Tullier v. Halliburton Geophysical Services, Inc.

• Decision Date: 25 April 1996
• Docket Number: No. 95-30037,95-30037
• Parties: Shawn TULLIER, Plaintiff, v. HALLIBURTON GEOPHYSICAL SERVICES, INC., Defendant/Cross-Claimant/Cross-Defendant/Appellant. v. McCALLS BOAT RENTALS, INC., Defendant/Cross-Defendant/Cross-Claimant/Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 552

81 F.3d 552

1996 A.M.C. 1561

Shawn TULLIER, Plaintiff, v. HALLIBURTON GEOPHYSICAL SERVICES, INC., Defendant/Cross-Claimant/Cross-Defendant/Appellant. v. McCALLS BOAT RENTALS, INC.,

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

No. 95-30037.

United States Court of Appeals, Fifth Circuit.

April 25, 1996.

Bob F. Wright, Domengeaux, Wright, Moroux and Roy, Lafayette, LA, for plaintiff.

James E. Diaz, Sr., Onebane, Donohoe, Bernard, Torian, Diaz, McNamara and Abell, Lafayette, LA, for Halliburton Geophysical Services, Inc.

James A. Blanco, Stockwell, Sievert, Viccellio, Clements & Shaddock, Lake Charles, LA, Robert W. Clements, Lake Charles, LA, for McCalls Boat Rentals, Inc.

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

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

                and against claims brought by or on behalf of the indemnitor's employees.   Time Charter Agreement pp 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."  p  6.4.   McCall, however, agreed to provide insurance as follows
                

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