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Parol Evidence and Indemnity Clauses

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CaseIndividual Healthcare Specialists, Inc. v. BlueCross BlueShield Of Tennessee, Inc.

Issues:  Should the court have considered parol evidence in determining the meaning of an indemnity provision? Do indemnification provisions apply to disputes between the parties?

Facts:  The contract contained an indemnity provision, as well as an integration clause. The trial court held that the indemnity provision was inapplicable because it only applied to third-party claims, not disputes between the contracting parties. The trial court acknowledged that its findings were partially based on evidence of the parties’ intentions as to the meaning of the terms.

Appellate Decision:  The intermediate court reversed, holding the trial court should not have considered extrinsic evidence beyond the “four corners” of an integrated contract. The court then held that the clear language of the contract provides that the indemnity clause does not cover a dispute between the contracting parties.

Review Granted:  October 4, 2017.

Prediction:  Ben thinks the supreme court is likely to affirm for the reasons stated by the intermediate court. Under the “American rule” for attorney fees, a prevailing party is not entitled to attorney fees unless expressly contracted or otherwise authorized. Prevailing party fees are commonly labeled as such in contracts more explicitly.