An indemnity basket is a deductible on ordinary claims. A special or carve-out indemnity protects only what its own words name — and no statute polices how well that scope matches the risk it was written for.
Short answer
An indemnity basket is a deductible — a threshold of aggregate Losses the buyer has to clear before it can claim anything under the general indemnity — and yes, a separately drafted special indemnity can sit entirely outside that basket and outside the general cap, but only for whatever risk its own wording actually names, not the broader category of concern the parties had in mind when they wrote it.
No statute polices the scope of a bespoke indemnity carve-out. A special indemnity is a pure creature of drafting, and it protects exactly, and only, what its own words name — not the underlying category of risk the parties were worried about. A carve-out drafted around the two tax years diligence happened to flag as risky protects those two years; it does not protect against the mechanism of the risk itself, which may reach further.
That makes the general indemnity's ordinary survival period the real backstop for anything the special indemnity does not name. The Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s.152(3.1)(b), fixes the CRA's normal reassessment window for a CCPC as “the period that ends three years after the earlier of the day of sending of a notice of an original assessment under this Part in respect of the taxpayer for the year and the day of sending of an original notification that no tax is payable by the taxpayer for the year.” A general survival period shorter than that three-year window can leave a gap a special indemnity, drafted too narrowly, never named.
Whether a claim genuinely sits outside the basket and cap depends entirely on the carve-out's own words: notwithstanding the Basket or the Cap language reaching a named category (tax, environmental, title, fraud) does what it says for that category and nothing else. A carve-out sized to specific years or specific facts, rather than to the mechanism of the risk, is the recurring drafting failure — it looks broad and reads narrow.
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