Indemnity is an important tool for businesses to cover their expenses in litigation should the need arise. Indemnity is a duty to cover the losses, damages, or liability of another. A claim for indemnity often arises when a party is forced to litigate a matter due to the actions of another party. You can imagine a scenario where slip and fall accident occurred in a store and the store owner sold the business. If the accident victim sued the store, the buyer of the store may be able to assert a claim for indemnity against the store seller because it was the accident occurred while the seller was in charge of the store. The buyer might sue to seller for the damages it has to pay the accident victim plus all the attorney’s fees and costs it had to spend defending itself in the slip-and-fall lawsuit.
There are two types of indemnity; contractual indemnity and common law indemnity. In contractual indemnity, a contract between two parties will contain an indemnity clause obligating one party to indemnify the other party or both parties to indemnify each other. These provisions are common in business contracts but their actual terms can vary greatly. An indemnity provision might require the indemnitor (the party required to indemnify) to indemnify the indemnitee (the party to be indemnified) only for legal expenses caused by the indemnitor’s own fault. Other provisions might require the indemnitor to indemnify the indemnitee for legal expenses caused by either the indemnitor’s or indemnitee’s fault. It may seem strange that the law allows an indemnitee to recover damages resulting from his or her own conduct, but in Florida, these sweeping provisions are valid so long as they “clearly and unequivocally express[es] the intent to indemnity for indemnitee’s own negligence.” University Plaza Shopping Center v. Stewart, 272 So. 2d 507 (Fla. 1973). The Miami business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.
It is possible to seek indemnity against another without an indemnity provision by asserting a claim for common law indemnity. In Florida, a plaintiff must prove (1) the party seeking indemnity is without fault and its liability is solely vicarious for the wrongdoing of another, and (2) the party against whom indemnity is sought must be wholly at fault. Heapy Engineering, LLP v. Pure Lodging, Ltd., 849 So. 2d 424 (Fla. 1st DCA 2003). In addition, there must be a “special relationship” between the indemnitee and the indemnitor. Houdaille Industries, Inc. v. Edwards, 374 So. 2d 490 (Fla. 1979). These special relationships are not well defined but have included vicariously, constructively, derivatively, or technically liable for the wrongful acts.
In the context of business disputes, common law indemnity may arise in conjunction with a breach of contract. In Diplomat Properties Ltd. Partnership v. Tecnoglass, LLC, 114 So. 3d 357 (Fla. 4th DCA 2013), a business that installed shower doors was found liable for breach of contract because a hotel claimed the installed doors spontaneously fractured. The installer assigned its indemnity claims to the hotel, and the hotel sued the door manufacturer for common law indemnity. The appellate court found the hotel had a valid cause of action for common law indemnity because there was a special relationship between the installer and the manufacturer.
Businesses facing a lawsuit might be able to seek indemnity against a third party to insulate themselves from liability or provide an alternative payor. A contract outside the lawsuit between a plaintiff and defendant may provide the defendant an ability to seek indemnity from a third-party. And if not, common law indemnity cold might provide a basis to obtain indemnity from another. Either way, indemnity could be an important method for businesses to transfer the legal exposure to another.
The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.