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The enforceability of knock-for-knock indemnity clauses in offshore wind construction contracts

Friday 31 March 2023

Credit: dell/Adobe Stock

William Durham
PEAK Wind, Denmark


The United States is on the cusp of an explosion of offshore wind development. Government backing of developing is growing. President Biden has announced ambitious installation goals and reinstated tax incentives. Individual states have followed with strong state-level procurement targets and incentives, with immediate focus on development of fixed wind in the Northeast.2 Two major events have brought expectations soaring. Vineyard Wind I, the first commercial scale US project at 800 MW, achieved a major financial close in September 2021 and moves closer to reality. More recently, in February 2022, six new leases were auctioned off the coast of New York for $4.37bn, signalling investor faith in US offshore wind.3

Project development in the US will follow the practices from the North Sea, where the bulk of expertise with offshore wind has been developed. European Union-based developers, alone or in concert with local utilities, are involved in all 39 projects currently in the pipeline and they will rely on many key suppliers based in the EU, using practices from the North Sea.4 One practice that will be imported into the US are knock-for-knock indemnity clauses, which are commonly included in North Sea offshore wind contracts. Knock-for-knock clauses, however, have never been fully accepted in the American environment. This article looks to understand the knock-for-knock regime and its enforceability in offshore wind projects in the US.

How does knock-for-knock indemnification work?

Knock-for-knock indemnification is a standard clause in vessel charters and offshore oil and gas contract forms used in the North Sea.5 They have been adapted for use in offshore wind development and are commonly included in offshore wind contracts. The knock-for-knock clause is designed to limit each contractor’s liability for damages incurred by other contractors during the construction of large offshore projects.

Conceptually, knock-for-knock is very simple: the damage stays where it falls, regardless of fault. The knock-for-knock clause starts with a reciprocal waiver of liability for property or personal injury damages suffered by either party, even if caused by the other’s negligence. Afterwards, an indemnification provision whereby each party agrees to compensate the other party for any loss from personal injury or property damage suffered by the party or anyone in the contractual chain, including subcontractors and employees. The contractor also obtains similar indemnification obligation from its subcontractors so that individual losses are kept at the place where they occur.

One practice that will be imported into the US are knock-for-knock indemnity clauses, which are commonly included in North Sea offshore wind contracts. Knock-for-knock clauses, however, have never been fully accepted in the American environment.

The parties cannot prevent their injured employees or third parties from bringing tort claims. Therefore, each party undertakes to indemnify and defend any claims brought by their employees or subcontractors against the other party (or the other parties’ subcontractors). In this way, contractors in each major area of offshore wind construction (turbines supply, foundations, array cables, export cables, offshore works, and onshore works) become a contained group, responsible for damages to its property and employees/subcontractors.6

Each party obtains insurance without the right of subrogation, meaning that claims are quickly paid by insurers who cannot bring negligence claims against the party that caused the injury. Generally, the developer takes out a construction all-risk insurance policy that insures the works (but not the vessels or other contractor equipment) and harm to third parties. The lead contractor and the subcontractors take out personal injury insurance on their own employees and insurance for their vessels and equipment and any potential third-party liability not covered by the construction all-risk or knock-for-knock agreement.7

What are the benefits and use of knock-for-knock in the offshore oil and gas industry?

The justification for knock-for-knock in the oil and gas industry is that the parties are involved in complex contractual relationships such that the resulting losses from harm may not be commensurate to the value of each individual work scope and this justifies altering the inherently fair system of liability based on fault given the complexity of resolving claims and assigning blame.8 The main benefit of the knock-for-knock system is, where effective, improved efficiency and reduction of the overall costs of a project. Knock-for-knock clauses are aimed at acknowledging and insuring all risks, while limiting the litigation costs as far as possible.

Are the justifications for the regime applicable to the offshore wind industry?

Around half of offshore wind projects include knock-for-knock clauses, arguably justified by the conditions similar to offshore oil and gas, for instance, many contractors doing complicated work together in a complex contractual web. However, the risks in offshore wind are simply not as large as in oil and gas. The biggest risks from major oil and gas disasters include losses from pollution for oil discharges and explosions on offshore rigs. These risks are absent in the offshore wind industry and some question the appropriateness of using knock-for-knock indemnification.9

