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

People & Company News

China COSCO to be First through the Expanded Panama Canal

China COSCO Shipping has won the draw for its container vessel Andronikos to make the ceremonial first transit through the Expanded Panama Canal during the waterway’s inauguration on Sunday, June 26.

Sellick Equipment to Open New Facility

On April, 20, 2016, at the young age of 97 years, Walter Sellick along with sons Howard Sellick - President, David Sellick - Vice President and grandson Colin Sellick - Systems Manager,

Asia Tankers-VLCCs Rates Ease as Tanker Jams Fade

Port congestion eases at Basra and Chinese ports; tanker demand set to expand on lower oil prices. Freight rates for very large crude carriers (VLCCs), hurt by slower-than-usual release of cargo,

Contracts

Asia Tankers-VLCCs Rates Ease as Tanker Jams Fade

Port congestion eases at Basra and Chinese ports; tanker demand set to expand on lower oil prices. Freight rates for very large crude carriers (VLCCs), hurt by slower-than-usual release of cargo,

EU Clears CMA CGM, NOL Merger, with Conditions

The European Commission said on Friday it had cleared French shipping group CMA CGM's $2.4 billion takeover of Neptune Orient Lines on condition that NOL pulls out from a rival shipping alliance.

How France Sank Japan's Sub Dream

Ousting of Japan ally PM Abbott opened door to rivals; Tokyo slow to respond to new competitive process. In 2014, a blossoming friendship between Australian

Legal

Drug Interception at Red Hook Container Terminal

Approximately 121 pounds of heroin and eight pounds of cocaine were discovered in a shipping container of vegetables that was moving from Ecuador to Miami, Fla.

Royal Caribbean's Revenue up 5.6%

Royal Caribbean Cruises Ltd reported a 5.6 percent rise in quarterly revenue, helped by higher passenger ticket revenue and onboard spending, sending the company's

ICS Criticises 'Prestige’ Judgement by Spanish Court

At a meeting of the International Oil Pollution Compensation Funds (IOPCF) this week, the International Chamber of Shipping (ICS) has strongly criticised the judgement

Finance

MARAD: $5 Mln Available for Marine Highway Projects

The Maritime Administration (MARAD) has announced the availability of $5 million in Federal funding to expand marine highway service by creating new or expanding

Baltic Index Down on Lower Capesize, Panamax Rates

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, slipped on Friday, as demand for capesize and panamax vessels fell.

Oil Rally is Not Just About Hedge Funds: Kemp

Oil prices are becoming dangerously overheated as speculators anticipate a rebalancing of supply and demand that has barely started, according to many oil analysts.

Insurance

ICS Criticises 'Prestige’ Judgement by Spanish Court

At a meeting of the International Oil Pollution Compensation Funds (IOPCF) this week, the International Chamber of Shipping (ICS) has strongly criticised the judgement

Dangers Arising from Carriage of Indonesian Coal

The London P&I Club has issued a warning about continued problems associated with the carriage of Indonesian thermal or ‘steam’ coal, following a number of recent

ExxonMobil Starts Production at Point Thomson

ExxonMobil said today it has started production at its Point Thomson project, the first company-operated project on Alaska’s North Slope. Central pad facilities

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Navigation Pod Propulsion Salvage Ship Electronics Ship Repair Shipbuilding / Vessel Construction 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: 0.1779 sec (6 req/sec)