Drafting Contractual Indemnity Provisions to Maximize Coverage Under Pa. Law

Indemnity provisions appear in almost all commercial contracts, from leasing agreements to service contracts and supply contracts. In many industries, standardized form contracts prepared by trade groups and used to facilitate quick transactions incorporate indemnity terms that parties may view as default provisions and accept without thought as to how courts actually interpret the provisions under applicable law. Language matters—as does the governing law. Parties should avoid adopting boilerplate indemnity provisions. Indemnity provisions should be drafted with an eye toward how disputes could arise in the context of the contract at issue and how courts applying the governing law would interpret the indemnity provision within the contract as a whole. This article focuses on a just few of the many potential disputes that may arise with respect to indemnification under Pennsylvania law.

• Does the indemnification provision apply to claims for a party’s own negligence?

State laws differ with respect to their treatment of indemnification for negligent conduct. Under Pennsylvania law, courts follow the “Perry-Ruzzi” rule, under which “provisions to indemnify for another party’s negligence are to be narrowly construed, requiring a clear and unequivocal agreement before a party may transfer its liability to another party.” See Bernotas v. Super Fresh Food Markets, 963 A.2d 478, 482 (Pa. 2004). Under this rule, generic indemnification language (i.e., indemnification for “any and all liability”) is insufficient to trigger indemnification for a party’s own negligence. See Ruzzi v. Butler Petroleum, 588 A.2d 1, 2 (Pa. 1990). On the other hand, courts have found terms that provide for indemnification against loss caused “in whole or in part by any negligent act or omission … regardless of whether or not it is caused in part by a party indemnified hereunder” to be sufficiently specific. See Hershey Foods v. General Electric Service, 619 A.2d 285, 288 (Pa. Super. 1992). A promise to pay for “any and all claims … even though such damages, injury, loss or expense are attributable to the joint, concurrent or contributory negligence” of the indemnitee, also is sufficiently specific. See Ratti v. Wheeling Pittsburgh Steel, 758 A.2d 695, 702 (Pa. Super 2000).

• Does the indemnification provision apply to inter-party claims?