We settled with the injured workers. Can we still recover from the subcontractor whose equipment failed?
The Supreme Court of Texas addressed that question in S&B
Engineers & Constructors, Ltd. v. Scallon Controls, Inc., 734
S.W.3d 869 (Tex. 2026). Scallon supplied and programmed a fire-suppression
system for a South Texas refinery under a purchase order with S&B, the
contractor. In January 2015 the system lost power, a failsafe feature released
the suppressant, and seven workers on scaffolding fell while trying to escape.
The workers sued S&B and the refinery owner, but not Scallon. After four
years of litigation, S&B and the owner settled; the settlement released
them, did not mention Scallon, and was funded by S&B and the parties’
insurers. S&B and the owner’s insurer then sought to recover from Scallon
its proportional share of the settlement under the purchase order. The trial
court granted summary judgment for Scallon, and the court of appeals affirmed.
716 S.W.3d 590 (Tex. App.—Beaumont 2024). The Supreme Court reversed, five to
four, and remanded.
The purchase order provided that Scallon would indemnify
S&B for bodily-injury claims “to the extent of [Scallon’s] negligence or
willful misconduct,” and that in the event of comparative negligence Scallon’s
duty would be limited to “[Scallon’s] allocable share.” 734 S.W.3d at 873–74.
Two lines of authority stood in the way. Under Beech Aircraft Corp. v.
Jinkins, 739 S.W.2d 19, 21–22 (Tex. 1987), a defendant who settles resolves
only its own proportionate share of liability and cannot pursue contribution
from a non-settling party. And under Ethyl Corp. v. Daniel Construction
Co., 725 S.W.2d 705, 708 (Tex. 1987), a contract will not be read to
indemnify a party for its own negligence unless it says so in specific terms.
The court of appeals reasoned that S&B’s settlement necessarily covered
only S&B’s negligence, so any recovery from Scallon would amount to
indemnity for S&B’s own fault, which the clause did not provide.
The majority, in an opinion by Justice Young, concluded
that neither case controlled. Jinkins addressed common-law and statutory
contribution among joint tortfeasors and “did not discuss contractual risk
allocation or even use the words ‘contract’ or ‘indemnification.’” Id.
at 872. Proportional indemnity by agreement “differs fundamentally from
common-law and statutory schemes for the basic reason that the parties
bargained for and agreed to it,” id. at 874, and the Legislature has
provided that contractual indemnification rights “shall prevail over” the
comparative-responsibility statute. Tex. Civ. Prac. & Rem. Code § 33.017.
As to Ethyl, the Court found the clause compliant precisely because it
disclaimed any indemnity for S&B’s negligence and confined Scallon to its
own share; “[t]here is nothing magical about the word ‘allocable,’” and any
formulation that makes the indemnity proportional rather than entire will do.
734 S.W.3d at 876. The Court held that “neither Jinkins nor Ethyl
nor any other legal principle precludes S&B and Sunoco from invoking their
contractual indemnity rights,” while emphasizing that “[w]hether they are
entitled to any indemnification, however, presents another question — one not
before us today.” Id. at 872. On remand, the settling parties must show
that the settlement was made in good faith for a reasonable amount and that
some portion of the liability is attributable to Scallon’s negligence; a
settling party that cannot prove either “cannot recover at all.” Id. at
877. The Court also held that the insurer’s subrogation claim was timely,
because an indemnity claim accrues when the indemnitee’s liability becomes
fixed and certain through settlement or judgment. Id. at 878.
Justice Bland, joined by Justices Lehrmann, Devine, and
Huddle, dissented. In the dissent’s view, “[e]very dollar S&B paid was to
settle S&B’s negligence, not Scallon’s,” id. at 881, and reading the
word “allocable” to permit S&B to shift part of that payment to a party the
plaintiffs never sued operates as an assignment of claims the plaintiffs never
brought — the result Jinkins and State Farm Fire & Casualty
Co. v. Gandy, 925 S.W.2d 696 (Tex. 1996), were designed to prevent.
The dissent also observed that S&B had not timely designated Scallon as a
responsible third party and had not disclosed Scallon’s alleged fault in
discovery; when S&B later sought to bring Scallon in, the plaintiffs
objected because limitations had run. On that account, S&B “elected to buy
peace at the cost of nullifying its indemnity rights,” and the Court “need not
rescue S&B from its litigation strategy under the guise of contract
interpretation.” 734 S.W.3d at 883. Finally, the dissent questioned the
majority’s expectation that the post-settlement trial would be “streamlined,”
comparing the settling defendant’s position as a “surrogate plaintiff” to the
Mary Carter arrangements the Court declared void in Elbaor v. Smith, 845
S.W.2d 240 (Tex. 1992), and noting a pending case, Blanchard Refining
Co. v. Industrial Specialists, LLC, No. 26-0118, in which such a
trial reportedly ran seven days with thirty depositions. 734 S.W.3d at 884–86.
Several points may be worth noting. The decision appears
to confirm that a settlement does not, by itself, extinguish a bargained-for
right to proportional indemnity, so long as the clause disclaims indemnity for
the indemnitee’s own negligence and is otherwise enforceable. It also makes
clear that the right to sue is not a right to recover: the settling party
carries the burden on both the reasonableness of the settlement and the
non-settling party’s share of fault, and the majority acknowledges it “may
receive no indemnification at all.” Id. at 877. The dissent’s account of
S&B’s procedural choices suggests that a party expecting to rely on such a
clause may want to designate the indemnitor as a responsible third party while
the underlying case is pending, rather than after it settles. And the
four-justice dissent, together with the pending Blanchard Refining matter,
indicates that how these post-settlement trials are to be conducted — what
evidence bears on reasonableness, and how the non-settling party may contest
the underlying damages — remains to be worked out.
Rehearing was denied on June 5, 2026.
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