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Tuesday, 11 March 14
HOLD HARMLESS CLAUSES ARE NOT ALWAYS MUTUAL! - ITIC
 KNOWLEDGE TO ELEVATE
ITIC provides an insurance related contract review service to all of its members. As the leading professional indemnity insurer for the offshore and hydrographic sector, we are often asked to review contracts which contain a mutual hold harmless or knock for knock clause. We are usually told that the presence of this clause in a contract means the risk of a claim is either significantly reduced or even non-existent! No contract is completely risk free. However, if the clause is worded carefully, and is balanced between both contracting parties, it is good contractual risk management and can help to reduce the chance of a successful claim of negligence against you.
A mutual hold harmless indemnity regime provides that each party to the contract agrees to take responsibility for, and to indemnify the other, against injury and loss to its own personnel and property and its own ‘consequential losses’. This is intended to be effective even if the accident and related losses are caused by negligence.
The mutual hold harmless clause in the LOGIC standard form contracts, does seek to create balance. However, in many of the contracts we review, the party with the greater bargaining power will naturally seek to swing the balance back to their favour. Consequently, there are a number of pitfalls to consider. We shall provide a few of these below. This shall be viewed from an English law and a professional indemnity insurance perspective.
Insurance
First, when asked to review contracts with a mutual hold harmless clause, ITIC would suggest that your other insurers are notified. Potentially you are signing away the recovery rights of both your property and employers’ liability insurer. Therefore, you should seek authority from them before signing a contract containing a mutual hold harmless clause.
They may not be mutual
It is staggering how often we see contracts where “the consultant shall indemnify the company against any and all losses,” but there is no reciprocal benefit to the consultant. Furthermore, the clause can be more beneficial to one party, as one side may be carrying out all of the work, using only their employees and property. The clause should be read carefully to ensure there is a mutual provision.
Third party damage
The mutual hold harmless clauses seen by ITIC, although setting out the losses suffered to the property or employees of the contracting parties, will often leave the distribution of third party liabilities unclear. If, for example, you act as a hydrographic consultant on a survey vessel, you should be protected from third party claims arising from the operation of the vessel. The consultant should not be responsible for potentially multi-million dollar pollution liabilities, or collision damages to third party property. These should fall upon the party who has insurance for these liabilities, such as the vessel’s protection and indemnity or hull and machinery cover.
Gross Negligence
The hold harmless regime provides that neither party shall be liable to the other even where the loss occurred is due to the negligence of one party. However, in some cases we see the clause is amended to state this does not apply in instances of “gross” negligence. Therefore, if one of the parties is found to be grossly negligent they will not be held harmless. This might be fine if the contract was pursuant to Norwegian or US law.
Unfortunately, there is no true concept of gross negligence under English law. You should always operate under the assumption that you are negligent or you are not. Baron Rolfe, in - Wilson v Brett (1843) - stated that he “could see no difference between negligence and gross negligence; that it was the same thing, with the addition of a vituperative epithet.” In other words “gross” did not add anything to the standard negligence test. That being said, if gross negligence is included in a contract, a tribunal will attempt to interpret it. The leading decision comes from Lord Mance in - The Hellespont Ardent (1997) – in which he found that gross negligence: is “conduct so seriously negligent that the defendant should not be entitled to rely on the exemption clause.” He further added that it is “very much a matter of degree and judgment,” and, “all the circumstances must be weighed and balanced.” It should be pointed out that Lord Mance was interpreting a contract pursuant to New York law. Therefore, his words are not binding, and his interpretation on gross negligence may not be followed by subsequent tribunals.
The line between negligence and gross negligence can become blurred, and cases will turn on the facts and expert evidence. Moreover, tribunals may have differing opinions on how to apply the test against the facts, reaching differing decisions. On balance, the inclusion of gross negligence within a hold harmless clause in a contract pursuant to English law can lead to uncertainty and increased litigation costs.
Finally, it is understandable that contracting parties do not want the other to rely on a hold harmless clause, as a shield for reprehensible behaviour, beyond the ordinary test of negligence. However, as the line is blurred between that of negligence and gross negligence, a more delineated position to take, is between that of wilful default/misconduct and negligence.
Indirect damages
A further and final point we see, is how consequential or indirect losses are defined in the mutual hold harmless clause. It is usual that these losses are excluded under contract. However, the distinction between indirect and direct loss can be complicated. The famous case of Hadley v Baxendale [1854] found that direct losses were those which arise naturally from the breach of contract, and is therefore foreseeable and recoverable. Whereas, indirect losses were recoverable, but only if they were reasonably foreseeable by both parties, as a possible result of a breach, at the time of contracting.
