This issue is used to identify provisions related to the acceptance of, and protection from, liabilities arising in relation to an agreement. If a party is liable for something, it means that they bear responsibility for it. In the context of an agreement, this could mean that they are responsible for paying costs if something goes wrong. 

Agreements often include provisions in which one party indemnifies another against liabilities related to certain events. This means that one party (the “indemnifying party”) will take responsibility for any claims made against the other party (the “indemnified party”). Some agreements also place limits on what each party will be liable for.

The reasons that a liability claim might arise may be specific to the purpose of a particular agreement – for example, an agreement to supply a finished product has a different set of circumstances to an early stage research collaboration. Similarly, the extent to which one party may agree to indemnify another may depend on the specific roles and responsibilities of each party under the agreement. It is therefore important to consider purpose and context in order to negotiate an appropriate indemnification provision.

The negotiation of indemnity requirements is particularly important for contracts involving use of medical products under fast track or emergency use approval mechanisms, such as those that have been used for COVID-19 vaccines, as product developers will require sufficient protection against the risk of liability claims related to products that do not have full regulatory approval. There are some government and multilateral indemnification schemes intended to address this situation – for example, the U.S. PREP Act and the COVAX No Fault Compensation Program.

Questions to consider when developing provisions for indemnification & liability

• What occurrences could result in a liability claim?
• Are there any circumstances under which one party will not indemnify the other?
• What is the process for managing liability claims?
• Are there government or other types of indemnification schemes?
• Is there any limitation or monetary cap on each party’s liabilities under the agreement?

Example approaches found in the MAPGuide

• What occurrences could result in a liability claim?
  • Many agreements in the MAPGuide, regardless of their purpose, provide for indemnification against claims arising from material breach of the agreement, gross negligence, or breach of data protection requirements.
  • Agreements in the MAPGuide related to the purchase of COVID-19 vaccines often include indemnification by the purchasing party (usually a government entity) against claims for death or injury related to use of the vaccine. This is a contrast to funding agreements for product development, which generally require the product developer to indemnify the funder against such claims.
  • MAPGuide agreements related to licensing or the transfer of materials often provide for indemnification against the exploitation of the licensed rights, materials or data. Exploitation could cover a number of activities such as development, manufacture or sale of a product. Some licensing agreements also require the licensee to indemnify the licensor against claims arising from breach of a sublicense by a sublicensee.

• Are there any circumstances under which one party will not indemnify the other?
  • Some provisions in the MAPGuide restrict the obligations of the indemnifying party if a claim for loss or damages relates to the negligence or wilful misconduct of the indemnified party.
  • In some agreements for the purchase of COVID-19 vaccines, the obligation of the purchasing party to indemnify the product developer against claims relating to use of the vaccine does not apply if the developer has failed to follow Good Manufacturing Practice.

• What is the process for managing liability claims?
  • The indemnification provisions found in the MAPGuide generally state that: (i) the indemnified party must promptly inform the indemnifying party of the details of a claim; (ii) the indemnifying party will have control of the defense and settlement of any claims; and (iii) the settlement of a claim requires the consent of the other party.

• Are there government or other types of indemnification schemes and pools?
  • Agreements in the MAPGuide related to the supply of COVID-19 vaccines and therapeutics to the US government provide for protection of the product developer under the Public Readiness and Emergency Preparedness Act (PREP Act). The PREP Act provides immunity from suit and liability for any death or injury claims related to the product.
  • An agreement between CEPI and Novavax for the development of COVID-19 vaccines refers to the establishment of a potential WHO insurance mechanism. Since the effective date of that agreement, the COVAX No Fault Compensation Programme has been launched.

• Is there any limitation or monetary cap on each party’s liabilities under the agreement?
  • MAPGuide agreements often state that neither party is liable to the other for indirect damages, or for loss of profits or revenue, arising from the agreement.
  • Some agreements limit the liability of one or more parties to the amounts paid or budgeted for the activities under the agreement. However, damages arising from fraud or wilful misconduct are generally excluded from any liability caps.