Stanfield v. Island Operating Co.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
January 12, 2009
No. 08-30294 Charles R. Fulbruge III
Clerk
JAMES STANFIELD
Plaintiff
v.
ISLAND OPERATING COMPANY, INC; ET AL
Defendants
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OMEGA NATCHIQ, INC
Third-Party Plaintiff -
Cross Defendant- Appellant
v.
TRAVELERS INSURANCE, CO.
Third-Party Defendant -
Cross Claimant-Appellee
Appeal from the United States District Court for the Eastern District of
Louisiana, Civil Action No. 06-2323
Before HIGGINBOTHAM, ELROD, and HAYNES, Circuit Judges.
No. 08-30294
PER CURIAM:*
This suit presents an appeal from a district court order requiring a
construction contractor to indemnify the insurer of a company owning offshore
wells and platforms for the costs of defending the company against a suit
brought by one of the contractor’s employees. For the following reasons, we
AFFIRM.
I
Merit Energy Company contracted with Appellant, Omega Natchiq, Inc.,
to perform construction repairs on Merit’s platforms in the Gulf of Mexico. Their
relationship was governed by a Master Service Agreement in which Omega
agreed to “fully and unconditionally release, protect, defend, indemnify, and hold
harmless the indemnified Merit Parties and their respective insurers” from any
claims of illness, injury, or death of any Omega employees arising out of the
contract work.
An Omega employee, James Stanfield, in the course of his work under the
contract, allegedly sustained injuries when he struck a pole on the platform deck
while being transferred from a vessel to the platform by way of a personnel
basket suspended from a crane. Stanfield sued Merit. Merit moved for and was
granted summary judgment, the district court finding that Merit was neither
vicariously nor directly liable for Stanfield’s alleged injuries.
Merit’s cost of defense, $62,438.86, was borne by Merit’s insurer, Appellee
Travelers Insurance. Merit, at the outset of the suit, demanded that Omega
provide for its defense pursuant to the Master Service Agreement. Omega,
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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however, refused, pointing to the Louisiana Oilfield Anti-Indemnity Act.1 Courts
have interpreted the Act to prohibit a well owner from demanding indemnity
from a contractor if there is any negligence or fault on the part of the owner.2
Accordingly, Travelers, as Merit’s primary insurer, shouldered the cost of
defense. After summary judgment was entered finding Merit faultless,
Travelers sought indemnity from Omega.3 The district court granted Travelers’
summary judgment motion, awarding the $62,438.86 in defense costs. Omega
appeals and we review de novo.4
II
Omega contends on appeal, as it did at the district court, that despite the
indemnity clause in the Master Services Agreement, Omega and Merit’s insurer,
Travelers, were solidary obligors under Louisiana law, each liable to pay Merit’s
defense in its entirety, but between themselves each liable for one-half.5 The
district court disagreed, finding that Omega and Travelers were not solidary
obligors because their obligations differed:
Travelers’ obligation and duty to its insured is broad. It is to
pay for the defense of its insured on the main demand . . . . On
the other hand, Omega’s obligation is much narrower. Omega
1
LA. REV. STAT. ANN. § 9:2780 (2005).
2
Meloy v. Conoco, Inc., 504 So. 2d 833, 838–39 (La. 1987) (“Therefore, we conclude that
LA.R.S. 9:2780 nullifies completely any provision in any agreement that requires defense
and/or indemnification where there is any negligence or fault on the part of the indemnitee.”).
3
Id. at 839 (“If it is established at trial that there is no ‘negligence or fault (strict
liability) on the part of the indemnitee,’ the Act does not prohibit indemnification for cost of
defense.”).
4
See Parm v. Shumate, 513 F.3d 135, 142 (5th Cir. 2007).
5
See LA. CIV. CODE ANN. art. 1794 (“An obligation is solidary for the obligors when each
obligor is liable for the whole performance. A performance rendered by one of the solidary
obligors relieves the others of liability toward the obligee.”); LA. CIV. CODE ANN. art. 1804
(“Among solidary obligors, each is liable for his virile portion. If the obligation arises from a
contract or quasi-contract, virile portions are equal in the absence of agreement or judgment
to the contrary. . . .”).
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is to pay the indemnitee’s defense costs if and only if, a finding
is made that the indemnitee is free from fault.6
Because of this timing difference as to when the obligations of Omega and
Travelers arose, the district court found that they were not solidary obligors;
that on paying Merit’s cost of defense, Travelers became subrogated to the rights
of Merit, and under the Master Services Agreement entitled to recover from
Omega the full costs of defending Merit.
