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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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Tuesday, 04 March 14
HIGHER PRICES AND STEADY FREIGHT RATES LEAD SHIP OWNERS TO TEMPORARILY HALT SECOND HAND VESSEL PURCHASES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the dry bulk market has kept on improving, but at a very slow rate, ship owners have elected to take a step back from the flurry of the S&P m ...
Monday, 03 March 14
SUB-BIT INDONESIA COAL SWAP (FOB) FOR AVERAGE Q115 CLOSED AT $60.28, $ 1.70 HIGHER THAN 2Q14
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 slightly corrected do ...
Monday, 03 March 14
API 8 CFR SOUTH CHINA SWAPS: Q4' 2014 DELIVERY CLOSED US$ 1.40 HIGHER COMPARED TO Q2' 2014 DELIVERY
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 1.90 percent month on month and closed at US$ 76.27 per mt as on Fr ...
Monday, 03 March 14
COSTS LIABILITY PASSING DOWN A CHARTERPARTY CHAIN - SKULD
KNOWLEDGE TO ELEVATE
Provided that charterparties are on back to back terms, and the claim is successful, liability for costs incurred shoul ...
Sunday, 02 March 14
THE FREIGHT MARKET WAS STEADY TO FIRM THIS PAST WEEK - CAPT. REDDY
COALspot.com: The freight market was steady to firm this past week. The BDI was up 7.06 pct and closed at 1258 points and the cape index was also fi ...
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Showing 3821 to 3825 news of total 6871 |
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- Miang Besar Coal Terminal - Indonesia
- Agrawal Coal Company - India
- Indonesian Coal Mining Association
- Krishnapatnam Port Company Ltd. - India
- Chettinad Cement Corporation Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Transport, Egypt
- Thiess Contractors Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Wood Mackenzie - Singapore
- Medco Energi Mining Internasional
- Cigading International Bulk Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Ambuja Cements Ltd - India
- Renaissance Capital - South Africa
- Bhatia International Limited - India
- Coastal Gujarat Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Eastern Energy - Thailand
- Vizag Seaport Private Limited - India
- Marubeni Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Toyota Tsusho Corporation, Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- International Coal Ventures Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- TeaM Sual Corporation - Philippines
- Central Java Power - Indonesia
- Sree Jayajothi Cements Limited - India
- Binh Thuan Hamico - Vietnam
- Bhoruka Overseas - Indonesia
- European Bulk Services B.V. - Netherlands
- VISA Power Limited - India
- Uttam Galva Steels Limited - India
- Mercator Lines Limited - India
- White Energy Company Limited
- Madhucon Powers Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- CNBM International Corporation - China
- Aboitiz Power Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Bangladesh Power Developement Board
- Parry Sugars Refinery, India
- Wilmar Investment Holdings
- GAC Shipping (India) Pvt Ltd
- New Zealand Coal & Carbon
- Xindia Steels Limited - India
- Trasteel International SA, Italy
- Orica Mining Services - Indonesia
- Ind-Barath Power Infra Limited - India
- Videocon Industries ltd - India
- Baramulti Group, Indonesia
- South Luzon Thermal Energy Corporation
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Jindal Steel & Power Ltd - India
- Dalmia Cement Bharat India
- Petrochimia International Co. Ltd.- Taiwan
- Carbofer General Trading SA - India
- Bukit Makmur.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Romanian Commodities Exchange
- Australian Commodity Traders Exchange
- Barasentosa Lestari - Indonesia
- Meralco Power Generation, Philippines
- Sarangani Energy Corporation, Philippines
- CIMB Investment Bank - Malaysia
- Thai Mozambique Logistica
- Kartika Selabumi Mining - Indonesia
- Riau Bara Harum - Indonesia
- Vedanta Resources Plc - India
- Standard Chartered Bank - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Energy Development Corp, Philippines
- Edison Trading Spa - Italy
- Eastern Coal Council - USA
- Latin American Coal - Colombia
- Interocean Group of Companies - India
- The Treasury - Australian Government
- Globalindo Alam Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Simpson Spence & Young - Indonesia
- Australian Coal Association
- SMG Consultants - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Rio Tinto Coal - Australia
- Indogreen Group - Indonesia
- Independent Power Producers Association of India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Billiton Holdings Pty Ltd - Australia
- London Commodity Brokers - England
- Indian Oil Corporation Limited
- Cement Manufacturers Association - India
- Manunggal Multi Energi - Indonesia
- PTC India Limited - India
- The State Trading Corporation of India Ltd
- Orica Australia Pty. Ltd.
