Why Businesses That Utilize Contractor Services Must Be Cognizant of How the Texas Construction Anti-Indemnity Act Is Applied


The Texas Anti-Indemnity Act was added to the Texas Insurance Code effective as of January 1, 2012, but since then, there have been many questions regarding how the act is applied and who needs to be cognizant of its application. The term construction is not as important as originally believed, with many contractual agreements for services, equipment, and materials falling under the act without having direct ties to construction. We dive into why businesses that utilize contractor services must be cognizant of how the Texas Construction Anti-Indemnity Act is applied.

An Overview of the Texas Anti-Indemnity Act

Added as Subchapter C of Chapter 151 of the Texas Insurance Code, the Texas Anti-Indemnity Act limits and prohibits certain actions in relation to liability exposure, indemnity agreements, insurance provisions, and construction law. Businesses that use contractor services often utilize indemnification clauses in contracts, which control who is liable when claims, losses, or damages arise from mistakes or negligence on the job site.

For example, prior to the Act, a general contractor (the indemnitee) could have a broad form indemnity clause in their contracts stating that whenever anything went wrong on the job site, their subcontractor (the indemnitor) would be responsible for covering any associated claims, losses, damages, and legal fees incurred by the indemnitee.

The Act prohibits broad-scope indemnity clauses in construction contracts, stating they are now void and unenforceable. It also prohibits provisions requiring additional insurance coverage from indemnitors as a way to work around anti-indemnity laws. The intention of this is that both the indemnitor and indemnitee will take appropriate responsibility for issues arising from their work and working conditions.

This has significantly affected the way businesses write contracts under the Texas law. Businesses in Texas that work with contractors need to know how the Act applies to them, whether or not they are directly in the construction industry. For assistance evaluating contracts and managing risk and litigation, Texas businesses should consider working with an experienced business lawyer.

Construction Contract Defined

The Texas Construction Anti-Indemnity Act defines the term “construction contract” in a broad sweep that many businesses have failed to understand. The term construction refers not just to new construction but also to remodeling, maintaining, or repairing property. Contracts related to this definition of construction include owners, architects, engineers, contractors, construction managers, subcontractors, suppliers, and more.

Construction refers to any subsequent work done on a real property, including remodeling, maintenance, and repair. This means the Act can relate to anything from property management to yard work services. It also applies to material or equipment leasing for the design, construction, alteration, renovation, remodeling, repair, or maintenance, including moving, demolition, and excavation.

If you are a business that hires contractors on a regular basis, be sure to contact your business contract lawyer to verify you meet the standards set by the Construction Anti-Indemnity Act in Texas. Protecting your organization from litigation can be vital to a business surviving after an accident on a worksite. At MehaffyWeber, our business litigation attorneys have decades of trial experience and successful litigation which has helped our clients achieve optimal results.

Conforming to the Texas Construction Anti-Indemnity Act

Understanding and conforming to the Texas Anti-Indemnity Act can help avoid unenforceable contract terms, increased liability, and costly litigation. Businesses must understand how to avoid the restrictions on indemnity agreements and how to draft contracts that comply with the Act and protect their company’s best interests. Effective risk management requires careful drafting of contracts to ensure they align with the Act, thereby minimizing potential legal and financial exposure.

Businesses need to review current insurance arrangements, especially those that involve owner-controlled insurance policies and contractor insurance. Reviewing contracts so that any indemnity clauses involve precise and detailed language will help ensure that they are enforceable and do not fall under the “broad indemnity” that the Act has made null and void. Regularly reviewing your contracts and contractor relationships with legal professionals can help make sure that you remain compliant and protected.

Despite the act having been in place for over ten years, businesses are still learning how to adapt and protect themselves properly. Getting help from a team experienced in business law can help you get your questions answered. In addition, they will help you ensure that your business has the best protection in place to account for this significant shift in risk and liability.

Exceptions to the Texas Anti-Indemnity Act

The Anti-Indemnity Act provides a few exceptions to these restrictions. One important exception is for a claim for bodily injury or death of an employee of the indemnitor or a subcontractor of any tier. Eleven other exclusions apply in the Texas Anti-Indemnity Act; some include:

  • Workers’ Compensation Laws: The benefits and protections provided under Texas workers’ compensation laws
  • Copyright Infringement Claims: Indemnity provisions related to claims based on copyright infringement
  • Construction Contracts: Indemnity provision in a construction contract, or in a related agreement, concerning:
    • A single-family house, townhouse, duplex, or related land development
    • A public works project of a municipality
  • Joint Defense Agreements: Any joint defense agreement entered into after a claim is made
  • Railroad License Agreements: License agreements between a railroad company and an individual that permit access to the railroad’s property for work covered by a construction contract that does not benefit the railroad company primarily

Another important point is that all contracts related to residential projects are excluded from the definition of “construction projects” under this Act. This means indemnity agreements in residential construction contracts are not subject to the same restrictions as those in other types of construction projects.

Get Help With the Texas Construction Anti-Indemnity Act From an Experienced Business Lawyer at MehaffyWeber Today

If you run a Texas-based business and use contractors, reach out to one of our experienced business law attorneys. Their legal expertise, especially with regards to construction defense law, is sure to be of assistance. With guidance from a legal professional, you can learn how to best protect yourself from liability and meet the requirements of the Texas Anti-Indemnity Act. Contact the team at MehaffyWeber and get your questions answered today.