We review the district court’s application of Louisiana law, without
considering whether general maritime law applies, because this case involves
analysis of a contract regarding repair work on an fixed structure and because
the parties do not contend that maritime law applies.7 We hesitate to adopt the
district court’s reasoning for finding Omega and Travelers were not solidarily
obligated to pay Merit’s defense. Louisiana law is less clear on the matter than
the district court order found. There are decisions from Louisiana appellate
courts holding that separate insurers, liable to the same insured and for the
same coverage, are8 and are not9 solidary obligors. And, in Louisiana “an
6
Stanfield v. Island Operating Co., No. 06-2323, 2007 WL 3408285, at *3 (E.D. La.
2007).
7
We have interpreted the Outer Continental Shelf Lands Act, 43 U.S.C. § 1333(a)(2)(A),
to provide for the assimilation of state law—here the Louisiana Oilfield Anti-Indemnity Act—to
OCSLA cases when three factors are met: “(1) The controversy must arise on a situs covered
by OCSLA (i.e. the subsoil, seabed, or artificial structures permanently or temporarily attached
thereto). (2) Federal maritime law must not apply of its own force. (3) The state law must not
be inconsistent with Federal law.” Hodgen v. Forest Oil Corp., 87 F.3d 1512, 1523 (5th Cir.
1996) (citing Union Tex. Petroleum Corp v. PLT Eng’g, 895 F.2d 1043, 1047 (5th Cir. 1990).
In Hodgen, a case presenting similar facts to those present here, we found the factors satisfied:
there was a contract for the operation and maintenance of a fixed platform, a contract
employee was injured when swinging from the platform to a vessel, and the Louisiana Oilfield
Indemnity Act was found not inconsistent with federal law. Hodgen, 87 F.3d at 1527–29.
8
Great Southwest Fire Ins. Co. v. CNA Ins. Co., 557 So. 2d 966, 968 (La.1990); Hobbs
v. Teledyne Movible Offshore, Inc., 632 F.2d 1238, 1241–42 (5th Cir. 1980).
9
Tufaro v. Stanley Bishop Real Estate, Inc., 422 So. 2d 220, 221–22 (La. App. 4th Cir.
1982); Fremin v. Collins, 194 So. 2d 470, 473–74 (La. App. 4th Cir. 1967).
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obligation may be solidary though for one of the obligors it is subject to a
condition or term.”10 Put plainly, the fact that an obligation may not be enforced
against one obligor until a condition is fulfilled does not necessarily preclude
solidarity between it and another obligor which is immediately liable.11
But we need not resolve whether Omega and Travelers were solidary
obligors to decide this case. By the clear language of the Master Services
Agreement, Omega is liable for Merit’s defense costs whether or not Omega and
Travelers are solidary obligors. If Omega and Travelers are solidary obligors,
virile apportionment is merely a presumption and parties may agree to
apportion liability differently.12 That is the case here, as Omega agreed to
“unconditionally release, protect, defend, indemnify, and hold harmless” Merit’s
insurers in precisely the situation presented. If, on the other hand, Omega and
Travelers are not solidary obligors, Travelers, after paying for Merit’s legal
defense, became conventionally subrogated to Merit’s right to enforce the
10
LA. CIV. CODE ANN. art. 1798.
11
See S. Litivinoff, The Law of Obligations § 7.69 in 5 LOUISIANA CIVIL LAW TREATISE
(2d ed. 2001). These principles may have been at play in Great Southwest Fire, 557 So. 2d at
966–69, where the Louisiana Supreme Court held that an insured's primary liability insurer
and its excess liability insurer were solidarily obligated for the portion of a judgment against
the insured that was in excess of the primary policy and that was caused by the primary
insurer's bad faith failure to settle. The primary insurer's liability for the excess portion of the
judgment did not arise until it was found to be the cause of the excess liability, yet the court
nevertheless found both insurers solidarily obligated for the excess portion. Id.
12
See Great Southwest Fire, 557 So. 2d at 969; Litivinoff, supra note 11, § 7.78.
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indemnity clause in the Master Services Agreement.13 Either way, Omega must
honor its contractual obligation to indemnify Merit’s insurer. AFFIRMED.
13
See LA. CIV. CODE ANN. art. 1827 (“An obligee who receives performance from a third
person may subrogate that person to the rights of the obligee, even without the obligor's
consent.”); A. Copeland Enters., Inc. v. Slidell Mem’l Hosp., 657 So. 2d 1292, 1297–98 (La.
1995); Cont’l Cas. Co. v. Canadian Universal Ins. Co., 605 F.2d 1340, 1344–45 (5th Cir. 1979)
(“[Subrogation] applies whether the parties are primary or, as here, secondary obligors, and
to suretyship situations. Therefore, if Continental Casualty discharged the duty owed by
Canadian to Continental Diving . . . then Continental Casualty is subrogated to the rights of
Continental Diving.”) (internal citation omitted).
6