Pennsylvania Appeals Court Clarifies the Murky Waters of Pennsylvania Contract Indemnity Law

Last month the Pennsylvania Superior Court attempted to clarify what it referred to as the "murky waters of Pennsylvania contractual indemnification law." In Mace v. Atlantic Refining & Marketing Corp., the Pennsylvania Superior Court held that the franchisor’s claim for indemnity against the franchisee was unenforceable because the indemnification provisions contained in the franchise agreement and lease did not clearly and unambiguously require indemnification.

In Mace, the plaintiff claimed that the franchisee’s employee attacked him with a baseball bat. Mace sued the employee, the franchisee and Atlantic, the franchisor. Atlantic and the franchisee made cross claims against one another. Atlantic won summary judgment on both the plaintiff’s and the franchisee’s claims against it. After the trial court also dismissed its cost-of-defense indemnification claim against the franchisee, Atlantic appealed.

While the Mace decision is a challenging read, the import of the decision is clear. Citing Pennsylvania’s Perry-Ruzzi doctrine, which requires clear and unambiguous language to enforce an indemnity claim, the appellate court affirmed the trial court’s dismissal of Atlantic’s claim. According to the MaceCourt, "This (Perry-Ruzzi) standard recognizes that the parties are free to reach their own contract terms and to assume whatever burdens or risks their respective bargaining resources dictate. The insistence on clear statement of their undertaking by the parties allows the court to decide indemnity and defense issues promptly and based upon agreement reached by the parties." Atlantic’s indemnity claim was denied because Atlantic was charged with negligence and the franchise agreement and lease did not unambiguously provide indemnification for negligence claims.

Under the Mace reasoning, franchisors should ensure that franchise and other agreements clearly and unambiguously require indemnification for all potential claims, including negligence claims.

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