5th Circuit Finds Record Insufficient to Confirm OCSLA Situs in Indemnity Dispute

The U.S. Fifth Circuit Court of Appeals recently addressed the situs requirement of a personal injury claim arising under the Outer Continental Shelf Lands Act (OCSLA).  Tetra Technologies was performing a salvage operation on a decommissioned oil production platform in the Gulf of Mexico and retained Vertex Services to assist with the project.  A rigger employed by Vertex was injured when he fell approximately 80 feet into the water.  He sued Tetra for personal injury and Tetra sought indemnity from Vertex pursuant to a Master Service Agreement between the two companies.  The District Court determined Tetra was entitled to indemnity from Vertex and Vertex appealed to the 5th Circuit.

 

On appeal, Vertex raised several arguments including that under OCSLA, Louisiana law was applicable and the indemnity agreement was voided under the Louisiana Oilfield Indemnity Act (LOIA).  The first question for the Court was whether OCSLA applied to this case such that Louisiana law should be applied as a surrogate to federal law.  The adoption of state law as a surrogate to federal law requires 1) that the controversy arise on a situs covered by OCSLA (such as a fixed platform on the outer continental shelf); 2) that federal maritime law must not apply of its own force; and 3) state law must not be inconsistent with federal law.  For the controversy to arise on a situs covered by OCSLA in a contractual dispute, the majority of the work performed under the contract must occur on a stationary platform or other OCSLA situs.

 

After reviewing the plaintiff’s deposition testimony, the MSA, and the Salvage Plan, the Court was unable to conclude whether the majority of Vertex’s work was to be performed on an OCSLA situs.  The Court determined the record was inadequate and the case was remanded to the District Court for further evaluation of this dispositive question.

 

Tetra Technologies v. Continental Insurance Co.

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).