ExxonMobil Corp.: How Indemnity Obligations May Limit Contractual Insurance Requirements

Most service contracts contain separate indemnity provisions and insurance procurement requirements, the latter of which often include an obligation that the contractor name its client as an additional insured on the contractor’s CGL policy. As the U.S. Court of Appeals for the Fifth Circuit’s decision in ExxonMobil Corp. v. Electric Reliability Services, 868 F.3d 408 (5th Cir. 2017), explains, in some instances a party’s contractual obligation to procure insurance—including payment of deductibles—may be limited to claims that fall within the scope of the indemnity agreement. This is an important consideration.