Being Indemnified for Your Own Wrongdoing

Generally, the parties to a contract may agree to any terms they want.  Once the contract is formed, the parties will generally be bound by those terms.  Some provisions, however, must satisfy certain requirements in order for them to be enforceable, like indemnification provisions.

In an indemnification provision, the parties agree that one party will reimburse the other for damages that stem from the contract.  The provision may even require a party be reimbursed when it caused the damages.  While that might not seem fair, if that is what the parties agree to, the provision will be enforced, if it satisfies the limitation requirement in Section 725.06, Florida Statutes.  Section 725.06 requires that the responsible party’s right to be reimbursed under the provision be limited to an amount that “bears a reasonable commercial relationship to the contract” in order for the provision to be enforceable.

As Pumpco, Inc. learned, indemnification provisions in boilerplate documents, like work orders, are not exempt from the requirement.  When Pumpco leased a cement pump truck to Griswold Ready Mix Concrete, Inc., Pumpco used its standard form work order as the contract.  The reverse side of Pumpco’s work order contained an indemnification provision requiring Griswold to reimburse Pumpco for any damages resulting from the lease of the truck.  When someone at the project was injured by the truck’s hose and Pumpco paid to settle the injured person’s claim, Pumpco tried to use the indemnification provision to get Griswold to reimburse Pumpco for the settlement payment.  However, the provision did not contain the limitation required by Section 725.06 and was deemed unenforceable.  As a result, Pumpco was unable to recover its settlement payment from Griswold.  Griswold Ready Mix Concrete, Inc. v. Reddick, 2012 WL 1216268 (Fla. 1st DCA 2012).

No matter how short or simple the document, or how long or routinely you have used it, it is important to remember that form documents like work orders may constitute your “contract” with your customers.  Therefore, it is important to make sure they contain the terms you need, and satisfy the applicable requirements to be enforceable, so you can rely on them when you need them most.