The Houston [1st] Court of Appeals has held that an indemnity provision in a master contract between a refinery owner and a contractor did not impose a comparative indemnity obligation on the contractor. It thus reversed a $46 million judgment in favor of the owner.
Industrial Specialists, LLC v. Blanchard Refining Company LLC and Marathon Petroleum Company LP (No. 01-23-00704-CV; December 23, 2025) arose from a fire at Blanchard’s Galveston Bay Refinery that injured fifteen of Industrial’s employees, one of whom died from his injuries. The injured employees filed four separate suits, asserting negligence claims against Marathon and its other contractors (Marathon owns Blanchard Refining through a wholly-owned subsidiary, Blanchard Holdings). The employees’ suits were transferred to an MDL court for pre-trial proceedings, during which Industrial was designated as a responsible third party. Pursuant to an indemnity provision in the master contract between Blanchard and Industrial, Marathon demanded a defense and indemnity from Industrial. Industrial rejected the demand. Subsequently, Marathon and the other contractors collectively settled the employees’ claims for $104 million. The settlement included the contractors’ claims against each other, as well as Marathon’s indemnity claims against the contractors. Under the agreement, Marathon paid out $86 million of the total amount. As Industrial did not participate in the settlement, the settlement agreements excluded claims any party may have against Industrial and specified that Industrial was not a third-party beneficiary of the agreements.
Marathon filed a breach of contract action against Industrial, seeking to enforce the indemnity provision. Both parties moved for summary judgment, which the trial court denied. Prior to trial, the trial court issued three legal rulings under TRCP 166(g), the upshot of which was that the indemnity provision was enforceable. The case went to a jury, which apportioned liability to five parties, including Industrial (17%) and Marathon (38%). The trial court signed a final judgment awarding Marathon actual damages of $46,480,000, representing 38% of the amount Marathon paid to settle the case plus prejudgment interest and attorney’s fees. Industrial appealed.
In an opinion by Chief Justice Adams, the court of appeals reversed and rendered. Industrial argued that Marathon’s indemnity claim was barred by the express negligence doctrine. Marathon responded that the doctrine didn’t apply because Marathon didn’t seek indemnification for its own negligence, just that of other parties. Characterizing Marathon’s claim as “a form of ‘comparative indemnity’ that requires compliance with the express negligence doctrine, the court turned to the language of the indemnity provision. Here the contract required Industrial to indemnify Blanchard (Marathon) from all liabilities for bodily injury or death occurring in the performance of the work, “except to the extent the liability, loss or damage is attributable to and caused by the negligence of [Blanchard].” Noting that this provision does not “expressly state that Industrial will indemnity Marathon when Marathon’s concurrent negligence causes the liability,” the court turned to SCOTX’s decision in Ethyl Corp. v. Daniel Const. Co., 725 S.W.2d 705 (Tex. 1987), which held that “[i]ndemnitees seeking indemnity for the consequences of their own negligence which proximately causes injury jointly and concurrently with the indemnitor’s negligence must also meet the express negligence test.” Because the indemnity provision in Ethyl did not provide for contractual comparative identity, the court concluded that it did not meet the test.
Marathon tried to avoid Ethyl by arguing that the express negligence doctrine didn’t apply because the parties’ indemnity agreement “expressly excludes indemnification for Marathon’s own negligence—taking it out of the purview of the express negligence rule altogether.” Marathon offered up Gulf Masonry, Inc. v. Owens-Illinois, Inc., 739 S.W.2d 239 (Tex. 1981) in support of this proposition. The court disagreed. First, in Ethyl the indemnitee didn’t seek indemnification for its own proportionate share of the liability (90%) but only the injured employee’s 10%. But SCOTX ruled that Ethyl could not recover comparative indemnity because the indemnity provision didn’t expressly call for it. As to Gulf Insurance, the court observed that comparative indemnity wasn’t even an issue in the case.
Having established that the express negligence rule applied, the court ruled that the indemnity provision in question “contains no reference to comparative indemnity.” Though Marathon pointed to the exception as establishing the comparative indemnity obligation, the court stated, “there is [] no language in the exception clause expressly stating that Industrial is required to indemnify Marathon for Industrial’s (or anyone else’s) allocable share or portion of comparative faul in the event that the parties are concurrently negligent,” much less for Marathon’s own negligence. Put another way, the court intepreted “except to the extent” the loss was caused by Blanchard’s negligence to apply to Blanchard’s sole, joint, or concurrent negligence, not Marathon’s separate negligence. The court reversed the trial court’s judgment and rendered judgment for Industrial.
This decision will undoubtedly motivate owners and contractors to scrutinize their indemnity agreements, perhaps with unpleasant results. And given the rather significant amount of money hinging on the outcome one way or the other, we can reasonably expect an appeal to a higher authority.
