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 Reporter August 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Syncrude Uncertain about Plant Fire Affecting Production

The operator of Canada's largest synthetic crude project said on Saturday it is investigating the causes of an early morning fire at an upgrading plant. Firefighters extinguished the blaze,

Hurricane Ignacio Gains Strength but Expected to Bypass Hawaii

Hurricane Ignacio intensified as it blew across the Pacific on a route likely to bypass Hawaii on Saturday, said the Central Pacific Hurricane Center of the National Weather Service.

United Heavy Lift Gears up for the Asian Boom

All set to expand its footprint in the South Asian market significantly, Hamburg based, United Heavy Lift (UHL) appointed strategically placed Lexicon Overseas Pvt Ltd.

Contracts

United Heavy Lift Gears up for the Asian Boom

All set to expand its footprint in the South Asian market significantly, Hamburg based, United Heavy Lift (UHL) appointed strategically placed Lexicon Overseas Pvt Ltd.

China Passes New Pollution Law, Will Cap Coal Consumption

Legislators have approved amendments to China's 15-year-old air pollution law that grant the state new powers to punish offenders and create a legal framework to cap coal consumption,

Gazprom, OMV Meet on Establishing Nord Stream JV

At a Meeting held at the Gazprom headquarters between Alexey Miller, Chairman of the Company's Management Committee and Rainer Seele, Chairman of the Executive Board of OMV,

Legal

Syncrude Uncertain about Plant Fire Affecting Production

The operator of Canada's largest synthetic crude project said on Saturday it is investigating the causes of an early morning fire at an upgrading plant. Firefighters extinguished the blaze,

China Passes New Pollution Law, Will Cap Coal Consumption

Legislators have approved amendments to China's 15-year-old air pollution law that grant the state new powers to punish offenders and create a legal framework to cap coal consumption,

Gazprom, OMV Meet on Establishing Nord Stream JV

At a Meeting held at the Gazprom headquarters between Alexey Miller, Chairman of the Company's Management Committee and Rainer Seele, Chairman of the Executive Board of OMV,

Finance

TASI Acquires SignalFire Telemetry

TASI HOLDINGS INC. announced today it has completed the acquisition of all shares of SignalFire Telemetry, located in Hudson, Massachusetts.  This new acquisition

DP World Profit Up 22%

Global marine terminal operator DP World today announced strong financial results from its global portfolio of marine terminals for the six months to 30 June 2015,

Med Crude-Russian Urals Edges Lower in Med, Baltic

Russian Urals crude weakened in the Mediterranean and in the Baltic on Friday, while trading activity was limited ahead of a long holiday weekend in Britain, traders said.

Insurance

Syncrude Uncertain about Plant Fire Affecting Production

The operator of Canada's largest synthetic crude project said on Saturday it is investigating the causes of an early morning fire at an upgrading plant. Firefighters extinguished the blaze,

MN 100: Gencorp Insurance Group

The Company: Gencorp Insurance Group provides the Insurance and Surety needs of Marine Contractors, Vessel Operators and Shipyards throughout the country and Caribbean.

Mariners Dread Port Calls

Seafarer social media site Crewtoo, part of KVH Industries, Inc., has published the results of its second Crewtoo Seafarers Happiness Index report detailing job satisfaction at sea.

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Naval Architecture Offshore Oil Pipelines Pod Propulsion Salvage 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: 0.4944 sec (2 req/sec)