Project Double Indemnity

L

L

A

AW

W OF

OF

 C

 C

ONTRACTS

ONTRACTS

 - “D

 - “D

OUBLE

OUBLE

 I

 I

NDEMNITY

NDEMNITY

”

”

(Term Paper towards partial fulfilment of the assessment in the

(Term Paper towards partial fulfilment of the assessment in the

 subject of Special Contra

 subject of Special Contracts)

cts)

Submitted by:

Submitted by:

Anuj Bahukhandi

Anuj Bahukhandi

Roll No. 899

Roll No. 899

Semester- III 

Semester- III 

Submitted to:

Submitted to:

Prof. Bipin Kumar 

Prof. Bipin Kumar 

 Assistant Pro

 Assistant Professor (Law)

fessor (Law)

Ntio!" L# U!i$e%&ity' (od)*u%

Ntio!" L# U!i$e%&ity' (od)*u%

Summer Session

Summer Session

(July-Noem!er" #$%#&

(July-Noem!er" #$%#&

Table of Contents

Table of Contents

INSURANCE CE CONTRCONTRACT, IF ACT, IF CONTRCONTRACT OF ACT OF INDEMNITY...INDEMNITY...6...6

INDIA

INDIA... 66

ENGLAND

ENGLAND... 66 RIGHTS

RIGHTS OF OF INDEMNITY INDEMNITY HOLDER...HOLDER...7...7 DOUBLE INDEMNITY-AN ANALYSIS...10 DOUBLE INDEMNITY-AN ANALYSIS...10 CONCL

INTRODUCTION

'he onep) of *ou!le +ndemni)y as an impor)an) aspe) of )he ,on)ra) of +ndemni)y has no) ye) !een adop)ed and adap)ed !y )he ,our)s in +ndia. As a onseuene of )he lassial onep) of )o physial indiiduals" hain/ eual !ar/ainin/ poer" freely and olun)arily en)erin/ in)o )he on)ra)" on)rol oer )he )erms of )he on)ra) as limi)ed )o )he minimum. +n )he presen) en)ury" )he use of dou!le indemni)y lauses in indemni)y on)ra) has !eome ery ommon and i) is ar/ua!le )ha) a us)omer ho on)ra)s on suh s)andard )erms has  !een imposed on him and does no) really a/ree )o )hem a) all. +ndemni)y a/reemen)s are

re/ularly used )o alloa)e risk !e)een par)ies on ons)ru)ion proje)s. Reen)ly" some dou!) has surfaed as )o he)her )he lan/ua/e found in a )ypial indemni)y a/reemen) is suffiien) )o reuire indemni)y in si)ua)ions here )he indemnifyin/ par)y ()he indemni)or& is i)hou) faul).

*ou!le indemni)y ,lauses in +ndemni)y ,on)ra)s0)hese )ypes of on)ra)s are found in our  eeryday parlane and of ourse e for/e) )o no)ie )hem in our day-)o-day life and ho i) /oes on )o affe) our lies. 'hese form of on)ra)s hae !een in e1is)ene sine anien) )imes like ,ons)ru)ion proje)s e)." hih are in e1is)ene een no and has )aken a muh omple1 form een )oday. 2en in )his era of )ehnolo/y and moderni3a)ion )here has opened up arious aenues for )he dou!le indemni)y lauses like in insurane on)ra)s" proje) on)ra)s e). No )he ues)ion arises as )o he)her )here is reasona!ili)y !e)een )o par)ies hen )hey are e1eu)in/ an a/reemen) )hrou/h an indemni)y on)ra) and as suh )he res)ri)ion or e1lusion" refle1ie indemni)y lauses.

'here are learly iden)ifia!le s)eps in )he in)erpre)a)ion of on)ra)s. 4irs)" )he par)ies5 ommon in)en)ion ()ha) hih )hey an)ed )o re/ula)e& is sou/h)6 ne1)" an a))emp) is made )o  !uild up a pi)ure of )he relean) ondi)ions" he)her )hey !e ommon or le/ally reuired ()hose hih" /ien )he irums)anes" )he par)ies ould hae ished )o es)a!lish" on ei)her  ra)ional or le/al /rounds&6 finally" )he jud/e may end up applyin/ le/al proisions far  remoed from )he par)ies5 e1 an)e ommon ill" suh as )he on)ra proferen)em rule" hose  purpose is )o preen) )he use of unin)elli/i!le )erms )hrou/h )he )hrea) of applyin/" in eah

suh ase" an in)erpre)a)ion in faour" no) of hoeer is responsi!le for rea)in/ suh unin)elli/i!ili)y" !u) of )he o)her par)y.

7pinions differ and in )his re/ard one shool of )hou/h) says )ha) dou!le indemni)y lauses are an adan)a/e hereas i) is a disadan)a/e and i) should !e done aay i)h. 'hey ome )o )his onlusion as !eause a dou!le indemni)y on)ra) is a uniersal on)ra) hain/ or  enumera)in/ )he same se) of )erms and ondi)ions and )he onep) of iarious lia!ili)y omin/ up in ,on)ra)ion ,on)ra)s. No in suh )ype of on)ra)s )he ues)ion )ha) arises is )ha) he)her )he o)her par)y has )ha) same !ar/ainin/ poer or )he freedom of on)ra) as )he )erms and ondi)ions are one sided. As suh )hrou/h )his proje) repor) an a))emp) is !ein/ made )o anser )his !asi pro!lem and )hus reah )o a defini)e end in )he ourse of )his researh.

INDEMNITY 

,on)ra)s are /enerally onluded !y offer and aep)ane. No aordin/ )o di)ionary meanin/" indemni)y is a pro)e)ion a/ains) loss" esp. in )he form of a promise )o pay" or   paymen) for loss of money" /oods" e). +) is a seuri)y a/ains)" or ompensa)ion for loss e).

4or ins)ane" A on)ra)s )o indemnify B in respe) of a er)ain sum of #$$ Rupees. 'his is a on)ra) of indemni)y. +n a on)ra) of indemni)y" )he person ho promises )o indemnify is knon as indemnifier" and )he person in hose faour suh a promise is made is knon as indemnified or indemni)y holder.

Aordin/ )o Se)ion %#: of )he +ndian ,on)ra) A)" a on)ra) of indemni)y means a on)ra) !y hih one par)y promises )o sae )he o)her from loss aused )o him !y )he on)ra) of )he promisor himself" or !y )he ondu) of any o)her person. 'his proision inorpora)es a on)ra) here one par)y promises )o sae )he o)her from loss hih may !e aused" ei)her 

(i& By )he ondu) of )he promisor himself" or" (ii& By )he ondu) of any o)her person.

'his defini)ion oers indemni)y for loss aused !y human a/eny only. +) does no) deal i)h )hose lasses of ases here )he indemni)y arises from loss aused !y een)s or aiden)s" hih do no) or may no) depend upon )he ondu) of )he indemnifier or any o)her person" or   !y )he reason of lia!ili)y inurred !y some)hin/ done !y )he indemnified a) )he reues) of )he

indemnifier. +n fa)" hoeer )here are )o )ypes of indemni)y lauses- )hey are )he refle1ie indemni)y lause and )he insurane indemni)y lause. ;here )he former indemni)y reuires B ho has suessfully sued his fello-!u) defaul)in/0on)ra)in/ par)y A )o indemnify A. suh lauses orrespond ery muh )o <isoun) *ilhorne5s desrip)ion of an indemni)y lause as )he o!erse of an e1emp)in/ lause.% _{'he la))er )ype of indemni)y lause" )he insurane}

indemni)y is )ri//ered off hen )hird par)y = reoers a/ains) on)ra)in/ par)y A" or  e1ep)ionally hen )he )hird par)y fails )o reoer and )he indemni)y is relied on )o oer )he os)s of li)i/a)ion" )he indemni)y hih is a )erm of )he on)ra) !e)een A and B reuires B )o indemnify A.

