Court Opinion

ID: 9775062
Source: CourtListenerOpinion
Date Created: 2023-08-29 18:42:22.273473+00
Date Added: 2024-06-11T07:32:19.589191
License: Public Domain

VANCE, Justice,
concurring in part and dissenting in part.
I concur in that portion of the opinion affirming Page’s recovery against Dresser and dissent from that portion reversing its *367recovery against Houston. I do not believe that we should either classify the agreements as providing for indemnity or a release or engage in the fiction of writing a party out of an agreement obviously intended to cover that party.
THE DRESSER AGREEMENT
Dresser pled its indemnity agreement both as a release of liability and as the basis for a counterclaim. The agreement, prepared by Dresser in indemnity-agreement form, was intended to transfer to Page the risk of any liability (other than for gross or wilful negligence) arising out of Dresser’s services on the well site, including damages for personal injuries, subsurface damages, and damage to the well itself. Although it encompasses damage suffered by Page, Page’s employees, or third parties, we are concerned with the agreement only as it relates to Page.
Express Negligence Rule
The express negligence rule is that a party seeking indemnity from the consequences of that party’s own negligence must express that intent in specific terms within the four comers of the contract. Enserch Corp. v. Parker, 794 S.W.2d 2, 8 (Tex.1990); Ethyl Corp. v. Daniel Const. Co., 725 S.W.2d 705, 707-08 (Tex.1987). The agreement between Dresser and Page addresses “claims alleging that injuries or damage were caused by our negligence.” Thus, we find expressed within the four comers of the contract the intent of the parties that Page indemnify Dresser against loss by Page arising out of Dresser’s negligence. See id. I would hold that Dresser’s agreement meets the criteria of the express negligence rule. See id.
The “Conspicuous” Requirement
Page points out that the court was justified in denying indemnity to Dresser because the indemnity portion of the contract was not sufficiently conspicuous to be enforceable. The indemnity agreement is part of one of eighteen uniformly printed and spaced paragraphs printed on the reverse side of the contract. The face of the contract includes a paragraph containing over one hundred thirty words, in regular size type, without color or other distinguishing characteristics, incorporating the eighteen paragraphs on the other side of the contract.
An indemnity agreement must be conspicuous in order to provide “fair notice” and to prevent an obvious injustice. Enserch Corp., 794 S.W.2d at 8; K & S Oil Well Service, Inc. v. Cabot Corporation, Inc., 491 S.W.2d 733, 737-38 (Tex.Civ.App.—Corpus Christi 1973, writ ref’d n.r.e.). Here, as in K & S Oil, the indemnity provision was hidden, located on the reserve side of what in reality is a work order under the heading "Terms and Conditions.” See K & S Oil, 491 S.W.2d at 737-38. The paragraph including the agreement begins with: “There are obviously many conditions in and about the well of which we can have no knowledge and over which we can have no control. Therefore, we accept this service order only on condition that we do not guarantee any particular results from services to be performed hereunder.” By contrast, the agreement in Enserch, which the Supreme Court held was sufficiently conspicuous, was on the front side of the contract, not hidden under a separate heading, and was not surrounded by unrelated terms. Enserch Corp., 794 S.W.2d at 9. I would hold that as a matter of law Dresser cannot enforce the indemnity agreement because it was not sufficiently conspicuous. See K & S Oil, 491 S.W.2d at 737-38; see also Rourke v. Garza, 511 S.W.2d 331, 344 (Tex.Civ.App.—Houston [1st Dist.] 1974), aff'd, 530 S.W.2d 794 (Tex.1975); Safway Scaffold Co. v. Safway Steel Products, 570 S.W.2d 225, 228 (Tex.Civ.App.—Houston [1st Dist.] 1978, writ ref’d n.r.e.).
THE HOUSTON AGREEMENT
Houston pled that its agreement was a release by Page from any liability arising out of Houston’s services on the well site. To distinguish between potential liability to Page and to third parties, Houston drafted the provision exculpating itself from liability to Page without using the term “indemnity,” reserving that language for successive paragraphs relating to liability to third *368parties. The intent was to transfer the risk of liability to Page for its (Houston’s) own negligence. This case presents an ideal comparison of the use of differing language, because the Houston agreement has, as to Page, the same effect as Dresser’s agreement. Because no good reason exists to distinguish between them, I would extend the express negligence rule to releases and other exculpatory agreements which do not use the traditional language of “indemnity.”
No sound policy reason exists to apply or not apply the requirements of the express negligence rule based only on the label which the parties or a court may affix to the agreement. All such agreements involve the transfer of risk and are necessarily interrelated with considerations of insurance coverage against the risks transferred. In the business world this includes considerations of the time necessary to acquire insurance against risks associated with the negligence of another, the increasing costs of such coverage, and the fact that such coverage is increasingly difficult to obtain. It stands to reason that every business is in a better position than its customers to obtain insurance against the risks associated with its own negligence and to keep that insurance in place. The business and its insurance representatives have time to evaluate the risks, negotiate their way through complicated insurance markets, and obtain competitive prices. The customer, on the other hand, has limited knowledge of the risks associated with the business of the other party, may contract for goods or services on short notice, and does so through field representatives who may or may not understand the nature or effect of a risk-transfer agreement. A contracting party should be on fair notice that he may, through no fault of his own, suffer a large and ruinous loss solely by reason of negligence of the other contracting party. K&S Oil, 491 S.W.2d at 737. Public policy “looks with disfavor upon attempts of a party to avoid liability for his own fault_” See id. at 738.
