Does the Cream franchise agreement require an Indemnified Party to seek recovery from insurance or other third parties before seeking indemnification from the franchisee?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
Each Indemnified Party may defend any claim against it at your expense and agree to settlements or take any other remedial, corrective, or other actions. This indemnity will continue in full force and effect subsequent to and notwithstanding this Agreement's expiration or termination. 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 Section 16.D. Any Indemnified Party may demand that you advance funds to such Indemnified Party to pay for any claims that are indemnifiable under this Section 16.D, and you will advance such funds promptly upon demand; provided, however, that if (and only to the limited extent that) any such claim is ultimately determined not to be indemnifiable under this Section 16.D in a final, unappealable ruling issued by a court with competent jurisdiction or arbitrator, such Indemnified Party must reimburse any portion of such funds that are attributable to such non-indemnifiable claims.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, an Indemnified Party does not need to seek recovery from any insurer or other third party before seeking indemnification from the franchisee. The franchise agreement specifies that the Indemnified Party is not required to mitigate its losses and expenses to fully recover a claim from the franchisee.
This means that Cream or its affiliates can immediately seek indemnification from a franchisee for claims, losses, or expenses without first attempting to recover those amounts from insurance policies or other sources. This could potentially increase the financial burden on the franchisee if a claim arises, as they may be responsible for covering the full amount of the loss without any offset from other available resources.
Furthermore, the Cream franchise agreement states that the failure of the Indemnified Party to pursue recovery from another source will not reduce or alter the amounts recoverable from the franchisee. Cream can also demand that the franchisee advance funds to cover any claims that are indemnifiable. However, if a court determines that the claim is not indemnifiable, Cream must reimburse the franchisee for the non-indemnifiable portion of the advanced funds.