The major critique of the system is that it could create a moral hazard, as there exists the risk that individual contractors may perform negligently knowing full well that the liability for its negligence would be passed on to other parties.10 There are both legal and commercial factors that mitigate this critique in the offshore wind industry. First, the industry is highly regulated.11 These regulations define the background standard of care for offshore projects and are subject to regulation and enforcement separate from any contract. Second, commercial forces encourage safe practices. The industry is small, safety focused, and commercially competitive, including on issues of safety; hazardous behaviour could quickly lead to a bad reputation and exclusion from future projects.12 The industry has an impressive safety record. In a 2020 study in the US, 1.6 million working hours resulted in only two incidents of medical treatment from injury and only one lost working day.13

Regardless of its merits, the clause may nonetheless be introduced into a contract web by a particular important contractor or come from the vision or past practices of a particular developer. Once introduced, the knock-for-knock concept is very hard to contain to just one part of a contracting quilt. For coherence and insurability, the knock-for-knock provision should be included across the project.14

Where adopted, the major risk to a project is enforceability of the indemnification.15 The system is designed to leave loss where it lies and insure loss at that level. Where losses are large, insurers may file lawsuits challenging the validity of the indemnification clause, seeking to avoid payment. If successful, the regime fails and an uninsured loss, which could have been insured in other ways, can fall directly on a party – the worst outcome from a liability risk management perspective.

In the North Sea, the system used in the oil and gas industry has largely been upheld. English courts have upheld the clause, even to grossly negligent conduct, where sufficiently definite and clear.16 In Norway, the clause has been generally upheld, but cases suggest it cannot be extended to gross negligence.17 A similar landscape prevails in other regimes in the North Sea. The system, however, has some challenges when used in the US.

Enforceability in the US

Knock-for-knock indemnities have never been fully accepted or integrated into the US system. In offshore wind, courts may apply federal maritime law or the law of the shore state, depending on an individualised analysis of the circumstances which can be hard to predict in advance.18 If the indemnity is invalidated under either regime, it can have disastrous effects for the project.

Forty-three US states have enacted some form of anti-indemnity statute in the construction or oil and gas industries.19 All eight of the most promising development states for offshore wind (based on political motivation and potential offshore wind resource) have enacted such legislation.20 For example, the New York Law declares that knock-for-knock construction indemnities are ‘against public policy […] void and unenforceable’.21

Does New York’s anti-indemnity law invalidate knock-for-knock clauses?

The New York statute’s language is broad. It seems a likely risk that a court applying the New York statute would strike down a knock-for-knock clause in offshore wind construction.

The simplest solution to avoid this, if effective, would be a choice of law clause pointing to maritime law. Courts will generally honour choice of law clauses, unless application of the forum law instead is required by ‘public policy’. Liability limitations are a sensitive area for public policy analysis and are sometimes struck down as contrary to public policy.

An early New York case, penned by the esteemed jurist Benjamin Cardozo established a high bar for public policy refusal to apply chosen law, saying that the chosen standard must ‘violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal’. Judge Cardozo applied that standard and allowed a Massachusetts law’s cap on wrongful death damages to limit damages in the New York case.22 Cardozo’s high standard remains the law and it is routinely cited by courts, both in and outside New York.23 However, later New York cases, applying that standard, have refused to allow the use of some out-of-state provisions capping damages.24

In 1999, New York’s anti-indemnity Act was tested as ‘public policy’. A New York office building was undergoing renovation by an Oklahoma contractor. The contract included an indemnification and choice of law clause pointing to Oklahoma law. When one of the building’s employees fell over some wires and was injured, she sued the Oklahoma company for negligence, who then sought indemnification from the contractor. The New York court was forced to determine if the anti-indemnity Act was in line with public policy in New York or whether it could apply Oklahoma law. The Act’s inclusion of specific language that such indemnities were ‘against public policy’ was strong evidence in favour. However, citing Judge Cardozo, the court found that the new law was not sufficiently ‘deeply rooted’ in tradition and did not meet the ‘heavy burden’ needed to be found as public policy.25

In New York, it is now clear that parties can use a choice of law provisions to avoid the anti-indemnity law. However, this is not a certain conclusion in all courts and other courts that have grappled with the issue have reached the opposite conclusion.26 Parties to offshore wind contracts will need to scrutinise the law of the shore state to assess the risk of non-enforcement in particular projects under state law.

Are the indemnity clauses enforceable under maritime law?

There is no general public policy in maritime law that prevents enforcement of indemnities for the negligence of the indemnified party.27 Courts are split, however, on whether indemnification can include gross negligence.28 An enforceable knock-for-knock negligence indemnity must be: (1) ‘expressed freely’, clearly stating the indemnity includes the other party’s negligence; and
(2) ‘entered into freely by parties of equal bargaining power’.29

Expressed freely

To validly indemnify for the other party’s negligence, the intent of the parties to do so must be clear.30 It is not enough to state that the indemnity covers all claims in tort and contract. Rather, the indemnity should explicitly state that it includes any act of negligence of the indemnified party. Clear drafting can easily satisfy this requirement of the law.

