Does a Body20 Indemnified Party need to seek recovery from insurance or mitigate losses before claiming indemnification from the franchisee?
Body20 Franchise · 2025 FDDAnswer from 2025 FDD Document
defense and response costs and other Losses you are solely responsible, subject to Section 11.3 (Willful Misconduct or Gross Negligence). An Indemnified Party need not seek recovery from any insurer or other third party, or otherwise mitigate its Losses, in order to maintain and recover fully a claim against you, and you agree that a failure to pursue a recovery or mitigate a Loss will not reduce or alter the amounts that an Indemnified Party may recover from you under this Section 11. Your obligations in this Section 11 will survive the expiration or termination of this Agreement.
11.3 Willful Misconduct or Gross Negligence. Despite Section 11.1, you have no obligation to indemnify or hold harmless an Indemnified Party for, and we will reimburse you for, any Losses (including costs of defending any Proceeding under Section 11.2) to the extent they are determined in a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction to have been caused solely and directly by the Indemnified Party's willful misconduct or gross negligence, so long as the claim to which those Losses relate is not asserted on the basis of theories of vicarious liability (including agency, apparent agency, or employment) or our failure to compel you to comply with this Agreement. However, nothing in this Section 11.3 limits your obligation to defend us and the other Indemnified Parties under Section 11.2.
Source: Item 23 — RECEIPT (FDD pages 74–251)
What This Means (2025 FDD)
According to Body20's 2025 Franchise Disclosure Document, an Indemnified Party does not need to seek recovery from any insurer or third party, or otherwise mitigate its losses, before making a claim against the franchisee. The franchisee agrees that the failure to pursue recovery or mitigate a loss will not reduce or alter the amounts that an Indemnified Party may recover from them. This obligation survives the expiration or termination of the Franchise Agreement.
This means that if Body20 or its affiliates incur losses due to the franchisee's actions or the studio's operation, they can seek full compensation from the franchisee without first attempting to recover those losses from other sources like insurance companies. This places a significant financial responsibility on the franchisee to cover any potential liabilities or damages arising from their business operations.
However, the franchisee is not obligated to indemnify Body20 for losses caused solely and directly by Body20's willful misconduct or gross negligence, as determined by a court or arbitrator, unless the claim is based on vicarious liability or Body20's failure to compel the franchisee to comply with the agreement. This exception provides some protection to the franchisee against Body20's own actions. The franchisee is still obligated to defend Body20 and other Indemnified Parties under Section 11.2 of the agreement.
This indemnification clause is a standard practice in franchising, where franchisees often bear the responsibility for liabilities arising from their business operations. However, the specific terms and exceptions can vary, so prospective Body20 franchisees should carefully review this section of the Franchise Agreement with legal counsel to fully understand their obligations and potential liabilities.