265 So. 3d 880
La. Ct. App.2019Background
- Accident (Sept. 26, 2013) on an Integrated Exploration & Production platform: Valerus employee Dustin Rogers injured; Coastal Marine was Integrated's subcontractor. Plaintiffs sued Integrated and Coastal Marine. Integrated and Coastal Marine sought contractual defense/indemnity under a Master Contract Service Agreement (MCSA) with Valerus.
- MCSA contained a "knock for knock" reciprocal indemnity clause obligating each party to defend/indemnify the other for its own employees' claims, and required Valerus to name Integrated as an additional insured; it did not require Valerus to add subcontractors such as Coastal Marine as additional insureds but obligated Valerus to defend/indemnify members of Integrated’s "Group."
- Valerus had primary insurance (Zurich, $1M) and excess (AGLIC, $25M). Integrated, Coastal Marine, and others had separate insurance carriers implicated. Valerus was dismissed earlier from district court litigation based on an arbitration clause; other parties proceeded in court.
- District court issued three judgments (Dec. 7, 2016; June 16, 2017; Dec. 19, 2017) ordering Zurich/AGLIC to defend Valerus and indemnify Integrated and Coastal Marine and to fund/participate in a $5M settlement; Zurich/AGLIC appealed.
- On appeal, Zurich/AGLIC raised (inter alia): LOAIA voiding indemnities; MCSA limitation-of-liability capping Valerus's indemnity; policy endorsements/exclusions (additional insured endorsement and policy limits); ranking/other-insurance issues; Coastal Marine’s standing to sue insurer directly; and that arbitration barred the court's rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of LOAIA to MCSA indemnity | MCSA does not "pertain to a well" because platform commingles gas and functions as processing/scrubbing station; LOAIA inapplicable. | LOAIA bars indemnity because contract relates to oil/gas operations and therefore pertains to a well. | Court: LOAIA does not apply — facility commingled gas from multiple pipelines so gas could not be identified to a particular well; indemnity provisions enforceable. |
| MCSA limitation-of-liability caps indemnity | Integrated: Section 12 (6-month payment cap) does not limit indemnity obligation in Section 11; indemnity separate from Services. | Zurich/AGLIC: Section 12 limits aggregate liability to amounts paid by Integrated to Valerus in prior 6 months (zero), so no indemnity owed. | Court: Section 12 applies to contract performance/services, not to indemnification/insurance obligations; limitation does not bar indemnity. |
| Policy coverage / additional insured endorsement and limits | Integrated/Coastal Marine: Valerus procured contractual-liability and additional-insured coverage covering MCSA obligations; Coastal Marine is intended third-party beneficiary of Valerus' policy (insured contract). | Zurich/AGLIC: Broad-form additional-insured endorsement and exclusions preclude coverage for indemnitee’s sole negligence; policy limits and ranking arguments limit exposure. | Court: Zurich/AGLIC not entitled to summary judgment; endorsement does not bar coverage as a matter of law; Coastal Marine is a third-party beneficiary entitled to sue insurer; Zurich liable up to policy limits ordered ($1M Zurich, $4M AGLIC here). |
| Standing / direct action and arbitration waiver | Coastal Marine: entitled to direct action against Zurich as intended third-party beneficiary (stipulation pour autrui); arbitration was not timely invoked by Zurich/AGLIC so waived. | Zurich: LDAS and related jurisprudence bar contractual direct actions by parties who have not sued the insured; arbitration clause required dismissal/stay and Valerus’s dismissal to arbitration precludes court determinations. | Court: Coastal Marine has right to sue insurer as third-party beneficiary; LDAS did not bar claim. Zurich/AGLIC waived arbitration by failing to timely assert it in district court. |
Key Cases Cited
- Jones v. Estate of Santiago, 870 So.2d 1002 (La. 2004) (de novo review and summary-judgment standards)
- Fontenot v. Chevron U.S.A., 676 So.2d 557 (La. 1996) (two-step test for LOAIA: contract must "pertain to" a well and relate to exploration/development/production/transportation)
- Transcontinental Gas v. Transportation Ins. Co., 953 F.2d 985 (5th Cir. 1992) (factors for whether a contract "pertains to a well")
- Lloyds of London v. Transcon. Gas Pipe Line Corp., 38 F.3d 193 (5th Cir. 1994) (LOAIA inapplicable where gas is commingled/processed such that it no longer "pertains to a well")
- Weathersby v. Conoco Oil Co., 752 F.2d 953 (5th Cir. 1985) (explaining "knock for knock" indemnity structure)