What is a cap and basket indemnification?

An indemnification 'cap' limits the overall liability of the seller to some dollar amount and an indemnification 'basket' establishes a threshold under which the buyer cannot make a claim against the seller.

What is a basket claim?

The basket concept establishes a threshold for the indemnification, which means that claims would not be payable unless the threshold, or "basket," is exceeded. The "first dollar" method usually applies to baskets. This means that if there is a basket of $250,000, any claims up to $250,000 would not be paid.

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San Bernardino California Indemnity Provisions - Dollar Exposure of the Indemnity regarding Baskets, Caps, and Ceilings

Name: San Bernardino California Indemnity Provisions - Dollar Exposure of the Indemnity regarding Baskets, Caps, and Ceilings
Brand: US Legal Forms
Rating: 4.84 (337 reviews)

Category:

Contracts - Clauses - Indemnification

State:

Multi-State

County:

San Bernardino

Control #:

US-ND1010

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This form provides boilerplate contract clauses that restrict or limit the dollar exposure of any indemnity under the contract agreement. Several different language options are included to suit individual needs and circumstances.

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An indemnification 'cap' limits the overall liability of the seller to some dollar amount and an indemnification 'basket' establishes a threshold under which the buyer cannot make a claim against the seller.

Caps and baskets are types of limitations on the Buyer's ability to recover from the Seller for certain losses, even when the Seller has breached its representations and warranties under the acquisition agreement.

A basket (sometimes called a deductible) is a threshold amount of losses and damages that a buyer must incur before it is entitled to any indemnification from the seller.

The basket concept establishes a threshold for the indemnification, which means that claims would not be payable unless the threshold, or "basket," is exceeded. The "first dollar" method usually applies to baskets. This means that if there is a basket of $250,000, any claims up to $250,000 would not be paid.

The aggregate Losses of the Seller Indemnifying Parties, pursuant to Section 7.02(a), shall not exceed one million dollars ($1,000,000) (the Indemnity Cap), other than with respect to Losses arising out of (a) fraud or willful misconduct or (b) breaches of any Fundamental Representations.

In addition to representations and warranties, M&A purchase agreements generally include indemnification provisions, pursuant to which any given party (indemnitor) agrees to defend, hold harmless, and indemnify the other party or parties (indemnitees) from specified claims or damages.

Per GF Data Spring 2019 Report, the average deal indemnification cap for non-fundamental reps and warranties as a percentage of enterprise value was 15.0% in 2018, an increase from 12.2% in 2017.

These are damages directly between the two parties to the agreement. As mentioned above, this makes sense to be capped. As between the two parties themselves directly, the value of the deal should be in line with the amount of risk.

Indemnification basket refers to the amount that damages or losses must exceed before a seller is liable for any indemnification payments. An indemnity basket requires the buyer to incur a certain amount of loss before it can seek indemnification from the seller.

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Responsible for completing all technical transactions regarding the delivery and maintenance of insurance and underwriting services. Tara Hemmingsen, CIC.The City of Covina and the East San Gabriel Valley Human Services Consortium.

San Bernardino California Indemnity Provisions - Dollar Exposure of the Indemnity regarding Baskets, Caps, and Ceilings

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