Fifth Circuit: Who “Invited” Plaintiff on the Vessel?

The U.S. Fifth Circuit Court of Appeals recently addressed competing indemnification provisions in a maritime contract.  A pipeline operator, W&T Offshore, hired a diving contractor, Triton Diving Services, for an offshore pipeline decommissioning project.  Triton provided their own vessel and personnel, but operated under W&T’s instruction pursuant to a Master Service Contract.  W&T also hired a safety contractor, Tiger Safety, to assist with filtration of pipeline fluids.  An employee of Tiger was working on Triton’s vessel under supervision of W&T when he fell and injured himself. 

The Tiger employee sued both W&T and Triton in U.S. District Court.  W&T and Triton filed cross-claims against one another seeking defense and indemnity based on their Master Service Contract.  W&T had agreed to indemnify Triton for personal injury claims brought by members of the “W&T Group”.  Likewise Triton had agreed to indemnify W&T for personal injury claims brought by members of the “contractor group”.  The contract defined the “contractor group” to include Triton’s “invitees on the work sites” and “W&T Group” included W&T’s “invitees on the work sites”.  The indemnification question therefore boiled down to whether the Tiger employee was an “invitee” of W&T or Triton.  At the time of the accident, the Tiger employee was working on Triton’s vessel under the direction of Triton personnel, but he was hired by W&T and was being monitored by a W&T employee also on the vessel. 

The District Court sided with Triton, finding that the plaintiff was W&T’s invitee and W&T appealed to the Fifth Circuit.  On appeal, the Court confirmed that the Master Service Contract was a maritime contract and turned to Fifth Circuit precedent that defined “invitee” as “a person who goes onto premises with the expressed or implied invitation of the occupant, on business of the occupant or for their mutual advantage”.  The Court concluded that even though the plaintiff was injured on Triton’s vessel, he was a W&T invitee because he was hired by W&T and was working under the supervision of W&T.  The Fifth Circuit affirmed the District Court’s finding that W&T owed Triton defense and indemnity. 

Grogan v. W&T Offshore   

One More Thing To Consider Before Voluntary Retirement…

In this decision presented to the Benefits Review Board, Claimant appeals, and Employer and Carrier cross-appeal, the Decision and Order of Administrative Law Judge Steven B. Berlin.

Claimant originally sustained right knee injuries due to an unrelated-work injury.  Claimant began working for Employer as a marine machinist in 1998.  On September 18, 2007, Claimant sustained injuries to his right knee.  Claimant underwent surgery, which was voluntarily paid for by the Carrier at the time- American Home Assurance/ AI Surplus Insurance/ Chartis/ AIG Worldsource (Chartis).  Claimant returned to work on April 16, 2008, at which time Signal was the Longshore and Harbor Workers’ Compensation Act carrier.  Claimant began working part-time in August 2008 and continued until he retired voluntarily in April 2011.

In September 2010, Claimant filed a claim alleging residuals from a surgery caused increased pain during his work activities.  Chartis moved to add Signal to the claim asserting that Claimant’s continued work activities after April 2008 aggravated Claimant’s condition such that Signal would be the responsible carrier.

In its cross-appeal, Signal argued that Claimant’s claim was time-barred under Section 13, which applies to traumatic injury cases and provides that the right to compensation shall be barred unless the claim is filed within one year of the time the claimant is aware, or should have been aware, of the relationship between the injury and the employment.  See 33 USC 913(a).  The BRB rejected Signal’s contention and instead found the claim to be timely filed; the claim was filed within one year of a May 2010 medical opinion linking claimant’s increased knee pain to his 2007 work-related accident.  The BRB also rejected Signal’s contention that it was not the last responsible Employer.  Affirming the ALJ’s decision, the BRB agreed that Claimant presented substantial evidence that he sustained an aggravation of his right knee condition when he was working part-time, which was during Signal’s coverage period.

