A Seemingly Complex Legal Term Made Simple
Indemnification clauses are frequently encountered in contracts and purchase agreements, but they are commonly misunderstood, misread, or simply ignored. Yet, their legal ramifications are enormous and can have devastating consequences. For this reason, we’ve broken down this seemingly complex legal provision into simplified parts below.
When the average AED buyer purchases a product, they frequently gloss over legal terms, particularly terms like “indemnity,” for which they have little-to-no understanding. Rather than asking questions, seeking the advice of legal counsel, or making informed decisions by understanding the fine print, buyers often purchase AEDs without the necessary knowledge. This decision-making is short-sighted and worse, can lead to legal exposure and significant financial loss in the future.
While it may seem boring and difficult to understand, it’s important to take a quick moment to learn how the indemnity clauses commonly found in AED purchase agreements might affect you down the road. Fear not: we’ll break down these concepts step-by-step!
The first step is understanding what the term “indemnity” means. Indemnity is defined by Black’s Law Dictionary as: “a duty to make good any loss, damage, or liability incurred by another.”
In other words, indemnity is a way to allocate the risk of various types of losses between the seller and the buyer. How the risk is allocated depends on who is agreeing to indemnify, and who is receiving the benefit of the indemnity language. Basically, indemnity clauses shift monetary responsibilities from one party (like an AED owner or buyer) to another party (like the AED manufacturer or distributor).
For example, let’s say you buy software to prepare your taxes. The seller claims that the software is free of defects and agrees to “indemnify” you in case the software does not work as promised. You later learn that the software had a bug and it underreported your earnings, causing you to have to refile your taxes and pay penalties. The indemnification provision in the purchase agreement becomes applicable and the software provider would be on the hook for covering all the costs you incurred due to the bug. These costs would include your expenses, penalties, attorney fees, and basically any other costs related to the software mistake. If they didn’t indemnify you, then you’d be responsible for these costs.
So, what do indemnification clauses have to do with AEDs?
AED buyers purchase these lifesaving devices to protect their families, employees, customers, and communities. Unfortunately, if something goes wrong while using the AED, an adverse legal action is usually looming on the horizon. In fact, legal action is always a possibility even if nothing goes wrong! (As the adage goes, “you can sue a ham sandwich…”)
Here are a couple of hypothetical scenarios:
Case 1: On the advice of a friend, you bought an AED four years ago from an AED distributor. Despite some employee turnover, you’ve always done a good job of training your staff in CPR and AED use. You make sure that the AED has up-to-date batteries and electrode pads. One day, somebody in your parking lot collapses and a customer at your store grabs your AED and runs to the rescue. This customer does everything she could to save the victim but, unfortunately, it was too late. The victim does not survive. Despite your customer’s correct and ideal response, the victim’s family claims the AED malfunctioned.
Case 2: When one of your employees collapses, another employee retrieves and applies your office’s AED to the victim’s chest. The AED offered the audio prompt: “no shock advised.” Unfortunately, your employee died (even though the volunteer responder did everything they could to try to help) and his family sued you on the grounds that your AED malfunctioned.
Case 3: You carry an AED in your car with you. At your child’s soccer game, a player from the opposing team collapses. You run to get your AED and apply the electrode pads to the child’s chest. During the AED analysis, the AED delivered a “shock,” but the child ended up passing away. Later, the child’s family erroneously says that a shock shouldn’t have been delivered and that the AED malfunctioned. You are included in the lawsuit.
All 50 states offer strong immunity protection for the rescuers in these hypothetical scenarios, known as Good Samaritan laws. Now, if the AED unit malfunctions (or if it’s alleged to have malfunctioned even if it didn’t), who pays to prove this in court? Good Samaritan laws may make you immune from most civil damages, but it will not prevent you from being dragged to court to account for your actions (or those of your employees).
So, aside from any insurance coverage you might have, and the insurance company’s willingness to pay your behalf, the answer to “who pays the court costs” likely depends on your indemnification policy.
AED indemnification clauses are similar to those found in agreements for many other medical devices. In fact, there are a couple of common terms we see in indemnification policies that are worth defining. Here are a few examples and what they might mean for you:
- Definition of claims: These are the type of costs covered (or not covered!) in the policy. They typically include costs such as attorney’s fees, judgments, liens, and demands. If there are limitations of what is covered, such as indemnification only applies to those responding during an emergency, or if the policy is only triggered when the AED is proven to malfunction, this limitation will appear in the definition of the indemnification policy’s claims.
- Cause of action: What has to occur to trigger the policy?
- Other conditions and customer responsibilities: These are simple, yet critical, items for AED buyers to understand prior to their purchase. Some customer responsibilities are intuitive, like a requirement to use the AED unit according to the operating manual and instructions. Other requirements, such as “preserving the AED’s self-test data,” may not be so obvious.
Pro tip: Learn what is required to keep and download your AED’s self-test data and incident information. If your AED requires complicated cords, adaptors, software, and a laptop to retrieve this data, move on to an AED that makes this process easier.
Bonus tip: Some AEDs can be extremely confusing to interrogate. One device on the market can accidentally delete this valuable data if you’re not careful. If you accidentally delete the data, your indemnification policy may not apply or provide you with the necessary protection!
It is also important to note that the most common customer responsibilities, as it pertains to enforcing an indemnification policy, include:
- Written notice: Providing the AED manufacturer with a written notice (to a specific email or mailing address) shortly after an indemnifiable event.
- Timing of notice after the claim – how long after the indemnifiable event do you have to notify the AED manufacturer?
