Broad form indemnities are common in Texas construction contracts, even though indemnifying someone for their own negligence is a tough pill to swallow.
In 2011, Texas passed a law limiting such clauses in construction contracts. Since then, Texas courts have analyzed the statute only a handful of times.
The Rule
In a nutshell, the statute voids an indemnity provision in a construction contract if it requires the indemnitor to indemnify, defend, or hold harmless the indemnitee for a claim caused in whole or in part by that indemnitee’s own negligence. See Signature Indus. Services, LLC v. Int’l Paper Co., 638 S.W.3d 179, 196 (Tex. 2022) (“But we do not understand section 151.102 to ask who is truly at fault for the injuries complained of. Instead, it asks only whether the ‘claim’ for which indemnity is sought was ‘caused by’ the fault or breach of contract of the indemnitee.”).
The law also bars any construction contract provision that requires the purchase of additional insured coverage that would cover the indemnitee’s own negligence. In other words, Texas law prevents an owner or a general contractor from requiring a contractor or subcontractor to provide insurance for the owner’s or general contractor’s own negligence.
What is a “construction contract”?
The statute broadly defines the term “construction contract” as:
“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.”
This likely covers many contracts including some (e.g., maintenance contracts) that may not traditionally be thought of as construction contracts.
Oil and Gas Contracts
The statute specifically exempts out contracts covered by the Texas Oilfield Anti-Indemnity Act (TOAIA) which will exclude most contracts related to oil and gas. However, contracts related to pipelines may be covered by the new construction statute because such contracts are not covered by TOAIA and arguably fit within the definition of “construction contracts.”
Other Important Exceptions
The statute names several other exceptions. For instance, Section 151.102 of the Texas Insurance Code does not apply to claims “for the bodily injury or death of an employee of the indemnitor, its agent, or subcontractor of any tier.” Residential construction contracts are also excluded.
Notably, the express negligence rule should still apply to these exceptions. That is, indemnity clauses that cover the indemnitee’s own negligence should be clear and conspicuous.
The Bottom Line
This law is largely a good thing for subcontractors and suppliers in the construction industry because their contracts frequently contain broad form indemnities to the general contractor. It also benefits general contractors required to provide broad form indemnities to the owner.