“Words Matter: Understanding Indemnification Clauses”

– The wording of an indemnification provision must be specific in order to provide full protection to the indemnified parties.
– The way indemnification agreements are drafted can have significant practical implications.
– A recent decision by New York’s Appellate Division confirms the importance of specific language in indemnification clauses. 1. The language of the indemnification provision in the contract does not cover the party’s fees and expenses in suing the counterparty to enforce the indemnification in the event of a breach.

2. The party may recover damages resulting from the counterparty’s breach of the agreement, but not for costs, attorneys’ fees, and expenses in suing the counterparty to enforce the indemnification.

3. The party may recover from their indemnitor the judgment paid to a third party and the fees and expenses incurred in defending the third-party lawsuit, but not for costs, attorneys’ fees, and expenses in suing the counterparty to enforce the indemnification. 1. The indemnification provision must clearly state that attorneys’ fees are covered in order to be reimbursed for enforcing the agreement with the counterparty.
2. The provision should exclusively refer to claims between the parties themselves, rather than claims by third parties, in order to recover attorneys’ fees incurred in litigation.
3. Interim indemnification is an important consideration, as the agreement should state that one is entitled to be indemnified as costs are incurred.
4. Consulting with legal counsel to address language and practical issues in indemnification agreements can prevent costly problems in the future.

Language Trumps Logic in Indemnification Clauses


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