Indemnification Clauses in Commercial Contracts (GA)

Search the Resource ID numbers in blue on Westlaw for more.

Resource ID: w-009-2443

Indemniﬁcation Clauses in

Commercial Contracts (GA)

JENNIFER G. COOPER AND MATTHEW LEONARD, BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, PC,

WITH PRACTICAL LAW COMMERCIAL TRANSACTIONS

A Practice Note discussing indemniﬁcation

and defense provisions in commercial

contracts under Georgia law. This Note deﬁnes

indemniﬁcation and explains how parties often

use indemniﬁcation to allocate risk. It discusses

key issues including statutory and common law

barriers to enforcement, deﬁning the scope of

the indemnity, limiting liability, and alternatives

to indemniﬁcation. This resource includes

drafting and negotiating tips.

Nearly every commercial contract has an indemnification provision.

Parties include these provisions for a variety of reasons. For example,

the parties to an equipment lease might include an indemnification

provision to:

 Allocate risk between the parties that:

z

defects in the equipment injure the lessee or third parties like

sublessees;

z

the lessee’s use of the equipment infringes third-party

intellectual property rights;

z

the lessor fails to timely deliver the equipment;

z

the equipment does not adhere to specifications; or

z

the lessor does not obtain all of the tax benefits associated with

being the tax owner of the equipment.

 Allow an aggrieved party to pursue certain rights, like the right to

attorneys’ fees, which may otherwise not be available in a common

law cause of action.

 Provide predictability and certainty of recourse.

 Show a court the parties’ intent regarding risk allocation.

 Increase the odds of settlement based on the parties’ intent.

If the contract does not contain a properly drafted indemnification

provision:

 The non-breaching party may:

z

have to rely on uncertain common law causes of action; and

z

not be able to obtain certain types of reimbursement, for

example, attorneys’ fees.

 The breaching party may not be able to adequately:

z

cap its liability;

z

reduce its liability by incorporating materiality qualifiers; or

z

reduce its liability by incorporating liability caps or deductibles

like thresholds or baskets.

Although commonly used, indemnity provisions can be complex. If

used improperly, an indemnification provision can subject a party

to continuing liability for circumstances outside of its control. If

used correctly, an indemnification provision can shield a party

from lawsuits and damages. This Note discusses the meaning

and benefits of indemnity under Georgia law, and helps parties

to correctly draft and negotiate an indemnification provision that

effectively manages risk.

DEFINITION OF INDEMNIFICATION

Generally, indemnification (or indemnity) is an undertaking by one

party to compensate the other party for certain costs and expenses.

Indemnity is imposed either by law or contract in Georgia (District

Owners Ass’n, Inc. v. AMEC Environmental & Infrastructure, Inc, 322 Ga.

App. 713, 715-16 (2013)).

INDEMNITY IMPLIED BY GEORGIA LAW

State law indemnity is a remedy implied under common law or

statute and arises out of obligations imposed through a preexisting

relationship (O.C.G.A. § 11-2-312(3), for example; see also, District

Owners Ass’n, 322 Ga. App. at 715-16 (recognizing common law

indemnity arising out of a vicarious liability relationship such as

between principals and agents and employers and employees)).

Theextent to which this obligation is imposed depends on:

 Applicable state law.

 The nature of the transaction.

 The nature of the relationship.

Indemniﬁcation Clauses in Commercial Contracts (GA)

Generally, courts impose an implied indemnity on a contractual

relationship only in the absence of an indemnification provision. For

example, in Georgia, a claim for common law indemnification exists

when a party is vicariously liable for the tort committed by another

and is compelled to pay damages because of negligence imputed to

him or her as a result (see District Owners Ass’n, 322 Ga. App. at 715-

16; see also U.S. Lawns, Inc. v. Cutting Edge Landscaping, LLC, 311 Ga.

App. 674, 676 (2011)). Parties relying on implied contractual indemnity

generally face unpredictable outcomes and may not be able to obtain

certain types of reimbursement, for example, attorneys’ fees. To avoid

any uncertainty, the parties to an express indemnity provision may

choose to include a disclaimer of the right to implied indemnity.

CONTRACTUAL INDEMNITY

Parties to a contract use a contractual indemnity provision to

customize risk allocation. Under Georgia law, the nature of an

indemnity relationship is determined by the intent of the parties as

expressed by the language of the contract (Service Merchandise Co. v.

Hunter Fan Co., 274 Ga. App. 290, 292 (2005)).

Georgia courts interpret indemnification agreements in the same

manner as other contracts. Specifically:

 The indemnity agreement will be enforced according to its terms if

the language is clear and unambiguous.

 If the language of the indemnity agreement is ambiguous, courts:

z

strictly construe the language against the indemnified party

with every presumption against an intention to indemnify; and

z

construe any ambiguities against the drafter.

(Viad Corp v. United States Steel Corp., 343 Ga. App. 609, 614 (2017).)

Indemnification clauses vary widely, but in a typical indemnification

provision, the indemnifying party promises to reimburse the

indemnified party from and against “losses, liabilities, claims, and

causes of action” (recoverable damages) incurred by the indemnified

party that “are caused by,” “arise from,” or are “related to” (nexus

phrase) the specified events giving rise to the indemnity obligation

(covered events).

For more information on recoverable damages, nexus phrases, and

covered events, see Defining the Recoverable Damages, Choosing

the Right Nexus Phrase, and Defining the Covered Events of the

Indemnity, respectively.

An insurance policy is a classic example of a contractual indemnity,

in which the insurer agrees to indemnify and defend the insured

against specified recoverable damages incurred as a result of

specified events. For an example of an indemnification provision for

use in a broader commercial contract, see Standard Clauses, General

Contract Clauses: Indemnification (GA) (W-000-1089).

In many cases, parties negotiating an indemnity clause also

negotiate a defense clause (see Obligation to Defend). In a defense

clause, the indemnifying party promises to defend the indemnified

party against third-party claims, for example, litigation or arbitration,

caused by or arising from:

 The indemnifying party’s breach of contract.

 The indemnifying party’s acts or omissions, even if the acts or

omissions are not breaches.

