Going Back to Risk Basics for Clinical Work: Beware of Overly Broad Indemnification Clauses, Lack of Clarity on Third-Party Loss Clauses, and Incomplete Insurance Coverages


1. You May Get What You Drafted.

Broad indemnification provisions, once played out, can sometimes result in surprising applications. For example, in Mass Transit Administration v. CSX Transportation, Inc., 708 A.2d 298 (Md. 1998), the court considered an indemnification clause in a procurement contract between the Maryland Transit Authority (MTA) and CSX Transportation, Inc. (CSX). CSX had contracted with the MTA to operate a commuter rail service between Washington, D.C., and Baltimore. In the contract, the MTA agreed to “indemnify, save harmless, and defend CSX from any and all casualty losses, claims, suits, damages or liability of every kind arising out of the Contract Service.” Ultimately, the court found that CSX, whose train had crashed into a piece of equipment belonging to CSX’s own subcontractor, could be indemnified against the subcontractor’s claims by virtue of the “any and all” language in the indemnification clause between CSX and the MTA. This was because the services the subcontractor was performing were part of the services CSX had contracted with the MTA to provide under the services contract.

While some courts will find a way to avoid results like that reached in Mass Transit Administration v. CSX Transportation, Inc. (usually by voiding the outcome based on the fact there was no regard for the factual determination of liability, see PIC Group, Inc. v. Landcoast Insulation, Inc., No. 09-662, *9 (S.D. Miss. Sept. 1, 2010) (citing cases)), this is not always the case.

When constructing an indemnification clause in a clinical trial agreement, master agreement with a CRO, or a master manufacturing agreement, avoid rolling out the standard language prior to thinking through the deal very carefully. Ask yourself several questions...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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