Indemnity Provisions In Energy Agreements

A BRIEF OVERVIEW OF INDEMNITY PROVISIONS

AND ALLOCATION OF RISK IN

ENERGY AGREEMENTS

TEXAS LAWYER’S IN-HOUSE COUNSEL SUMMIT

MAY 17, 2012

Kenneth W. Bullock, II

1200 Smith Street, 14

th Floor

Houston, Texas 77002

Telephone: (713) 654-9637

[email protected]

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A BRIEF OVERVIEW OF INDEMNITY PROVISIONS AND

EFFECTIVE ALLOCATION OF RISK IN ENERGY AGREEMENTS

The conscientious practitioner will always strive to allocate risk in connection with all

contractual obligations and undertakings in the most efficient and effective manner available

given the prevailing circumstances in which the subject matter of the contract or obligation is to

be performed. This goal is, of course, no different for practitioners whose efforts are

concentrated on behalf of one client as in the role of in-house counsel.

One of the most often utilized risk allocation devices in commercial settings, including

several particular applications seemingly unique to the energy industry, is the contractual

indemnity provision. At its most basic form, the contractual indemnity provision serves as a

mechanism by which the parties to a contract may, through unambiguous terms, specify which

party will be held financially responsible for certain losses, thus allowing the parties to

effectively manage, shift and anticipate the risks that may be associated with the undertaking at

hand. While the goal of specifying such financial responsibility and, as a result, effectively

managing the associated risk, seems straightforward, a myriad of barriers, obstacles and snares in

the form of specific legal hurdles and requirements often makes the actual execution of this goal

confounding to both clients and their counsel.

The purpose of this paper is to provide the practitioner with a framework under which

contractual indemnity provisions may be analyzed, drafted and ultimately enforced. The first

section of this paper sets out the basic structure of an indemnity provision and identification of

the roles and responsibilities of the parties involved. The second section of this paper provides a

brief overview of the law governing the enforceability of contractual indemnity provisions

frequently applied in domestic energy contracts: Texas, Louisiana, and the maritime law. The

third section addresses commonly encountered statutory limitations on indemnification. Finally,

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the fourth section provides the practitioner with several points of consideration when confronted

with the task of negotiating and drafting of a contractual indemnification provision.

I. CONTRACTUAL INDEMNITY IN GENERAL.

An agreement for indemnity is commonly defined as “[a] collateral contract or assurance,

by which one person engages to secure another against an anticipated loss or to prevent him from

being damnified by the legal consequences of an act or forbearance on the part of one of the

parties or of some third person.”1 Thus, “[a]n indemnity agreement is a promise to safeguard or

hold the indemnitee harmless against either existing and/or future loss liability,” which “creates a

potential cause of action in the indemnitee against the indemnitor.”2

As noted above, such contractual indemnity provision may be employed by the prudent

practitioner as an effective method of proactively allocating and managing risk between the

parties. In the standard contractual indemnity provision, the “indemnitor,” or the party providing

indemnification, agrees to “stand in the shoes” of the “indemnitee,” or the party receiving

indemnification, and to undertake financial responsibility for certain losses defined in the

indemnity provision – i.e., to hold harmless the indemnitee.

The contractual indemnity provision may take one of three standard forms:

“Narrow Form” indemnity provisions, which establish essentially a comparative

fault scheme between the parties, require the indemnitor to indemnify the

indemnitee only to the extent the indemnitor is at fault for causing or contributing

to the loss.

“Intermediate Form” indemnity provisions, where the indemnitor is obligated to

indemnify the indemnitee relating to the subject of the agreement, except for

injury or loss caused by the indemnitee’s sole negligence. Any amount of fault on

the part of the indemnitor will usually obligate the indemnitor to indemnify the

indemnitee for the entire loss.

“Broad Form” indemnity provisions, where the indemnitor agrees to indemnify

the indemnitee for all losses regardless of fault, including losses caused by the

sole negligence of the indemnitee.

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In the energy industry, contractual indemnity provisions often take the form of a specific

type of broad form indemnity know as the “knock-for-knock” provision, where each party agrees

to indemnify the other for injuries or damage to its personnel and property (which will often

include each party’s respective contractors) irrespective of the cause of such injury or damage.

Additionally, it is not uncommon to encounter contractual “hybrid” indemnity provisions,

including some negotiated middle-ground between the typical narrow form, broad form and

knock-for-knock provisions.

Of particular importance in many contractual indemnification provisions is the issue of

how to account for injury or damage on the basis of ownership rather than fault, whether

sounding in tort, strict liability or breach of warranty. Because a requirement purportedly calling

for indemnification for losses occasioned by the fault of another is often considered an

extraordinary shifting of risk between the contracting parties, such provisions are regularly

afforded heightened scrutiny and, more often than not, necessitate compliance with specific and

stringent prerequisites before enforcement will be allowed.

II. SURVEY OF INDEMNITY PROVISIONS UNDER TEXAS, LOUISIANA AND MARITIME LAW.

Although many jurisdictions recognize the general enforceability of contractual

indemnification provisions, not surprisingly, enforceability of such provisions calling for

indemnification for the indemnitee’s own negligence can vary significantly from jurisdiction to

jurisdiction. This section provides a brief survey of the three bodies of law most commonly

encountered in energy-related contracts: Texas, Louisiana and the maritime maw. Additionally,

the often-confounding factor of the applicability of the Outer Continental Shelf Lands Act3

(“OCSLA”) is also briefly addressed.

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A. TEXAS LAW.

Texas law generally recognizes the enforceability of contractual indemnity provisions.4

Under Texas law, indemnity agreements are construed pursuant to the same, well-settled

principles that control interpretation of contracts in order to give effect to the parties’ intent as

expressed in the agreement.5 Such agreements are construed as a matter of law.

6 In construing a

written contract, the court’s primary concern is to ascertain the true intent of the parties as

expressed in the agreement itself.7 Thus, the court must examine and consider the entire writing

in an effort to harmonize and give effect to all provisions so that none is rendered meaningless;

the court may not consider any single provision as controlling, but must consider all provisions

in the context of the entire agreement.8

Whether indemnity provisions are ambiguous or unambiguous is determined as a matter

of law, and unambiguous provisions are not enforceable.9 If considering all provisions enables

the court to construe the agreement as giving a “definite or certain legal meaning,” the agreement

is not ambiguous and may be construed as a matter of law.10

Simply because two opposing

parties put forth differing interpretations of an agreement does not make it ambiguous; rather, an

agreement is ambiguous only if a provision is reasonable susceptible to more than one meaning

or if its meaning is uncertain.11

Fair Notice Requirements Under Texas Law.

Although such risk-shifting provisions are unquestionably enforceable as a general

proposition, special considerations apply to those indemnity provisions contemplating an

allocation of risk where the indemnitor agrees to indemnify the indemnitee regardless of fault. In

such cases, Texas law requires the indemnity provision meet what are commonly referred to as

the “fair notice” requirements of (i) the express negligence doctrine, and (ii) conspicuity.

