The Texas Supreme Court just handed insurers a new playbook for recovering settlement dollars from subcontractors through proportionate indemnity clauses.
In a sharply divided 5-4 decision filed on March 13, 2026, the Court reversed the Ninth District Court of Appeals and ruled that a settling party's contractual right to proportionate indemnification is not wiped out by settlement - even when the indemnitor played no part in that settlement.
The case, S&B Engineers & Constructors, Ltd. and Zurich American Insurance Company v. Scallon Controls, Inc. (No. 24-0525), traces back to a January 2015 accident at a Sunoco refinery in South Texas. A fire-suppression system supplied and programmed by Scallon Controls discharged a chemical called Purple K after a brief power loss. Seven workers from a Sunoco subcontractor fell from scaffolding and suffered injuries.
The injured workers sued S&B and Sunoco. Four years later, the parties settled for $6.75 million. S&B paid $2.35 million out of pocket, its insurers contributed $2 million, and Zurich American Insurance Company - Sunoco's insurer - paid $400,000. Scallon was not mentioned in the settlement and did not participate in it.
After the dust settled, S&B and Zurich turned to a proportionate indemnity clause in the purchase agreement between S&B and Scallon. That clause required Scallon to cover its "allocable share" of liability arising from bodily injury "to the extent of [Scallon's] negligence or willful misconduct." The contract did not give S&B or Sunoco any right to be indemnified for their own negligence.
Scallon pushed back, arguing the settlement resolved everything and left nothing to allocate. The trial court and the court of appeals agreed, relying on a 1987 precedent - Beech Aircraft Corp. v. Jinkins — which bars settling defendants from seeking contribution from non-settling parties under statutory or common law.
The Supreme Court saw it differently. Writing for the majority, Justice Young held that Jinkins dealt only with statutory and common-law contribution, not with freely negotiated contractual indemnity. Because the contract disclaimed any right to indemnification for S&B's own negligence, the Court found it satisfied the express-negligence doctrine set out in Ethyl Corp. v. Daniel Construction Co. (1987).
Zurich scored a separate win on timing. The Court held that the clock on an indemnity claim starts when the indemnitee's liability becomes "fixed and certain" through settlement - not when the accident happens. Since Zurich intervened less than three years after the settlement, its claim was timely.
The case now heads back to the trial court. To recover, S&B and Zurich will need to prove the settlement was reasonable, made in good faith, and that Scallon's negligence was at least partly to blame.
The four dissenting justices, led by Justice Bland, raised red flags. They warned that allowing post-settlement indemnity trials creates lopsided proceedings with misaligned incentives, drawing comparisons to the "Mary Carter" agreements the Court voided in 1992.
For insurers and claims professionals, this ruling is a signal worth watching. Proportionate indemnity clauses are standard fare in construction and energy contracts, and this decision now confirms they can survive settlement in Texas — with real teeth.
