Subcontractor’s Contractual Indemnity Obligation to Contractor for EIFS Damage Not Covered by Indemnity Provisions of Texas Product Liability Act

K-2, Inc. v. Fresh Coat, Inc., 253 S.W.3d 386 (Tex. App. 2008)

In this case, the court held that the Texas Product Liability Act did not provide a product seller with the right of indemnity against a product manufacturer for that seller’s independent liability under a contract.

Several homeowners sued their builder, its subcontractor which installed synthetic stucco cladding (EIFS) on their houses and the EIFS manufacturer after experiencing water penetration leading to structural damage.  After the claims made by the homeowners and the home builder against the subcontractor were settled, the subcontractor obtained a judgment against the manufacturer for indemnification of the amounts it paid in the settlement.  The manufacturer appealed that portion of the judgment finding it liable to indemnify the subcontractor for the amount it paid to settle the home builder’s claims because it was paid under an indemnity clause in the subcontract. It did not dispute that part of the judgment obligating it to indemnify the subcontractor for settlement of the homeowners’ claims. 

After initially concluding that the material the subcontractor purchased from the manufacturer and applied to the houses was a product within the meaning of the Texas Product Liability Act, the Court of Appeals addressed whether the manufacturer was liable to the subcontractor for the amounts it paid to the home builder under the contractual indemnity clause.

The Court of Appeals reversed the trial court’s award of indemnity for the amounts the subcontractor paid to the home builder on the grounds that the Product Liability Act, Tex. Civ. Pract. & Rem. Code Ch. 82, did not impose a duty on the manufacturer to indemnify the product seller for its independent liability under a contract with the home builder.  It reasoned that the settlement with the home builder was attributable solely to a contract to which the manufacturer was not a party and thus the EIFS subcontractor could not recover the amount it had paid the home builder under the statutory indemnification provision.