News & Insights

As we head into spring, many transportation contractors are working on final details of contract renewals with their school districts. When reviewing terms of a contract, it is easy to glance over the terms that look boilerplate, but can actually have significant ramifications for your operation. One consequential term often found in transportation contracts, as well as many other types of contracts, is indemnity. Although it may seem routine, contractors should understand what indemnity provisions require, and what risks exist with such terms. 

When it comes to contracted school transportation, school districts often seek to allocate risks stemming from transportation to the transportation contractor. This allocation of risk is typically done through indemnity. Indemnity is a contractual provision that requires one party to defend, indemnify, and hold the other party harmless from certain losses, claims, and judgments. Consequently, it is not uncommon for the proposed scope of indemnity to be broad, covering all losses, claims, and judgements arising out of, caused, or claimed to have been caused by the transportation contractor. It is also not uncommon for coverage to be expanded beyond the Contractor, such as Contractor’s agents or employees. An indemnity provision in a school transportation contract is almost always third-party indemnity, meaning it applies only when there are claims by third parties. Rarely, transportation contractors may come across first-party indemnity language – which applies when there are direct losses suffered by a party to a contract— but this is generally not recommended for transportation contractors.
 

As discussed above, indemnity typically requires one party to defend, indemnify, and hold harmless another. But what do these terms actually require the contractor to do? When a third party makes a claim against an indemnified party, the indemnifying party is responsible to defend the indemnified party from the point that a claim is filed, regardless of merit of the claim. The duty to indemnify triggers when there are damages, requiring the indemnifying party to reimburse the indemnified party for such losses or judgments. The duty to hold harmless largely overlaps with the duty to indemnify, but essentially means the indemnifying party will protect the indemnified party from being held liable at all.
 

When it comes to school transportation contracts, school districts will usually require some form of indemnification. Contractors should recognize that these indemnity provisions are often one sided, as school districts are afforded certain immunities under the Political Subdivision Tort Claims Act. 42 Pa. C.S.A. §8541. Accordingly, contractors can try to limit the scope of the indemnity obligation, such as by carving out indemnity for the other party’s negligence or intentional conduct. If you need assistance in reviewing contract terms such as indemnity, or have questions on above, you can contact help@rckelly.com or call us at 215-896-3846.