Does Costa Vida Fresh Mexican Grill have the obligation to direct the defense of an indemnification event?
Costa_Vida_Fresh_Mexican_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
The term "Losses and Expenses" includes compensatory, exemplary, and punitive damages; fines and penalties; attorney's fees; experts' fees; court costs; costs associated with investigating and defending against claims; settlement amounts; judgments; compensation for damages to our reputation and goodwill; and all other costs associated with any of the foregoing losses and expenses. We agree to give you reasonable notice of any Event of which we become aware for which indemnification may be required and we may elect (but are not obligated) to direct the defense thereof, provided that the selection of counsel shall be subject to your consent, which consent shall not be unreasonably withheld or delayed.
We may, in our reasonable discretion, take such actions as we deem necessary and appropriate to investigate, defend, or settle any Event or take other remedial or corrective actions as may be necessary for the protection of Indemnitees or Costa Vida Restaurants generally, provided however, that any settlement shall be subject to your consent, which consent shall not be unreasonably withheld or delayed. Further, notwithstanding the foregoing, if the insurer on a policy or policies obtained in compliance with your Franchise Agreement agrees to undertake the defense of an Event (an "Insured Event"), we agree not to exercise our right to select counsel to defend such Event if such an action would cause your insurer to deny coverage. We reserve the right to retain counsel to represent us with respect to an Insured Event at our sole cost and expense. This Section 5.B shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 67–282)
What This Means (2025 FDD)
According to Costa Vida Fresh Mexican Grill's 2025 Franchise Disclosure Document, Costa Vida Fresh Mexican Grill may elect to direct the defense of an indemnification event, but they are not obligated to do so. Costa Vida Fresh Mexican Grill will give the franchisee reasonable notice of any event for which indemnification may be required. If Costa Vida Fresh Mexican Grill chooses to direct the defense, the selection of counsel is subject to the franchisee's consent, which cannot be unreasonably withheld or delayed.
The document also states that Costa Vida Fresh Mexican Grill may take actions deemed necessary to investigate, defend, or settle any event or take other remedial or corrective actions for the protection of Indemnitees or Costa Vida Restaurants generally. However, any settlement is subject to the franchisee's consent, which cannot be unreasonably withheld or delayed.
Furthermore, if the franchisee's insurer agrees to defend an event (an "Insured Event"), Costa Vida Fresh Mexican Grill agrees not to exercise its right to select counsel if doing so would cause the insurer to deny coverage. Costa Vida Fresh Mexican Grill reserves the right to retain counsel to represent them with respect to an Insured Event at their sole cost and expense. This section of the agreement remains in effect even after the agreement expires or is terminated.