PSYCHEMEDICS CORPORATION VS. CITY OF BOSTON (SJC)

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KeywordsIndemnity. Contract, Municipality, Indemnity, Construction of contract. Notice. Practice, Civil, Summary judgment. Waiver. Proximate Cause. Estoppel. Judicial Estoppel

The Supreme Judicial Court today issued an important decision concerning indemnification language in a municipal contract and the duty to indemnify.  In this case  the court discussed, among other issues, the indemnity language in a contract between the City and the plaintiff.  The Plaintiff had claimed that the City did not initiate the indemnification process properly and a Superior Court agreed in a summary judgment motion.  The SJC however reversed.  This is an important case on indemnification, defense, and hold harmless clauses.

[Excerpt] – “Where, as here, the parties do not specify the proper form of notice or what would constitute the opportunity to defend, we must decide what constitutes, as a matter of law, the provision of such notice and opportunity.  See Browning-Ferris Indus., Inc. v. Casella Waste Mgt. of Mass., Inc., 79 Mass. App. Ct. 300, 312 (2011), quoting Fay, Spofford & Thorndike, Inc. v. Massachusetts Port Auth., 7 Mass. App. Ct. 336, 342 (1979) (“Where the parties to a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances will be supplied by the court”).  We conclude that, in the absence of any specific contractual provisions by the parties, a simple statement of claims that are encompassed by the indemnification clause is sufficient to trigger the obligation to assume the defense; the notice need not be in writing or in any particular form of words, and the indemnitee need not explicitly ask for the assumption of the defense or to hold the indemnitee harmless.  Once notice has been received, the burden shifts to the indemnitor proactively to attempt to assume the defense.  To attempt proactively to assume the defense entails good faith efforts promptly to assume and control the defense of the claims asserted.[5]

Given this, and on the record before us, we conclude that Psychemedics did not meet its burden to establish by undisputed facts that it was entitled to judgment as a matter of law.  Accordingly, the allowance of summary judgment and the entry of a declaratory judgment in Psychemedics’s favor were incorrect.”

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