Johansen v. Liberty Mutual: A Marketing Vendor Had to Indemnify Without a Finding That It Broke the Law

How the Deal Was Set Up

In 2012, Liberty Mutual hired Digitas for interactive marketing through "paid search, aggregator, affiliate and landing pages." Digitas warranted that its services would meet Liberty Mutual's specifications. Each side agreed to indemnify the other against "any and all third[-]party claims, damages, liabilities, costs and expenses" arising from a breach of warranty. Indemnity required three things: prompt written notice, an "opportunity for complete control of the defense," and reasonable cooperation at the indemnifying party's expense.

Digitas, in turn, contracted with Spanish Quotes, an insurance shopping tool. A consumer received several calls that were transferred to Liberty Mutual. The calls traced back to a Spanish Quotes call source, and Digitas confirmed its work wasn't supposed to include outbound calls transferred to Liberty Mutual. The consumer filed a putative class action in 2015 alleging, among other things, repeated calls to numbers on the National Do Not Call Registry.

The Indemnity Standoff

Liberty Mutual told Digitas about the suit right away and cited the indemnity clause. Digitas responded months later with conditional offers, such as funding 40 percent if another vendor did the same and having Liberty Mutual cover its own cooperation costs. Liberty Mutual rejected these offers and filed a third-party complaint. District Judge Allison D. Burroughs granted Liberty Mutual summary judgment on the indemnity claim.

No Actual Liability Required

Writing for the majority, Judge Howard rejected Digitas's argument that breach of warranty required a finding that Digitas violated the TCPA. The clause covered "any and all third[-]party claims," and a "claim" is just a demand for money or a legal remedy. That broad language displaced any actual-liability requirement. Digitas didn't dispute that it allowed "warm transfers," which here involved outbound dialing, in breach of its warranty. That was enough.

Opportunity, Not Tender

Digitas also argued that Liberty Mutual had to hand over the defense. The court called that reading "patently incorrect." The contract required only an "opportunity" to control the defense, and under Massachusetts law, with an existing relationship, very little is needed to give that opportunity.

As for conditions, the court said it was Digitas, not Liberty Mutual, that kept adding terms that weren't in the contract. Turning those down didn't block Digitas from defending. Digitas could have assumed the defense under a reservation of rights. Because it never took over the defense, the cooperation requirement never kicked in.

A Jurisdiction Wrinkle

The judgment hadn't fixed damages, raising a question about appellate jurisdiction. The majority skipped it because the merits favored Liberty Mutual, the party challenging jurisdiction. Judge Arias-Marxuach dissented on that point only, saying the court should resolve jurisdiction first.

Takeaways

• Read your indemnity clause. "Any and all claims" language can trigger indemnity without proof of liability.
• Notice can be enough. Telling the vendor about the claim and citing the clause may give it the opportunity to defend.
• Don't add conditions. Offers loaded with terms outside the contract don't help a vendor avoid indemnity.

Read the First Circuit opinion.