To set forth guidelines to be used in the evaluation of contractual language and, specifically, hold harmless agreements to determine acceptability with respect to the University System’s liability exposure.
With the increased activity in the legal liability arena over the past ten years, the University System has experienced an increasing number of hold harmless clauses in its contractual agreements. Originally, it was the goal of the Attorney General and the University System that no hold harmless agreements be used against the University System. Because this is an unrealistic goal for a functioning entity, the requirements have been revised. The University System currently strives to avoid contracts where exculpatory and indemnity agreements exist, which transfer all responsibility to the University System regardless of blame.
In addition, the University System seeks to limit its own liability exposure in certain situations where outside entities utilize the facilities and functions of the University System. This is achieved by requiring participants to sign hold harmless agreements which have been developed by the University System.
Contractual Transfer Agreement:
An agreement under which one party shifts to another the responsibility for a loss. Three types which exist are (1) hold harmless agreements, (2) exculpatory agreements, and (3) indemnity agreements.
Hold Harmless Agreement:
An agreement whereby the first party (the indemnitor) agrees to hold a second party (the indemnitee) harmless from tort liability arising out of the indemnitor’s negligent act or omission.
An arrangement whereby one party agrees to absolve a second party from any blame even when damage or injury is caused by negligence of the second party.
Although similar to a hold harmless agreement, an indemnity agreement is an arrangement whereby one party agrees to pay the other party for any damages regardless of who is at fault.
A. When a school, college, department, etc. is presented with a contract from an outside party, whether it be for the use of facilities or equipment, for participation in some event, or for any other purpose, the contract should be sent to the risk management office for evaluation. The risk manager should:
1. Read through the contract to determine if contractual transfers exist in any form.
2. Evaluate the contractual transfer agreement to determine if it is of the exculpatory, hold harmless, or indemnity type. Then determine if the intent of the clause conforms to the acceptable language.
Note: the University System will not agree to any contractual transfer which is exculpatory or indemnity in nature but will take responsibility for its own negligence through a hold harmless agreement.
In consideration of (some activity or privilege), the University of Wisconsin- (party I) does hereby agree to hold harmless (party II) from any and all liability, loss, damages, costs or expenses which arise out of the negligent act or omission of an employee, officer, or agent of the University while acting in the scope of their employment and in the course of their involvement with the above mentioned program.
3. If the contract does not meet the requirements of the University System, then negotiation for inclusion of our standard language should ensue.
4. If difficulties persist in developing acceptable language, System and State Risk Management should be consulted for suggestions or alternatives.
5. Any time that a contract is used that contains contractual language which is not within the scope of State Statutes, then contractual liability insurance must be purchased to cover the exposure (see Section 3, B of this manual). This coverage is administered by System Risk Management.
B. When a school, college, or department desires to use a contract to limit its own liability when outside parties are using University System facilities or participating in University System functions, the department should consult with the risk manager in developing acceptable language. The risk manager should:
1. Consider the circumstance to determine what type of contractual transfer is desired based on the value of the particular program or function to the University System and to the outside party: i.e., if a group is using the University System’s facility for a function which is outside the scope of the University’s mission and is of no benefit to the University, then the shifting of the maximum possible amount liability is more desirable.
2. Develop language consistent with the circumstances and in accordance with the following:
The undersigned does hereby agree to hold harmless and indemnify the State of Wisconsin, the Board of Regents of the University of Wisconsin System, and the University of Wisconsin- , their officers, agents and employees, from any and all liability, loss, damages, costs, or expenses which are sustained, incurred, or required arising out of the actions of the undersigned in the course of (description of program) .
3. If the proposed language is unacceptable to the outside party then negotiation will follow, keeping in mind the benefit and potential loss that the program presents for the University System.
4. If an agreement is not reached, the campus risk manager will consult with the University of Wisconsin System Office of Risk Management (UWSRM) in devising more acceptable language.
C. The campus risk manager should maintain a file of all contractual agreements for a period of ten years to ensure that control of the contractual exposure is met. Although it is impractical to expect the risk manager to review all contracts on campus, a good flow of communication between departments will result in increased awareness by the risk manager and department heads.
D. Finally, it is the goal of System Risk Management that training in contractual review be addressed as an ongoing program in the course of daily interactions and specifically at the annual risk management conferences.
V. Key Points to Remember
A. Because the University System is self-funded for liability arising out of the acts of its officers, employees, and agents, it is our goal to minimize our assumption of liability risk. This is achieved by eliminating exculpatory and indemnity agreements in all contracts that we sign, and by agreeing on hold harmless language only for liability arising out of the negligent acts of University employees, officers, and agents in the course of their duties.
B. The University System can attempt to shift the responsibility for injury and damage to others by proposing contracts which use exculpatory, indemnity, and hold harmless language that makes the other party responsible. Court interpretation of the contract of course, may differ from our intent.