Letter Of Indemnity Form Template for Canada

It is not. Insurance is a regulated product backed by a licensed insurer, whereas an indemnity is a promise from one party to another and is worth only what that party can actually pay. Before relying on one, consider whether the indemnifier could meet a large claim, since a numbered company with no assets can sign an unlimited indemnity as easily as a bank. That is why a parent company guarantee, a letter of credit or a deposit is often asked for alongside. They also behave differently: an insurer is answerable under a policy with its own claims process, while an indemnity is enforced by suing on the contract.

Only if it says so. Indemnity wording is read against the party relying on it, so the document should state whether defence costs, settlements and the cost of enforcing the indemnity itself are included, and whether any cap applies. Say when money is payable as well as whether it is owed: an indemnity that pays only once the indemnitee has been held liable is a different commercial position from one that funds the defence as it runs. Note any exclusion for the indemnitee's own negligence. A cap expressed as an aggregate over the life of the document behaves differently from one applying to each claim.

That has to be agreed in the document. Set out who must be notified of a claim and how quickly, who conducts the defence, and whether the indemnifier can settle without the other party's consent. Late notice is the usual place these arrangements fail, so give the notice obligation a number of days and a method rather than leaving it at prompt notification. Decide who chooses counsel and who pays as the matter proceeds, and provide for what happens if the parties disagree about a settlement offer. Include a duty to cooperate and to share documents, since the party running the defence rarely holds all the records.

Until it expires by its own terms, which may be a fixed period, the life of an underlying contract, or open ended. Limitation periods are set provincially and affect when a claim can still be brought: two years is the basic period in most common law provinces, and three years for a personal action in Quebec under article 2925 of the Civil Code of Quebec. Those are separate questions: an indemnity that survives termination is of little use if the period for suing on it has run. Say whether the obligation continues after the main contract ends, and for how long, rather than leaving survival to be argued about.

Rules vary. Quebec is a civil law jurisdiction where the Civil Code of Quebec governs obligations, including suretyship and indemnification, rather than the common law applying in the other provinces and the territories. One difference is worth noting: suretyship in Quebec must be express under article 2335 of the Code, so an obligation of that kind cannot be inferred from surrounding conduct, although the Code imposes no requirement that it be in writing. Check the position for the province whose law the document selects, and make sure the party named as indemnifier is the entity that actually holds the assets.