After years of failed attempts, the Texas Legislature was finally successful in passing an Anti-Indemnity Statute applicable to the construction industry. Chapter 151 of the Texas Insurance Code addresses not only addresses the appropriate use of indemnification clauses in construction contracts, but it also tackles additional insured provisions. Section 151.101 applies broadly to any construction contract where one party is required to provide liability insurance coverage. In addition, so that it capture as many contractual agreements as possible, construction contract is defined very broadly.
Section 151.001(5) defines "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."
The statute makes "void and unenforceable as against public policy" any provision in a construction contract that requires an indemnitor to indemnify an indemnitee for the indemnitee's negligence. The only indemnification provision that is now permitted is one where the indemnitor agrees to indemnify the indemnitee for the portion of the damages that can be attributed to the indemnitor's conduct. Despite the broad application of the statute to all construction contracts, there is one important exception. It does not apply to an indemnification agreement where the indemnitor agrees to defend, indemnify, and hold harmless another party for the bodily injury or death of the indemnitor's employee, agent, or subcontractor.
The Anti-Indemnity Statute also cuts off the back door avenue to obtain full indemnification for one own's negligence - -the additional insured clause. The statute still allows construction contracts to require the purchase of additional insured coverage. However, if the coverage provides coverage that is otherwise prohibited in the indemnification clause in the contract, it too is void and unenforceable.
The effective date of the statute is January 1, 2012. If you are a business that is relying on those old contract forms and insurance policies for protection against the company's own negligence, then you need to reevaluate the company's potential exposure.
http://www.jonathanallenlaw.com/.
Jonathan C. Allen
Over the years, I have represented a variety of businesses, ranging from the commercial contractor to the large petrochemical plant, in the resolution of insurance coverage and commercial disputes, as well as construction defect claims and general liability suits brought by contractors and employees. At my website, I write a business litigation blog, complete with movie and television references, and I also write an insurance coverage blog. I invite you to read my blogs and comment on any posts that interest you.
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