A common misconception is that all “loss of profits” are indirect losses. This is wrong. Loss of profits can be either direct or indirect, depending on the facts of the case. The following is taken from the hold harmless clause of a contract we have reviewed recently:
“ The consultant nor the company shall be liable to the other… for any consequential indirect damage, that may be suffered by the other.”
This clause could pose problems in the event of a claim, as it only excludes “consequential indirect damages.” Following Hadley v Baxendale, dependant on the facts, loss of profit can either be a direct or indirect result of the breach. If, for example, a consultant was providing design work for sub-sea equipment and carried out the design negligently, not only could this cause damage to property, but also lost drilling time, leading to lost revenue and profit. In this example, a tribunal could find the loss of profit arose naturally from the breach, and therefore, is a direct loss not excluded under the above hold harmless clause. Taking into account the current day rates of drill rigs, this could form a substantial part of any claim.
The clause should be amended to state loss of profits are excluded, whether direct or indirect.
Conclusion
ITIC’s advice is that you carefully review your hold harmless clauses to ensure that they are actually mutual and of benefit to you.
Source: ITIC / Hellenic Shipping
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Tuesday, 04 March 14
HIGHER PRICES AND STEADY FREIGHT RATES LEAD SHIP OWNERS TO TEMPORARILY HALT SECOND HAND VESSEL PURCHASES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the dry bulk market has kept on improving, but at a very slow rate, ship owners have elected to take a step back from the flurry of the S&P m ...
Monday, 03 March 14
SUB-BIT INDONESIA COAL SWAP (FOB) FOR AVERAGE Q115 CLOSED AT $60.28, $ 1.70 HIGHER THAN 2Q14
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 slightly corrected do ...
Monday, 03 March 14
API 8 CFR SOUTH CHINA SWAPS: Q4' 2014 DELIVERY CLOSED US$ 1.40 HIGHER COMPARED TO Q2' 2014 DELIVERY
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 1.90 percent month on month and closed at US$ 76.27 per mt as on Fr ...
Monday, 03 March 14
COSTS LIABILITY PASSING DOWN A CHARTERPARTY CHAIN - SKULD
KNOWLEDGE TO ELEVATE
Provided that charterparties are on back to back terms, and the claim is successful, liability for costs incurred shoul ...
Sunday, 02 March 14
THE FREIGHT MARKET WAS STEADY TO FIRM THIS PAST WEEK - CAPT. REDDY
COALspot.com: The freight market was steady to firm this past week. The BDI was up 7.06 pct and closed at 1258 points and the cape index was also fi ...
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Showing 3821 to 3825 news of total 6871 |
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- Parry Sugars Refinery, India
- Borneo Indobara - Indonesia
- Indika Energy - Indonesia
- Siam City Cement PLC, Thailand
- Minerals Council of Australia
- ASAPP Information Group - India
- Central Electricity Authority - India
- VISA Power Limited - India
- Central Java Power - Indonesia
- Kaltim Prima Coal - Indonesia
- Larsen & Toubro Limited - India
- Manunggal Multi Energi - Indonesia
- Kideco Jaya Agung - Indonesia
- Globalindo Alam Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- Sical Logistics Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Renaissance Capital - South Africa
- Gujarat Mineral Development Corp Ltd - India
- GMR Energy Limited - India
- Chettinad Cement Corporation Ltd - India
- Jaiprakash Power Ventures ltd
- Karbindo Abesyapradhi - Indoneisa
- Barasentosa Lestari - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Mercuria Energy - Indonesia
- Indian Energy Exchange, India
- Planning Commission, India
- The Treasury - Australian Government
- Eastern Coal Council - USA
- Ceylon Electricity Board - Sri Lanka
- Kobexindo Tractors - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Anglo American - United Kingdom
- Essar Steel Hazira Ltd - India
- Heidelberg Cement - Germany
- Sinarmas Energy and Mining - Indonesia
- Antam Resourcindo - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- LBH Netherlands Bv - Netherlands
- Iligan Light & Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Romanian Commodities Exchange
- Jindal Steel & Power Ltd - India
- White Energy Company Limited
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Banpu Public Company Limited - Thailand
- Star Paper Mills Limited - India
- Electricity Authority, New Zealand
- Edison Trading Spa - Italy
- Pipit Mutiara Jaya. PT, Indonesia
- Carbofer General Trading SA - India
- Xindia Steels Limited - India
- PowerSource Philippines DevCo
- Gujarat Sidhee Cement - India
- Chamber of Mines of South Africa
- GVK Power & Infra Limited - India
- Oldendorff Carriers - Singapore
