ABA Guest Article: Construction Anti-Indemnification Law Changes Indemnity and Additional Insurance Landscape

05/30/2012

Historically, Texas has permitted indemnification provisions covering the indemnitee’s sole negligence or fault as long as the agreement was “unambiguously stated.” XL Specialty Ins. Co. v. Kiewitt Offshore Servs., Ltd., 513 F.3d 146 (5th Cir. 2008). But on January 1, 2012, Texas joined a handful of states in declaring construction contract indemnity provisions and additional insured requirements void and unenforceable if they require a person to indemnify, defend, or hold harmless another party for a claim caused by that party’s own negligence or fault. See Tex. Ins. Code § 151.102. Under the new law, owners and general contractors can, except under limited circumstances, no longer require subcontractors to indemnify them for the owner or general contractor’s own negligence or purchase insurance coverage for the owner or general contractor’s own negligence.

The Statute’s Scope

The new provision applies to most Texas “construction contracts.” The term “construction contract” is defined very broadly in Section 151.001(5):

‘Construction contract’ means a contract, subcontract, or agreement, or a performance bond assuring the performance of any of the foregoing, entered into or made by an owner, architect, engineer, contractor, construction manager, subcontractor, supplier, or material or equipment lessor for the design, construction, alteration, renovation, remodeling, repair, or maintenance of, or for the furnishing of material or equipment for, a building, structure, appurtenance, or other improvement to or on public or private real property, including moving, demolition, and excavation connected with the real property. The term includes an agreement to which an architect, engineer, or contractor and an owner’s lender are parties regarding an assignment of the construction contract or other modifications thereto.

Published on the Insurance Coverage webpage of the Section of Litigation’s Insurance Coverage Litigation Committee, May 2012. © 2011 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. To view full article, please click here (subscription required).

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