Ethyl Corp. v. Daniel Construction Co.
99 Oil & Gas Rep. 438, 725 S.W.2d 705, 30 Tex. Sup. Ct. J. 255 (1987)
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Rule of Law:
For an indemnity provision to obligate an indemnitor to indemnify an indemnitee for the consequences of the indemnitee's own negligence, the contract must expressly state that intent in specific terms within the four corners of the agreement.
Facts:
- Ethyl Corporation (owner) contracted with Daniel Construction Company (contractor) to construct tie-in lines for aluminum alkyls, a highly volatile substance.
- The contract stipulated that Ethyl was responsible for purging the existing lines of the substance before the work began.
- The contract also required Daniel to remove all valve handles from the existing lines as an additional safety measure.
- Ethyl failed to purge the lines as required.
- Daniel failed to remove the valve handles as required.
- Donald Metcalf, a Daniel employee, was severely burned when alkyls escaped from a line and ignited during the construction work.
- The contract contained a provision stating Daniel would indemnify Ethyl for any loss 'caused by the negligence or carelessness of Contractor, Contractor’s employees...'
Procedural Posture:
- Donald Metcalf sued Ethyl Corporation in a Texas trial court for personal injuries.
- Ethyl Corporation filed a third-party action against Daniel Construction Company, seeking contractual indemnity.
- A jury in the trial court found Ethyl 90% negligent and Daniel 10% negligent.
- The trial court entered a judgment granting indemnity to Ethyl.
- Daniel Construction Company, as appellant, appealed to the court of appeals.
- The court of appeals reversed the trial court's judgment, holding Daniel was not required to indemnify Ethyl.
- Ethyl Corporation, as petitioner, appealed to the Supreme Court of Texas.
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Issue:
Does an indemnity provision that requires a contractor to indemnify an owner for losses 'caused by the negligence... of Contractor' require the contractor to indemnify the owner for the owner's own concurrent negligence when the provision does not explicitly state that intent?
Opinions:
Majority - Justice Wallace
No. An indemnity provision does not cover the indemnitee's own negligence unless that intent is specifically and expressly stated in the contract. This case abandons the 'clear and unequivocal' test in favor of the 'express negligence doctrine.' The court reasoned that the prior test encouraged ambiguous drafting and led to excessive litigation to interpret unclear provisions. The express negligence doctrine provides a brighter line: parties must state their intent to indemnify for the indemnitee's own negligence in specific terms within the four corners of the contract. The language in the contract at issue, which limits indemnity to losses 'caused by the negligence... of Contractor,' does not expressly state an intent to cover Ethyl’s own negligence. Therefore, Daniel is not required to indemnify Ethyl for a loss that was found to be 90% Ethyl's fault.
Analysis:
This landmark decision fundamentally altered Texas indemnity law by replacing the subjective 'clear and unequivocal' test with the objective 'express negligence doctrine.' This holding significantly raises the bar for enforcing provisions that shift liability for a party's own negligence, requiring drafters to be explicit and unambiguous. The ruling aims to protect indemnitors from unknowingly assuming liability for an indemnitee's fault and has since forced contracting parties in Texas to use highly specific language (e.g., 'including the indemnitee's own negligence, whether sole or concurrent') to ensure such provisions are enforceable.