OBLIGATION TO INDEMNIFY DISTINGUISHED FROM OBLIGATION

TO DEFEND

Under Georgia law, the obligation to indemnify for damages and

the obligation to defend against third-party suits are separate and

distinct (see Nationwide Mut. Fire Ins. Co. v. Somers, 264 Ga. App. 421,

424 (2003); Ashton Park Trace Apartments, LLC v. City of Decatur, 2015

WL 11618243 at *5 (N.D. Ga. Oct. 21, 2015); George L. Smith II Georgia

World Cong. Ctr. Auth. v. Miller Brewing Co., 255 Ga. App. 643, 643-44

(2002) (stating that the duty to indemnify is a legally separate duty

from the duty to defend)).

While the duty to defend arises if the facts as alleged in the

complaint “even arguably” are within the coverage of the

indemnification provision, the duty to indemnify arises only if liability

actually exists under the indemnification language (see Nationwide

Mut. Fire Ins. Co., 264 Ga. App. at 425-427; see also Ashton Park

Trace Apartments LLC, 2015 WL 11618243 at *4-5).

Obligation to Indemnify

Under an indemnity provision, the indemnifying party agrees

to compensate the indemnified party for direct claims (by the

indemnified party against the indemnifying party), third-party claims,

or both. For a more detailed discussion of indemnity for direct versus

third-party claims, see Direct Versus Third-Party Claims.

Indemnification requires the indemnifying party to:

 Reimburse for covered paid costs and expenses (losses). Georgia

courts require reimbursement for all paid losses pursuant to the

parties’ contract (see, for example, Deep Six, Inc. v. Abernathy, 246

Ga. App. 71, 73 (2000)).

 Advance payment for covered unpaid costs and expenses (like

liabilities) as they are incurred but only if the recoverable damages

under the indemnity include liabilities, claims, or causes of action.

In Georgia, a judgment fixing legal liability is not a condition

precedent to recovery under an indemnity clause (O.C.G.A.

§51-12-32(c) (pertaining specifically to joint tortfeasors); see also

Doss & Associates v. First Am. Title Ins. Co., Inc., 325 Ga. App. 448,

465-66 (2013)). For more information on losses versus liabilities,

see Defining the Recoverable Damages.

Obligation to Defend

The obligation to defend is usually broader than the obligation to

indemnify because it may apply whether or not the third-party claim

has merit (see S. Guar. Ins. Co. v. Dowse, 278 Ga. 674, 676 (2004) and

Cantrell v. Allstate Ins. Co., 202 Ga. App. 859, 859 (1992); see also

Ashton Park Trace Apartments LLC, 2015 WL 11618243 at *4-6). The

obligation to defend is both:

 An obligation. The indemnifying party must:

z

reimburse for covered paid costs and expenses (losses)

comprised of defense costs and expenses, which may include

the cost and expense of appeals and counterclaims and losses

on resolution of the dispute; and

z

advance payment for covered unpaid costs and expenses (like

liabilities) comprised of defense costs and expenses.

 A right. The indemnifying party has the right to assume and control

the defense, subject to applicable agreements (such as control of

defense provisions (see Control of Defense Provisions)) and the law.

Indemniﬁcation Clauses in Commercial Contracts (GA)

An indemnified party always wants the indemnification provision

to expressly include the duty to defend because it otherwise risks

having the indemnifying party only offering to pay for actual

damages or judgments resulting from the claims made.

The obligation to defend is generally held to exist:

 In the context of third-party claims.

 If the defense provision arguably covers allegations in the

complaint and there is no applicable exclusion (see Nationwide

Mut. Fire Ins. Co., 264 Ga. App. at 425; see also Ashton Park Trace

Apartments, LLC, 2015 WL 11618243 at *5 and JNJ Foundation

Specialists, Inc. v. D.R. Horton, Inc., 311 Ga. App. 269, 271 (2011)).

The allegations asserted in the suit, not the ultimate merits of

the action, give rise to the obligation to defend. For an example,

see Defense is Often Broader than Indemnification: An Example.

Therefore, a party may have to defend the other party even if the

court ultimately finds the underlying claim to be without merit.

For a detailed discussion of the triggers to and scope of the

obligation to defend, see Practice Note, Commercial General Liability

Insurance Policies: Property Damage and Bodily Injury Coverage

(Coverage A) (9-507-2539).

Defense is Often Broader than Indemniﬁcation: An Example

Consider an indemnification provision that requires the indemnifying

party to:

 Indemnify against third-party claims for damages and losses

arising out of the indemnifying party’s negligence.

 Defend against third-party suits raising claims covered by the

indemnity.

The indemnified party sues the indemnifying party under the

provision for losses and damages suffered. The court absolves the

indemnifying party of negligence. In this case, the court:

 Also absolves the indemnifying party of any indemnity liability.

Because the indemnifying party is absolved of negligence, the

indemnifying party has no obligation to indemnify for its own

negligence.

 May require the indemnifying party to defend the indemnified

party. The indemnifying party’s defense obligation is triggered

by suits raising claims covered by the indemnity, not whether the

conditions of indemnity were, or were not, later established. In this

case, some courts have upheld the defense obligation regardless

of the merits of the obligation to indemnify. (See, for example,

Great American Ins. Co. v. McKemie, 244 Ga. 84, 85 (1979).)

For information about the scope of defense obligations under

insurance contracts, see Practice Note, Commercial General Liability

Insurance Policies: Property Damage and Bodily Injury Coverage

(Coverage A): The Duty to Defend Is Broader than the Duty to

Indemnify (9-507-2539).

INDEMNIFICATION VERSUS HOLD HARMLESS PROVISIONS

Most indemnification provisions require the indemnifying party to

“indemnify and hold harmless” the indemnified party for specified

liabilities or losses. In practice, these terms are typically paired and

interpreted as a unit to mean “indemnity.” Black’s Law Dictionary

takes this approach, an authority that Georgia courts cite to in

discussing these terms (see, for example, Lanier At McEver, L.P. v.

Planners And Engineers Collaborative, Inc., 284 Ga. 204, 209-10

(2008) (dissent) and Parker v. Puckett, 129 Ga. App. 265, 267 (1973)).

However, some commentators have drawn a distinction between

the two terms. For example, they construe “hold harmless” to

protect another against the risk of loss as well as actual loss and

define “indemnify” to mean “reimburse for any damage,” a narrower

meaning than that of “hold harmless” (see Mellinkoff’s Dictionary of

American Legal Usage 286 (1992); see also discussion in Bryan A.

Garner, 15 Green Bag 2d 17, 22-24 (2011)).

