Knock for knock indemnities form part of the liability allocation model frequently found in contracts in the oil and gas industry.1They were originally used as a tool to protect drilling contractors from accepting liability for a client's property in high risk off-shore environments involving multiple contractors.\r
\r
It was acknowledged by the industry that contractors' balance sheets would be unable to cope with potential liability for the destruction of an entire oil rig facility and it also assisted with risk allocation at a practical level, because in an off-shore environment it was common for the sharing of tasks between different contractors and a blurring and overlapping of responsibilities, making it difficult to determine fault if an issue occurred.\r
\r
Most large oil and gas companies have bespoke pro forma contracts which contain knock for knock indemnity clauses, such as British Gas, Conoco Phillips and Inpex.\r
\r
It seems the use of knock for knock indemnities in an on- shore environment occurs due more to custom now rather than to address any particular concerns in an on-shore environment.
This resource is only available to our paid members. You can Join Us or Sign in to get access to this resource.