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Ken Petroleum Corporation v. Questor Drilling Corporation6/29/2000
As amended October 12, 2000
On Petitions for Review from the Courts of Appeals for the Thirteenth and First Districts of Texas
Argued December 1, 1999
The common issue in these cases is the proper construction of the 1991 version of the Texas Oilfield Anti-Indemnity Act. The drilling contracts in dispute have mutual indemnity provisions under which the drilling contractor agreed to indemnify the operator from claims by the contractor's employees, and the operator in turn agreed to indemnify the contractor for claims by the operator's employees. The trial courts in each case held that the indemnity provisions were void under the TOAIA, and the courts of appeals affirmed. The courts of appeals construed section 127.005 of the TOAIA to require the parties to agree to procure the same dollar amount of insurance to support their respective indemnity obligations and concluded that the contracts at issue did not reflect such an agreement.
We hold that while section 127.005 required that there be a written agreement to procure insurance or self-insurance to support mutual indemnity obligations, such an agreement is not void if the parties agree to provide insurance in differing amounts. Section 127.005(b) only restricted the enforceability of an indemnity obligation to the coverage and dollar limits that applied equally to both parties. We further hold that section 127.005 did not require a written agreement to specify the dollar amounts of insurance to be provided.
With regard to issues in Ken Petroleum v. Questor that are not present in Weber Energy v. Grey Wolf Drilling, we hold that (1) Questor did not establish as a matter of law that it had no agreement with Ken Petroleum regarding the dollar amount of insurance to be provided, and (2) the subrogation claims brought by Ken Petroleum's insurance underwriters have not been waived. Because of its construction of section 127.05, the court of appeals did not reach the other issues raised by Ken Petroleum and its underwriters regarding the collateral source rule and an alleged guaranty. We therefore remand those issues to the court of appeals.
Accordingly, in Weber Energy, we reverse the judgment of the court of appeals and render judgment for Weber Energy. In Ken Petroleum, we reverse the judgment of the court of appeals in part and remand the case to that court for further proceedings consistent with this opinion.
I.
A.
Weber Energy was the operator of an oil and gas property and contracted with Grey Wolf Drilling Company to drill a well. The parties used an International Association of Drilling Contractors form, which is commonly found in the oil and gas industry. The contract contained mutual indemnity provisions. Grey Wolf agreed to indemnify Weber Energy, for, among other things, all claims and causes of action asserted by Grey Wolf employees for personal injury or death. Weber Energy had a reciprocal indmenity obligation regarding its employees. The contract reflects an agreement that the parties would support their respective indemnity obligations with insurance or self-insurance. Weber Energy and Grey Wolf each had the same amount of insurance, $16,000,000.
A Grey Wolf employee, Wade Williams, was injured during drilling operations and sued Weber Energy. Weber Energy brought a third-party action against Grey Wolf when it refused to honor its indemnity obligation. Weber Energy ultimately settled Williams's claim for $4,000,000 and filed a motion for summary judgment against Grey Wolf seeking recovery of that amount. Grey Wolf filed a cross motion for summary judgment contending that the mutual indemnity agreements were void unde
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