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In the seminal Texas case of Ethyl Corp. v. Daniel Construction Co., wherein the Texas

Supreme Court adopted the express negligence doctrine, the court noted that “[t]he express

negligence doctrine provides that parties seeking to indemnify the indemnitee from the

consequences of its own negligence must express that intent in specific terms.”12

Subsequently,

in Dresser Industries v. Page Petroleum, Inc., where the Texas Supreme Court again addressed

the fair notice requirements of the express negligence doctrine and conspicuousness, the court

carefully and succinctly set out the issue under consideration: “It is important to note that our

decision today is limited solely to those types of releases which relieve a party in advance of

liability for its own negligence.”13

The court further noted that, “[b]ecause indemnification of a

party for its own negligence is an extraordinary shifting of the risk, this Court has developed fair

notice requirements which apply to these types of agreements.”14

With respect to the express negligence doctrine, parties seeking to provide

indemnification resulting from the indemnitee’s own negligence must express such an intent in

specific terms within the four corners of the indemnity provision.15

If an indemnity provision

does not meet the requirements of the express negligence doctrine, the indemnitor will not be

required to indemnify the indemnitee with regard to liability arising from the indemnitee’s own

negligence, or for the costs of defense of any claim based upon the alleged negligence of the

indemnitee.16

Notably, parties attempting to contract for comparative indemnity must also

comply with the express negligence doctrine before indemnification for negligence claims will

be enforced.17

Compliance with the express negligence doctrine is determined by the reviewing

court as a matter of law.18

With respect to the conspicuity prong of the fair notice requirements, a contractual

indemnity provision contemplating indemnification for the indemnitee’s own negligence will not

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be enforced where the provision itself is not conspicuous within the overall agreement.19

If the

indemnity provision does not meet the conspicuity requirement, the indemnitor will not be

required to indemnify the indemnitee for liability in connection with the indemnitee’s own

negligence or for the costs of defense in defending against claims alleging the indemnitee’s own

negligence. This is true even where the indemnitee is ultimately exonerated from negligence

claims.20

As with the express negligence doctrine, whether an indemnity provision meets the

conspicuity requirement is determined by the reviewing court as a matter of law, and is based

upon an objective standard.21

Such a provision will ordinarily be found to meet the conspicuity

requirement when a reasonable person should have noticed the provision. By way of example,

an indemnity provision on the back of a contract in the same font and color as the remainder of

the agreement and not otherwise set apart from the other provisions of the agreement does not

rise to the level of conspicuousness. On the other hand, an indemnity provision in bold face

and/or in a different color, with all capital letters and under a separate heading would satisfy the

conspicuity requirement.22

B. LOUISIANA LAW.

Like Texas law, the law of the State of Louisiana will generally enforce contractual

indemnity provisions where such provisions are set forth in specific and unambiguous terms.23

Additionally, Louisiana law, like Texas law, will also enforce contractual indemnification

provisions purportedly calling for indemnification for losses or damage arising from the

indemnitee’s own negligence; however, unlike Texas law, Louisiana law imposes a slightly

lesser burden for enforcement of such provisions.24

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Under Louisiana law, a contractual indemnification provision calling for indemnification

for the indemnitee’s own negligence will be held enforceable where such intent is set out in clear

and unequivocal terms.25

In the seminal Louisiana case of Polozola v. Garlock, Inc., the

Louisiana Supreme Court held “such a contract will not be construed to indemnify an indemnitee

against losses resulting to him through his own negligence act, unless such an intention was

expressed in unequivocal terms.”26

C. MARITIME LAW.

Under the maritime law, contractual indemnity provisions are generally enforceable.27

An agreement containing an indemnification provision “should be read as a whole and its words

given their plain meaning unless the provision is ambiguous.”28

“A court should construe an

indemnity clause to cover all losses which reasonably appear to have been within the parties’

contemplation. Interpretation of the terms of a contract is a matter of law, reviewable de novo on

appeal.”29

Additionally, and relying upon a rule similar to that found under Louisiana law addressed

immediately above,30

a contractual indemnity provision purportedly calling for indemnification

by the indemnitor of the indemnitee for the indemnitee’s own negligence will also be enforceable

under the maritime law, but only where the provision is expressed in clear and unequivocal

terms.31

Thus, while the maritime law requirements for enforceability of indemnity provisions

calling for indemnification for the indemnitee’s own negligence are somewhat more relaxed than

the requirements imposed by Texas law, a determination of language necessary to meet the clear

and unequivocal standard must be made. For example, the Fifth Circuit in Theriot v. Bay

Drilling Corp. held that language providing for indemnification “without limit and without

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regard to the cause or causes thereof or the negligence of any party” met the requirements of the

clear and unequivocal standard necessary for enforcement of the indemnity provision.32

However, in Randall v. Chevron U.S.A., Inc., the Fifth Circuit held language calling for

indemnification for fault “howsoever arising” did not meet the clear and unequivocal standard

for enforcement under the General Maritime Law.33

D. THE OUTER CONTINENTAL SHELF LANDS ACT.

Originally enacted in 1953 to encourage exploration and development of the subsea and

seabed resources contained within the outer continental shelf,34

the Outer Continental Shelf

Lands Act (“OCSLA”)35

was intended to define a body of law applicable to the seabed, subsoil

and fixed structures (such as artificial island drilling rigs and platforms) engaged in the

exploration, development, production and transportation of resources, including oil and gas,

found in the OCS.

With respect to contractual disputes arising on the OCS, the OCSLA generally adopts the

law of the adjacent state as surrogate federal law where the controversy arises (i) on an OCSLA

situs, (ii) the federal maritime law does not apply of its own force, and (iii) the adjacent state’s

law is not inconsistent with federal law.36

With respect to the OCSLA situs inquiry, OCSLA applies to “all artificial islands, and all

installations and other devices permanently or temporarily attached to the seabed, which may be

erected thereon for the purpose of exploring for, developing, or producing resources therefrom,

or any such installation or other device (other than a ship or vessel) for the purpose of

transporting such resources ….”37

With respect to the second prong of the analysis – whether federal maritime law applies

of its own force – such a determination depends not on a location inquiry but, rather, upon the

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nature of the contract involved.38

Generally, maritime contracts are agreements “relating to a

ship in its use as such, or to commerce or navigation upon navigable waters, or to transportation

by sea or to maritime employment.”39

In making the determination of whether a contract is, in

fact, a maritime contract, the Fifth Circuit relies upon a two-part test set out in Davis & Sons,

Inc. v. Gulf Oil Corp.40

First, the court considers the historical treatment of contracts similar to

the contract at issue.41

If not dispositive, the court then applies a six-factor test to determine

whether the contract at issue is a maritime contract.42

If the loss at issue occurred on an OCSLA situs, and the federal maritime law does not

apply of its own force to the contract at issue, the court must finally determine whether the

applicable adjacent state’s law is inconsistent with federal law.43

Suffice it to say that, for the

limited purpose of this paper, numerous decisions of the Fifth Circuit have held that Texas and

Louisiana law, and in particularly, the Texas and Louisiana anti-indemnity acts, are not

inconsistent with federal law.44

Thus, in instances where the contractual indemnity provision at issue purportedly requires

indemnification for loss or injury occurring on the OCS is not governed by maritime law of its

own force, the adjacent state’s law is applied to determine the enforceability of such a provision.

