The Perils of "Standard Form" Contract Terms: "Indemnify and Save Harmless"

Contracts contain terms which lawyers and non-lawyers alike often regard as "standard" and not needing further explanation or detailed consideration. A recent case in the Ontario Superior Court (Court) reminds us that some of this apparently repetitious "legalese" could have important meaning after all. The context was a title insurance contract between a law firm and a real estate title insurer, a contract in which the insurer agreed that if an action was brought against the law firm, the insurer would "indemnify and save harmless' the law firm from the costs of legal proceedings. Readers may well recognize the phrase, because it appears in a very wide variety of contracts including, for instance, in many outsourcing and software licence agreements. The insurer asserted that it should be required to respond to the contract only after liability was determined and, until then, the costs of litigation should be borne by the insured. The law firm, on the other hand, replied that the obligation of the insurer was triggered by the use of the word "indemnify", but that the use of the further words "save harmless" indicated the intention to require the insurer to pay costs during the litigation and before the ultimate result was known. Reviewing cases dating back to the late 19th Century, the Court agreed that the term "save harmless" connotes more than "indemnify" and does indeed extend to ongoing and continuing costs: "' save harmless' means that [the insured] should never have to put his hand in his pocket in respect of a claim covered by the … Agreement". The result is a reminder that much of the so-called "boilerplate" language in business contracts has a venerable history, and continues to be a possible trap for the unwary. For the full reasons for judgment in Stewart Title Guarantee Company v Zeppieri (2009), 94 OR (3d) 196, see: http://tinyurl.com/ndfv6m Summary by: The Editor