1 Smith . South Wales Switchear Ltd! >%9?8@ % All 2.R %8 a) ##

'hus a om!ina)ion of )hese )o )ypes of indemni)y ould /ie rise )o ano)her form of  indemni)y i.e. an indire) refle1ie indemni)y. 4or e1ample suppose A" a Si)e *eeloper" on)ra)s )o do !uildin/ ork for B6 A employs su!-,on)ra)or =. = ne/li/en)ly injures B and B sues = dire)ly and reoers dama/es. = inokes an insurane indemni)y a/ains) A and A inokes a similar indemni)y a/ains) B. i) is also )heore)ially possi!le )o hae a s)rai/h)-forard indire) indemni)y A and B hae a on)ra)" A is in defaul) is--is a )hird par)y =. )he on)ra) i)h A reuires B )o indemnify =. 4or e1ample Se)ion : of )he Cnfair ,on)ra) 'erms A) %9??#_{" applies only here a person deals as onsumer and only here )he lia!ili)y}

inurred is for ne/li/ene or !reah of on)ra). ;i)hin )hese limi)a)ions )he se)ion oers  !o)h our refle1ie indemni)y and insurane indemni)y lause. Se)ion :(#& makes )his ery

lear.D

 No al)hou/h Se)ion : looks ery lear )o )he un)rained eye" !u) lookin/ more losely e see )ha) a )riky poin) of in)erpre)a)ion arises. Suppose B ho deals as onsumer has en)ered in)o a on)ra) i)h A hih on)ains an indemni)y lause in A5s faour. A ne/li/en)ly injures a )hird par)y =" and = an no suessfully laim from A and A laims from B. e1)endin/ )his e1ample suppose A employs a su!-on)ra)or ," and i) is , ho injures =. no = ill no suessfully laim from , and , from A and A from B. 'o pu) )hin/s mildly" )he same  pro!lem ould arise if , ne/li/en)ly injured B ho duly laimed from A" )here!y /iin/ rise

)o an indire) refle1ie indemni)y a/ains) himself.

2 Se)ion : of )he Cnfair ,on)ra) 'erms A) %9?? reads asSe)ion :

(%& A person dealin/ as onsumer anno) !y referene )o any on)ra) )erm !e made )o indemnify ano)her  person (he)her a par)y )o )he on)ra) or no)& in respe) of lia!ili)y )ha) may !e inurred !y )he o)her for

ne/li/ene or !reah of on)ra)" e1ep) in so far as )he on)ra) )erm sa)isfies )he reuiremen) of reasona!leness.

(#& 'his Se)ion applies he)her )he lia!ili)y in

ues)ion---(a& is dire)ly )ha) of )he person )o !e indemnified or is inurred !y him iariously6 (!& is )o )he person dealin/ as onsumer or )o someone else.

INSURANCE CONTRACT, IF CONTRACT OF INDEMNITY 

INDIA

+) has !een no)ed a!oe )ha) se)ion %#: reo/ni3es only suh on)ra) as a on)ra) of  indemni)y here )here is a promise )o sae ano)her person from loss hih may !e aused !y )he ondu) of )he promisor himself or !y ondu) of any o)her person. +) does no) oer a  promise )o ompensa)e for loss no) arisin/ due )o human a/eny. 'herefore a on)ra) of 

insurane is no) oered !y )he defini)ion of se)ion %#:. 'hus if under a on)ra) of  insurane" an insurer promises )o pay ompensa)ion in )he een) of loss !y fire" suh a on)ra) does no) ome under )he purie of se)ion %#:. suh on)ra)s are alid on)ra)s" as !ein/ on)in/en) on)ra)s as defined in se)ion D%.

+n #nited India Insurance Compan" . $%s! Aman Sinh $unshilal ": _{)he oer no)e s)ipula)ed}

deliery )o )he onsi/nor. Foreoer" on i)s ay )o )he des)ina)ion )he /oods ere )o !e s)ored in a /odon and )hereaf)er )o !e arried )o )he des)ina)ion. ;hile )he /oods ere in )he /odon" )he /oods ere des)royed !y fire. +) had !een held !y )he our) )ha) )he /oods ere des)royed durin/ )ransi)" and )he insurer as lia!le as per )he insurane on)ra).

ENGLAND

Cnder 2n/lish la" )he ord Gindemni)y5 arries a muh ider onno)a)ion )han /ien )o i) under )he +ndian ,on)ra) A). +) inludes a on)ra) )o sae )he promisee from a loss" he)her  i) !e aused !y human a/eny or any o)her een) like an aiden) and fire. Cnder 2n/lish la" a on)ra) of insurane (o)her )han life insurane& is a on)ra) of indemni)y.

Eife insurane on)ra) is" hoeer no) a on)ra) of indemni)y !eause in suh a on)ra) differen) onsidera)ions apply. A on)ra) of life insurane" for ins)ane" may proide )he  paymen) of a er)ain sum of money ei)her on )he dea)h of a person" or on )he e1piry of a s)ipula)ed period of )ime (een if )he assured is s)ill alie&. +n suh a ase" )he ues)ion of  amoun) of loss suffered !y )he assured" or indemni)y for )he same does no) arise. Foreoer" 4 A+R %99: P.H I. #$

een if a er)ain sum is paya!le in )he een) of dea)h" sine" unlike proper)y" )he life of a  person anno) !e alued" )he hole of )he amoun) assured !eomes paya!le. 4or )ha) reason

also" i) is no) a on)ra) of indemni)y.

+ndian ,on)ra) A) does no) speifially proide )ha) )here an !e an implied on)ra) of  indemni)y. 'he Priy ,ounil has" hoeer" reo/ni3ed an implied on)ra) of indemni)y also. _{'he Ea ,ommission of +ndia in i)s %D)h Repor)" %98 on )he +ndian ,on)ra) A)"}

%8?#" has reommended )he amendmen) of Se)ion %#:. Aordin/ )o i)s reommenda)ion" 'he defini)ion of )he G,on)ra) of +ndemni)y5 in Se)ion %#: he e1panded )o inlude ases of  loss aused !y een)s hih may or may no) depend upon )he ondu) of any person. +) should also proide learly )ha) )he promise may also !e implied.

RIGHTS OF INDEMNITY HOLDER

+n a sui) a/ains) )he indemni)y holder" he may hae !een ompelled )o pay dama/es" and inurred os)s" e). +n his on )urn" he an !rin/ an a)ion a/ains) )he promisor (indemnifier& )o reoer dama/es and os)s" e). paid !y him" if )he indemnifier has promised an indemni)y in suh a ase. 'he proision in )his re/ard is on)ained in Se)ion %#" hih reads as under Ri/h) of indemni)y-holder hen sued. - 'he promisee in a on)ra) of indemni)y" a)in/ i)hin )he sope of his au)hori)y" is en)i)led )o reoer from )he

promisor-(%& All dama/es hih he may !e ompelled )o pay in any sui) in respe) of any ma))er )o hih )he promise )o indemnify applies6

(#& All os)s hih he may !e ompelled )o pay in any suh sui) if" in !rin/in/ or  defendin/ i)" he did no) on)raene )he orders of )he promisor" and a)ed as i) ould hae  !een pruden) for him )o a) in )he a!sene of any on)ra) of indemni)y" or if )he promisor 

au)hori3ed him )o !rin/ or defend )he sui)6

(D& All sums hih he may hae paid under )he )erms of any ompromise of any suh sui)" if  )he ompromise as no) on)rary )o )he orders of )he promisor" and as one hih i) ould

hae !een pruden) for )he promise )o make in )he a!sene of any on)ra) of indemni)y" or if  )he promisor au)hori3ed him )o ompromise )he sui).

;hen an an indemnifier !e made lia!leL ,an he laim )o !e indemnified !efore he is demnifiedL

'here has !een a on)roersy re/ardin/ )he poin)" as )o he)her )he indemnifier an !e asked )o indemnify !efore )he indemni)y-holder has a)ually suffered )he loss" or his lia!ili)y arises only af)er )he loss has !een suffered !y )he indemni)y-holder.

