UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 99-31150
CYNTHIA ROBERTS, Etc., ET AL.,
Plaintiffs,
VERSUS
ENERGY DEVELOPMENT CORPORATION;
GRASSO PRODUCTION MANAGEMENT, INC.,
Defendants - Third Party Plaintiffs - Appellees,
VERSUS
THE GRAY INSURANCE COMPANY,
Third-Party Defendant - Appellant.
Appeal from the United States District Court
For the Eastern District of Louisiana
December 13, 2000
Before DUHÉ, EMILIO M. GARZA, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge:
In this appeal, Third-Party Defendant-Appellant Gray Insurance
Company (“Gray”) appeals from an adverse summary judgment entered
against it in an insurance indemnification dispute among various
insurance defendants. The underlying claim giving rise to an
insurance payment obligation was the death of Kerry Roberts, who
died when he fell through the top of an oil storage tank which he
was repairing. Surviving family members sued both the owner and
the production operator of the storage tank, Energy Development
Corporation (“EDC”), and Grasso Production Management, Inc.
(“Grasso”), respectively. These defendants then filed third-party
complaints against Roberts’s employer, Production Management
Control Systems (“PMCS”) and its insurance company, The Gray
Insurance Company (“Gray”), seeking indemnity pursuant to the
master service agreement between PMCS and EDC. For the reasons
discussed below, we reverse the district court’s order granting
summary judgment in favor of EDC and Grasso.
I. FACTUAL AND PROCEDURAL BACKGROUND
Kerry Roberts, an employee of PMCS, was killed installing a
fire protection device on the top of an oil storage tank owned by
EDC when the top of the storage tank collapsed and he fell through
and ultimately drowned in the oil stored therein. Roberts was sent
to the storage tank by EDC and Grasso, both of which had prior
knowledge that the top of the storage tank might be defective since
only months prior, a Grasso employee’s knee had gone through the
top of a companion storage tank. The storage tank at issue was
located on EDC’s E-5 platform facility in a canal in West Delta
Block 83, which is located in Plaquemines Parish, Louisiana. EDC
2
classifies its E-5 platform as an offshore facility but the West
Delta Block 83 facility is located in waters within the State of
Louisiana.
PMCS limits its services to performing work such as the
installation, repair, and testing of safety systems on oil and gas
production platforms. The work done on April 29, 1994, the day of
the accident, was performed pursuant to a verbal work order issued
four days earlier for the installation of a fire safety device on
the E-5 tank and platform. The work order was issued from the EDC
facility in Plaquemines, Louisiana.
EDC and PMCS had previously entered into a form master service
agreement (“MSA”) on May 7, 1993, which agreement was prepared by
EDC and was quite similar to the MSA entered into by EDC and
Grasso. The MSA did not bind EDC to perform any work at all for
PMCS and did not identify specific dates, time, or places for
performance. The MSA did, though, contain an indemnity provision
which required PMCS to carry $1 million in general liability
coverage and to designate EDC and EDC’s subcontractors as
additional insureds. The form MSA also contained a choice of law
provision, which provided as follows:
This Contract shall be governed by General Maritime
Law of the United States, wherever permissible.
Otherwise, the laws of the State of Texas shall
apply, excluding, however, any such law which would
direct the application of the law of a different
jurisdiction.
PMCS is a Louisiana corporation domiciled in Louisiana and EDC
3
is a New Jersey corporation with corporate offices in Ardmore,
Oklahoma. The record reveals that most of the work performed by
PMCS was done in Louisiana or in her waters, and a very small
portion was performed at a facility in the Outer Continental Shelf
in the non-territorial waters offshore of Texas, but none was
performed in either Texas or her territorial waters.
The insurance provisions of both the EDC/PMCS and the
EDC/Grasso MSAs required the contractee’s general comprehensive
liability policy to provide that EDC be covered as an additional
insured under the policy. Each of these entities had general
liability policies as follows: PMCS had a $1 million primary policy
and a $5 million excess policy, both issued by Gray; EDC’s primary
policy was issued by Lloyd’s for $250,000; and Grasso’s primary
policy was issued by Lloyd’s for $250,000 and it carried an excess
policy in the amount of $750,000, also issued by Lloyd’s. Both
PMCS’s and Grasso’s excess policies provide that any entity insured
under the primary policy is also covered under the excess policy.
