Indemnity
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In contract law, an indemnity is a contractual obligation of one party (the indemnitor) to compensate the loss incurred by another party (the indemnitee) due to the relevant acts of the indemnitor or any other party. The duty to indemnify is usually, but not always, coextensive with the contractual duty to \"hold harmless\" or \"save harmless\". In contrast, a \"guarantee\" is an obligation of one party (the guarantor) to another party to perform the promise of a relevant other party if that other party defaults.
Indemnities form the basis of many insurance contracts; for example, a car owner may purchase different kinds of insurance as an indemnity for various kinds of loss arising from operation of the car, such as damage to the car itself, or medical expenses following an accident. In an agency context, a principal may be obligated to indemnify their agent for liabilities incurred while carrying out responsibilities under the relationship. While the events giving rise to an indemnity may be specified by contract, the actions that must be taken to compensate the injured party are largely unpredictable, and the maximum compensation is often expressly limited.
In England and Wales an \"indemnity\" monetary award may form part of rescission during an action of restitutio in integrum. The property and funds are exchanged, but indemnity may be granted for costs necessarily incurred to the innocent party pursuant to the contract. The leading case is Whittington v Seale-Hayne,[4] in which a contaminated farm was sold. The contract made the buyers renovate the real estate and, the contamination incurred medical expenses for their manager, who had fallen ill. Once the contract was rescinded, the buyer could be indemnified for the cost of renovation as this was necessary to the contract, but not the medical expenses as the contract did not require them to hire a manager. Were the sellers at fault, damages would clearly be available.
The distinction between indemnity and damages is subtle and may be differentiated by considering the roots of the law of obligations: how can money be paid if the defendant is not at fault The contract before rescission is voidable but not void, so, for a period of time, there is a legal contract. During that time, both parties have legal obligation. If the contract is to be voided ab initio the obligations performed must also be compensated. Therefore, the costs of indemnity arise from the (transient and performed) obligations of the claimant rather than a breach of obligation by the defendant.[5]
An indemnity is distinct from a guarantee, which is the promise of a third party to honor the obligation of a party to a contract should that party be unable or unwilling to do so (usually a guarantee is limited to an obligation to pay a debt). This distinction between indemnity and guarantee was discussed as early as the eighteenth century in Birkmyr v Darnell.[6] In that case, concerned with a guarantee of payment for goods rather than payment of rent, the presiding judge explained that a guarantee effectively says \"Let him have the goods; if he does not pay you, I will.\"[7]
In 2010, the Colorado Supreme Court required a flower shop to indemnify its shopping center for a customer who slipped on the icy parking lot, though of no fault of the flower shop, because the tenant was there to visit that shop, and the shop's lease had a broad indemnity clause.[18]
Indemnities can be expensive enough to bankrupt a company which pays them: \"If manufacturers ... are to survive, they will need liability insurance, as well as favorable contracts with retailers. If you look at a big retailers, such as Trader Joe's or Costco or Walmart or Randalls, very often there will be an indemnity provision providing that, if you want to sell a product in our stores, and if it gets someone sick or if it has to be recalled, and it's your fault, you must pay us back for that.\"[22]
An example of letting the indemnitor control costs is in the case of a contractor for a homeowners' association (HOA) in which \"Contractor shall indemnify, defend (by counsel reasonably acceptable to Association) and hold harmless the Association.\"[25] Companies and HOAs also use indemnity to protect directors since few would serve as directors if their risks were not indemnified.[26] Negotiation is important for both parties. \"Just about all homeowner association management contracts have a provision which states that the HOA shall indemnify the manager under certain circumstances ... There are several ways the indemnification clause can be drafted and both management and HOA must take into account what protects each the best.\"[27]
When a contract is not negotiable (adhesion contract), the wording often lets the indemnitee decide what to spend on legal costs and bill the indemnitor.[29] Most clauses are quite broad.[29][30] The following are examples of indemnity requirements from a range of businesses. The last one, Angie's List, limits issues to the user's fault, but decisions and costs are still controlled by the indemnitee (Angie's List).
