Defense and Indemnity Demands in Today’s Global Marketplace

In defending product liability cases, product manufacturers, sellers and distributors often tender a request for defense and indemnity from claims to one of their business partners. Typically, the tender arises from two common scenarios: (1) a product distributor or seller tenders its defense to the product’s manufacturer or (2) a product manufacturer or assembler tenders defense to the manufacturer of a component part used in the final product. Given the fact most of the products sold in the U.S. marketplace are manufactured overseas, the tender of defense is typically made to a foreign entity. This adds an additional layer of complexity to the situation.

Seasoned product liability defense attorneys know that the request for defense should be tendered as early as possible to preserve the ability to claim for reimbursement for costs from the time of the original tender. However, additional complexities arise when a tender of defense is made to a foreign company.

Wilson Elser’s Product Liability team includes dedicated practice teams for Asia, Europe and Latin America. Practice team members regularly serve tenders of defense to product manufacturers and component manufacturers in these regions, and understand the region-specific difficulties that can arise from such tenders. In addition to tendering a request for defense early to maximize the potential reimbursement for defense costs, practice team members must consider the method of delivery for the tender and the language in which the tender is made to ensure that it is appropriate for the jurisdiction.

More significantly, product liability attorneys making tenders to foreign entities must confirm that the tender letter incorporates the defense and indemnity requirements for all applicable jurisdictions and acknowledges the business relationship and contracts between the two parties. A tender letter sent to the same manufacturer in a case pending in California might not include the elements needed to establish a proper tender of defense in a different case pending in Texas. Thus, the tender letter should be tailored to comply with the statutes and case law governing defense and indemnity obligations in the jurisdiction where the claim is pending. In addition, if a defense is sought from a foreign manufacturer or component supplier, careful consideration should be paid to whether the tender letter should also incorporate defense and indemnity language that may be required under the laws of the nation where the manufacturer or component manufacturer resides.

Naturally, if there is a contract between the two companies that requires defense and indemnity, the tender letter also should cite those specific provisions of the contract that require indemnification. Prior to issuing the tender of defense letter it is also important for the attorney and the client to confer about the relationship and business practices between the client and the target manufacturer, including situations where this issue has been dealt with in the past between the two companies. Information about the relationship between the two companies might provide additional grounds for seeking the tender or govern the method by which it should be delivered.

When sending the tender letter, a product liability attorney must also determine whether their client is entitled to coverage as an additional insured under a foreign supplier’s insurance policy and tailor the tender letter accordingly. A primitive short-form tender of defense letter that simply advises a company to notify its insurer, or that purports to tender to both the company and its insurer, may not invoke insurance coverage under the terms of the insurance policy. Before sending the tender, the product liability attorney should review the insurance policy procured by the business partner and determine the specific terms by which the client is provided coverage as an additional insured. The tender letter should then incorporate those specific requirements, whether they arise under a broad form or limited form vendor endorsement. The tender letter should also meet other conditions precedent to coverage under the insurance policy, such as compliance with notice provisions.

Finally, it is naïve to expect that all foreign suppliers will accept or even respond to a tender of defense. Product liability defendants must be prepared to proceed with the defense of the case and pursue a third-party action against the supplier to whom the tender was made. Of course, we welcome any comments that our readers may have and we are happy to learn about their experiences. If you should have any specific comments, please contact Claire Parsons at Wilson Elser.

This blog post was published originally on May 18, 2015.