Exculpatory vs. Indemnity: What is Your Clause?

I am sure almost every adult in the 651 area code has agreed to a clause that starts out something like; "You agree do indemnify and hold harmless Corporation X, its officers, employees...from any and all acts, errors, and omissions of any and all kind..." Even though agreed, to, most people, including most lawyers I expect, do not actually read the entire clause. So, just what is that clause - exculpatory or indemnifying?

The Court of Appeals just addressed that issue in the context of a health club membership agreement. The Black's Law dictionary of an exculpatory clause, the definition cited by the Court of Appeals, is

“[a] contractual provision relieving a party from liability resulting from a negligent or wrongful act.” An indemnification clause on the hand is a"contractual provision in which one party agrees to answer for any specified or unspecified liability or harm that the other party might incur.”

Functionally, exculpatory and indemnification clauses are the same. They function to have someone else pay. The primary difference between the two types of clauses is the standard of review for enforceability against the benefitting party as indemnification clauses can shift liability to even innocent parties, a socially unpalatable proposition. To be enforceable, an indemnification clause is enforceable if:

  1. The terms of the agreement are expressed in clear and unequivocal terms; and
  2. The agreement is not contrary to public policy.

To the point, the Court of Appeals ruled that in the situation where a health club employee dropped a barbell on a member's head, the indemnification clause was unclear to the extent that it failed to address negligence by the health club's employee. Due to that ambiguity, the indemnification clause was unenforceable under these facts and the injured patron's suit was permitted to proceed.

This is a splendid example of the need for thoughtful legal counsel in seemingly black and white cases. I am here to be your thoughtful counsel.

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