Texas Supreme Court Decides Indemnity Survives Settlement

If you’re a general contractor or owner in Texas, here’s a scenario you may have faced: a subcontractor causes an accident, injured workers sue you (not the sub), you settle to end the litigation, and then when you go to the sub for indemnity, the sub argues your settlement wiped out your indemnity rights. As of March 13, 2026, the Texas Supreme Court has eliminated the subcontractor’s argument.

In S&B Engineers & Constructors, Ltd. v. Scallon Controls, Inc., in a 5-4 decision, the Texas Supreme Court held that the contractor’s voluntary settlement with injured plaintiffs does not automatically extinguish its contractual indemnity rights against a non-settling subcontractor.

Ultimately, the Texas Supreme Court drew a sharp distinction between contribution claims, which are governed by tort law (and which can be cut off by settlement) and contractual indemnity, which is governed by the parties’ agreements. The Court affirmed that parties may contract for comparative indemnity so long as they comply with the express negligence doctrine — and that settling with a claimant does not wipe out contractual indemnity rights.

Why This Maters for Construction Contracts

This decision can reshape how Texas owners, contractors, subcontractors, and their insurers should approach both contract drafting and litigation strategy. First, settlement is no longer the end of the indemnity fight: a second round of litigation over fault allocation and settlement reasonableness is now squarely on the table. Second, subcontractors (or other at-fault parties) who refuse to participate in settlement negotiations face real post-settlement exposure; owners, GCs, and subs now have stronger incentives to coordinate on settlement strategy.

Practical Takeaways for Your Next Construction Contract

• Make sure your indemnity clauses comport with the express-negligence doctrine.

• Notify your indemnitors early and demand they participate in settlement negotiations—and build in contractual mechanisms to require this.

• Review your pay-if-paid and downstream risk transfer provisions in light of this decision.

S&B Engineers v. Scallon Controls is a contractor-friendly ruling—but only if your contracts are drafted to take advantage of it. If your indemnity clauses are vague, overly broad, or don't address comparative fault allocation, you may find yourself on the wrong side of an indemnity fight.

Questions about your contractual indemnity clauses? Contact Elkhoury Law PLLC.