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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Tullier v. Halliburton Geophysical Services, Inc.
Court: Court of Appeals for the Fifth Circuit
Date filed: 1996-04-26
Citations: 81 F.3d 552
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