Part 7 of 8
Not all indemnity clauses are created equal. Some are narrow and predictable. Others are broad, vague, and dangerous.
Under the AVOID Act, broad wording no longer has time to be sorted out slowly. Understanding broad indemnity language defense exposure is now essential for controlling defense costs.
Narrow Versus Broad Indemnity Clauses
Narrow indemnity clauses tie obligation to specific acts or negligence. They usually require a clear causal link between the indemnitor’s work and the loss.
Broad clauses are different. Phrases like “arising out of the work” or “in connection with operations” expand potential responsibility far beyond direct fault. These are important words to pay attention to.
Why “Arising Out of the Work” Matters
Language such as “arising out of the work” often lowers the causal threshold. In many jurisdictions, it does not require negligence. It may require only a minimal connection between the work and the loss.
That low bar can trigger defense obligations even when liability is uncertain.
Under compressed timelines, those obligations are often assumed before the facts are developed.
How Defense Exposure Expands
Broad indemnity language often includes a duty to defend. That defense obligation can be triggered by allegations alone.
Once defense is triggered, costs begin immediately. Counsel is assigned. Bills accumulate. Limits may erode.
The worst case scenario is defense being owed where no indemnity will ever be paid.
Why the AVOID Act Magnifies This Risk
Before the AVOID Act, broad language could be debated over time. Discovery could narrow facts. Courts could clarify scope.
Now, early tender decisions must be made quickly. Broad language combined with speed often results in defense being extended by default.
Once extended, it is rarely withdrawn.
The Snowball Effect of Early Assumptions
When broad indemnity language is assumed to apply, it affects every decision that follows. Defense strategy changes. Reserves increase. Settlement pressure grows.
These outcomes are often driven by wording, not facts.
The AVOID Act exposes that reality sooner.
The Disciplined Way to Handle Broad Language
Broad clauses must be read carefully and early. Governing law matters. Defense obligations must be confirmed, not assumed.
Claims teams must document why defense is or is not owed under the specific wording. Silence or default decisions create long term exposure.
The Takeaway
Broad indemnity language is not a technical detail. It is a driver of defense exposure.
Under the AVOID Act, claims teams that recognize broad indemnity language defense exposure early will avoid worst case outcomes. Teams that assume the language can be sorted out later will discover that later arrived too soon.
Thank you for taking the time to read this article. Broad indemnity language often drives exposure long before liability is clear. In the final article of this series, we will tie everything together and explain why the AVOID Act does not reward speed and how disciplined teams can adapt their workflows.
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