Ridings v. Danos & Curole Marine Contractors, Inc.

Citations: 723 So. 2d 979; 1998 La. App. LEXIS 3330; 1998 WL 564590Docket: 97-CA-2710

Court: Louisiana Court of Appeal; November 9, 1998; Louisiana; State Appellate Court

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In the case of Jerry B. Ridings v. Danos, Curole Marine Contractors, Inc., and American Oilfield Divers, Inc., the Louisiana Court of Appeal addressed cross-claims in a maritime personal injury lawsuit stemming from an accident involving the plaintiff, an employee of Danos, who was injured while AOD's equipment was being transferred to Danos' vessel. The trial court granted summary judgment favoring Danos under an insurance provision in their contract with AOD, which required AOD to provide liability insurance covering Danos and to waive subrogation. AOD's cross-claims sought indemnity from Danos based on reciprocal indemnity clauses in the Master Service Contract (MSC) between the parties.

The court affirmed the trial court's interpretation that the insurance provision "primed" the indemnity provision, meaning Danos was entitled to insurance coverage before any indemnity obligations of AOD were triggered. However, the appellate court identified a genuine issue of fact regarding the potential invalidation of the insurance and indemnity provisions under the Louisiana Oilfield Anti-Indemnity Act. As a result, the court reversed the trial court's decision and remanded the case for further proceedings to resolve the issues surrounding the applicability of the LOAIA to both provisions.

The trial court's interpretation of the Master Service Contract (MSC) is supported by the precedent set in Tullier and other cases, including Klepac, Woods, and Ogea. However, the minority view in Spell suggests a different outcome, particularly in cases where a contractor fails to obtain required additional insurance coverage. A significant factual issue exists regarding whether the MSC's requirement for AOD to purchase additional assured insurance is void under the Louisiana Oilfield Anti-Indemnity Act (LOAIA). 

The LOAIA states that provisions requiring defense or indemnification for death or bodily injury due to negligence or fault of the indemnitee, their agents, employees, or responsible contractors are void and against public policy. It specifically defines "agreement" in the context of oil, gas, or mineral drilling operations to include all related activities and services. Furthermore, any provision that aims to circumvent these prohibitions, such as waivers of subrogation or additional insured endorsements, is also declared null and void. The Act applies to agreements related to future indemnity for activities outlined within its scope.

Master or general service agreements, referred to in the oil industry as blanket contracts, are specifically addressed in this Act. Contracts providing indemnity executed before the Act's effective date and governing specific terminable jobs listed in Subsection C are exempt from the Act's provisions. Notably, a party that is solely or concurrently negligent in relation to death or bodily injury cannot enforce provisions for being added as an additional assured on the other party's insurance policy or for a waiver of subrogation.

The enforceability of the insurance provision in the Master Service Contract (MSC) is contingent upon whether D.C. or its employees were solely or concurrently negligent regarding Mr. Ridings' injury, a matter not yet decided. Therefore, a genuine issue of material fact exists, preventing the granting of summary judgment based on that insurance provision. D.C. claims that the Louisiana Oilfield Indemnity Act (LOAIA) does not apply to the insurance provision because the MSC does not pertain to a well, which is a requirement for LOAIA’s applicability. However, it is established that the work performed by AOD and D.C. was related to Murphy Oil Company wells. The MSC does not specify particular work for Murphy Oil but instead covers any future work under unspecified work orders, raising questions about its applicability under LOAIA.

Master service contracts (MSCs) in the oil and gas industry are general agreements that outline the desire for labor, services, or materials without specifying particular tasks. Specific work is later defined through work orders, purchase orders, or invoices. The indemnification and insurance provisions within an MSC are not exempt from the Louisiana Oilfield Anti-Indemnity Act (LOAIA), as the statute explicitly applies to such contracts. Relevant case law supports the application of indemnity and insurance provisions that are included in MSCs, even when specific work orders are absent.

In the present case, AOD and D.C. did not have a direct work order for the work related to the accident, as both contracted separately with Murphy Oil Company. However, the MSC includes a clause that makes its insurance and indemnity provisions applicable to any work performed by AOD on D.C.'s property, establishing a link between the MSC and the work involving Murphy Oil Company's wells. D.C.'s argument that the MSC does not pertain to a well is unconvincing, as the MSC’s provisions are contingent upon the work being related to wells.