Obligation to Hold Harmless

Similar to the obligation to indemnify (see Obligation to Indemnify),

in states or courts that recognize a distinction, under the obligation

to hold harmless the indemnifying party must:

 Reimburse for covered paid costs and expenses (losses).

 Advance payment for covered unpaid costs and expenses (like

liabilities) as they are incurred.

However, unlike the indemnity obligation, in states and courts that

recognize a distinction, the hold harmless obligation may require the

indemnifying party to advance payment for covered unpaid costs and

expenses even when the defined recoverable damages are limited to

losses and do not include liabilities, claims, and causes of action (see

Obligation to Indemnify and Defining the Recoverable Damages).

Additionally, although unlikely in Georgia, “hold harmless” may

release the indemnified party from any related claim or cause of

action by the indemnifying party.

To avoid “hold harmless” being given meaning above and beyond

indemnification or otherwise causing confusion, the indemnifying

party should consider:

 Excluding “hold harmless” from the indemnification provision.

However, if the contract includes the obligation to defend, the

indemnifying party will likely in any event have to compensate the

indemnified party for both paid and unpaid costs and expenses

(see Obligation to Defend).

 Clarifying that payments will be made only for actual losses and in

the form of reimbursement.

For more information, see Standard Clauses, General Contract

Clauses: Indemnification (GA): Drafting Note: Hold Harmless

(W-000-1089).

STATUTORY AND COMMON LAW BARRIERS

TOENFORCEMENT

Statutory or common law restrictions may limit the enforceability of

an indemnity. While there is no specific statute that generally governs

the enforceability of all indemnification provisions in Georgia,

parties should review any applicable Georgia law specific to their

circumstances that may restrict or establish rules regarding aspects

of the indemnity provision. For example, certain types of indemnities

are vulnerable to challenge under state law or public policy that:

 Require a party to indemnify another for all claims, regardless of

who is at fault. In Georgia, when a party seeking to indemnify for

Indemniﬁcation Clauses in Commercial Contracts (GA)

its own negligence does so in unequivocal terms, courts give effect

to those provisions. However, Georgia courts:

z

strictly construe these types of indemnification provisions

against the indemnified party (see Service Merchandise Co., 274

Ga. App. at 296; see also Firmani v. Dar–Court Builders, LLC, 339

Ga. App. 413, 425 (2016));

z

do not give effect to any terms by implication where the

language is not otherwise clear (see Seaboard Coast Line R.

Co.v. Dockery, 135 Ga. App. 540, 545 (1975)); and

z

have held that an agreement by one party to indemnify another

against “any and all claims” does not clearly and unequivocally

evidence the indemnifying party’s intent to indemnify for the

indemnitee’s own negligence (see Park Pride Atlanta, Inc. v. City

of Atlanta, 246 Ga. App. 689, 690-91 (2000)).

 Georgia courts, however, have enforced less than explicit

language to require indemnification for damages resulting

from the combination of the indemnified and indemnifying

parties’ negligence (see, for example, Lawyers Title Ins. Corp.v.

New Freedom Mortgage Corp., 285 Ga. App. 22, 30 (2007)).

Nevertheless, best practice is to expressly mention negligence

 Provide for tort-based damages like punitive damages (in Georgia,

public policy does not bar insurance coverage for punitive

damages (see Fed. Ins. Co. v. Nat’l Distrib. Co., Inc., 203 Ga. App.

763, 768 (1992)).

 Are not conspicuously set out in the contract (see, for example,

Legal Update, Tenth Circuit: Inconspicuous Indemnification Clause

is Unenforceable (2-591-9145)). While Georgia does not require an

indemnification provision to be conspicuous, courts may disfavor

provisions buried in an agreement, especially where the provision

might be viewed as disfavored or otherwise meriting greater

conspicuousness (for example, protecting an indemnitee against

its own negligence).

 Are given by protected classes like those involved in or relating to:

z

construction-related contracts (O.C.G.A. § 13-8-2(b))

(indemnification against party’s own negligence is void);

z

engineering, architectural, or land surveying services (O.C.G.A.

§ 13-8-2(c)) (indemnification agreements void except for the

indemnification for damages resulting from the negligence,

recklessness, or intentionally wrongful conduct of the

indemnifying party or its representatives);

z

motor carrier transportation contracts (O.C.G.A. § 40-1-113)

(indemnification in a transportation contract against party’s own

negligence or intentional acts is void); and

z

leases (O.C.G.A. § 11-2A-504) (indemnification for the loss of tax

benefits or damage to landlord’s interest must be reasonable).

IDENTIFYING THE INDEMNIFIED PARTIES

Either or both parties to the agreement may be indemnified parties,

depending on whether the indemnification clause is structured as a

unilateral indemnification or a mutual indemnification (for more on

mutual indemnification, see Mutual Indemnities). Some contracts

include officers, directors, managers, members, employees, agents,

subcontractors, and affiliates as indemnified parties.

If parties include certain terms, for example, affiliates, they may

need to add temporal modifiers to expressly indicate whether they

intend the term to include both existing and future affiliates. In the

absence of defining or modifying the term, Georgia courts look to

the language of the contract as a whole to determine the intention

of the parties (see Service Merch., 274 Ga. App. at 292 (the language

the parties have used will be looked to for the purpose of finding the

parties’ intent, and all ambiguities are construed against the drafter);

see also Ellington v. EMI Music, Inc., 997 N.Y.S.2d 339, 343-44 (2014)

(use of the term “affiliates” in a contract includes only those affiliates

in existence at the time the contract was executed, absent clear and

unambiguous language indicating that the parties intended to bind

other affiliated parties to the underlying contractual obligations)).

When identifying the indemnified parties, parties should consider the

impact of other provisions in the agreement:

 Third-party beneficiaries provisions. The parties can use a third-

party beneficiaries provision to give a third-party indemnified party

the ability to enforce its rights under the agreement. For a sample

third-party beneficiaries provision, see Standard Clauses, General

Contract Clauses: Third-Party Beneficiaries (6-519-7630).

 Assignment provisions. An assignment provision can change

or expand the list of future indemnified parties (see Assignment

Rights).

For more information, see Standard Clauses, General Contract

Clauses: Indemnification (GA): Drafting Note: Who is the

Indemnifying Party? (W-000-1089).

DEFINING THE SCOPE OF THE INDEMNITY

Parties can manage risk expectations and avoid interpretation,

enforceability, and other disputes if the covered events and related

damages under the indemnity are appropriate in nature and scope.