Pro tip: You may not know that there’s a problem or a threat of litigation shortly after you use an AED. After all, you just tried to save someone’s life and they may be in the hospital recovering. It’s always best to inform your AED manufacturer that your AED was used and notify them right away. Once you’re made aware of a threat or hint of litigation, immediately contact your legal counsel and share your AED manufacturer’s indemnification policy.
- Owner of the device: There’s one policy that defines who the “owner” of the AED is and it only covers the “first owner.” So, if you bought your AED from an unauthorized distributor, on Craigslist, or on eBay, be very careful!
Pro tip: Make sure that your AED’s indemnification policy covers anyone who might use the AED during a rescue, not just the purchaser of the device.
- Required maintenance: Some policies require “maintenance” (as defined in your AED’s user manual) in order for indemnification coverage to apply.
Pro tip: Check out your AED’s user manual. The manual for one AED on the market requires “daily” visual self-checks to ensure that your AED is operational!
- Required Training: Some indemnification policies only cover “trained responders” whereas others cover all responders, irrespective of whether or not they’ve taken a formal training course. If your AED unit will be placed in a location such that a bystander might use your device (which, of course, is the whole point of easy-to-use public access AEDs), make sure that the AED’s policy covers all rescuers.
- Use of “other” parts: Unfortunately, in the AED industry, third-party manufacturers have created batteries and electrode pads that appear to be compatible with many AED brands. Customers might gravitate toward these products, hoping to save some money. However, because these third-party manufacturers don’t have to adhere to the same quality standards as the AED unit manufacturer, the use of these AED parts can nullify your indemnification policy.
Pro tip: When in doubt, check with your AED manufacturer to determine which parts are covered prior to purchasing replacement supplies.
Now that you know more about indemnification policies, let’s review how they may or may not offer you coverage based on the three scenarios discussed above.
On the advice of a friend, you bought an AED four years ago from an AED distributor. Despite some employee turnover, you’ve always done a good job of training your staff in CPR and AED use. You make sure that the AED has up-to-date batteries and electrode pads. One day, somebody in your parking lot collapses and a customer at your store grabs your AED and runs to the rescue. This customer does everything she could to save the victim but, unfortunately, it was too late. The victim does not survive. Despite your customer’s correct and ideal response, the victim’s family claims the AED malfunctioned.
Pitfalls to consider:
- Did you buy the AED from an “authorized” distributor? If not, your indemnification policy may not apply.
- Have you always purchased supplies that come from the AED manufacturer? If not, third-party products may void your policy.
- Does your policy cover all users, including your customer who used the AED, or just you as the owner?
When one of your employees collapses, another employee retrieves and applies your office’s AED to the victim’s chest. The AED offered the audio prompt: “no shock advised.” Unfortunately, your employee died (even though the volunteer responder did everything they could to try to help) and his family sued you on the grounds that your AED malfunctioned.
Pitfalls to consider:
- Have you always maintained your AED properly and per the AED’s user manual?
- Can you access (and did you save) your AED’s log files showing a history of “passing” self-tests? Can you easily retrieve the data from the AED incident?
- Was “training” a requirement for your AED’s policy? If so, does your employee have up-to-date CPR training records to prove that he satisfies this requirement?
You carry an AED in your car with you. At your child’s soccer game, a player from the opposing team collapses. You run to get your AED and apply the electrode pads to the child’s chest. During the AED analysis, the AED delivered a “shock,” but the child ended up passing away. Later, the child’s family erroneously says that a shock shouldn’t have been delivered and that the AED malfunctioned. You are included in the lawsuit.
Pitfalls to consider:
- Did you buy the AED from an “authorized distributor?” If not, your policy may not apply. How can you learn if the distributor you’re working with is an “authorized distributor?” Visit the AED manufacturer’s website and contact them to ask. The AED manufacturer should be able to confirm their distributors right away!
- Did you save your AED’s incident data from the rescue? It may be required to help prove that the unit properly analyzed the child’s heart rhythm.
Working with insurance companies
For many folks, working with insurance companies can be challenging. Perhaps you, or someone you know, has had a negative experience where their insurer found every reason “not to pay” or cover the costs you felt they should. Given this, it’s important to implement the following best practices to maximize your chances of obtaining full indemnification protection.
- Review the indemnification policies proposed by each AED manufacturer with your legal counsel and firm’s risk manager BEFORE buying an AED. Make indemnification a factor in your purchase decision, just as you would cost or other AED features. Once you purchase the device, you’re stuck with the indemnification policy.
- Make sure to purchase the AED directly from the AED manufacturer or one of their authorized distributors. If you buy from someone who isn’t authorized to sell the device, you may not have any rights to indemnification. There are far too many unauthorized sellers of AED units, so be careful!
- While the specific indemnification policies vary, train your staff and all potential responders in CPR and AED use. Go with an accredited organization, like the American Heart Association, so that you have a paper trail of training (i.e. CPR cards).
- Hire a medical director to oversee your AED unit.
- Even if you’re unaware of a potential claim, make sure that you contact the AED manufacturer and your AED medical director any time the AED is used in a rescue attempt, even if no “shock” is delivered. You’ll need to replace your AED’s pads no matter what, and they can help you download important data from the AED. This data should be stored and preserved in case it’s needed.
- As soon as you’re made aware of a claim (or a potential claim), contact your legal counsel and the AED manufacturer to get them engaged. Time is of the essence and the sooner you contact them, the better.
This Article is intended solely to provide information to the public and does not constitute legal or professional advice. It is not intended, nor can it be relied upon, to create any legally enforceable rights against Avive Solutions, Inc. or any of its employees. No user should act on the basis of the information contained in this Article alone without obtaining proper professional advice specific to their situation. Neither Avive Solutions, Inc. nor any of its employees makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness or usefulness of any information provided herein.