Federal Court Says Texas Anti-Indemnity Law Does Not Prohibit All Additional Insured Obligations – Insurance

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United States: Federal Court Says Texas Anti-Indemnity Law Does Not Prohibit All Additional Insured Obligations

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A Texas federal court has ruled that the section of the Texas Anti-Indemnity Act voiding additional insured status applies only to the extent that a putative additional insured seeks coverage for its own negligence. Knife River Corporation-South v Zurich American Insurance Company, CA no. 3:21-cv-1344-B, 2022 US Dist. LEXIS 40409 (ND Texas, March 8, 2022).

A driver lost control of his car in a highway construction zone, crashed and was injured. He and his wife went on to allege that the defendants failed to properly backfill, slope or otherwise secure an excessive height difference at the edge of a roadway and failed to place warning signs alerting the public to the danger. The contractor settled and sued its subcontractors and their insurers, alleging that the settlement “was necessitated by and resulted, in whole or in part, from the negligence” of its subcontractors. The contractor sought defense and indemnification based on its additional insured status and the contractual indemnification obligations of its subcontractors. He argued that the discovery established that the subcontractors contractually assumed full responsibility for all project tasks related to signage and had placed the signage without the contractor’s permission and refused to remove it despite the contractor’s requests. One subcontractor and its insurers reached an agreement with the contractor regarding defense and indemnification obligations, but not the second subcontractor and its insurers. The insurers of the subcontractor remaining responsible for the signaling requested the dismissal of the lawsuit against this subcontractor on the grounds that, among others, that additional insured status of the contractor is prohibited by the Texas Anti-Indemnity Act. The insurers argued that the underlying claim did not allege negligence on the part of the subcontractor for which the contractor could be held liable because it contained no allegation that the contractor was liable for others from the actions of the subcontractor, who acted independently, and that his contract with the contractor provided that the contractor “will install and move the paving panels as required”. The insurers therefore argued that any negligence based on the signage was that of the contractor and that the contractor’s settlement should relate to the contractor’s own negligence, so that any compensation due is based on the contractor’s own negligence. the contractor, which is prohibited by the Texas Anti-Compensation Act.

The court, however, relying on allegations in the underlying motion that “[d]”the defendants are jointly and severally liable for the acts and/or omissions of [their] respective agents … and/or representatives by … principles of vicarious liability”, and that the subcontractor’s policies clearly stated that coverage (for additional insureds) or indemnification is not available that to the extent the injury resulted from the subcontractor, not the contractor, negligence, found no violation of law.

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