To do this, a party should:

 Carefully consider its needs and negotiating position within the

given context.

 Assess transaction-related risk in terms of events and

consequences, and the likelihood that those events or

consequences will occur.

In defining the scope of the indemnity, the parties should consider

how broadly or narrowly they will:

 Define the recoverable damages (see Defining the Recoverable

Damages).

 Define the nexus phrase (see Choosing the Right Nexus Phrase).

 Define the covered events of the indemnity (see Defining the

Covered Events of the Indemnity).

 Limit the scope of the indemnity (see Limitation of Liability

Approaches).

DEFINING THE RECOVERABLE DAMAGES

Although seemingly redundant, each word in the phrase “losses,

liabilities, claims, and causes of action” has an individual meaning

and serves a specific purpose. Since Georgia courts strictly construe

indemnification provisions against the indemnified party, the parties

Indemniﬁcation Clauses in Commercial Contracts (GA)

should include language covering all types of damages intended to

be covered (see, for example, Service Merch., 274 Ga. App. at 292).The

terms are listed below in order of increasing breadth:

 Losses. This includes any covered judgments, settlements, fees,

costs, and expenses. The indemnifying party becomes responsible

for a loss only after the indemnified party pays. (See, for example,

Auto-Owners Ins. Co. v. Anderson, 252 Ga. App. 361, 364 (2001).)

 Liabilities. This includes debts and other legal obligations. The

indemnifying party becomes responsible for a liability when the

liability is legally imposed, but before the money is paid. (See, for

example, Doss & Associates, 325 Ga. App. at 466.)

 Claims. This includes damages resulting from a third-party

lawsuit. The indemnifying party becomes responsible for a claim at

the moment when a party, including any third party, files a lawsuit.

 Causes of action. This includes damages resulting from a right

to seek relief. The indemnifying party becomes responsible for

a cause of action when the indemnified party’s or a third party’s

right to seek relief, as the case may be, accrues.

The above list of standard covered items is not exhaustive.

Additionally, “losses, liabilities, claims, or causes of action” can be

narrowly tailored, for example, to cover one or more of the following:

 Personal injury and death.

 Real and personal property damage. Parties may specify “tangible

property damage” if they want to distinguish the term from

indemnification for claims relating to intangible property (such as

claims for intellectual property infringement).

 Infringement of intellectual property. However, intellectual

property claims are often covered in a separate provision because

intellectual property indemnification generally has different:

z

remedies: and

z

limitations of liability.

 For an example of an intellectual property indemnification

provision, see Standard Document, Professional Services

Agreement: Section 11.2 (9-500-2928).

 Breach of confidentiality.

 Violation of law.

Direct Versus Third-Party Claims

The obligation to compensate an indemnified party may apply to:

 Direct claims. These are claims that the indemnified party

has against the indemnifying party. Commercial contract

indemnification provisions typically do not cover direct claims.

These provisions will only cover third-party claims unless the

language clearly reflects the intent to cover direct claims also.

Therefore, absent specific language, parties cannot rely on a

general indemnity clause to recover costs from legal action against

one other. (See SRG Consulting, Inc. v. Eagle Hosp. Physicians,

LLC, 282 Ga. App. 842, 844-45 (2006).) Parties, however, may be

subject to increased risk of liability or dispute if they overlook or

fail to address direct claims (see Practice Note, Indemnification:

Avoiding Common Pitfalls: Direct Claims (W-015-5317)). An

indemnification provision for direct claims typically covers

damages relating to the indemnifying party’s acts, omissions,

orbreach of the agreement.

 Third-party claims. These are claims that a third party has

against the indemnified party, which parties most commonly use

indemnification to cover.

In many commercial transactions, parties limit indemnification

to cover only third-party claims and address liability for direct

damages elsewhere in the agreement, for example, in the limitation

of liability clause. If the indemnification clause covers direct claims

and breach of the agreement, the parties should consider whether

the indemnification obligation should be included in the limitation

of liability. For a sample limitation of liability clause, see Standard

Clauses, General Contract Clauses: Limitation of Liability (GA)

(W-000-1148).

Attorneys’ Fees

Under Georgia law, unless a statute provides otherwise or an

indemnification clause includes a duty to defend or express language

requiring the payment of attorneys’ fees, an indemnified party is not

entitled to recover attorneys’ fees and legal costs incurred as a result

of suits brought against it relating to matters for which the party is

entitled to be indemnified (see George L. Smith II, 255 Ga. App. at 644).

Similarly, attorneys’ fees incurred in establishing the right to

indemnification are not permitted unless there is a clear and

unambiguous contractual provision or a statutory right providing for

such fees and costs (see, for example, SRG Consulting, 282 Ga. App.

at 844-45; but see PIC Group, Inc. v. LandCoast Insulation, Inc., 795

F. Supp. 2d 459, 461-63 (S.D. Miss. 2011) (applying Georgia law to

hold that the broad language of an indemnity agreement covering

“costs” and “expenses” which are “in connection with” breach of the

agreement allowed recovery of attorneys’ fees incurred in enforcing

the agreement)).

Therefore, parties should expressly address attorneys’ fees in the

indemnity provision, and if relevant, identify whether they are

limited to reasonable or out-of-pocket expenses. Attorneys’ fees are

implicitly included in an obligation to defend.

CHOOSING THE RIGHT NEXUS PHRASE

This Note uses the term nexus phrase to describe the series of

words that link the list of recoverable damages (for example, losses

or liabilities) to the covered events (for example, breach of the

agreement or the indemnifying party’s negligence). Nexus phrases

dictate the degree to which the event giving rise to the indemnity and

the indemnified party’s damages need to be related for the event

to qualify for recovery. The nexus phrase therefore helps shape the

scope of indemnity and directly impacts the amount of recoverable

damages.

Usually, the indemnified party wants the indemnity to include a

broad nexus phrase, for example, “related to.” A broad nexus phrase

helps to expand the indemnity’s scope of coverage.

Usually, the indemnifying party wants the indemnity to include a

narrow nexus phrase. A narrow nexus phrase excludes damages

unrelated to the indemnifying party’s own acts or omissions. To

narrow indemnity coverage, parties can use:

 ”Caused by.”

 ”Result from.”

Indemniﬁcation Clauses in Commercial Contracts (GA)

 ”Solely result from.”

 ”To the extent they arise out of.”