In his appeal, Claimant argued he was improperly denied total disability benefits when the ALJ found that since Claimant voluntarily left the workforce at a time when he was still able to work, he incurred no wage loss due to his work injury.  Relying on Hoffman v. Newport News Shipbuliding & Dry Dock Co., 35 BRBS 148 (2001), the BRB agreed: if a Claimant retires for reasons unrelated to his work-injury, he is not entitled to permanent total disability benefits.  Accordingly, Claimant was not entitled to permanent total disability benefits, even though his claim had been timely filed.

Horner v. Cascade General/Vigor Industrial, LLC, BRB Nos. 13-0555 and 13-0555A (Aug. 21, 2014).

Deepwater Horizon: Contractual Indemnity for Gross Negligence or Punitive Damages?

U.S. District Judge Carl Barbier recently rendered a very important ruling in the Deepwater Horizon/BP Oil Spill suit that relates to the enforceability of contractual indemnity in the context of GROSS NEGLIGENCE and/or PUNITIVE DAMAGES. 

Judge Barbier addressed whether BP was contractually obligated to defend and indemnify Transocean, owner of the Deepwater Horizon, for pollution claims asserted by third parties.  The drilling contract between BP and Transocean, in pertinent part, required BP to defend and indemnify Transocean for damages and liability from spills “without regard to negligence of any party or parties and specifically without regard for whether the pollution or contamination is caused in whole or in part by the negligence or fault of” Transocean. 

BP argued to Judge Barbier that its duty to defend and indemnify did not extend to damages caused by Transocean’s gross negligence or to punitive damages that may be awarded against Transocean.  BP asserted that the words “negligence and fault” (as used in the contract) meant “ordinary fault” but not gross negligence or strict liability.  BP also contended that public policy prohibits indemnity for gross negligence and punitive damages. 

In a rather detailed opinion, Judge Barbier accepted BP’s arguments relating to punitive damages but disagreed with respect to gross negligence.  Judge Barbier ruled that public policy bars indemnity for punitive damages.  However, he held that public policy does not prohibit indemnity for gross negligence.  The Court found that the foregoing indemnity wording was intended to emphasize that BP assumed the risk even if caused by Transocean’s negligent conduct but was not intended to limit such conduct to ordinary negligence.  

Interestingly, Judge Barbier noted that, in some instances, gross negligence may indeed render certain contractual language unenforceable where one party agrees in advance to release the other contracting party from liability for damages suffered by the former, as a matter of public policy.  Such provisions are more rightly defined as “releases” rather than indemnity, according to the court.  

Judge Barbier explained that, in general, a “release” surrenders legal rights or obligations between parties to an agreement.  In comparison, a true indemnity agreement determines which party to a contract will ultimately bear the risk of injury to a third party.  In the first instance, the injured party has no recourse.  In the latter instance, the injured party is not restrained from seeking compensation.  Thus, the court ruled that gross negligence will render release language unenforceable, but will not prohibit indemnity. 

This ruling will certainly be appealed to the Fifth Circuit.

In re Oil Spill by the Oil Rig “Deepwater Horizon, MDL No. 2179 (E.D. La. Jan. 26, 2012).

Fifth Circuit Holds That Repair Service Order Validly Incorporated Online Terms And Conditions By Reference

As the Internet continues to play an increasingly important role in commerce, courts have begun to deal with relatively new considerations arising out of contracts formed in whole or in part online.  The United States Fifth Circuit Court of Appeals recently dealt with some of these new considerations in One Beacon Insurance Co. v. Crowley Marine Serv., Inc., 2011 WL 3195292 (5th Cir. 2011).

This case arose out of a dispute over the terms of a ship repair contract and maritime insurance policy.  Crowley Marine Services, Inc. (“Crowley”) hired Tubal-Cain Marine Services, Inc. (“Tubal-Cain”) to perform ship repair work on one of its barges.  Tubal-Cain hired a subcontractor to perform lighting and electrical work.  During repairs to the barge, an employee of the subcontractor was severely injured by an electrical shock and resulting fall.  The injured employee initiated an action in Texas state court alleging that Crowley and Tubal-Cain were negligent.  This prompted Crowley to formally demand defense and indemnity from Tubal-Cain purportedly arising out the ship repair contract between them.  Crowley also sought defense and coverage from One Beacon Insurance Company (“One Beacon”) as an additional insured under Tubal-Cain’s Maritime Comprehensive Liability Policy.

