Federal Court Holds Texas Anti-Indemnity Act Does Not Bar All Additional Insured Obligations

A federal court in Texas has held that the Texas Anti-Indemnity Act’s section nullifying additional insured status applies only to the extent a putative additional insured seeks coverage for its own negligence. Knife River Corporation-South v. Zurich American Insurance Company, C.A. No. 3:21-cv-1344-B, 2022 U.S. Dist. LEXIS 40409 (N.D. Tex., Mar. 8, 2022).

A driver lost control of his car in a highway construction area, crashed and was injured. He and his wife sued alleging that the defendants failed to properly backfill, slope or otherwise make safe an excessive height difference at the edge of a roadway and failed to place warning signs alerting the public to the hazard. The contractor settled and sued its subcontractors and their insurers claiming the settlement “was made necessary because of, and arose out of, in whole or in part, the negligence” of its subcontractors. The contractor sought defense and indemnity based on its additional insured status and the contractual indemnity obligations of its subcontractors. It argued that discovery established the subcontractors contractually assumed all responsibility for all project duties related to signage and placed the signage without the contractor’s permission and refused to remove it despite the contractor’s demands. One subcontractor and its insurers reached an agreement with the contractor regarding defense and indemnity obligations, but the second subcontractor and its insurers did not. The insurers for the remaining subcontractor responsible for signage moved to dismiss the suit in respect of that subcontractor on the basis, inter alia, that the contractor’s additional insured status is barred by the Texas Anti-Indemnity Act. The insurers argued that the underlying petition alleged no negligence by the subcontractor for which the contractor could be held liable because it contained no allegation that the contractor was vicariously liable for the subcontractor’s actions, which acted independently, and that its contract with the contractor provided that the contractor “shall set and relocate paving signs as needed.” The insurers thus argued that all negligence based on signage was the contractor’s and that the contractor’s settlement had to have been for the contractor’s own negligence, as a result of which any indemnity owed is based on the contractor’s own negligence, which is barred by the Texas Anti-Indemnity Act.

The court, however, based on the allegations of the underlying petition that “[d]”efendants are jointly and severally responsible for the acts and/or omissions of [their] respective agents … and/or representatives through … vicarious responsibility principles,” and that the subcontractor’s policies made clear that coverage (for additional insureds) or indemnification is available only to the extent injury results from the subcontractor’s, not the contractor’s, negligence, found no violation of the statute.