Tullier v. Halliburton Geophysical Services, Inc.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

_______________________

No. 95-30037
_______________________

SHAWN TULLIER,

Plaintiff,

versus

HALLIBURTON GEOPHYSICAL SERVICES, INC.,

Defendant/Cross-Claimant/Cross-Defendant/Appellant.

versus

McCALLS BOAT RENTALS, INC.,

Defendant/Cross-Defendant/Cross-Claimant/Appellee.

_________________________________________________________________

Appeals from the United States District Court
for the Western District of Louisiana
_________________________________________________________________

April 25, 1996

Before WISDOM, GARWOOD, and JONES, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The contracting parties to a time charter for a vessel

used in the offshore oil and gas industry agreed to indemnify each

other for job-related liabilities and to back up the cross-

indemnity provisions with insurance. Their dispute involves which

comes first, the “additional assured” coverage of McCall Boat

Rentals, Inc., or Halliburton Geophysical Services’ indemnity

obligation. Following established caselaw in this circuit, we hold

that the “additional assured” coverage must be exhausted before
HGS’s indemnity responsibility is called into play. It is

therefore necessary to reverse the district court’s contrary

decision and remand for further proceedings.

BACKGROUND

Shawn Tullier, an HGS employee, slipped and fell in a

pool of water while working in the galley of McCall’s vessel M/V

JOYCE McCALL. Tullier sued and settled with HGS and McCall,

triggering this controversy under the parties’ time charter

agreement. McCall and HGS had each agreed broadly to indemnify and

defend the other party from and against claims brought by or on

behalf of the indemnitor’s employees. Time Charter Agreement

¶¶ 5.11.1 and 5.11.2. While the cross-indemnity provisions are for

our purposes identical, the parties agreed to treat the insurance

provisions backing up their indemnities quite differently. HGS was

required “to insure the liabilities it assumes under this Time

Charter with a manuscript comprehensive general liability coverage

with appropriate maritime endorsements.” ¶ 6.4. McCall, however,

agreed to provide insurance as follows:

5.9 (b) Protection and Indemnity (P&I) insurance on
SP-23 form to at least the full value of the
vessel with minimum limits equal to
$1,000,000.00 per occurrence. The P&I policy
shall . . . be endorsed to amend the
sistership clauses to provide full coverage
for Additional Assureds for claims involving
vessels or equipment owned, chartered or
involving vessels or equipment owned,
chartered or otherwise controlled by OWNER or
Additional Assureds, and to provide
contractual liability coverage covering the
obligations of OWNER to HGS under time
charter, and to delete the “as owner”
limitations as respects the Additional

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 Assureds to underwriters against claims by the
Additional Assureds. . . .

(e) Comprehensive General Liability insurance )or
equivalent third party liability insurance)
with bodily injury and property damage limits
of $1,000,000.00 per accident or occurrence.
Follow form excess liability insurance shall
be obtained to provide single limit coverage
of no less than $5,000,000.00 per occurrence.

5.9.1 On all policies of insurance referred to
above, OWNER (McCall) shall obtain
endorsements from its underwriters providing
that HGS . . .shall be named by endorsement as
Additional Assureds.

5.9.2 All such insurance required herein shall be
endorsed to provide that the insurance
provided thereby shall be primary insurances,
as respects to the Additional Assureds,
irrespective of any “excess” or “other
insurance” clauses contained therein.

Thus, McCall’s insurance was intended specifically to cover HGS as

an additional assured, to delete the “as owner” limitations with

respect to HGS, and to constitute primary coverage for the

additional assureds.

Based on these provisions, McCall cross-claimed against

HGS for defense and contractual indemnity for Tullier’s settlement,

and Halliburton cross-claimed against McCall for breach of the time

charter because of McCall’s alleged failure to provide insurance

for HGS. (Each party had incurred costs in defending the Tullier

claim.) The district court, ruling on cross-motions for summary

judgment, approved McCall’s position that because HGS was obliged

to indemnify McCall's for injuries to HGS’s employee, HGS could not

rely on McCall’s insurance -- through the additional insured

provision -- to fulfill its responsibility. The court relied on

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two cases, Wilson v. JOB, Inc., 958 F.2d 653 (5th Cir. 1992), and

Spell v. NL Industries, Inc., 618 So.2d 17 (La. App. 3rd Cir.

1993).1 Judgment was entered against HGS for McCall’s indemnity

and defense costs. HGS has appealed the judgment for McCall’s and

the rejection of its cross-claim for breach of contract.

DISCUSSION

In a line of cases commencing with Ogea v. Loffland

Brothers Co., 622 F.2d 186 (5th Cir. 1980), this court has held

that a party such as McCall, who has entered into a contractual

indemnity provision but who also names the indemnitor, here HGS, as

an additional assured under its liability policies, must first

exhaust the insurance it agreed to obtain before seeking

contractual indemnity. See also, Klepac v. Champlin Petroleum Co.,

842 F.2d 746 (5th Cir. 1988), rehearing denied 844 F.2d 788 (1988);

Woods v. Dravo Basic Materials Company, 887 F.2d 618 (5th Cir.

1989). Ogea held that the insurance procurement and indemnity

provisions of a drilling contract “must be read in conjunction with

each other in order to properly interpret the meaning of the

contract.” Ogea, at 190. The court continued:

By so doing, it is clear that the parties
intended that Phillips would not be held
liable for injuries incurred on its off-shore
platform up to $500,000.00. The insurance to
be acquired and maintained by Loffland would
cover such damages. For damages in excess of
$500,000.00, the indemnity provisions would
come into effect. Because Ogea’s

Spell’s analysis is inconsistent with that of the Fifth Circuit in
Ogea v. Loffland Brothers Co., 622 F.2d 186 (5th Cir. 1980), but as Spell was
decided under Louisiana law, whereas the case before us involves federal maritime
law, Spell is not controlling and will not be further discussed.

