Liability

Springfield, Massachusetts, is a city that’s home to the Basketball Hall of Fame, and my alma mater, Western New England University School of Law. I had the (dis)pleasure of living in Springfield for five years, and from earthquakes to tornadoes to purse snatchings, I thought that I had seen it all. Boy, was I wrong!

Apparently I escaped the slums of downtown Springfield just in time to avoid a stripper explosion (not an actual stripper explosion; that would be glittery and fabulous). No, as you may have heard over the holiday weekend, there was a massive natural gas explosion in Springfield that leveled a strip club, damaging numerous other buildings in the city’s entertainment district, about two blocks over from my old apartment.

At first, no one knew what could have caused the gas leak that triggered the blast, but now fingers are being pointed every which way. This may sound like a 1L Torts hypothetical, but who’s liable for the explosion?

Did the strippers grind so hard on the pole that they ignited a spark that set the blaze? Did the babies shrieking in the daycare center next door to the strip club (yes, seriously) inspire a childcare worker to light a match and burn that mother down?

Let’s get some insights from our readers on who will be held ultimately responsible for this calamity….

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I wrote about these contractual issues the week before Thanksgiving. I received so many emails that I thought it best to flesh these topics out a bit more. Also, some of these headings are from the anonymous “comments” section on this site, so I can’t attribute them (and I’ve also edited them for language).

1) “Real life example: Company A hired to refurbish shipping vessel owned by Company B. Contract obligated Company B to indemnify Company A fully, worded broadly enough and specifically enough to require indemnification for Company A’s own fault. Company A sets the boat on fire through clearly negligent actions and then tries to put it out with a garden hose. Fifth Circuit Court of Appeals tells Company B that yes, Company A was at fault; yes, you are out quite a bit for the value of the boat and the lost income, but you must eat it as you have to indemnify Company A for your own claim.”

Why on Earth someone would agree to indemnify a Customer for their own negligence is beyond me. I have been through this scenario many times, and I always inquire as to how I am expected to indemnify my Customer for its own negligence. In the B2B arena, indemnity should be limited (if possible) to third party claims against the potential indemnitee, at which point the indemnitor would take on the payment.

This raises another point: even if I indemnify you, who is going to defend you?

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So, the Customer wants you to take on unlimited liability for breach of confidentiality, indemnify (and hold harmless) for any and all bad acts of your employees, and to carry a multi-million dollar insurance policy. What do you do?

First, begin by triaging these from simplest to more complicated. During a negotiation it can be helpful to appear to “give” as much as possible up front when you’re down to a few points. This way, when the final hot button items arise, you appear reasonable.

Insurance requirements are usually no-brainers, and as long as the amounts demanded are not grotesquely high, your Risk folks will approve the proposed language with very light editing, if any. Today, it is also not unusual for the Customer to demand to be named as a payee in the event of a loss; this is often fine, and usually not an issue. More practice pointers, after the jump….

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