- Kapuas Tunggal Persada - Indonesia
- Lanco Infratech Ltd - India
- Agrawal Coal Company - India
- Formosa Plastics Group - Taiwan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cement Manufacturers Association - India
- Latin American Coal - Colombia
- India Bulls Power Limited - India
- GAC Shipping (India) Pvt Ltd
- Bhatia International Limited - India
- Port Waratah Coal Services - Australia
- Trasteel International SA, Italy
- TeaM Sual Corporation - Philippines
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- Australian Commodity Traders Exchange
- Directorate General of MIneral and Coal - Indonesia
- Kumho Petrochemical, South Korea
- Makarim & Taira - Indonesia
- Sree Jayajothi Cements Limited - India
- Economic Council, Georgia
- Uttam Galva Steels Limited - India
- Metalloyd Limited - United Kingdom
- Coastal Gujarat Power Limited - India
- Sojitz Corporation - Japan
- Goldman Sachs - Singapore
- Georgia Ports Authority, United States
- SMC Global Power, Philippines
- Vizag Seaport Private Limited - India
- Global Business Power Corporation, Philippines
- Parliament of New Zealand
- MS Steel International - UAE
- Ambuja Cements Ltd - India
- Commonwealth Bank - Australia
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Rashtriya Ispat Nigam Limited - India
- Indo Tambangraya Megah - Indonesia
- Directorate Of Revenue Intelligence - India
- GN Power Mariveles Coal Plant, Philippines
- European Bulk Services B.V. - Netherlands
- Standard Chartered Bank - UAE
- Aditya Birla Group - India
- Marubeni Corporation - India
- Altura Mining Limited, Indonesia
- Medco Energi Mining Internasional
- Sindya Power Generating Company Private Ltd
- Posco Energy - South Korea
- SMG Consultants - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Samtan Co., Ltd - South Korea
- Petron Corporation, Philippines
- Interocean Group of Companies - India
- Eastern Energy - Thailand
- Meenaskhi Energy Private Limited - India
- Indonesian Coal Mining Association
- Tamil Nadu electricity Board
- IEA Clean Coal Centre - UK
- Bukit Makmur.PT - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Kepco SPC Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Wood Mackenzie - Singapore
- Australian Coal Association
- PetroVietnam Power Coal Import and Supply Company
- Electricity Generating Authority of Thailand
- Krishnapatnam Port Company Ltd. - India
- McConnell Dowell - Australia
- Karaikal Port Pvt Ltd - India
- Bharathi Cement Corporation - India
- Semirara Mining and Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tata Chemicals Ltd - India
- ICICI Bank Limited - India
- Bukit Baiduri Energy - Indonesia
- Wilmar Investment Holdings
- Independent Power Producers Association of India
- Savvy Resources Ltd - HongKong
- Pendopo Energi Batubara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- Timah Investasi Mineral - Indoneisa
- Ind-Barath Power Infra Limited - India
- New Zealand Coal & Carbon
- Energy Link Ltd, New Zealand
- Salva Resources Pvt Ltd - India
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
- Sakthi Sugars Limited - India
- London Commodity Brokers - England
- TNB Fuel Sdn Bhd - Malaysia
- Binh Thuan Hamico - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Aboitiz Power Corporation - Philippines
- Meralco Power Generation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Africa Commodities Group - South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Intertek Mineral Services - Indonesia
- Indogreen Group - Indonesia
- Riau Bara Harum - Indonesia
- Bhushan Steel Limited - India
- PTC India Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Energy Development Corp, Philippines
- Vedanta Resources Plc - India
- CIMB Investment Bank - Malaysia
- Ministry of Finance - Indonesia
- PNOC Exploration Corporation - Philippines
- Thai Mozambique Logistica
- Coalindo Energy - Indonesia
- Coal and Oil Company - UAE
- CNBM International Corporation - China
- Orica Mining Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Baramulti Group, Indonesia
- Ministry of Transport, Egypt
- Leighton Contractors Pty Ltd - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Siam City Cement - Thailand
- The State Trading Corporation of India Ltd
- Orica Australia Pty. Ltd.
- Global Coal Blending Company Limited - Australia
- Ministry of Mines - Canada
- Power Finance Corporation Ltd., India
- Videocon Industries ltd - India
- Straits Asia Resources Limited - Singapore
- International Coal Ventures Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Mercator Lines Limited - India
- Attock Cement Pakistan Limited
- Bangladesh Power Developement Board
- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Deloitte Consulting - India
- Singapore Mercantile Exchange
- Bhoruka Overseas - Indonesia
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