Court Addresses Wild Well and Cleanup Exception to Louisiana Oilfield Indemnity Act: Indemnity Clause in Contract for Oil Spill Held Enforceable

Author: Darla Nguyen

Sanchez v. American Pollution Control Corp., 2021 WL 4647864, 2021 U.S. Dist. LEXIS 193743* (E.D. La. Oct. 7, 2021). 

On October 7, 2021, Judge Barbier in Sanchez v. American Pollution Control Corp., held that the prohibition of indemnity for personal injury and death claims in oil and gas contracts under the Louisiana Oilfield Indemnity Act (“LOIA”), La. Rev. Stat. Ann. § 9:2780, did not apply to a claim for contractual indemnity arising out of the cleanup after the BP oil spill. 

Plaintiff, Victoria Sanchez, sought to recover for injuries she allegedly sustained in 2010 while working aboard a vessel in connection with the “Vessels of Opportunity” program in Venice, Louisiana for the Deepwater Horizon oil spill response efforts. Plaintiff settled her claims with all defendants on September 24, 2021. 

The current motion related to the crossclaim brought by defendant BP against United States Environmental Services, LLC (“USES”). BP alleged that a Master Service Contract (“Contract”) between BP and USES was in full force and effect and that it is entitled to contractual indemnity from USES for any liability BP may have to plaintiff or other parties. BP filed the instant motion seeking summary judgment. The court ultimately granted the summary judgment holding that the Contract is enforceable and USES must indemnify BP against plaintiff’s claims. 

The court reached its conclusion by first determining whether the Contract applied to plaintiff’s claim. The court analyzed the Contract’s plain language in § 3.01, which stated that, “[a]ny services performed by [USES] for [BP] that are not governed by another written master service agreement shall be considered as Work performed under this Contract irrespective of whether a written Work Release has been executed.” The court held that it was immaterial that there was no work release or work order governing USES’ work at the Venice Facility because there was no evidence that another master service agreement controlled. Thus, the court determined that the Contract controls.

The court then determined which law governed the Contract. BP argued that maritime law governed; and therefore, USES had a duty to indemnify BP per § 24.02 of the Contract. In opposition, USES asserted that Louisiana law applied. USES contended that the contract did not contain anything maritime in nature, and the terms “vessel” and “offshore” were not in the Contract. 

A contract is maritime in nature if it satisfies the two-prong test from In re Larry Doiron, 879 F.3d 568 (5th Cir. 2018): (1) is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters? and (2) does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract? 

Judge Barbier held that the Contract was one to provide services to facilitate activity on navigable water. The Contract’s language “on, over, or in close proximity to navigable waters or vessels or in any way involves maritime workers,” anticipated that USES would provide spill response services on navigable waters and require additional insurance. The court also held that BP had presented evidence that oil spill response work contemplates the use of vessels. The parties anticipated to respond to oil spills because the title of the Contract is “Spill Response Services.” There was no debate that vessels were involved in the cleanup from the oil spill. USES offered a singular, conclusory statement that the Contract does not satisfy either prong under Doiron without further explanation. Thus, the court found that USES, as the non-movant, did not produce sufficient evidence, or any evidence at all, to present a genuine issue of material fact. Therefore, the Contract is maritime in nature.

The court noted that even if the Contract is not maritime in nature, the Louisiana Oilfield Indemnity Act does not apply as it carves out an exception for: “loss or liability for damages, or any other expenses, arising out of or resulting from...[b]odily injury or death to persons arising out of or resulting from the retainment of oil spills and clean-up and removal of structural waste subsequent to a wild well…so as to protect the safety of the general public and the environment.”

The court then interpreted the language of the indemnity clause which is a question of law   citing Fontenot v. Mesa Petroleum Co., 791 F.2d 1207, 1214 (5th Cir. 1986). As the language of the indemnity clause is clear and unambiguous, and USES never argued otherwise, the indemnity clause is enforceable requiring USES to indemnify BP from and against the personal injury claim brought by plaintiff.