Undisputedly, each primary policy also contains a provision that
a party becomes an additional insured when that status is required
by any contract with the named insured. An “endorsement” on the
Gray primary policy also contains a schedule of companies to whom
primary coverage is to apply. Neither EDC nor Grasso is listed as
one of the 27 in the schedule to whom the endorsement explicitly
refers.
4
When the Roberts family sued EDC and Grasso for the death of
Kerry Roberts, EDC and Grasso filed third-party complaints against
PMCS and its insurer, Gray, for MSA contractual indemnification.
PMCS denied the third-party claims and asserted in the alternative
that if indemnity was owed EDC, it was to be shared with Grasso,
and that if additional insured status was declared, it would be
shared with EDC’s and Grasso’s insurers.
The federal district court originally granted summary judgment
to PMCS and Gray based on the Louisiana Oilfield Indemnity Act
(“LOIA”), La. Rev. Stat. 9:2780, and dismissed EDC’s and Grasso’s
third-party complaints. EDC and Grasso then settled the underlying
claims of the Roberts family against them, with EDC paying the
family $544,300 and Grasso paying $816,833.75. EDC and Grasso then
appealed the district court’s dismissal of their third-party claims
against PMCS and Gray.
In Roberts v. Energy Development Corp., 104 F.3d 782 (5th Cir.
1997), a prior panel of our Court affirmed the district court’s
finding that the contract at issue “pertained to a well” and that
the LOIA would bar EDC’s and Grasso’s claims, but it remanded to
the district court for reconsideration of the district court’s
determination regarding the choice of law provision in the MSA.
Specifically, the prior panel remanded for a consideration of
whether the LOIA rendered unenforceable the agreement’s choice of
law provision. The prior panel observed that, in a diversity case,
5
the forum state’s conflict laws govern resolution of the
enforceability of a choice of law provision, and thus, it remanded
for consideration of the viability of the agreement’s choice of law
provisions in light of Louisiana’s conflict articles, La. Civ. Code
arts. 3540, 3537, and 3515. See Roberts, 104 F.3d at 786-87.
On remand, the district court concluded that the choice of law
provision in the MSA, selecting Texas law, was enforceable and that
as a result, the LOIA did not apply. The district court also
concluded that while a contractual indemnity clause is otherwise
barred by the Texas Oilfield Anti-Indemnity Act (“TOAIA”), Tex.
Civ. Prac. & Rem. Code §§ 127.001-127.007 (Vernon Supp. 1996), an
“additional insured requirement,” like that found in the MSA at
issue in this case, does not violate the TOAIA and is valid and
enforceable. The court went on to conclude that Grasso’s policy
would not provide coverage because Roberts was not a Grasso
employee. Additionally, the district court ruled that EDC and
Grasso would share equally the reimbursement from the $1 million
Gray primary policy, that EDC’s primary policy would absorb the
shortfall after receiving the $500,000 from Gray, and that since
Grasso’s primary policy had been exhausted by prior claims, Gray’s
excess policy was to cover the additional liability amount of
$316,833.75, which was beyond the $500,000 Grasso would receive
from Gray’s primary policy. All told, Gray was ordered to pay EDC
$500,000 and to pay Grasso $816,833.75.
6
Gray has now timely appealed all adverse rulings made against
it by the district court.
II. DISCUSSION
A. Standard of Review
We review the grant of summary judgment de novo, applying all
of the same standards applicable in the district court. See
Sherrod v. American Airlines, Inc., 132 F.3d 1112, 1119 (5th Cir.
1998). Summary judgment under Rule 56 of the Federal Rules of
Civil Procedure is appropriate only if
. . . the pleadings, depositions, answers to
interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of
law.
Fed.R.Civ.P. 56(c).
Here, the material facts are not in dispute and our
disposition hinges on the application of the undisputed facts to
the law determined applicable. It is not disputed that should
Louisiana law be determined applicable pursuant to the Louisiana
conflicts articles, the LOIA would bar any claims against Gray by
EDC and Grasso for contribution or indemnity.
