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Posted: September 16, 2017

Indemnification Provision Applies to Litigation Between Parties

On September 5, 2017, Justice Sherwood of the New York County Commercial Division issued a decision in Banc of America Credit Products, Inc. v. Guidance Enhanced Green Terrain, LLC, 2017 NY Slip Op. 31910(U), holding that an indemnification provision of a contract applied to litigation between the parties to the contract, explaining:

In Hooper, the Court of Appeals was tasked with determining whether an indemnity clause was limited to attorney’s fees incurred by plaintiff in actions involving third parties or also includes those incurred in prosecuting a suit against defendant for claims under the contract. Noting the well-understood rule that parties are responsible for their own attorney’s fees, the Court held that a court should not infer a party’s intention to waive the benefit of the rule unless the intention to do so is unmistakably clear from the language of the promise. The Court then applied normal canons of construction to find that the agreement did not indemnify intra-party claims. In particular, the Court noted the fact that the indemnity provision included a list of covered subjects, all of which were susceptible to third-party claims, and the fact that other provisions in the contract, which unmistakably related to third-party claims would be rendered meaningless if the indemnity clause applied to intra-party claims. As plaintiff notes, the First Department has repeatedly distinguished Hooper on the basis that, after applying standard canons of construction, the clauses at issue reasonably covered intra-party claims. Accordingly, the fact that an indemnification provision does not explicitly include intra-party claims is not fatal under Hooper.

Of the above cited cases, the most factually similar is Crossroads ABL LLC. In that case, the First Department distinguished Hooper and found that an indemnification provision did not preclude intra-party claims, in spite of the fact that the provision did not expressly include such claims. In so ruling, the First Department noted that the indemnification provision does not include an exhaustive list of actions for which indemnification is required, nor are there any other provisions in the servicing agreement that would be rendered meaningless if the indemnification provision is read to include any claims-intra-party or otherwise-that involve plaintiff. The court also noted that parties chose to use highly inclusive language in their indemnification provision, which they chose not to limit by listing the types of proceedings for which indemnification would be required.

The provision at issue in this case shares virtually all of the above elements and much more. As discussed above, Section 12(a) expressly provides that the indemnification provision (i.e., Section 12 [b]) shall apply to the breaches by Guidance listed in Section 12(a). The language of Section 12(a) easily satisfies the rule in Hooper.

(Internal quotations and citations omitted).

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