However, as noted immediately below, several statutory restrictions and limitations on

indemnification agreements under both Texas and Louisiana law add yet another layer of

complexity to the indemnification analysis.

III. COMMONLY ENCOUNTERED STATUTORY LIMITATIONS ON CONTRACTUAL INDEMNITY

PROVISIONS.

Given that contractual indemnity provisions are, as a general rule, enforceable in many

jurisdictions, negotiations regarding these provisions often consume a disproportionately large

amount of time during the drafting and execution stages of the formation of a contract. Also, as

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is demonstrated in the general overview of the enforceability of contractual indemnity provisions

under Texas, Louisiana and maritime law provided above, the sophistication of the parties

involved and their awareness and understanding of the applicable law can be the key in drafting

an enforceable indemnity provision that properly expresses the parties’ true intent. However, in

situations where an obvious disparity exists between the relative bargaining power and

sophistication of the parties, the less sophisticated contracting party could potentially find itself

on the receiving end of a contractual indemnity provision containing nearly or completely one-

sided terms.

As a result, the legislatures in a large number of jurisdictions across the United States

have enacted various statutory restrictions applicable to various forms of contractual

indemnification provisions utilized in particular industries. Again, as Texas and Louisiana law is

frequently applied to energy contracts along the Gulf Coast, a general overview of the relevant

Texas and Louisiana statutory anti-indemnification provisions is provided below.

A. TEXAS OILFIELD INDEMNITY ACT.

To prevent what it considered to be an inequity suffered by various contractors as a result

of contractual indemnity provisions contained in oil and gas contracts, in 1973, the Texas

legislature enacted the Texas Oilfield Indemnity Act (“TOIA”) shortly after New Mexico

adopted similar legislation. Codified in Texas Civil Practice & Remedies Code §127.001, et

seq., the TOIA generally renders void and unenforceable as against public policy contractual

indemnification provisions in contracts pertaining to oil, gas or water wells or mines for other

minerals that purportedly call for indemnification for the indemnitee’s own negligence.45

Under the plain language of the statute itself, the TOIA’s limitations upon contractual

indemnity provisions apply only to those contracts pertaining to oil, gas or water wells or mines

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for other minerals.46

A contract pertains to a well if it requires the contractor to provide “well or

mine services” or “to perform a part of those services or an act collateral to those services ….”47

The TOIA defines “well or mine service” in broad terms as including “drilling, deepening,

reworking, repairing, improving, testing, … or otherwise rendering services in connection with a

well drilled to produce or dispose of oil, gas, other minerals or water; and designing, excavating,

constructing, improving, or otherwise rendering services in connection with a mine shaft ….”48

Despite its seemingly broad application, the Texas Supreme Court has held that the TOIA

is to be strictly construed to allow parties to contract freely in agreements not covered by the

plain language of the TOIA.49

For example, in Getty Oil Co. v. Insurance Company of North

America, the Texas Supreme Court determined that an additional insured provision in a purchase

order was not invalidated by the TOIA, holding that the TOIA applied exclusively to indemnity

agreements and did not prohibit insurance shifting agreements.50

Similarly, the Fifth Circuit in

In re: John E. Graham & Sons, after conducting a review of the Texas case law, held that the

TOIA applied only to those contracts bearing a close nexus to a well and that are directed toward

the goal of obtaining and/or maintaining production from a well.51

Despite the prohibitions on indemnity agreements contained within the TOIA, §127.005

expressly states the TOIA does not apply “to an agreement that provides for indemnity if the

parties agree in writing that the indemnity obligation will be supported by liability insurance

coverage to be furnished by the indemnitor ….”52

However, if the indemnity provision calls for

mutual indemnification, “the indemnity obligation is limited to the extent of the coverage and

dollar limits of insurance … each party as indemnitor has agreed to obtain …,”53

and where the

indemnity provision calls for unilateral indemnification, “the amount of insurance required may

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not exceed $500,000.”54

Additionally, the TOIA does include several other important exceptions

and limitations of potential applicability to energy agreements:

Exclusion for sale, purchase or transportation of gas or natural gas liquids or for

construction, repair or maintenance of oil, natural gas liquids or gas pipelines;55

Exclusion for property damage resulting from pollution;56

Exclusion for property damage resulting from reservoir or underground damage,

including loss of oil, gas or water or the well bore itself;57

Exclusion for damage resulting from services to control a wild well;58

and

Exclusion for costs of control of a wild well.59

B. LOUISIANA OILFIELD INDEMNITY ACT.

In 1981, apparently finding the same inequitable position between operators and

contractors as that found by the Texas legislature, the Louisiana legislature enacted that state’s

own anti-indemnity act relating to contractual indemnity provisions “pertaining to wells for oil,

gas, or water, or drilling for minerals which occur in a solid, liquid, gaseous, or other state ….”60

Specifically, the Louisiana Oilfield Anti-Indemnity Act (“LOAIA”) declares void as against

public policy “[a]ny provision contained in, collateral to, or affecting an agreement pertaining to

a well for oil, gas, or water … to the extent that it purports to or does provide for defense and/or

indemnity … to the indemnitee against loss or liability for damages arising out of or resulting

from death or bodily injury to persons, which is caused by or results from the sole or concurrent

negligence or fault (strict liability) of the indemnitee, or an agent, employee, or an independent

contractor who is directly responsible to the indemnitee.”61

In addition to the basic premise that the LOAIA, like the TOIA, applies only to those

indemnity provisions contained in agreements pertaining to a well, the TOIA and LOAIA share

several further commonalities. First, the LOAIA, like the TOIA, is construed and applied strictly

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by the courts. In order for the LOAIA to apply, there must be an agreement pertaining to a

“well,” and the agreement must involve operations related to the exploration, development,

production or transportation of oil, gas or water.62

Also, the TOIA, like the LOAIA, invalidates

only those “agreements” relevant to the particular work giving rise to the claim at issue,63

and

courts have determined that, under both the TOIA and LOAIA, multiple directionally-drilled

wells situated on a single platform constitutes one “well.”64

Finally, both the LOAIA and TOIA

generally include exceptions for radioactivity, oil spill cleanup and pollution and for wild well

control.