B. Analysis
Pursuant to our prior panel’s remand, the district court first
set about to reconsider whether the choice of law provision in the
MSA between PMCS and EDC, which provision selected Texas law as
7
applying except for those such laws “which would direct the
application of the law of a different jurisdiction,” was
enforceable in light of the LOIA. Pursuant to the remand order,
the district court analyzed the enforceability of the choice of law
provision under Louisiana’s conflicts articles. The district court
noted that the decision upon which it had previously relied in
determining that Louisiana law governed the dispute, that is Matte
v. Zapata Offshore Co., 784 F.2d 628 (5th Cir. 1986), was
inapplicable, as noted in the prior panel’s remand order, because
the holding in Matte resulted from the fact that the application of
Louisiana law in that case was mandated by the applicability of the
Outer Continental Shelf Lands Act (“OCSLA”), which Act the district
court concluded is inapplicable to this case because the accident
at issue occurred in Louisiana state waters and not on the Outer
Continental Shelf.1
The district court, therefore, turned to an application of
Louisiana’s conflicts articles to determine whether the parties’
choice of law provision was enforceable. The provisions applicable
to the choice of law provision in this case are Articles 3540,
3537, and 3515 of the Louisiana Civil Code. We explained the
1
However, the district court failed to recognize that in
addition to concluding that the OCSLA required application of
Louisiana law, the Matte panel stated that the choice of law
provision in that case was also invalidated by the fact that it
would have violated the public policy of Louisiana, which state’s
law would presumably have been otherwise applicable. See Matte,
784 F.2d at 631.
8
relevant inquiry under Louisiana law in Roberts as follows:
Under the Louisiana conflicts articles, we look
first to Article 3540 which states:
All other issues of conventional
obligations are governed by the law
expressly chosen or clearly relied upon
by the parties, except to the extent that
law contravenes the public policy of the
state whose law would otherwise be
applicable under Article 3537.
La. Civ. Code art. 3540.
Thus, we next turn to Article 3537 to determine
which state law would otherwise be applicable to
the Agreement. Article 3537 states:
Except as otherwise provided in this
Title, an issue of conventional
obligation is governed by the law of the
state whose policies would be most
seriously impaired if its law were not
applied to that issue.
That state is determined by evaluating
the strength and pertinence of the
relevant polices of the involved state in
light of: (1) the pertinent contacts of
each state to the parties and the
transaction, including the place of
negotiation, formation and performance of
the contract, the location of the object
of the contract, and the place of
domicile, habitual residence, or business
of the parties; (2) the nature, type,
and purpose of the contract; and (3) the
polices referred to in Article 3515, as
well as the policies of facilitating the
orderly planning of transactions, of
promoting multistate commercial
intercourse, and of protecting one party
from undue imposition by the other.
La. Civ. Code art. 3537.
Article 3515 guides us in balancing the policies of
9
the states:
Except as otherwise provided in this
Book, an issue in a case having contacts
with other states is governed by the law
of the state whose policies would be most
seriously impaired if its law were not
applied to that issue.
That state is determined by evaluating
the strength and pertinence of the
relevant policies of all involved states
in the light of: (1) the relationship of
each state to the parties and the
dispute; and (2) the policies and needs
of the interstate and international
system, including the policies of
upholding the justified expectations of
parties and of minimizing the adverse
consequences that might follow from
subjecting a party to the law of more
than one state.
La. Civ. Code art. 3515.
The Revision Comments to Articles 3515 and 3537
provide helpful instructions to courts using these
articles. The Comments emphasize that the
objective of the choice of law analysis is to
"identify 'the state whose policies would be most
seriously impaired if its law is not applied to
that issue.'" La.C.C. art. 3515 (1991 revision
comments (a)). The Comments to Article 3537 list
two steps to follow in making this determination.
The first is to identify "'the relevant policies of
the involved states.'" The next step is to
evaluate "'the strength and pertinence of [these]
policies' in light of" the three factors listed in
the second paragraph of Article 3537. La.C.C. art.
3537 (revision comments 1991 (d)).
Roberts, 104 F.3d at 786-87.
In simplest terms, we must first determine which state’s law
would be otherwise applicable in the absence of the choice of law
provision. We then determine whether application of the chosen law
10
would contravene the otherwise applicable state’s public policy.