Aordin/ )o 2n/lish ,ommon Ea" no a)ion ould !e !rou/h) a/ains) )he indemnifier un)il )he indemni)y-holder had suffered a)ual loss. 'his si)ua)ion rea)ed a /rea) hardship in )hose ases here )he indemni)y-holder as no) in a posi)ion )o mee) )he laim ou) of his poke). Relief as proided )o indemni)y-holder in suh ases !y )he ,our) of 2ui)y. Aordin/ )o )he rules eoled !y )he ,our) of 2ui)y" i) as no more neessary for )he indemni)y-holder  )o !e demnified !efore he ould !e indemnified. +n o)her ords" )he indemni)y-holder an no ompel )he indemnifier )o sae him from )he loss in respe) of lia!ili)y a/ains) hih indemni)y has !een promised.

'here has !een a differene of opinion !e)een arious Ii/h ,our)s in +ndia as )o he)her  )he indemni)y-holder an laim indemni)y !efore he has a)ually suffered )he loss.

Aordin/ )o )he ie e1pressed !y )he differen) our)s" )ha) a person mus) !e demnified  !efore he an !e indemnified" i.e. no indemni)y an !e indemnified" i.e. no indemni)y an !e

laimed un)il )he indemni)y-holder has already a)ually suffered )he loss.

;hereas )he hi/h ,our)s of Bom!ay_{" ,alu))a}?_" Fadras8 _{and Allaha!ad}9 _{hae e1pressed a}

differen) ie" and )hey are in faour of )he applia)ion of la similar )o )he one reo/ni3ed in 2n/land !y )he ,our) of 2ui)y. Aordin/ )o )he deisions of )hese our)s" an indemni)y-holder an ompel )he indemnifier )o indemnify een !efore )he indemni)y-indemni)y-holder has a)ually suffered )he loss.

6 ajanan $oreshwar  . $oreshwar $adan A+R %9:# Bom D$#

7 Prafulla umar .opee &allabh Sen +.E.R (%9::& # ,al D%8

8 *amalina .#nnamolaiA+R %9D8 Fad ?9%

 Abdul $ajeed  . Abdul *ashid " A+R %9D All 98

Referrin/ )o )he eui)a!le priniple and also )he desira!ili)y of i)s !ein/ folloed in +ndia" ,ha/la" J. hile delierin/ )he jud/emen) in )he Bom!ay Ii/h ,our) deision of Majanan

 $oreshwar . $oreshwar $adan+,_{" o!sered}

'he ,our) of eui)y held )ha) if his (indemni)y-holder5s& lia!ili)y had !eome a!solu)e" )hen he as en)i)led ei)her )o /e) )he indemnifier )o pay off )he laim or )o pay in)o ,our) suffiien) money hih ould ons)i)u)e a fund for payin/ off )he laim heneer i) as made..+ hae already held )a) Se)ion %#: and %#" ,on)ra) A)" are no) e1haus)ie of )he la of indemni)y and )he ,our)s here ould apply )he same eui)a!le priniple )ha) )he ,our)s in 2n/land do. 'herefore" if )he indemnified has inurred a lia!ili)y and )ha) lia!ili)y is a!solu)e" he is en)i)led )o all upon )he indemnifier )o sae him from )ha) lia!ili)y and )o pay i) off.

'he Ea ,ommission of +ndia in i)s %D)h Repor)" %98" has e1pressed )he opinion )ha) )he ie e1pressed !y ,ha/la J." is orre) and should !e adop)ed !y )he le/isla)ure. 'he Ea ,ommission reommended )ha) as in 2n/lish Ea" )he ri/h) of )he indemni)y-holder should  !e more fully defined and )he remedies of an indemni)y-holder should !e india)ed een in

ases here he has no) !een sued.

 No all )he repor)ed ases on indemni)ies in fa) inole insurane ra)her )han refle1ie indemni)y lauses and nearly alays )he poin) in issue is he)her or no) a ne/li/en) proferens ()he par)y for hose !enefi) )he indemni)y purpor)s )o opera)e& an rely on )he indemni)y. An insurane indemni)y lause in a ommerial on)ra)" like an e1emp)ion lause is usually aimed a) appor)ionin/ insurane risks. A refle1ie lause may also fulfil )his fun)ion. Cn)il reen)ly" hoeer )his has reeied li))le open reo/ni)ion in )he our)s. Perhaps !eause of  )he more o!iously ommerial on)e1) of indemni)y lauses )han of e1emp)ion lauses )here is" hoeer" a ompe)in/ line of au)hori)y. +) holds )ha) )he oerridin/ onsidera)ion is )he in)en)ion of )he on)ra)in/ par)ies as e1pressed in )heir on)ra). +f )he par)ies hae used ords hih are ap) )o allo )he indemni)y )o opera)e in faour of )he ne/li/en) proferens )hen effe) mus) !e /ien )o )he lause. 'his is )he or)hodo1y of 'he 4reedom of ,on)ra).

DOUBLE INDEMNITY-AN ANALYSIS

+ndemni)y a/reemen)s are re/ularly used )o alloa)e risk !e)een par)ies on ons)ru)ion  proje)s. Reen)ly" some dou!) has surfaed as )o he)her )he lan/ua/e found in a )ypial indemni)y a/reemen) is suffiien) )o reuire indemni)y in si)ua)ions here )he indemnifyin/  par)y ()he indemni)or& is i)hou) faul).

,our)s hae a le/i)ima)e pa)ernalis)i fun)ion" een rela)ie )o ommerial on)ra)s" )o ensure )ha) poerful ommerial par)ies do no) a!use )heir !ar/ainin/ s)ren/)h !y fois)in/ indemni)y lauses on eaker par)ies. Ano)her anser is )ha) ne/li/en) par)ies should !e alloed )o anser personally for )heir defaul)" and no) !e alloed )o pass on )he risk )o an innoen) par)y. A/ains) )hese responses" of ourse" )here are ell-rehearsed o!je)ions. 'he  pro!lem i)h )he our)s hain/ an in)eren)ionis) role is )ha) ommerial par)ies simply ill no) kno here )hey s)and. 'he olle)ie messa/e of )hese deisions is lear Par)ies should )ake are )o ensure )ha) )he lan/ua/e in )heir indemni)y a/reemen)s properly s)a)es )he sope of indemnifia)ion in)ended.%%

'hree reen) ,alifornia ,our) of Appeal ases hae addressed )his issue. Oe)" despi)e su!s)an)ially similar lan/ua/e in eah of )he a/reemen)s a) issue" )he ases reahed differen) ou)omes. +n )o ases" )he our)s held )ha) )he a/reemen)s reuired indemnifia)ion een )hou/h )he su!on)ra)ors ere no) a) faul). +n )he o)her ase" )he our) ruled )ha) )he lan/ua/e of )he a/reemen) as no) e1plii) enou/h )o reuire indemnifia)ion i)hou) a findin/ of  faul).

A )ypial indemni)y a/reemen) is desi/ned )o shif) lia!ili)y )o )he par)y ho is )hou/h) )o !e more a)iely or primarily responsi!le for )he een)s /iin/ rise )o )he lia!ili)y. Su!on)ra)ors ommonly are reuired )o indemnify a /eneral on)ra)or for any a)s for  hih )he /eneral on)ra)or is less )han %$$ per en) responsi!le. Bu) in some ases" )he su!on)ra)or is no more a) faul) )han )he /eneral on)ra)or. +n )hese ases" )he ues)ion of  he)her )he a/reemen) reuires indemnifia)ion !eomes one of in)erpre)a)ion. As a resul)" our)s e1amine )he lan/ua/e )ha) par)ies use in )heir a/reemen) )o de)ermine )heir in)en) --een if )hey did no) a)ually onsider )he possi!ili)y of indemnifia)ion i)hou) faul).

