Legal Memorandum: Application of an Indemnification Clause to Misconduct

Issue: Under Illinois and California case law, does an indemnification clause apply to misconduct directed by the indemnified party against the indemnifying party that is the subject of the lawsuit by the indemnifying party against the indemnified party?

In Collins v. Montgomery Ward & Co., 21 Ill. App. 3d 1037, 315 N.E.2d 670 (1974), an independent installer of aluminum siding for Montgomery Ward was injured when a ladder he bought from Montgomery Ward collapsed.  Montgomery Ward sought to defend based on an indemnification clause in the independent contractor agreement.  The trial court struck the defense and the Appellate Court of Illinois affirmed, holding that it would be an undue extension of the agreement to protect Montgomery Ward in a products liability case separate and distinct from its indemnification contract with the independent contractor.  The basis for the holding was that an agreement should not be construed to protect a party from its own negligence, particularly when the claim arose from a transaction not specifically related to the indemnification agreement.

Halperin v. Darling & Co., 80 Ill. App. 2d 353, 225 N.E.2d 92 (1967).  Contracts of indemnity against one’s own negligence are generally regarded as valid and enforceable.  However, they are strictly construed against the indemnitee.  It is generally held that an indemnity contract will not be construed as indemnifying one against his own negligence, unless such a construction is required by the clear and explicit language of the contract or such intention is expressed in unequivocal terms.

Accordingly, a vehicle rental contract providing that the lessor would retain all responsibility for maintenance of the vehicle and providing that the lessee would hold the lessor harmless from any loss arising out […]