What is an indemnity agreement?

INDEMNITY DEFINED

Legally speaking: What is indemnity all about?

“An indemnity agreement is a promise to safeguard or hold the indemnitee harmless against either existing and/or future loss liability” and provides the indemnitee with a cause of action to recover against the indemnitor. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex. 1993).

Most contract provisions involve a certain degree of risk-shifting, but some provisions involve such an “extraordinary shifting of risk” that courts impose additional fair notice requirements to make the provision enforceable. Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 387 (Tex. 1997); Dresser, 853 S.W.2d at 508; Amtech Elevator Serv. Co. v. CSFB 1998-P1 Buffalo Speedway Office Ltd., 248 S.W.3d 373, 377 (Tex. App.—Houston [1st Dist.] 2007, no pet.).

The fair notice requirements are (1) the express negligence doctrine and (2) the conspicuousness requirement. Amtech Elevator Serv., 248 S.W.3d at 377.

Express negligence doctrine

The express negligence doctrine dictates that a party’s intent to be released or indemnified from its own future negligence must be clear and unambiguous. Green Int’l, 951 S.W.2d at 386.

Conspicuousness requirement

The conspicuousness requirement means that “something must appear on the face of the [contract] to attract the attention of a reasonable person.” Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190, 192 (Tex. 2004) (quoting Dresser, 853 S.W.2d at 508)).

The fair notice requirements apply when “one party exculpates itself from its own future negligence.” Green Int’l, 951 S.W.2d at 387; DDD Energy, Inc. v. Veritas DGC Land, Inc., 60 S.W.3d 880, 885 (Tex. App.—Houston [14th Dist.] 2001, no pet.) (holding fair notice does not apply “where an indemnitee is seeking indemnification from claims not based on the negligence of the indemnitee.”). In DDD Energy Inc., the indemnity clause required each contracting party to indemnify the other for its individual negligence resulting from claims by a third party. DDD Energy, 60 S.W.3d at 884. Nothing in the indemnity clause shifted responsibility for DDD Energy’s negligence onto the other contracting party. Id. The court of appeals affirmed summary judgment and held that the fair notice requirements identified in Dresser are limited to claims for indemnity based on the indemnitee’s own negligence. Id. at 885. See also English v. BGP Int’l, Inc., 174 S.W.3d 366, 375 (Tex. App.—Houston [14th Dist.] 2005, no pet.).


SOURCE: Houston Court of Appeals - 01-10-00489-CV 7/28/11