11 John N. Adams and Ro/er Bronsord" ouble Indemnit".Contractual Indemnit" Clauses  *e/isited " J.B. E %: (%988& a) %D

'he firs) ase in )he reen) )rilo/y of opinions is Continental 0eller Corp! .  Amtech  $echanical Ser/ices1 Inc!+2_{. 'here" Am)eh" ,on)inen)als su!on)ra)or ins)alled a ale}

manufa)ured !y a )hird ompany in )he ourse of i)s ork a) a mea)-pakin/ plan). 'he ale failed and aused an e1plosion )ha) injured employees and dama/ed proper)y. 'he a/reemen) reuired Am)eh )o indemnify ,on)inen)al Ieller for loss hih >arose@ ou) of or >as in@ any ay onne)ed i)h Am)ehs a)s or omissions in )he performane of i)s ork. ;hile )he our) a/reed )ha) Am)eh did no) ins)all )he ale ne/li/en)ly" i) found )ha) ,on)inen)al Ieller did no) need )o sho )ha) Am)eh as a) faul) in order )o laim indemni)y. 'he our)" folloin/ )he e1plii) lan/ua/e in )he a/reemen)" found )ha) ,on)inen)al Ieller as en)i)led )o indemni)y !eause ,on)inen)al Iellers loss as onne)ed )o Am)ehs a) of ins)allin/ )he ale.

'he ,on)inen)al our) also remarked on )he ommerial on)e1) of )he ase as ell as issues onernin/ pu!li poliy. Bo)h Am)eh and ,on)inen)al ere lar/e" sophis)ia)ed firms )ha) had arefully ne/o)ia)ed )heir indemni)y a/reemen). 'hus" )he our) fel) Am)eh had ample oppor)uni)y )o ne/o)ia)e )he )erms of i)s indemni)y o!li/a)ions. Foreoer" Am)ehs su!on)ra) as or)h Q%.# million hile i) only as reuired )o indemnify ,on)inen)al for  Q#$"$$$. 'he our) seems )o hae relied upon )hese fa)ors )o suppor) i)s !road in)erpre)a)ion of )he indemni)y a/reemen).

+n 0eppler . 3!$! Peters Co!+4_{" lass a)ion plain)iffs" s)andin/ in )he shoes of )he deeloper"}

sou/h) indemni)y from )hree su!on)ra)ors ho orked on a residen)ial deelopmen). 'he indemni)y a/reemen)s proided )ha) )he su!on)ra)ors ould hold )he on)ra)or harmless from all laims arisin/ ou) of or in onne)ion i)h )he Su!on)ra)ors... performane of )he ;ork. ;hile nei)her ne/li/ene nor faul) as e1plii)ly referened in )he indemni)y  proision" )he our) neer)heless ruled )ha) faul) on )he par) of )he su!on)ra)or as a  prereuisi)e for indemni)y !ased on o)her lauses in )he on)ra). +) no)ed )ha) )he lan/ua/e did no) eidene a mu)ual unders)andin/ of )he par)ies )ha) )he su!on)ra)or ould indemnify... if i) as no) ne/li/en). Al)hou/h )he lan/ua/e in )he a/reemen) as su!s)an)ially similar )o )ha) in ,on)inen)al Ieller" )he our) e1plii)ly dis)in/uished )he )o 12 D ,al.App.:)h $$ (%99?& i)ed from

h))p.ons)ru)ione!links.omResoures+ndus)ryRepor)sNesle))ersAu/us)#%#$$$in demni)ylauses.h)m TEas) <isi)ed on #:-$8-$U

13 ?D ,al.App.:)h %# (%999& i)ed from

h))p.ons)ru)ione!links.omResoures+ndus)ryRepor)sNesle))ersAu/us)#%#$$$in demni)ylauses.h)m TEas) <isi)ed on #:-$8-$U

ases !ased on )he lan/ua/e found in )heir respe)ie a/reemen)s. Si/nifian)ly" i) no)ed )ha) )he a/reemen) in Ieppler did no) on)ain )he any a)s or omissions lan/ua/e found in )he a/reemen) in ,on)inen)al Ieller.

'he Ieppler our) also foused on )he ommerial on)e1) of )he indemni)y a/reemen) and )he pu!li poliy onerns i) raised. +n on)ras) )o ,on)inen)al" )he su!on)ra)ors si/ned pre- prin)ed form a/reemen)s prepared !y )he more sophis)ia)ed deeloper. 4ur)her" if )he su!on)ra)ors had !een fored )o indemnify )he deeloper" )hey )ruly ould hae !een Vsaddled i)h ruinous lia!ili)yV amoun)in/ )o oer Q.D million. 'hese fa)s suppor)ed )he our)s res)ri)ie in)erpre)a)ion of )he indemni)y a/reemen) a) issue.

4inally" in Cente5 olden Construction Co. . ale Tile Co!+6_{" ,en)e1" )he /eneral on)ra)or"}

sued *ale 'ile" )he su!on)ra)or" for indemni)y !ased on defe)ie )ile ork on a ommerial  !uildin/. A) )rial" )he jury found )ha) *ale 'ile had no) !een ne/li/en) in i)s ork on )he  proje)" !u) )he our) ruled for ,en)e1 on i)s indemni)y laim. As in ,on)inen)al Ieller" )he ,our) of Appeal a/reed )ha) under )he a/reemen)" ,en)e1 did no) need )o sho faul) on )he  par) of *ale 'ile )o preail. 'he indemni)y a/reemen) s)a)ed )ha) all ork performed !y *ale

'ile Vshall !e a) )he risk of subcontractor  e1lusiely.V 'he our) found )ha)" een more )han )he lan/ua/e in )he a/reemen) in ,on)inen)al Ieller" )his e1pression !y )he su!on)ra)or as suffiien) )o proide indemni)y in )he a!sene of faul). As in ,on)inen)al Ieller" )he ,en)e1 our) fur)her jus)ified i)s rulin/ !y no)in/ )he ases ommerial on)e1) and )he a!sene of   pu!li poliy onerns.

+n eah of )he )hree ases" )he our)s ere areful )o no)e )ha) )he in)en)ion of )he par)ies is )o  !e aser)ained from )he lear and e1plii) lan/ua/e of )he on)ra)" and )ha) hen in)erpre)in/ indemni)y a/reemen)s" )he our)s look firs) )o )he ords of )he on)ra) )o de)ermine )he in)ended sope of )he indemni)y a/reemen). ;hile none of )he a/reemen)s e1plii)ly addressed )he su!je) of indemni)y hen )he su!on)ra)or as i)hou) faul)" eah of )he our)s onfiden)ly s)a)ed )ha) )heir in)erpre)a)ion of )he lan/ua/e in )he a/reemen)s as onsis)en) i)h )he Vin)en)ionV of )he par)ies.

'o !e sure" par)ies )o indemni)y a/reemen)s should no) hae )o rely on a our)s skill a) rea)ie in)erpre)a)ion in order )o ahiee a faoura!le resul). 'he lesson learned from )hese 14 ?8 ,al.App.:)h 99# (#$$$& i)ed from

h))p.ons)ru)ione!links.omResoures+ndus)ryRepor)sNesle))ersAu/us)#%#$$$in demni)ylauses.h)m TEas) <isi)ed on #:-$8-$U

deisions is )ha) )ypial indemni)y a/reemen)s may !e ill euipped )o deal i)h laims )ha) do no) arise ou) of )he indemni)ors faul). 'hus" par)ies )o ons)ru)ion on)ra)s should )ake are )ha) )heir )rue in)en)ions on )he issue of indemni)y are manifes)ed in lear and e1plii) lan/ua/e.

+n a ons)ru)ion proje) in 4lorida" if an indiidual or )he indiidual5s a/en) a)s ron/fully  !y a)ion or ina)ion )ha) resul)s in proper)y dama/e or personal injury" a on)ra)or" loer 

)ier on)ra)or" arhi)e)" en/ineer" or ma)erial supplier ill indemnify )ha) person and hold )hem harmless for )heir on ron/ful a)" omission" or defaul). 21ep) for )he year #$$$" lauses on)ainin/ suh indemnifia)ions ere and are enforea!le in 4lorida if er)ain ondi)ions ere me)" hih are desri!ed !elo. 'his onep) of indemnifia)ion for one5s on ron/ful a)s is disussed in an ar)ile a) 8 A.E.R.Dd ? (%9?&" and raises in)eres)in/ ues)ions.%

+s i) fair for one person )o !e responsi!le for )he ron/ful or ne/li/en) a)s of ano)her personL +s )he anser )o )his ues)ion any differen) if )he person a/rees )o )ake on )ha) responsi!ili)y  !y a on)ra)L +s i) reasona!le )o !eliee )ha) mos) people si/nin/ ons)ru)ion on)ra)s unders)and )ha) )hey are indemnifyin/ )he o)her side from )heir on ne/li/eneL 4or )hose  people in ons)ru)ion ho si/n suh on)ra)s and unders)and ha) an indemni)y lause is"

)here are )hree !asi shools of )hou/h) on he)her a on)ra)ual under)akin/ )o hold someone harmless from )ha) o)her person5s on ron/ful a)s is fair.

