The NAM filed an amicus brief in the Texas Supreme Court concerning the interpretation and enforceability of indemnity provisions in contracts between sophisticated commercial entities. In this case, the owner and operator of an oil refinery contracted with a large industrial contractor to perform specialty work. In the contract, the contractor agreed to indemnify the owner for losses or other liabilities due to bodily injury claims in connection with the contractor’s work. The owner was later sued after some of the contractor’s employees were injured. Although the owner reached a settlement with the injured workers, the contractor refused to participate in that settlement or honor its indemnity obligations. The owner filed suit, and the contractor moved for summary judgment, arguing that the owner had forfeited its contractual rights by settling with the workers. That motion was denied, and the instant interlocutory appeal followed.
Manufacturers consistently enter into contracts, like the general services agreement at issue in this case, with indemnification provisions governed under Texas law. The ability of sophisticated private parties to negotiate the allocation of risks and potential liability through contract is crucial to manufacturers’ business interests. The NAM’s brief argues that fundamental principles of contract law require Texas courts to honor the contractor’s express agreement to indemnify. The contractor’s position here would disrupt countless contracts between commercial parties and severely disincentive personal injury settlements, unnecessarily wasting judicial resources. Happily, on December 10, 2021, the court agreed to hear the case.