While these examples are more narrow than “related to” language,

courts may construe some of these more broadly than others. For

example, Georgia subscribes to the general rule that indemnity

agreements containing language such as “arising out of” should be

read broadly (see Fayette County Nursing Home, LLC v. PRI X-Ray, LLC,

342 Ga. App. 143, 146-47 (2017) and Viad Corp., 343 Ga. App. at 615-16).

DEFINING THE COVERED EVENTS OF THE INDEMNITY

Covered events generally arise from or relate to:

 The indemnifying party’s breach of the agreement (see Indemnities

for Breach of the Agreement (2-519-9438)).

 The indemnifying party’s acts or omissions, even if the acts or

omissions are not breaches (see Occurrence-Based Indemnities

(W-000-1089)).

Covered events include two broad categories:

 Direct claims.

 Third-party claims.

Indemnities for Breach of the Agreement

An indemnity for breach of some or all of the agreement may appear

unnecessary because a breaching party can almost always be sued

for the direct loss under contract theory. However, parties commonly

include an indemnity for breach as a way to:

 Change (usually extend) the indemnified party’s right to recover

damages, particularly regarding legal costs and expenses.

 Recover loss suffered as a result of third-party claims that result

from the breach.

Indemnity based on breach of the agreement can be limited by:

 Common law. Common law rules relating to breach of the

agreement, such as the foreseeability rule in Hadley v. Baxendale,

may similarly modify indemnity coverage of breach ((1854) 156

Eng. Rep. 145). Under Hadley, a plaintiff may not recover damages

that are improbable and unforeseeable unless the defendant had

special knowledge of the circumstance. Georgia courts have not

definitively determined whether Hadley’s foreseeability rule would

apply to an indemnity claim based on breach of the agreement.

Therefore, if appropriate, parties should include “reasonably

foreseeable” language in the indemnity provision to ensure that

the common law rule of reasonableness applies.

 Limitations in the underlying contract language. The scope,

depth, and duration of the indemnifying party’s representations,

warranties, and covenants impact the indemnified party’s

indemnification rights for breach of the agreement. For example,

the seller of a business often makes a series of representations

about its business and the enforceability of the agreement to

induce the buyer to enter into the transaction. If a statement is

untrue when made, then the seller has breached the agreement,

and the buyer may have an indemnification claim on this basis.

If the statement is true when made, but becomes untrue some

time later, then the seller has not breached the agreement, and

the buyer does not have an indemnification claim (unless the

seller breaches a corresponding covenant). To the extent that a

representation is qualified, the indemnification for breach of that

representation will also be correspondingly limited. For sample

representations and warranties, see Standard Clauses, General

Contract Clauses: Representations and Warranties (2-519-9438).

For more information on indemnity for breach of the agreement, see

Standard Clauses, General Contract Clauses: Indemnification (GA)

(W-000-1089).

Occurrence-Based Indemnities

Indemnity clauses frequently cover liabilities based on specific

occurrences. A broad occurrence-based indemnity obligation

may, for example, cover all negligent acts or omissions of the

indemnifying party. In some instances, parties may agree to forgo

a non-infringement representation and warranty, but protect the

indemnified party with an indemnity obligation covering third-party

intellectual property infringement claims. In this case, the third-party

claim does not arise from a breach, but is indemnified regardless.

Occurrence-based indemnities can be narrowed, including by:

 Limiting coverage to specific claims or liabilities. The claims may

be known or unknown, contingent or non-contingent, or cover a

specific subject matter, such as:

z

environmental harms;

z

claims arising in a specific jurisdiction; or

z

losses associated with specific pending litigation.

 Limiting the scope of activities and qualifying the standard of

care, for example, by replacing “negligent acts or omissions” with

“negligent work” or limiting the indemnification obligation to apply

only when the indemnifying party is solely negligent.

LIMITATION OF LIABILITY APPROACHES

Parties should customize indemnity coverage to be reasonably

consistent with the transaction-related risk and the parties’ negotiating

posture. Parties can control the impact of the indemnity by:

 Carefully tailoring the language, by negotiating, for example:

z

exceptions to the indemnifying party’s obligation to indemnify

(see Exceptions to Indemnification);

z

the degree to which either party has the right or the obligation

to control the defense of an indemnified claim (see Control of

Defense Provisions);

z

the degree to which the indemnified party has the obligation to

notify the indemnifying party of third-party claims (see Notice of

Third-Party Claims);

z

indemnification deductibles (see Liability Baskets);

z

an indemnification cap (see Maximum Liability (Limitation of

Liability)); and

z

materiality and other indemnification qualifiers (see Materiality

and Other Qualifiers).

 Integrating the language with the agreement’s other risk allocation

provisions, for example:

z

waiver of consequential damages (see Waiver of Incidental and

Consequential Damages);

z

sole remedy provisions (see Sole Remedy Provisions); and

z

assignment rights (see Assignment Rights).

Indemniﬁcation Clauses in Commercial Contracts (GA)

EXCEPTIONS TO INDEMNIFICATION

Indemnity coverage commonly excludes circumstances where the

indemnified party’s own actions cause or contribute to, in whole

or in part, the harm triggering indemnification. For example, an

indemnification provision may exclude the indemnified party’s:

 Negligent or grossly negligent acts or omissions, or willful

misconduct.

 Use or alteration of the products that does not conform with the

specifications.

 Bad faith failure to comply with the agreement.

A party with significant negotiating leverage may request

indemnification for its own plain or ordinary negligence, including

only gross negligence as an exception to indemnification. With

certain exceptions, Georgia public policy generally does not prohibit

indemnifying a party for its own negligence if the parties’ agreement

explicitly and unequivocally states that intent (see Park Pride Atlanta,

246 Ga. App. at 690-91).

Requesting indemnification for one’s own negligence is unusual and

typically associated with specific industries and may be subject to

statutory restrictions. For example, under Georgia law:

 Construction and motor carrier contracts are statutorily prohibited

from indemnifying a party for its own negligence (O.C.G.A.

§§13-8-2(b) and 40-1-113).

 Indemnification clauses in engineering, architectural, or land

surveying services contracts are prohibited, except for damages

resulting from the negligence, recklessness, or intentionally

wrongful conduct of the indemnifying party or its representatives

(O.C.G.A. § 13-8-2(c)).

Such requests are uncommon in the broad commercial context.

Aparty seeking indemnification for its own negligence should consider:

 Whether such requests are accepted practice in the relevant

industry.

