Opinion
CIVIL ACTION NO. 01-526, SECTION: I/5
March 6, 2003
ORDER AND REASONS
Before the Court are the motions for summary judgment of defendants, Cross Offshore Corporation and Ocean Salvage Corporation (collectively referred to as "Cross Offshore"), Knots Marine Inshore, Inc., as owner of the HOOKING BULL ("Knots Marine"), and Tom Kiffe Son Boat Rental, Inc., individually and on behalf of the M/V TOMAHAWK ("Kiffe Son"), seeking dismissal of plaintiffs' claims. Plaintiffs, Basin Exploration, Inc. (Delaware), Stone Energy, L.L.C., and Stone Energy Corporation (collectively referred to as "Basin") oppose the motions.
R. Doc. No. 20.
R. Doc. No. 25.
R. Doc. No. 26.
R. Doc. No. 34.
FACTUAL BACKGROUND
Basin brought this action against defendants, Cross Offshore, Knots Marine, and Kiffe Son, seeking indemnification for costs allegedly expended by Basin as a result of damages to its property on March 1, 2001. On that date, Cross Offshore, which had been hired by Basin to perform certain heavy lift services with its derrick barge the D/B SOUTHERN HERCULES, was attempting to lift onto a deck barge a prefrabricated offshore deck owned by Basin. The work was being conducted pursuant to the terms of an Offshore/Marine Master Service Agreement entered into by Cross Offshore and Basin on August 2, 1999. While attempting the lift, the boom on the SOUTHERN HERCULES' crane broke, causing the deck package to drop into the bayou.Basin alleges that the above incident and the resulting damage to its deck was "a result of the negligence, fault, and breach of contract and/or warranty of the defendants, as well as the unseaworthiness" of defendants' vessels. Basin seeks damages resulting from the loss of its property.
R. Doc. No. 1, ¶¶ XV, XVIII. The MIV TOMAHAWK, a vessel owned and operated by Kiffe Son, "was assisting the operation by standing by the D/B SOUTHERN HERCULES." R. Doc. No. 26, Memorandum, p. 2. It is alleged that Knots Marine provided a tug, the M/V HOOKING HERCULES, to move the D/B SOUTHERN HERCULES when the incident occurred. R. Doc. No. 25, Statement of Uncontested Facts, p. 2.
As a result of the above incident, Basin alleges that it has sustained property damages totaling at least $1,574,604.65, exclusive of recoverable interests and costs. R. Doc. No. 34, Memorandum, p. 2.
Defendants bring the present motions for summary judgment, alleging that pursuant to the terms of the master service agreement, Basin released Cross Offshore and "its subcontractors" from any liability for damage to Basin's property even if said damage was caused by the fault or negligence of Cross Offshore and/or "its subcontractors." Defendants, Kiffe Son and Knots Marine, allege that they were at all times pertinent to this lawsuit the subcontractors of Cross Offshore and that they, therefore, along with Cross Offshore, fall within the protection of the release agreement.
R. Doc. No. 20, Exhibit "A," Article 10(B), p. 5.
Id.; R. Doc. No. 20, Memorandum, pp. 2, 9, 12; R. Doc. No. 26, Memorandum, p. 2; R. Doc. No. 25, Memorandum, pp. 1-2. Defendant, Knots Marine, adopts the memorandum of law submitted by Cross Offshore in support of its motion for summary judgment.
R. Doc. No. 25, Memorandum, p. 2; R. Doc. No. 26, Memorandum, p. 3.
Basin denies that it released defendants from liability to Basin for its alleged loss in this matter. Basin argues that notwithstanding any language in the agreement purporting to release the defendants from any damage to Basin's property, Cross Offshore agreed to indemnify Basin for damages resulting from defects in the services provided by Cross Offshore. Finally, Basin argues that there is no evidence supporting Kiffe Son's and Knots Marine's allegations that they were subcontractors of Cross Offshore within the meaning of the master service agreement.
