When a shopper is injured in or near a department store, the store's insurer consults the applicable lease agreement early on. The lease may require the mall owner to indemnify the tenant store if the shopper brings a lawsuit, or it may require the store to indemnify the mall.

If the shopper sues both the mall and the store, then the party entitled to indemnification under the lease can “tender” the suit to the other. When tender is accepted, the party accepting tender agrees to defend the other during the lawsuit, and to pay any judgment entered against it at trial. As such, an indemnification clause can allow for a significant savings in defense costs.

On occasion, however, a lease is silent on the issue of indemnification. Or the indemnification clause cannot be enforced because it is too general and vague. In these situations, the parties may be able to resort to common law indemnification.

“Common law” is not contained in any contract or statute. Instead it consists of judge-made law dating back hundreds of years to the founding of the United States, and in fact has its roots in British law.

Common law indemnification consists of two main elements. First, the party seeking indemnification must be completely without fault. Second, the party against whom indemnification is sought must be at fault.

Examine The Lease

In determining which party is at fault, the lease agreement once again becomes important. The lease usually will specify the owner of the accident location. Ownership is a significant factor is assessing fault, because landowners have a non-delegable duty to make their property reasonably safe for visitors. So for example, if a claimant alleges she fell on the mall's sidewalk and the lease indicates the mall owns that sidewalk, then the store can argue any fault rests with the mall instead of the store.

In addition, the lease may reiterate who is responsible for maintaining and cleaning the accident location. In the foregoing example, if the lease indicates the mall owns the sidewalk, it likely also would indicate the mall (or its agent) is responsible for the sidewalk's maintenance.

Conversely, the party against whom indemnification is sought may have reasons for wanting to deny the tender request. The most obvious reason is that, theoretically, the presence of additional defendants in a lawsuit reduces the amount of money each would need to pay to resolve the case. In the example of the sidewalk discussed above, the mall would have a basis to deny the store's tender if it could establish the store had even 1-percent liability for the accident. For example, perhaps the store stationed a table of goods on the sidewalk. The mall could argue the store's table attracted the shopper to the accident location in the first place, and that without the table, the accident would not have happened. Or it could argue the table in essence made the sidewalk part of the store's sales floor, and as such the store should have made the area immediately surrounding the table safe for shoppers.

As illustrated above, contractual indemnification has the potential for being much more efficient than common law indemnification, as contractual indemnification does not require a demonstration of fault. However, common law indemnification should be remembered as a possible alternative when an enforceable indemnification clause is lacking.

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Commercial Leases and &quot;Common Law&quot; Indemnification

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