What is indemnity and why are Foreign Vaccine makers like Pfizer and Moderna demanding Indemnity from the Indian Government?
WHAT IS INDEMNITY?
Indemnity is a comprehensive type of insurance that compensates for damages or losses or in legal terms, it means an exemption from liability for damages.
According to section 124 of the Indian Contract Act, 1872, a “contract of indemnity” is a contract wherein one party promises to protect the other against damages caused due to the actions of the promisor or any other person.1 Hence, it is an agreement between two parties in which one undertakes to compensate the other for any possible loss or damage incurred by the other.
The specific condition could be whatever the parties agree on, such as –
- Breach of contract
- Negligence or Carelessness of a party
- A particular action
Thus, an indemnity acts as a transfer of risks among the parties and modifies what the party would have been accountable for or eligible to in an event of a typical damage claim.
WHY ARE PFIZER AND MODERNA DEMANDING INDEMNITY FOR PROVIDING THEIR COVID-19 VACCINES?
Pfizer and Moderna are demanding indemnity from the nations that they are providing their vaccines to get protection under the law. In this situation, indemnity ensures that the manufacturers could not be held liable and sued for any adverse outcomes that occur after the administration of the vaccine. As a result, the vaccine manufacturers would be protected from any monetary or other expenses of settlement claimed in India concerning the vaccine doses.
The benefit of this is that the vaccine doses will become more economical to purchase as the producers would not have to deal with insurance or settlement issues.
HAVE VACCINE MANUFACTURERS BEEN GRANTED INDEMNITY IN OTHER COUNTRIES?
Pfizer and Moderna have till now, not sold their vaccines to any nation before securing indemnity against any lawsuit stemming from any negative consequences of their vaccine. The United States was the very first country to offer Covid-19 vaccine producers Pfizer and Moderna, protection under the law in December of 2020 by a federal court from any liability.2 As a result, if there are any negative side effects following the administration of their vaccines, they could not be sued for damages.
They have also been given indemnity in the United Kingdom.
ESSENTIAL ELEMENTS OF AN INDEMNITY CONTRACT
- It must be a legally binding contract. They are subject to the principles of general contract law outlined in Sections 1 to 75 of the Indian Contract Act, 1872.
- A contract like this should include two parties, the promisor or indemnifier, and the promisee or the indemnity holder must be present.
- It is a separate contract and not collateral.
- It is a method of assigning risk-based responsibility.
- The breach of promise is required to trigger the indemnity contract.
- An indemnity contract can be express (which means that it can be made with words spoken or written) or implied (which means inferred from the conduct of the parties or circumstances of the particular case).
- The consideration and purposes of the contract must be legal.
- Indemnity clauses in such contracts must among other things, be clear, detailed, and if feasible specify the conditions under which the indemnity will apply.
ENFORCEMENT OF CONTRACT OF INDEMNITY
- A contract of indemnity can be enforced according to its provisions and the amount worth of damages awarded might be up to the amount of indemnification provided to the indemnity holder.
- The claim by indemnity holder can consist of damages, legal expenses of adjudication, and amount paid under the conditions of the agreement.
- The promisor or in this case, the indemnifier must preferably be made aware of the legal action or should be involved as the third party.
- There is no requirement for the promisor or the indemnifier to prove a breach of real damage.3
Does this mean, vaccine recipients cannot sue for compensation in case of adversity?
No, this does not exclude vaccine recipients from seeking compensation in the case of an unfortunate occurrence, although the standard is set quite high in general. Every nation has its own set of rules for compensation in the event of an adverse outcome. In the United States, people who suffer significant injuries or die as a direct result of the vaccination will be able to claim compensation under the Countermeasures Injury Compensation Programme (CCIP) depending upon their eligibility.4
In the United Kingdom, a Vaccine Damage Payment of £ 120,000 can be made as a one-time tax-free payment.5 It is done in situations wherein an individual has become grievously handicapped as a result of the vaccination. This option is available for Covid-19 vaccines as well.
The ‘No-Fault Compensation Programme’ of the WHO for providing Covid-19 vaccines to the 92 countries with low and middle income, is funded by a modest fee on each dose by the Gavi COVAX Advance Market Commitment. The reimbursement covers uncommon but serious adverse effects linked to vaccinations provided under the Covax programme. It includes any critical injury or ailment which –
- Needs the patient to be hospitalised or increases the duration of hospitalisation and causes permanent damage
- Results in congenital birth damage or sickness in an unborn or new-born child of a female that who got vaccinated and causes permanent total or partial abnormality
- Results in death6
LIMITATION OF LIABILITY UNDER AN INDEMNITY
In some circumstances, the risk of loss from a contract violation may surpass the price of the contract and the indemnifier might be unable to afford an uncapped indemnity. As a result, the parties frequently agree to restrict the liability of the indemnifier by restricting it at a specific sum or limiting it to specified conditions.
WILL INDIA BE REQUIRED TO PROVIDE INDEMNITY TO ALL VACCINE MANUFACTURERS?
According to experts, if indemnity is provided to foreign vaccine manufacturers, the government might as well have to provide it to the Indian vaccine manufacturers like Serum Institute and Bharat Biotech to keep a uniform policy.7
Author’s Name: Subhankori Banerji (Bennett University, Greater Noida)
5 Vaccine Damage Payment – GOV.UK (www.gov.uk)