Xto Energy, Inc. v. Atd, LLC
| Decision Date | 11 March 2016 |
| Docket Number | No. CIV 14-1021 JB/SCY,CIV 14-1021 JB/SCY |
| Parties | XTO ENERGY, INC., Plaintiff, v. ATD, LLC, AIR TECH DRILLING, INC. and ZURICH AMERICAN INSURANCE COMPANY, Defendants. |
| Court | U.S. District Court — District of New Mexico |
THIS MATTER comes before the Court on Defendant Zurich American Insurance Company's Motion for Summary Judgment, filed November 13, 2015 (Doc. 32)("Motion"); and Defendant ATD, LLC's Notice of Adoption by Reference of Defendant Zurich American Insurance Company's Motion for Summary Judgment and Reply in Support of Motion for Summary Judgment, filed February 4, 2016 (Doc. 61). The Court held a hearing on March 1, 2016. The primary issues are: (i) whether the Master Service Contract ("Master Contract") between Plaintiff XTO Energy, Inc. and Defendant Air Tech Drilling, Inc. violates the New Mexico Oilfield Anti-Indemnity Statute, N.M. Stat. Ann. § 56-7-2; (ii) whether the Master Contract's savings clause saves the agreement from the New Mexico Oilfield Anti-Indemnity Statute's proscriptions; and (iii) whether the New Mexico Oilfield Anti-Indemnity Statute voids the commercial general liability policy ("Zurich Policy") between Zurich Insurance and Air Tech. When the Master Contract is read in conjunction with its savings clause in § 10.4, the Master Contract complies with § 56-7-2 as New Mexico courts have interpreted it. Because the Master Contract does not violate § 56-7-2(A) or (B), the contract similarly does not violate § 56-7-2(C). Accordingly, while the Master Contract's savings clause limits Zurich Insurance's duties: (i) to provide indemnity only for those losses that do not arise from any XTO Group member's own negligence; and (ii) to defend and reimburse the XTO Group members for their defense costs, the New Mexico Oilfield Anti-Indemnity Statute does not void the Zurich Policy and the Court will not grant summary judgment. Because the Court rules on the requests for declaratory judgment, the Court denies the Motion in part and grants it in part.
This case involves numerous parties who contracted with each other to provide services and insurance. Below, the Court describes the parties involved, the contracts they entered into, and the disputes that surround those contracts.
XTO Energy is an oil and gas well operator that contracts with various contractors to perform well operations. See Defendant Zurich American Insurance Company's Memorandum in Support of Motion for Summary Judgment, filed November 13, 2015 (Doc. 33)("MSJ"); Plaintiff XTO Energy Inc.'s Memorandum in Support of Response to Defendant Zurich American Insurance Company's Motion for Summary Judgment ¶ A, at 2, filed December 21, 2015 (Doc. 44)("Response").1 Defendant Air Tech, a contractor, is a New Mexico Corporationbased in Bloomfield, New Mexico and formed on June 9, 2006. See MSJ ¶¶ 7, 10, at 4; Response ¶ A, at 2.2 Air Tech's corporate status was revoked on June 28, 2010. See MSJ ¶ 7, at 4. Defendant ATD, LLC is a New Mexico limited liability company based in Hobbs, New Mexico, originally formed as a New Mexico Corporation on September 22, 2006 and converted into an LLC on August 27, 2009. See MSJ ¶ 8, at 4. Zurich Insurance is an insurance company that provides insurance for Air Tech. See MSJ ¶ 19, at 6.
On November 8, 2006, XTO Energy entered into a Master Service Contract ("Master Contract" or "MSC") with Air Tech. See MSJ ¶¶ 7, 10, at 4; Response ¶ A, at 2. The MasterContract provides that Air Tech, "as 'Contractor,' would provide certain well-related services to XTO." MSJ ¶ 10, at 4; Response ¶ A, at 2. "The MSC defines 'XTO Group' as 'XTO, its Affiliates, co-owners . . . at the Site, joint venturers, partners, contractors and subcontractors other than Contractor or its Subcontractors and all of their respective directors, officers, employees, representatives, agents, licensees and invitees." MSJ ¶ 11, at 4. The Master Contract defines "Contractor Group" as "Contractor, its Affiliates, any Subcontractor of Contractor, and their respective directors, officers, employees, representatives, agents, licensees and invitees." MSJ ¶ 13, at 4-5. The XTO Complaint does not allege that "XTO or any defendants named in the Manley Complaint or the Betancur Complaint is a member of the 'Contractor Group,' as defined in the Master Contract, nor any allegation of wrongdoing by any member of the Contractor Group." MSJ ¶ 14, at 5.
Master Contract § 10, entitled "RELEASE, DEFENSE, INDEMNITY, AND HOLD HARMLESS," states:
MSJ ¶ 15, at 5 (quoting Master Contract §10.1 (emphases in MSJ)).
Master Contract § 11.4 provides that all Contractor's liability insurance policies must name "XTO Group" as an additional insured and must "contain a waiver on the part of the insurer, by subrogation or otherwise, of all rights against the XTO Group." MSJ ¶ 16, at 5-6. Master Contract § 10.4 also contains a savings clause, which states:
SPECIAL PROVISION FOR NEW MEXICO. THE FOLLOWING PROVISION APPLIES WHERE WORK IS TO BE PERFORMED IN NEW MEXICO, NOTWITHSTANDING ANY PROVISIONS IN THE CONTRACT TO THE CONTRARY. To the extent this Article X is governed by New Mexico law, then the provisions therein shall be read not to include indemnification for one's own negligence.
MSJ ¶ 17, at 6 (quoting MSC §10.4 (emphasis in MSJ)). MSC § 14.8 provides that Texas law -- "excluding the Texas rules on conflict of law" -- governs the Master Contract. MSJ ¶ 18, at 6.
Named Insured Insurer Mesa WellServices Zurich Insurance Air TechListed on the Schedule of Named Insureds XTO GroupNamed as Additional Insured
Zurich Insurance issued "a commercial general liability policy ('Policy') to Mesa Well Servicing, LP, policy number GLO 4391238-03, effective July 1, 2012 through July 1, 2013." MSJ ¶ 19, at 6. "The Policy's Commercial General Liability Coverage Part Declarations page identifies Mesa Well Servicing, LP as the Named Insured." MSJ ¶ 19, at 6. The Policy's Commercial General Liability Coverage Form states that "[t]hroughout this policy the words 'you' and 'your' refer to the Named Insured shown in the Declarations and any other person or organization qualifying as a Named Insured under this policy." MSJ ¶ 20, at 6. The Policy's Schedule of Named Insureds includes Air Tech. See MSJ ¶ 21, at 6.
In describing the coverage, the Policy states in the section entitled "Coverage A Bodily Injury and Property Damage Liability ('Coverage A')":
We will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'bodily injury' or 'property damage' to which this insurance does not apply. We may, at our discretion, investigate any 'occurrence' and settle any claim or 'suit' that may result. . . . But: . . . No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments—Coverages A and B.
MSJ ¶ 22, at 6-7 (emphasis in MSJ).
Coverage A excludes coverage for "'Bodily injury' or 'property damage' for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement," except for liability for damages: "(1) That the insured would have in the absence of the contract or agreement; or (2) Assumed in a contract or agreement that is an 'insured contract', provided the 'bodily injury' or 'property damage' occurs subsequent to the executionof the contract or agreement."3 MSJ ¶ 23, at 7. The Policy defines "Insured contract" as: "That part of any other contract or agreement pertaining to your business . . . under which you assume the tort liability of...
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