Authored by Donald Dinnie and Luyanda Hlongwane.
In October 2025 the Supreme Court of Texas confirmed that a party who settles a third party’s damages claim may enforce a contractual right to proportional indemnification against a non-settling joint wrongdoer, provided the contract allows it and the required proof of fault is met.
Following a workplace accident, injured workers brought claims against the contractor and project owner, all of which claims were settled. The contractor and its insurer then sought to recover part of the settlement from a subcontractor, relying on an indemnity clause in their contract. The subcontractor argued that the settlement revoked any right to indemnification because the subcontractor was not part of the settlement.
The court rejected that argument stating that contribution between joint wrongdoers does not apply to contractual indemnity. Contribution arises from statute or common law, while indemnity obligation in this case arose from a negotiated agreement between the parties. The court emphasised that parties are free to allocate risk through contracts, including agreeing to proportional indemnification based on each party’s share of fault.
The court further addressed the “express negligence” doctrine. This rule requires that a contract must clearly state if a party is to be indemnified for its own negligence. The contract expressly excluded indemnification for the contractor’s own negligence and limited recovery to the subcontractor’s “allocable share” of fault. The court found that this satisfied the legal requirement for a right of action and allowed the indemnity claim to proceed.
The court made it clear that a settlement with the claimant does not automatically determine liability between contracting parties. A settling party must still prove that another party was partly responsible for all or part of the loss in order to recover that portion of the loss.
For policyholders and insurers, this judgment underscores that, while a properly drafted indemnity clause may afford significant protection, it does not automatically entitle the settling party to be indemnified by a joint wrongdoer. Successful recovery claims are contingent on precise wording as well as the ability to establish fault and reasonableness of the indemnified claim.
S&B Engineers & Constructors, Ltd. V. Scallon Controls, Inc.