Construction Blog

If you build, own, or manage projects in Texas, your indemnity clause is no longer “boilerplate.” A recent Texas Supreme Court decision changes how settlements and risk-sharing work between project players, and it puts a premium on clear drafting so the risk you think you shifted actually sticks.

The Big Picture

In S&B Engineers & Constructors, Ltd. v. Scallon Controls, Inc., the Texas Supreme Court held that a party who settles injury claims can still go after a non-settling party for its fair share if the contract includes a comparative indemnity clause tying payment to that non-settling party’s percentage of fault.

The case actually resolved two separate questions that often get confused. Keeping them straight matters, because each one maps onto a different drafting decision you need to make in your contracts.

Question 1: Can You Settle and Still Sue for Reimbursement?

For years, there was an old Texas rule (from a 1987 case called Beech Aircraft v. Jinkins) saying that once you voluntarily settle with an injured plaintiff, you generally can’t turn around and sue a co-defendant for their share. That rule made sense for what lawyers call “contribution,” which is a statutory right the law gives co-defendants to split up a shared liability because statutory rights are narrowly defined.

But what if you have a contract that says exactly how losses get divided up? The Texas Supreme Court made clear that the old rule doesn’t apply to those bargained-for indemnity agreements. If your contract promises reimbursement tied to each party’s percentage of fault, you can settle the injured worker’s claim and still collect from the responsible party for it’s share of the liability.

The distinction matters because contribution is a rule the law imposes by default. Contractual indemnity is a deal you struck on purpose. Courts will enforce the deal you made.

Question 2: Does Your Clause Clearly Say What It Covers?

Texas has a separate, stricter rule (from another 1987 case, Ethyl Corp. v. Daniel Construction) called the “express negligence doctrine.” Under this rule, if you want the party you are contracting with to cover losses caused by your own negligence, your contract indemnification clause has to say so in clear, conspicuous terms. Hide-the-ball drafting won’t work.

This has nothing to do with settlements. It’s a drafting rule about the scope of the indemnification obligation, setting the boundaries on whose liabilities are covered in the first place. In Scallon, the Court confirmed that when a contract affirmatively says the indemnitor is not covering the indemnitee’s own negligence—only its own allocable share—the express negligence doctrine simply doesn’t come into play. There’s no risk of accidentally sweeping in the indemnitee’s fault because the contract has already ruled it out.

A Real-World Example From the Case

A Sunoco refinery accident injured seven workers after a fire suppression system discharged chemicals during a power outage. The system had been programmed by Scallon Controls, a subcontractor to S&B Engineers, the general contractor.

The injured workers sued Sunoco (the owner) and S&B (the GC), who together settled for $4.75 million. S&B and Sunoco’s insurer then went after Scallon under a subcontract clause that required Scallon to indemnify “to the extent of [Scallon]’s negligence,” limited to its “allocable share of comparative, concurrent and/or contributing negligence, fault or strict liability.”

The lower courts said no—citing both the old Jinkins settle-and-sue bar and the express negligence doctrine. The Texas Supreme Court reversed on both grounds. On Question 1, the Court said Jinkins is about default contribution rights, not contractual indemnity. Since the claims against Scallon were based on a contractual indemnity provision rather than the statutory right of contribution, Scallon could be pursued for reimbursement for its share of liability.  On Question 2, the Court found that the express negligence doctrine doesn’t block the claims against Scallon because the indemnification clause already disclaims coverage for S&B’s own negligence.

What You Still Have to Prove

This ruling isn’t a blank check. The settling party must still prove two things:

1. That the settlement amount was reasonable and made in good faith.
2. What portion of fault is fairly assigned to the party you’re seeking reimbursement from.

If the settlement was unreasonable, your recovery shrinks. If you can’t prove the non-settling party’s fault, you may recover nothing at all.

Why Contractors and Owners Should Care

Settlements no longer have to mean you eat someone else’s share. If your contract ties indemnity to comparative fault, you can settle with the injured party and still chase the responsible party for its percentage.

Sloppy indemnity language still costs real money. The two doctrines above could prevent a settling party from being able to enforce an indemnification obligation. A well-drafted clause handles both. It uses comparative-fault language (so settlements don’t cut off your recovery) and it’s clear about whose fault is covered (so the express negligence doctrine doesn’t trip you up).

Practical Takeaways You Can Use Today

1. Say “to the extent of negligence” and link it to allocation. Use clear wording that each party covers losses to the extent of its own negligence or fault, and that any reimbursement is limited to that allocable share.
2. Be explicit about whose negligence is (and isn’t) covered. If you don’t intend to be indemnified for your own negligence, say so plainly. That clarity keeps the express negligence doctrine from becoming a problem. If you do intend the other side to cover your negligence, the language has to be conspicuous and specific.
3. Build a process for figuring out “allocable share.” After a loss, someone has to determine percentages of fault. Spell out who investigates, what evidence counts, and how disputes get resolved.
4. Preserve proof of reasonableness. Because you must show the settlement was reasonable, require documentation (e.g. bids, injury valuations, expert reports, and claims notes that support the settlement amount).
5. Align indemnity with insurance. Get insurance that matches the indemnity promise on limits, additional insured status, and primary/non-contributory language, so coverage is there when allocation points to your counterparty.
6. Use examples in the contract. Spell out that if Subcontractor is 30% at fault, it owes 30% of the settlement and defense costs, and that the parties will exchange data needed to calculate that share.

A Simple Analogy

Think of a jobsite mishap like a restaurant tab split among friends who agreed up front to pay only for what each ordered. One friend can pick up the whole bill to keep the evening moving, then collect the exact amounts from the others later. That’s the settle-and-sue piece.

Now consider, before anyone orders, the group agrees in writing that nobody has to pay for somebody else’s steak. That written understanding is the express negligence piece. It defines what’s covered, so there’s no argument later about whether the salad-eater has to chip in for the ribeye.

Two different rules, working together, protecting the deal the parties made.

Bottom Line

The Texas Supreme Court’s decision encourages owners, contractors, and insurers to settle third-party claims without losing the right to recover a proportional share from non-settling parties who share fault. But the decision was a close 5–4 split, and the settling party still carries the burden of proving both a reasonable settlement and the indemnitor’s allocable fault. As such, it is always prudent to seek the advice of experienced counsel to better protect your rights and interests.