Ken Petroleum Corp. v. Questor Drilling Corp.
| Decision Date | 06 August 1998 |
| Docket Number | No. 13-97-014-CV,13-97-014-CV |
| Citation | 976 S.W.2d 283 |
| Parties | KEN PETROLEUM CORP., et al., Appellants, v. QUESTOR DRILLING CORP. and Phibro Energy U.S.A., Inc., Appellees. |
| Court | Texas Court of Appeals |
Christopher L. Evans, Lauren L. Simpson, Meyer, Orlando & Evans, P.C., Houston, for appellant.
Michael Lamar Brem, Macey Reasoner Stokes, Jeffrey V. Brown, Baker & Botts, Houston, for appellee.
Before SEERDEN, C.J., and YANEZ and CHAVEZ, JJ.
Appellants Ken Petroleum Corporation (KEN) and Certain Member Companies at the Institute of London Underwriters (Underwriters), brought suit against Questor Drilling Corporation (Questor) and its parent company, Phibro Energy USA, Inc. (Phibro), for breach of the defense and indemnity provisions in a drilling contract. The trial court granted summary judgment in favor of Questor without stating the grounds for its decision. Appellants bring five points of error contending the trial court erred in granting summary judgment because: (1) the drilling contract was valid and legally enforceable under the Texas Anti-Indemnity Act (TAIA); (2) KEN had a valid claim under the Deceptive Trade Practices-Consumer Protection Act (DTPA); (3) Underwriters, as KEN's insurers, did not waive their subrogation rights; (4) Questor was not entitled to an offset for payments made by Underwriters; and (5) Phibro breached a guaranty agreement. We affirm in part and reverse in part, remanding the case to the trial court for further proceedings.
In October 1992, KEN, an operator of oil and gas leases, entered into a written contract with Questor, a contractor, for the drilling of the Duson # 1 well in Wharton County, Texas. The parties executed their agreement using a form contract supplied by the International Association of Drilling Contractors (IADC) which contained the following indemnity provision:
14.8 Contractor's Indemnification of Operator: Contractor [Questor] agrees to protect, defend, indemnify, and save Operator [KEN], its officers, directors, employees and joint Owners harmless from and against all claims, demands, and causes of action of every kind and character, without limit and without regard to the cause or causes thereof or the negligence of any party or parties, arising in connection herewith in favor of Contractor's employees or Contractor's subcontractors or their employees, or Contractor's invitees, on account of bodily injury, death, or damage to property. If it is judicially determined that the monetary limits of insurance required hereunder or of the indemnities voluntarily and mutually assumed under paragraph 14.8 () exceed the maximum limits permitted under applicable law, it is agreed that said insurance requirements or indemnities shall automatically be amended to conform to the maximum monetary limits permitted under such law.
The contract contained a mutual and reciprocal provision in paragraph 14.9 by which KEN as operator agreed to indemnify Questor. Under both provisions, each party agreed to support their respective indemnity obligations "either by available liability insurance, under which the insurer has no right of subrogation against the indemnitees, or voluntarily self-insured, in part or whole...."
Paragraph 13 obligated Questor to maintain insurance coverages as set forth in Exhibit A of the contract. Exhibit A made reference to Questor's certificate of insurance identifying Questor as having one million dollars of available liability insurance in excess of two million dollars of self-insurance for a total of three million dollars. It is undisputed that KEN had Questor's certificate of insurance on file and that it was incorporated by reference into the contract. This paragraph made no reference to KEN's insurance, but it is undisputed that KEN had six million dollars of liability insurance at the time the contract was executed. However, KEN never provided Questor a copy of its insurance certificate nor did Questor ever request one.
On November 5, 1992, Karl Hemphill, an employee of Questor, was killed while working on the Duson # 1 well. Hemphill's estate and survivors sued Questor, KEN and others for wrongful death (the "Hemphill action"). KEN filed a cross-claim for indemnity against Questor in this underlying suit, but subsequently nonsuited Questor after Hemphill's estate and survivors settled with all defendants. For KEN's portion, its insurer, Underwriters, contributed $495,000 and KEN contributed its $5000 deductible, for a total settlement of $500,000.
