How will the Texas indemnity statute impact waivers of subrogation?  Waivers of subrogation are never mentioned in the statute.  That's true.  So, the new law should have no impact, right?  Well, before we explore that question, let's do some "site work."

What is a waiver of subrogation anyway?  Subrogation is a fancy legal term for "substituting one person for the rights of another."  You are essentially "stepping into the shoes" of someone else.  The person doing the subrogating gets the legal rights of the other person.  We see this most often in the insurance context.  Let's say your car gets damaged, but the other driver is unwilling to pay for the damage.  Your insurance carrier may pay your damages, but the carrier will have rights of subrogation.  They can go after the at fault driver with or without your help because they have "stepped into your shoes."  

However, if you had a contract with the other driver that waived your rights of subrogation, your insurance carrier would not be able to subrogate your rights due to that waiver.

Apply this to a construction site.  The general contractor may have obtained an indemnity from the subcontractor that obligates the subcontractor to "indemnify, hold harmless, and defend" the general contractor from any and all claims.  He may also want the subcontractor to waive his subrogation rights because he does not want the insurance carrier to come after him should the subcontractor have an insured loss.  Indeed, the waiver of subrogation requirements are usually found separate and apart from the indemnity provisions of any given subcontract (usually, in the "insurance" section).

This is a "belts and suspenders" approach because the indemnity provision already contains a promise to "hold harmless" the general contractor.  Thus, any insurance carrier wanting to subrogate a claim against a general contractor will be "in the shoes" of the subcontractor and bound to that promise to hold harmless.  

So, what impact, if any, will the new Texas indemnity statute have on these waivers?  If the waiver is the suspender to the indemnity's belt, it would seem that the waiver is now even more important, right?  If your belt goes, you want to keep your suspenders, lest your pants end up around your ankles.  I think the answer to the question of "boxers or briefs" should be a private one.  

Let's read the indemnity statute closely:

a provision in a construction contract, or in an agreement collateral to or affecting a construction contract, is void and unenforceable as against public policy to the extent that it requires an indemnitor to indemnify, hold harmless, or defend a party, including a third party, against a claim caused by the negligence or fault, the breach or violation of a statute, ordinance, governmental regulation, standard, or rule, or the breach of contract of the indemnitee, its agent or employee, or any third party under the control or supervision of the indemnitee, other than the indemnitor or its agent, employee, or subcontractor of any tier.

The language applies to more than just the duty to indemnify.  It also makes void and unenforceable any promise to hold harmless a "party, . . . against a claim caused by the negligence . . . of the indemnitee."

Wouldn't this also encompass waivers of subrogation?  What is a waiver of subrogation if not a promise to "hold harmless?"  So, does the indemnity law also prohibit a waiver of subrogation to the extent it would bar recovery from an at-fault indemnitee (i.e., general contractor)?

This is an interesting question.

Of course, the statute makes an exception for employee claims:

Section 151.102 does not apply to a provision in a construction contract that requires a person to indemnify, hold harmless, or defend another party to the construction contractor a third party against a claim for the bodily injury or death of an employee of the indemnitor, its agent, or its subcontractor of any tier.

What does all this mean?

If waivers of subrogation are something separate and distinct from promises to hold harmless, the Texas indemnity statute will not make them void and unenforceable in any case.  Thus, waivers of subrogation will be extremely important to Texas general contractors.  In any claim, it will ensure that insurance carriers for subcontractors cannot sue them directly to recover damages.  

If waivers of subrogation are found void and unenforcable under the new Texas indemnity statute, general contractors need to be aware that subcontractor insurance carriers will have an interest in any general liability or auto liability claim filed by the subcontractor.

Regardless of how the statute impacts waivers of subrogation, they are still applicable in the context of employee claims (due to the employee claim exception).  Thus, the workers' compensation carrier paying the claim for the subcontractor employee will still be subject to any waiver of subrogation (and hold harmless) that is a part of the contract documents.

Also, prepare to live with this ambiguity for an extended period of time.  It may take years to get any regulation or case law addressing the question.  Talk with your counsel about how to treat the waiver of subrogation in your contracts.  Please don't send the Dec Page the bill!   

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