Anaya Nolan
A tender is a demand made to a party that has primary responsibility or liability for a claim or lawsuit, requesting that they indemnify and defend the defendant. This is often based on indemnity or hold-harmless language in a written agreement, such as a supply agreement or a contract between a retailer and distributor. When tendering a defense to a company for common law indemnity, it is important to act as soon as possible and focus on the claim made against the tendering party and the relevant contract, statute, or case law that establishes the indemnity obligation. This involves applying the language in the contract or common law to the circumstances of the claim, clearly setting forth the basis for indemnity.
| Characteristics | Values |
|---|---|
| What is a tender? | A demand made to someone who has (or should have) primary responsibility or liability for some casualty, either by law or by contract, to indemnify, and possibly to defend, an innocent or passive defendant from a claim or lawsuit |
| Bases for making a tender | Written agreements, statutes, or the common law of relevant jurisdictions |
| Who to send the tender to? | The indemnifying company’s legal department, an insurer’s claims professional, or a person identified in a written agreement for receiving notices associated with that agreement |
| What should the tender letter focus on? | The claim made against the tendering party, and the language in the contract, statute, or case law that sets forth the indemnity obligation |
| When to send the tender? | As soon as possible |
| What should the tender include? | A copy of the suit papers, if a lawsuit has been filed. If not, it should include sufficient information regarding the time, place, and circumstances of the claim |
| What should the tender include (continued)? | A reasonable deadline for the insurance carrier to either unconditionally acknowledge its duty to provide a defense, or to provide a defense under a reservation of rights, or to deny any obligation to provide a defense |
| What to do before denying a tender of defense? | Determine whether the controlling state law imposes a defense obligation on your client |
| Which states impose a statutory obligation on indemnitors to provide a defense? | California, Montana, Oklahoma, and South Dakota |
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What You'll Learn
- Tenders should be made in writing and sent to the legal department
- Focus on the claim and the contract, statute or case law setting forth the indemnity obligation
- Include a copy of the suit papers, or sufficient information about the claim for the carrier to make an informed decision
- The duty to defend is broader than the duty to indemnify
- The duty to defend is triggered if any part of the claim is within the scope of protection
Tenders should be made in writing and sent to the legal department
A tender is a formal demand for indemnity, made to the party that has primary responsibility or liability for a loss or claim. In the case of a company, this demand is typically sent to the legal department.
The tender letter should focus on two key elements: the claim made against the party seeking indemnity, and the contractual or legal basis for indemnity. It should clearly outline the circumstances of the claim and explicitly refer to the relevant contract clauses, statutes, or case law that establish the obligation for indemnity. This could include supply agreements, distribution agreements, or specific indemnity obligations outlined in the contract.
Additionally, it is important to be mindful of the date of the tender, especially when seeking payment for defence fees. The date often marks the transition of responsibility for these fees, so timely submission is crucial.
In some cases, there may be statutory protections or common law indemnity provisions that support the tender. For example, in certain states like California, Montana, Oklahoma, and South Dakota, there is a statutory obligation for indemnitors to provide a defence upon request, even if the contract does not expressly state this.
By following these guidelines and submitting a well-constructed tender to the company's legal department, one can effectively initiate the process of seeking defence and indemnity from the responsible party.
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Focus on the claim and the contract, statute or case law setting forth the indemnity obligation
When tendering a defence to a company for common law indemnity, it is important to focus on the claim made against the tendering party and the language in the contract, statute, or case law that sets forth the indemnity obligation. This is because the tender letter should clearly apply the language in the contract or the relevant common law or indemnity statute to the circumstances alleged in the claim.
A tender is a demand made to the party that has, or should have, primary responsibility or liability for a casualty, either by law or by contract, to indemnify and possibly defend an innocent or passive defendant from a claim or lawsuit. The bases for making a tender are found in written agreements, statutes, or the common law of relevant jurisdictions. These written agreements can include supply agreements between a retailer and distributor or a distributor and a manufacturer, or even on the backs of invoices or receipts issued between any of the parties along a product's supply or distribution chain.
In most cases, a valid tender for the defence of a claim requires some kind of written promise by the other party to defend or hold the tendering party harmless from damages, judgments, and settlements, and also, perhaps, from claims and liability in general. It is important to note that under the common law of most states, an indemnitor generally has no duty to defend unless the contract specifically requires that a defence be provided. Therefore, if the governing indemnity provision does not expressly require the indemnitor to both defend and indemnify the indemnitee with respect to certain claims, many parties will reflexively deny a tender of defence. However, some states impose a statutory obligation on all indemnitors to provide a defence, while others read an implied duty to defend into every indemnification agreement unless the contract specifically negates that right. For example, in California, Montana, Oklahoma, and South Dakota, the indemnitor is bound, on request of the indemnitee, to defend actions brought against the indemnitee in respect of the matters embraced by the indemnity, unless a contrary intention appears in the contract.
Additionally, in any lawsuit involving multiple claims, if any one claim in the lawsuit is potentially covered by the policy, then the insurer generally has a duty to defend the entire action, including any non-covered claims. Only when the allegations in support of a claim are completely outside the coverage of the policy is there no duty on the liability carrier's part to provide a defence of that claim.
