Nabors Drilling Techs. USA Inc. v. Deepwell Energy Servs. LLC

568 F.Supp.3d 756

NABORS DRILLING TECHNOLOGIES USA INC and Nabors Industries Inc, Plaintiffs,

v.DEEPWELL ENERGY SERVICES LLC and Liberty Mutual Fire Insurance Company, Defendants.

Civil Action No. 4:19-cv-02854

United States District Court, S.D. Texas, Houston Division.

Signed October 21, 2021

Daniel David Schick, Germer PLLC, San Antonio, TX, Thomas Joseph Smith, Kelly Clinton Hartmann, Galloway Johnson et al, Houston, TX, for Plaintiffs.

Frank Anthony Piazza, Jr, Brothers, Alvarado, Piazza & Cozort, P.C., Sarai Sanchez Neuman, Eastham, Watson, Dale & Forney, L.L.P., Houston, TX, for Defendants.

OPINION AND ORDER GRANTING SUMMARY JUDGMENT IN PART

Charles Eskridge, United States District Judge

Plaintiffs Nabors Drilling Technologies USA Inc and Nabors Industries Inc and Defendants Deepwell Energy Services LLC and Liberty Mutual Fire Insurance Company have all moved for partial or full summary judgment. See Dkts 21 (Deepwell), 22 (Liberty Mutual), and 23 (Nabors entities). Each motion is granted in part and denied in part.

In summary, Texas law governs the obligations of the parties under the Master Service Agreement at issue; Liberty Mutual has a duty to defend and indemnify the Nabors entities if they qualify as additional insureds under the policy; if Nabors is assigned any liability in the underlying action and Deepwell is required to indemnify, then the coverage cannot exceed $500,000; and the action will be abated pending resolution of the underlying liability determination.

1. Background

Plaintiffs Nabors Drilling Technologies USA Inc and Nabors Industries Inc are both subsidiaries of the same parent corporation. Dkt 4. They will be referred to together as Nabors.

Nabors entered into a Master Service Agreement with Defendant Deepwell Energy Services LLC in October 2015. Dkt 23-1 (MSA). Under the MSA, "Deepwell was approved as a full cycle rigger in all regions, and approved to perform work in any state except for the State of North Dakota." Dkt 21-1 at 31 (objections and answers to Deepwell's first set of interrogatories).

The following are the MSA provisions most pertinent to this action.

Section 9 of the MSA pertains to insurance. It provides in relevant part:

a. As a separate and independent obligation and without limiting the indemnity obligation of Contractor or its insurers, at any and all times during the term of the Agreement, Contractor shall, at Contractor's sole expense, carry insurance ... for the types of insurance and in minimum amounts as follows:

....

iii. Comprehensive General Liability Insurance on an occurrence basis, including contractual liability, sudden and accidental pollution, and products liability/completed operations coverage, including without limitation insurance for the indemnity agreements set forth in the Agreement, with limits of not less than $1,000,000 per occurrence covering to [sic] bodily injury, sickness or death, personal injury, broad form, property damage premises/operations, independent contractors, underground resources, underground property damage, loss of or damage to property.

....

b. The Nabors Group shall be named as additional insured in each of Contractor's policies, except Workers' Compensation.

c. All policies shall be endorsed to provide that underwriters and insurance companies of Contractor shall not have any right of subrogation against the Nabors Group or their underwriters and insurance companies.

....

f. It is hereby understood ... that any coverage provided to Nabors Group by Contractor's insurance under the Agreement is primary insurance with respect to the obligations of Contractor under any Contract, and shall not be considered contributory insurance with any insurance policies of Nabors Group.

Dkt 23-1 at 4–5 (MSA); Dkt 22 at 4–5.

Section 10 of the MSA pertains to risk allocation and indemnity. It provides in relevant part:

c. Contractor shall be liable for, and hereby releases, all claims against Nabors Group with respect to all losses, costs, damages, expenses and legal fees which Contractor may suffer, sustain, pay or incur directly or indirectly arising from or on account of bodily injury to or death of any persons in the Contractor Group or damage to or loss of property owned by a member of the Contractor Group arising out of or relating to the Agreement or any Contract. In addition, Contractor shall defend, indemnify, and hold harmless Nabors Group against all Claims arising from or related to (1) bodily injury to or death of any person in the Contractor Group, or loss of or damage to any property owned by a member of the Contractor Group (2) bodily injury or death of any person or loss of or damage to any property resulting from any negligent act or willful misconduct of any person within the Contractor Group.

d. Except as otherwise specified herein, the liability, release and indemnity provisions contained in this Agreement shall apply notwithstanding any breach or alleged breach of this Agreement or any Contract and shall be without regard to cause or causes, including without limitation pre-existing defects in equipment or materials, the negligence, whether sole, concurrent, active, passive, primary or secondary, of either party or any other person including without limitation the party or person being released or indemnified, or otherwise, strict liability or the unseaworthiness of any vessel ingress and egress, loading and unloading.

