How Far can an Indemnity in a Settlement Agreement be Expected to go?

A specialist Settlement Agreement Solicitor examines the effectiveness of an indemnity in a Settlement Agreement.

In the case of Coulson v Newsgroup Newspapers in the high court a judge placed a limit on the effect of an indemnity in a Settlement Agreement.

Andy Coulson was employed as Editor of the News of the World between 2003 and 2007 (he later went on to become David Cameron’s press secretary at 10 Downing Street).  The Settlement Agreement he entered into at the termination of his employment contained a clause allowing for re-imbursement of legal expenses “which arise from his having to defend, or appear in, any administrative, regulatory, judicial or quasi-judicial proceedings as a result of his having been Editor of the News of the World”.

Coulson was subsequently arrested in connection with allegations of intercepting communications and making unlawful payments to police officers.  He denied the allegations and was not eventually charged with any offence.

He then sought to claim payment of his legal costs under the terms of the indemnity in the Settlement Agreement.  Newsgroup refused to pay on the basis that the indemnity did not cover legal costs associated with the defence of criminal charges.  Coulson applied to the court for a declaration as to the effect of the clause in the Settlement Agreement.

The judge decided that although the indemnity was wide ranging, seeking to protect Coulson from legal expenses arising from the “ordinary occupational hazards” of being an Editor, the provision in the Settlement Agreement did not cover criminal allegations made against Coulson personally.

The judge went further by saying that, even if he was wrong in deciding as he had, as no “judicial or quasi-judicial proceedings” had actually been commenced, the expenses would not have been covered anyway.

For advice on the effect of specific terms contained in a Settlement Agreement contact specialist solicitor, Emma Napper. You can email her at [email protected]