D.C. also raises concerns about AOD asserting a cross-claim for contractual indemnity while invoking the LOAIA against D.C.'s insurance claims. It is noted that the LOAIA only voids provisions that indemnify parties solely or concurrently negligent. Should the trial court determine that D.C. was not at fault, the insurance provisions would remain valid and take precedence over the indemnity provisions.

A finding of negligence or fault (strict liability) by the trial court against D.C. will result in the voiding of the insurance provision. Conversely, if AOD is found to be negligent or at fault, the indemnity provision favoring AOD will be voided. If AOD is not found to be at fault, the indemnity provision will remain intact but will be subordinate to the insurance provision if D.C. is also found not at fault. If both parties are found negligent, both provisions will be voided. As a result, the trial court's judgment is reversed, and the case is remanded for further proceedings.

In the rehearing petition, D.C. contends that the Louisiana Oilfield Anti-Indemnity Act (LOAIA) does not apply because the Master Service Contract (MSC) is not considered an 'agreement pertaining to a well.' D.C. argues that the MSC, which involves vessel services, does not fall under this definition. However, the court disagrees, stating that a contract for vessel services can qualify as an 'agreement pertaining to a well' depending on the context. The LOAIA's definition is broad and encompasses 'furnishing incidental transportation,' which could include vessels.

The court notes that while vessel service contracts are generally maritime and governed by federal law, the MSC is governed by Louisiana law due to its choice-of-law clause. The insurance and indemnity provisions of the MSC are subject to the LOAIA as they affect agreements related to a well, specifically referencing AOD's contract with Murphy Oil Company, which involved work on wells using D.C.'s vessel. Consequently, the MSC's provisions are applicable to AOD's well-related work and the LOAIA applies to these provisions. The petition for rehearing by Danos and Curole is denied.

Justice Plotkin dissents and advocates for a rehearing to clarify whether the Master Service Contract in question pertains to a well. He acknowledges that Louisiana courts interpret "pertains to a well" broadly, leading to extensive applications of the Louisiana Oilfield Indemnity Act (LOIA) across various contracts. Plotkin cites the extensive test from *Transcontinental Gas Pipe Line Corp. v. Transportation Insurance Co.* to assess contract relevance to a well, which includes factors such as the association of structures with gas gathering systems, geographic proximity to wells, the nature of pipelines, the function of facilities, ownership, and other details affecting the contractual nexus to the well.

He references *Livings v. Service Truck Lines of Texas, Inc.*, where services need not occur at a specific well site to fall under LOIA, provided they relate to exploration, development, production, or transportation of oil, gas, or water. In *Fuselier v. Amoco Production Co.*, the court ruled that maintenance activities at a production facility were integral to production, emphasizing that LOIA focuses on the contractual relationship between oil companies and contractors, without distinguishing service types. Lastly, in *Copous v. ODECO Oil, Gas Co.*, the LOIA's broad interpretation was again affirmed in a case involving a master service contract related to a workplace injury.

The court determined that ODECO's platform is a manned operation requiring living quarters, which are essential for its function. Thus, a contract to renovate these quarters is considered related to oil and gas production and falls under the Oilfield Indemnity Act (OIA). While courts have broadly interpreted the Louisiana Oilfield Indemnity Act (LOIA), the evidence in this case is insufficient to determine if the master service agreement pertains to a well. AOD's claim lacks substantial backing and the master service agreement primarily outlines vessel services without referencing well services. The appellate court believes it is premature to make a decision on this matter and recommends remanding the case to the trial court for further examination.

Additionally, Louisiana law governs the master service contract due to a choice-of-law clause, not federal maritime law. The court disagreed with a precedent (Tanksley v. Gulf Oil Corp.) suggesting that an indemnitee's prior settlement precludes determining negligence or fault; it argued that such determinations can still be made at trial. The excerpt also notes that the cited cases do not support the claim that vessel service contracts are necessarily unrelated to agreements concerning wells under the LOIA.