Under the Cicis franchise agreement, is an Indemnified Party required to seek recovery from an insurer or mitigate losses before making a claim against the franchisee?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
An Indemnified Party need not seek recovery from any insurer or other third party, or otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against you under this subparagraph.
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 subparagraph.
In all cases, the Indemnified Party will use commercially reasonable efforts to mitigate the controllable costs it incurs in connection with any claims that are subject to indemnification under this Section 14.
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to the 2025 Cicis Franchise Disclosure Document, an Indemnified Party is not required to seek recovery from any insurer or other third party, or otherwise mitigate its losses and expenses, before making a claim against the franchisee under the indemnification clause. Furthermore, the agreement states that a failure to pursue recovery or mitigate a loss will not reduce or alter the amounts that the Indemnified Party may recover from the franchisee. However, the Indemnified Party will use commercially reasonable efforts to mitigate the controllable costs it incurs in connection with any claims that are subject to indemnification.
This means that if Cicis is faced with a claim for which they are entitled to indemnification from the franchisee, Cicis does not have to first pursue any insurance claims or other avenues of recovery before seeking compensation from the franchisee. This could potentially increase the financial burden on the franchisee, as they may be responsible for covering the full amount of the claim even if Cicis could have recovered some of the losses from another source.
However, the clause regarding commercially reasonable efforts to mitigate controllable costs provides some protection to the franchisee. This suggests that Cicis is expected to take reasonable steps to minimize the costs associated with the claim, which could include pursuing insurance claims or other forms of recovery if it is commercially reasonable to do so. The franchisee is responsible for indemnifying Cicis, but Cicis is expected to manage costs reasonably.
It is important for a prospective Cicis franchisee to understand the scope of the indemnification clause and the potential financial implications. Franchisees should carefully review the agreement with a legal professional to fully understand their obligations and to assess the potential risks associated with this provision.