Hold-harmless Clauses May Not Be So Harmless

Posted by Michelle Howard
Friday, February 28, 2014
Robert Hodge

ITIC has warned that the so-called ‘hold harmless’ clauses in many of the contracts entered into by its members may contain pitfalls which could prejudice their rights.
 


A mutual hold-harmless indemnity clause should provide 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, even if the accident and related losses are caused by negligence. But ITIC notes that, in many of the contracts it reviews, the party with the greater bargaining power will naturally seek to swing the balance back in its favour.
 


Writing in the latest issue of The Wire, the ITIC newsletter for the offshore and hydrographic sector, Robert Hodge, Senior Underwriter for the Offshore Sector, says, “It is staggering how often we see contracts stipulating that ‘the consultant shall indemnify the company against any and all losses’, yet there is no reciprocal benefit to the consultant. The clause must have a mutual provision.”



Meanwhile, the mutual hold-harmless clauses seen by ITIC often leave the distribution of third-party liabilities unclear. Hodge says, “A hydrographic consultant on a survey vessel, for example, 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 on the party which has insurance for these liabilities.”
 


ITIC notes that, in some cases, it sees hold-harmless clauses amended to state that if one of the parties is found to be grossly negligent it will not be held harmless. Robert Hodge emphasises, “There is no true concept of gross negligence under English law. The line between negligence and gross negligence can become blurred, and cases will turn on facts and expert evidence. 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.”



ITIC also warns that the distinction between indirect and direct loss can be complicated. Robert Hodge says, “A common misconception is that all ‘loss of profits’ is indirect loss. This is wrong. Loss of profits can be either direct or indirect, depending on the facts of the case. If, for example, a consultant was providing design work for sub-sea equipment and carried out the design negligently, this could cause not only damage to property but also lost drilling time, leading to lost revenue and profit. In such a case, a tribunal could find that the loss of profit arose naturally from the breach and was therefore a direct loss not excluded under the 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 that loss of profits is excluded, whether direct or indirect.”



ITIC concludes that hold-harmless clauses should be carefully reviewed to ensure that they are actually mutual.
 

 

  • The Wire also includes a contract checklist for offshore and hydrographic consultants, and an explanation of why there is a growing need for them to take out professional indemnity insurance in an increasingly litigious business environment. Copies of the newsletter can be requested from: chris@merlinco.com
  • ITIC, the leading professional indemnity insurer for the offshore and hydrographic sector, will be exhibiting at Oceanology International 2014 at London Excel from 11 to 14 March. You can find us on Stand N550, where we will be holding a daily competition inviting visitors to complete a lap on a racing-car simulator. Participants will be entered into a champagne draw.
  • ITIC is managed by Thomas Miller. More details about the club and the services it offers can be found on ITIC’s website at www.itic-insure.com


 

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter July 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Cenac Marine to Christen New Vessel, Donate Barge

A ceremony will be held July 29 at Cenac Marine Services headquarters in, Houma, La. To commemorate the christening of its newest vessel, M/V Quincey Cenac, as

Concordia Maritime Posts Q2 Profit

Facing a “gradually deteriorating market,” Sweden based tanker shipping company Concordia Maritime said it was able to post a profit in Q2 2016 based on high vessel

Brown Named Bureau Veritas Communications Director

Nick Brown has been appointed Bureau Veritas’ new Communications Director, Marine & Offshore Division, the classification society announced.    Brown will take up the post from November 2,

Contracts

Asia Dry Bulk-Capesize Steady as Owners Spurn Low Rates

Owners anchoring ships rather than fix at low rates. W. Australia-China capesize rates hit over two-month low. Freight rates for large capesize dry cargo ships

India Buys 4 P-8I Maritime Planes

India has inked a deal with the US defence and aerospace giant Boeing to procure four more Poseidon-8I (P-8I) long-range surveillance and anti-submarine warfare

Technip Bags Woodside's Subsea Contract

Technip has been awarded a large(1) subsea contract by Woodside to support the development of the Greater Enfield Project offshore Western Australia, at a water

Legal

Gener8 Maritime Net Income Up 91%

Announcing its financial results today for the three and six months ended June 30, 2016 Gener8 Maritime, Inc. reported net income of $38.0 million, or $0.46 basic and diluted earnings per share,

Navios Maritime Posts 2Q Profit

Navios Maritime Midstream Partners LP (NAP) has reported second-quarter earnings of $5.9 million.   It says revenue for three month period ended June 30, 2016 increased by $4.

Safety and Preparation on the Brownwater Radar

Weather Channel Forecasters are predicting a “near-average” hurricane season for 2016, but warn that an average season does not mean businesses and residents shouldn’t prepare for the worst.

Finance

Gener8 Maritime Net Income Up 91%

Announcing its financial results today for the three and six months ended June 30, 2016 Gener8 Maritime, Inc. reported net income of $38.0 million, or $0.46 basic and diluted earnings per share,

Dynagas 2Q Results Upbeat

The financial results of Greece-based Dynagas LNG Partners LP (DLNG) for Q2 beat Wall Street expectations.    The average estimate of three analysts surveyed

Safe Bulkers Reports Q2 Loss, Expands Fleet

The Athens, Greece-based Safe Bulkers Inc. (SB) has reported a loss of $9 million in its second quarter.  It had a loss of 15 cents per share.   Net revenue for Q2 of 2016 decreased by 18% to $26.

Insurance

Panama Canal: Assessing the Risk & Reward

The Panama Canal’s impact on shipping routes and vessel sizes since it opened in 1914 is undisputed. This will continue with the opening of a third channel for larger vessels in 2016.

How to Avoid Claims for Self-cooking Cargo

North P&I Club has advised its members to be extra vigilant during loading and transport of soya beans to ensure they do not get blamed for cargoes that start ‘cooking’ at sea.

ABS Advisory Solutions Integrate ERM

ABS Group anticipated the update to Circular A-123 from the United States (US) Office of Management and Budget (OMB) requiring US executive departments and agencies

 
 
Maritime Security Maritime Standards Naval Architecture Pipelines Pod Propulsion Port Authority Salvage Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1794 sec (6 req/sec)