R. Doc. No. 34, pp. 4, 6-7.
R. Doc. No. 31, Memorandum, p. 2; R. Doc. No. 32, Memorandum, p. 2.
LAW AND ANALYSIS
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.Pro. 56(c). Once the moving party carries its burden of proving that there is no material factual dispute, the burden shifts to the nonmovant "to show that summary judgment should not lie." Hopper v. Frank, 16 F.3d 92, 96 (5th Cir. 1994). While the court must consider the evidence with all reasonable inferences in the light most favorable to the nonmovant, the nonmoving party must come forward with specific facts showing that there is a genuine issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Webb v. Cardiothoracic Surgery Associates of North Texas, 1998 WL 175313, *2 (5th Cir. 1998). This requires the nonmoving party to do "more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec., 475 U.S. at 586, 106 S.Ct. at 1356. The nonmoving party must "go beyond the pleadings and by his own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Auguster v. Vermillion Parish School Board, 249 F.3d 400, 402 (5th Cir. 2001).The parties agree that their rights and obligations in this action are governed by the August 12, 1999, master service agreement between Basin and Cross Offshore. The parties, however, are in dispute regarding the meaning and interpretation of the relevant contractual provisions.
R. Doc. No. 34, p. 3; R. Doc. No. 20, p. 8.
"A maritime contract must be interpreted according to the general rules of contract, construction and interpretation." Consolidated Grain Barge Co., Inc. v. Capital Marine Supply, Inc., 2001 WL 823737, *3 (E.D.La. 7/19/01). "Each provision of a contract must be read in light of others so as to give each the meaning reflected by the contract as a whole." Id. Lastly, "each provision of a contract must be given a meaning which renders it, along with all other provisions, effective rather than meaningless." Id.
The master service agreement between Basin and Cross Offshore contains indemnity clauses which provide that Cross Offshore will indemnify and/or hold Basin harmless under certain circumstances and that Basin will indemnify and/or hold Cross Offshore and its subcontractors harmless under certain other circumstances. of relevance to the issues in this case, Article 10(A) contains the requirements of Cross Offshore's agreement to indemnify and hold Basin harmless for any alleged property damage, while Article 10(B) sets forth Basin's agreement to indemnify and hold Cross Offshore and its subcontractors harmless for any alleged property damage. Article 10(A) states in relevant part:
R. Doc. No. 20, Exhibit "A," Article 10.
Contractor [Cross Offshore] hereby accepts full, complete and unconditional responsibility for, and agrees to release, protect, defend, indemnify and hold harmless the indemnified Basin parties and their respective insurers from and against any and all damages to and/or loss of any and all property, equipment, materials and vessels it owns, even if said damage and/or loss allegedly or actually results, in whole or in part, from negligence, strict liability, products liability and/or unseaworthiness attributable to the indemnified Basin parties and/or vessels they own, operate, charter or control.
R. Doc. No. 20, Exhibit "A," p. 4.
Similarly, Article 10(B) states, in pertinent part:
Basin hereby accepts full, complete and unconditional responsibility for, and agrees to release, protect, defend, indemnify and hold harmless the indemnified contractor parties and their respective insurers from and against any and all damages to and/or loss of any and all property, equipment, materials and vessels owned, by Basin even if said damage and/or loss allegedly or actually results, in whole or in part, from negligence, strict liability, products liability and/or unseaworthiness attributable to the indemnified contractor parties and/or vessels they own, operate, charter or control.
R. Doc. No. 20, Exhibit "A," p. 5.
The term "indemnified contractor parties" is defined by the master service agreement as the "contractor or its subcontractors or their employees, officers or directors." The agreement further identifies Cross Offshore as the "contractor." However, the Court notes that the agreement does not identify any "subcontractors" of Cross Offshore.
Id. at p. 4.
Id. at p. 1.
In addition to Articles 10(A) and 10(B), Article 10(C) provides that:
Notwithstanding anything else in this contract, contractor [Cross Offshore] will fully and unconditionally protect, defend, indemnify, and hold harmless the indemnified Basin parties and their respective insurers from and against any claims, demands, suits and/or causes of action, losses, damages, costs, and liabilities arising out of or attributable to defects in services provided by contractor under this agreement.
R. Doc. No. 20, Exhibit "A," p. 5.
With respect to Article 10(C), defendants argue that the article applies only in matters involving third party claims against Basin — a situation which does not exist in the present case. Basin denies that Article 10(C) is limited to third party claims and further argues that the language of the provision clearly requires Cross Offshore to indemnify Basin for any losses, damages, and costs which result from defects in the services provided by Cross Offshore irrespective of any agreement in Article 10(B) to release and hold harmless the defendants from any damage to Basin's property. It is Basin's contention that the dropping of its deck into Bayou Black constitutes a defect in the services provided by defendants for which the defendants are required to indemnify Basin.
