Express Negligence Rule: Everything You Need to Know
The express negligence rule requires all of the involved parties to specifically express intent to indemnify themselves in the signing of a contract.3 min read
The express negligence rule requires all of the involved parties to specifically express intent to indemnify themselves in the signing of a contract. All of this must be clearly spelled out within the contract itself. The specific requirements must be met for a party to have indemnity for its own acts of negligence, without which, the indemnity is considered invalid.
In construction, for example, indemnity has been used for quite awhile, as construction contracts have a tendency to flow risk downstream.
Express Negligence Rule in Texas
Before 2012, the Lone Star State was one of the few states was still without an anti-indemnity statute, but in 2011, the Texas legislature passed Chapter 151 of the Texas Insurance Code, also known as the Texas Anti-Indemnity Act. This statute has huge implications within the construction industry, as it essentially makes indemnity clauses unenforceable within construction contracts. However, there are some areas that are actually excluded from this statute.
There are actually 11 specific exclusions that are set forth in Texas. Some of them include:
- Residential construction contracts. So, homes, condos, apartments, townhouses, and the like are excluded from Chapter 151.
- Municipal construction contracts. As such, any public projects that are contracts with cities, towns, and other municipalities are exempt.
- Indemnity is not applicable in the case of death or injury. Should a party try to include language in the indemnity clause providing indemnity in such cases, it will not be upheld.
- It is not retroactive, meaning that only those contracts that were entered into after January 1, 2012, may benefit.
- Litigation pertaining to those cases before January 1, 2012, may continue.
Prior to the establishment of Chapter 151 in Texas, the enforceability of the indemnity clause was essentially dependent upon the form that was provided. Which, begs the question: what are the forms of indemnity?
Forms of Indemnity
There are three different forms of indemnity:
- Broad form indemnity, wherein the indemnitor agrees to indemnify the indemnitee for any liability.
- Intermediate form of indemnity is when the indemnitor is required to indemnify the indemnitee for all liability, even it was the indemnitee’s negligence that is responsible for any damages. However, if the indemnitee is solely responsible for said damages, then indemnity is not owed.
- Limited form indemnity exists when the indemnitor will indemnify the indemnitee only to the extent of his or her own negligence. The indemnitee’s negligence is not a factor in limited form indemnity.
If an indemnity clause is providing for broad form or intermediate form indemnity, then per common law, it is required to satisfy both of the two parts of the Fair Notice Doctrine, which are the express negligence rule and the conspicuousness test. It is the intent of the Fair Notice Doctrine that the indemnitor be put on notice that he or she is agreeing to indemnify the indemnitee as it pertains to negligence; specifically, his or her own negligence.
Additionally, the conspicuousness test dictates that the indemnity clause be visible on the face of the contract. The idea behind this being that it is then harder for one of the parties involved to make claim of never having seen it, if it is somewhere that any reasonable person would see it. This can be accomplished by using a different sized font (typically larger than what exists in the rest of the document), different style font, or using bold or italicized lettering.
Trend of Express Negligence Application
Currently, the application of the express negligence rule in Texas has been extended beyond that of past indemnifying individuals against their own negligence to include additional risks, including strict product liability claims and strict statutory liability in FELA claims.
You may be wondering if all of these requirements apply to all agreements.
One exception to the conspicuousness requirement pertains to extremely short documents. For example, if the indemnity clause is written in the same size font and style as the rest of the document, yet the document is quite short, then it could still be considered conspicuous if the indemnitor can reasonably prove that the indemnitee would have noticed and understood it. With that said, there is no clear guidance on the exact length a document must be to be considered short, although courts have given the previous example of a telegram being considered a short document. As such, it is best to err on the side of caution, and regardless of the length, make sure that the indemnity clause is clearly indicated with a different font or size than the rest of the document.
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