Entered freely

The freely entered principle comes from background common law relating to unconscionability and contracts of adhesion. The principle is generally used to provide relief to unsophisticated parties who sign take-it-or-leave-it waivers against parties with superior sophistication and bargaining power, where the waiver and circumstances are found fundamentally unfair.31 They are often thought of in the realm of consumer protection.32 Courts look at the sophistication and bargaining power of the parties and will even look at things like the size or boldface of the print, as a factor in determining whether the party actually consented to the terms.33

Generally, offshore construction contracts are between highly sophisticated parties. At first glance, it would seem that the freely entered principles would have little or no import in the area.34 However, as discussed, once knock-for-knock is introduced to the deal, the project’s viability and insurability requires that all subcontractors include the clause and, in this way, contracts are offered to sub-contractors on a take-it-or-leave-it basis and they are not subject to negotiation. The main contractor would likely sign contracts requiring it to obtain similar indemnities from subcontractors.35 Of course, the parties can negotiate other conditions as trade-offs, such as additional financial renumeration in light of the necessary insurance.

The freely entered principle for knock-for-knock contracts became a major concern in the offshore oil and gas industry after a federal court in Griffin surprisingly struck down an indemnity between two commercial contracting parties. In that case, a vessel needed a contract for a tow, relating to some work offshore. A broker arranged and signed the contract, which included the indemnity. When a seaman was injured during the tow and sued, the tow company sought indemnification. At trial, the broker testified that, when he received the charter form, he was ‘confused and did not understand the meaning’ of the indemnity and related insurance provisions. He called the manager of the tow company, who said it was take-it-or-leave-it. The broker sought no legal advice and just signed the contract. The court, relying on the broker’s confusion, struck down the indemnity, finding it was not freely entered.36 Griffin is problematic as it throws the knock-for-knock regime in doubt, when courts stand ready to excuse performance in a contract between two commercial parties, one of whom even testified that he actually reviewed the clause in question.

Although one commentator describes Griffin as ‘not particularly well reasoned’ and notes that other judges might reach a different conclusion, the case highlights the need for parties to demonstrate in drafting that the indemnity was actually negotiated.37 Housing the indemnity in a separate agreement and highlighting the negligence waiver in bold terms is the best practice and a practical method to show that the contract is freely entered.38


As offshore wind projects are developed in the US, the indemnification regime common to projects in the North Sea may face challenges. Knock-for-knock indemnities have never been fully integrated into the US market and many state anti-indemnity laws are a real threat to enforceability. Advisers to developers and contractors must understand this risk and the devastating effect a finding of invalidity of such a clause could have on a project.

Developers and their legal counsel must first consider whether knock-for-knock indemnities are necessary and appropriate to any given project and pay special attention to specific state law provisions that could impact enforceability. Counsel should review the law of the coastal state and make an independent evaluation if any anti-indemnity laws will be considered public policy and become unavoidable. In those situations, it may be best to abandon knock-for-knock and rely on the negligence regime.

Where a knock-for-knock clause is deemed necessary and appropriate, for commercial or legal risk reasons, the clause must be insulated from attack. Wise drafters will place the clauses in a separate indemnities and waivers agreement and subject that agreement to a choice of law clause to federal maritime law.


1 This work is based on research originally included in the author’s master thesis at the University of Copenhagen, ‘North Sea know-how in the New World: Building offshore windfarms in America’ (2022) (available online from the Royal Danish Library). The author would like to acknowledge the contributions of thesis adviser Sylvie Cécile Cavaleri (University of Copenhagen) and interview subjects Lars Nagstrup Conradsen (PEAK Wind), Don Jakins (Copenhagen Offshore Partners), Anders Hørlyck Jensen (Accura Law Firm), and Joan Bondareff (Virginia Offshore Wind Development Authority) to the author’s research.

2 Consolidated Appropriations Act, Pub L 116-260 (27 December 2020) (federal tax incentives); Walter Musial and others, ‘Offshore Wind Market Report’, Office of Energy Efficiency and Renewable Energy, US Department of Energy (2021), 7, 25, 83; Joseph B Nelson and David P Yaffe, ‘The Emergence of Commercial Scale Offshore Wind: Progress Made and Challenges Ahead’, 10 San Diego J Climate & Energy L 25, 47–52 (2019).

