Exxonmobil Corp. v. Electrical Reliability Services, Inc.
868 F.3d 408 | Court of Appeals for the Fifth Circuit | 2017
What This Case Means for Subcontractors
ExxonMobil hired Electrical Reliability Services as a contractor and required ERS to carry insurance naming Exxon as an additional insured. When a subcontractor's employee was injured and sued, Exxon settled for $2.5 million. Exxon demanded ERS pay the $3 million insurance deductible. The court ruled that insurance requirements and indemnity clauses are separate obligations—ERS had to pay the deductible even though the indemnity clause didn't require it. This means subcontractors can't use negligence allocation arguments to avoid paying insurance deductibles.
Key Takeaways
- •Insurance and indemnity clauses are treated as independent obligations. You can't use one to escape the other.
- •If your contract requires you to add a client as an additional insured, you're responsible for the deductible—regardless of who was actually at fault.
- •Review your insurance requirements carefully before signing. The deductible obligation flows directly to you, not just your insurer.
Insurance and indemnity provisions impose separate and independent obligations.
Frequently Asked Question
If I'm required to add my client as an additional insured, am I responsible for paying the insurance deductible?
Yes. Courts treat insurance requirements and indemnity clauses as separate obligations. Even if your indemnity clause limits your liability based on fault, you're still responsible for paying the insurance deductible. This applies regardless of who caused the injury or damage.
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