....

h. The indemnity obligations contained in this Agreement or any Contract with respect to the injury to or death of any person in the Contractor Group or damage to or loss of property of any member of the Contractor Group shall be supported by liability insurance coverage in the amounts set forth in article 9 above.

i. The parties are cognizant of statutes in various jurisdictions that nullify in whole or in part the indemnity obligations contained herein to the extent of the indemnitee's negligence (including but not limited to Tex. Civ. Prac. & Rem. Code § 127.001, et seq , La. Rev. Stat. 9:2780, N.M. Stat. Ann. § 56-7-2 and Wyo. Stat. § 30-1-131, et seq. ) and of the public policy considerations underlying those statutes. Notwithstanding those statutes, the public policy considerations and the cases decided under those statutes, the parties confirm their intent to voluntarily honor and abide by the terms of the indemnity provisions in this Agreement, despite any nullifying effect the statutes or cases may have thereon.

Dkt 23-1 at 5–7 (MSA).

Deepwell furnished certificates of liability insurance in conjunction with executing the MSA. These certificates represented that its policies provided Nabors "Blanket Additional Insured Primary and Non-Contributory" coverage along with general commercial and excess liability coverages. Dkt 23-3 at 1–2. Deepwell reaffirmed that its general commercial liability policy provided that same blanket coverage in a 2018 certificate of liability insurance that identified Liberty Mutual as its insurer. Id at 3. Indeed, Liberty Mutual issued Commercial General Liability Policy No TB2-641-445005-018 to Deepwell as the first-named insured with an effective date from July 1, 2018 to July 1, 2019. Dkt 30-5 (insurance policy).

The CGL policy generally covers "bodily injury and property damage liability," but it doesn't apply if the insured assumed such liabilities by contract. Id at 15–16. But that exclusion itself doesn't apply when the insured assumes the tort liability of another to pay for bodily injuries to third persons through an insured contract. Id at 16, 28. The MSA is an insured contract, as Deepwell assumed the tort liability of Nabors to pay for bodily injuries to any of its employees or contractors performing work under the MSA. Dkt 23-1 at 5–7. So the policy covers liabilities for bodily injuries arising under the MSA, and it extends such coverage to additional insureds, which (as discussed below) Nabors may be. Ibid; Dkt 30-5 at 15–16, 28, 57; Dkt 23-3 at 1–2.

A Deepwell employee named Rashaan Jones was injured on a drilling rig owned and operated by Nabors in Eddy County, New Mexico in August 2018. Dkt 21-1 at 20 (incident report); Dkt 22-1 at 2 (state petition). Jones claims he "was attempting to remove a pin on a gas buster on the rig" and ultimately severed two of his fingers. Dkt 22-1 at 2; Dkt 21-1 at 20. Jones is a citizen of Louisiana. But he brought action in December 2018 against Nabors in Texas state court, seeking compensatory and punitive damages on claims for negligence and gross negligence. See Dkt 22-1, citing Jones v. Nabors Drilling Technologies USA Inc , No 2018-87021, in the 125th District Court, Harris County, Texas.

Nabors sent a tender for defense, indemnity, and coverage as additional insured to Deepwell in February 2019 and asked it to notify Liberty Mutual. Dkt 23-5. Nabors there insisted that Jones was an employee of Deepwell at the time of his injury and was working in the course and scope of his employment under the MSA. Deepwell forwarded the letter to Liberty Mutual, which denied the tender in April 2019. Dkt 23-6. It reasoned that Nabors isn't entitled to additional-insured status under the policy because the New Mexico Oilfield Anti-Indemnity Act "nullifies the indemnification provisions of an agreement pertaining to an oil well or gas well." Id at 4. Even so, a Liberty Mutual representative sent an email to Deepwell in September 2019 acknowledging that "under Texas law, Nabors may ultimately qualify as an additional insured, but Liberty has no present duty to defend. If Deepwell or Jones himself is partly responsible for the injury, Nabors will be entitled to indemnity coverage as an additional insured." Dkt 23-7.

Nabors brought this action against Deepwell and Liberty Mutual in Texas state court in June 2019. It seeks a declaration affirming that it's entitled to defense and indemnity for costs arising out of the underlying tort action. And it seeks a further declaration affirming that it's entitled to defense and indemnity as an additional...