R. Doc. No. 20, p. 11-12.
R. Doc. No. p. 34, pp. 4, 6-7.
R. Doc. No. 34, p. 4.
As previously observed by this Court, the master service "agreement must be considered as a whole and all of the provisions of a contract `must be read in conjunction with each other in order to properly interpret the meaning of the contract.'" Marquette Transportation Company, Inc. v. Louisiana Machinery Company, Inc., 2002 WL 1809092, *17 (E.D.La. 8/7/02) (quoting Ogea v. Loffland Brothers Co., 622 F.2d 186, 189-190 (5th Cir. 1980)). Guided by that principle, the Court finds that the indemnification provisions quoted above should be read in light of another portion of the master service agreement which sets forth the parties insurance requirements. Specifically, the master service agreement requires that Basin and Cross Offshore maintain liability insurance to support their mutual defense and indemnity obligations and it further requires the parties to name each other as additional insureds under their respective policies. of significance to the issue of Basin's indemnification, Article 8(i) provides as follows:
In the case of Basin, the master service agreement requires it to name the "Contractor Indemnified Parties," which includes Cross Offshore and its subcontractors, as additional insureds under its liability policy. R. Doc. No. 20, Exhibit "A," Article 8(i), p. 4.
R. Doc. No. 20, Exhibit "A," Article 8, pp. 2-4. Cross Offshore's insurance requirements are set forth in Article 8(a)-(h). Because resolution of the issue at hand requires only a review of Basin's insurance and indemnity obligations, the Court does not include that portion of the agreement setting forth Cross Offshore's insurance requirements.
Basin agrees that its indemnities under paragraph 10(B) will be supported by liability insurance to the maximum limit permitted by applicable law, in amounts no less than those specified in paragraphs 8(e) and 8(f) above. Basin also agrees to cause its liability policies to be endorsed to waive subrogation against the Contractor Indemnified Parties with respect to the release, defense and indemnity obligation of Basin in paragraph 10(B) and to cause the Contractor Indemnified Parties to be named as additional insured under such liability policies to the extent of such release, defense and indemnity obligations.
Paragraphs 8(e) and 8(f) set forth policy limits of $5,000,000.00 and $10,000,000.00, respectively. See R. Doc. No. 20, Exhibit "A," p. 3.
Finally, Article 9 provides:
It is agreed and understood that it is in the best interests of the parties that certain risks of the enterprise in which they are engaged should be identified and allocated as between them. Therefore, it is the intent of this Agreement to provide for indemnity by each party supported by liability insurance coverage to be furnished by the indemnitor.
R. Doc. No. 20, Exhibit "A," p. 4.
In its motion for summary judgment, Cross Offshore argues that in light of the insurance and indemnity requirements of Articles 8 and 10, the jurisprudence mandates that Basin exhaust its insurance coverage before pursuing a claim for indemnity. This Court agrees.
R. Doc. No. 72, Supplemental Memoranda, pp. 2, 6.
Beginning with the case of Ogea v. Loffland Brothers Co., 622 F.2d 186 (5th Cir. 1980), the courts have held that where indemnity obligations in a contract are supported by insurance agreements which require the parties to name each other as additional insureds in their respective policies, the parties, prior to asserting a claim for indemnity, are to first look to their own insurance coverage. In Ogea, the issue before the Court was the interpretation of a drilling contract entered into between the owner of a drilling platform and the operator of same. Like the case at bar, "[t]he drilling contract included an indemnity clause providing that [the owner of the platform] would indemnify [the operator] under certain circumstances with [the operator] indemnifying [the owner] in other cases." Id. at 187-88. The drilling contract also required the operator to acquire liability insurance and to name the owner as an additional insured under the policy. Id. The Ogea court rejected the contention that the contract should be governed exclusively by the indemnity provisions of the contract, holding that inclusion of the mandatory insurance provisions meant that the parties would first look to insurance to cover claims and damages. Only after insurance coverage was exhausted would the indemnity provisions be enforced. Id. at 189-90.
