Claims initiated by indemnitee: Overview, definition, and example
What are claims initiated by indemnitee?
Claims initiated by indemnitee refer to situations where a party protected by an indemnification clause (the indemnitee) brings a claim or lawsuit against a third party and seeks reimbursement for costs, damages, or liabilities from the indemnifying party. This clause clarifies the indemnitee’s rights when they must take legal action to protect their interests.
For example, if a company faces a lawsuit due to actions taken by its supplier, the company (indemnitee) may initiate legal action against the supplier and seek indemnification for any legal costs and damages incurred.
Why are claims initiated by indemnitee important?
This clause is important because it ensures that the indemnitee has the right to recover expenses if they must take legal action to enforce contractual rights or defend against third-party claims. Without this protection, an indemnitee could bear the financial burden of disputes caused by the other party’s actions or negligence.
For businesses, having a clear indemnification clause provides financial protection and reduces litigation risks by shifting liability to the responsible party.
Understanding claims initiated by indemnitee through an example
Imagine a software company sells a product that a customer later sues over due to a data security flaw. If the issue was caused by a third-party developer’s negligence, the software company may initiate a claim against the developer for indemnification, seeking reimbursement for legal costs and damages.
In another scenario, a construction firm hires a subcontractor to complete part of a project. If the subcontractor’s work leads to property damage and the client sues the construction firm, the firm (indemnitee) may initiate a claim against the subcontractor for indemnification to cover legal fees and settlement costs.
An example of a claims initiated by indemnitee clause
Here’s how a claims initiated by indemnitee clause might appear in a contract:
“If the Indemnitee initiates a claim, lawsuit, or proceeding against a third party in connection with matters covered under this indemnification provision, the Indemnifying Party shall reimburse the Indemnitee for all reasonable costs, expenses, and damages incurred in such action, including legal fees.”
Conclusion
Claims initiated by indemnitee clauses ensure that a protected party can seek reimbursement if they must take legal action to enforce their rights or defend against third-party claims. This provision helps businesses reduce financial risk and ensures that liability is placed on the responsible party.By including this clause in contracts, businesses can protect themselves from unexpected legal costs and ensure that indemnification obligations are clearly defined.
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.