BHP Billiton Petroleum Deepwater, Inc. (oil exploration company) entered a Master Service Agreement with Deep Marine Technology, Inc., who was to provide offshore construction support vessels. BHP also contracted with Wood Group/Deepwater Specialists to provide offshore services. A Wood Group employee, Glenn Duval, was allegedly injured in a personnel basket transfer between a Deep Marine vessel and BHP’s platform. Duval initially sued Deep Marine and later amended his Complaint twice to add Dolphin Services (employer of allegedly negligent crane operator) and Northern Assurance Company of America and Markel American Insurance Company (Deep Marine’s Underwriters).
Deep Marine tendered to BHP for defense, indemnity and additional insured status under the MSA, which BHP accepted. Deep Marine subsequently filed for bankruptcy, automatically staying Duval’s claims against Deep Marine. However, the bankruptcy court allowed Duval to proceed against Deep Marine’s Underwriters, who filed a Third-Party Complaint against BHP asserting claims for complete defense, indemnity and protection pursuant to the BHP-Deep Marine MSA. Thereafter, Deep Marine’s Underwriters and BHP filed cross Motions for Summary Judgment on the issue of whether the underwriters had standing to invoke those provisions. The District Court (W.D.La., Judge Richard Haik) granted BHP’s MSJ and denied Underwriters’ MSJ, holding that an underwriter for a Contractor to a Master Service Agreement (“MSA”) may not enforce the defense and indemnity provisions against the Company if the Contractor’s insurers are not included in the Contractor Group under the terms of the MSA.
On appeal, the Fifth Circuit (Steward, Higginbotham, and Jones) AFFIRMED. The Court pointed out that other parties to similar contracts expressly included their respective underwriters in the defined Company Group and Contractor Group, and agreed that the Company owes no duty to the Contractor Group’s insurers in the absence of such provision.
Thus, parties to MSAs should be careful to include their underwriters within the definition of Company Group and Contractor Group in order to extend their rights under the MSA to each of their respective underwriters. A potential underwriting solution for insurers of these parties may be to require the insured to specifically include its underwriters as members of its Group when the insured enters Master Service Agreements or similar contracts. However, this problem is only likely to arise where, as here, the insured is not subject to suit directly due to insolvency.
Author: Charley Rothermel