Despite these similarities, the LOAIA and TOIA have important differences. First, the

LOAIA addresses only indemnification provisions for death or bodily injury to persons –

indemnification for property damage is allowed under the LOAIA.65

Additionally, and is

important in the energy industry, the LOAIA contains no exception for provisions relating to

pipeline activities.66

C. OTHER STATUTORY CONSIDERATIONS.

In addition to the Texas Oilfield Indemnity Act relating to indemnity provisions

concerning well or mine services discussed above, the Texas legislature recently enacted a

somewhat similar statute relating to indemnity provisions in construction contracts. Like the

Texas Oilfield Indemnity Act, the Texas Construction Anti-Indemnity Act (“TCAIA”), which

went into effect on January 1, 2012 and is codified in Texas Insurance Code §151.001 et seq.,

provides for a significant limitation upon indemnity and insurance provisions in a “construction

contract.”67

The operative provision of the TCAIA, §151.102, declares void and unenforceable as

against public policy any indemnity provision “to the extent it require an indemnitor to

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indemnify, hold harmless, or defend a party, including a third party, against a claim caused by

the negligence or fault … of the indemnitee, its agent or employee, or any third party under the

control or supervision of the indemnitee ….”68

Thus, the TCAIA expressly precludes the

enforceability of broad form contractual indemnity provisions in contracts relating to private or

public construction project where the indemnitor is required to provide liability insurance

coverage.

Although the TCAIA limitations on indemnity are somewhat similar to those contained in

TOIA in Civil Practice & Remedies Code §127, there are significant and important differences.

Namely, the TCAIA expressly excludes from its coverage indemnification provisions concerning

bodily injury or death of an employee: “Section 151.102 does not apply to a provision in a

construction contract that requires a person to indemnify, hold harmless, or defend another party

to the construction contract or a third party against a claim for the bodily injury or death of an

employee of the indemnitor, its agent, or its subcontractor of any tier.”69

IV. NEGOTIATING AND DRAFTING CONTRACTUAL INDEMNITY PROVISIONS.

As should be hopefully evident to the gentle reader, the negotiating and drafting of

contractual indemnity provisions requires careful thought and analysis of not only the basic

terms of the parties’ agreement, but also of the various contingencies which may arise in

connection with the execution and performance of the parties’ agreement. The following

discussion references only but a few of the issues the prudent practitioner will consider when

negotiating and drafting the contractual indemnity provision.

A. CHOICE OF LAW.

As noted in Section II. above providing a general survey of Texas, Louisiana and

maritime law concerning contractual indemnity provisions, and also in Section III. above

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regarding certain statutory limitations on contractual indemnity provisions, the varied nuances of

each jurisdiction’s analysis of enforceability of such provisions make choice of law

considerations of critical importance in negotiating and drafting the contractual indemnity

provision. The prudent practitioner will be well-served in carefully selecting and the jurisdiction

most beneficial to his or her client’s interests, whether those interests lie on the side of the

potential indemnitor or the potential indemnitee.

A word of caution, however, is appropriate regarding the potential implications of state

public policy considerations when drafting a choice of law provision. In certain scenarios where

a loss or damage is sustained within a state or by a resident of that state, but the relevant contract

under which indemnity may be had calls for application of the law of another state, the parties’

negotiated choice of law provision may be set aside by the reviewing court where the loss or

damage was sustained based upon public policy considerations.70

B. SPECIFICITY, CONSPICUITY AND SIMILAR CONSIDERATIONS.

While the above analysis also makes clear that the prudent practitioner should

specifically reference “negligence,” in any contractual indemnity provision seeking

indemnification for losses arising irrespective of fault, consideration should also be paid to issues

of sole and concurrent fault, as well as to various other non-negligence claims for which

indemnification is sought.71

With respect to negligence claims, the prudent practitioner should also specifically

include reference to “sole or concurrent” fault in the language of the indemnification agreement

to ensure enforceability. For example, the Fifth Circuit in Smith v. Shell Oil Co. held the

indemnitor owned indemnity for concurrent negligence of the indemnitee where the indemnity

provision at issue referred to the “sole negligence” of indemnitee.72

In contrast, the Fifth Circuit

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in XL Specialty Ins. Co. v. Kiewitt Offshore Services, Ltd. held that, under Texas law, indemnity

language referencing “any and all claims … whether or not caused in part by … active or passive

negligence or other fault,” except for sole negligence, met the requirements of the Texas fair

notice standard.73

Further, the prudent practitioner should also consider expressly including in a contractual

indemnity provision specific language providing coverage for claims beyond negligence, such as

claims for strict liability and breach of warranty. Under Texas law, the Texas Supreme Court in

Houston Lighting & Power Co. v. Atchinson, Topeka & Santa Fe Railway Co. has noted that,

where the parties intend for a contractual indemnity provision to provide coverage for strict

liability claims, the fair notice requirements applicable for sole negligence claims apply, and

such claims for strict liability should be expressly included in the indemnity language.74

Similarly, and relying primarily on HL&P, the Dallas Court of Appeals recently held in Stanton

Holdings, Inc. v. Tatum, L.L.C., that the express negligence test should be extended to

indemnification for claims arising from breach of warranty.75

However, the Louisiana Supreme

Court held in Sovereign Insurance Co. v. Texas Pipe Line Co. that indemnification for strict

liability claims does not need to be stated in clear and unequivocal terms in the indemnity

provision, so long as an intent to provide indemnity for strict liability claims can be found from

the agreement as a whole.76

C. ACTUAL KNOWLEDGE AND THE PARTIES’ COURSE OF DEALINGS.

Although Texas requires compliance with the twin-prongs of the fair notice requirements

(the express negligence doctrine and conspicuity) and Louisiana and maritime law require the

use of clear and unequivocal language before a contractual indemnity provision calling for

indemnification of an indemnitee for the indemnitee’s own negligence will be found enforceable,

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certain evidence regarding the contracting parties’ negotiation and drafting of the subject

agreement and/or prior course of dealings may obviate the need for compliance with the

otherwise heightened scrutiny usually afforded such agreements.

The Texas Supreme Court in Dresser Industries, Inc. v. Page Petroleum, Inc.77

reaffirmed its prior holding in Cate v. Dover Corp.78

that actual knowledge renders the fair

notice requirements of the express negligence doctrine and conspicuity irrelevant and

immaterial: “The fair notice requirements are not applicable when the indemnitee establishes

that the indemnitor possessed actual knowledge of the indemnity agreement.”79

The Texas

Supreme Court subsequently reiterated the actual knowledge exception in Storage & Processors,

Inc. v. Reyes, holding: “[I]f both contracting parties have actual knowledge of the plan’s terms,

an agreement can be enforced even if the fair notice requirements were not satisfied.”80

In applying the actual knowledge exception to the fair notice requirements of Texas law,

Texas courts look to a number of factors in finding actual knowledge or notice. These factors

include, but are not limited to, (i) evidence of negotiations regarding contract terms; (ii) evidence

that the provisions had been brought to the indemnitor’s attention; and (iii) evidence of prior

dealings between the parties.81

The Fifth Circuit, when interpreting Texas law, has also expressly acknowledged,

accepted and applied the actual knowledge exception to the fair notice requirements. In Cleere

