What Do You Mean I Am Not Indemnified?—The Comparative Negligence Trap in Indemnity Clauses in Texas
The Comparative Negligence Trap in Indemnity Clauses in Texas
Texas, like a number of other states, strictly interprets indemnity clauses. Moreover, it has adopted a strict interpretation of a rule called the Express Negligence Doctrine. The express negligence doctrine, adopted by the Texas Supreme Court in 1987 in Ethyl Corp v. Daniel Construction Co., 725 S.W.2d at [703] (1987), was created to ‘to cut through the ambiguity’ of indemnity provisions, thereby reducing the need for satellite litigation regarding the interpretation of indemnity clauses.’” Industrial Specialists, LLC v. Blanchard Refining Company, LLC, et al., Slip Opinion, No. 01-23-00704-CV (1st Dist Ct. of Appeals) (2025) at 8 (“Industrial Specialists”). In essence, the doctrine provides that a party seeking to have a counterparty indemnify them for their own negligence must express that intent in specific terms and within the four corners of the agreement. Failure to do so makes any indemnity unenforceable as a matter of law. See Fisk Elec. Co. v. Constructors & Assocs., Inc., 888 S.W.2d 813, 814 (Tex. 1994). This doctrine is one of contract interpretation, so a failure to comply means the indemnity provision becomes unenforceable absent a court reforming it, which is unlikely.
Standard Indemnity Clause Language Creates Hidden Risk
The problem arises from the language of the standard indemnity clause. Many contracts provide language similar to the following:
[Party A] agrees to indemnify, defend and hold [Party B] harmless from and against all loss, damages, and other liabilities (“Loss”) arising out of, in connection with, relating to, or under the performance of [Party A] under this Agreement or [Party A’s] breach of this Agreement, except to the extent the Loss arises out of, is in connection with, or relates to the negligence of [Party B].
Assumed Allocation of Risk Under Typical Indemnity Clauses
Without more, parties would assume that Party A, under this clause, would be responsible for indemnifying Party B from any acts occurring under the Agreement to the extent not caused by the negligence of Party B. In situations where only one party did the acts that created liability, this clause seems to work.
Comparative Negligence Exposes Indemnity Clause Ambiguity
The problem arises when there may be negligence on the part of both parties. The 1st Circuit Court of Appeals for Texas recently took up this question in Industrial Specialists. In Industrial Specialists the parties had an indemnity clause similar to the standard indemnity language. Blanchard Refining (an affiliate of Marathon) had an accident where an employee was killed and several were injured. After being sued by the injured employees, Marathon and other parties to the lawsuits (other than Industrial Specialists) settled. Marathon then sought reimbursement for the percentage of damages caused by Industrial Specialists under the indemnity clause. The jury determined that Industrial Specialists were responsible for 17% of the damages and the Court awarded Marathon the amount of the settlement attributable to Industrial Specialists.
Texas Court of Appeals Applies Express Negligence Doctrine
The 1st Circuit Court of Appeals reversed the decision based on the express negligence doctrine. The Court found that the clause was unenforceable in this context because it was not specific regarding comparative negligence. Specifically, the Court found that the clause “except to the extent that the liability, loss or damage is attributable to and caused by the negligence of [Blanchard Refining]” was ambiguous and thus as a matter of contract interpretation rendered the clause unenforceable. While Marathon argued language in Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417 (Texas 2000) (“Gulf”) allowed for indemnity in cases of comparative negligence, the Court was not convinced. In addition, it is not clear that the Court would have reached the same decision in a non-comparative negligence context in that it distinguished language in Gulf that allowed indemnity even with similar language on the basis that the Court in Gulf found that the indemnitor had no negligence in connection with the damages which the indemnitee sought to have reimbursed. Industrial Specialists at 11.
Drafting Lessons for Indemnity Clauses Under Texas Law
What does this mean for parties contracting in Texas? First, it is important to craft indemnity language to be clear and conspicuous. Ambiguity will not be resolved in the favor of the party seeking indemnity. Second, if a party wants to carve out negligence of the indemnified party, the language must clearly state whether it carves out sole negligence, partial negligence, or otherwise. Some commenters have suggested that the following may be sufficient to do the trick “except to the extent the Loss arises out of, is in connection with, or relates to the negligence of the indemnitee, including claims caused by the sole or concurrent negligence of the indemnitee.” We believe that a better approach may be to add a clause in addition to that language that specifically addresses the point that an indemnitor will remain liable for its portion of damages even if the indemnitee has some fault as well. For example, in addition to the addition of “sole or concurrent” language, drafters may want to add another clause stating affirmatively that “; provided, further, that [indemnitor] shall remain liable, and indemnify, for any portion, or amount, of losses, damages or liabilities which [indemnitor] shall be responsible notwithstanding any acts or negligence of [indemnitee].” Third, the express negligence doctrine also applies to the duty to defend and hold harmless. Accordingly, while most indemnity clauses include the duty to defend and to hold harmless, the inclusion will not save an otherwise defective provision which does not address explicitly whether the duty applies to sole or concurrent negligence. Fourth, the Industrial Specialists case is worth watching as it will undoubtedly be appealed to the Texas Supreme Court.
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