The Texas Anti-Indemnity Statute
Texas Insurance Litigation Lawyers
Texas’ legal landscape concerning insurance law and litigation was changed substantially by the Texas Anti-Indemnity Statute (Chapter 151 of the Texas Insurance Code), which took effect in January of 2012 following the passing of HB 2093. The law has a significant impact on Texas cases by limiting and prohibiting certain agreements to shift liability risks for negligence and similar torts from the indemnitee to a third party, and especially so as they relate to construction.
Given the implications involving the Texas Anti-Indemnity Statute as they relate to liability exposure, construction law, involving indemnity and additional insured provisions, and evolving case law, companies that do business in Texas have been forced to rethink how they draft construction contracts, manage risks, and engage in litigation, and increasingly rely on experienced attorneys.
Insurance Law & Indemnity in Texas
Indemnity clauses are contractual provisions that commit one party to compensate the other for losses arising out of a construction contract. While they can be used by businesses in various industries, they are central parts of many construction contracts because they allow parties such as a contractor to control liability risks when another party, such as a subcontractor, assumes liability.
Prior to the Texas Anti-Indemnity Act, parties in a construction contract (indemnitor) had the ability to agree to indemnify another party (indemnitee) for all claims, losses, or damages arising from work the indemnitor performed, regardless of which party was at fault, and regardless of whether the indemnitee was at least partly at fault. However, the Act changed that through statutory restrictions and prohibition.
Here are a few key points about the Texas Anti-Indemnity Act and its impact on construction contracts and insurance:
- Under the Act, construction contracts for indemnification of certain types of broad form indemnity obligations are prohibited (void and unenforceable). In other words, construction contracts can no longer contain clauses requiring a party to indemnify, defense, or hold harmless another party for claims arising from their own negligence, whether in whole or in part.
- The Act also prohibits any related provision requiring insurance coverage for prohibited obligations, meaning indemnitors can’t be required to purchase additional coverage if such coverage would be prohibited as a result of the underlying indemnification agreement.
- Parties cannot waive provisions of the Act by contract or otherwise.
The Anti-Indemnity Act has had a marked impact on insurance policies, as it voids additional coverage in some cases. This is especially true among construction companies and related businesses which may purchase additional insurance coverage for other parties to work around anti-indemnity clauses. It also renders any indemnification provision void if it requires a party to indemnify another for claims arising from the indemnitee’s fault.
Anti-Indemnification Statute Exceptions
Despite the restrictions created by the Anti-Indemnity Act, the law does provide for some exceptions. By statute, this includes eleven specific circumstances where the prohibition does not apply. Examples include:
- Indemnification of a party or third party for the death or bodily injury of an indemnitor’s employee, or that of its agent or subcontractor (“action over claims”).
- Residential and public works projects
Experienced Texas Insurance Litigation Attorneys on Your Side
Our insurance law and litigation team can assist clients with evaluating cases involving the Anti-Indemnity Act and provide the experienced representation they need. This includes proactive representation for drafting, negotiating, and structuring construction contracts to address statutory restrictions and exceptions and maximize the indemnification without risking violations.
It also includes protecting the rights and interests of clients when disputes arise – whether it be enforcing or defending against a claim. Our firm has particular experience in addressing such matters as they relate to construction, and is equipped with the experience to assist in matters involving construction contracts, indemnification, construction arbitration, litigation, and more.
At Hendershot, Cannon & Hisey, P.C., our breadth of experience in matters involving insurance law, business contracts, construction law, and litigation uniquely prepare us to tackle even the toughest of issues on a proactive and responsive basis.
If you have questions about the Texas Anti-Indemnity Act and how it may be implicated in your potential case, please call (713) 909-7323 or contact us online to speak personally with an attorney. Our Houston-based firm serves clients throughout the state of Texas and beyond.