Similarly, in Tullier v. Halliburton Geophysical Services, Inc., 81 F.3d 552 (5th Cir. 1996), the court 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 meaning of the contract.'" Id. at 553-54 (quoting Ogea, 622 F.2d at 190). The Tullier court found that the controlling fact in Ogea and other similar cases "is the existence of `additional assured' coverage whereby an indemnitee agreed to procure insurance coverage for the benefit of the indemnitor." 81 F.3d at 554; see also Klepac v. Champlin Petroleum, 842 F.2d 746, 47-48 (5th Cir. 1988) (holding that provision of agreement between rig owner and oil company required the former to procure and maintain comprehensive general liability insurance naming the latter as co-insured, and, therefore, oil company's duty to indemnify the rig owner applied only to amounts exceeding that coverage); Consolidated Grain and Barge Company, Inc. v. Capital Marine Supply, Inc., 2001 WL 823737, *2-3 (E.D.La. 7/19/01) (applying the reasoning in Ogea and Tullier to preclude enforcement of an indemnification clause where the policy limits of the party seeking indemnity had not been exhausted); Computalog USA, Inc. v. Mallard Bay Drilling, Inc., 21 F. Supp.2d 620, 626 (E.D.La. 1998)(same); Marquette Transportation Company, Inc. v. Louisiana Machinery Company, Inc., 2002 WL 1809092, *17 (E.D.La. 8/7/02)(same).
The Ogea line of cases mandates harmonious reading of the indemnity and insurance procurement provisions. Tullier, 81 F.3d at 554. Following this Court's review of the indemnity provisions of Article 10 of the master service agreement with the insurance provisions of Article 8, this Court is compelled to follow the Fifth Circuit's holdings in Ogea and its progeny.
Article 8(i) required Basin to obtain liability insurance covering its indemnity obligations set forth in Article 10(B), which, among other things, included the obligation of Basin to protect and release the "Indemnified Contractor Parties," ( i.e., Cross Offshore and its subcontractors) from and against any and all damages to Basin's property. Basin was further required to name the "Indemnified Contractor Parties" ( i.e., Cross Offshore and its subcontractors) "as additional insured[s] under such liability policies to the extent of such release, defense, and indemnity obligations." Since Basin agreed to provide insurance that would protect Cross Offshore, along with its subcontractors, in the event of damage to Basin's property, Basin cannot make a claim for loss of the deck package until that insurance is exhausted. Basin has presented no evidence that the policy limits on the coverages required by Article 8(i) of the master service agreement have been exhausted.
R. Doc. No. 20, Exhibit "A," Article 10(B), p. 5.
R. Doc. No. 20, Exhibit "A," Article 8(i), p. 4.
Basin contests the applicability of the Ogea line of reasoning in this matter by arguing that Ogea and the cases stemming from it all involved claims for contractual indemnification against third party claims. Because this case involves direct claims by and between parties to the contract and not a third party claim for indemnification, it is Basin's position that the Ogea rule has no application herein. Basin's argument, however, is not persuasive. Nothing in Ogea and the cases which follow Ogea limits the application of the Fifth Circuit's ruling to cases involving third party claims and Basin points to no such authority.
R. Doc. No. 80 and 83.
R. Doc. No. 80, p. 4.
After considering the master service agreement as a whole, and reading the indemnity provisions along with the insurance provisions, the Court finds that Basin must look to the insurance procured pursuant to the master service agreement prior to asserting a claim for contractual indemnity against Cross Offshore and its subcontractors. As this Court has previously noted, "[t]here is no logical way to reconcile the indemnity provisions and the mandatory insurance provisions of the [master service agreement] other than to find that the parties intended that the insurance coverages be exhausted prior to the indemnity obligation being triggered." Marquette, 2002 WL 1809092 at *18. Accordingly, Basin is precluded as a matter of law from enforcing Cross Offshore's indemnity obligation for any alleged damage to Basin's property until Basin has exhausted its insurance coverage.
With respect to the motions for summary judgment filed by Kiffe Son and Knots Marine, the Court finds that although Basin is precluded from asserting a claim for indemnity against Cross Offshore and its subcontractors until its insurance is exhausted, Kiffe Son and Knots Marine have presented no evidence to this Court to support their allegations that they were in fact subcontractors of Cross Offshore and that they fall within the agreement's definition of "Indemnified Contractor Parties." Absent such evidence, Kiffe Son and Knots Marine are not entitled to the protection of Basin's contractual obligations and their motions for summary judgment must be denied.
Accordingly, for the above and foregoing reasons,
IT IS ORDERED that the motion of defendant, Cross Offshore Corporation and Ocean Salvage Corporation, for summary judgment is DENIED as premature as there is no evidence that Basin's insurance has been exhausted.
IT IS FURTHER ORDERED that the motions for summary judgment of defendants, Knots Marine Inshore, Inc., as owner of the HOOKING BULL, and Tom Kiffe Son Boat Rental, Inc., individually and on behalf of the M/V TOMAHAWK, are DENIED.