Hold harmless clause meaning

Practical implications This decision explored how far a purchaser of a company can rely on an indemnity in a share sale agreement to recover from the seller for losses stemming from an employee’s negligent acts occurring both before and after the business transferred. The indemnity clause stated the seller would hold the buyer harmless for loss ‘directly or indirectly’ arising from services the company (or its agents) supplied before the transfer date, as specified in the agreement. Such wording is a common feature of share sale indemnities. On a straightforward reading, it implies that any loss linked to conduct after completion falls to the buyer, with no route to reimbursement from the seller. The core dispute was how liability should be apportioned for losses spanning pre- and post-transfer where pre-transfer negligence was left uncorrected following completion. This required analysis of two principal questions, including: the issue of continuing breach—on this point, the Court of Appeal (by a majority) reached a view concerning the existence of a...

Sky UK Ltd and another company v Riverstone Managing Agency Ltd and other companies [2024] EWCA Civ 1567 What are the practical implications of this case? It is uncommon for coverage disputes under CAR policies to reach the Courts, as most are resolved through private arbitration. This ruling is especially welcome because it addresses a policy with a standard-form insurance clause, making it likely to have broad application. The standout finding relates to cover for damage emerging after the expiry of the policy. The judgment emphasises the value of reverting to first principles when grappling with complex legal issues. The central tenet is that an insurance policy is a contract of indemnity, under which the insurer undertakes that the insured peril will not materialise. If the insured event nevertheless occurs, the insurer is in breach of contract and must pay unliquidated damages for failing to hold the insured harmless. Where the insured event is property damage within a defined period, and it occurs, the unliquidated damages payable by...

Introduction to claims co-operation and control clauses All liability insurance is written on an indemnity footing, under which the insurer undertakes to hold the policyholder harmless for liability owed to a third party. It was once the case that the insured could recover only after making payment; however, in Post Office v Norwich Union Fire Insurance Society Ltd the court confirmed that the right to an indemnity arises once the insured’s liability is fixed by agreement or judgment. Liability wordings commonly also promise to reimburse all costs incurred in defending third party claims, sometimes subject to a consent requirement that must not be unreasonably withheld. Where a claim sits within the policy limit—save for any excess or deductible—the insurer bears the entire financial exposure for the claim itself. Insurers may likewise be the only party with the requisite expertise and resources to handle the matter. A clause is therefore used to grant them the right, but not the obligation, to assume conduct of the defence and to control...