Drilling Co. v. Dominion Exploration & Production, Inc., the Fifth Circuit held “[e]ven if we

assume without conceding that the pertinent language of the Contract is not sufficiently

conspicuous …, we are convinced that the requirement of fair notice – both elements, i.e.,

express negligence and conspicuousness – is irrelevant in the face of Dominion’s actual

knowledge of the subject provisions of the Contract.”82

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Similarly, in Campbell v. Sonat Offshore Drilling, Inc.,83

the Fifth Circuit held that an

indemnification provision on the back of a purchase order was effective and enforceable based

upon the history and course of dealings between the parties. In arriving at its conclusion, the

court stated: “[W]here parties share a history of business dealings and standardized provisions

have become part of those dealings, those provisions, even though issued after performance, are

binding if they are accepted without objection.”84

Thus, evidence of actual knowledge and a course of dealings between the parties to a

contractual indemnity provision may transform an otherwise unenforceable indemnity provision,

not in compliance with the fair notice requirements of express negligence and conspicuousness

or meeting the clear and unequivocal standard, into a fully valid and enforceable indemnity

agreement. As a result, the prudent practitioner would be well-served to preserve and maintain

inviolate all drafts and/or redline versions of the indemnity agreement and other evidence of

negotiations and course of dealings between the parties to combat a potential defense of failure

to comply with the fair notice requirements or clear and unequivocal standard.

D. CONTRACTUAL LIABILITIES TO THIRD PARTIES.

While indemnification for contractual liabilities to third parties may not be critical in

every indemnification scenario, failure to include coverage for contractual liabilities in the

energy-relate indemnification provision may prove disastrous.

Absent express language, a contractual indemnity provision will not be construed to

cover the indemnitee’s contractual liability to a third party: “[E]xpress notice is required where a

party seeks to shift is contractual liability to indemnify a third party.”85

Thus, where an

indemnification provision requires that indemnitor (“A”) will provide indemnification to the

indemnitee (“B”), and where indemnitee B has also agreed in a separate agreement to indemnify

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yet another party (“C”) for certain losses, the original indemnitor A will not be required to

indemnify the original indemnitee B for its obligation to indemnify C unless the indemnification

provision between A and B contained express language providing coverage for, or “passing

through,” B’s contractual liabilities to third parties.

In Sumrall v. Ensco Offshore Co., the Fifth Circuit analyzed a contractual indemnity

provision that included language specifying the indemnitor’s intent to indemnify the indemnitee

for obligations “whether arising in … tort” or “contract” and further included language that

broadened the scope of indemnity to include “all claims … of whatsoever nature or character …

whether or not caused by the … legal duty” of the indemnitee.86

The Fifth Circuit held that,

based upon the specific inclusion of “contract” claims and the use of broad language covering

claims “of whatsoever nature,” the indemnity provision required indemnification for the

indemnitee’s contractual obligations.87

In Foreman v. Exxon Corp., however, the Fifth Circuit determined that the indemnity

provision at issue contemplated indemnification only for “all claims, demands and causes of

action … for injury to or death or illness of persons … in any way resulting from the willful or

negligence acts or omissions of Contractor ….”88

Thus, because the indemnity language at issue

failed to make specific reference to Contractor’s contractual indemnity obligations, no such

indemnification was provided.89

E. GROSS NEGLIGENCE AND PUNITIVE DAMAGES.

When viewed as a particular subset of claims for which indemnification may or may not

be provided under the particular law governing the contractual indemnification provision, issues

concerning indemnification for gross negligence and punitive damages are often at the forefront.

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Texas Law.

With respect to indemnification for gross negligence and punitive damages, Texas law is

generally unsettled. In Fairfield Insurance Co. v. Stephens Martin Paving, LP, the Fifth Circuit

certified the following question to the Texas Supreme Court: Does Texas public policy prohibit

a liability insurer from indemnifying a punitive damages award based upon a finding of gross

negligence?90

In a 2008 opinion, the Texas Supreme Court held that Texas public policy did not

prohibit coverage for punitive damage awards in the workers’ compensation context.91

The

Texas Supreme Court, however, declined to make a particular pronouncement with respect to

public policy for indemnification of gross negligence.92

The intermediate courts of appeal, however, have reached conflicting results. In Crown

Central Petroleum Corp. v. Jennings, the Texas First Court of Appeals held that indemnification

for gross negligence was not available where the language in the indemnification provision at

issue specifically excepted sole negligence but included otherwise broad language requiring

indemnification for “any and all claims … damages.”93

The First Court went on to note:

“Because we find the indemnity agreement at issue did not specifically express an obligation to

indemnify Crown for punitive damages resulting from its sole gross negligence, we do not reach

the question of whether indemnification of punitive damages (in a non-insurance context)

violates public policy.” However, in Webb v. Lawson-Avila Construction, Inc.,94

the Texas

Fourth Court of Appeals held that, where the parties’ indemnity agreement specifically

contemplated for indemnification of general contractor for damages caused by its own gross

negligence, and the parties’ agreement included a provision that the agreement was not to be

construed in favor of one party over the other, such a provision was enforceable under Texas

law.95

In so holding, however, the Fourth Court of Appeals refused to address the public policy

- 21 -

considerations: “We do not join the Crown court in condemning contractual agreements that

provide for indemnification of gross negligence for the additional reason that we believe this is a

matter better left to the legislature or the ruling of our Supreme Court.”96

Maritime Law.

In the recent decision issued in connection with the Deepwater Horizon incident, District

Judge Carl Barbier of the Eastern District of Louisiana held that, under maritime law,

indemnification for gross negligence is enforceable and not void for public policy

considerations.97

At issue was whether BP was contractually obligated to indemnify Transocean

with respect to pollution claims in light of the parties’ contract that provided, in relevant part,

that BP:

SHALL PROTECT, RELEASE, DEFEND, INDEMNIFY, AND HOLD

[Transocean] HARMLESS FROM AND AGAINST ANY LOSS, … FOR

POLLUTION … SPECIFICALLY WITHOUT REGARD TO NEGLIGENCE

OF ANY PARTY OR PARTIES AND SPECIFICALLY WITHOUT REGARD

FOR WHETHER THE POLLUTION … IS CAUSED IN WHOLE OR IN PART

BY THE NEGLIGENCE OR FAULT OF [Transocean].98

An adjacent provision broadly defined the scope of the parties’ indemnity, which applied to the

specific indemnity provision concerning pollution at issue:

