Supplier contracts often contain indemnity provisions. But when do they apply? Because small differences can result in major changes, it is important for suppliers and purchasers alike to tailor indemnity provisions carefully. A recent federal court opinion demonstrates this importance. Judge Watson of the Southern District of Ohio interpreted the defense provisions of a supplier agreement's indemnity provision broadly, holding the supplier's duty to defend was triggered by mere allegations of causation—not by a factual finding of causation. Pacific International Vegetable Marketing, Inc. v. Wendy's International, LLC, 2025 WL 2061664 (S.D. Ohio Mar. 20, 2025). The Pacific International opinion explicitly distinguished the Sixth Circuit's narrow interpretation of a different indemnity clause in Nissan North America, Inc. v. Continental Automotive Systems, 92 F.4th 585 (6th Cir. 2024). (Taft's update on Nissan is available here.)
Reading Pacific International in light of Nissan highlights some of the apparently minor differences in contract language (and governing law) that can materially change outcomes in indemnity disputes.
Background
Nissan involved a dispute between Nissan (the automotive manufacturer) and one if its suppliers regarding whether the supplier had to indemnify Nissan for certain product-liability judgments. The Sixth Circuit held that Nissan's supplier had no indemnity obligation under that supplier's agreement with Nissan because Nissan had not demonstrated that a defective part from the supplier caused the injuries alleged.
In broad strokes, Pacific International concerned a similar fact pattern.
Wendy's (the restaurant franchisor) purchased romaine lettuce from Pacific International Vegetable Marketing, Inc. under a Supplier Operation Agreement (SOA). In 2022, an E. Coli outbreak affected over 100 individuals, with 83% of those infected having eaten at Wendy's shortly before falling ill. When Wendy's faced many lawsuits and claims alleging personal injury and breach of warranty, it tendered its defense and indemnity to Pacific under the SOA.
Pacific refused to assume the defense, arguing that its obligations under the SOA were not triggered unless and until a factual determination was made that the lettuce caused the injuries. Pacific sought a declaratory judgment favoring its argument. Wendy's counterclaimed. Both parties moved for summary judgment, with Pacific's motion relying heavily on Nissan.
The Court's Opinion
Applying Ohio law, the court granted in part and denied in part both motions. It held that mere allegations that the lettuce caused injury triggered Pacific's duty to defend. For defense purposes, factual determination of causation was not required. On the other hand, Pacific's separate duty to indemnify (in distinction to its defense obligation), required a factual finding that the lettuce actually caused the injury.
The court emphasized the breadth of the SOA's indemnity language, which covered "any and all actions, claims, suits ... which may arise ... from or be connected with" injuries "caused by" or "connected with" the lettuce. The court interpreted "arise from" and "connected with" as broad terms under Ohio law, requiring only a causal relationship—not proximate cause.
The Ohio court distinguished Nissan in three ways. First, the contracts obligated the suppliers to different scopes of duties. The contract at issue in Nissan addressed only the duty to "indemnify," whereas the SOA in Wendy's involved both defense and indemnity. Additionally, the court indicated that Nissan's "all-or-nothing" strategic decision to not pursue a contribution action limited the court's focus solely to the issue of indemnity. Second, the indemnity clause in Nissan was worded more narrowly, requiring injury "caused directly or indirectly by defective parts." The SOA in Wendy's used broader language: "arise from, be caused by, or be connected with." Finally, Nissan applied Tennessee law, while the SOA in the Wendy's case was governed by Ohio law, which interprets "arising from" more broadly. More specifically, while the Tennessee court's interpretation of the phrase implied the existence of a "link between whatever is arising and the cause from which it arises[,]" the Ohio court broadly interpreted "arising from" to simply require some causal relationship, not proximate cause.
In coming to this decision, the court in Wendy's harmonizes private contractual indemnity/defense provisions with universal insurance coverage law, where an insurer's duty to defend its policyholder is triggered merely just the potential or possibility of coverage, not by an ultimate finding of coverage.
Takeaways
The Wendy's decision underscores several key points for businesses:
- Defense vs. indemnity: Courts may interpret these duties differently, even within the same provision. Defense obligations are usually construed more broadly than indemnity provisions and can be triggered by allegations, while indemnity may require proof.
- Contract language matters: The inclusion of expansive terms like "connected with" and "any and all claims" can significantly broaden the scope of indemnity/defense provisions.
- State law differences: Interpretation of indemnity clauses can vary by jurisdiction. Businesses should carefully consider choice-of-law provisions.
Businesses should revisit the indemnity provisions in their contracts with an eye toward clarity and precision. The Wendy's case shows that broad language can impose defense obligations even before liability is established. Conversely, Nissan illustrates how narrower language can limit exposure.
Taft attorneys assist clients in drafting and negotiating indemnity provisions tailored to their industry and risk profile. Our team also advises on litigation strategy when indemnity disputes arise, ensuring that businesses are protected both in contract and in court.
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