7ne shool of )hou/h)" adop)ed in seeral s)a)es in )he C.S is )ha) )he onep) of holdin/ someone harmless from )ha) person5s on ron/ful a)s is simply ron/" no) fair" a/ains)  pu!li poliy" and should no) !e enfored in any een).

'he seond shool of )hou/h)" a) )he o)her end of )he spe)rum" is )ha) people in )he ons)ru)ion !usiness should !e a!le )o unders)and )he )erms )o hih )hey are a/reein/. +f  )hey don5) omprehend )heir responsi!ili)y" )hey should o!)ain adie )o allo )hem )o unders)and !efore a/reein/ )o an indemni)y under)akin/. 4ur)her" )he par)ies )o a on)ra) should !e free )o alloa)e )he risks arisin/ ou) of a ons)ru)ion proje) as )hey see fi) and )here is no)hin/ ron/ i)h an indiidual a/reein/ )o !e responsi!le for )he proper)y dama/e 15h))p.le/almar).om.au)opis!usinessi)eom)rues)ory%.asp T$#-$9-%#U

or personal injury )ha) ano)her person auses if )he indemni)or illin/ly su!sri!es his name )o suh an indemni)y lause.

'he )hird shool of )hou/h) (a middle /round& is )ha) suh indemni)y lauses are su!)le" no) easily unders)ood" and" in order )o !e enforea!le" )hey should inlude some limi)a)ion on" or  arnin/ re/ardin/" )he du)y )o hold someone harmless from )ha) person5s on ron/ful a)s. Suh indemni)y should !e dis)in/uished from an indemni)y for one person )o hold ano)her  harmless from a)ions done !y )he firs) par)y" or o)hers orkin/ under him. ;hile )ha) may  !e addressed !y on)ra)" i) is also addressed in )he ommon la" knon as ommon la indemni)y. 'he su!je) of )his ar)ile re/ards holdin/ one harmless from proper)y dama/e or   personal injury )ha) suh indiidual auses. 'here is no ommon la indemni)y for )ha)

si)ua)ion. +ndemni)y for )ha) only arises hen a/reed in a on)ra). 4lorida la eoled from hain/ no s)a)u)e addressin/ suh lauses (pre-%9?#&" )o reuirin/ mone)ary limi)s or speifi onsidera)ion for suh lauses as a ondi)ion of enforea!ili)y (%9?#-#$$$&" )o su!)ly makin/ suh lauses unenforea!le for all ons)ru)ion par)ies (#$$$-#$$%&" )o makin/ )hem enforea!le for ons)ru)ion par)ies so lon/ as )here is a mone)ary limi) on )he indemni)y of  no) less )han Q%"$$$"$$$ per ourrene" hih limi) mus) !ear a reasona!le rela)ionship )o )he on)ra)" is a par) of )he proje) speifia)ions or !id doumen)s" if any" and has o)her  limi)s on in)en)ional" rekless" and an)on a)s.%

+n Aschenbrenner .  #nited States 7! 8 uarantee Co!"%? _{Fr. Jus)ie S)one deliered )he}

opinion of )he ,our). Pe)i)ioner" a !enefiiary of a poliy of aiden) insurane issued )o her  hus!and !y responden)" !rou/h) )his sui) in )he *is)ri) ,our) for Nor)hern ,alifornia )o reoer under )he dou!le indemni)y proisions of )he poliy. A) )he )rial lia!ili)y as oneded for )he sin/le amoun) s)ipula)ed )o !e paid in )he een) of )he insureds dea)h !y aiden)" !u) dou!le lia!ili)y as on)es)ed on )he /round )ha) )he insured" a) )he )ime of )he aiden)" as no) a passen/er on a ommon arrier i)hin )he meanin/ of )he dou!le indemni)y proisions of )he poliy. A jud/men) en)ered upon a erdi) for )he pe)i)ioner for  )he dou!le lia!ili)y as reersed !y )he ,our) of Appeals for )he Nin)h ,irui)" hih dire)ed )ha) jud/men) !e redued !y one-half.  4.(#d& 9?. ,er)iorari as /ran)ed.%8

16 _{h))p.nmmla.omar)ileson)rindem.h)ml Tlas) isi)ed on #?-$8-%#U} 17 _{#9# C.S. 8$ (%9D:& i)ed from h))pasela.lp.findla.omsrip)s/e)ase.plL}

our)WusHolW#9#HinolW8$ TEas) <isi)ed on $D-$9-$U

18 +!id a) 8$" 8#

'he poliy proided for paymen) of a speified amoun) in ase of loss of life of )he insured resul)in/ from aiden)al !odily injury" and for paymen) of dou!le )ha) amoun) if suh injury is sus)ained !y )he insured hile a passen/er in or on a pu!li oneyane (inludin/ )he  pla)form" s)eps or runnin/ !oard )hereof& proided !y a ommon arrier for passen/er 

serie. 'he insured" hih had in his possession a )ike) en)i)lin/ him )o )ranspor)a)ion" arried a) )he railroad s)a)ion pla)form jus) as )he )rain s)ar)ed )o moe ou) of )he s)a)ion. 'here as )es)imony from hih )he jury mi/h) hae found )ha)" hile )he )rain as moin/ a) a speed of seen )o )en miles an hour !u) as s)ill i)hin )he s)a)ion and opposi)e )he  pla)form" i)h es)i!ule doors open" )he insured jumped on)o )he loer s)ep of a ar" his hand /raspin/ )he handrail" and )ha) he on)inued for a !rief )ime" hile )he )rain moed a!ou) )en)y fee)" )o s)and i)h !o)h fee) upon )he s)ep !u) i)h a small par) of his !ody or lo)hin/  proje)in/ !eyond or ou)side )he es)i!ule un)il i) !rushed a/ains) a !ys)ander on )he pla)form

in a manner ausin/ )he insured )o lose his hold and fall )o his dea)h.

'he )rial jud/e ins)ru)ed )he jury )ha) if )he insured held a )ike) en)i)lin/ him )o ride as a  passen/er" and in a))emp)in/ )o !oard )he )rain hile in mo)ion he s)ood i)h !o)h fee) upon )he s)ep" he as a passen/er and en)i)led )o reoer under )he dou!le indemni)y lause. 'he only ues)ion hih i) is neessary )o deide here is he)her )he insured as a passen/er a) )he )ime of )he aiden) i)hin )he meanin/ of )he poliy. 'he ,our) of Appeals ruled )ha) he as no)%9_{6 i) reahed )his onlusion !y applyin/ )he )erm as i) as said )o !e defined in )he}

la of ommon arriers.

'he ,our) of Appeals )hou/h) )ha) )he eidene here ould hae made no ase for )he jury in a sui) a/ains) )he arrier" and )herefore onluded )ha) )he )rial jud/e should hae dire)ed a erdi) for )he insurer on )he issue of dou!le indemni)y. No dou!) in)endin/ passen/ers" ho are injured in a))emp)in/ )o !oard a moin/ )rain" unless )hey ere ini)ed )o do so" are no) usually en)i)led )o reoer from )he arrier. Bu) i) is no) lear )ha) suh ases )urn on )he e1is)ene or non-e1is)ene of )he passen/er-arrier rela)ionship.#$

And in )he ase of )he insured" ho had ome upon )he s)a)ion pla)form in)endin/ )o !e a  passen/er" i) may !e )ha) ne/li/ene in jumpin/ unini)ed on)o )he moin/ )rain ould !ar 

his reoery from )he arrier i)hou) resor) )o )he ar)ifiial assump)ion of a hia)us in )ha) 1 +!id a) 8D

rela)ionship durin/ )he !rief in)eral reuired for !oardin/ )he )rain. 'he no)ion of suh a suspension of )he passen/er-arrier rela)ionship has !een reje)ed in alloin/ reoery upon  poliies insurin/ a/ains) injury hile )raellin/ as a passen/er on a railay )rain" !o)h here )he passen/er ali/h)ed from )he )rain a) an in)ermedia)e s)op and as injured in a))emp)in/ )o re)urn )o )he )rain af)er i) s)ar)ed )o moe a/ain.

