IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 06-41785

XL SPECIALTY INSURANCE CO.

Plaintiff-Appellant

v.

KIEWIT OFFSHORE SERVICES, LTD.;

Defendant-Appellee

RBT WELDERS, INC.

Defendant-Appellant

Appeal from the United States District Court 

for the Southern District of Texas

Before KING, GARZA, and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

This appeal is from a declaratory judgment ruling that the plaintiff

insurance company had a duty to defend and indemnify the defendant general

contractor in an underlying state wrongful death suit. It involves the

application of Texas’s express negligence rule to an indemnity contract between

a general contractor, the indemnitee, and a sub-contractor, the indemnitor.

Applying Texas precedent, we conclude that the language in the indemnity

provision satisfied the requirementthatthe contract must unambiguously state

a party’s intent to indemnify the indemnitee for all liability caused by the

United States Court of Appeals

Fifth Circuit

F I L E D

January 2, 2008

Charles R. Fulbruge III

Clerk
No. 06-41785

2

indemnitee’s own future negligence. Additionally, we reject the challenge to the

reasonableness of the settlement. We affirm. 

I. BACKGROUND

Defendant-Appellee Kiewit Offshore Services (Kiewit) was the general

contractor performing welding services on the Skyway Bridge San Francisco Bay

Project. Kiewit entered into a subcontract with Defendant-Appellant R.B.T.

Welders, Inc. (RBT). Pursuant to this contract, RBT provided welders to Kiewit

to work on the project at Kiewit’s facility in Ingleside, Texas.

On January 6, 2003, at the facility, Mann Nguyen, an employee of RBT,

entered a confined space, which resembled a large steel box, to perform a weld

repair. The gas in the steel box ignited, and the resulting explosion blew off the

roof. Nguyen, who was conscious after the explosion, suffered third degree burns

over sixty-five percent of his body. He was transported to the Brooks Army

Medical Center and died one week later. Ernesto Moreno, a Kiewit employee,

had been standing on the roof at the time of the explosion and was killed

instantly.

The families of Moreno and Nguyen brought suit against Kiewit and RBT

in Texas state court, alleging that Kiewit and RBT were negligent for operating

the Ingleside Plant without implementing an adequate safety program for

welding in confined spaces. At the time of the explosion, RBT had the following

insurance policies: (1) an excess liability policy through XL Specialty Insurance

Company (the Plaintiff-Appellant in the instant declaratory judgment action);

(2) a commercial general liability insurance policy from Atlantic Insurance

Company; (3) and a worker’s compensation policy through American Interstate

Insurance Company. After receiving service, Kiewit demanded that XL

Specialty defend and indemnify Kiewit as an additional insured. XL Specialty

refused, and Atlantic tendered a defense.
No. 06-41785

3

RBT settled with the Moreno family for four million dollars and the

Nguyen family for one million dollars. Kiewit subsequently began negotiating

with the Nguyen family. During this time, Kiewit’s counsel prepared a report

analyzing Kiewit’s potential liability to the Nguyen family. The report was

prepared based on Kiewit’s internal investigation and initial discovery in the

underlying suit. 

The evidence demonstrated that Kiewit was hired to construct bridge

footings, a type of project that Kiewit had not previously undertaken. Kiewit

usually worked on offshore platforms. Unlike offshore platforms, the welding on

bridge footings had to be done in an enclosed space. Kiewit’s safety officer had

no experience working on structures like bridge footings. Kiewit had no

provision for ventilating the enclosed space during welding. Although Kiewit

provided fans for welders in the enclosed spaces, these fans did not have

“explosive proof” switches and were not placed fully outside the enclosed space

when in use. 

Kiewit’s counsel concluded that the operating procedures created a

foreseeable risk of an explosion and that such procedures did not adequately

protect the employees from the hazards of welding in enclosed spaces. The

report concluded that Kiewit was potentially liable to the Nguyen family for: (1)

failing to properly execute the confined space entry permit system; (2) failing to

implement a proper confined space ventilation system; and (3) providing a

ventilation fan that potentially was the ignition source for the explosion. It also

estimated that Nguyen’s survival damages for the week in the hospital suffering

third-degree burns could be twenty million dollars, with perhaps fifty to sixty

percent of the fault attributed to Kiewit. Because Kiewit owned the facility, the

report stated the percentage of fault could be higher. 

Kiewit, using RBT’s settlement with the Moreno family as a guidepost,

settled with the Nguyen claimants for four million dollars. Subsequent to the
No. 06-41785

4

settlements, XL Specialty filed a declaratory judgment action in federal district

court, seeking a judgment that it had no duty to defend or indemnify Kiewit for

Kiewit’s settlement with the Nguyen claimants because Kiewit was not an

additional insured under the XL Specialty policy. Kiewit filed a third-party

claim against RBT and a cross-claim against XL Specialty, asserting that RBT

had a duty to defend and indemnify Kiewit under the indemnification provision

in the RBT/Kiewit subcontract. Kiewit further asserted that the XL Specialty

policy provided coverage for RBT’s liability under the indemnification provision.

The district court granted summary judgment, holding that RBT had

contracted to indemnify Kiewit for Kiewit’s negligence with respect to the

explosion, and the XL Specialty policy provided coverage for RBT’s contractual

duty to indemnify. RBT and XL Specialty now appeal.

II. ANALYSIS

A. Standard of Review

This Court reviews a district court’s grant of summary judgment de novo,

applying the same standards as the district court. E.g., Hirras v. Nat’l R.R.

Passenger Corp., 95 F.3d 396, 399 (5th Cir. 1996). Summary judgment is proper

if the record reflects “that there is no genuine issue as to any material fact and

that the moving party is entitled to a judgment as a matter of law.” FED. R. CIV.

P. 56(c). 

B. Express Negligence Rule

Appellants RBT and XL Specialty contend that the district court erred in

finding thatthe indemnity provision atissue expressly provided that RBT would

indemnify Kiewit for Kiewit’s own negligence. Appellants argue that the

indemnity clause did not satisfy the express negligence rule. Texas’s express

negligence rule is a “rule of contract interpretation that applies specifically to

agreements to indemnify another party for the consequences of that party’s own
No. 06-41785

5

negligence.” Quorum Health Serv. v. Maverick County Hospital District, 308 F.3d

451, 458 (5th Cir. 2002). Under this rule, “contracting parties seeking to

indemnify one party from the consequences of its own negligence must express

thatintentin specific terms, within the four corners ofthe document.” Id. (citing

Ethyl Corp. v. Daniel Const. Co., 725 S.W.2d 705, 707-08 (Tex. 1987)). The Texas

Supreme Court adopted this stringent rule because indemnification of a party

for the consequences of that party’s negligence was an “extraordinary shifting

of risk.” Id. at 458-59. Whether an indemnity provision satisfies the express

negligence rule is a question of law for the court to determine. Id. at 459. 

The instant indemnification provision reads as follows:

To the fullest extent permitted by law, Subcontractor [RBT]

specifically obligates itself to Contractor [Kiewit], Contractor’s

partners, individually, and all Kiewit companies (defined as any

company or business entity in which Peter Kiewit Sons, Inc. directly

or indirectly holds a controlling interest). Contractor’s surety,

Owner and any other party required to be indemnified under the

Prime Contract, jointly and severally, (hereinafter “Contractor

Indemnified Parties”) in the following respects, to-wit:

. . . .

