Singapore
- Banpu Public Company Limited - Thailand
- Bukit Baiduri Energy - Indonesia
- Thiess Contractors Indonesia
- Manunggal Multi Energi - Indonesia
- Bhoruka Overseas - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Wilmar Investment Holdings
- Karbindo Abesyapradhi - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Coal and Oil Company - UAE
- Interocean Group of Companies - India
- Electricity Authority, New Zealand
- ICICI Bank Limited - India
- Indo Tambangraya Megah - Indonesia
- Meenaskhi Energy Private Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Gujarat Electricity Regulatory Commission - India
- Leighton Contractors Pty Ltd - Australia
- Indian Energy Exchange, India
- Planning Commission, India
- Trasteel International SA, Italy
- Kalimantan Lumbung Energi - Indonesia
- SMC Global Power, Philippines
- Iligan Light & Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- GAC Shipping (India) Pvt Ltd
- Central Java Power - Indonesia
- Borneo Indobara - Indonesia
- Indogreen Group - Indonesia
- Wood Mackenzie - Singapore
- Aboitiz Power Corporation - Philippines
- Carbofer General Trading SA - India
- Ambuja Cements Ltd - India
- Larsen & Toubro Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Barasentosa Lestari - Indonesia
- Riau Bara Harum - Indonesia
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- GVK Power & Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Commonwealth Bank - Australia
- Rashtriya Ispat Nigam Limited - India
- Kapuas Tunggal Persada - Indonesia
- Oldendorff Carriers - Singapore
- Attock Cement Pakistan Limited
- Coastal Gujarat Power Limited - India
- Semirara Mining Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- Vedanta Resources Plc - India
- Anglo American - United Kingdom
- Meralco Power Generation, Philippines
- Mjunction Services Limited - India
- Electricity Generating Authority of Thailand
- Maheswari Brothers Coal Limited - India
- Rio Tinto Coal - Australia
- The Treasury - Australian Government
- New Zealand Coal & Carbon
- Edison Trading Spa - Italy
- Bulk Trading Sa - Switzerland
- Tata Chemicals Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bhushan Steel Limited - India
- Uttam Galva Steels Limited - India
- Georgia Ports Authority, United States
- Gujarat Mineral Development Corp Ltd - India
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