In today’s commercial arena, the term 'indemnity' is so often used either in contractual negotiations or in commercial documents that we assume we know what it means. But do we? And, more importantly, how does it impact on your insurance coverage?
Essentially, an indemnity clause is about risk allocation. Parties to commercial contracts allocate their respective legal risk exposures – whether their exposure is breach of contract, negligence or other unlawful conduct – in accordance with the provisions set out in the contract. The precise wording of the indemnity clause determines the extent of the indemnity and the risks allocated between the parties to the contract.
This technical update from Liberty discusses these issues.