 Whether applicable state laws or industry-specific regulations

allow or prohibit such indemnification.

 Whether the nature and scope of the risk sufficiently outweighs the

bargained-for consideration in the transaction.

 The potential negative effect of the request on negotiations of the

overall transaction.

In Georgia, provisions indemnifying a party for its own negligence

are strictly construed against the indemnified party (see Service

Merch., 274 Ga. App. at 296.) In doing so, courts do not give effect to

any terms by implication where the language is not otherwise clear

(Seaboard Coast Line R. Co., 135 Ga. App. at 545).

Further, since Georgia public policy never implies an agreement to

indemnify a party for its own negligence in the absence of express

language, courts are unlikely to extend indemnity provisions covering

a party’s own negligence to cover a party’s own gross negligence or

intentional conduct absent express terms (see, for example, Ryder

Integrated Logistics Inc. v. BellSouth Telecommunications, Inc., 281

Ga. 736, 737-38 (2007); see also Holmes v. Clear Channel Outdoor,

Inc., 284 Ga. App. 474, 477 (2007) (holding that exculpatory clauses

relieving liability for acts of gross negligence or willful or wanton

conduct are void as against public policy)).

For an example of an exceptions clause in an indemnity provision,

see Standard Clauses, General Contract Clauses: Indemnification

(GA): Section 2.1 (W-000-1089). For common indemnity exclusions

found in the loan agreement context, see Practice Note, Loan

Agreement: Expenses and Indemnification: Exceptions to Expense

Reimbursement Obligation (4-502-0802).

WAIVER OF INCIDENTAL AND CONSEQUENTIAL DAMAGES

This waiver, which often disclaims a host of non-direct damages

including indirect, consequential, incidental, punitive, and special,

limits the indemnifying party’s liability to certain actual and direct

damages and reduces the amount the party may otherwise be liable

to pay. For definitions of certain of these damages, see Practice

Note, Damages for Breach of Commercial Contracts (W-012-6210).

For a sample waiver of incidental and consequential damages, see

Standard Clauses, General Contract Clauses: Limitation of Liability

(GA) (W-000-1148).

When drafting and negotiating an indemnification provision,

parties should understand whether and how this type of waiver

impacts the indemnification provision. For example, if the

indemnity for third-party claims is not excluded from the waiver,

the indemnifying party generally is not required to pay for indirect

and consequential damages stemming from third-party claims

even though these damages are caused by its own bad acts. If

parties intend for the indemnity to cover all liabilities (including

indirect and consequential damages) arising from third-party

claims, then the parties should exclude indemnification for third-

party claims from the waiver.

CONTROL OF DEFENSE PROVISIONS

With an obligation to defend, the indemnifying party has the right to

control the defense, unless the agreement states otherwise. Georgia

courts uphold the parties’ right to allocate the control of defense to

the indemnifying party (see, for example, Tuzman v. Leventhal, 174

Ga. App. 297, 299-300 (1985)). As the paying party, the indemnifying

party wants to control the defense to better regulate its expenses

and liabilities. However, the indemnified party, as defendant,

may want to control the defense to protect its own legal status,

reputation, and liability.

If representation by the same counsel presents a genuine conflict of

interest between the parties, Georgia law may grant the indemnified

party the right to select counsel, subject to certain conditions (see,

for example, Am. Family Life Assur. Co. of Columbus, Ga. v. U.S. Fire

Co., 885 F.2d 826, 831-32 (11th Cir. 1989)). However, for more certain

protection and control over its liabilities, an indemnified party can

seek contractual rights, such as the right to:

 Assume the defense, either outright or based on certain

contingencies (for example, conflict of interest or inaction of the

indemnifying party).

 Consent to settling the claim or entry of a judgment, either

outright or based on certain contingencies (for example, if the

judgment will have an adverse impact on the indemnified party’s

financial interest or reputation).

 Consent to counsel selection.

 Participate in the defense (possibly at its own expense).

Indemniﬁcation Clauses in Commercial Contracts (GA)

For an example of a Control of Defense Provision, see Standard

Clauses, General Contract Clauses: Indemnification (GA): Section 3

(W-000-1089).

NOTICE OF THIRD-PARTY CLAIMS

The indemnifying party is usually better able to limit its liability if:

 It has prompt notice of a covered third-party claim. Georgia courts

generally agree that prompt, written notice provisions are conditions

precedent to indemnification rights (see Progressive Mountain Ins.

Co. v. Bishop, 338 Ga. App. 115, 117-18 (2016); see also Artrac Corp. v.

Austin Kelley Advertising, Inc., 197 Ga. App. 772, 776 (1990)).

 The indemnified party agrees to cooperate throughout the

disposition of the claim.

However, under common law, the indemnified party’s failure to give

the indemnifying party notice of covered claims does not relieve

the indemnifying party from its indemnity obligations. Therefore,

an indemnifying party may want to insist in the contract on prompt

notice of a third-party claim.

The main point of contention regarding notice typically relates to

whether the indemnified party’s late or defective notice excuses or

limits the indemnifying party’s obligation to indemnify. To avoid this

potential conflict, the parties should specify whether indemnification:

 Is conditioned on notice.

 Covers litigation expenses that were incurred before notice.

The parties may agree that an indemnified party’s failure to provide

proper notice will excuse the indemnity obligation only to the extent

the indemnifying party’s ability to defend is adversely affected, such

as if the lack of notice causes the indemnifying party to miss a filing

deadline.

LIABILITY BASKETS

Liability baskets are common in corporate transactions like asset

and stock purchase transactions, but uncommon in commercial

transactions like the sale of goods and services. However, sellers

that engage in multiple transactions with individual buyers should

consider including this provision, as the cost of indemnifying a

relatively small third-party claim could greatly exceed the value of

the commercial agreement.

Generally, a basket shields the indemnifying party from having to

indemnify an otherwise covered claim unless and until the amount of

losses resulting from covered claims exceeds a defined amount. The

parties can structure the basket as either a:

 Threshold, so that once the agreed amount is reached, the

indemnifying party is liable for the total amount of losses

(sometimes referred to as a “tipping,” “dollar one,” or “first

dollar” basket).

 Deductible, so that once the agreed amount is reached, the

indemnifying party is only liable for the amount of losses in excess

of the agreed amount (sometimes referred to as an “excess

liability” basket).