(b) TO DEFEND AND INDEMNIFY THEM AGAINST AND

SAVE THEM HARMLESS FROM ANY AND ALL CLAIMS, SUITS

OR LIABILITY FOR DAMAGES TO PROPERTY, INCLUDING

LOSS OF USE THEREOF, INJURIES TO PERSONS, INCLUDING

DEATH, AND FROM ANY OTHER CLAIMS, SUITS OR

LIABILITY ON ACCOUNT OF ACTS OR OMISSIONS OF

SUBCONTRACTOR, OR ANY OF ITS SUBCONTRACTORS,

SUPPLIERS, OFFICERS, AGENTS, EMPLOYEES OR

SERVANTS, WHETHER OR NOT CAUSED IN PART BY THE

ACTIVE OR PASSIVE NEGLIGENCE OR OTHER FAULT OF A

CONTRACTOR INDEMNIFIED PARTY; PROVIDED HOWEVER

SUBCONTRACTOR’S DUTY HEREUNDER SHALL NOT ARISE

IF SUCH CLAIMS, SUITS OR LIABILITY, INJURIES OR DEATH

OR OTHER CLAIMS OR SUITS ARE CAUSED BY THE SOLE

NEGLIGENCE OF CONTRACTOR, UNLESS OTHERWISE

PROVIDED IN THE PRIME CONTRACT. SUBCONTRACTOR’S

OBLIGATION HEREUNDER SHALL NOT BE LIMITED BY THE
No. 06-41785

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PROVISIONS OF ANY WORKERS’ COMPENSATION ACT OR

SIMILAR STATUTE.

(emphasis added). 

Texas precedent persuades us that this language would satisfy the express

negligence rule. In Payne & Keller, Inc., v. P.P.G. Industries, Inc., the Texas

Supreme Court held that similar language expressed the parties’ clear intent

that Payne & Keller would indemnify P.P.G. for P.P.G.’s own concurrent

negligence: 

By its terms, the Payne & Keller/P.P.G. contract required Payne &

Keller to indemnify P.P.G. for work-related claims “arising out of .

. . the acts or omissions . . . of [Payne & Keller] or its . . . employees

. . . in the performance of the work . . . irrespective of whether

[P.P.G.] was concurrently negligent . . . but excepting where the

injury or death . . . was caused by the sole negligence of [P.P.G.].”

793 S.W.2d 956, 957 (Tex. 1990) (brackets and ellipsis in opinion). 

Although the wording in the instant provision is not identical to the

language in the above case, the key language is quite similar. In this case, as

previously set forth, the indemnity clause provides that RBT will indemnify

Kiewit “on account of” the acts or omissions of RBT regardless of whether such

acts were caused in part by the negligence of Kiewet. With respect to the

contract provision in the cited case, the principal, relevant difference is that

instead of “on account of,” that contract provision uses the phrase “arising out

of.” Accordingly, as the appellants admit in their reply brief, the crux of the

issue is whether the instant phrase “on account of” is synonymous with the

phrase “arising out of,” which was used in the Texas case finding that the

express negligence rule was satisfied. 

There is language indicating that the phrases are synonymous. In Joe

Adams & Son v. McCann Construction Company, the Texas Supreme Court

interchangeably used these similar phrases. 475 S.W.2d 721 (Tex. 1971). In
No. 06-41785

1

It should be noted that in Joe Adam & Son, the indemnity provision was found

insufficient because, unlike the instant case, it did not contain the additional language that

the subcontractor would indemnify the contractor regardless of whether the damages were in

part based on the contractor’s own negligence. Id. It should also be noted that Joe Adam &

Son involved applying the “clear and unequivocal”testthatwas later replaced with the express

negligence rule. Ethyl Corp., 725 S.W.2d 705. We do not find that troubling because we are

relying on the court using the two relevant phrases interchangeably, notthe court’s application

of the clear and unequivocal test.

7

that case,the indemnity clause provided that the contractor would indemnify the

owner for damages “through or on account of any act or in connection with the

contractor.” 475 S.W.2d at 723 (emphasis added).1 While analyzing the

indemnity clause, the court paraphrased the language and stated that “it

purports to afford protection against liability arising from . . . any default or

omission . . . .” Id. at 725 (emphasis added). We are persuaded that the Texas

Supreme Court would find “on account of” to be interchangeable with the phrase

“arising from.” Thus, we conclude that the instant indemnity clause satisfies

the fair notice requirement of the express negligence rule. 

Nonetheless, we address Appellants’ remaining arguments. Relying on

Fisk Elec. Co. v. Constructor & Assoc., Inc., Appellants point to other language

in the instant provision that is very similar to language the Texas Supreme

Court has held did not satisfy the express negligence rule. 888 S.W.2d 813 (Tex.

