A commercial services agreement signed 14 months earlier by a small industrial cleaning company and a regional food processing facility now sits at the centre of a dispute that neither party anticipated when they formalized their business relationship. The agreement, running to 28 pages of standard commercial terms, included an indemnification clause spanning 3 paragraphs that obligated the cleaning company to indemnify, defend, and hold harmless the food processor against claims arising from the cleaning company's work at the facility. The clause used broad language typical of commercial contracts in the industry, requiring indemnification for any and all claims, losses, damages, costs, and expenses arising out of or related to the cleaning company's performance of services, regardless of whether the cleaning company was solely negligent, partially negligent, or not negligent at all.
The relationship proceeded without incident until a worker employed by a third-party refrigeration contractor suffered injuries while working in a cold storage area that the cleaning company had serviced earlier that day. The injured worker brought a civil action against both the food processing facility and the cleaning company, alleging that chemical residue left on the floor after cleaning contributed to his fall. The food processor immediately tendered defence of the claim to the cleaning company, invoking the indemnification clause and demanding that the cleaning company assume conduct of the litigation and pay all associated defence costs from the outset. The cleaning company's principal, the sole owner of a business generating approximately $850,000 in annual revenue, received the tender letter and a copy of the statement of claim on a Friday afternoon.
The cleaning company carries commercial general liability insurance with a $2 million per-occurrence limit, and the policy includes coverage for contractual liability assumed under an insured contract. The food processor also carries its own liability coverage, though the precise scope of that coverage and how it interacts with the contractual indemnification remains unclear. The third-party claim seeks $1.2 million in damages, and preliminary estimates place defence costs in the range of $150,000 to $250,000 if the matter proceeds to trial. The cleaning company's owner now faces immediate questions about the scope of the duty to defend, whether the indemnification obligation extends to the facts alleged, what limitations or exclusions might apply, and how the contractual provisions interact with the available insurance coverage—all while confronting a 30-day deadline to respond to the tender demand.