1 / 24

Texas Indemnity Law Update

Texas Indemnity Law Update. Presented by James W. Bartlett, Jr. Purpose of an Indemnity Provision. Practical definition “Extraordinary” shifting of risk Generally enforced unless: Violates the constitution or a statute; or Violates public policy. Common Forms of Indemnity in Texas.

lanai
Download Presentation

Texas Indemnity Law Update

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Texas IndemnityLaw Update Presented by James W. Bartlett, Jr.

  2. Purpose of anIndemnity Provision • Practical definition • “Extraordinary” shifting of risk • Generally enforced unless: • Violates the constitution or a statute; or • Violates public policy WWW.KASOWITZ.COM

  3. Common Forms ofIndemnity in Texas • Contractual indemnity (most common) • Statutes affecting indemnity (less common) • Common law indemnity (rare) WWW.KASOWITZ.COM

  4. Contractual Indemnity:Tenants of Construction • Interpreted under normal rules of contract construction • (SeeNabors Drilling USA, L.P. v. Encana Oil and Gas (USA), Inc., 2013 Tex. App. LEXIS 8583 (Tex. App. – Fort Worth July 11, 2013, pet. filed)) • Strictly construed against the indemnitee • (SeeIrvin v. Guarantee Company of North America, U.S.A., 2008 Tex. App. LEXIS August 5, 2008 (Tex. App. – Dallas August 5, 2008, no pet.)) • Unless contract provides otherwise WWW.KASOWITZ.COM

  5. Three Common Types ofContractual Indemnity Provisions • Broad Form • Intermediate Form • Limited Form WWW.KASOWITZ.COM

  6. Contractual Indemnity:Fair Notice Requirements • “Fair Notice” required for a party to obtain indemnification for its own negligence in advance • Two components: • “Express Negligence” doctrine • “Conspicuousness” test • Matter of law determination WWW.KASOWITZ.COM

  7. Contractual Indemnity:“Express Negligence” Doctrine • Ethyl Corporation v. Daniel Construction Company, 725 S.W.2d 705 (Tex. 1987) • “[C]lear and specific terms” • “Four corners” rule • The word “negligence” is not necessary • (See Texas Engineering Extension Service v. Gifford, 2012 Tex. App. LEXIS 2030 (Tex. App. – Waco March 14, 2012, no pet.)) • Has been applied to more than just negligence WWW.KASOWITZ.COM

  8. Contractual Indemnity:“Conspicuousness” Test • Dresser Industries v. Page Petroleum, Inc., 853 S.W.2d 505 (Tex. 1987) • Adopted UCC definition of conspicuousness: • Reasonable person standard • E.g., capital headings, larger font size, contrasting font color, bold type, etc. • Sliding scale of acceptability WWW.KASOWITZ.COM

  9. Contractual Indemnity:Fair Notice Requirements • “Actual Notice” or “Actual Knowledge” exception • Definitely applies to “Conspicuousness” test • Application to “Express Negligence” doctrine unsettled • (See Sydlik v. REEIII, Inc., 195 S.W.3d 329 (Tex. App. – Houston [14th Dist.] 2006, no pet.)) WWW.KASOWITZ.COM

  10. Statutes Affectingor Providing Indemnity • Texas Anti-Indemnity Act • (Tex. Ins. Code § 151.001, et seq.) • Architect/Engineer Anti-Indemnity Statute • (Tex. Civ. Prac. & Remedies Code § 130.001, et seq.) • Texas Oilfield Anti-Indemnity Act • (Tex. Civ. Prac. & Remedies Code § 127.001, et seq.) • Products Liability Indemnity Statute • (Tex. Civ. Prac. & Remedies Code § 82.001, et seq.) WWW.KASOWITZ.COM

  11. Texas Anti-Indemnity Act:Scope • Applies to: • a “construction contract”; • for a “construction project”; • for which an indemnitor is provided or procures insurance subject to Chapter 151 or Title 10 of the Texas Insurance Code • Chapter 151 relates to Consolidated Insurance Programs • Title 10 relates to regulations for property and casualty insurance in Texas • Includes standard CGL and WC coverages WWW.KASOWITZ.COM

  12. Texas Anti-Indemnity Act:Important Definitions • Definition of “construction contract” is broad, and includes a range of private and public contracts, subcontracts, and agreements • Definition of “construction project” includes construction, maintenance, or repair of improvements to real property • Excludes certain smaller-scale projects WWW.KASOWITZ.COM