3 Lisa Friedman, ‘Sale of Leases for Wind Farms Off New York Raises More Than $4 Billion’, New York Times (25 February 2022); Vineyard Wind, Press Release: Vineyard Wind 1 Becomes the First Commercial Scale Offshore Wind Farm in the US to Achieve Financial Close, Vineyard Wind (15 September 2021); Coral Davenport and Lisa Friedman, Biden Administration Approves Nation’s First Major Offshore Wind Farm: The Vineyard Wind project, off the coast of Massachusetts, would generate enough electricity to power 400,000 homes, New York Times (11 May 2021); Musial and others, ‘Offshore Wind Market Report’, 7.

4 Musial and others, ‘Offshore Wind Market Report’, 13, 16–17.

5 Baltic and International Maritime Council (BIMCO), SUPPLYTIME 2017 (2017), s 14(a); Norsk Industri and Norsk Olje og Gass, Norsk Totalkontrakt 2015 (NTK 15) (2015), s 30 and 31; ‘Leading Oil and Gas Industry Competitveness’, Construction Edition 3 (LOGIC Constr 3) (2018), s 22.

6 For conceptual overview, see Cavaleri, ‘The Validity of Knock-for-Knock Clauses in Comparative Perspective’, 26 ERPL, 3, 7 (2018); Knut Kaasen, Tilvirkningskontrakter: Med kommentarer til NTK 15 og NF 15 (2018), 799–802; Richard W Williams, ‘Knock-for-Knock Clauses in Offshore Contracts: The Fundamental Principles’ in Bariş Soyer and Andrew Tettenborn (eds), Offshore Contracts and Liabilities (2015), 53–58; Simon Rainey, ‘The Construction of Mutual Indemnities and Knock-for-Knock Clauses’ in Bariş Soyer and Andrew Tettenborn (eds), Offshore Contracts and Liabilities (2015), 68–70.

7 Kaasen, Tilvirkningskontrakter: Med kommentarer til NTK 15 og NF 15, 800-801.

8 Williams, ‘Knock-for-Knock Clauses in Offshore Contracts: The Fundamental Principles’, 53.

9 See Kurt Thomsen, Offshore wind – a comprehensive guide to a successful offshore wind farm installation (2nd edn, 2014), 127–128.

10 Cavaleri, ‘The Validity of Knock-for-Knock Clauses in Comparative Perspective’ 26 ERPL at 8 (2018).

11 See, eg, James C Card and others, ‘Worker Health and Safety on Offshore Wind Farms: Special Report’ 310, Committee on Offshore Wind Farm Worker Safety, Transportation Research Board of National Academy of Sciences (2013), 47–59, 108–115.

12 Dewan Ahsan and others, ‘Why does the offshore wind industry need standardized HSE management systems? An evidence from Denmark’ 136 Renewable Energy 691, 691 (2019).

13 Tove Lunde, 2020 incident data report, G+ Global Offshore Wind Health & Safety Organisation in partnership with Energy Institute (June 2021), 17.

14 Fabien Lerede, ‘Knock-for-Knock: The P&I Insurance Perspective’ in Bariş Soyer and Andrew Tettenborn (eds), Offshore Contracts and Liabilities (2015), 201 (the insurer often requires the insured party to further contract on knock-for-knock terms).

15 See note 10 above.

16 Canada Steamship Lines v The King [1952] UKPC 1 (PC) (approving waivers based on own negligence); A Turtle Offshore SA v Superior Trading Inc [2008] EWHC 3034 (Admlty) (approving knock-for-knock clause contained in BIMCO contract). See also, Cavaleri, ‘The Validity of Knock-for-Knock Clauses in Comparative Perspective’ 26 ERPL at 8-11; Tim Taylor, ‘Offshore Energy Construction Insurance: Allocation of Risk Issues’ 87 TUL L REV 1165, 1175–1177 (2013).

17 Lagmannsrett Gulating LG-2012-77280 (25 May 2013) (approving knock-for-knock, but finding gross negligence can invalidate the indemnity); Hammerfest tingrett THAFE-2006-108795 (31 January 2007) (approving generally knock-for-knock in passing). See Cavaleri, ‘The Validity of Knock-for-Knock Clauses in Comparative Perspective’ 26 ERPL at 24–25; Erik Røsæg, ‘The Norwegian Perspective with regard to Liability Regimes Concerning Oil Rigs and Installations’ in Bariş Soyer and Andrew Tettenborn (eds), Offshore Contracts and Liabilities (2015), 285–286.

18 See discussion in David W Robertson, ‘The Outer Continental Shelf Lands Act’s Provisions on Jurisdiction, Remedies, and Choice of Law: Correcting the Fifth Circuit’s Mistakes’ 38 J MAR L & COM 487 (2007), 542–543.

