The plaintiff in the underlying action was a passenger in a golf cart operated by a fellow guest at a golf tournament hosted by the Canadian Litigation Counsel Inc. (“CCLI”). The plaintiff was injured while a passenger in the golf cart and sued the operator and the owner of the golf course, Clublink Corp. Clublink Corp. claimed over against CCLI seeking to be indemnified pursuant to their agreement.1 The agreement read as follows:
The Customer and/or their guest(s) agree to hold Clublink Corporation and its officers and employees free and harmless from any damage or claims of any nature that may arise from or through the use of a golf cart.
It is the Customer/s and/or their guest(s) responsibility to fully understand the safe operating instructions of the golf cart and to return it immediately following completion of the round of golf in as good condition as was received. [emphasis added]
CCLI argued that the indemnity did not expressly cover claims made against Clublink Corp. by third parties, claims for personal injury or claims for loss based on Clublink’s own negligence. CCLI took the position that the indemnity was limited to damage to Clublinks’ property by CCLI or its guests, particularly to golf carts. To read the indemnity otherwise was to allow Clublink Corp. to escape liability and transfer the burden of risk to an innocent party.
The court disagreed entirely with CCLI’s interpretation of the indemnity.
On a general level, the Court was not persuaded that an indemnity is the “the most onerous contractual provision in existence” or that it allowed a guilty part to escape liability. An indemnity simply allows for an allocation of risk and dictates which party needs to (or ought to) insure the risk. A right to indemnity is not a defence to liability – it simply determines who will bear the cost of that liability.
In interpreting the indemnity, the Court stressed the importance of discerning what was in the reasonable contemplation of the parties in context. CCLI’s undertaking to be responsible for the guest’s understanding of the safe operation of a golf cart put the risk of safe driving on CCLI. To have held otherwise would be to exclude the dominant type of claim the parties could expect to see arise “from or through the use of a golf cart” and render the indemnity virtually meaningless.
The Court also looked to the rules of construction and held that CCLI’s narrow reading of the indemnity left the phrase “or claims” without meaning. The term “damage” protected Clublink Corp. from damage to its own property so the phrase “or claims” had to refer to something else.
CCLI also argued that an indemnity cannot obligate a party to indemnify another for its own negligence unless negligence is expressly mentioned or, there is no other possible interpretation of the clause. While the Court agreed that such an obligation should not be inferred absent a clear and express contractual term, there is no requirement that the term “negligence” must be used – just a consideration of whether the words used (whatever they are) extend to include it.
While this decision does not break new ground, it serves as a strong reminder to companies and individuals about the importance of drafting and the potential impact of a broad indemnity.