If the effect of an agreement is to exculpate a party from the consequences of its own negligence, the “better policy is to cut through the ambiguity of those provisions” and apply the express negligence rule. See Ethyl Corp., 725 S.W.2d at 708. Although the Supreme Court in Ethyl addressed an indemnity agreement rather than a release or other type of exculpatory agreement, “the policy considerations underlying the enforcement of either type of contract are similar enough to warrant application of the express negligence doctrine to releases.” Comment, Releases: An Added Measure of Protection from Liability, 39 Bay-LOR L.Rev. 487, 492 (1987) (authored by Julie Ann Springer). Thus, I would not enforce any agreement, whatever its form, which transfers the risks of one’s own negligence to another party in the absence of an express, conspicuous agreement made by a person who is in a position to make an informed decision about the nature of the risks being transferred and who has a real choice in accepting or rejecting the agreement. See Enserch Corp., 794 S.W.2d at 8-9 (applying both the express negligence rule and the “conspicuous” requirement); Haring v. Bay Rock Corp., 773 S.W.2d 676, 678 (Tex.App.—San Antonio 1989, no writ) (applying the express negligence rule to an agreement which did not use the term “indemnity”); Whitson v. Goodbodys, Inc., 773 S.W.2d 381, 383 (Tex.App.—Dallas 1989, writ denied) (recognizing that a disparity in bargaining power may leave a party no real choice in accepting the agreement); Monsanto Co. v. Owens-Corning Fiberglas, 764 S.W.2d 293, 295 (Tex.App.—Houston [1st Dist.] 1988, no writ) (finding that failure to use the term negligence and specify the extent of coverage, i.e., comparative negligence, concurrent negligence or gross negligence, caused agreement to fail the express negligence test); K & S Oil, 491 S.W.2d at 738 (stating that “the term negligence or fault must be used”); see also Tex.Civ.PRAC. & Rem.Code Ann. Chapter 127 (Vernon 1986 and Vernon Supp. 1991) (concerning certain risk-transfer agreements where the indemnitor supports the agreement with insurance coverage against those risks); Comment, Releases: An Added Measure of Protection from *369Liability, 39 Baylor L.Rev. 487 (1987) (authored by Julie Ann Springer).
EXPRESS NEGLIGENCE RULE
Houston’s agreement states, in pertinent part:
2. (A) [Houston] shall not be liable to [Page] on any theory of legal liability against which [Houston] may legally contract for any damage (whether subsurface or not, including reservoir loss) to any property of [Page] and loss arising out of such damage where such damage is sustained in connection with, arising out of, or resulting from the service or material used in the service.
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(D) The theories of legal liability referred to in paragraphs (A), (B), and (C) immediately preceding, include, but are not limited to, breach of express or implied warranty and the sole or concurrent negligence of [Houston].
Thus, the language expresses the intent that Houston would not be liable to Page for Houston’s own negligence in specific terms within the four comers of the contract. See Enserch, 794 S.W.2d at 8; Ethyl, 725 S.W.2d at 707-08. The fact that the extent of coverage provision appears in a separate paragraph is of no consequence; the agreement need not be confined to a single sentence. See Enserch, 794 S.W.2d at 8. I would hold that Houston’s release meets the criteria of the express negligence rule. See Enserch, 794 S.W.2d at 8; Ethyl, 725 S.W.2d at 707-08.
THE “CONSPICUOUS” REQUIREMENT
Page also asserts that the court was justified in not giving effect to Houston's release because the release provision of the contract was not sufficiently conspicuous to be enforceable. The release paragraph is one of many similarly printed and spaced paragraphs printed on the reverse side of the contract. The face of the contract includes a paragraph under the heading “Work Order,” in regular size type, without color or other distinguishing characteristics, incorporating the paragraphs on the other side of the contract.
Here, as in K & S Oil, the release was hidden, located on the reverse side of the work order under a sub-heading “Terms and Conditions-Services.” See K & S Oil, 491 S.W.2d at 737-38. The agreement begins with: “[Houston] does not guarantee the successful performance of the service involved and shall not be subject to any legal liability for failure to accomplish the desired result.” By contrast, the agreement in Enserch, which the Supreme Court held was sufficiently conspicuous, was on the front side of the contract, was not hidden under a separate heading, and was not surrounded by unrelated terms. En-serch Corp., 794 S.W.2d at 9. I would hold that as a matter of law Houston cannot enforce the release because it was not sufficiently conspicuous. See K & S Oil, 491 S.W.2d at 737-38; see also Rourke, 511 S.W.2d at 344; Safway Scaffold Co., 570 S.W.2d at 228.
I would affirm the judgment.