THE PARTIES INTEND AND AGREE THAT THE PHRASE “SHALL

PROTECT, RELEASE, DEFENDANT, INDEMNIFY AND HOLD

HARMLESS” MEANS THAT THE INDEMNIFYING PARTY SHALL …

INDEMNIFY … THE INDEMNIFIED PARTY … FROM AND AGAINST

ANY AND ALL CLAIMS … WITHOUT LIMIT AND WITHOUT REGARD

TO THE CAUSE OR CAUSES THEREOF, INCLUDING …THE

NEGLIGENCE OF ANY PERSON OR PERSONS, INCLUDING THAT OF

THE INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE BE …

GROSS ….99

Based upon the language of the parties’ indemnity provision, Judge Barbier concluded

that BP was required to indemnify Transocean for its own gross negligence, and that the

conflicting public policy considerations of freedom of contract and a reluctance to encourage

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grossly negligent behavior did not preclude such indemnity.100

Importantly, however, Judge

Barbier also held that the indemnification provision did not require BP to indemnify Transocean

for punitive damages. Thus, because the fines and penalties that may be levied under the Clean

Water Act are penal in nature, such penalties would not fall under the coverage of the indemnity

agreement.101

F. OTHER DRAFTING AND NEGOTIATING CONSIDERATIONS.

Although the several sections immediately above have hopefully provided the gentle

reader with several specific issues requiring attention in the negotiation and drafting of typical

energy-related indemnity provisions, the prudent draftsman should always consider the following

core concepts that can often go over-looked where a majority of the draftsman’s time and

attention is focused on the various vicissitudes of indemnity law:

Who are the parties covered by the indemnification provision and whether each

individual party’s officers, directors, shareholders, stakeholders, successors,

assigns, affiliated entities, contractors, subcontractors, and so on are also provided

coverage?

Does the indemnity provision include an express provision requiring defense as

well as indemnity?

Should an applicable standard of conduct regarding the subject matter of the

contract be included, and if so, what should it be – e.g., a requirement to work in

good faith or to comply with a particular warranty of workmanship?

How are notice requirements defined regarding when a demand for defense and/or

indemnity must be made by the indemnitee so as to avoid the possibility of

prejudice on the part of the indemnitor in providing such defense and indemnity?

Should provisions regarding enforcement, such as setting out when a demand for

defense and/or indemnity must be accepted or denied and the procedure for

contesting such a demand or denial, be included?

Will the indemnitor or the indemnitee select counsel if the indemnification

provision includes a duty to defend?

- 23 -

How long after the completion of the underlying work should the indemnification

provision survive?

Should alternate dispute resolution methodologies, such as binding arbitration, be

included?

V. CONCLUSION.

Although application of a contractual indemnification provision seems, on its face, a

relatively straightforward method to allocate and manage risk in an energy agreement, the many

factors and varying issues affecting the enforceability of such provisions have the potential to

leave both contracting parties out to sea. While by no means all-encompassing, this paper has

hopefully provided the gentle reader with enough background regarding these varying factors

and issues to recognize the many pitfalls potentially present in negotiating and drafting, and in

ultimately seeking enforcement of, contractual indemnification provisions in energy and related

industries.

1 Dresser Indus., Inc. v. Page Petroleum, Inc., 852 S.W.2d 505, 508 (Tex. 1993) (quoting BLACK’S LAW

DICTIONARY 692 (5th

ed. 1979)). 2 See Id.

3 43 U.S.C. § 1331, et seq.

4 See, e.g., Dresser Indus., 852 S.W.2d at 508; see also Atl. Richfield Co. v. Petroleum Pers., Inc., 768 S.W.2d 724,

726 (Tex. 1989) (finding contractual indemnity provision valid and enforceable under Texas law). 5 See Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000); Ideal Lease Serv., Inc. v. Amoco Prod.

Co., 662 S.W.2d 951, 952 (Tex. 1984). 6 See J. M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003) (citing Coker v. Coker, 650 S.W.2d 391,

394 (Tex. 1983)). 7 J. M. Davidson, Inc., 128 S.W.3d at 229

8 See Id.

9 See Id.

10 See Id.; see also Stewart Title Guar. Co. v. Aiello, 941 S.W.2d 68, 73-74 (Tex. 1997).

11 See J. M. Davidson, Inc., 128 S.W.3d at 229; Aiello, 941 S.W.2d at 73-74.

12 Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708 (Tex. 1987) (emphasis added); see also Enserch Corp. v.

Parker, 794 S.W.2d 2, 8 (Tex. 1990). 13

Dresser Indus., 852 S.W.2d at 507. 14

Id., at 508. 15

Ethyl Corp., 725 S.W.2d at 707-08. 16

See Fisk Elec. v. Constructors & Assoc’s, 888 S.W.2d 813, 814-16 (Tex. 1994). 17

Ethyl Corp., 725 S.W.2d at 707-08. 18

Id., at 814.

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19

See, e.g., Dresser Indus., 852 S.W.2d at 511. 20

See, e.g., U.S. Rentals, Inc. v. Mundy Service Corp., 901 S.W.2d 789, 791-91 (Tex. App.—Houston [14th

Dist.]

1995, pet. denied). 21

Douglas Cablevision v. SWEPCO, 992 S.W.2d 503, 509 (Tex. App.—Texarkana 1999, pet. denied). 22

See Dresser Indus., 853 S.W.2d at 511; see also TEX. BUS. & COM. CODE §1.201(b)(10) (Texas UCC definition of

“conspicuous”). 23

See, e.g., Lee v. Allied Chem. Corp., 331 So.2d 608 (La. App. 1st Cir.), cert. denied, 337 So.2d 525 (La. 1976).

24 See, e.g., Amoco Prod. Co. v. Forest Oil Corp., 844 F.2d 251 (5

th Cir. 1988) (in construing indemnity provision

under Louisiana law, the court noted Louisiana’s “rule does not require any ‘magic words’ for an agreement to

cover the indemnitee’s negligence ….”). 25

Polozola v. Garlock, Inc., 343 So.2d 1000 (La. 1977). 26

Id., at 1003 (citing, among others, Lee v. Allied Chem. Corp., 331 So.2d 608 (La. App. 1st Cir.), cert. denied, 337

So.2d 525 (1976)). 27

Tex. Eastern. Transmission Corp. v. McMoRan Offshore Exp. Co., 877 F.2d 1214 (5th

Cir. 1989). 28

Foreman v. Exxon Corp., 770 F.2d 490, 495 (5th

Cir. 1985) (quoting Weathersby v. Conoco Oil Co., 752 F.2d 953

(5th

Cir. 1984)). 29

Id. (internal quotations omitted). 30

In Randall v. Chevron U.S.A., Inc., 13 F.3d 888 (5th

Cir. 1994), cert. denied sub nom., Sea Savage, Inc. v. Chevron

U.S.A., Inc., 115 S.Ct. 498 (1994), the Fifth Circuit reversed the district court’s holding that Louisiana law

required more specificity in indemnity provisions and “is more restrictive in allowing indemnification for an

indemnitee’s own negligence than maritime law,” thus holding that the applicable clear and unequivocal standard

appeared to be the same under both Louisiana law and maritime law. 31

See, e.g., United States v. Seckinger, 397 U.S. 203 (1970), rehearing denied 397 U.S. 1031 (1970); see also

Theriot v. Bay Drilling Corp., 783 F.2d 527 (5th

Cir. 1986); Seal Offshore, Inc. v. Am. Std., Inc., 736 F.2d 1078,

1081 (5th

Cir. 1984). 32

Theriot, 783 F.2d at 539-40. 33

Randall v. Chevron U.S.A., Inc., 13 F.3d 888 (5th

Cir. 1994). 34

Under the Outer Continental Shelf Lands Act (“OCSLA”), the “outer continental shelf” is defined as “all

submerged lands lying seaward and outside of the area of lands beneath navigable waters …, and of which the

subsoil and seabed appertain to the United States and are subject to its jurisdiction and control.” 43 U.S.C.