  13. Texas Anti-Indemnity Act:Application • If applicable, voids a provision that indemnifies a party for its own negligence or fault • Also applies to agreements “collateral to or affecting” applicable contracts • Broad form and intermediate form indemnity not permitted if Act applies • “Additional insured” issues WWW.KASOWITZ.COM

  14. Texas Anti-Indemnity Act:Notable Exceptions • Does not apply to: • Consolidated Insurance Programs • Indemnification for claims for bodily injury to or death of “the indemnitor, its agent, or its subcontractor of any tier” • Breach of contract or breach of warranty claims • Public works projects of a municipality WWW.KASOWITZ.COM

  15. Texas CPRC 130.002:Architects and Engineers • Voids any provision in a construction contract requiring a contractor to indemnify a registered architect or licensed engineer for liability relating to: • Certain defects in materials of architect or engineer; or • Negligence of the architect or engineer in the rendition or conduct of certain professional duties • Also voids certain provisions providing indemnification to owners WWW.KASOWITZ.COM

  16. Texas OilfieldAnti-Indemnity Act(Tex. Civ. Prac. & Rem. Code § 127.001, et seq.) • Generally renders void indemnification provisions for an indemnitee’s own negligence in contracts pertaining to oil, gas, or water wells or mines for other minerals • However, indemnity supported by liability insurance not prohibited • If unilateral indemnity, $500,000 cap • If mutual indemnity, indemnity obligation is limited to the extent of the coverage and dollar limits of insurances each party as indemnitor has agreed to obtain • Statute contains a number of exclusions WWW.KASOWITZ.COM

  17. CPRC Chapter 82:Manufacturer/Seller Indemnity • Applies to products liability actions • Requires a “manufacturer” to indemnify a “seller” against loss except for the seller’s: • Negligence; • Intentional misconduct; or • Other act or omission for which the seller is independently liable WWW.KASOWITZ.COM

  18. CPRC Chapter 82:Manufacturer/Seller Indemnity • Who is a manufacturer? • Who is a seller? • A person who merely provides services is not a seller • Manufacturers are always sellers, but sellers are not always manufacturers • (See General Motors Corporation v. Hudiburg Chevrolet, Inc., 199 S.W.3d 249 (Tex. 2006)) WWW.KASOWITZ.COM

  19. CPRC Chapter 82:Manufacturer/Seller Indemnity • What constitutes recoverable “loss”? • “Reasonable damages” includes amounts paid by the seller in settlement WWW.KASOWITZ.COM

  20. CPRC Chapter 82:Manufacturer/Seller Indemnity:Trigger and Scope of Duty • Duty to indemnity applies regardless of manner in which the products liability action is concluded: • Settlement; • Judgment; or • Dismissal • No showing of manufacturer liability is required to trigger statutory duty to indemnify • Instead, triggered by pleadings • However, duty to indemnify not implicated unless the pleadings can be fairly read to allege a defect in the manufacturer’s product • Issues raised by multiple manufacturer defendants WWW.KASOWITZ.COM

  21. CPRC Chapter 82:Manufacturer/Seller Indemnity:Manufacturer “Outs” • Manufacturer may escape indemnity obligation by proving seller’s independent culpable conduct • Innocent manufacturer of a component product that is not defective may be considered an innocent “seller” and owed reciprocal indemnification WWW.KASOWITZ.COM

  22. Common Law Indemnity:Rare But Still There • Some vestiges of common law indemnity survive today, e.g.: • Purely vicarious employer liability • Purely vicarious landlord-tenant liability • Manufacturer’s duty to indemnify innocent seller • Must be a judicial determination or admission that a wrongdoer could be legally liable WWW.KASOWITZ.COM

  23. Protect Yourself!Drafting Tips • Indemnitee – insist on provision against strict construction • Indemnitor – do the opposite • Indemnitee – go for gross and beyond • Indemnitor – push for exclusion of gross negligence, intentional torts, etc. • Be conspicuous! • Specify claims, levels of negligence, damages • Consider using multiple indemnity provisions in construction contracts • Severability clause • Expressly include agreement to defend WWW.KASOWITZ.COM

  24. Texas IndemnityLaw Update Thank you!

More Related