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Include a copy of the suit papers, or sufficient information about the claim for the carrier to make an informed decision
When tendering a defense to a company for common law indemnity, it is important to provide sufficient information for the company to make an informed decision. This includes sharing relevant documents, such as a copy of the suit papers, and any other pertinent details about the claim.
The suit papers are essential as they outline the specific allegations and legal arguments presented by the claimant. They provide a comprehensive overview of the case, allowing the company to assess its merits and make a well-informed decision. By examining the suit papers, the company can identify the legal basis for the claim, the specific allegations being made, and the evidence supporting these allegations. This information is crucial for the company to determine its potential liability and decide on the appropriate course of action.
In addition to the suit papers, it is advisable to include any relevant facts or evidence related to the claim. This could encompass witness statements, expert opinions, or any other supporting documentation. By providing this supplementary information, you can offer a more holistic understanding of the case, enabling the company to evaluate the strength of the claim and consider potential defense strategies. This additional context can be invaluable in helping the company make a well-reasoned decision.
Furthermore, when tendering a defense, it is important to consider the specific requirements and guidelines of the company to which the tender is being made. Different companies may have unique procedures and criteria for evaluating tenders. Familiarizing yourself with their processes can increase the likelihood of a successful tender by ensuring that your submission aligns with their expectations. It demonstrates diligence and a comprehensive understanding of the matter at hand.
The goal of providing a copy of the suit papers and additional pertinent information is to empower the company to make a fully informed decision. By having access to the same factual foundation that forms the basis of the claim, the company can actively assess its potential liability and determine the most appropriate course of action. This transparency fosters a collaborative environment and increases the likelihood of a successful defense strategy.
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The duty to defend is broader than the duty to indemnify
When it comes to insurance policies, the duty to defend and the duty to indemnify are two distinct obligations that an insurer owes to the insured. The duty to defend refers to the insurer's obligation to provide legal defence to the insured in the event of a claim, whereas the duty to indemnify refers to the insurer's obligation to pay the claim, either through a settlement or a judgment.
While these duties are separate and independent, they are often mentioned in the same clause in construction contracts, which can lead to confusion. In some jurisdictions, it is understood that an indemnity obligation automatically includes the duty to defend, even if it is not explicitly stated. However, in other jurisdictions, the duty to defend is considered "independent of and broader than the duty to indemnify". This means that even if an indemnity provision is found to be invalid or non-compliant with anti-indemnity statutes, it does not automatically negate the duty to defend. For example, Massachusetts courts have explicitly held that the duty to defend is not constrained by the state's anti-indemnity statute as the statute does not refer to it.
The distinction between the two duties is crucial for practitioners, especially in the construction industry, as failing to recognise the duty to defend can have severe consequences. When evaluating whether the duty to defend has been triggered, it is essential to consider the governing law for the contract, as different states have varying legislation and case law surrounding this issue. Most states have enacted some form of anti-indemnity legislation for construction contracts, but the majority of these statutes do not specifically address the duty to defend, focusing instead on the duty to indemnify.
To summarise, while the duty to defend and the duty to indemnify are separate obligations, they are often interconnected in insurance policies. The duty to defend is broader in the sense that it can exist independently of the duty to indemnify and may not be constrained by the same statutory limitations. Therefore, when assessing an insurer's obligations, it is vital to carefully review the policy and consider the specific laws and precedents of the relevant jurisdiction.
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The duty to defend is triggered if any part of the claim is within the scope of protection
The duty to defend is a term used to describe an insurer's obligation to provide an insured defence against claims made under a liability insurance policy. This duty is triggered when any part of the claim made against the insured falls within the scope of protection provided by the policy. This is true even if the allegations are groundless, false, or fraudulent.
In most cases, a valid tender for the defence of a claim requires a written promise by the other party to defend or hold the tendering party harmless from damages, judgments, and settlements. This is typically based on indemnity or hold-harmless language in a written agreement. These agreements can include supply agreements between a retailer and distributor or a distributor and a manufacturer.
To determine whether an insurer has a duty to defend, the allegations in the underlying complaint must be compared to the relevant coverage provisions of the insurance contract. This comparison should be made as soon as possible, as the duty to defend requires an early judgment. If an insurer wrongly refuses to defend, they may face significant liability to their policyholders, including consequential, tort, and punitive damages.
It is important to note that the duty to defend is separate and independent from the duty to indemnify. While most states have enacted some form of anti-indemnity legislation for construction contracts, some states impose a statutory obligation on all indemnitors to provide a defence. Therefore, it is essential to consider the governing law for the contract when evaluating whether the duty to defend has been triggered.
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Frequently asked questions
A tender is a demand made to the party that has primary responsibility or liability for a casualty, requesting that they indemnify and defend the defendant from a claim or lawsuit.
A tender letter should focus on the claim made against the defendant and the language in the contract, statute, or case law that sets forth the indemnity obligation. The letter should also include a reasonable deadline for the insurance carrier to respond.
Tenders should be transmitted to the appropriate person or department, typically the legal department of the indemnifying company, an insurer’s claims professional, or a person identified in a written agreement for receiving notices.
The duty to defend refers to the obligation of the insurer to provide legal counsel and cover defence costs if a claim is brought against the insured. The duty to indemnify refers to the obligation of the insurer to settle a claim or pay a judgment against the insured.
Tenders should be made as soon as possible after a claim or lawsuit is filed. If a lawsuit has not yet been filed, the tender should include information about the time, place, and circumstances of the claim.
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