§1331(a). Generally, this boundary line begins three nautical miles, or approximately three and three tenths

statute miles from the coast. However, due to various historical considerations, the boundary line extends nine

nautical miles beyond the coast of both Texas and Florida. 35

43 U.S.C. §1331, et seq. 36

See Union Tex. Petroleum v. PLT Eng’g, Inc., 895 F.2d 1043, 1047 (5th

Cir. 1990). 37

See 43 U.S.C. §1333(a); see also Demette v. Falcon Drilling Co., 280 F.3d 492 (5th Cir. 2002) (discussing the

OCSLA situs test in detail). 38

Davis & Sons, Inc. v. Gulf Oil Corp., 919 F.2d 313, 316 (5th

Cir. 1990); Theriot, 783 F.2d at 538-39. 39

Thurmond v. Delta Well Surveyors, 836 F.2d 952, 954 (5th

Cir. 1988). 40

Davis & Sons, 919 F.2d 315-16. 41

Id., at 315. 42

Id., at 316. The six-factors considered in the Davis & Sons test include:

1) what does the specific work order in effect at the time of the injury provide? 2) what work did the

crew assigned under the work order actually do? 3) was the crew assigned to work aboard a vessel in

navigable waters; 4) to what extent did the work being done relate to the mission of that vessel? 5) what

was the principal work of the injured worker? and 6) what work was the injured worker actually doing at

the time of injury? 43

See PLT Eng’g, 895 F.2d at 1047. 44

See, e.g., Hogden v. Forest Oil Corp., 87 F.3d 1512 (5th

Cir. 1996) (holding that the Louisiana Oilfield Indemnity

Act is not inconsistent with federal law); Campbell v. Sonat Offshore Drilling, Inc., 979 F.2d 1115 (5th

Cir. 1992)

(holding that application of the Texas Oilfield Indemnity Act would not conflict with any fundamental purpose of

federal law). 45

TEX. CIV. PRAC. & REM. CODE §127.001, et seq. The operative provision of the TOIA, §127.003, provides:

- 25 -

(a) Except as otherwise provided by this chapter, a covenant, promise, agreement, or understanding

contained in, collateral to, or affecting an agreement pertaining to a well for oil, gas, or water or to a

mine for a mineral is void if it purports to indemnify a person against loss or liability for damage that:

(1) is caused by or results from the sole or concurrent negligence of the indemnitee, his agent or

employee, or an individual contractor directly responsible to the indemnitee; and

(2) arises from:

(A) personal injury or death;

(B) property injury; or

(C) any other loss, damage, or expense that arises from personal injury, death, or property injury. 46

TEX. CIV. PRAC. & REM. CODE §127.001(1) 47

TEX. CIV. PRAC. & REM. CODE §127.001(1)(A)(i)-(ii). 48

TEX. CIV. PRAC. & REM. CODE §127.001(4)(A)(i)-(ii). 49

See Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 795 (Tex. 1992), cert. denied sub nom., Youell & Companies

v. Getty Oil Co., 510 U.S. 820 (1993). 50

Id., at 804-805. 51

In re: John E. Graham & Sons, 210 F.3d 333, 339-40 (5th

Cir. 2000). 52

TEX. CIV. PRAC. & REM. CODE §127.005(a); see also Nabors Corp. Servs., Inc. v. Northfield, 132 S.W.3d 90, 99

(Tex. App.—Houston [14th

Dist.] 2004, no pet.). 53

TEX. CIV. PRAC. & REM. CODE §127.005(b). 54

TEX. CIV. PRAC. & REM. CODE §127.005(c). 55

TEX. CIV. PRAC. & REM. CODE §127.001(4)(B)(i)-(ii). 56

TEX. CIV. PRAC. & REM. CODE §127.004(2). 57

TEX. CIV. PRAC. & REM. CODE §127.004(3). 58

TEX. CIV. PRAC. & REM. CODE §127.004(4). 59

TEX. CIV. PRAC. & REM. CODE §127.004(5). 60

La. R.S. 9:2780. 61

La. R.S. 9:2780B. 62

See generally, Transcontinental Gas v. Transp. Ins. Co., 953 F.2d 985, 991 (5th

Cir. 1992) 63

See In re John E. Graham & Sons, 210 F.3d at 341. 64

Transcontinental Gas, 953 F.2d at 995 n. 40. 65

See La. R.S. 9:2780. 66

Compare La. R.S. 9:2780 with TEX. CIV. PRAC. & REM. CODE §127.001(4)(B)(i)-(ii); see also In re John E.

Graham & Sons, 210 F.3d at 342. 67

Under the Texas Construction Anti-Indemnity Act, a “construction contract” is defined as “A contract … or

agreement … entered into by an owner, … contractor, … subcontractor, supplier or material or equipment lessor

for the design, construction, alteration, … repair, or maintenance of, or … furnishing of material or equipment for,

a building, structure, appurtenance, or other improvement to or on public or private real property.” TEX. INS.

CODE §151.001(5). 68

TEX. INS. CODE §151.102. 69

TEX. INS. CODE §151.103. 70

See, e.g., Roberts v. Energy Dev. Corp., 235 F.3d 935 (5th Cir. 2000) (finding parties’ choice of law provision

calling for application of Texas law was unenforceable where incident at issue occurred in Louisiana and the work

being done under the contract was primarily performed in Louisiana, even though the contracting parties involved

had extensive connections with Texas). 71

See Quorum Health Res., L.L.C. v. Maverick Cnty. Hosp. Dist., 308 F.3d 451, 461-62 (5th Cir. 2002) (noting that,

under Texas Law, “[A] contract subject to the express negligence rule cannot define what is included in an

indemnity provision by stating what obligations are outside that indemnity agreement.”). 72

Smith v. Shell Oil Co., 746 F.2d 1087 (5th

Cir. 1984). 73

XL Spec. Ins. Co. v. Kiewitt Offshore Servs., Ltd., 513 F.3d 146, 150 (5th

Cir. 2008). 74

Houston Lighting & Power Co. v. Atchison, Topeka & Santa Fe Ry. Co., 890 S.W.2d 455 (Tex. 1994); cf English

v. BGP Int’l, Inc., 174 S.W.3d 366, 375 (Tex.App.—Houston [14th

Dist.] 2005, no pet.) (“[T]he express-

negligence doctrine does not apply to non-negligent actions”) and DDD Energy, Inc. v. Veritas DGC Land, Inc.,

60 S.W.3d 880, 885 (Tex. App.—Houston [14th

Dist.] 2001, no pet.) (“[T]he express negligence component of the

fair notice requirements does not apply where an indemnitee is seeking indemnification from claims not based on

the negligence of the indemnitee”).

