One of our existing work providers has sent its new terms to us and having quickly flicked through the contract I came across a term about indemnity. Is this term something to do with the insurance company’s legal requirement to indemnify their policyholder?
Without reading a copy of the agreement it is impossible to provide definitive advice as to the meaning of a specific term. However ‘indemnity clauses’ are becoming something of ‘standard term’ in approved repairer contracts.
Whilst the term ‘indemnity’ is a primary principle in insurance, this term which you have questioned is in a contract between you and the work provider so it is unlikely to relate to the policyholder.
With regard to the policy of insurance the term ‘indemnify’ essentially means that the insurer is required to return the policyholder to the position he/she enjoyed prior to the accident. If the policyholder’s vehicle was damaged in a collision the insurer is responsible for rectifying the damage to the vehicle and returning it to ‘pre accident condition’.
Turning to the indemnity clause in the contract, the work provider is essentially requesting that you agreed to indemnify the work provider if they experience an issue with the service you have supplied. If the work provider incurs loss as a result of your actions you are agreeing to indemnify their loss.
An indemnity is a contractual promise by you to accept liability for the work provider's loss.
These clauses started to be incorporated into approved repairer agreements during 2005 and have become ‘normal’.
Whether you agree to indemnify the work provider is a commercial decision that you are required to make and will depend upon the amount of work supplied and the profitability of the work offered by the contract.
However, by agreeing to the term you are exposing the company (or you personally if you are a sole trader or partnership) to a potential significant financial risk. Usually these types of indemnity clauses include legal expenses incurred by the work provider. These expenses are likely to be considerable due to the fact that any dispute will almost certainly include three parties, the car owner, the work provider and you.
The work provider is likely to incur significant fees and will also be responsible for meeting the vehicle owner’s legal fees. If you have agreed to provide an indemnity then you will be responsible for paying the legal fees incurred by the work provider, together with any compensation ordered by the Court.
You do have the option to remove the indemnity clause and sign the agreement with the clause removed. The work provider may be more concerned with retaining a repairer in your area than ensuring they retain the indemnity clause. Repairers should remember that work providers are contractually liable for indemnifying policyholder if they are unable to get a vehicle repaired then they will be in breach of contract to their policyholder.
With the contraction in the number of body repairers over recent years and the expansion of the nationwide group, independent quality repairers are becoming ever increasingly difficult to locate in every area. It is doubtful that insurers will want to ‘keep all their eggs in one basket’ and choose to only use Nationwide. If they only use Nationwide the number of independent repairers will fall and the balance of power between insurers and Nationwide will tip in Nationwide's favour which many insurers are likely to guard against.
Finally, it is noted in your question that you ‘flicked through’ the contract. The importance of reading these agreements cannot be over stated. A proportion of your income will come through this agreement perhaps hundreds of thousands of pounds. It is sensible to read the contract and be aware of what is in it so that you can ensure that as a business you can provide the service the work provider requires. If you subscribe to RML we will read it for you, highlight the concerns and allow you to make an informed decision.
Whilst the term ‘indemnity’ is a primary principle in insurance, this term which you have questioned is in a contract between you and the work provider so it is unlikely to relate to the policyholder.
With regard to the policy of insurance the term ‘indemnify’ essentially means that the insurer is required to return the policyholder to the position he/she enjoyed prior to the accident. If the policyholder’s vehicle was damaged in a collision the insurer is responsible for rectifying the damage to the vehicle and returning it to ‘pre accident condition’.
Turning to the indemnity clause in the contract, the work provider is essentially requesting that you agreed to indemnify the work provider if they experience an issue with the service you have supplied. If the work provider incurs loss as a result of your actions you are agreeing to indemnify their loss.
An indemnity is a contractual promise by you to accept liability for the work provider's loss.
These clauses started to be incorporated into approved repairer agreements during 2005 and have become ‘normal’.
Whether you agree to indemnify the work provider is a commercial decision that you are required to make and will depend upon the amount of work supplied and the profitability of the work offered by the contract.
However, by agreeing to the term you are exposing the company (or you personally if you are a sole trader or partnership) to a potential significant financial risk. Usually these types of indemnity clauses include legal expenses incurred by the work provider. These expenses are likely to be considerable due to the fact that any dispute will almost certainly include three parties, the car owner, the work provider and you.
The work provider is likely to incur significant fees and will also be responsible for meeting the vehicle owner’s legal fees. If you have agreed to provide an indemnity then you will be responsible for paying the legal fees incurred by the work provider, together with any compensation ordered by the Court.
You do have the option to remove the indemnity clause and sign the agreement with the clause removed. The work provider may be more concerned with retaining a repairer in your area than ensuring they retain the indemnity clause. Repairers should remember that work providers are contractually liable for indemnifying policyholder if they are unable to get a vehicle repaired then they will be in breach of contract to their policyholder.
With the contraction in the number of body repairers over recent years and the expansion of the nationwide group, independent quality repairers are becoming ever increasingly difficult to locate in every area. It is doubtful that insurers will want to ‘keep all their eggs in one basket’ and choose to only use Nationwide. If they only use Nationwide the number of independent repairers will fall and the balance of power between insurers and Nationwide will tip in Nationwide's favour which many insurers are likely to guard against.
Finally, it is noted in your question that you ‘flicked through’ the contract. The importance of reading these agreements cannot be over stated. A proportion of your income will come through this agreement perhaps hundreds of thousands of pounds. It is sensible to read the contract and be aware of what is in it so that you can ensure that as a business you can provide the service the work provider requires. If you subscribe to RML we will read it for you, highlight the concerns and allow you to make an informed decision.
