Establishing Indemnification in a Clinical Trial Agreement Requires Precise Language

January 14, 2019

Negotiating a clinical trial agreement (CTA) can be a maze of confusion, filled with difficult-to-understand legalese and contractual traps seemingly around every corner. An accidental omission, an unintended commitment, or even just the wrong choice of words can lead to misunderstandings and an agreement that fails to do what you want it to.

The indemnification clause in particular needs to be worded precisely. Indemnification apportions between the parties to the agreement the liability for third-party claims brought against one or more of the parties. Thus, when triggered, the ultimate resolution of the indemnified claim can be quite time consuming, complicated and costly. This makes it especially important to get the details right.

Indemnification is a contractual agreement between the parties whereby one party, the indemnifying party, agrees to protect the other party, the indemnified party, against harms or losses brought by a third party that the indemnified party may incur. It’s important to understand that indemnification protects the indemnified party against third-party claims that are brought against it, not claims by the indemnifying party against the indemnified party.

This is where indemnification gets tricky — defining the scope of this obligation. There’s likely to be a good deal of negotiation over who will or will not be indemnified, which types of claims should be included and which claims should not be included.

The first thing to consider is who is being protected. From the sponsor’s perspective, indemnified parties will include the institution involved in the study, the principal investigator and the staff. Special attention should be paid to ensure that the scope is limited to only the staff who are conducting the study or those who may potentially be exposed to study-related liability.

As a sponsor, or entity representing a sponsor in negotiations, make sure your indemnification clause only indemnifies those who are actually involved in the study. For instance, it could be appropriate to indemnify an affiliate hospital that is performing a tangible role in the study, like providing a facility and employees (e.g., nurses) to the institution. However, if there are other affiliate hospitals in the same network that are not directly involved in the study, language should not be included to expand the sponsor’s obligation to cover every other entity. In this case, it is industry practice to incorporate language that expressly limits the scope of the obligation to those affiliates, or entities, “that are conducting the study.”

Similarly, from a site’s perspective, determine which of your entities, staff or personnel might need indemnification. Sites will also want to consider which of your entities, staff or personnel might realistically be exposed to a loss or third-party claim as a result of your site’s conduct on the study. If your analysis results in the need to expand indemnification to be more inclusive of those entities, staff or personnel that might not be directly involved in the conduct of the study, be prepared to discuss with the sponsor why they need to be indemnified.

The same concepts hold true for indemnification by a site to the study sponsor. Many sponsors will request similar or reciprocal indemnification rights for third-party losses or claims that the sponsor incurs due to the certain conduct of the Institution. As with the above, sites will want to consider who they will include as an indemnified party, while the sponsor will want to consider who should be indemnified. Commonly, this indemnification is limited to the sponsor and its officers, directors, employees and agents, but may also include the CRO retained by the sponsor for the conduct of the study.

Excerpted from Clinical Trial Agreements: A Guide to Key Words and Phrases, by Eric Babineaux, Lead Legal Counsel, Clintrax Global, Inc.