Our overall objective is to determine the state whose policies
would be more seriously impaired if its law was not applied, and
this is done by comparing the strength and pertinence of the
competing states’ policies in light of the various factors set
forth in Article 3537.
In its assessment of the conflicts articles, the district
court concluded that Louisiana’s explicit “public policy” against
indemnity agreements stated in the LOIA, though strong, was but one
of many other factors which guided its decision, and the other
factors weighed more heavily in favor of selecting Texas as the
appropriate law to govern. The district court concluded that Texas
law would otherwise be applicable under Article 3537, and as a
consequence, the application of Texas law would not offend any
Texas public policy. In making its determination that Texas law
would be otherwise applicable under Article 3537, the district
court relied on the following factors: (1) both EDC and PMCS had
significant contacts with Texas; (2) EDC has its principal place of
business in Houston and PMCS maintains a Houston operations office
to which all correspondence regarding the MSA was to be sent;
(3) the parties contemplated that work orders would be performed in
both Louisiana and Texas; (4) the choice of law provision was
bargained for by the parties; (5) additional policies of Louisiana
encourage the facilitating of multi-state ventures; and (6) the
location of the accident was not dispositive. The district court
11
also relied on what it perceived as our implicit recognition of the
propriety of selecting Texas law over that of Louisiana based on
application of the Louisiana conflicts provisions and in spite of
the LOIA in Americas Ins. v. Apache Corp., No.95-31296 (5th Cir.
August 12, 1996) (per curiam) (unpublished).2 Citing to our
unpublished decision in Americas, the district court thus concluded
that “there is no doubt that Texas law should apply to the
underlying agreement between PMCS and EDC.”
Gray argues on appeal that the primary inquiry required by
Article 3540 is whether application of the chosen state’s law would
“contravene[] the public policy of the state whose law would
otherwise be applicable under Article 3537.” Arguing that
Louisiana law would be “otherwise applicable” under Article 3537,
Gray asserts that permitting the indemnity arrangement in this case
would directly contravene the proviso in the LOIA that “it is the
intent of the legislature by this section to declare null and void
and against public policy of the state of Louisiana”
indemnification agreements requiring defense and/or indemnification
of at-fault principals with respect to oilfield accidents. La.
Rev. Stat. 9:2780(A). In that section, the legislature declared
2
We pause here to note that the application of the Louisiana
conflicts articles in Americas involved the consideration of the
fact that both parties to the agreement in question were Texas
entities. The Americas district court noted in its opinion, which
was approved by a panel of our Court, that “Louisiana certainly
does not have an interest in protecting Texas contractors from
entering into agreements with other Texas entities.”
12
that “an inequity is foisted on certain contractors and their
employees by the defense or indemnity provisions, either or both,
contained in some agreements pertaining to wells for oil, gas, or
water . . . .” Id.
Gray argues that the public policy of Louisiana is clearly and
unambiguously stated in the LOIA and there is no explicit statement
of the public policy of Texas on any pertinent issue cited by
either the district court or the Appellees. Gray cites to Cherokee
Pump & Equip., Inc. v. Aurora Pump, 38 F.3d 246 (5th Cir. 1994), in
which a panel of our Court noted that unlike the LOIA, the
Louisiana Repurchase Statute at issue in that case did not contain
an explicit embodiment of state public policy. Gray notes that in
Matte, we stated:
[t]he public policy of Louisiana is clear, certain,
and unambiguous. Any provision which purports to
provide a defense or indemnity to an indemnitee for
claims of injury or death alleged to have been
caused by the indemnitee’s negligence . . . is
‘void and unenforceable.’
Matte, 784 F.2d at 631.
It is Gray’s position that considering the factors set forth
in Article 3537, and the relative strengths of the policies of both
Texas and Louisiana, Louisiana has a stronger interest in, and
policy for, protecting its sub-contractors like PMCS, from
indemnity provisions like the one found in the PMCS/EDC MSA. Gray
also argues that considering the verbal work order and not the MSA
as the operative agreement even more strongly favors selection of
13
Louisiana, and it points to our prior panel’s statement that “[t]he
oral work order is the relevant agreement for determining this
issue [of whether the agreement pertained to a well].” Roberts,
104 F.3d at 784. The oral work order, which originated in and was
conveyed to PMCS in Louisiana, called for work to be performed
solely on well platforms in Plaquemines Parish, Louisiana. We read
Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313, 315 (5th Cir.
