Responsible Procurement: Proportionality

We’ve been discussing hold harmless indemnities. As Mark Laudrum (he/him) pointed out, it’s a matter of finding “the right balance between protection for recruitment firms, whilst also not taking on unlimited liability”.
 
Many think it’s smart to shift liability away from their client and point it at someone else. It might be smart – well at least half-smart – but is it responsible?
 
I spoke last week of the fantastic work that Matt Perfect and his team did in creating the Responsible Procurement Principles. In this context, Matt’s PROPORTIONALITY PRINCIPLE sets the benchmark for responsible procurement.  Basically it states:

"Risk is shared appropriately between the customer and the service provider including fair, proportionate and justifiable indemnification and insurance requirements."
 
WorkAccord had the task of operationalizing that principle for the review of several large tenders. We came up with six sub-rules that could be used as a checklist.
 
Recently, I used those six sub-rules to prompt Open AI’s GPT-4. That’s the version which passed the US Bar exam! I then prompted it with the plain English hold harmless indemnity clause that we’ve been discussing and asked it to evaluate the clause, whilst noting that the party accepting the risk was likely to have an insurance policy that contained a common form of contractual liability exclusion.
 
I want you to read its evaluation.
 
"RISK SHARING
This clause places the full burden of risk on one party, namely the party giving the indemnity. The party is obligated to take on the full financial burden, without any conditions or limits to their liability. Therefore, it doesn't promote risk sharing, contravening sub-rules 1 and 2. This clause could potentially discourage a collaborative risk-management approach since it shields the other parties from any liability, leaving the party giving the indemnity solely responsible.
 
INDEMNITIES
The clause requires the party giving the indemnity to cover losses that are outside their control or beyond their contribution. This is contrary to sub-rules 3 and 4. It does not take into account situations where the other parties might share responsibility for the loss or damage.
 
INSURANCE
Given the inability to obtain insurance cover for such liability due to a common contractual liability exclusion, the clause contravenes sub-rule 5. This requirement to bear an uninsurable risk may cause significant financial stress, especially if significant claims arise. It also potentially violates sub-rule 6 if the requirement for such insurance coverage is not readily available in the local market.
 
Overall, this clause does not adhere to the Proportionality Principle due to the lack of risk sharing, requiring indemnities beyond the party's control or contribution, and potentially necessitating insurance coverage that may not be feasible to obtain. It imposes an unbalanced risk and burden on the party giving the indemnity. A more equitable clause should consider the proportionate responsibility of all parties involved and the insurability of the risk."
 
GPT-4 rates the clause a FAIL on all six counts. If an intelligent chat agent can get it, why can’t others?
 
Let's keep talking...

ACW