Bu) i) is unneessary here )o follo )he nie)ies of le/al reasonin/ and )erminolo/y applied in ne/li/ene sui)s a/ains) ommon arriers" for e are in)erpre)in/ a on)ra) and are onerned only i)h )he sense in hih i)s ords ere used. 'he phraseolo/y of on)ra)s of  insurane is )ha) hosen !y )he insurer and )he on)ra) in fi1ed form is )endered )o )he  prospe)ie poliyholder ho is of)en i)hou) )ehnial )rainin/" and ho rarely aep)s i) i)h a layer a) his el!o.#% _{So if i)s lan/ua/e is reasona!ly open )o )o ons)ru)ions" )ha)}

more faoura!le )o )he insured ill !e adop)ed" and unless i) is o!ious )ha) )he ords are in)ended )o !e used in )heir )ehnial onno)a)ion )hey ill !e /ien )he meanin/ )ha) ommon speeh impor)s.

'ha) )he s)ipula)ion )o !e ons)rued is one for dou!le indemni)y alls for no differen) onlusion. +) has !een ar/ued )ha) suh a proision on)empla)es a risk hih is ompara)iely sli/h)" and )ha) )herefore i) should !e s)ri)ly ons)rued.## _{+) may !e )ha) )he}

insurer assumes li))le addi)ional risk6 !u) )he )erms of )he lause dislose an induemen) )o insure se) for)h in a))ra)ie de)ail. 'he poliy on)ains no e1ep)ions e1emp)in/ )he insurer  from lia!ili)y if )he injury is aused !y ne/li/ene of )he insured" or res)ri)in/ )he lia!ili)y )o aiden)s ourrin/ only af)er a poin) of safe)y has !een reahed" and )he s)eps of a ar are speifially inluded in )he plae here injury insured a/ains) may our. No)hin/ in )he  poliy /ies any hin) )ha) ords in )his lause are used more narroly )han )hose in any o)her. 'he insurer has hosen )he )erms" and i) mus) !e held )o )heir full measure in )his lause" as in any o)her" he)her i)s promise !e for more or less. 'he *eision as reersed.

+n Petrofina (#) Ltd  . $anaload 24_{" )he )ra/i !ak/round )o )his a)ion is" of ourse" ell}

knon. 7n )he eenin/ of  July %988 )he Piper Alpha oil pla)form hih as loa)ed in )he  Nor)h Sea some %%$ miles nor)h-eas) of A!erdeen as des)royed in a massie onfla/ra)ion.

21 _{+d a) 8} 22 +d a) 8

23 >%99:@ XB %#?

% persons los) )heir lies and many of )hose ho suried suffered aryin/ de/rees of  injury or )rauma. 'he aiden) as )he ors) disas)er in )he his)ory of )he Bri)ish off-shore oil indus)ry.

4olloin/ )he aiden) )he families of )he deeased and )he suriors presen)ed laims a/ains) )he pla)form opera)ors 7iden)al Pe)roleum (,aledonia& E)d (7P,AE&. As is so of)en )he ase )hese laims ere )hrea)ened )o !e !rou/h) no) in So)land" !u) in 'e1as. Iere i) as pereied )ha) dama/es" su!s)an)ially hi/her )han )hose likely )o !e aarded in So)land" mi/h) !e aarded.

 Ne/o)ia)ions )ook plae )hrou/hou) )he au)umn of %988 !e)een represen)a)ies of )he i)ims and layers appoin)ed !y 7P,AEs +nsurers. 2en)ually an a/reemen) as arried a) here!y 7P,AE ould pay dama/es )o i)ims )o !e assessed on a Vmid-A)lan)i !asisV. 'his represen)ed an appro1ima)e mid aypoin) !e)een 'e1as and So))ish leels of  dama/es. 'hese dama/es ere me) !y 7P,AEs lia!ili)y +nsurers su!je) only )o )he usual dedu)i!les and a self-insured /ap in oera/e hih !eame knon as V)he 71y /apV.

Iain/ paid ou) ery su!s)an)ial sums in dama/es 7P,AEs +nsurers sou/h) )o !rin/ in )he name of 7P,AE (hih had" !y )hen" !een re-named 2lf ,aledonia E)d& a series of  su!ro/a)ed laims a/ains) )he arious on)ra)ors hose employees ere killed or injured. 'hese laims ere !ased on )he )erms of er)ain indemni)ies on)ained in )he on)ra)s under  hih )he on)ra)ors ere employed. 'he on)ra)s ere su!je) )o So))ish Ea.

A) )he end of an e1)remely len/)hy )rial Eord ,aplan arried a) ha)" )o )he insurers inoled" seemed )o !e a ui)e e1)raordinary onlusion. Ie held )ha)

VFy onlusion ...is )ha) )he +nsurers of 7P,AE and )heir Par)iipan)s do no) hae any ri/h)s of su!ro/a)ion in respe) of )he indemni)ies /ran)ed !y )he ,on)ra)ors. >7P,AE@ no lon/er  hae any )i)le or in)eres) )o sue )he ,on)ra)ors. 'his means )ha) if +nsurers ish )o reoer  )heir ou)lay )his ould hae )o !e !y ay of a separa)e a)ion !ased on on)ri!u)ion.V

'his findin/ has" no) surprisin/ly" aused onsidera!le onern amon/s) many +nsurers and )heir adisors. +) is" hoeer" impor)an) )o larify from )he ou)se) )he sope of )his findin/. +n  par)iular i) should !e unders)ood )ha) Eord ,aplan is no) sayin/ )ha) in all So))ish ases ri/h)s of su!ro/a)ion do no) e1is). Nor )ha) in So)land su!ro/a)ed laims mus) !e !rou/h) in )he name of +nsurers and no) )heir assured.

4ar from i)" in fa)" Eord ,aplan e1pressly reaffirmed )he ell knon priniples of  su!ro/a)ion. 'hese apply jus) as muh )o So))ish ases as )hey do )o 2n/lish ones. Eord ,aplans jud/men) does hoeer raise an impor)an) issue as )o )he na)ure of su!ro/a)ed laims and )he irums)anes under hih )hey an !e !rou/h).

'he su!ro/a)ion issue arose ery la)e in )he hearin/. 'he firs) )ime i) as raised as on )he las) day of )he defendan)s losin/ su!missions on day D8% of )he )rial. Rumour has i) )ha) one of )he So))ish defene ounsel )hou/h) up )he poin) la)e in )he )rial hils) hain/ a ell earned soak in his !a)h. ;he)her he leap) ou) of )he !a)h i)h )he ry of oh aye eureka is no) knon !u) i) is er)ainly an in/enious ar/umen). +n order )o unders)and )he issue i) is neessary )o !riefly look a) )he ori/ins and his)ory of )he do)rines of !o)h su!ro/a)ion and on)ri!u)ion.

