Jerry B. Hodgen Bobby Sue Hodgen v. Forest Oil Corporation, Forest Oil Corporation Ronald J. Doucet, Defendants-Third Party Plaintiffs-Intervenor Defendants-Cross Claim Plaintiffs-Appellants-Cross-Appellees, Forest Oil Corporation, in Its Capacity as Platform Owner Ronald J. Doucet, Defendants-Third Party Plaintiffs-Intervenor Defendants-Cross Claim Plaintiffs- Appellants- Cross v. A & a Boats Inc. C & G Marine Service Inc., Defendants-Third Party Plaintiffs-Intervenor Defendants-Cross Claim Defendants-Appellees-Cross v. Operators & Consulting Services Inc., Third Party Defendant-Cross Claim Chancellor Insurance Company Yorkshire Insurance Company Limited Cornhill Insurance Plc Allianz International Insurance Company Limited Ocean Marine Insurance Company Limited, Third Party Albany Insurance Co., Third Party Defendant-Third Party v. Aetna Casualty & Surety Co., Intervenor Plaintiff-Third Party
Docket: 94-41244
Court: Court of Appeals for the Third Circuit; July 29, 1997; Federal Appellate Court
The case involves Jerry B. Hodgen and Bobby Sue Hodgen as plaintiffs against Forest Oil Corporation and Ronald J. Doucet, among others. The United States Court of Appeals for the Fifth Circuit addressed an appeal concerning the Louisiana Oilfield Indemnity Act (LOIA), specifically whether an oil company can be indemnified for defense costs if it is found negligent. The court reaffirmed that under LOIA, an oil company, acting as a platform owner, cannot receive indemnification for its defense costs if it is negligent as a time charterer of a vessel.
The facts include Forest Oil's contract with Operators and Consulting Services (OCS) for offshore platform work, which stipulated that OCS would indemnify Forest for claims even if Forest was at fault. Jerry Hodgen, an OCS employee, was injured during a rope transfer from the platform to a vessel chartered by Forest. The district court determined that Hodgen's claims were valid against Forest as both the platform owner and the vessel's time charterer, finding Forest negligent in the latter capacity but faultless as the platform owner. The court's decision followed a prior opinion affirming part of the district court's judgment and certifying remaining issues to the Louisiana Supreme Court, which declined to accept them. The parties settled all but one certified issue prior to this ruling.
Forest filed a third-party complaint against OCS and five underwriters, seeking indemnification for defense costs under a Master Service Agreement. The district court ruled that Louisiana law invalidates the indemnity clause because Forest was found at fault as time charterer, despite its argument that it should receive indemnification because Hodgen's suit against it as platform owner lacked merit. Louisiana's Oilfield Indemnity Act (LOIA) prohibits indemnification agreements that require contractors to defend or indemnify oil companies when the latter are at fault. This law aims to address the power imbalance between oil companies and contractors, preventing adhesion contracts that unfairly burden contractors. However, the LOIA allows for cost of defense in cases deemed meritless. In this instance, Hodgen's claims against Forest were governed by different laws based on its dual roles: as platform owner under the Outer Continental Shelf Lands Act and as time charterer under the Longshore Workers' Compensation Act. The LOIA does not differentiate between the capacities of an oil company but protects contractors from bearing risks due to the oil companies' own negligence. Courts have interpreted the LOIA broadly, emphasizing that any fault by the oil company nullifies an indemnification provision, as established in Meloy v. Conoco, where the Louisiana Supreme Court ruled that the Act disallows indemnification if the oil company is found at fault, regardless of the contractor's concurrent negligence.
A suit must be entirely devoid of merit for an indemnification provision to be upheld. In this case, Forest was found 85% responsible for an accident, stemming from its role as the time charterer of a vessel, and its negligence contributed to Hodgen's injury during a swing rope transfer. Consequently, the court determined that Forest cannot recover defense costs, even for legal theories under which it was found not liable, as the Louisiana Supreme Court is unlikely to permit a company that is 85% at fault to seek such costs. The ruling affirms that the LOIA prevents Forest from recouping defense costs as the platform owner. Judge Jerry E. Smith dissented, arguing that the Louisiana Supreme Court should have addressed the statute, as the analysis presented by the majority is reasonable but does not adequately consider the distinct legal capacities under which companies operate in offshore oil exploration. Smith contended that the purposes of the Oilfield Indemnity Act would be better served by allowing indemnification for defense costs incurred as a fault-free platform owner. The relevant statutory provisions declare void any agreements requiring indemnity for bodily injury when there is negligence on the part of the indemnitee or their agents, emphasizing the inequity present in such situations. Some lower courts have previously rejected similar "dual capacity" arguments in worker's compensation cases.