1994). In Fisk, “the contract contained the following indemnity clause: ‘[t]o the

fullest extent permitted by law, [Fisk] shall indemnify, hold harmless, and

defend [Constructors] ... from and against all claims, damages, losses, and

expenses, including but not limited to attorney’s fees ...’ arising out of or

resulting from the performance of Fisk’s work.” Id. at 814. Appellants correctly

state that the instant indemnity provision contains similar language that does

not, by itself, satisfy the express negligence rule. Nonetheless, Fisk is

distinguishable because it does not contain the additional language providing

that RBT would indemnify Kiewit regardless of whether Kiewit was negligent.
No. 06-41785

2 The district court relied on Rule 8(c) of the Federal Rules of Civil Procedure to find

the arguments waived. In a diversity case, the “Federal Rules of Civil Procedure provide the

8

Appellants also rely on precedent holding that “contracts defining what is

included in an indemnity obligation by stating what is excluded fail the rule’s

requirements.” Quorum, 308 F.3d at 462 (citing Singleton v. Crown Cent.

Petroleum Corp., 729 S.W.2d 690 (Tex. 1987)). Stated another way, if the only

language indicating coverage is exclusionary, the only way to find coverage

would be implied. By definition, implied coverage does not satisfy the express

negligence rule. In this case, although the indemnity provision does exclude

indemnity for damages when the contractor is solely responsible, this

exclusionary language does not provide coverage. Instead, the language that

satisfies the rule is the language that the subcontractor will indemnify the

contractor “ON ACCOUNT OF ACTS OR OMISSIONS OF SUBCONTRACTOR

. . . WHETHER OR NOT CAUSED IN PART BY THE ACTIVE OR PASSIVE

NEGLIGENCE OR OTHER FAULT OF A CONTRACTOR.” As previously

discussed, this inclusionary language demonstrates the parties’ intent that the

subcontractor will indemnify the contractor regardless of whether the contractor

is partially responsible. 

In sum, the district court properly granted summary judgment finding

that the indemnity provision satisfied the express negligence rule. 

C. Sole or Gross Negligence

Appellants argue thatthe case should be remanded for a trialto determine

whether Kiewit was solely or grossly negligent because the indemnity clause

expressly precludes indemnity if Kiewit was solely or grossly negligent. It is

clear that the indemnity clause excludes claims based on Kiewit’s sole or gross

negligence. The district court found these arguments waived because neither

argument was raised as an affirmative defense in their pleadings.2 On appeal,
No. 06-41785

manner and time in which defenses are raised and when waiver occurs.” Arismendez v.

Nightingale Home Health Care, 493 F.3d 602, 610 (5th Cir. 2007) (citation and internal

quotation marks omitted). 

3 Delta Engineering Corp. v. Warren Petroleum, 668 S.W.2d 770, 772-73

(Tex.App.–Houston [1st Dist.] 1984, writ ref’d n.r.e.). 

9

Appellants have failed to challenge the district court’s finding of waiver. Thus,

we are precluded from reaching the arguments. Even assuming arguendo that

the district court erred in finding waiver, Appellants pointto no evidence in their

brief showing that there is a genuine issue of material fact with respect to

whether Kiewit was solely or grossly negligent. Thus, Appellants, who had the

burden of pleading and proving these affirmative defenses,3 have failed to show

that the district court erred in finding that they did not satisfy their burden.

D. Reasonableness of Settlement

Appellants argue that the district court erred in ruling that Kiewit’s $4

million settlement with the Nguyens was reasonable and prudent. “Under Texas

law, where an indemnitee enters into a settlement with a third party, it may

recover from the indemnitor only upon a showing that potential liability existed,

and that the settlement was reasonable, prudent, and in good faith under the

circumstances.” Insurance Co. of North America v. Aberdeen Ins. Services, 253

F.3d 878, 888 (5th Cir. 2001) (citing Transamerica Ins. v. Avenell, 66 F.3d 715,

721 n.15 (5th Cir. 1995)). Further, “[t]he settling indemnitee need not prove

actual liability to the third party before recovering from the indemnitor.” Id. 

Appellants’ argumentis very narrow. Appellants admit that “Kiewit faced

potential liability to the Nguyen plaintiffs.” There is no allegation of bad faith.

