Is there really no such thing as a free lunch?

Everyone “knows” there is no such thing as a free lunch, right? Well, maybe there is and maybe it is quite satisfying…

We often discover that a company’s vendor contracts promise protection for the company in the event of a lawsuit. When we see indemnity or insurance procurement provisions in these contracts, we evaluate risk-shifting and money-saving opportunities for the company we represent.

Often, these contract provisions mean the other party and its insurer will pay for your “lunch” by paying your defense costs and settlement costs. This is exactly the result we achieved for a client in a recent premises liability negligent security lawsuit.

Our client managed an apartment complex and had hired a third-party vendor to provide security patrol services. The Security Contract shifted risks “arising out of” vendor security services to the vendor; there was both an indemnification and an insurance procurement provision. Although the vendor was not a named defendant, we tendered anyway to the vendor and its insurer. After litigating the issue, as part of the underlying case against our client, the end result was a recovery of our client’s legal fees and defense costs from the vendor and its insurer who also paid in full to resolve the underlying case against our client. Our client certainly enjoyed that free lunch!

Pursuing the vendor and its insurer on parallel tracks under the indemnity and insurance procurement provisions meant two potential pots of money from which to obtain recovery for and protection of our client, and also meant we did not need to worry about the possibility that the vendor would be judgment-proof. Hats off to our client for its careful negotiation and inclusion of indemnity and insurance procurement provisions in this vendor contract. Careful examination of the subject contract on the front end of any lawsuit of claim is the key to shifting risk, saving money, and planning the best tender strategy.

Please feel free to contact us if you have a question about the interpretation of your contract’s indemnity and insurance procurement provisions and to discuss tender/recovery strategy for that “free lunch” you bargained for.

Matthew G. Moffett and Jeffrey M. Wasick – for the defense.