A federal court in Oklahoma granted an insurer’s motion to dismiss claims against it for breach of contract and bad faith on the grounds that an owner, which had contractually obligated its contractor to make it an additional insured, was not named as such in the policy and was subject to Oklahoma’s anti-indemnification statute. Tyson Foods, Inc. v. Routh Enterprises, Inc., 2015 WL 457945 (E.D. Okla. Feb. 3, 2015).
An owner of a construction project was sued by an employee of the contractor for injuries he sustained during the course of the project. The owner filed a third-party complaint against the contractor based on the contractor’s contractual obligation to provide indemnity. The owner was granted summary judgment. The owner then sued the contractor and its insurer, alleging that it was owed a defense as an additional insured and under the contractor’s indemnity obligation. The policy did not list the owner as an additional insured despite a certificate of insurance stating otherwise.
The court found that 15 O.S. §221, an anti-indemnification statute, precluded indemnity. The statute provides that “a construction agreement that requires an entity or that entity’s insurer to indemnify, insure, defend or hold harmless another entity against liability … which arises out of the negligence or fault of the indemnitee … is void as against public policy.” Some state’s anti-indemnification statutes allow for the reallocation of risk to an indemnitor’s insurer, so that even if the indemnification agreement is voided by statute, a separate promise to procure insurance designed to shift risk is enforceable. The court held that Oklahoma’s statute does not draw this distinction and that an exception does not apply because it does not use the words “insure” and “defend.” The court also rejected the argument that the insurer was estopped because it initially offered to defend and then revoked it after a dispute about separate counsel arose. The court held that waiver and estoppel are inapplicable to the creation of a contract. Finally, the court did not adopt the insurer’s argument that the owner’s claims should be dismissed because the owner was ultimately found immune from liability to the injured employee under workers’ compensation. The court held that an ultimate finding of immunity does not retrospectively negate a duty to defend, if one independently existed.