Jill Berkeley | Policyholder Insurance Law Blog | February 3, 2016
Contractual indemnification clauses are among the most overused and misunderstood rights that parties argue over and negotiate for. Although nothing in Illinois law prohibits parties from specifically contracting to provide for indemnity in non-construction related contracts, “[i]t is quite generally held that an indemnity contract will not be construed as indemnifying one against his own negligence, unless such a construction is required by clear and explicit language of the contract or such intention is expressed in unequivocal terms.” Buenz v. Frontline Transportation Co., 227 Ill. 2d 302, 316 (2008) (citing Westinghouse Electric Elevator Co. v. La Salle Monroe Building Corp., 395 Ill. 429, 434-35, 70 N.E.2d 604, 607 (1946)). If the agreement does not expressly provide contractual indemnity for the indemnitee’s own negligence, it is unenforceable as a matter of law.
In order for an indemnity agreement to be enforceable for something other than pro rata allocation in contribution, it must provide that the obligation to indemnify include liability for the indemnitee’s own negligence. This rationale derives from the legal distinction between contribution and indemnity. As the Illinois Supreme Court has observed:
There is an important distinction between contribution, which distributes the loss among the tortfeasors by requiring each to pay his proportionate share, and indemnity, which shifts the entire loss from one tortfeasor who has been compelled to pay it to the shoulders of another who should bear it instead.
Virginia Sur. Co. v. Northern Ins. Co., 362 Ill.App.3d 571, 574, 840 N.E.2d 1271, 1274 (3d Dist. 2005) (quoting Prosser, Law of Torts, sec. 51, at 310 (4th ed. 1971)). An “indemnity provision” that requires the indemnitor to “indemnify and hold harmless” the indemnitee for only the indemnitor’s negligence is not really indemnity at all, but is actually a form of contractual contribution (sometimes labeled “partial indemnity.”). See Stevens v. Silver Manufacturing Co., 70 Ill. 2d 41, 46 (1977) (“Although stated in terms of partial indemnity rather than contribution, the prayer for relief clearly seeks contribution based on the relative degree to which the employer’s misuse of the product or assumption of the risk contributed to cause plaintiff’s injuries”); Estate of Willis, supra, 357 Ill.App.3d at 1006.
Stated differently, unless the indemnitee is shifting liability for its own negligence to the indemnitor (i.e., the entire loss), the contractual indemnification clause is not really “indemnity” in its true sense. The courts recognize that if the indemnitee becomes liable to the Plaintiff, then its liability is based on its own negligence. In order to transfer its liability under an indemnification clause for “its own negligence,” the indemnity clause must so provide explicitly.
If the indemnitee’s liability to the third party arises from its own negligence, the indemnitee cannot enforce the contractual indemnity clause against the indemnitor. Absent language expressly providing…