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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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Thursday, 19 June 14
PANAMAX: VERY CLOSE TO BREAKING THE ALL TIME LOW RECORD - FEARNLEYS AS
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Wednesday, 18 June 14
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Wednesday, 18 June 14
MARKET INSIGHT - TIMOS PAPADIMITRIOU
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Tuesday, 17 June 14
DRY BULK FREIGHT RATES TO RISE DURING THE SECOND HALF OF 2014, AS CHINA IS EXPECTED TO START IMPORTING MORE IRON ORE FROM BRAZIL - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
In its latest analysis of the dry bulk market, BIMCO said that it doesn’t expect freight rates to react significantly to increased demand bef ...
Monday, 16 June 14
INDONESIAN COAL SWAPS FOR Q3 DELIVERY FALL 2.34 % MONTH ON MONTH
COALspot.com: Indonesian coal swaps for average Q3’ 2014 lost on day, week and on month according to AsiaClear OTC coal swap's reports re ...
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Showing 3651 to 3655 news of total 6871 |
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- Meenaskhi Energy Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Coalindo Energy - Indonesia
- Ambuja Cements Ltd - India
- London Commodity Brokers - England
- Electricity Generating Authority of Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Global Coal Blending Company Limited - Australia
- GVK Power & Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Wilmar Investment Holdings
- Goldman Sachs - Singapore
- Indo Tambangraya Megah - Indonesia
- Posco Energy - South Korea
- Kepco SPC Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Deloitte Consulting - India
- Independent Power Producers Association of India
- Tata Chemicals Ltd - India
- Xindia Steels Limited - India
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
- Carbofer General Trading SA - India
- Thiess Contractors Indonesia
- OPG Power Generation Pvt Ltd - India
- Lanco Infratech Ltd - India
- India Bulls Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Marubeni Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- Malabar Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Maheswari Brothers Coal Limited - India
- Meralco Power Generation, Philippines
- Sakthi Sugars Limited - India
- Aboitiz Power Corporation - Philippines
- Mercuria Energy - Indonesia
- Indogreen Group - Indonesia
- Directorate Of Revenue Intelligence - India
- Georgia Ports Authority, United States
- Bangladesh Power Developement Board
- Kapuas Tunggal Persada - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Standard Chartered Bank - UAE
- Central Electricity Authority - India
- Sree Jayajothi Cements Limited - India
- Baramulti Group, Indonesia
- Planning Commission, India
- McConnell Dowell - Australia
- Energy Development Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Karaikal Port Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Attock Cement Pakistan Limited
- White Energy Company Limited
- Australian Commodity Traders Exchange
- Bulk Trading Sa - Switzerland
- Power Finance Corporation Ltd., India
- IEA Clean Coal Centre - UK
- Vedanta Resources Plc - India
- Billiton Holdings Pty Ltd - Australia
- Chettinad Cement Corporation Ltd - India
- Ind-Barath Power Infra Limited - India
- Merrill Lynch Commodities Europe
- Bhushan Steel Limited - India
- Banpu Public Company Limited - Thailand
- Australian Coal Association
- Renaissance Capital - South Africa
- Aditya Birla Group - India
- Asmin Koalindo Tuhup - Indonesia
- Edison Trading Spa - Italy
- Port Waratah Coal Services - Australia
- Indonesian Coal Mining Association
- Price Waterhouse Coopers - Russia
- New Zealand Coal & Carbon
- Alfred C Toepfer International GmbH - Germany
- Larsen & Toubro Limited - India
- The Treasury - Australian Government
- Mintek Dendrill Indonesia
- Eastern Coal Council - USA
- Neyveli Lignite Corporation Ltd, - India
- Sindya Power Generating Company Private Ltd
- European Bulk Services B.V. - Netherlands
- South Luzon Thermal Energy Corporation
- Sinarmas Energy and Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Singapore Mercantile Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GAC Shipping (India) Pvt Ltd
- Parliament of New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- The State Trading Corporation of India Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Tamil Nadu electricity Board
- The University of Queensland
- Coastal Gujarat Power Limited - India
- Anglo American - United Kingdom
- Gujarat Sidhee Cement - India
- SMG Consultants - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Agrawal Coal Company - India
- Ceylon Electricity Board - Sri Lanka
- Toyota Tsusho Corporation, Japan
- Africa Commodities Group - South Africa
- Essar Steel Hazira Ltd - India
- Siam City Cement - Thailand
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Bhoruka Overseas - Indonesia
- Commonwealth Bank - Australia
- Makarim & Taira - Indonesia
- Kobexindo Tractors - Indoneisa
- Uttam Galva Steels Limited - India
- Heidelberg Cement - Germany
- ASAPP Information Group - India
- Electricity Authority, New Zealand
- Borneo Indobara - Indonesia
- Indika Energy - Indonesia
- Rio Tinto Coal - Australia
- Jorong Barutama Greston.PT - Indonesia
- Iligan Light & Power Inc, Philippines
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Global Green Power PLC Corporation, Philippines
- Parry Sugars Refinery, India
- Cement Manufacturers Association - India
- Simpson Spence & Young - Indonesia
- Ministry of Transport, Egypt
- Orica Australia Pty. Ltd.
- Straits Asia Resources Limited - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- Indian Oil Corporation Limited
- Therma Luzon, Inc, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- San Jose City I Power Corp, Philippines
- Interocean Group of Companies - India
- Oldendorff Carriers - Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dalmia Cement Bharat India
- Ministry of Mines - Canada
- Siam City Cement PLC, Thailand
- Directorate General of MIneral and Coal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Makmur.PT - Indonesia
- ICICI Bank Limited - India
- Kumho Petrochemical, South Korea
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- LBH Netherlands Bv - Netherlands
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- SMC Global Power, Philippines
- Altura Mining Limited, Indonesia
- Eastern Energy - Thailand
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Holcim Trading Pte Ltd - Singapore
- Indian Energy Exchange, India
- Sojitz Corporation - Japan
- Energy Link Ltd, New Zealand
- Semirara Mining Corp, Philippines
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Bhatia International Limited - India
- Manunggal Multi Energi - Indonesia
- Romanian Commodities Exchange
- Bharathi Cement Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Wood Mackenzie - Singapore
- Trasteel International SA, Italy
- Offshore Bulk Terminal Pte Ltd, Singapore
- Globalindo Alam Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- PTC India Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Salva Resources Pvt Ltd - India
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- MS Steel International - UAE
- Formosa Plastics Group - Taiwan
- Orica Mining Services - Indonesia
- Barasentosa Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Intertek Mineral Services - Indonesia
- Chamber of Mines of South Africa
- Vizag Seaport Private Limited - India
- Samtan Co., Ltd - South Korea
- Central Java Power - Indonesia
- CNBM International Corporation - China
- Semirara Mining and Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Antam Resourcindo - Indonesia
- Ministry of Finance - Indonesia
- Minerals Council of Australia
- Economic Council, Georgia
- GMR Energy Limited - India
- Kaltim Prima Coal - Indonesia
- Riau Bara Harum - Indonesia
- Latin American Coal - Colombia
- VISA Power Limited - India
- Petron Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Videocon Industries ltd - India
- Thai Mozambique Logistica
- CIMB Investment Bank - Malaysia
- Madhucon Powers Ltd - India
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