Duval v. Northern Assurance Co. of America
722 F.3d 300 | Court of Appeals for the Fifth Circuit | 2013
What This Case Means for Subcontractors
A worker injured on an offshore platform sued a vessel operator (Deep Marine). Deep Marine tried to get its insurance company to defend and indemnify it under a master services agreement with the project owner (BHP). The Fifth Circuit ruled that indemnification and insurance obligations in a contract only bind the two parties who signed it—insurers cannot be forced to enforce those obligations just because they're mentioned in the contract. This protects insurers from unexpected liability but means contractors must carefully manage their own defense and indemnity obligations.
Key Takeaways
- •Indemnity clauses in your contracts only create obligations between you and the other party—they don't automatically bind your insurance company or create rights for third parties
- •If you agree to indemnify a client, you must ensure your insurance policy actually covers that obligation; don't assume it does just because the contract requires it
- •When tendering a claim to your insurer, the insurer can still refuse coverage if the contract obligation falls outside what the policy actually covers
BHP's indemnification obligation runs only to Deep Marine.
Frequently Asked Question
If my contract requires me to indemnify the client, does my insurance company have to cover it?
Not automatically. The court ruled that indemnity obligations run only between the two parties who signed the contract. Your insurer can refuse to cover an indemnity obligation if it's not explicitly included in your insurance policy. Always review your insurance coverage before signing indemnity clauses and confirm with your insurer that the obligation is covered.
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