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Friday, July 29, 2005

Cases: Indemnity clauses

Indiana_flag_2 The difference between breach of a contract duty to take care of property and breach of a promise to indemnify for loss to that property is nicely illustrated in a recent decision from the Indiana Court of Appeals.

In the case, electronics retailer Best Buy leased a store from Simon Property Group.  In 1996, Best Buy's store was being renovated by Brandt Construction to expand the store.   Simon was responsible for hiring Brandt, and in the Brandt-Simon contract, Brandt agreed to provide weather protection to any exposed part of the store during the renovation period, and also promised to indemnify Best Buy and Simon for any damages.  Brandt nevertheless left a large hole in the back wall of Best Buy, and in July 1996, a large rainstorm flooded the store, damaging thousands of dollars of merchandise.  Brandt refused to accept responsibility and refused to indemnify Best Buy.  A jury found that Brandt had not breached its contractual duty with Simon to protect the property, but that its negligence had been 50 percent responsible for the damage.

The jury, however, apparently was looking at the wrong question.  The issue was not whether Brandt had breached its promise to protect the store from damage, the issue was whether Brandt had breached its promise to indemnify Best Buy.  Here, said the court, the clause was clear, and since the loss was at least partially Brandt’s fault, judgment on the contract count should have been entered against it.

Simon Property Group, L.P. v. Brandt Construction, Inc., 2005 Ind. App. LEXIS 1263 (2d Dist., July 15, 2005).

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