Q: I see an “indemnity” provision in every single one of my agreements and have never really understood what it means… what does it mean?
A: I’ve seen Mulholland Drive six times and have never really understood what it means. That doesn’t stop me from watching it every time I see it on the movie channels, just as I’m sure that indemnity provision doesn’t stop you from signing your agreements. While you’re never going to get rid of it, you may as well understand the provision so you can at least get it changed a little if you need to.
First, the basics. Think of the indemnity provision as turning you into your own little insurance company. If the other guy suffers any sort of loss (including damages and costs) from a lawsuit that arises due to your breach, you’re on the hook for that loss. It’s the other side’s way of avoiding liability due to your bad behavior (by putting it on you).
Now that you know its purpose, let’s look at the body of an indemnity provision so you know what to watch our for. (I know. That’s the second sentence I’ve ended in a preposition. That’s the beauty of a blog! No rules!!) A typical indemnity provision looks like this (with the trickiest stuff highlighted and explained below):
“Writer shall indemnify,  defend and hold harmless Company, its parents, subsidiaries, affiliates, successors, licensees and assignees, and the officers, employees, agents, and all other representatives thereof, and hold each of them harmless from and against any and all loss, damages, costs and expenses, including  reasonable, outside attorneys’ fees, arising out of or connected with any  third party claim, demand or action arising from a breach  or alleged breach of any warranties, representations,  agreements and/or covenants made by Writer in this Agreement.”
1. In some provisions, you may be required not only to indemnify, but also “defend.” Not only are you going to be required to pay them back for losses, but you’re going to be obligated to provide them with a legal defense. I doubt a studio with its cadre of legal professionals is going to ask someone who wears a vintage Mr. Tickle t-shirt (you know you own one) to provide them with a lawyer, but you don’t want to take that risk so you should try to get this stricken. It is, however, something you should try to get in the studio’s indemnification of you.
2. You’re always going to be asked to cover their attorney’s fees. You can’t get out of that. You can, however, demand that such fees be reasonable (which I’m pretty sure disqualifies 100% of attorneys fees). You can also require that those fees be limited to those charged by an outside firm. You don’t want a studio charging you for the time spent by its legion of browbeaten junior attorneys slaving away in some dark basement.
3. More often than not you’ll get a provision that omits the term “third party” here. Seems innocuous enough but the omission can have big consequences. If you don’t clarify that you should only be indemnifying for third party claims, you may find this provision applying if studio sues you. The problem there is that this puts you on the hook for their attorney’s fees. Your obligation to pay their attorney’s fees in the event of a dispute is usually something that’s specifically negotiated in the form of an attorney’s fees provision (which they may not always get). You have to add “third party” here so that you don’t allow them to backdoor an attorney’s fees obligation in an indemnity provision.
4. It is critical that you don’t let them to obligate you to indemnify in the case of an alleged breach. Any nut-job could claim your script infringes upon that one great idea he once told a guy in the stall next to him. Could be the silliest claim of all time, but if a suit is filed, the studio’s going to have to defend against it just to get rid of it. That defense will generate legal fees. You didn’t do anything wrong, so you shouldn’t be on the hook for those legal fees.
5. The studio/producer is going to try to make the scope of the provision as broad as possible. They’ll want it to cover your breach of anything in the agreement, even if it’s an “implied covenant” and not explicitly stated in the agreement. In addition to the bracketed language above, you may also see it cover something as broad as any claim arising due to your “acts or omissions.” You, on the other hand, should fight for the narrowest scope possible, namely that it only apply to claims arising from a breach of your representations and warranties — the section of the agreement where you’re giving specific assurances about your materials (e.g., that they don’t infringe anyone’s rights, etc.). At least that way you know exactly where you stand. More importantly, you can fight to narrow your reps and warranties (which would in turn cause the indemnity provision to have less bite).
Ugh. I just reread this blog and it was about as enjoyable as being a celebrity in the audience of the Golden Globes with the network camera on you right after a Ricky Gervais joke. Sorry, folks, sometimes the law just isn’t that funny. At least I managed to break my YouTube clip addiction.
The good news is that now that you understand your indemnification provision, you can enjoy your new role as an insurance company. Please just promise me you won’t be as ubiquitous and annoying as the Progressive woman (I refuse to call her “Flo”) or as smug and annoying as the State Farm guy or even as new and annoying as the Nationwide guy. (And we wonder why people don’t have insurance.)
This blog was originally published as part of Legal Ease, Film Independent’s weekly column on legal matters pertaining to the entertainment industry. To see other LEGAL EASE columns please click here.
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