1990) (“if . . . the contract consists of two parts, a blanket
contract followed by later work orders, the two must be interpreted
together in evaluating whether maritime or land law is
applicable.”), and Domingue v. Ocean Drilling and Exploration Co.,
923 F.2d 393, 396 (5th Cir. 1991) (“[w]e must read the . . .
blanket agreement modified by the later work order together as the
actual contract.”), to require that we look both to the MSA and the
work order in conducting our conflict analysis. Article 3537
provides that the governing law is the law of the state whose
“policies would be most seriously impaired if its law were not
applied to that issue,” and that state is determined by weighing
the relative strength and pertinence of the competing states'
policies.3 As Comment (c) to Article 3537 explains, the state
3
It is important to note that in Article 3515, the legislature
used a broader reference to the term policies of the states, which
should not be restricted to consideration of stated “public”
policies only. And while we agree with Gray that the Louisiana
legislature has no doubt explicitly stated a public policy against
indemnity agreements in the LOIA, under Article 3515, we cannot
constrain our analysis to consideration of this policy alone.
14
whose law should apply is the state that “in light of its
connection to the parties and the transaction and its interests
implicated in the conflict, would bear the most serious legal,
social, economic, and other consequences 'if its law were not
applied' to the issue at hand.”
The policies which we must balance are Louisiana's anti-
indemnification policy and any countervailing state policies, such
as the policy of upholding contracts freely and voluntarily entered
into by the parties.4 We must evaluate the strength of these
policies in light of (1) the pertinent contacts regarding the
development and formation of the agreement, the location of the
parties, and the location of the performance of the agreement; (2)
the nature and purpose of the agreement; and (3) (a) the policies
and needs of the interstate system, including the policies of
upholding the justified expectations of the parties and of
minimizing the adverse consequences that might follow from
subjecting a party to the law of more than one state (see La. Civ.
Code art. 3515)5 and (b) the policies of facilitating the orderly
4
Comment (d) to Article 3537 states that the “relevant [state]
policies” which must be weighed “are identified through the
resources of the interpretive process by focusing on the specific
rules of substantive contract law whose applicability is being
urged in the particular case.”
5
Comment (f) to Article 3537 makes clear that:
[t]hrough its cross-reference to Article 3515, clause (3) of
the second paragraph of this Article incorporates by reference
the list of policies contained therein as well as the analysis
prescribed by that Article. . . . [The] relative importance
15
planning of transactions, of promoting multi-state commercial
intercourse, and of protecting one party from undue imposition by
the other (see La. Civ. Code art. 3537).
The district court based its conclusion that Texas law “wins
the analysis” primarily on the extent of the parties' contacts with
Texas, the fact that the parties contemplated the possibility that
work orders would be performed in Louisiana and Texas, and the fact
that the choice of law provision was “selected and bargained for”
by the parties. The court briefly mentioned the policies stated in
the conflicts articles regarding the fostering and planning of
transactions and of facilitating multi-state ventures. However,
the court did little to compare the relative strengths of each
state's respective policies in these regards.
We note the following specific factors which, pursuant to
Article 3537, guide our comparison of the states' policies. With
respect to contacts of the parties, the district court noted that
PMCS had “significant” contacts with Texas, but while PMCS does
maintain an office in Houston, Texas, it is in fact incorporated
and performs most of its operations in Louisiana. Under the
Louisiana conflicts rules, a juridical person may be treated as a
domiciliary of either the state of its formation or the state of
its principal place of business, whichever is more pertinent to the
[of these polices] will depend on the particular contacts of
the enacting jurisdiction, the nature, type, and purpose of
the contract, and the particular issue with regard to which
there exists an actual conflict.
16
particular issue. See La. Civ. Code art. 3518. Under this rule,
PMCS is clearly a domiciliary of Louisiana. EDC is incorporated in
New Jersey, but claims Houston, Texas as its principal place of
business, and it has corporate offices in Oklahoma. Because we
feel EDC's Texas office is more closely connected to this dispute,
we conclude that it is domiciled in Texas under the Louisiana
conflicts rules.