19 Mahoney, ‘Making Sense of the Texas Oilfield Anti-Indemnity Act (TOAIA): It’s About Recovery’ 16 Texas Journal of Oil, Gas, and Energy Law, 95, 99 (2021).

20 Mass Gen Laws 149, s 29C; R I Gen Law s 6-34-1; NJ Stat s 2A:40A-1; Md Code Ann, Cts & Jud Proc 5-401; NY Gen Oblig Laws s 5-322.1; Conn Gen Stat s 52–572k; Va Code s 11–4.1; NC Gen Stat s 22B-1.

21 NY Gen Oblig Laws s 5-322.1 (emphasis added).

22 Loucks v Standard Oil 224 NY 99, 111 (NY 1918).

23 United States v Moseley 980 F3d 9, 20 (2d Cir 2020) cert denied, 141 SCt 1442 (2021); Willis Re Inc v Herriott 550 F Supp 3d 68, 94 (SDNY 2021); Metro Creditors Serv v Sadri,15 Cal App 4th 1821, 1824 (Ca Ct App 1993); Corbett v Stergios 257 Iowa 1387, 1393 (Ia 1965); Brown & Brown, Inc v Johnson, 25 NY3d 364, 368 (NY 2015).

24 Kilberg v Northeast Airlines, Inc 9 NY 2d 34, 41–42 (NY 1961) (striking down use of the same Massachusetts wrongful death cap previously approved in Loucks).

25 Finucane v Interior Constr Corp 264 AD 2d 618, 620–621 (NY Sup Ct App Div 1999).

26 Compare Champagnie v WE O’Neill Constr Co 77 Ill App. 3d 136, 143 (Ill Ct App 1979) (finding Illinois construction anti-indemnity law not public policy and allowing choice of law clause to avoid effects) with Cannon Oil & Gas Well Servs Inc v KLX Energy Servs LLC, 20 F4th 184, 194 (5th Cir 2021) (finding Wyoming oilfield anti-indemnity law to be public policy and refusing to allow choice of law clause to avoid effects, focusing on language in statute that such indemnification was ‘against public policy’).

27 Olsen v Shell Oil Co 595 F2d 1099, 1104 (5th Cir 1979) (‘no underlying public policy, no statute, and no case law prevents’ such indemnification).

28 Compare Energy XXI, GoM, LLC v New Tech Eng’g LP 787 F Supp 2d 590, 609 (S D Tex 2011) (striking down gross negligence indemnity) with In re Oil Spill by the Oil Rig ‘Deepwater Horizon’ in the Gulf of Mexico on 20 April 2010, 841 F Supp 2d 988, 998–1001 (ED La 2012) (upholding gross negligence indemnity).

29 See note 19 at 101–102; Dann Marine Towing LC v Gen. Ship Repair Corp 31 F Supp 3d 743, 746 (D Md 2014) (stating general standard under maritime law); Cont’l Res Inc v Rink Constr Inc 352 F Supp 3d 928, 935 (DND 2018).

30 United States v Seckinger 397 US 203, 211–213 (1970). The US law is in accord with the English law, where courts have upheld the provision. See Cavaleri (note 10 above) at 3, 9–11.

31 See Restatement (Second) of Contracts (1981) s 208 (Unconscionable Contract or Term).

32 Zuniga v Major League Baseball 2021 IL App (1st) 201264, 7 (Ill Ct App 2021).

33 Michael A Golemi and William W Pugh, ‘Hoping for the Best, Preparing for the Worst: Don’t Worry, We Have Indemnity’ 78 The Advocate (Texas) 47, 48 (2017).

34 Rainey, ‘The Construction of Mutual Indemnities and Knock-for-Knock Clauses’ in Soyer and Tettenborn (eds), Offshore Contracts and Liabilities (2015), 75–77 (discussing English cases acknowledging the commercial nature of the exemption and the parties as sophisticated commercial entities).

35 For example, the NTK s 30.1 requires ‘Contractor shall, as far as practicable, ensure that other companies in Contractor Group waive their right to make any claim against Company Group when such claims are covered by Contractor’s obligation to indemnify’.

36 Griffin v OPI Int’l Inc 878 F Supp 996, 1008–1009 (SD Tex 1995) affirmed by 79 F3d 1144 (5th Cir 1996).

37 See note 33, at 48–49.

38 Ibid.

About the author

William Durham is legal counsel for PEAK Wind, best-in-class consultant and operator of renewable energy projects based in Denmark. He can be contacted at whd@peak-wind.com.