U.S. nonprofit museums and organizations planning temporary exhibitions in the United States may be eligible for Domestic Indemnity coverage. Details appear below.The indemnity agreement is backed by the full faith and credit of the United States. In the event of loss or damage to an indemnified object, the Federal Council must certify the validity of the claim and request Congress to authorize payment.
The Arts and Artifacts Indemnity Act (P.L. 94-158) as amended (P.L. 110-161, Sec. 426) authorizes the Federal Council to make indemnity agreements with U.S. nonprofit, tax-exempt organizations and governmental units for coverage of eligible objects owned by public and private collections in the United States, while on exhibition in the United States. For an exhibition to be eligible, the total dollar value of all U.S. loans in the exhibition must exceed $75 million, not including objects owned by the applicant or participating venue while on exhibition at their location.
The Arts and Artifacts Indemnity Act allows coverage for a single exhibition up to $1,000,000,000. The total dollar amount of indemnity agreements which can be in effect at any one time is $7.5 billion. This limit includes all current agreements as well as new certificates awarded through these guidelines. A minimum of $75 million value for all U.S.-owned loans in the exhibition (not including applicant-owned objects in non-traveling exhibitions) is required for eligibility.
The Indemnity Advisory Panel and Federal Council meetings occur approximately eight weeks and twelve weeks, respectively, following each final deadline date (after image submission). An application should not be submitted more than one year and three months in advance of the start of the indemnity period. Contact the Indemnity Administrator (see Contact below) to discuss which deadline may be most appropriate to your program.
To assist the Advisory Panel and the Federal Council with long range planning of indemnity allocations, future applicants are encouraged, but not required, to submit preliminary statements about exhibitions as much as four years in advance of the indemnity period. Updated material may be submitted subsequently, as applicable. Send all material directly to the Indemnity Administrator (see Contact below).
In all published material and announcements concerning an indemnified exhibition, the following acknowledgment must appear: \"This exhibition is supported by an indemnity from the Federal Council on the Arts and the Humanities.\" (Do not include any logo.)
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The Second Injury Fund; the Silicosis, Dust Disease and Logging Industry Compensation Fund; and the Self-Insurers' Security Fund are preparing to make the 2023 assessments in accordance with Chapter 5, Section 551 of the Workers' Disability Compensation Act of 1969. In order to properly calculate each fund's assessment, it is necessary that all carriers provide their calendar year indemnity payments.Please report the total Michigan workers' compensation benefits, including redemption agreements, but excluding medical benefits, rehabilitation payments, and funeral costs, paid by your company during calendar year 2022. Please note that the amount you report should not include monies reimbursed by the Second Injury Fund; the Silicosis, Dust Disease and Logging Industry Compensation Fund; or the Compensation Supplement Fund. If your records are not complete, please provide an estimate.The form must be completed and returned to the Funds Administration office by February 28, 2023. You may send your response by regular mail, by fax to 517-284-8890, or by e-mail to funds@michigan.gov.Self-Insurers (Individual and Group)Self-Insurers should include all subsidiaries covered under your self-insurance approval, during calendar year 2022. If you are no longer a self-insured employer in Michigan, but paid on claims incurred during your prior self-insurance program in calendar year 2022, please report this amount. If you have various periods of self-insurance coverage handled by either you or service organizations, please report to us the combined total payment for calendar year 2022.Because many self-insured employers have used numerous service organizations, the assessment is sent directly to the self-insured employer. It is your responsibility to collect the necessary information and to complete the form.Insurance CarriersIf you write deductible workers' compensation policies in Michigan, you are responsible for reporting the payments that are within the deductible as well as those in excess of the deductible.If you have any questions regarding this reporting requirement, please call Allison Kelly at 517-284-8871 or e-mail at kellya4@michigan.gov. 59ce067264