Order from the Courts: A Uniform Approach Begins to Emerge on the Texas Anti-Indemnity Act’s Effect on an Additional Insurer’s Duty to Defend
Dallas attorneys Travis Brown and Sam Crecelius authored an article for the December edition of Construction News examining how Texas courts are clarifying the Texas Anti-Indemnity Act’s impact on an additional insurer’s duty to defend. Recent cases show a consistent approach emerging: courts first determine whether indemnity and insurance provisions comply with the TAIA, and when they do, insurers cannot avoid their duty to defend simply because the allegations may implicate the additional insured’s own negligence. Travis and Sam conclude by encouraging contractors to review their indemnity and insurance provisions, as well as their additional insured endorsements, to ensure TAIA compliance.
The Texas Legislature passed Subchapter C of Chapter 151 of the Texas Insurance Code, the Texas Anti-Indemnity Act (the “TAIA”), effective January 1, 2012, which applies exclusively to “construction contracts,” as that term is defined in the statute. Broadly speaking, Section 151.102 of the TAIA voids indemnity provisions to the extent they require an indemnitor to defend or indemnify an indemnitee for the indemnitee’s own negligence or fault. Unlike previous anti-indemnity statutes, such as the Texas Oilfield Anti-Indemnity Act, the TAIA also expressly prohibits additional insured coverage, “the scope of which is prohibited under [Section 151.102].”
Before the TAIA, a carrier’s duty to defend a party seeking additional insured coverage was determined by two questions: (1) is the party an additional insured under the policy based on the additional insured requirements in the construction contract and the provisions in the insurance policy addressing additional insured status; and (2) if so, is there even a single allegation in the pleading that potentially states a claim covered under the policy? If the answer to both questions was ‘yes,’ the CGL carrier owed the additional insured a defense against the entire lawsuit.
However, following the passage of the TAIA, with its prohibition on “additional insured” coverage for the additional insured/indemnitee’s own fault, many insurers argued that rather than having to defend the entire lawsuit if there was a single covered allegation, they were now entirely relieved of their duty to defend (even covered allegations) if there was a single allegation for which providing a defense or indemnity would violate the TAIA.
Until recently, there was little guiding case law to resolve this recurring dispute. However, a recent series of Texas federal district court cases has clarified the issue. A uniform approach emerges from these cases, in which courts first evaluate whether the contractual-indemnity and additional insured provisions comply with the TAIA. If they do, courts readily find a duty to defend the entire suit, irrespective of any allegations of the additional insured’s own fault for which, standing alone, a defense would be prohibited under the TAIA.
The first of these cases, BNSF Railway Co. v. Jones Lang Lasalle Americas, Inc. (N.D. Tex. Feb. 24, 2022), was not an additional insurance case. But the Court expressly rejected the indemnitor’s more moderate argument that, because of the TAIA, rather than a defense to the entire lawsuit, the indemnitor could only owe a defense to those claims involving the indemnitor’s own negligence. The court disagreed, noting that if the underlying complaint “includes even one covered claim, the insurer must defend the entire suit.”
In Knife River Corp. – S. v. Zurich American Insurance Co. (N.D. Tex. Mar. 8, 2022), decided a few weeks later, the court did not specifically address the issue of whether the duty to defend applied to the “entire lawsuit,” but the court did establish the proper order of the analysis, evaluating the issue of compliance with the TAIA before turning to an “eight corners” analysis of the allegations in the pleadings.
In Phoenix Insurance Co. v. Knife River Corp. S. (S.D. Tex. July 27, 2023 & Sept. 11, 2023), the court adopted this same order of the analysis. Id. (citing Knife River and following that court’s approach of “assessing whether insurance policy violated TAIA prior to conducting the duty to defend analysis.”). That case tied the concepts from BNSF and Knife River together, first evaluating whether the contract provisions complied with the TAIA and, finding that they did, holding that there was a duty to defend the entire lawsuit in the face of mixed allegations of both the indemnitor’s and indemnitee’s negligence.
At first glance, the most recent case, Allied World Assurance Co. (U.S.) Inc. v. Acadia Insurance Co. (E.D. Tex. Sept 9, 2024) would seem to contradict the cases above and revive the argument that a single allegation of the indemnitee’s negligence excuses the additional insurer from its defense obligation. The court appeared to reference an insurer’s duty to defend “the entire suit” as a basis for holding that there could be no duty to defend when there were allegations of the additional insured’s fault. But in fact, the court analyzed in the same order as the cases above, first finding the additional insured provision invalid because it provided coverage for bodily injury “caused, in whole or in part, by” the indemnitor’s negligence—meaning it expressly provided coverage for bodily injury that was also caused in part by the indemnitee’s negligence, violating the TAIA.
Considering these recent opinions, general contractors building in Texas should evaluate the indemnity and insurance provisions of their subcontracts to ensure compliance with the TAIA. They might also consider adding language to those insurance provisions requiring additional insured endorsements, which the Insurance Services Office has recently explicitly promulgated to comply with various state anti-indemnity acts, such as the TAIA.
About the Authors
Travis Brown leads the firm’s Insurance Coverage and Risk Management practice group and serves as Managing Principal of the Dallas office. With more than a decade of experience, he helps clients ensure carriers meet their obligations. Travis represents contractors, owners, subcontractors, and energy-sector clients in complex coverage disputes and has secured significant multi-million-dollar recoveries across a wide range of claims. If you have any questions regarding the Texas Anti-Indemnity Act or a related legal inquiry, Travis can be contacted via email at TBrown@CokinosLaw.com.
Sam Crecelius is a key member of Cokinos | Young’s Dallas office whose practice includes coverage, construction defect, commercial, and premises liability litigation. A decorated U.S. Army combat veteran, Sam brings discipline, perseverance, and real-world experience to every stage of litigation, from mediation to trial and appeal, and works diligently to achieve favorable outcomes for his clients. If you have any questions regarding the Texas Anti-Indemnity Act or a related legal inquiry, Sam can be contacted via email at SCrecelius@CokinosLaw.com.
About Cokinos | Young
Cokinos | Young has led Texas construction and real estate law for over three decades. And today, our 100+ dedicated professionals operate coast to coast and proudly handle all aspects of construction law for owner/developers, project managers, general contractors, design professionals, subcontractors, sureties, and lenders. We provide both dispute resolution and transactional services to clients through all phases of commercial, industrial, pipeline, offshore, civil, and residential construction. Our reputation was built on relentless commitment to client service and the industries we serve, and that remains our primary driver. Dedicated. Resilient. Expertise. That’s Cokinos | Young. Learn more at cokinoslaw.com.