First Court Of Appeals Decision Broadly Applies Express Negligence Doctrine

Contracting parties operating in Texas are no doubt mindful of the express negligence rule: If the contracting parties intend to indemnify a party for the consequences of its own negligence, they must specifically and expressly say so in the contract. But when the indemnified party is only one of several players found negligent, application of the express negligence doctrine becomes less straightforward. The First Court of Appeals' recent decision in Industrial Specialists, LLC v. Blanchard Refining Company LLC highlights that potential complexity in comparative-negligence scenarios and serves as a warning that Texas courts may apply the express negligence rule more broadly than many contract drafters may think.

Refinery Fire and Settlement

Blanchard Refining Company LLC contracted with Industrial Specialists, LLC for turnaround services at Blanchard's refinery. Blanchard is an affiliate of Marathon Petroleum Company LP (like in the decision, Blanchard and Marathon are referred to collectively here as "Marathon"). The contract's indemnity provision required Industrial (as Contractor) to indemnify Marathon (as Company) for losses relating to the contract, except for losses caused by Marathon's negligence:

A fire at the refinery ultimately injured more than a dozen Industrial employees and killed one. The injured employees sued Marathon and several of its contractors, though they did not sue Industrial given the workers-compensation bar. Marathon and its co-defendants settled the claims for $104 million, of which Marathon paid $86 million.

Marathon then sued Industrial to enforce the indemnity agreement, seeking to recover much of what it paid to settle the underlying personal-injury lawsuits. A jury found that several companies' negligence caused the fire and assigned percentages of responsibility to each negligent company:

The trial court accordingly awarded Marathon $46.48 million against Industrial under the indemnity agreement, representing the amount Marathon paid to settle the personal-injury suits ($86 million), minus the portion of the liability the jury attributed to Marathon's negligence (38% of $104 million, or $39.52 million). Industrial appealed.

The First Court of Appeals Applies the Express Negligence Rule

On appeal, Industrial argued that the express negligence doctrine barred Marathon's indemnity claim. Marathon countered that "(1) Marathon is not seeking indemnification for its own negligence, and (2) the parties' contract explicitly excludes indemnification for Marathon's own negligence—taking it out of the purview of the express negligence doctrine."

Agreeing with Industrial, the court held (a) the express negligence doctrine applied and (b) the indemnity provision did not comply with it.

First, the court held that the express negligence doctrine applied because Marathon was seeking indemnity for a settlement resulting from Marathon's own negligence. The court relied on the Texas Supreme Court's 1987 decision in Ethyl Corp. v. Daniel Construction Co., which held that "[i]ndemnitees seeking indemnity for the consequences of their own negligence which proximately causes injury jointly and concurrently with the indemnitor's negligence must also meet the express negligence test."

Second, the court held that the language in the indemnity provision was not sufficiently specific to satisfy the express negligence doctrine. The court reasoned that the contract language—that Industrial would indemnify Marathon "except to the extent the liability, loss or damage is attributable to and caused by the negligence of [Marathon]"—did not expressly create a comparative indemnity scheme. Instead, the court read this provision as an "exclusion from liability for indemnification" where the loss was "caused by any negligence—sole, joint, concurrent, or otherwise—of Marathon."

According to the court, "if the parties had intended to limit the exception to Industrial's indemnity obligation to just 'the degree of Marathon's separate negligence'—and provide for a comparative indemnity scheme—they would have expressly said so by including those words in their indemnity agreement." The court did not specifically address the "attributable to ... the negligence of Company" language as a possible reference to Marathon's separate negligence.

Having found the indemnity agreement unenforceable, the court rendered judgment that Marathon take nothing from Industrial.

Potential Implications for Contracting Parties

Industrial Specialists illustrates that the express negligence doctrine applies even if the indemnified party was only one of multiple negligent parties. Under the court's reasoning, a negligent indemnitee with only 1% fault would lose its ability to enforce the indemnity unless the indemnity agreement satisfied the express negligence doctrine.

Further appellate review in Industrial Specialists, including by the Texas Supreme Court, seems likely. Nevertheless, contracting parties should be mindful of the potentially broad sweep of the express negligence doctrine. If parties intend for an indemnity agreement to apply when the indemnified party bears partial fault for an injury—in other words, in comparative-negligence scenarios—Industrial Specialists indicates they must clearly and expressly say so in the indemnity provision, including, for example, through the explicit use of comparative-fault language.

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