Word of the Day: Indemnification

An indemnity is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnitor (A) may or may not be responsible for the loss suffered by the indemnitee (B). Forms of indemnity include cash payments, repairs, replacement, and reinstatement.


Sometimes, when sales or contracts are signed, attorneys get very nervous about not getting rid of indemnity.  Example: Toyota sells you a car, and the gas pedal sticks, and you crash and get injured, Toyota is going to have to compensate you. They owe you an indemnity.Toyota was not indemnified.

Lets say that everyone knows about the gas pedal problem, but parties are eager to buy and sell; even with some risk.  So a year later, Toyota sells you another car. but, in order to buy the car, you create a waiver form that eveyone signs---stating that you know about the gas pedal issue and if it sticks,and you are injured, that Toyota will NOT have to compensate you. Toyota is now INDEMNIFIED, or protected from responsibility.

What does this have to do with Dam Removal?

I just completed an interview with one of the companies who proposed buying the dam last year. They seemed concerned and are not very excited about the money-making potential. The city actually sought out and located potential buyers; and invited them to propose and bid. The dam site has not been actively sought out by potential buyers thus far.

This particular firm has a big issue with INDEMNITY and city dams....and have had to walk away from deals that were perfect from a business standpoint. Buyer and seller were happy. But the attorneys were NOT, and could not accept the validity and soundness of the (former) dam owner trying to escape INDEMNITY. They were afraid they would never be properly INDEMNIFIED.

In a recent interview, this same buyer took this aspect of the deal and felt complelled to take a closer look. Why? Since the Pucker street dam has had structural damage done do it. Its old, its broken, its out of operation.  There is a dam inspection report in 2009 that outlines these in detail.

Their conclusion is that even if a buyer of the dam has its attorneys and insurance company create and present numerous WAIVERS of INDEMNIFICATION to the City as part of the deal...they have been sternly warned that:

Even if the dam is sold outright to some other firm willing to risk it; even if the old dam is gutted, removed, replaced----and  there is some kind of failure, breach, damage, or injury. 

If anything happens to that dam the insurance companies/courts/attorneys of the plaintiff will most likely blow right through all those previously signed waivers, the city will never be fully INDEMNIFIED and will most likely will be held financially responsible for any future incident. 
(as demonstrated by other dam claims cases in the last 10 years)

FACT:

DID YOU KNOW; that the primary reason for restoring the 'run of the river' and drawing the dam down in 1999 was not for environmental reasons; but mainly due to a safety concern and reducing the risk of dam collapse?

There are large cracks and open seams running down the center of the main concrete structure near the top. By lowering the water level, the risk of collapse is mitigated.


Conclusion:

Given the trend with dam sales that make it difficult to escape INDEMNITY when an intact, functioning, on-line, structurally sound dam is considered for sale; ---What do you suppose the odds of INDEMNIFICATION will be for the city of Niles with a dam that has a dam with documented damage, structural degradation, a breach, and cracks in its structure?   

Do you think that Falling Waters, LLC, despite the very best intentions of business and insurance will be able to assure, waive liability, and protect a city from INDEMNITY?

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