Hudson v. Forest Oil Corp.

• Decision Date: 04 June 2004
• Docket Number: No. 03-30751.,03-30751.
• Parties: Judy HUDSON, et al., Plaintiffs, v. FOREST OIL CORP.; Zurich American Insurance Co., Defendants-Appellees, v. Ace American Indemnity Insurance Co., doing business as Montlake Casualty Co., Intervenor-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 742

372 F.3d 742

Judy HUDSON, et al., Plaintiffs, v. FOREST OIL CORP.; Zurich American Insurance Co., Defendants-Appellees, v. Ace American Indemnity Insurance Co., doing business as Montlake Casualty Co., Intervenor-Appellant.

No. 03-30751.

United States Court of Appeals, Fifth Circuit.

June 4, 2004.

Richard A. Cozad (argued), Alina Pagani, McAlpine & Cozad, New Orleans, LA, for Defendants-Appellees.

Ped C. Kay, III (argued), Broussard & Kay, Lafayette, La, for Intervenor-Appellant.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before GARWOOD, WIENER, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

Intervenor-Appellant Ace American Indemnity Insurance Co., d/b/a Montlake Casualty Co. ("Ace"), seeks reversal of the district court's judgment denying Ace's motion for summary judgment and dismissing its petition to intervene in the underlying suit filed by Plaintiff Terry Hudson against Defendant-Appellee Forest Oil Corp. ("Forest") and its insurer Defendant-Appellee Zurich American Insurance Co. ("Zurich") with prejudice, and the district court's denial of Ace's motion for reconsideration. Ace argues that the district court erred in not applying the Louisiana Oilfield Anti-Indemnity Act ("LOAIA") such that the waiver of subrogation provisions in favor of Forest would be invalid; in failing to find that Forest and Zurich were solely responsible for Mr. Hudson's future worker's compensation benefits; and in failing to grant Ace reimbursement under the doctrine of equitable or legal subrogation. This Court concludes the district court was correct in finding that LOAIA did not apply such that the waiver of subrogation by Ace was valid; we thus AFFIRM the decisions of the district court.

BACKGROUND

Terry Hudson was formally employed by Coastal Production Services, Inc. ("Coastal") as an operator who was contracted out to work for Forest on its SATURDAY ISLAND oil production fixed platform in waters near or off the coast of Louisiana. On August 11, 2001, Mr. Hudson sustained injuries as a result of an accidental motor explosion on the platform. At the time of the accident, Coastal had a worker's compensation insurance policy through Ace. Ace paid Mr. Hudson worker's compensation benefits according to this policy until May 2002. This policy contained a waiver of subrogation rights by Ace, which was secured by Coastal for an additional premium.

On July 22, 2002, Terry and Judy Hudson filed a tort suit against Forest in district court based on diversity; they later amended it to add Forest's insurer Zurich as a defendant. On September 13, 2002, Ace petitioned to intervene in this lawsuit in order to recoup the payments it had made to or on Mr. Hudson's behalf. At the time of Mr. Hudson's injury, Forest and Coastal had a master service agreement that provided for defense and indemnification. The indemnity provision read, in part, as follows:

[Coastal agrees to] indemnify, defend, and save harmless [Forest]... from and against any and all claims, demands, judgments, defense costs, or suits (including, but not limited to, claims, demands, judgments or suits for ... bodily injury ... or for loss of services, or wages or for loss of consortium or society) by ... any [employee of Coastal] ... in any way, directly or indirectly, arising out of or related to the performance of [the master contract] or the use by [Coastal] or its employees of, or their presence on, any premises owned, operated, chartered or controlled by [Forest] ... expressly including any claims, demands, judgments or suits actually or allegedly caused by the ... sole, concurrent or partial negligence ..., fault or strict liability of [Forest]....

This master service contract also provided that Coastal would carry worker's compensation insurance, which policy would "name [Forest] as additional insured and waive subrogation against [Forest] and its insurers." This waiver of subrogation provision was located within the insurance coverage provision.

Forest and Zurich filed a motion for summary judgment, which the district court granted, finding that Forest was Mr. Hudson's borrowing employer and, as such, the Hudsons' sole remedy was a claim for worker's compensation benefits. Hudson v. Forest, No. Civ.A. 02-2225, 2003 WL 2004445, at *6 (E.D.La. Apr.28, 2003) (unpublished). This action left only Ace's intervention claim against Forest and Zurich. Ace filed a motion for summary judgment seeking a judgment directing Forest and Zurich to reimburse Ace for compensation benefits already paid to Mr. Hudson along with an order that Forest and Zurich be responsible for all future compensation benefits. The district court denied this motion, dismissed the intervention claim with prejudice, and entered final judgment to that effect on June 9, 2003. The district court denied Ace's motion for reconsideration on July 3, 2003, and Ace timely appealed.

