Supply Agreements: Structuring Defense, Indemnity, and Insurance Provisions

Risk allocation and mitigation provisions are arguably the most important terms in supply agreements, yet the most challenging clauses to negotiate. Attorneys drafting defense, indemnity, and insurance provisions on behalf of manufacturers, suppliers, or end sellers must identify and evaluate all potential risks of the arrangement for their clients and clearly outline who will be responsible for any losses arising from such risks. International trade policy shifts and tariff uncertainty add additional complexity to the negotiation and drafting process.

Common risks of supply agreements that the parties should specifically address in the risk allocation provisions include a party's breach of representations, warranties, or covenants; IP infringement; negligence or willful misconduct; liability for design errors vs. manufacturing errors; failure to comply with federal or state laws and regulations; and risk allocation specific to trade policy and tariff volatility.

When negotiating and structuring defense, indemnity, and insurance clauses in supply agreements, counsel must understand and anticipate potential statutory and insurance claim limitations, as well as enforcement and procedural hurdles. Failure to do so may result in serious mistakes and unanticipated liabilities.

Listen as our expert panel of attorneys discusses best practices for structuring defense, indemnity, and insurance provisions in supply contracts.

I. Evaluating and drafting defense and indemnity provisions

II. Reconciling indemnity obligations and insurance policies

III. Potential enforcement and procedural hurdles

The panel will review these and other key issues:

• What specific risks should be addressed in the defense, indemnity and insurance provisions of supply agreements?
• How have the courts’ interpretations of indemnity provisions impacted parties’ ability to shift liability in supply agreements?
• How can parties use insurance provisions to meet defense and indemnity obligations?
• What are the most commonly disputed issues during supply contract negotiations and what are some effective strategies for resolving them?