Hercules Offshore, Inc. and the Hercules Offshore Drilling Company, LLC v. Excell Crane & Hydraulics, Inc.
454 S.W.3d 70 | Texas Court of Appeals, 1st District (Houston) | 2014
What This Case Means for Subcontractors
Hercules Offshore and its drilling company hired Excell Crane for services under a contract with both indemnity and insurance provisions. When an employee was injured, a dispute arose over whether Excell's insurance had to pay first before Hercules could claim indemnification. The Texas Court of Appeals ruled that the insurance requirement must be satisfied before the indemnity obligation kicks in, even when the indemnity language is very broad. This protects contractors by ensuring insurance coverage is exhausted first.
Key Takeaways
- •If your contract names the other party as an 'additional assured' on your insurance, that insurance must be exhausted before they can claim indemnification from you
- •Broad indemnity language does not override the priority of insurance requirements—courts will enforce the insurance-first rule under maritime law
- •Include clear insurance requirements and 'additional assured' language in your subcontracts to establish a payment hierarchy that protects you
Insurance obligation must be exhausted before indemnity obligation is triggered.
Frequently Asked Question
If I'm required to indemnify another party, do I have to pay before their insurance covers the loss?
No. Under this ruling, if your contract requires you to provide insurance and name them as an additional assured, that insurance must be exhausted first. Your indemnity obligation only applies after the insurance coverage is used up. Make sure your contract clearly establishes this insurance-first priority.
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