Nabors Corporate Services Inc. v. Northfield Insurance Co.

The Texas Oilfield Anti-Indemnity Act neither alters the appellant's indemnity obligations because its insurer became insolvent prior to funding the settlement, nor requires Abraxas Petroleum Corp. to reimburse the appellant for the money paid to settle the underlying claim.

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Click here for the full text of this decision FACTS:In 1997, Abraxas Petroleum Corp. hired Pool Co. Texas Ltd. to perform work on an oil and gas lease owned and operated by Abraxas. Abraxas and Pool entered into a Master Service Agreement which contained, in part, mutual indemnity provisions whereby each party agreed to indemnify the other for any claims or causes of action, without limit, for any injuries or death suffered by their respective employees. In the agreement, each party also agreed to acquire insurance to cover these indemnity obligations in accordance with the safe harbor provisions of the Texas Oilfield Anti-Indemnity Act. Pool’s general liability insurer was Reliance Insurance Co. and Abraxas was insured by Northfield Insurance Co. In 1999, a Pool employee, Michael Carter, was fatally injured. Carter’s heirs and estate filed suit against Abraxas, and other defendants not parties to this appeal, asserting negligence claims. When Abraxas presented the claim to Northfield, Northfield hired counsel to represent Abraxas; counsel, in turn, contacted Pool and demanded Pool defend and indemnify Abraxas in accordance with the agreement. Pool agreed, subject to its right under Texas law to deny indemnification for any grossly negligent conduct by Abraxas or any award for punitive damages. Pool then hired counsel to defend Abraxas. In September 2001, the Carter litigation was settled on behalf of Abraxas for $1.545 million. Prior to funding the settlement, Pool’s insurer, Reliance, became insolvent. Suit was filed by the Carter plaintiffs against Abraxas to enforce the settlement agreement, and Abraxas looked to Pool by virtue of the indemnity provision contained in the Agreement. Pool contributed $1 million to the settlement by Abraxas, reserving all rights and causes of action, then demanded reimbursement from Northfield. Consequently, Northfield filed this declaratory judgment action, asserting it did not owe any reimbursement to Pool. Pool filed counterclaims against Northfield and third-party claims against Abraxas, alleging both parties had violated the Texas Property and Casualty Insurance and Guaranty Act and asserting claims for indemnity and unjust enrichment against both parties. Northfield filed a “Motion to Dismiss and/or Summary Judgment,” requesting the trial court dismiss Pool’s claims against Abraxas and Abraxas’ claims against Northfield in the event Abraxas should be held liable to Pool for any reimbursement. The trial court signed a final judgment granting Northfield’s motion and 1. dismissing with prejudice, Pool’s claims against Abraxas and Northfield; 2. dismissing without prejudice, Abraxas’s counterclaims against Pool; and 3. dismissing as moot, Abraxas’ cross-claims for reimbursement against Northfield. The trial court severed all other remaining claims to permit appeal of the judgment. HOLDING:Affirmed. Pool argues the trial court erred in granting Northfield’s motion because once Reliance was placed into receivership, there was no longer any supporting insurance coverage and the indemnity provision contained in the Agreement was rendered void under the TOAIA. Pool reasons that because the purpose behind the TOAIA is to protect contractors from unfair indemnity obligations, and Pool was no longer protected due to Reliance’s insolvency, the TOAIA serves to invalidate the indemnity provision. In support of its contentions, Pool relies solely on the provisions of the TOAIA. The court finds that the TOAIA neither alters Pool’s indemnity obligations because its insurer became insolvent prior to funding the settlement, nor requires Abraxas to reimburse Pool for the money paid to settle the underlying claim. Because the court finds the indemnity provision was not voided by the TOAIA, Pool is unable to assert its claims for unjust enrichment or quantum meruit against Abraxas because a valid contractual provision exists that covers the dispute. The trial court did not err in granting summary judgment on these claims. Pool argues the trial court erred in granting Northfield’s motion to dismiss Pool’s claims because Abraxas failed to request that Northfield comply with the TPCIGA. In its third-party petition, Pool did in fact assert a cause of action against Abraxas, alleging Abraxas had violated the TPCIGA. Second, examining the plain language of the TPCIGA, the court finds nothing that allows Pool to bring a cause of action against Abraxas under the circumstances of this case. Although Pool argues that the TPCIGA indicates an intent by the Legislature that Northfield be obligated for the $1 million which Pool paid, assuming without deciding this was the Legislature’s intent, there is nothing transforming this intent regarding Northfield into a private right of action against Abraxas. By virtue of the agreement, Pool agreed to indemnify Abraxas for the subject injuries. There is no language in the TPCIGA, nor in its purpose, that relieves Pool of its obligations as indemnitor under the circumstances of this case. OPINION:Guzman, J.; Edelman, Frost and Guzman, JJ.

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