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Court Of Chancery Resolves 2 Significant Indemnification Issues

Posted In Indemnification

Creel v. Ecolab Inc., C.A. 12917-VCMR (October 31, 2018)

This decision resolves indemnification issues that regularly arise. First, when there are two possible indemnitors and one pays up, may the indemnitee still seek indemnification from the second indemnitor?  It depends on when the obligation to indemnify arose. If the indemnitor who actually paid up only assumed that duty after the underlying claim arose that led to the expense to be paid, then that indemnitor is a volunteer and its indemnitee may seek payment from the other indemnitor. Note that this decision does not foreclose suit by the actual indemnitor for equitable contribution.

Second, a company that has not imposed limits on the fees that are to be paid to its indemnitee (such as by requiring a most-favored client discount), cannot impose those limits after the obligation to indemnify arises. Those limits must be set at the time the obligation to indemnify is created.