The MSA was signed in Texas and PMCS designated one of its
operations offices in Texas for all mailings regarding the MSA in
this case, but the great majority of the work contemplated by the
MSA was to take place in or offshore of Louisiana. Though the
parties contemplated that work might be performed in waters near
both Louisiana and Texas, in fact, virtually all work performed
under the MSA was performed exclusively in the waters of or
offshore of Louisiana. And the specific work order at issue in
this case was issued from, to, and in regards to work to be
performed in, Louisiana. In addition, the accident giving rise to
the insurance obligation occurred in Louisiana, and while this
factor is not dispositive, as the district court acknowledged, it
is most certainly an important factor, especially where, as here,
the sub-contractor whose employee was injured is a Louisiana
domiciliary.
17
We now turn to the policy stated in Article 3515 of upholding
the justified expectations of the parties, and the policies stated
in Article 3537 of facilitating the orderly planning of
transactions and minimizing the adverse consequences that might
result from subjecting a party to the law of more than one state.
Viewed in light of these policies, the policy stated in the LOIA,
which would invalidate the parties' choice of law provision, loses
some force against the countervailing policy of upholding
contractual obligations freely entered into by the parties.
However, with respect to the policy of protecting one party from
undue imposition by the other, Louisiana's commitment to protecting
its sub-contractors from the “inequity” foisted on such entities by
indemnity provisions in work agreements pertaining to wells for oil
and gas, is more emphatic than that of any respective policies of
Texas. The force of Louisiana's public policy disfavoring
indemnity agreements, as stated in the LOIA, is unquestionably very
strong. See Matte, 784 F.2d at 631 (“The public policy of
Louisiana is clear, certain, and unambiguous. Any provision which
attempts to provide a defense of indemnity . . . is void and
unenforceable.”). The language of the LOIA makes it clear that
Louisiana has a very strong policy against allowing its oil and gas
well sub-contractors to be manipulated by well owners and operators
who would foist the burden of indemnification on them through work
agreements, and subjecting these subcontractors to contrary laws
18
permitting indemnification provisions in other jurisdictions.
Given that one of the contracting parties in this case, PMCS,
is a Louisiana domiciliary, that PMCS is the type of oil and gas
well sub-contractor for whom the Louisiana legislature specifically
contemplated providing protection with the anti-indemnification
policy announced in the LOIA, that the nature and purpose of the
agreement therefore directly implicate the LOIA policy, that the
work order at issue was generated from and pertained to work to be
performed exclusively in Louisiana, that the parties' history
reveals that virtually all work arranged under the MSA was
performed in or offshore of Louisiana, that no work would have been
performed under the MSA in the territorial waters of Texas, that
the injury giving rise to the underlying insurance obligation
occurred in Louisiana, and considering the policy of protecting one
party from undue imposition by the other, we conclude that the
strength of Louisiana's policy of preventing the adverse
consequences which would fall upon its sub-contractors by
application of the laws of Texas tips the scales which might
otherwise be balanced with respect to each state's policies noted
above. We disagree with the district court’s holding, that our
unpublished, and consequently non-precedential, decision in
Americas dictates a contrary result under the Louisiana conflicts
articles. The Americas decision is easily distinguished by the
fact that it involved two contracting parties, both of which were
19
Texas entities. As the district court noted in that case,
“Louisiana certainly does not have an interest in protecting Texas
contractors from entering into agreements with other Texas
entities.” Thus to sum up, our analysis of the relative strengths
of the relevant policies of Texas and Louisiana convinces us that
in the absence of the choice of law provision in the PMCS/EDC MSA,
Louisiana law would be applicable since its policies for protecting
its sub-contractors outweighs any relevant competing policies in
Texas.
