Chevron Oil Co. v. E. D. Walton Const. Co., Inc.

• Court: U.S. Court of Appeals — Fifth Circuit
• Writing for the Court: Before WISDOM, SIMPSON and RONEY; RONEY
• Citation: Chevron Oil Co. v. E. D. Walton Const. Co., Inc., 517 F.2d 1119 (5th Cir. 1975)
• Decision Date: 22 August 1975
• Docket Number: No. 74-3067,74-3067
• Parties: CHEVRON OIL COMPANY, Plaintiff-Appellant, v. E. D. WALTON CONSTRUCTION COMPANY, INC., Defendant-Appellee.

Page 1119

517 F.2d 1119

CHEVRON OIL COMPANY, Plaintiff-Appellant, v. E. D. WALTON CONSTRUCTION COMPANY, INC., Defendant-Appellee.

No. 74-3067.

United States Court of Appeals Fifth Circuit.

Aug. 22, 1975.

Donald M. Hunt, Bernard P. Evans, Lubbock, Tex., for plaintiff-appellant.

John P. Camp, Ft. Worth, Tex., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before WISDOM, SIMPSON and RONEY, Circuit Judges.

RONEY, Circuit Judge:

This Texas diversity case presents a single question of contract construction: whether a contractor is contractually obligated to indemnify an owner for payments for injuries to the contractor's employee resulting from the sole negligence of the owner. Under applicable Texas law, a contract of indemnity will not afford protection to the indemnitee against the consequences of its own negligence, unless the contract clearly expresses such an obligation in unequivocal terms. Fireman's Fund Insurance Co. v. Commercial Standard Insurance Co., 490 S.W.2d 818 (Tex.1972). Since we find that in this case the contract between the parties does not evidence such a "clear and unequivocal" obligation, we affirm the district court's entry of judgment denying indemnification.

The facts essential to appeal are undisputed. In October 1971, Chevron Oil Company contracted with E. D. Walton Construction Company for certain remodeling and construction work at a Chevron gas processing plant in Texas. In the contract, Walton agreed to indemnify Chevron against injury claims arising out of the contractor's operations.

On October 7, 1971, Charles Greene, a general employee of Walton, while performing contractual work, was injured in a fire and explosion at the gas plant. The parties agree that the accident and Greene's damages were caused solely by the negligence of an employee of Chevron acting within the scope of his employment. Neither Walton nor any of its other employees were guilty of any negligence proximately causing the accident or injuries to Greene.

When Greene sued Chevron for damages, Chevron, relying on its indemnity contract, tendered the suit defense to Walton and requested Walton to pay any judgment rendered against Chevron. Walton refused. Faced with potential liability in the suit, Chevron settled with Greene for $43,000. It then brought this action against Walton for the sum paid to Greene, plus its attorney's fees and court costs in Greene's suit. Walton defended on the ground that the contract did not indemnify Chevron for damages resulting from Chevron's own negligence. From the judgment for Walton, Chevron appealed.

The precise wording of the indemnification clause in the contract is as follows:

LIABILITY AND LIENS: * * * Contractor agrees to protect, defend, indemnify and hold Company, its agents and employees, harmless from and against all loss, damage, liability, claims and liens of every kind arising out of or attributed, directly or indirectly, to the operations of Contractor hereunder, including without limitation and irrespective of negligence, all claims for injury to or death of persons, loss of or damage to property, and claims of workmen and materialmen. (emphasis added)

The general rule in Texas, subject to a number of exceptions, is that a contract of indemnity will not afford protection to the indemnitee against the consequences of his own negligence unless the contract expresses such an obligation in clear and unequivocal terms. Fireman's Fund Insurance Co. v. Commercial Standard Insurance Co., 490 S.W.2d 818 (Tex.1972); Sira & Payne, Inc. v. Wallace & Riddle, 484 S.W.2d 559 (Tex.1972); Joe Adams & Son v. McCann Construction Co., 475 S.W.2d 721 (Tex.1971). Although Texas has not formally adopted the rule that an indemnitee is protected against his own negligence only if the contract language expressly states that the contract covers the negligence of the indemnitee, the decisions of Texas courts indicate an increasingly stricter application of the clear and unequivocal rule and have "progressed toward the so-called 'express negligence' rule as near as judicially possible without adopting it." Fireman's Fund Insurance Co. v. Commercial Standard Insurance Co., 490 S.W.2d at 822.

In order for Chevron to recover indemnity for its own sole negligence, the contract must contain language which is close enough to "express negligence" that doubt is removed as to the parties intent. The language quoted above from the contract is generally the same as found in previous Texas cases denying liability, except for the emphasized portion. Chevron contends that the emphasized phrase "without limitation and irrespective of negligence" clearly and unequivocally expresses an intent that Chevron be indemnified against its own sole negligence. By emphasizing the agreement's reference to the concept of negligence, Chevron attempts to distinguish this case from all other reported similar cases, none of which have construed an agreement referring to negligence. The contract with Walton "goes further than any on which the courts have ruled," Chevron contends, including some in which recovery was permitted by the indemnitee on account of his own negligence. Chevron concludes that until Texas adopts the express negligence rule, the plain words in this contract that indemnity is owed irrespective of negligence are sufficient to establish liability against Walton.

Since Texas cases indicate a progressively stricter application of the clear and unequivocal rule, Fireman's Fund Insurance Co. v. Commercial Standard Insurance Co., 490 S.W.2d at 822, the precedential value of the older cases is questionable today. See, e. g., Ohio Oil Co. v. Smith, 365 S.W.2d 621 (Tex.1963), the analysis of which has been questioned in Joe Adams & Son v. McCann Construction Co., 475 S.W.2d 721 (Tex.1971). See generally Note, Contractual Indemnity Provisions, Hopefully Reclarified, 25 Baylor L.Rev. 543 (1973); Note, The Indemnity Dilemma: Perfectly Obvious or Hopelessly Confused, 24 Baylor L.Rev. 132 (1972); Note, 50 Tex.L.Rev. 520 (1972). The cases in which a negligent indemnitee has been permitted recovery normally have involved what have come to be recognized as exceptions to the general rule and are not now...