When I review a contract, I give it a quick glance and broadly categorize it as either “reasonable” or one with “weasel words” before I delve into the review. Weasel words is my characterization of clauses that unreasonably shift risk to one party. Although I often use the term for owner-drafted contracts, I have run across weasel words in contracts drafted by design professionals as well. Let’s take a look at such a clause.
To the extent that the Consultant’s obligation to indemnify as set forth herein arises in whole or in part from the acts, omissions, or default of the Indemnified Parties, such obligation shall be limited to Two Million and No/100 ($2,000,000.00) per occurrence, or the amount of the Consultant’s aggregate insurance coverage per occurrence, whichever amount is greater, which sum the parties hereto acknowledge and agree bears a reasonable commercial relationship to this Agreement.
This clause initially reads as a limitation of liability clause, limiting the indemnity obligation to either the greater of $2 million dollars or the amount of insurance coverage that is available. Not a great provision, since the clause only applies to the indemnity obligation. But then I realized that the limitation on the indemnity is limited to only those items that arise in whole or in part from the acts or omissions, or default of the Indemnified Parties. The limitation does not apply to those items where the consultant is wholly responsible for the claim. In the scenario where the indemnified party is wholly responsible for the matter, the consultant should have no obligation to indemnify because the design professional is, by definition, not responsible for the claim. If the indemnified party is responsible for the whole claim, then logic dictates that the consultant is not responsible for the claim. When you run across this kind of formulation, you yearn for contract language that is clear and simple.