For an example of a liability basket provision, see Standard Clauses,

General Contract Clauses: Indemnification (GA): Section 2.2

(W-000-1089) and the accompanying Drafting Note, which also

discusses the possibility of structuring the liability basket as hybrid

threshold/deductible basket or a mini-basket. A party could even

establish a “mini-basket,” where an individual loss must exceed a

certain dollar threshold to be applied to the basket itself.

The Implications of a Liability Basket on the Obligation to Defend

Parties may choose to limit an obligation to defend using a liability

basket. In this case, the obligation to defend may arise before the

liability basket threshold has been reached. Parties should consider

clarifying the parties’ rights and responsibilities by obligating the

indemnified party to reimburse the indemnifying party for all non-

covered amounts in this event.

MAXIMUM LIABILITY (LIMITATION OF LIABILITY)

An indemnifying party with negotiating leverage may insist on a

monetary cap on indemnity. As with other types of liability caps, the

indemnifying party should ensure that this provision:

 Caps its potential liability to a fixed amount.

 Limits the maximum aggregate liability for all potential claims that

may arise under the agreement, not just for individual claims.

The indemnification cap may appear in a general limitation of liability

clause covering all contract liabilities (including indemnity) or as

part of the indemnification provision (see, for example, WESI, LLCv.

Compass Environmental, Inc., 509 F. Supp. 2d 1353, 1356 (2007)).

A limitation of liability covering all contract liabilities will affect the

indemnity provision, unless indemnification is explicitly excluded

from the cap.

For an example of a maximum liability clause, see Standard Clauses,

General Contract Clauses: Indemnification (GA): Section 2.3

(W-000-1089).

If the agreement includes a cap on the maximum liability for

indemnification, the parties should ensure that the agreement does not

contain any other provisions that potentially conflict with the stated limit.

Implications of Maximum Liability on the Obligation to Defend

Parties may choose to limit an obligation to defend using a liability

cap. In this case, the obligation to defend may continue after the

liability cap has been reached. Parties should consider clarifying the

parties’ rights and responsibilities by obligating:

 The indemnifying party to continue the defense.

 The indemnified party to reimburse the indemnifying party for all

non-covered amounts in this event.

SOLE REMEDY PROVISIONS

A sole remedy provision prohibits the indemnified party from

recovering damages for covered claims beyond the terms set out

in the indemnification provision. With a sole remedy provision, the

indemnified party can look only to the indemnification provision

for recourse on covered claims (see, for example, WESI, LLC, 509

F. Supp. 2d at 1356 (referring to an “exclusive remedy” provision)).

Without a sole remedy provision, the indemnified party may be able

to use a non-indemnity related contractual remedy or remedy at

law to recover more than what the indemnifying party thought the

parties had originally bargained for.

Indemniﬁcation Clauses in Commercial Contracts (GA)

In addition, the indemnifying party should ensure that the agreement

does not contain a cumulative remedies clause that could conflict

with this provision and, as a result, provide the aggrieved party

an opportunity to seek damages or remedies beyond the scope of

what is provided in the indemnification clause. Parties should, if

appropriate, exclude the indemnification clause from the cumulative

remedies provision.

For an example of a sole remedy provision, see Standard Clauses,

General Contract Clauses: Indemnification (GA): Section 2.6

(W-000-1089).

MUTUAL INDEMNITIES

Commercial contracts often include mutual indemnification

provisions. Under a mutual indemnification provision, each party

indemnifies the other. While mutual, each indemnity obligation is

not necessarily identical or proportional to the other. The extent to

which the provision is balanced depends on the allocation of risk

and negotiating power between the parties. Each indemnifying

party should strive to tailor the indemnity to cover only the risk it has

agreed to shoulder.

The mutuality of an indemnity can serve to mitigate risk for either or

both parties by:

 Reducing the likelihood of litigation between the parties.

 Strengthening the contractual relationship.

 Establishing certainty regarding future potential liability.

MATERIALITY AND OTHER QUALIFIERS

Often, the representations and warranties in the agreement are

subject to materiality or other qualifiers. For example, a warranty

may state: “Seller represents and warrants that products are free

from material defects in material and workmanship.”

These qualifiers prohibit the non-breaching party from recovering

damages for the breach unless it can prove that the nature or the

subject matter of the breach, as the case may be, was material. In

Georgia, a breach is material if it both:

 Goes to the matter or essence of the contract and renders

substantial performance of its terms impossible.

 Is so substantial and fundamental so as to defeat the object of the

contract.

(Forsyth Cty. v. Waterscape Servs., LLC, 303 Ga. App. 623, 633 (2010)

and Lanier Home Center v. Underwood, 252 Ga. App. 745, 746 (2001).)

Indemnity for breach of a contract provision does not negate the

qualification placed on that provision, and so to this extent the

unqualified indemnification is similarly diluted, unless the contract

has an express statement to the contrary.

Sometimes, the parties agree to qualify the indemnification provision

with materiality. The parties should consider the consequences of

qualifying the indemnification provision with materiality because:

 It introduces a second layer of materiality if the underlying

representation is already qualified by materiality. In this case

the indemnifying party indemnifies only if it materially breaches

a provision that may already be qualified by materiality. This is

sometimes called double materiality.

 It introduces a new layer of materiality to representations that the

indemnifying party may have negotiated without qualification. This

is sometimes called back-door materiality.

 The indemnifying party may already have negotiated protective

qualifiers like indemnification baskets, which act as a kind of

materiality qualifier (see Liability Baskets).

INSURANCE AND ESCROW

Like most other contractual obligations, indemnification is only

valuable if the indemnifying party stands behind its promise. If an

indemnifying party is a significant credit risk, then the indemnified

party should consider requiring the indemnifying party to obtain

a minimum level of insurance coverage. Parties commonly use

insurance contracts to:

 Supplement, or even substitute, indemnity obligations.

 Induce counterparties to enter into the transaction.

The insurance policy can usually be tailored to correspond to the

transaction at hand. Different kinds of coverage may apply to

different aspects of the agreement, such as representation and

warranty insurance; but the parties should carefully consider whether

the types and amounts of insurance required are adequate to cover

all indemnification obligations.

Similarly, a party may seek a portion of the purchase price or service

fees to be held in escrow to satisfy the other party’s indemnification

obligations. These funds are often held in escrow for the duration of

the indemnity survival period.

Both insurance and escrows for indemnification obligations are more

commonly used in M&A transactions but less frequently relied on

in commercial contracts. For more information on insurance, see

Insurance Policies and Coverage Toolkit (4-506-1171).