KEN and Underwriters then brought this suit against appellees for breach of the parties' defense and indemnity agreement, DTPA violations, and breach of guaranty. Appellees filed a motion for summary judgment on the grounds that the contract was void under the TAIA, KEN's insurers had waived their subrogation rights pursuant to the contract, and KEN's DTPA claims were invalid. The trial court granted Questor's summary judgment and this appeal arose.
The standard of review in a summary judgment case is well-established:
1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.
2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.
3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.
American Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex.1997) ). A trial court should grant a defendant's motion for summary judgment when the defendant negates at least one element of each of the plaintiff's theories of recovery, or pleads and conclusively establishes each element of an affirmative defense. Science Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.1997); Dickson v. State Farm Lloyds, 944 S.W.2d 666, 667 (Tex.App.--Corpus Christi 1997, no writ). If the order granting a summary judgment does not specify the ground or grounds on which the trial court relied, the nonmoving party on appeal must negate any grounds on which the trial court could have granted the order. Malooly Brothers, Inc. v. Napier, 461 S.W.2d 119, 121 (Tex.1970); Reese v. Beaumont Bank, N.A., 790 S.W.2d 801, 804 (Tex.App.--Beaumont 1990, no writ).
By their first point of error, appellants contend the trial court erred by granting appellees' motion for summary judgment because the drilling contract's indemnity agreement was valid and enforceable under the Texas Anti-Indemnity Act (TAIA). TEX. CIV. PRAC. & REM.CODE ANN. §§ 127.001-127.008 (Vernon 1997).
The TAIA is based on the notion that an inequity is fostered on certain contractors by the indemnity provisions in certain agreements pertaining to wells for oil, gas, or water, or to mines for other minerals. Id. at § 127.002(1). Generally, indemnity provisions such as those contained in this contract are void and unenforceable if they purport to indemnify against liability that arises from personal injury or death. Id. at § 127.003(a)(2)(A). However, an exception to this prohibition exists if the parties agree in writing that the indemnity obligation will be supported by liability insurance coverage to be furnished by the indemnitor subject to specific limitations. The statutory exceptions controlling this issue state:
(a) This chapter does not apply to an agreement that provides for indemnity if the parties agree in writing that the indemnity obligation will be supported by liability insurance coverage to be furnished by the indemnitor subject to the limitations specified in Subsection (b) or (c).
(b) With respect to a mutual indemnity obligation, the indemnity obligation is limited to the extent of the coverage and dollar limits of insurance or qualified self-insurance each party as indemnitor has agreed to provide in equal amounts to the other party as indemnitee.
TEX. CIV. PRAC. & REM.CODE ANN. §§ 127.005(a), (b) (Vernon 1997) (emphasis added).
Appellants argue that the indemnity agreement is valid because paragraphs 14.8 and 14.9 of the contract satisfy subsection 127.005(a) requiring an indemnity obligation to be supported by liability insurance as evidenced by a writing. Further, appellants claim that 127.005(a) represents the sole statutory requirement for the validity of an indemnity agreement while 127.005(b) serves only to limit the dollar amount of liability under a mutual indemnity agreement. We disagree.
The resolution of an issue of statutory construction must begin with an analysis of the statute. Cail v. Service Motors, Inc., 660 S.W.2d 814, 815 (Tex.1983). If the disputed statute is clear and unambiguous, extrinsic aids and rules of statutory construction are inappropriate and the statute should be given its common everyday meaning. Id. Subsection 127.005(b) addresses mutual indemnity obligations such as the ones used in this drilling contract. While subsection 127.005(b) does act as a limit on the extent of the parties' indemnity obligations as appellants contend, it also contains a condition for validity requiring the parties to agree on equal amounts of liability insurance coverage that will be used to indemnify the other.
In this case, paragraph 13 of the drilling contract incorporated by reference the insurance certificate of Questor, and not KEN. Thus, it cannot be said that each party as indemnitor agreed to provide an equal amount of insurance to the other party as indemnitee, as required by subsection 127.005(b). We agree with appellants that section 127.005 does not contain a...
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...ch. 1102, § 3, at 4558. [70] .%sTex. Civ. Prac. & Rem. Code%s § 127.001 (6) (1997). [71] .Ken Petroleum Corp. v. Questor Drilling Corp., 976 S.W.2d 283, 289 (Tex. App. Corpus Christi 1998), rev'd on other grounds, 24 S.W.3d 344 (Tex. 2000) (Because the Texas Supreme Court found the mutual i......