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 claim . . . and actual settlement are both
less than $500,000.00, Phillips should not
incur any liability. The indemnity provisions
do not come into play. Id. at 190.

Shortly after this case was orally argued, another panel of this

court affirmed a district court decision that relied on Ogea to

interpret cross-indemnity and insurance procurement clauses in an

HGS time charter that are nearly identical to those before us.

LeBlanc v. Halliburton Geophysical Services, Inc., No. 95-30501

(5th Cir. 1995) (summary calendar). When LeBlanc was issued, it

became a precedential decision in our circuit.2 LeBlanc is

dispositive of this case. But because similar disputes seem to

arise regularly, it is useful briefly to recapitulate the reasoning

that supports application of the Ogea principle even where both

parties have insured their indemnity obligations.

McCall seeks to distinguish Ogea on two grounds and to

gain support from it on one. First, in Ogea, the only insurance

obligation under the contract required Loffland (the party entitled

to indemnity) to secure insurance for Phillips (the indemnitor) as

an additional assured. But here, McCall points out, HGS, the

indemnitor, agreed to cover its liability under the time charter

agreement by purchasing insurance. Second, Ogea states that

Phillips specifically negotiated the obligation of Loffland to

procure insurance for Phillips, whereas no similarly specific

bargain was struck with HGS. Taking advantage of Ogea, however,

For all unpublished opinions rendered after January 1, 1996, however,
the court has determined that such opinions will no longer have precedential
value. See Fifth Circuit Local Rule 47.5.1.

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McCall observes that the opinion criticized Loffland’s emphasis on

the mutual indemnity clauses to the exclusion of the insurance

purchase clause of the parties’ contract. Similarly, according to

McCall, HGS hopes to enforce the insurance procurement provision

imposed on McCall while ignoring its own contractual liability to

furnish insurance.

These distinctions are not persuasive. The controlling

fact in Ogea, as in this case and in LeBlanc, Klepac, and Woods is

the existence of “additional assured” coverage whereby an

indemnitee agreed to procure insurance coverage for the benefit of

the indemnitor. The import of the additional assured clause is

emphasized here because the time charter also required that

insurance procured by McCall must afford primary coverage to HGS.

The time charter could hardly have been more specific in protecting

HGS’s indemnity obligation by means of McCall’s insurance.

The fact that the parties may not have directly

negotiated this result, as they apparently did in Ogea, is not

controlling. Ogea rests on the legal imperative to read the

indemnity and insurance procurement provisions harmoniously. Ogea,

supra at 190. Moreover, as HGS notes, it is not unfair for

McCall’s additional assured coverage to bear HGS’s indemnity

obligation here because, if McCall complied with the insurance

procurement provision, it could have charged HGS for the enhanced

insurance coverage as part of its daily rental rate. HGS paid for

the insurance one way or another.

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 Finally, this interpretation of the insurance procurement

provision does not ignore HGS’s agreement to “insure the

liabilities it assumes” under the contract. McCall was required to

supply primary coverage up to $1,000,000 per incident, with HGS as

an additional assured. HGS, therefore, contracted to insure

liabilities over that amount in fulfillment of its indemnity

responsibility. All provisions of the HGS-McCall time charter are

integrated by the Ogea-LeBlanc reasoning that the unilateral

insurance procurement provision precedes the indemnity requirement

of the contract.

Like the district court, McCall also relies on Wilson v.

JOB, Inc., supra, a case that interpreted reciprocal indemnity

provisions and mutual insurance requirements. Wilson did not cite

Ogea, Klepac or Wood, and it is distinguishable from those cases.

The indemnity provisions in Wilson required the charterer of the

vessel to hold the owner harmless for claims arising directly out

of the charterer’s “actual drilling operations”. Id. at 655. In

addition, the charterer was required to procure insurance to

protect the owner for liability only with respect to “actual

drilling operations.” Wilson, at 658. In mirror-image provisions,

the vessel owner was required to indemnify the charterer and

procure insurance for the charterer’s benefit with respect to

“vessel operations.” The insurance policies obtained by each party

could not satisfy the other’s indemnity obligation. The

interrelationship and substance of the indemnity and insurance

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clauses in Wilson cannot be compared with the dissimilar provisions

between HGS and McCall.

Ogea and its progeny most appropriately guide the

resolution of this case, even though HGS as well as McCall

undertook an obligation to insure liabilities under the time

charter. HGS’s insurance obligation, however, like its indemnity

duty, was qualified by the provision requiring McCall to name HGS

as an additional assured and to render that insurance as primary

coverage.

For these reasons, the district court erred in granting

McCall’s summary judgment motion while denying HGS’s demand for

insurance coverage from McCall and dismissing HGS’s cross-claim for

breach of contract in the event McCall did not comply with its

obligation to obtain such insurance. The record is not clear as to

whether McCall purchased the appropriate insurance or what remedy

is due to HGS. Consequently, we must remand for the district court

to conduct further proceedings on HGS’s cross-claim.

CONCLUSION

For the foregoing reasons, the judgment of the district

court in favor of McCall is REVERSED, and the case is REMANDED for

further proceedings consistent herewith.

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