This article originally appeared as a Gavel to Gavel guest column in the Journal Record on December 26, 2025.
By Phillips Murrrah attorney Max G. West
Max G. West
In the wake of the Oklahoma Supreme Court’s 2024 decision in Knox v. Oklahoma Gas & Electric Co., many Oklahoma businesses, general contractors, and energy operators were forced to abandon a common protection against liability for injuries sustained by the employees of their subcontractors: the indemnity clause.
In short, an indemnity clause is merely a promise by one party (the indemnitor) to reimburse another party (the indemnitee) for the costs of defending against a lawsuit brought against the indemnitee. In the specific context of a business and its subcontractor, the upstream business would hire the subcontractor under a Master Service Agreement containing an indemnity clause. The clause functions as a safety net and is intended to ensure that if a subcontractor’s employee is injured and sues the upstream business for damages arising from the injury, the subcontractor ultimately bears the cost.
However, the Knox Court dismantled these standard protections. There, the Court held that because a subcontractor who pays workers’ compensation benefits is shielded by the “exclusive remedy” protections of the Administrative Workers’ Compensation Act’s (“AWCA”), it could not be contractually forced to indemnify a third party for the same injury. This ruling effectively invalidated indemnity clauses in this context, leaving upstream Oklahoma businesses exposed to multimillion-dollar lawsuits with no ability to pass liability down the chain.
The Legislative Fix: Senate Bill 642
In response to Knox, the Oklahoma Legislature amended the AWCA by passing Senate Bill 642, which took effect immediately upon being signed by the Governor in May. This amendment restored the pre-Knox liability landscape and offered businesses two distinct paths for protection.
First, the amendment explicitly allows businesses to include indemnity clauses in contracts with subcontractors, effectively overriding Knox and returning Oklahoma to its prior liability standards. However, business owners must remember that an indemnity clause is merely a promise by the subcontractor to reimburse the upstream business for the costs of defending a claim. If the subcontractor is insolvent, or their insurance carrier denies the claim, the general contractor could still be left holding the bag.
The amended AWCA offers a second option to businesses. In addition to—or instead of—indemnity, businesses may enter into a written agreement to provide the subcontractor and their employees with workers’ compensation insurance coverage. In exchange for securing this coverage, the upstream business gains the same “exclusive remedy” immunity enjoyed by the subcontractor. This relieves the upstream business of liability for negligence claims by the subcontractors’ employees altogether, rather than simply gaining a right to be reimbursed later.
The decision to rely on standard indemnity or to elect the stronger “immunity” option will depend on your specific situation, including administrative costs, the financial health of your subcontractor, and the risks associated with the project. If your business utilizes subcontractors, you should consult with legal counsel to review your current contracts to ensure you operate with the fullest protections available under the newly amended AWCA.
About the author:
Max G. West is a litigation attorney with experience representing individuals, corporations, and municipalities in various civil litigation matters. His practice includes first—and third-party insurance defense, breach of contract, insurance bad faith, property loss, and complex commercial litigation in state and federal courts. Max has also successfully represented plaintiffs in civil litigation involving business disputes, personal injuries, medical malpractice, and civil rights violations under Section 1983.
CONTACT: mgwest@phillipsmurrah.com | 405.552.2458
Visit Phillips Murrah on social media:
