September 08, 2009

More than Indemnity?

Posted on September 8, 2009 by Brian Rosenthal

Is an indemnity for a third party’s liabilities just an indemnity and not a right of direct action? Yes, says the District Court for the Eastern District of Pennsylvania because the indemnitor avoided words like “assume,” “become liable for,” or “assume all of the liabilities and obligations.” 

Here, the United States argued the indemnitor had crossed the line of indemnity into the land of assumption. The federal government pointed to a settlement agreement where the indemnitor agreed to provide remediation required by “law, regulation, order, judgment, or settlement agreement.” Finding the question one of contractual intent, the court found the language to defend and hold harmless does not sound in assumption and is only triggered when an indemnitee suffers a claim or pays damages on a claim. Finding the agreement lacking in the standard words of assumption, the indemnitor prevailed by summary judgment. United States v. Sunoco, Inc. No. 05-633 (E.D. Pa. 2009).

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