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To Indemnify, Or Not To Indemnify, That Is The Question (PA)

May 16, 2019

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In<em> <a href="">American South Insurance v. James A. Halbert et al.</a></em>, the Pennsylvania Superior Court ruled on the enforceability of an indemnity provision.

The Halbert family agreed to subdivide and develop property in North Cornwall Township.  To do so, they purchased a performance bond from American Southern Insurance Co.  In doing so, the Halberts agreed to indemnify American Southern from any claims or liability arising from the issuance of the bond.  Further, the agreement stated that American Southern had the sole authority to determine for itself and the Halberts whether claims brought upon the performance bond would be settled or defended.

The Halberts moved forward with the subdivision development but did not complete certain improvements that the township had required.  The township thereafter demanded that American Southern pay for the improvements pursuant to the bond.  American Southern sued the Halberts for the money necessary to pay for those improvements and won at the trial court level on a motion for summary judgment.

The Halberts appealed and argued that the improvements required by the township were not necessary to the development and, therefore, they did not have to pay.  The Superior Court disagreed and affirmed the lower court’s ruling.  In the main, there was no genuine factual dispute in the record.  Rather, the language of the indemnity agreement, which stated American Southern ultimately had sole authority to determine if a claim was defended or settled, was unambiguous.  Further, the township’s demand for additional improvements and the damages to American Southern were matters of record.  The Halberts offered nothing to dispute American Southern.  Thus, the clear language of the agreement required the Halberts to indemnify American Southern for the money owed to the township.

Accordingly, this case reveals that Pennsylvania courts are apt to enforce clear and unambiguous indemnity provisions.

Thank you to Robert Turchick for his contribution to this post.  Please email <a href="">Colleen E. Hayes</a> with any questions.


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