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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, 02 February 24
DRY BULK MARKET: THE DOWNWARD REVISION IN THE GROWTH OF CAPESIZE TONNE DAYS IN JANUARY WITH THE BCI DROPPING - MARIA BERTZELETOU
In the last week of January, the dry freight market sustained weakness in the Capesize segment, while the number of ballasters in the Southeast (SE ...
Friday, 02 February 24
COAL INDIA ACHIEVES NEARLY 80% OF ITS FY24 PRODUCTION TARGET IN TEN MONTHS - CNBCTV18
For the month of January, the company’s production grew by 9.1% from the same period last year to 78.4 Million Tonnes (MT), from 71.9 MT last ...
Thursday, 01 February 24
CHINA'S WIND, SOLAR CAPACITY TO OVERTAKE COAL IN 2024 - INDUSTRY BODY, REUTERS REPORTED
China’s installed wind and solar capacity is expected to overtake coal for the first time this year, according to industry forecasts.
&nb ...
Thursday, 01 February 24
ANTI-DEDUCTION CLAUSES: CAN A CHARTERER WITHHOLD HIRE WITHOUT AN OWNER'S CONSENT? - SKULD
KNOWLEDGE TO ELEVATE
Summary
In The Anna Dorothea, the Court found that where a charterparty provides that no deduction from hire may be m ...
Thursday, 01 February 24
INDIA REBUILDS COAL STOCKS TO ENSURE ELECTRIC RELIABILITY - REUTERS
India’s electricity supply is much more comfortable at the start of 2024 than in either 2023 or 2022 as coal production has ramped up and the ...
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- CIMB Investment Bank - Malaysia
- Binh Thuan Hamico - Vietnam
- Singapore Mercantile Exchange
- Miang Besar Coal Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Anglo American - United Kingdom
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- San Jose City I Power Corp, Philippines
- Siam City Cement - Thailand
- Gujarat Mineral Development Corp Ltd - India
- Antam Resourcindo - Indonesia
- VISA Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- McConnell Dowell - Australia
- AsiaOL BioFuels Corp., Philippines
- Rashtriya Ispat Nigam Limited - India
- Larsen & Toubro Limited - India
- Edison Trading Spa - Italy
- Coastal Gujarat Power Limited - India
- Pendopo Energi Batubara - Indonesia
- Malabar Cements Ltd - India
- The University of Queensland
- Samtan Co., Ltd - South Korea
- Manunggal Multi Energi - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Salva Resources Pvt Ltd - India
- Makarim & Taira - Indonesia
- Global Business Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Meenaskhi Energy Private Limited - India
- Oldendorff Carriers - Singapore
- IHS Mccloskey Coal Group - USA
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- Kalimantan Lumbung Energi - Indonesia
- Kartika Selabumi Mining - Indonesia
- Medco Energi Mining Internasional
- Globalindo Alam Lestari - Indonesia
- Lanco Infratech Ltd - India
- Bayan Resources Tbk. - Indonesia
- Sakthi Sugars Limited - India
- Tata Chemicals Ltd - India
- Renaissance Capital - South Africa
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Standard Chartered Bank - UAE
- Bhoruka Overseas - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Power Finance Corporation Ltd., India
- Minerals Council of Australia
- Grasim Industreis Ltd - India
- Therma Luzon, Inc, Philippines
- Wilmar Investment Holdings
- Banpu Public Company Limited - Thailand
- Meralco Power Generation, Philippines
- Essar Steel Hazira Ltd - India
- India Bulls Power Limited - India
- Semirara Mining and Power Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Ambuja Cements Ltd - India
- Eastern Energy - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- SMG Consultants - Indonesia
- Mintek Dendrill Indonesia
- GMR Energy Limited - India
- Uttam Galva Steels Limited - India
- Agrawal Coal Company - India
- Wood Mackenzie - Singapore
- The Treasury - Australian Government
- Indo Tambangraya Megah - Indonesia
- Altura Mining Limited, Indonesia
- Coalindo Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Bulk Trading Sa - Switzerland
- Parry Sugars Refinery, India
- GVK Power & Infra Limited - India
- Dalmia Cement Bharat India
- Directorate Of Revenue Intelligence - India
- Bharathi Cement Corporation - India
- Xindia Steels Limited - India
