WHAT IS INDEMNIFICATION IN CALIFORNIA?
There are two forms of indemnity: contractual and implied. The right to indemnity is predicated upon one’s breach of contract with the rationale being that a contract under which one undertook to do work or provide services necessarily implied an obligation to do the work in a proper manner and to discharge foreseeable damages that might result from incompetent performance.
In general, indemnity refers to “the obligation resting on one party to make good a loss or damage another party has incurred. Historically, the obligation of indemnity took three forms: (1) indemnity expressly provided for by contract (express indemnity); (2) indemnity implied from a contract not specifically mentioning indemnity (implied contractual indemnity); and (3) indemnity arising from the equities of particular circumstances (traditional equitable indemnity).” Prince v. Pacific Gas & Electric Co. (2009) 45 Cal. 4th 1151, 1157. Even though three forms of indemnity were once regarded as distinct, California courts have held that there are only two basic types of indemnity: express indemnity and equitable indemnity…”Id.
An action for contractual indemnity is based on a party’s breach of duty under a contract, express or implied. West v. Superior Court (1994) 27 Cal. App. 4th 1625, 1633. An implied contractual indemnity claim, like a traditional equitable indemnity claim, is subject to the rule that a party’s liability for equitable indemnity is based on its pro rata share of responsibility for the damages to the injured party. Prince, supra, 45 Cal. 4th at p. 1165.
Indemnification agreements are appropriate when two people or entities are being sued, or should be sued, in a lawsuit action filed by an aggrieved Plaintiff. For example, if two companies are being sued by a Plaintiff, then there could be a viable claim for indemnification that would involve apportioning liability to each company based on the evidence, which is when this legal theory applies.
Please note there could be agreements drafted that one will only do business based if potential legal liability will be on one party over another, even though they both might be liable.
PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.