≡ Menu

Do indemnity obligations cover first-party claims, or only third-party claims?

The Supreme Court of Texas is considering whether to grant a petition for review to establish whether, in Texas, an indemnity provision covers only third-party claims, not first-party claims, unless the provision unequiv­oc­al­ly states otherwise. (This seems to be the case in some other states such as New York.) The case is Claybar v. Samson Exploration LLC, on appeal from a decision by the Texas Court of Appeals in Beaumont.

Mr. Claybar entered into a contract allowing Samson Exploration to drill for oil and gas on Claybar’s property.  An equipment failure allegedly caused damage to the property; Claybar alleged that the failure was due to neg­li­gence by Sam­son’s contractor, Kinder Morgan.  Claybar settled with Kinder Morgan, but kept going in his lawsuit against Samson, claiming that Samson was con­tract­ually required to indemnify Claybar for the attorney’s fees and costs that Claybar had incurred in pursuing his negligence claim.

As quoted by the court of appeals, the indemnity provision stated:

[Samson] shall indemnify [Claybar] against any claims, damages, demands, liabilities, and costs (including reasonable attorneys’ fees) to the extent arising from or related to the negligence or misconduct of [Samson] or its employees, agents, contractors, or invitees in the course of their exercise of rights granted by this instrument, but not to the extent caused by [Claybar], or its employees, agents, contractors, or invitees.

(Emphasis added.)  The appeals court, affirming summary judgment, held that:

The plain language of the indemnity provision does not show that the parties intended for Samson to indemnify Claybar for attorney’s fees and costs in pursuing claims against Samson and Kinder Morgan for damages to Claybar’s property.

If Samson and Claybar had intended to include claims between them, they would have had to specifically add such language to the Agreement.

We hold that there is no specific language in the Agreement that would overcome the general rule that indemnity agreements do not generally apply to claims between the parties to the agreement.

(Citations omitted, extra paragraphing added.)

The appellant’s brief and respondent’s brief in the Texas supreme court contain extensive citations.

It seems possible that the supreme court might deny the petition, because in another provision in the contract, Claybar granted a release for any damage caused to his property:

Except as otherwise set forth herein, the consideration paid hereunder includes payment for all damages to the Lands, and Grantor hereby acknow­ledges receipt and sufficiency of said payment as full and com­plete settlement for and as a release of all claims for loss, damage, or injury to property arising out of the operations contemplated hereunder.

(Quoted in Samson’s brief at 6; emphasis added.)

{ 0 comments… add one }

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.