Contracts and Indemnification: Appellate Court Clarifies What’s Needed for Indemnification to be a Valid Part of a Contract

In AXIS Insurance Co. v. American Specialty, the Seventh Circuit addressed whether an indemnitee must tender the defense or obtain settlement approval as a prerequisite to indemnification under Indiana law. Reversing the district court, the court held that neither the parties’ indemnification agreement nor Indiana common law imposed such a requirement. Because the contract required only notice—and did not grant American Specialty a right to assume the defense or approve settlements—AXIS’s settlement payment was not “voluntary” merely because it proceeded without American Specialty’s participation. The decision underscores that sophisticated parties are bound by the terms they negotiate and that courts will not imply tender-of-defense obligations absent contractual language or controlling precedent.