Lack of record evidence on ultimate issue leads to remand: Salvage of Decommissioned Platform Has Nexus to a Well for La. Oilfield Indemnity Act

Lack of record evidence on ultimate issue leads to remand:

Salvage of Decommissioned Platform Has Nexus to a Well for La. Oilfield Indemnity Act

By: Megan Finger

Edited By: Andrew Lifsey

Tetra Techs., Inc. v. Contl. Ins. Co., 755 F.3d 222 (5th Cir. 2014)Tetra Technologies v. Continental involves an indemnity dispute arising out of a personal injury occurring during the salvage operations of a decommissioned platform. Continental Insurance Co. (“Continental”) appealed an adverse District Court ruling requiring Continental and its co-defendant, Vertex Services (“Vertex”), to indemnify Tetra Technologies, Inc. (“Tetra”) and Maritech Resources, Inc. (“Maritech”). The relevant facts are as follows: the injured party, Abraham Mayorga, who was employed by Vertex, was insured during work to decommission a platform. Vertex had entered into a Master Service Agreement with Tetra, which required Vetrex to indemnify Tetra pursuant to a reciprocal indemnity clause. Tetra then entered into an agreement with Maritech to salvage a decommissioned oil production platform located at Eugene Island. Mayorga was one of the Vertex employees sent to work on the Maritech job by Tetra. Mayorga was injured when a bridge collapsed that connected two parts of the platform.The central issue was whether Continental was required to indemnify Tetra/Maritech for Mayorga’s personal injury. This question has several moving parts. In order to determine whether Continental owed indemnification, the court addressed three issues: “(1) whether OCSLA requires the court to adopt Louisiana law as surrogate federal law; (2) if (or assuming, as did the district court) Louisiana law must be adopted as surrogate federal law, whether LOIA voids the indemnity agreement here; and (3) if LOIA does not void the indemnity agreement, whether the Policy excludes coverage.”To answer the first question in the affirmative, three requirements must be met. First, “[t]he controversy must arise on a situs covered by OCSLA (i.e., the subsoil, seabed, or artificial structures permanently or temporarily attached thereto).” Second, “[f]ederal maritime law must not apply of its own force.” Third, “[t]he state law must not be inconsistent with Federal law.”” After examining each requirement, the court concluded that the record was inadequate to determine whether there was an OCSLA situs, and whether federal maritime law applies. The court did find that the state law, LOIA, was consistent with federal law. Based on the lack of evidence, the court remanded to the lower court to determine if the “nature of the contract” was platform or maritime-related.As to the second question, , the court applied a two-part test to determine whether LOIA applies to this dispute and voids the indemnity agreement: “First, there must be an agreement that ‘pertains to’ an oil, gas or water well. If the contract does not pertain to a well, the inquiry ends…[Second], [i]f the agreement “has the required nexus to a well,” the court examines “the contract’s involvement with operations related to the exploration, development, production, or transportation of oil, gas, or water.” Only if both prongs are meet will LOIA invalidate any indemnity provision contained in or collateral to that agreement. Though usually a fact-intensive analysis, the only question the court needed to answer was whether salvaging a decommissioned platform has a sufficient nexus to a well for LOIA to apply. After reviewing the relevant case law, the court concluded that a contract for salvaging a platform from a decommissioned oil well had a sufficient nexus to a well under LOIA and reversed the district court’s interpretation of LOIA.As a result of this finding, if the district court on remand determines the nature of the contract work is platform related, Tetra will not be entitled to indemnity from Continental or Vertex. If the district court instead determines that Louisiana law does not apply, then the outcome depends on whether the policy itself excludes coverage.After reviewing the relevant law and contract provisions, the court determined that the policy did not exclude coverage due to ambiguous language in the policy. Consequently, the outcome of this case revolves around whether the district court on remand determines the nature of the contract. If the district court concludes it is platform-related, then  Louisiana law applies to this dispute, and LOIA will void the indemnity agreement. If the district court concludes that Louisiana law does not apply, then Tetra and Maritech will be entitled to indemnity because the policy does not exclude coverage.