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Where the indemnity clause of a contract expressly exculpated a prime contractor from the consequences of its own negligence that resulted in injury to a subcontractor’s worker, the prime was entitled to be indemnified by the subcontractor because the claim arose out of the performance of the contract.

In Spawglass, Inc. v. E.T. Services, Inc., 143 S.W.3d  897  ( Tex. 2004),  the appellate court reversed a summary judgment that had been granted by the trial court in favor of the subcontractor.  The contractor, SpawGlass Construction Corporation had subcontracted with E.T. Services, Inc.(“ETS”)  for ETS to perform structural steel erection for a high school.  An employee of ETS, Brian Sanders, was working as a welder on the site. While he was rolling up an oxygen hose, he was struck by a sheet of plywood that blew off of the roof during a sudden storm.  Sanders sued SpawGlass for negligence.  SpawGlass in turn sought indemnity from ETS pursuant to the indemnity provisions of the contract.

SpawGlass contended that the contract clearly and unambiguously required ETS to indemnity SpawGlass for claims of injury to ETS’s workers attributable to SpawGlass’s negligence.  ETS, in contrast, contended that the indemnity provision applied only to injuries resulting from ETS’s performance.  Flying plywood, says ETS, did not arise out of ETS performance.  ETS argued that the indemnity may only be triggered if the incident arose out of its performance, not its mere presence on the site.

The appellate court rejected ETS’s argument completely.  First, the court found that the indemnity provision was clear and unambiguous with regard to meeting what is known as the “express negligence rule.”  That rule requires that the intent of the party seeking indemnity from the consequences of its own future negligence must be expressed in unambiguous terms within the four corners of the contract.   In this case, the court held that the language clearly required that ETS would indemnify SpawGlass from the consequences of SpawGlass’s own negligence that resulted in injury to ETS’s worker.

With regard to whether the injury arose during ETS’ “performance”, the court held that despite ETS’s argument that the injury arose from SpawGlass’s performance completely unrelated to the work that ETS and its employee were hired to perform, the injury occurred while all the parties were “engaged in the construction of a high school auditorium.”   Thus, the court concluded, “The claim asserted by Brian Sanders arises out of the performance of ETS’s contract with SpawGlass.  For these reasons, the appellate court reversed and remanded the trial court decision.

Comment

Based on the reasoning of this decision, it is important for parties that are negotiating indemnity provisions in contracts to carefully determine what they want to be indemnified and to craft the language to accomplish that.  As explained in this case, the “express negligence rule” that is applicable in most states means that if you want to be indemnified for your own negligence, you need to clearly state that intent in the contract.  The contract in this case accomplished that for the prime contractor.

It is also not uncommon to see language like that in the contract at issue here which states that the indemnity applies to injuries or damages arising out of “performance of the contract.”  This does not necessarily mean that the injury has to arise directly out of the performance of the work performed by the party that is the Indemnitor.  As explained in this case, just the fact that the worker was on the site because his employer was performing work for the primer under a contract was enough to trigger the indemnity obligation – and it didn’t matter whether the employee or his employer had anything to do with causing the plywood to blow off the roof.

If you want to limit the indemnity to apply only to damages and injuries caused by your own performance, you can clearly state this in the contract.  For example, if you are a design professional, you might state something to the effect that you will only indemnify the other party for damages “to the extent that they arise from the negligent acts, errors or omissions of the design professional.”   If you are a contractor, you might not be able to limit your indemnity to negligence based acts, but you might nevertheless limit your indemnity to apply only to damages “to the extent that they are caused” by you.

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 7, No. 5 (Sep 2005).

Copyright 2005, ConstructionRIsk.com, LLC