10 Ways to Draft Negligence Terms in Indemnification Provisions: Practice Points

Look for negligence in all three places it can appear. Gabe identified at least three spots where negligence showed up in an indemnity. It could define the claim itself, carve something out as an exclusion, or attach to another claim as a qualifier. Each use sat in a different context and called for a different strategy. Laura called these inception-like provisions, where one added phrase could expand the obligation exponentially or kill it entirely.

Treat a plain negligence trigger as the broadest claim you will see. Breach of contract, services, and IP infringement triggers all came with a border drawn around them. Negligence did not. Laura compared a naked negligence claim to a hundred nuclear bombs going off, and Gabe called it the heat death of the universe claim, because someone spilling coffee in a conference room could set it off. It measured behavior, and behavior has no natural boundary.

Ask whose negligence the provision actually covers. Laura's first question was whose conduct counted. Provisions often tacked on personnel, contractors, representatives, affiliates, and sometimes even customers. That made sense when an affiliate did the actual work and much less sense when the affiliate just sat in your corporate family. Gabe added a warning about defined terms that quietly absorbed a party's affiliates, officers, agents, successors, and assigns and then landed in the other side's indemnity.

Watch the conduct language and the degree of fault. Laura's next two questions were what conduct and what degree. Adding omissions pushed the scope into anything someone failed to do, like never warning you about a trip hazard in the hallway. Gabe noted that acts may or may not include omissions, especially when the contract said acts or omissions in one place and only acts in another. Keep all of those plates spinning while you draft.

Don't count on gross negligence to keep you safe. Laura admitted she once thought gross negligence was so hard to prove that you did not need to worry about it. Complaints typically alleged negligence and gross negligence together, and without developed facts you could end up defending the whole thing anyway. Most cases settled long before a judge or jury decided which standard applied. That left executives trying to price a settlement around a subjective standard nobody had tested in discovery.

Check the governing law before you rely on the word negligence. Negligence varied tremendously from state to state, and Laura urged everyone on high-value deals to look at how the governing law treated it. Many states restricted clauses making one party indemnify the other for its own negligence, especially in construction, and some required conspicuous or explicit language. Laura also learned that some states did not automatically treat gross negligence and willful misconduct as exclusions unless the contract said so. Gabe suggested brushing up on the economic loss doctrine too, since tort law often would not treat purely financial harm as damage.

Tie the negligence to your deal with a tighter nexus. Gabe flagged in connection with this agreement in the first sample provision. It looked limiting but still covered someone slipping in the bathroom during renewal negotiations. He walked through the spectrum from related to and in connection with down to arising from and directly related to, and he preferred language tied to the indemnifying party's performance of services under the agreement. Arising from at least carried some causal connection.

Decide what the word alleged does to your trigger. People argued both ways about whether a negligence claim needed the word alleged. Gabe explained that a claim arising from negligence let the indemnifying party argue the claim never actually stated negligence and wait for a court that might never rule. That delay left the indemnified party paying its own legal bills, which could shape the whole case. Adding alleged let the indemnified party say the obligation started the moment someone alleged negligence.

Spell out how a negligence exclusion splits the claim. An exclusion applying to the extent the indemnified party was negligent left open whether it removed the whole claim or only a portion, and who would assign the percentage. Gabe asked what it even meant for an indemnity not to apply to part of a claim, and whether that covered the money, the defense, or both. Laura pictured covered claims as a green circle with exclusions as a white circle on top, and a broad exclusion left very little green. Match the exclusion's standard to the claim's standard too, because a gap between them leaves risk nobody priced.

Use qualifiers deliberately and watch for them on the other side. Laura called negligence qualifiers the secret sauce experienced lawyers used to turn a provision that looked pro indemnified party into one that barely covered anything. Gabe compared them to Lego blocks you could stack. In the final sample, caused by the negligence dangled after a list of bodily injury, death, or damage to tangible property, which left it unclear whether it modified all three items. Repeat the qualifier with each item, or introduce the list with any one or more of the following.