'he onep) of su!ro/a)ion is a ery old. +) da)es !ak )o Roman la under hih a )hird  par)y" ho me) a de!) for hih someone else as lia!le" as a!le )o !e su!ro/a)ed )o )he ri/h)s of )he redi)or a/ains) )he de!)or. 'he priniple has !een reo/nised in 2n/lish la for  many en)uries. 'he e1a) ori/ins and !asis of )he do)rine has" hoeer" lon/ !een )he su!je) of judiial de!a)e. +) seems )o hae !een aep)ed for a) leas) )he las) %$$ years )ha) )he do)rine is !ased on )he na)ure of a on)ra) of indemni)y and is no) uniue )o on)ra)s of  +nsurane. 'here are hoeer )o dis)in) shools of )hou/h). 'he firs) onsider )ha) i)s ori/ins lie in priniples of eui)y. 'he seond onsider )ha) )he insurers5 ri/h)s of su!ro/a)ion arise ou) of )erms implied !y )he opera)ion of la in)o )he on)ra) of insurane.#:

+n )he as) majori)y of ases )he ues)ion of hih shool of )hou/h) is orre) is li))le more )han of aademi in)eres). ;ha)eer )he preise !ak/round of i)s ori/ins )he ra)ionale and  !asi priniples are ell knon. 'he ra)ionale is )ofold" !o)h firmly !ased on )he onep) of 

fairness. 4irs)" )ha) an assured should no) !e a!le !o)h )o make a reoery under )he )erms of  his poliy from his insurers and keep )he proeeds of any reoery )ha) mi/h) !e made from a ron/doer hose ne/li/ene or !reah of on)ra) aused )he loss. Seondly" )ha) )he ron/doer should no) !e relieed of his lia!ili)y merely !eause )he assured has !een pruden) enou/h )o )ake ou) insurane.

24h))p.le1isne1is.omommuni)yinsuranela!lo/sinsurane!y)espoered!yneapplema narhie#$%%$9$su!ro/a)ion-ne-appleman-on-insurane-la-li!rary-edi)ion-hap)er-:9.asp1 T Eas) <isi)ed on #9-$8-%#U

4rom )his desire )o ensure fairness )he !asi priniples of su!ro/a)ion hae eoled. +n  par)iular )he ri/h)s of insurers )o !rin/ a su!ro/a)ed laim a/ains) a ron/doer arise on  paymen) !y )he insurers under )he poliy. 'hey an only !e e1erised in )he name of )he assured. 'he insurer is su!ro/a)ed )o any laim hih )he assured is en)i)led )o !rin/ )o diminish his loss (proided )hose ri/h)s are onne)ed i)h )he su!je) ma))er of )he insurane&.

'here are hoeer limi)a)ions. 4or e1ample" here )he assured has aused his on loss" !u) has a laim under a poliy" )he insurers anno) seek any se) off as a/ains) )heir assured as ron/doer. Similarly )here are pra)ial res)ri)ions on !rin/in/ su!ro/a)ed proeedin/s in )he name of one assured a/ains) a ne/li/en) o-assured ho also has an in)eres) in )he su!je) ma))er of )he insurane. Suh laims some)imes (!u) no) alays& fail !y reason of irui)y of  a)ion see. 7)her e1amples an !e found here under )he )erms of )he poliy +nsurers aie )heir ri/h)s of su!ro/a)ion a/ains) an iden)ified par)y.

  Rihard Aikens X, ro)e an e1ellen) ar)ile in )he Fay %99? edi)ion of )he Bri)ish +nsurane Ea Assoia)ion Journal in hih he e1plained in some dep)h )he irums)anes here!y underri)ers are or are no) a!le )o !rin/ a su!ro/a)ed laim in )he name of one o-assured a/ains) ano)her.

4ur)her" i) is impor)an) )o dis)in/uish a /enuine su!ro/a)ed laim !rou/h) in )he name of )he assured a/ains) a ron/doer from a laim for on)ri!u)ion. ,laims for on)ri!u)ion an arise heneer a par)y has ri/h)s of indemni)y a/ains) more )han one person. 'he mos) ommon e1amples of a laim for on)ri!u)ion happen hen assureds hae )aken ou) dou!le insurane. 'he !asi priniples of dou!le insurane are ell knon al)hou/h in pra)ie )hey an rea)e onsidera!le diffiul)ies. +) is perfe)ly laful for an assured )o insure any su!je) ma))er in hih he has an insura!le in)eres) as many )imes as he likes. Proided" of ourse" )ha) )he  purpose of suh dou!le insurane is no) fraudulen). 'his does no) mean )ha) )he assured an

reoer more )han his loss. +n a ase here an assured is oer-insured !y reason of dou!le insurane he ill !e limi)ed )o reoerin/ his a)ual loss and no more. Ie has hoeer  (su!je) )o e1press poliy )erms& )he ri/h) )o hoose hih of his insurers he ishes )o reoer from.

+f )he payin/ insurer had no remedy a/ains) his o-insurers )his ould lead )o an injus)ie. 'he our)s" hoeer" proide an eui)a!le solu)ion. 'he insurer is no) en)i)led )o make a su!ro/a)ed laim in )he name of his assured under )he al)erna)ie poliies. Ioeer" su!je) )o some ra)her omple1 rules and )he preise )erms of )he relean) poliies" )he payin/ insurer  is of)en en)i)led )o make a laim a/ains) his o-insurers for an eui)a!le on)ri!u)ion. 'his laim has )o !e dis)in/uished from a su!ro/a)ed laim as i) is !rou/h) in )he +nsurers on name and is no) for )he full sum insured under )he al)erna)ie poliies.

'he diffiul)ies 7P,AEs insurers hae e1periened flo dire)ly from )he do)rine of  on)ri!u)ion. 'he su!ro/a)ed laim !ein/ !rou/h) !y insurers in )he name of )he Piper Alphas opera)ors a/ains) )he on)ra)ors as !ein/ made pursuan) )o )he )erms of )he relean) on)ra)s hih e1is)ed !e)een )hem. Al)hou/h )he preise )erms aried !e)een )he arious on)ra)ors )hey all on)ained a series of indemni)ies a represen)a)ie e1ample of hih reads

V'he on)ra)or shall indemnify" hold harmless and defend 7P,AE ...a/ains) any laim" demand" ause of a)ion" e1pense or lia!ili)y (inludin/ !u) no) limi)ed )o os)s of li)i/a)ion& arisin/ ...!y reason of ...injury )o or dea)h of persons employed !y... )he on)ra)or  ...irrespe)ie of any on)ri!u)ory ne/li/ene" he)her a)ie or passie" of )he par)y )o !e indemnified" unless suh injury or dea)h as aused !y )he sole ne/li/ene or ilful misondu) of )he par)y hih ould o)herise !e indemnified.V

'he applia!ili)y of )his lause as ho)ly on)es)ed !y )he on)ra)ors ho ar/ued )ha) )he dea)hs and injuries suffered !y )heir employees ere aused ei)her !y )he sole ne/li/ene of  7P,AE or !y )heir ilful misondu). Eord ,aplan hoeer found )ha) )he disas)er as no) aused !y )he sole ne/li/ene of 7P,AE" or !y )heir ilful misondu). +mpor)an)ly" he also held )ha) )he loss as no) aused !y )he ron/doin/ of any of )he on)ra)ors ho ere defendan)s )o )he a)ion.

+n his jud/men) Eord ,aplan reorded )he fa) )ha) insurers ho paid ou) in )he firs) ins)ane should ei)her !e a!le )o reoer )heir hole ou)lay )hrou/h su!ro/a)ion or a propor)iona)e  par) of )heir ou)lay )hrou/h on)ri!u)ion. Ie en) on )o say )ha)" o!iously )hey ould no) do  !o)h as )he remedies ere mu)ually e1lusie. Iain/ onfirmed )ha)" in respe) of a laim

a/ains) a ron/doer" su!ro/a)ion is )he appropria)e remedy he en) on )o s)a)e

V+f a par)y enjoys )he !enefi) of )o or more indemni)ies /ran)ed )o him )o oer a par)iular  loss )hen if )ha) loss emer/es he an hoose )o reoer from hih of )he indemnifiers he hooses. +f he reoers his hole loss i) is diffiul) )o see upon ha) priniple he re)ains a 21

ri/h) )o enfore his indemni)y a/ains) )he non-payin/ indemnifier. Iis loss has !een sa)isfied. 'here is no es)a!lished priniple )ha) + am aare of )ha) ould en)i)le him )o enfore his loss from )he on)ra)or as )here is in a ase of a ron/doer.V

Aordin/ly Eord ,aplan held )ha) )he only laim )o surie as 7P,AEs on laim in respe) of )he uninsured V71y /apV. 'here an !e no dou!) )ha) )his deision )ook insurers !y surprise" !u) on analysis i) is no) as ou)ra/eous as )he response of er)ain insurers mi/h) su//es). +) is" hoeer" in many respe)s a )rou!lin/ ase. 'his is no) leas) !eause of )he fa) )ha) )his issue did no) emer/e un)il ery muh )he eleen)h hour of )he )rial. +) ould seem )ha) )he defene )eam ar/ued )ha) )hey ere unaare )ha) )he laim as !ein/ !rou/h) !y underri)ers e1erisin/ )heir ri/h)s of su!ro/a)ion. 'ha) )his emer/ed only durin/ )he ourse of )he )rial and )ha) )hey responded promp)ly one )hey learned of )he fa). 4rankly )his does no) sound ery redi!le. Surely i) mus) hae !een lear )o all )ha) 7P,AE ere insured for  )his loss.