Thus,the only question is whether the $4 million settlement was reasonable and

prudent. Appellants do not dispute that the Nguyen claimants suffered $4

million in damages. Indeed, in district court, although RBT admitted “that from
No. 06-41785

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Kiewit’s perspective the settlement was reasonable,” RBT incorrectly argued

that the reasonableness of the settlement should be determined from

indemnitor’s perspective. XL Specialty Ins. Co. v. Kiewit Offshore Serv., 426

F.Supp.2d 565, 577 n.11 (S.D.Tex. 2006 ). As the district court explained, the

Texas Supreme Court has held that the indemnitee must “establish that from

its standpoint the settlement was made in good faith and was reasonable and

prudent under the circumstances.” Mitchell’s, Inc. v. Friedman,157 Tex. 424,

431, 303 S.W.2d 775 (Tex. 1957) (emphasis added); Accord Aerospatiale

Helicopter Corp. v. Universal Health Services, Inc., 778 S.W.2d 492, 500

(Tex.App.-Dallas 1989, writ denied) (citing Pan American Gas Co. v. Natural Gas

Const. Corp., 418 S.W.2d 380, 381 (Tex.Civ.App.-Waco, 1967 writ ref’d n.r.e.)).

Thus, RBT has effectively conceded the reasonableness of the $4 million

settlement. Assuming that XL Specialty is not bound by this concession, we

address the remaining arguments.

Appellants argue thatthe “opportunity for Kiewit to prevail” on either the

borrowed servant defense or the statutory employer defense “lowered the

settlement value of the claim.” In other words, Appellants contend that these

defenses should have been used as bargaining tools to reduce the value of the

settlement. Kiewit responds that this argument is being raised for the first time

on appeal. An argument not raised before the district court cannot be asserted

for the first time on appeal. Stokes v. Emerson Elec. Co., 217 F.3d 353, 358 n.19

(5th Cir. 2000). To preserve an argument, it “must be raised to such a degree

that the trial court may rule on it.” Matter of Fairchild Aircraft Corp., 6 F.3d

1119, 1128 (5th Cir. 1993). 

Appellants assertthatthe reasonableness ofthe settlement was contested

in light of the two defenses available. However, our review of the briefing before

the district court reveals that Appellants argued the two defenses rendered

Kiewit immune from suit. Thus, Appellants argued Kiewit should not have
No. 06-41785

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agreed to a settlement. We have not found (and Appellants have not shown us)

an argument before the district court that the amount of the settlement was

unreasonable based on the availability of the above cited two defenses. We

believe those arguments are distinct and conclude thatthe reasonableness ofthe

amount of the settlement in light of the two defenses was not sufficiently raised.

Indeed, as the district court noted,“[i]n light of Nguyen’s third-degree burns, XL

and RBT’s counsel admitted at the hearing on Kiewit’s motion thatif Kiewit was

found liable, a judgment of at least four million dollars against Kiewit was

likely.” XL Specialty Ins., 426 F.Supp.2d at 577. Under these circumstances,

it does not appear that the particular issue was sufficiently raised such that the

district may have ruled on it. 

Even assuming the argument was sufficiently raised, we find it offers

Appellants no succor. As previously indicated, Appellants contend that the

amount was not reasonable “in light of two good legal defenses which Kiewit

could–and should–have developed.” Contrary to Appellants’ assertions, Kiewit

did investigate these possible defenses. In the court below, Kiewit provided the

affidavits of in-house counsel and pre-settlement outside counsel. Additionally,

as set forth previously, Kiewit’s counsel prepared a report analyzing the

potential liability to the Nguyens. With respect to the worker’s compensation

and borrowed servant defenses, both law firms retained by Kiewit advised that

the defenses would “probably not immunize Kiewit from suit.” 

The bottom line is that Appellant RBT first settled with its employee

(Moreno) for $4 million, and Kiewit, using that settlement as a guidepost,

likewise settled with its employee (Nguyen) for $4 million. Additionally, RBT

settled with Nguyen for $1 million. In light of Kiewit’s undisputed potential

liability, and the evidence indicating that Kiewit considered the possible

defenses, we find that the $4 million settlement was prudent and reasonable

from Kiewit’s perspective. Appellants have failed to establish a genuine issue
No. 06-41785

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of material fact with respect to the reasonableness of Kiewit’s settlement with

the Nguyens. 

Accordingly, the judgment of the district court is AFFIRMED.