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Baiduri Energy - Indonesia
- Kumho Petrochemical, South Korea
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Sindya Power Generating Company Private Ltd
- Makarim & Taira - Indonesia
- Posco Energy - South Korea
- Planning Commission, India
- McConnell Dowell - Australia
- Coalindo Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Bulk Trading Sa - Switzerland
- Merrill Lynch Commodities Europe
- The University of Queensland
- Karaikal Port Pvt Ltd - India
- Lanco Infratech Ltd - India
- Antam Resourcindo - Indonesia
- Gujarat Sidhee Cement - India
- Global Green Power PLC Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Semirara Mining Corp, Philippines
- Mercuria Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PowerSource Philippines DevCo
- Sakthi Sugars Limited - India
- Mintek Dendrill Indonesia
- Sinarmas Energy and Mining - Indonesia
- Attock Cement Pakistan Limited
- Maharashtra Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Samtan Co., Ltd - South Korea
- PNOC Exploration Corporation - Philippines
- Indika Energy - Indonesia
- Parliament of New Zealand
- SMC Global Power, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Link Ltd, New Zealand
- Siam City Cement - Thailand
- Electricity Generating Authority of Thailand
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining and Power Corporation, Philippines
- Goldman Sachs - Singapore
- Global Business Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Coal and Oil Company - UAE
- Kalimantan Lumbung Energi - Indonesia
- Singapore Mercantile Exchange
- Grasim Industreis Ltd - India
- Indo Tambangraya Megah - Indonesia
- Kaltim Prima Coal - Indonesia
- MS Steel International - UAE
- Larsen & Toubro Limited - India
- Malabar Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- Indian Energy Exchange, India
- Kepco SPC Power Corporation, Philippines
- ICICI Bank Limited - India
- Iligan Light & Power Inc, Philippines
- Bharathi Cement Corporation - India
- Essar Steel Hazira Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Ministry of Finance - Indonesia
- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- Kideco Jaya Agung - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- GVK Power & Infra Limited - India
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- Altura Mining Limited, Indonesia
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Timah Investasi Mineral - Indoneisa
- Chamber of Mines of South Africa
- OPG Power Generation Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Directorate Of Revenue Intelligence - India
- Formosa Plastics Group - Taiwan
- Sical Logistics Limited - India
- Power Finance Corporation Ltd., India
- Straits Asia Resources Limited - Singapore
- Deloitte Consulting - India
- Jorong Barutama Greston.PT - Indonesia
- Minerals Council of Australia
- Price Waterhouse Coopers - Russia
- Heidelberg Cement - Germany
- Sojitz Corporation - Japan
- Asmin Koalindo Tuhup - Indonesia
- Tamil Nadu electricity Board
- Petron Corporation, Philippines
- ASAPP Information Group - India
- Tata Chemicals Ltd - India
- Banpu Public Company Limited - Thailand
- Gujarat Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
- Anglo American - United Kingdom
- Jaiprakash Power Ventures ltd
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Neyveli Lignite Corporation Ltd, - India
- Siam City Cement PLC, Thailand
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- Therma Luzon, Inc, Philippines
- Aditya Birla Group - India
- LBH Netherlands Bv - Netherlands
- Star Paper Mills Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Africa Commodities Group - South Africa
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