Background and Business Context

Blanchard Refining Company LLC owns and operates the Galveston Bay Refinery in Texas City. Industrial Specialists, LLC, a turnaround-services contractor, entered into a five-year Major Service Contract with Blanchard to provide turnaround services at the refinery. The contract included Marathon Petroleum Company LP as an affiliated company entitled to indemnification. Three years into the contract term, a fire occurred in a regenerator vessel at the refinery, injuring fifteen Industrial employees and one employee of another contractor, Certified Safety, Inc. One Industrial employee ultimately died from his injuries.

The Indemnity Dispute

The injured employees filed four separate negligence lawsuits against Marathon and other contractors, but not against Industrial (which was designated as a responsible third party). Marathon and the other contractors settled all personal-injury claims, with Marathon and Blanchard paying $86 million of the settlement amount. Blanchard and Marathon then sued Industrial for breach of contract, seeking to enforce the indemnity provision in Article 13.1 of the parties' contract. That provision required Industrial to "indemnify ... Company [and] its affiliated companies ... from and against all losses, damages ... and other liabilities ... because of ... bodily injury, including death ... except to the extent the liability, loss or damage is attributable to and caused by the negligence of Company." Following a jury trial that allocated percentages of responsibility among the various contractors and Blanchard/Marathon, the trial court awarded Blanchard and Marathon $46.48 million in actual damages—representing the $86 million settlement payment less the portion attributable to their own negligence.

The Court's Analysis

Chief Justice Adams, writing for the panel, framed the central question as whether "an indemnitee under a contractual indemnity agreement—who is sued with other defendants for negligence—[can] settle all of the plaintiffs' negligence claims and then recover from its indemnitor the portion of the settlement attributable to the other defendants under a comparative indemnity scheme." The court held that while such recovery may be possible in theory, the indemnity agreement must comply with the express negligence doctrine and expressly provide for comparative indemnity. The court emphasized that

"[t]he express negligence doctrine ... applies in all cases in which the indemnitee seeks to be indemnified for its own negligence, including instances where the indemnitee seeks to be indemnified on a comparative or proportional basis."

The court rejected the argument that the exception clause—which carved out liability "attributable to and caused by the negligence of Company"—implicitly authorized comparative indemnity by negative implication. Because the indemnity agreement did not expressly provide for comparative indemnity, the court reversed the trial court's judgment and rendered judgment that Blanchard and Marathon take nothing.

Practical Implications

This decision clarifies that Texas's express negligence doctrine applies not only to full indemnification of an indemnitee's own negligence, but also to proportional indemnification schemes. Parties drafting indemnity provisions who intend to permit comparative or proportional recovery must now include explicit language authorizing such arrangements. The decision underscores the importance of precise drafting in indemnity clauses, particularly in the oil and gas industry where multi-party incidents and complex allocation of fault are common.