Having determined that Louisiana is the state whose law would
otherwise be applicable under Article 3540, we must now determine
whether application of the law selected in the choice of law
provision, in this case, Texas law, would “contravene the public
policy of” Louisiana. Our analysis here is brief. Both parties
have agreed that under Louisiana law, the LOIA would void the
indemnity provision in the MSA, and the parties agree that
application of Texas law permitting indemnification through an
additional insured provision like that found in the MSA at issue in
this case would contravene Louisiana’s explicit and unambiguous
public policy against indemnification agreements in any form.6
6
We note here that while, even under Texas law, an indemnity
agreement is unenforceable as violative of the TOAIA, the Texas
Supreme Court has held that additional insured requirements, like
that contained in the PMCS/EDC master service agreement, remain
viable. See Getty Oil Co. v. Insurance Co. of North America, 845
S.W.2d 794, 802-05 (Tex. 1987). On the other hand, the Louisiana
legislature specifically addressed and closed this type of
additional insured loophole to the prohibition against
20
Accordingly, we find that the district court committed reversible
indemnification agreements in subsection G of the LOIA which states
in pertinent part:
Any provision in any agreement arising out of the
operations, services, or activities listed in
Subsection C of [the LOIA] . . . which requires
waivers of subrogation, additional named insured
endorsements, or any other form of insurance
protection which would frustrate or circumvent the
prohibitions of this Section, shall be null and void
and of no force and effect.
La. Rev. Stat. 9:2780(G)(emphasis supplied).
Through subsection G, the Louisiana legislature rendered any
attempt to procure otherwise prohibited indemnification, through a
requirement that an oil services contractor name an oilfield owner
or operator as an additional insured under the contractor’s
insurance policies, unenforceable. Indeed, as the Louisiana First
Circuit Court of Appeal recently noted, voiding additional insured
provisions “promote[s] the purpose of the [LOIA] because it will
prevent oil companies from forcing contractors to purchase
contractual indemnity insurance coverage . . . [and insures]
against overreaching by [oilfield service contractors’] customers.”
Amoco Production Co. v. Lexington Ins. Co., 745 So.2d 676, 680 (La.
App. 1st Cir. 1999).
We note also that our Circuit has recognized an exception to the
LOIA’s prohibition against indemnity agreements and additional
insured provisions where the additional insured principal pays the
portion of the insurance premium incurred by the independent
contractor for adding the additional principal to its policy. See
Marcel v. Placid Oil Co., 11 F.3d 563, 569-70 (5th Cir. 1994).
However, here there is no evidence whatsoever to support
application of the Marcel exception. There is no evidence that EDC
was obligated to pay, or did in fact pay, any portion of PMCS’s
insurance premiums to Gray for the coverage of EDC as an additional
insured. To the contrary, the MSA states in paragraph (4) that
“[PMCS] agrees to procure and maintain, at its sole expense,
policies of insurance in the minimum amount outlined [in] Exhibit
A.” The referred to Exhibit A sets forth the insurance
requirements which EDC requires of its subcontractors. Paragraph
(7) of that exhibit requires that EDC, its subsidiaries, and its
employees be named as additional insureds.
21
error in holding that the choice of law provision in the PMCS/EDC
MSA was enforceable.
We pause here to briefly address EDC and Grasso’s argument
that a ruling that Louisiana law applies means that this case must
be remanded for trial on the issue of liability. Although we held
in Tanksley v. Gulf Oil Corp., 848 F.2d 515 (5th Cir. 1988), that
a settlement by indemnitees removes the issue of fault for the
LOIA, EDC and Grasso argue that decision has been rejected by
several Louisiana appellate courts. Gray responds by noting that
we held in FDIC v. Abraham, 137 F.3d 264 (5th Cir. 1998) that we
should not depart from Fifth Circuit precedent unless the highest
court of the state has ruled on the matter.
The remaining issues in this appeal regarding the proper
allocation of insurance benefits are moot as a result of our
conclusion that the indemnification provision in the MSA is
unenforceable against Gray under Louisiana law.
III. CONCLUSION
For the reasons set forth above, we find that the district
court erred in finding that the choice of law provision in the
PMCS/EDC MSA was enforceable. And having determined that the
choice of law provision is unenforceable, and that pursuant to
Louisiana conflicts law, the laws of Louisiana govern this case, we
REVERSE the district court’s order granting EDC and Grasso summary
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judgment, and RENDER judgment in favor of Gray.
REVERSED and RENDERED.
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