The Fifth Circuit Court of Appeals recently considered whether an insurer must cover a subcontractor’s contractual obligation to indemnify the contractor for the contractor’s negligence. XL Specialty Ins. Co. v. Kiewit Offshore Services, Ltd., No. 06-41785 (5th Cir. Jan. 2, 2008). The subcontractor’s employee was killed at a job site explosion while welding in an unventilated area. The employee’s family sued the subcontractor and contractor for negligence. The contractor demanded that the subcontractor’s insurer defend and indemnify it as an additional insured based on the indemnification provision in the contract. The insurer refused and filed a declaratory judgment action. The district court held the insurer must provide coverage for the subcontractor’s contractual duty to indemnify.
The Fifth Circuit noted that under Texas law, an agreement to indemnify another party for the consequences of that party’s own negligence is valid if there is an express intent in specific terms. The rule was strictly applied because it was an extraordinary shifting of risk.
The contract at issue provided that the subcontractor would defend and indemnify the contract whether or not caused by the negligence of the contractor. The court determined this provision was valid under Texas law. Therefore, the insurer had to provide coverage for the contractual indemnity obligation to the contractor.
Hawaii law apparently differs from Texas law regarding securing indemnification for one’s own negligence. Under Hawaii law, an indemnitor may not indemnify an indemnitee for the sole negligence of the indemnitee. See Kole v. AMFAC, Inc., 69 Haw. 530 (1988) (interpreting Haw. Rev. Stat. 431:10-222).