ASSIGNMENT RIGHTS

Assignment of the agreement could unexpectedly alter the risk

allocation in the transaction. For example, the indemnifying party

may assign the contract to a third party that cannot honor the

indemnity obligations. Absent language to the contrary, Georgia

common law applies and permits assignment in most cases (see

In re Terry, 245 B.R. 422, 426 (Bankr. N.D. Ga. 2000); see also

Dennard v. Freeport Minerals Co., 250 Ga. 330 (1982)). Parties should

therefore consider seeking assignment limitations, such as consent

requirements, if appropriate.

However, under Georgia law, anti-assignment provisions are

interpreted narrowly. Absent express terms, where an anti-

assignment provision prohibits the assignment of rights under

a contract, violation of the anti-assignment provision gives the

non-breaching party a right to damages for breach of contract but

does not render the assignment ineffective unless the assignment

would materially reduce the value of the contract. (Spears Mattress

Company, Inc. v. Innovative Mattress Solutions, LLC, 2015 WL

13307074 at *4 (N.D. Ga. July 7, 2015); Singer Asset Finance Co. v. CGU

Life Ins. of America, 275 Ga. 328, 329-30 (2002).)

For more information on assignment limitations in Georgia, see

Standard Clauses, General Contract Clauses: Assignment and

Delegation (GA) (W-000-0989). For information on assignability of

Indemniﬁcation Clauses in Commercial Contracts (GA)

ABOUT PRACTICAL LAW

Practical Law provides legal know-how that gives lawyers a better starting

point. Our expert team of attorney editors creates and maintains thousands of

up-to-date, practical resources across all major practice areas. We go beyond

primary law and traditional legal research to give you the resources needed to

practice more efﬁciently, improve client service and add more value.

If you are not currently a subscriber, we invite you to take a trial of our online

services at legalsolutions.com/practical-law. For more information or to

schedule training, call 1-800-733-2889 or e-mail referenceattorneys@tr.com.

11-19

and Privacy Policy (https://a.next.westlaw.com/Privacy).

commercial contracts, see Practice Note, Assignability of Commercial

Contracts (GA) (W-013-8962).

DURATION OF INDEMNITY

Indemnifying parties often impose time limitations on indemnity and

related provisions to control liability. Absent an agreement to the

contrary, Georgia law statutes of limitations dictate the length of time

that a party has to raise a claim, including an indemnity claim (State

Q&A, Statutes of Limitations: Georgia (1-559-8625)).

Under Georgia law, a claim for contractual indemnification arising

out of a simple contract must be brought within six years after

the claim accrues (O.C.G.A. § 9-3-24; see also Saiia Const., LLCv.

Terracon Consultants, Inc., 310 Ga. App. 713, 716 (2011); but see

Suntrust Bank v. Venable, 299 Ga. 655, 657 (2016) (holding that the

Uniform Commercial Code’s four year limitations period applies to

breaches of contracts involving the sale of goods)). However, time

limitations on indemnity claims may vary depending on whether the

claim is a:

 Direct claim. The statute of limitations clock starts once the

underlying indemnity accrues, which is when the indemnified party

pays the settlement or judgement (see Auto-Owners Ins. Co., 252

Ga. App. at 364). The length of time the indemnified party has to

file the claim depends on the type of claim. Parties often limit the

duration and survivability of contract terms, for example, to have

the representations survive the deal closing but expire 30 days

after the contract effective date (see, for example, Encompass Ins.

Co. of America v. Friedman, 299 Ga. App. 429, 431 (2009) (limiting

the period of time that a party has to bring a claim under the

contract)). For an example of a survival provision, see Standard

Clause, General Contract Clauses: Survival (GA) (W-003-9726).

For a direct claim such as this, the contractual time limitations

supersede the statute of limitations.

 Third-party claim. Absent an agreement to the contrary, the

statute of limitations limits:

z

the amount of time the third party has to bring a claim against

the indemnified party (the statute of limitations clock starts from

the time the claim accrues); and

z

the amount of time the indemnified party has to bring an

indemnity claim against the indemnifying party. A typical

statute of limitations clock for an indemnity claim starts when

the indemnified party has been served with process in the

underlying lawsuit, or when the party knew or should have

known of any act or omission giving rise to the cause of action

for indemnity, whichever period expires later.

Ideally, the duration of the indemnity gives the indemnified party a

reasonable amount of time to discover any covered breach or third-

party claim. Parties should consider customizing indemnity duration

in the agreement after:

 Analyzing each potential claim and its related statute of

limitations.

 Coordinating the time limitations of each of the covered claims and

the term and survival period of the contractual indemnity.

For a sample contractual statute of limitations clause, see

Standard Clauses, General Contract Clauses: Contractual Statute

of Limitations (GA) (W-000-1090). For a discussion of indemnity

duration in the context of acquisition agreements, see Practice Note,

What’s Market: Indemnification Provisions in Acquisition Agreements

(3-504-8533).

ALTERNATIVES TO INDEMNIFICATION

Indemnification is often a highly negotiated provision, and sometimes

the benefits are not worth the battle. With this in mind, parties

should consider alternatives to indemnity, including:

 Relying on Georgia common law or statute for recourse (for

example, bringing a lawsuit for breach of warranty, breach of

contract, or fraud).

 Conditioning the purchase price on fulfillment of certain

conditions.

 Using a right of offset by escrowing a part of the consideration with

a third party.

 Deferring payment so that the indemnified party can deduct

potential indemnity payments from future payments.

 If you are the buyer, using your own subsidiary to purchase the

seller or the seller’s assets to confine the transaction-related risk to

that subsidiary.

 Providing contractual work-arounds for anticipated problems (for

example, requiring the infringing party to provide a non-infringing

replacement in the event of intellectual property infringement).

 Using other risk allocation provisions to limit overall risk (see

Practice Notes, Risk Allocation in Commercial Contracts

(4-519-5496) and Remedies: Adequate Liability Coverage

(0-553-7425)).

Excluding an indemnification provision may increase the likelihood of

dispute. Therefore, parties should make sure the agreement contains

a strong dispute resolution provision if they choose not to include

an indemnity clause. For a sample dispute resolution clause, see

Standard Clauses, General Contract Clauses, Alternative Dispute

Resolution (Multi-Tiered) (GA) (W-008-2627).