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Contract Provision Indemnifying Municipality Applies Even Without an Explicit Demand to Contractor

Updated: Jul 1, 2021

Municipal contracts typically provide that the private contractor must indemnify

the municipality in the event of a claim arising from the contractor’s

work. In Psychemedics Corp. v. City of Boston, issued on January 29, the

Supreme Judicial Court determined that, where a City contractor had agreed in

its contract to assume the defense of the City for claims arising from the

contractor’s negligent acts, mere notice of such claims was sufficient to require

the contractor to assume the defense. An explicit demand from the City to

assume the defense was unnecessary.

Psychemedics, a city contractor that provided hair follicle drug tests, had failed

to assume the defense of the City after a group of police officers, who were

terminated based on positive drug tests, filed claims against the City. The

undisputed facts showed that the City had orally and in writing communicated

with Psychemedics regarding the subject of indemnification and requested that

Psychemedics contribute financially to the defense. Psychemedics and the

City reached an oral understanding that Psychemedics would provide support

by making its scientific and legal staff available to the City free of

charge. Psychemedics eventually sought relief in the Superior Court for a

declaration that it had no obligation to indemnify the City. The Superior Court

granted Psychemedics’s motion for summary judgment, but the SJC vacated

that judgment and remanded the case for further proceedings.

The central issue in the case was whether the City had afforded Psychemedics

a sufficient opportunity to defend. Psychemedics argued that it had not,

because the City asked only for financial support and did not explicitly demand

that Psychemedics assume the defense. The Court disagreed, finding that,

where the contract itself did not provide any specific process for notifying

Psychemedics and requesting that it assume the defense, any notice of the

claim—including oral notice—was sufficient to provide notice and the

opportunity to defend. Since the contract required that Psychemedics assume

the defense of any claims arising from its negligent acts, it would be in breach

for failing to do so once it had notice of a claim. Here, Psychemedics never

assumed the defense, though the City never took any steps to prevent it from

doing so. The Court noted that the burden on the City to provide notice and an

opportunity to defend was so low because the parties had specifically

contracted for indemnification, while indemnification obligations arising from

non-contractual circumstances might require something more.


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