- Commonwealth Bank - Australia
- Straits Asia Resources Limited - Singapore
- Holcim Trading Pte Ltd - Singapore
- Barasentosa Lestari - Indonesia
- Kideco Jaya Agung - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- Sical Logistics Limited - India
- Siam City Cement PLC, Thailand
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- OPG Power Generation Pvt Ltd - India
- Videocon Industries ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Africa Commodities Group - South Africa
- Jindal Steel & Power Ltd - India
- TeaM Sual Corporation - Philippines
- Aboitiz Power Corporation - Philippines
- Interocean Group of Companies - India
- Gujarat Sidhee Cement - India
- Bhatia International Limited - India
- Ministry of Transport, Egypt
- Toyota Tsusho Corporation, Japan
- Central Java Power - Indonesia
- Riau Bara Harum - Indonesia
- Ministry of Mines - Canada
- Australian Commodity Traders Exchange
- Intertek Mineral Services - Indonesia
- Deloitte Consulting - India
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Attock Cement Pakistan Limited
- Mercator Lines Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Economic Council, Georgia
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indika Energy - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PTC India Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Orica Australia Pty. Ltd.
- Thiess Contractors Indonesia
- Independent Power Producers Association of India
- Thai Mozambique Logistica
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Latin American Coal - Colombia
- SMC Global Power, Philippines
- Australian Coal Association
- CNBM International Corporation - China
- Gujarat Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- Coal and Oil Company - UAE
- Aditya Birla Group - India
- Alfred C Toepfer International GmbH - Germany
- Star Paper Mills Limited - India
- Kaltim Prima Coal - Indonesia
- Madhucon Powers Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Borneo Indobara - Indonesia
- Leighton Contractors Pty Ltd - Australia
- ICICI Bank Limited - India
- Georgia Ports Authority, United States
- Vedanta Resources Plc - India
- Asmin Koalindo Tuhup - Indonesia
- Metalloyd Limited - United Kingdom
- PNOC Exploration Corporation - Philippines
- ASAPP Information Group - India
- Formosa Plastics Group - Taiwan
- Carbofer General Trading SA - India
- Marubeni Corporation - India
- Mjunction Services Limited - India
- Bukit Makmur.PT - Indonesia
- Bhushan Steel Limited - India
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Savvy Resources Ltd - HongKong
- Krishnapatnam Port Company Ltd. - India
- Kepco SPC Power Corporation, Philippines
- White Energy Company Limited
- Pipit Mutiara Jaya. PT, Indonesia
- LBH Netherlands Bv - Netherlands
- Rio Tinto Coal - Australia
- Karaikal Port Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Petron Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- TNB Fuel Sdn Bhd - Malaysia
- Jorong Barutama Greston.PT - Indonesia
- MS Steel International - UAE
- Posco Energy - South Korea
- Price Waterhouse Coopers - Russia
- Tamil Nadu electricity Board
- SN Aboitiz Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- Romanian Commodities Exchange
- Central Electricity Authority - India
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Simpson Spence & Young - Indonesia
- London Commodity Brokers - England
- Neyveli Lignite Corporation Ltd, - India
- Timah Investasi Mineral - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Iligan Light & Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- Vizag Seaport Private Limited - India
- International Coal Ventures Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Energy Development Corp, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Ind-Barath Power Infra Limited - India
- Chamber of Mines of South Africa
- GN Power Mariveles Coal Plant, Philippines
- Cigading International Bulk Terminal - Indonesia
- The State Trading Corporation of India Ltd
- Mercuria Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Orica Mining Services - Indonesia
- Trasteel International SA, Italy
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