;ha)eer )he e1plana)ion i) mean) )ha) an impor)an) and noel poin) as deal) i)h ery muh as an af)er)hou/h). Eord ,aplan did no) een hae )he !enefi) of seein/ )he poliies under hih 7P,AE ere insured so )ha) he ould onsider any proisions )ha) mi/h) of   !een of releane. 'he laiman)s ere una!le )o pu) )heir house in order !y !rin/in/ a laim

in insurers5 names as an al)erna)ie ause of a)ion. +) ould seem likely )ha) any suh laim is no )ime !arred.

An appeal is almos) inei)a!le. Ioeer un)il suh )ime as )he ,our) of Appeal /ie )heir  ies )here is one er)ain lesson for all insurers and )heir adisors. So all )ha) an !e said is )ha) one should !e !eare of )he dou!le indemni)y.

+n 9sman 3amal 8 Sons Ltd . . opal Purshottam12: _{a ompany as a)in/ as )he}

ommission a/en)s of )he defendan) firm and in )ha) apai)y !ou/h) er)ain /oods for )he defendan)s hih )hey failed )o )ake. 'he supplier !eame en)i)led )o reoer from )he ompany er)ain sum of money as dama/es for !reah. 'he ompany en) in)o liuida)ion  !efore payin/ )he laim.

+) as held )ha) )he 7ffiial Eiuida)or ould reoer )he amoun) een )hou/h )he ompany had no) a)ually paid )he endor. 'his is here )he dou!le indemni)y lause ame in)o 25 %9#8 +ER  ,al ##

 prominene and i) is !eause of )his )ha) )he our) dire)ed )ha) )he amoun) should !e se) apar) so )ha) i) is used in full paymen) of )he endor in respe) of hose on)ra) )he ompany had inurred lia!ili)y.#

'he ase of $annin  . AI ;urope (#) Ltd .#?  _{as !rou/h) !y )he liuida)or in )he}

af)erma)hs of )he ollapse and liuida)ion of )he Sae /roup of pe)rol re)ailers. 'he paren) ompany" Sae Mroup pl" !ou/h) pe)rol and sold i) on )o a su!sidiary ompany" Sae Serie S)a)ions E)d hih oned :$$ pe)rol s)a)ions. 'he /roup also loaned money )o )he s)a)ions" rea)in/ su!s)an)ial in)er-ompany de!)s.

+n %99?" Sae proided a !ond )o ,us)oms H 21ise hih deferred paymen) of <A' due on )he pe)rol. 'his !ond as en)ered in)o on )he /roups !ehalf !y a )hird par)y" A+M 2urope" on )he ondi)ion )ha) Sae ould indemnify A+M for arious losses in er)ain irums)anes. 'he deed of indemni)y also on)ained a su!ordina)ed de!) lause.

;hen )he Sae /roup su!seuen)ly en)ered liuida)ion A+M ar/ued )ha) )he su!ordina)ed de!) lause /ae preedene )o )heir Y%$ million de!) oer )he Y% million in)er-ompany de!)s. Mien )ha) )he en)ire asse)s of Sae amoun)ed )o Y:. million" )he issue of here )he de!)s ranked as of ri)ial impor)ane )o A+M" Sae and o)her redi)ors.

'he our) onfirmed )he pre-eminene of )he pari passu priniple in insoleny" hih reuired )ha) )ha) all de!)s are )o !e )rea)ed eually" !u) i) added )ha) a redi)ors ri/h)s ould  !e su!ordina)ed )o )ha) of ano)her !y on)ra).

Ioeer" )he /roups liuida)ors ar/ued )ha) )he indemni)y as no) a )rue su!ordina)ed de!)  !u) a priori)ies a/reemen) !e)een er)ain redi)ors" suh )ha) )hose no) par)y )o )he on)ra) should no) !e prejudied !y i). 'hey ar/ued )ha) )he indemni)y infrin/ed )he pari passu  priniple !y effe)iely remoin/ a major asse) of )he /roup )o )he de)rimen) of i)s redi)ors.

Fr. Jus)ie Eloyd a/reed !u) he said in le/al )erms )he indemni)y does no) inole )he diersion of an asse) of Mroup" !u) ra)her i)s suppression !y su!ordina)ion. Ie on)inued 'he fa) )ha) Mroup ill no) !e a!le )o olle) in i)s main asse)" namely )he in)er-ompany de!)" does no) in)erfere i)h )he >pari passu@ priniple.

26 4olloed in Prafulla umar  .opi &allabh A+R %9: ,al %9

27 >#$$:@ 2;I, %?$ (,h&

Eookin/ a) )he issues more !roadly )he jud/e onluded hile )he >indemni)y@ is disadan)a/eous )o Mroup in presen) irums)anes" )he disa!ili)y hih i) imposes >@ as re/ards )he in)er-ompany de!) is" as i) ere" par) of )he prie for )he adan)a/e seured >@ )hrou/h o!)ainin/ )he assis)ane of A+M in /e))in/ )he paymen) of du)y deferred.

CONCLUSION

+) is here!y su!mi))ed )ha) )he onep) of fairness and euali)y of !ar/ainin/ anno) !e e1luded hen )alkin/ a!ou) dou!le indemni)y lauses in indemni)y on)ra)s. Some !asi )erms and ondi)ions ill alays !e )here" he)her )hey !e ou)laed !y )he proisions of  rules or s)a)u)es. ;ha) is needed in )he omple1 orld of )oday is a alid le/isla)ion i)h re/ard )o indemni)y lauses and as suh some proisions )o pro)e) )he eaker se)ions in a  !ar/ainin/ )ransa)ion.

 +) is no realised )ha) eonomi euali)y of)en does no) e1is) in any real sense and )ha) indiidual in)eres)s hae )o !e made )o su! sere )hose of )he ommuni)y. Iene )here hae  !een fundamen)al han/es !o)h in our soial ou)look and in )he poliy of )he Ee/isla)ure )oards on)ra) and )he la )oday in)erferes a) numerous poin)s i)h )he freedom of )he  par)ies )o make ha)eer on)ra) )hey like. 7!iously )he draf)sman of an indemni)y lause needs )o approah )he ma))er in muh )he same ay as he ould an e1emp)ion lause )he ordin/ mus) !e as )i/h) as possi!le" in o)her ords a)er)i/h). Al)hou/h )here is a reasona!ly s)ron/ line of au)hori)y for )he our)s no) )o approah an indemni)y lause in )he same li/h) as e1emp)ion lauses" )he idea )ha) is )o !e aimed a) is )i/h) ordin/ oupled i)h an india)ion in )he lause )ha) i)s fun)ion is )he appor)ionmen) of insurane risks or )ha) i) is o)herise reasona!le.

'herefore a)in/ i)hin )he limi)a)ions imposed on )hem !y )he on)ra)ual frameork of  )hese )ransa)ions" )he our)s neer)heless endeaoured )o alleia)e )he posi)ion of )he reipien) of )he doumen) !y reuirin/ er)ain s)andards of no)ie in respe) of )he onerous

lauses" and !y ons)ruin/ )he doumen) hereer possi!le in his faour. Iope )his piee of  researh ill add )o )he s)orehouse of knoled/e for )he fu)ure /enera)ions.

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