This form provides boilerplate contract clauses that restrict or limit the dollar exposure of any indemnity under the contract agreement. Several different language options are included to suit individual needs and circumstances.
Colorado Indemnity Provisions — Dollar Exposure of the Indemnity regarding Baskets, Caps, and Ceilings Colorado Indemnity Provisions refer to the contractual terms and clauses governing the allocation of risk and financial responsibility between parties involved in a business transaction, project, or agreement. The Dollar Exposure of the Indemnity, in this context, relates to the maximum amount of monetary liability an indemnifying party assumes when indemnifying the other party. Within Colorado Indemnity Provisions, there are various safeguards and limitations to manage the indemnifying party's liability. Three common types of limitations are Baskets, Caps, and Ceilings, each serving a specific purpose and providing clarity on the indemnity dollar exposure. 1. Baskets: A Basket functions as a threshold or deductible, below which the indemnifying party is not obligated to indemnify the other party. It ensures that minor claims or losses are not subject to indemnification and allows the indemnifying party to limit their financial exposure. Baskets can be broadly categorized into two types: a. Soft Basket: A Soft Basket indicates that only after a specified threshold is crossed will the indemnifying party be liable for indemnification. Below this threshold limit, the indemnifying party is not responsible for covering any losses or claims of the indemnified party. b. Hard Basket: In this case, the indemnifying party has no obligation to indemnify the indemnified party until the specified threshold amount is exceeded. Once the threshold is crossed, the indemnifying party becomes responsible for indemnifying any losses or claims exceeding the threshold. 2. Caps: Caps impose a monetary limit on the indemnifying party's overall liability, restricting their financial exposure. This ensures that even if the actual losses or claims exceed the cap amount, the indemnifying party's liability is capped at the agreed-upon maximum. This limitation protects the indemnifying party from potentially unlimited financial obligations. 3. Ceilings: Ceilings specify the maximum amount of indemnification payable by the indemnifying party for a certain type of loss or claim. They establish a predetermined upper limit, beyond which the indemnifying party is not required to provide further indemnification. Ceilings can be applied to different types of losses, such as property damage, legal expenses, or third-party claims, depending on the nature of the agreement. The inclusion of Baskets, Caps, and Ceilings in Colorado Indemnity Provisions aims to provide clarity, prevent excessive financial burden on the indemnifying party, and promote fair allocation of risk between parties. By understanding these limitations, parties can ensure adequate protection while managing their exposure and potential financial liabilities. Keywords: Colorado Indemnity Provisions, Dollar Exposure of the Indemnity, Baskets, Caps, Ceilings, Soft Basket, Hard Basket, Caps on liability, Limitations, Risk allocation, Financial responsibility, Indemnification.
