What is the difference between indemnity and additional insured?

Indemnity is a contract obligation. You promise to defend and pay the operator for certain claims. If you do not pay, the operator's remedy is against you. Your insurer gets involved only through your contractual liability coverage, which covers liability you assumed in an "insured contract."

Additional insured status is an insurance right. IRMI defines an additional insured as a person or organization "not automatically included as an insured under an insurance policy" who is added, often to satisfy a contract requirement. Once added, the operator can tender a claim straight to your insurer and is owed a defense on its own terms.

Each tool covers a gap in the other.

• If the indemnity is unenforceable, for example because it fails the fair notice rules or Chapter 127, additional insured status may still give the operator a direct path to coverage. IRMI makes this point in its definition.
• If the claim falls outside the additional insured wording, for example a loss after your work is done when you only have an ongoing operations endorsement, the indemnity may still require you to pay.

The Texas Supreme Court has long treated the duties to indemnify and to provide insurance as potentially "separate and independent." In its 2015 In re Deepwater Horizon opinion, the court noted that "a statute invalidating an indemnification clause does not relieve a party of a separate duty to obtain insurance," citing Section 127.005.

Separate does not mean unrelated. In In re Deepwater Horizon (Tex. 2015), an operator sought coverage as an additional insured under a drilling contractor's policies. The policies extended additional insured status "where required by written contract" and to parties the contractor was "obliged" to insure. The court held that this language required consulting the drilling contract, and that under that contract the operator's additional insured status was "limited to the liabilities" the contractor assumed in it. The court said the duties to indemnify and insure "may be separate and independent" but can also be "congruent."

The court distinguished an earlier 2008 decision involving a refinery owner, where a certificate of insurance named the owner as an additional insured and the policy wording did not tie the owner's coverage to the service contract. There, coverage was decided by the policy itself.

The ISO 12 19 edition additional insured forms build the same link into the policy: coverage "will not be broader than that which you are required by the contract or agreement to provide," and the most the insurer pays is the lesser of what the contract requires or the policy limits.

• Read the additional insured clause for words like "for liabilities assumed by Contractor." That phrasing can tie the operator's insured status to your indemnity scope.
• Match the endorsements to the contract. If the MSA requires ongoing and completed operations coverage, get both. See ongoing vs completed operations.
• Match limits on purpose. The required limits can cap both the indemnity under Chapter 127 and the additional insured coverage under the lesser-of wording.
• Add primary and waiver language. Additional insured status works best with primary and non-contributory wording and a waiver of subrogation.

How the indemnity and additional insured clauses interact in your MSA is a legal question for your attorney. We make sure the policy wording matches what the contract says.