Underwriters at Lloyd'S Syndicate 1036 v. Danos & Curole Marine Contractors, L.L.C.
Docket: No. 14-375
Court: Louisiana Court of Appeal; October 1, 2014; Louisiana; State Appellate Court
An employee of Danos. Curóle Marine Contractors, L.L.C. sustained injuries while attempting to swing from a fixed platform owned by Badger Oil Corporation to a utility vessel operated by Kevin Gros Offshore, L.L.C. The employee, Thao Nguyen, subsequently filed a negligence lawsuit against both Badger Oil and Kevin Gros. Under a Master Service Agreement (MSA) between Kevin Gros and Badger Oil, Kevin Gros sought defense and indemnity from Badger Oil regarding the claims. Badger Oil, in turn, requested similar indemnity from Danos based on a separate MSA with Danos, which Danos denied, arguing the MSA did not expressly require indemnification for third-party claims.
During the hearing on cross motions for summary judgment, the trial court ruled in favor of Badger Oil and its insurer, Underwriters at Lloyd’s Syndicate 1036, while denying the motions from Danos and its insurer, Gray Insurance Company. The court interpreted the MSA's broad language as extending indemnity beyond tort liability to include contractual obligations to third parties. Although the parties agreed Texas law would apply, the court did not determine whether Texas or general maritime law was applicable, asserting the interpretation would be consistent under either law.
The appellate court amended the trial court's judgment, affirming Texas law governs the MSA's interpretation, reversing the summary judgment for Underwriters and Badger Oil, and granting summary judgment in favor of Danos and Gray, dismissing all claims with prejudice. The issues for consideration included the applicable law for interpreting the MSA and whether the trial court erred in its summary judgment decisions.
Badger Oil demanded that Danos. Curóle and its insurer, Gray, defend and indemnify it concerning Mr. Nguyen’s tort claims based on the indemnity provisions in their Master Service Agreement (MSA). Citing Section 7(a) of the MSA, Badger Oil asserted that Danos. Curóle is required to protect and hold harmless Badger Oil and its associates from all claims related to work performed under the MSA, except for claims resulting from Badger Oil's gross negligence or willful misconduct. Additionally, Badger Oil invoked Section 6(f) of the MSA regarding insurance, arguing for additional insured status, and a waiver of subrogation by Danos. Curóle’s insurers. Danos. Curóle and Gray accepted these demands.
Separately, Kevin Gros also requested that Badger Oil defend and indemnify him against Mr. Nguyen’s claims, prompting Badger Oil to seek defense from Danos. Curóle based on their contractual relationship with Gros, again referencing Section 7(a). Danos. Curóle rejected this request, claiming that the language did not obligate them to defend and indemnify Badger Oil for third-party contractual obligations. Subsequently, Underwriters and Badger Oil sought a declaratory judgment and filed a Motion for Summary Judgment to compel Danos. Curóle and Gray to defend and indemnify them regarding Gros's claims, including reimbursement for legal costs. In response, Danos. Curóle and Gray filed cross motions for summary judgment, seeking dismissal of the defense and indemnity claims related to Kevin Gros.
The trial court granted summary judgment in favor of Underwriters and Badger Oil while denying Danos, Curóle, and Gray's cross motions. The court interpreted the indemnity provision in Section 7(a) of the Master Service Agreement (MSA) as providing broad protection against various claims, including contractual liabilities, for personal injuries and related issues. Although the parties agreed on Texas law governing the MSA's interpretation, the court refrained from determining whether Texas law or general maritime law was applicable, noting that the contract's interpretation would yield the same outcome under either.
Danos, Curóle, and Gray are appealing, asserting Texas law should govern the MSA interpretation and claiming they are entitled to summary judgment since the indemnity clause does not cover third-party contractual liabilities, nor does Badger Oil qualify for additional insured status under the Gray policy.
Choice of law issues are reviewed de novo. The court outlines the standard for granting summary judgment, emphasizing the need to consider evidence and inferences favorably for the non-moving party. If the moving party meets the burden of proof regarding a lack of factual support, the burden shifts to the non-mover to demonstrate sufficient evidence to support their case.
Additionally, the court addresses the choice of law concerning the MSA, balancing the MSA's provision for general maritime law against the Outer Continental Shelf Lands Act (OCSLA), which might necessitate applying Texas state law. Under OCSLA, federal law supplemented by adjacent state law applies to artificial islands like those covered in the case, provided certain conditions are met regarding the applicability of federal maritime law and consistency with federal law.