In response to Crowley’s actions, One Beacon denied coverage and filed a declaratory judgment action seeking a ruling that Crowley was not entitled to coverage as an additional insured.  One Beacon alleged that Tubal-Cain never requested that Crowley be added to the policy and did not otherwise qualify for coverage.  Crowley filed a third-party complaint against Tubal-Cain in the declaratory judgment action, alleging that terms and conditions incorporated into a repair service order issued in connection with the repair work required Tubal-Cain to procure certain insurance policies that named Crowley as an additional insured.

The district court, trying the case on written submission, ruled for Crowley on its contractual defense and indemnity claim against Tubal-Cain and on its claim that  Tubal-Cain failed to perform is obligation under their agreement to procure the required insurance coverage.  The court also held that Crowley did not qualify as an additional insured under the policy and granted One Beacon’s declaratory judgment claim.  Tubal-Cain and Crowley cross-appealed the district court’s judgment.  While it was undisputed that a ship repair agreement existed between the parties, there was a dispute as to whether a written agreement existed requiring Tubal-Cain to defend, indemnify and procure insurance for Crowley.

Executives and management for the two companies met in March 2007 to discuss the necessary barge repairs.  The companies had previously entered into similar agreements for minor repairs on eight prior occasions and contracted an additional fifteen times following the disputed agreement.  Each time, Crowley issued a repair service order (“RSO”) to Tubal-Cain outlining the scope of repairs.  The RSOs did not include pricing terms and were not signed by the parties.  The RSOs all contained a prominently displayed notice that they were issued in accordance with the purchase order terms and conditions on Crowley’s website unless the parties agreed otherwise in writing.  The terms and conditions, which were displayed in four-point font on a subpage of the website, required contractors to defend and indemnify Crowley for injury or damage even if alleged to be caused by the sole active negligence of Crowley.  The terms and conditions also included the provision requiring contractors to purchase certain policies of insurance and name Crowley as an additional insured.  The terms and conditions were never discussed and no hard copy was ever provided to Tubal-Cain.

On appeal, Tubal-Cain argued that an oral agreement was reached between the parties and the RSO merely confirmed that agreement.  Since defense, indemnity, and insurance were never made a part of the oral agreement, the RSO could not confirm more than what was already agreed to orally.  Further, the RSO was sent after Tubal-Cain had already commenced work and they did not have an opportunity to review and assent to it before beginning performance on the contract.

The Fifth Circuit noted that in construing maritime contracts, it has held that where parties share a history of business dealings and standardized provisions have become a part of those dealings, such familiar provisions within purchase order issued after performance are binding where they are accepted without objection.  Responding to Tubal-Cain’s argument that the relatively brief business dealings between the parties could not have established a course of dealing, the Fifth Circuit noted that courts have found a course of dealing between parties based on receipt of as few as three or four bills of lading.  Accordingly, the court concluded that the district court did not err in holding that the parties had established a course of dealing from which the court could infer that Crowley’s terms and conditions were implied in every contract.

Tubal-Cain also disputed the lower court’s finding that the RSO was sufficient to put Tubal-Cain on notice of the insurance and indemnity terms.  Specifically with respect to the indemnity, Tubal-Cain argued that indemnity provisions which purport to indemnify a party for its own negligence must be conspicuous to be enforceable.  The court explained that under general contract principles, where a contract expressly refers to and incorporates another instrument in specific terms clearly showing an intent to incorporate the instrument, both instruments are to be construed together.  The court held that maritime contracts may validly incorporate by reference terms from a website in the same manner that they may incorporate terms from a paper document.  Although Crowley could have been clearer in providing directions to the location of the terms and conditions, notice of the terms was reasonable under the facts of the case.

The Fifth Circuit also went on to affirm the district court’s additional holdings that the indemnity provision was sufficiently clear and conspicuous as to be enforceable and that the RSO terms and conditions supplemented the oral agreement.

One Beacon Ins. Co. v. Crowley Marine Services, Inc., — F.3d —-, 2011 WL 3195292 (5th Cir. July 28, 2011).