DISCUSSION

This Court reviews a district court's grant of summary judgment de novo. Fiesel v. Cherry, 294 F.3d 664, 667 (5th Cir.2002) (citation omitted). Under Federal Rule of Civil Procedure 56(c), "[s]ummary judgment is proper when, viewing the evidence in the light most favorable to the nonmovant, there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Id. (internal quotations and citation omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Here, Forest and Zurich never filed a cross-motion for summary judgment, just two responses in opposition to Ace's motion. However, the district court's decision to deny Ace's motion for summary judgment was in effect a grant of summary judgment in favor of Forest and Zurich in that the court dismissed Ace's intervention claim with prejudice, so we apply de novo review.

Whether the district court erred in determining that the waiver of subrogation provisions located in the master service contract between Coastal and Forest and in the insurance policy between Ace and Coastal were valid.

When granting summary judgment in favor of Forest and Zurich and against the Hudsons in the underlying tort suit, the district court determined that as a borrowed employee, Mr. Hudson's only remedy was through worker's compensation benefits, Hudson v. Forest Oil Corp., No. Civ.A. 02-2225, 2003 WL 21276385, at *1 (E.D.La. June 2, 2003) (unpublished). Thus, Forest and Zurich were immune from any tort suit related to Mr. Hudson's injury on SATURDAY ISLAND. Id. No party disputes this finding. What the parties dispute is whether LOAIA applies to the master service contract and the worker's compensation policy to invalidate the waiver of subrogation provisions, upon which Forest and Zurich defended Ace's intervention.

LOAIA, Section 9:2780 of the Louisiana Revised Statutes, was designed to alleviate the inequity "foisted upon certain contractors by agreements which purported to grant indemnification to the oil companies for their own negligence or strict liability." Fontenot v. Chevron U.S.A. Inc., 676 So.2d 557, 562 (La.1996) (citation omitted). LOAIA was also designed to protect oil contractor employees. Id. at 563. Subsection (B) of LOAIA states:

Any provision contained in, collateral to, or affecting an agreement pertaining to a well for oil, gas, or water, or drilling for minerals which occur in a solid, liquid, gaseous, or other state, is void and unenforceable to the extent that it purports to or does provide for defense or indemnity, or either, to the indemnitee against loss or liability for damages arising out of or resulting from death or bodily injury to persons, which is caused by or results from the sole or concurrent negligence or fault (strict liability) of the indemnitee....

La.Rev.Stat. Ann. § 9:2780(B) (West 2004). Thus, both master service contracts between a contractor and an oil company and insurance policies between a contractor or an oil company and an insurance company, which contain indemnification provisions, are presumptively covered by LOAIA. In addition to the prohibition on indemnification clauses, Subsection (G) of the LOAIA provides:

Any provision in any agreement ... 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.

Id. § 9:2780(G) (emphasis added).

Courts employ a two-part test to see whether LOAIA generally applies to an agreement's provisions: (1) whether the agreement pertains to an oil, gas, or water well; and (2) whether the agreement relates to the exploration, development, production, or transportation of oil, gas, or water. Fontenot, 676 So.2d at 564. The parties agree that both agreements at issue satisfy this test. Here, however, Forest and Zurich's defense to Ace's intervention involved only the waiver of subrogation by Coastal on behalf of Ace in the master service contract and by Ace itself in Coastal's worker's compensation policy; there has not been any reliance on any indemnification clause because Forest defended the Hudsons' suit on its own when Coastal refused to provide a defense. Forest also has not sought indemnification for any defense costs it incurred defending the Hudsons' suit.¹ Therefore, Forest and Zurich argue that Subsection (G) of LOAIA, as interpreted by the Louisiana Supreme Court in Fontenot v. Chevron, only applies to bar waivers of subrogation which are used in conjunction with an indemnification clause and thus frustrate or circumvent the prohibitions of LOAIA. Forest and Zurich maintain that waivers used on their own are not covered by LOAIA.

In Fontenot, an operator employee (Fontenot) of a contractor (Hercules) brought an action against the owner of an oil drilling platform (Chevron). 676 So.2d at 560. Hercules had a workover contract with Chevron that...