Texas law governs the interpretation of the Master Service Agreement (MSA) due to its situs requirement for contractual indemnity claims, as established by the Fifth Circuit. The court determined that the controversy arises under the Outer Continental Shelf Lands Act (OCSLA) because the MSA involved sandblasting and painting services on a fixed platform located offshore Texas. For federal law to apply, the contract must be maritime in nature. The determination of whether a contract qualifies as maritime is based on six factors related to the work performed and its connection to navigable waters. In this case, the MSA does not constitute a maritime contract since the services were rendered solely on a fixed platform without involvement of a vessel. Consequently, federal maritime law does not govern the MSA.
Regarding the compatibility of state and federal laws, the Texas Oilfield Indemnity Act is similar to Louisiana's Act and is not inconsistent with federal law concerning non-vessel-related indemnity agreements. Additionally, the rules for interpreting indemnity agreements under Texas law align closely with those under general maritime law. Texas courts emphasize the intent of the parties in contract interpretation, further supporting that Texas law applies without conflict with federal regulations.
The Master Service Agreement (MSA) includes a choice of law provision stipulating that general maritime law applies to incidents involving offshore work, with Louisiana law as a fallback if necessary. However, the Fifth Circuit has ruled that such choice of law provisions are void concerning disputes governed by the Outer Continental Shelf Lands Act (OCSLA), which favors the application of adjacent state law. Since Mr. Nguyen's injuries occurred on the Outer Continental Shelf, the MSA's choice of law provision is unenforceable, and Texas law will govern the MSA.
Regarding indemnity obligations, Danos. Curóle is not required to defend or indemnify Badger Oil against its contractual obligations to third parties, such as Kevin Gros. The Texas Supreme Court’s guidance on contract interpretation emphasizes determining the true intentions of the parties by reviewing the entire contract. Section 7(a) of the MSA specifies indemnity for claims related to personal injury or illness suffered by Danos. Curóle, with no mention of indemnifying for third-party contractual liabilities. In contrast, other sections (7(e), 7(f), 7(g), and 7(h)) explicitly include third parties as indemnitees, indicating a deliberate choice not to include such coverage in Section 7(a). This interpretation aligns with established Texas contract principles and ensures that indemnitors are aware of potential liabilities to parties outside the contract negotiations.
Underwriters and Badger Oil cite cases that support indemnification for contractual claims involving third parties, with all referenced rulings emphasizing the inclusion of third party invitees and contractors in the indemnity provisions. However, the absence of explicit mention of such indemnitees in Section 7(a) suggests that recognizing contractual liabilities to third parties would contravene public policy. The expansive language in Section 7(a) for indemnification against claims for personal injury, death, disease, or illness is limited to tort claims, as established by Fifth Circuit precedent. The explicit language of Section 7(a) confines indemnity to tort-based claims; there is no indication that it encompasses contractual claims arising from personal injuries. Thus, Badger Oil’s contractual liability claim does not meet the criteria for coverage under Section 7(a). Additionally, while Gray was obligated to name Badger Oil as an additional assured under the Master Service Agreement (MSA), this coverage is limited. Section 6(f) clarifies that Badger Oil does not benefit from Danos Curóle’s insurance for indemnity obligations not arising under the MSA.
Indemnification for Badger Oil’s contractual liabilities to Kevin Gros is not covered under the Master Service Agreement (MSA), resulting in Underwriters and Badger Oil lacking additional assured status under the Gray insurance policy with Danos. The interpretation of the MSA can be determined solely from the document itself, making it a legal question suitable for summary judgment. After reviewing the MSA, it is concluded that Danos is not obligated to indemnify or defend Badger Oil regarding its liabilities to Gros, and Badger Oil does not qualify as an additional insured under the Gray policy. Consequently, the trial court's summary judgment in favor of Underwriters and Badger Oil is reversed, and summary judgment is granted in favor of Danos and Gray, dismissing all claims against them with prejudice. The court also determines that Texas law governs the MSA's interpretation. The MSA specifies that if the work is offshore, it will follow General Admiralty and Maritime Law; if onshore, it will be governed by Louisiana law, excluding any conflicting choice of law rules. Costs are assigned to Underwriters and Badger Oil.
