Additional indemnity: Overview, definition and example
What is additional indemnity?
Additional indemnity refers to the extra protection or compensation provided by one party to another in a contract or legal agreement, beyond the primary indemnity clause. It is a provision that ensures the indemnifying party (typically the one agreeing to provide protection) covers extra costs or liabilities that may arise during the course of an agreement. This can include unforeseen risks, losses, or damages that were not initially anticipated but are still within the scope of the indemnity agreement. Additional indemnity clauses are often used to cover more specific, expanded, or future liabilities.
For example, a business might agree to provide additional indemnity to cover legal fees and other costs related to a breach of contract, even if those costs exceed the original indemnity limits outlined in the agreement.
Why is additional indemnity important?
Additional indemnity is important because it offers further financial protection to one party in case unforeseen risks or liabilities arise. It enhances the scope of indemnification, ensuring that the party seeking protection is not left vulnerable to unexpected legal or financial burdens. This added layer of security is particularly important in high-risk industries or complex agreements, where parties want to ensure comprehensive coverage for potential future claims or losses.
For businesses, providing additional indemnity can help foster trust and attract partners by showing that they are willing to cover additional risks. For individuals or organizations receiving indemnity, it offers peace of mind that they will be compensated for a broader range of possible liabilities, even those that may arise unexpectedly.
Understanding additional indemnity through an example
Imagine a company that enters into a contract with a contractor to provide services for a construction project. The original indemnity clause covers losses or damages arising from the contractor's negligence, but the company also includes an additional indemnity clause to cover any unexpected costs that might arise from third-party claims or legal fees associated with the project. This additional indemnity ensures that if a claim is filed by a third party for damages caused by the contractor’s work, the company will be protected against those additional expenses, even if they were not initially contemplated.
In another example, a company that leases office space might agree to an additional indemnity provision to cover the cost of any property damage or legal action taken by third parties if the tenant’s activities on the premises lead to damages or disputes. This indemnity would go beyond the standard lease agreement protections to cover extra liabilities related to specific risks associated with the tenant’s operations.
An example of an additional indemnity clause
Here’s how an additional indemnity clause might appear in a contract:
“In addition to the indemnity provisions set forth in Section 5, the Indemnifying Party agrees to provide additional indemnity to the Indemnified Party, covering any and all legal fees, claims, damages, or liabilities that arise as a result of third-party lawsuits, regulatory actions, or unforeseen events directly related to the actions of the Indemnifying Party, even if those claims exceed the limits established in the primary indemnity clause.”
Conclusion
Additional indemnity provides an expanded level of protection, ensuring that unforeseen liabilities or risks are covered beyond the primary indemnity agreement. This provision is important for parties who want to safeguard themselves against unexpected events or claims that may arise during the course of a contract. It is often used to create more comprehensive coverage, giving parties greater confidence and security when entering into agreements with complex or high-risk elements.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.