- 26 -

75

Stanton Holdings, Inc. v. Tatum, L.L.C., 345 S.W.3d 729, 734-35 (Tex. App.—Dallas 2011, no pet. h.). 76

Sovereign Ins. Co. v. Texas Pipe Line Co., 488 So.2d 982, 984-85 (La. 1986). 77

Dresser Indus., 852 S.W.2d at 508. 78

Cate v. Dover Corp., 790 S.W.2d 559, 561 (Tex. 1990) (“Because the object of the conspicuousness requirement

is to protect the buyer from surprise and an unknowing waiver of his or her rights, inconspicuous language is

immaterial when the buyer has actual knowledge of the disclaimer.”) 79

Dresser Indus., 852 S.W.2d at 508 n. 2. 80

Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190, 192 (Tex. 2004). 81

See, e.g., Cate, 190 S.W.2d at 561; see also Coastal Transp. Co. v. Crown Cent. Petroleum Corp., 20 S.W.3d 119,

126 (Tex. App.—Houston [14th

Dist.] 2000, pet. denied) (finding actual knowledge where indemnitor’s president,

who signed the agreement, had read the agreement when he signed it, the agreement was less than two and one-

half pages long and contained eight paragraphs with the indemnity provision constituting the last paragraph and

the indemnity provision was referenced in two other paragraphs); Cleere Drilling Co., 351 F.3d at 648 (finding

actual knowledge where the parties’ negotiations “included consideration of and changes to several portions” of

the agreement and where the parties’ agents had made and initialed numerous changes to several pages of the

printed form). 82

Cleere Drilling Co. v. Dominion Exp. & Prod., Inc., 351 F.3d 642, 647 (5th

Cir. 2003). 83

Campbell v. Sonat Offshore Drilling, Inc., 979 F.2d 1115 (5th

Cir. 1992). 84

Id., at 1120. 85

Corbitt v. Diamond M. Drilling Co., 654 F.2d 329, 333 (5th Cir. 1981); accord Foreman, 770 F.2d at 495-97.

86 Sumrall v. Ensco Offshore Co., 291 F.3d 316, 320 (5

th Cir. 2002).

87 See Id.

88 Foreman, 770 F.2d at 497 (italics in original).

89 Id., at 498.

90 Fairfield Ins. Co. v. Stephens Martin Paving, LP, 381 F.3d 435 (5

th Cir. 2004).

91 Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 654 (Tex. 2008).

92 See Id.

93 Crown Cent. Petroleum Corp. v. Jennings, 727 S.W.2d 739, 741-42 (Tex. App.—Houston [1

st Dist.] 1987, no

writ). 94

Webb v. Lawson-Avila Const., Inc., 911 S.W.2d 457 (Tex. App.—San Antonio 1995, writ dissm’d). 95

Id., at 461. 96

Id., at 462. 97

In re Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, MDL 2179 (E.D. La.

January 26, 2012). 98

Id., at *4. 99

Id. 100

Id., at *8. 101

Id., at *13.

Kenneth Wayne Bullock IISenior Counsel

Houston

1200 Smith Street

14th Floor

Houston, TX 77002-4310

Tel: 713.654.9637

Fax: 713.658.2553

[email protected]

Practice Areas

Admiralty & Maritime

Energy and Oil and Gas

Law

Construction Law

Litigation

Education

Centre College, Danville,

Kentucky. B.S., 1998.

Texas A&M University,

College Station, Texas.

Master of Agri-Business,

2001, with honors.

South Texas College of

Law, Houston, Texas.

Juris Doctorate, 2006,

cum laude, Oder of

Lytae

Honors

“Texas Rising Star” by

Texas Monthly Magazine

– publisher of Texas

Super Lawyers (2012)

Order of Lytae and Phi

Delta Phi Legal Honors

Fraternity, South Texas

College of Law.

President, Federalist

Society Student Chapter,

South Texas College of

Law.

Officer, Board of

Advocates, South Texas

College of Law.

Born in Lexington, Kentucky, Ken earned his

Bachelor of Science degree in Biology from Centre College in June, 1998. Ken then

attended Texas A&M University where he earned a Masters degree in Agri-Business

in May, 2001, graduating second in his class. Ken was also selected for membership

in the Phi Kappa Phi and Gamma Sigma Delta Honor Societies during his graduate

studies at Texas A&M. Ken then attended South Texas College of Law in Houston,

Texas, where he graduated cum laude and as a member of the Order of Lytae in May,

2006. During law school, Ken was a Director of the South Texas College of Law Board

of Advocates, President of the Federalist Society Law Student Chapter and member

of the Phi Delta Phi Legal Honors Society.

Bullock’s practice focuses primarily on energy and maritime matters, where he has

wide-ranging experience in representing upstream and midstream entities, including

drilling and exploration companies, pipeline operators, heavy construction companies,

supply vessel owners and seismic/geophysical operators in commercial, personal

injury and toxic tort litigation in state and federal court under Texas, Louisiana and

Maritime law, as well as the Outer Continental Shelf Lands Act (“OCSLA”) and

Longshore & Harbor Workers’ Compensation Act (“LHWCA”). Ken also counsels

clients in various corporate and transactional matters, and practices in commercial

litigation with an emphasis in construction, complex business litigation and first and

third party insurance claims.

Ken is a member of the State Bar of Texas and is admitted to practice before the

Southern and Eastern Districts of Texas and the United States Court of Appeals for

the Fifth Circuit. Ken is also an active member of the Garland Walker American Inn of

Court, the Houston Federalist Society and the Houston Young Lawyers Association.

Representative Matters

Represented numerous energy exploration and drilling clients throughout Texas,

Louisiana and Mississippi against claims under the Jones Act, Outer Continental

Shelf Lands Act ("OCSLA") and 905(b) of the Longshore and Harbor Workers'

Compensation Act ("LHWCA").

Phi Kappa Phi and Gamma

Sigma Delta Honor

Societies, Texas A&M

University.

Guest Lecturer, Agricultural

Economics and Food &

Agricultural Sales, Texas

A&M University.

Executive Board Member,

Sigma Alpha Epsilon

Fraternity, Centre College

Bar Admissions

Texas

Court Admissions

United States District Court

for the Eastern District of

Texas

United States District Court

for the Southern District of

Texas

United States Court of

Appeals for the Fifth Circuit

Clerkships

Hon. Kent Sullivan, 80th

Judicial District Court,

Harris County, Texas

Counseled clients regarding drafting of defense and indemnity provisions in various

energy and construction-related contracts and transactions.

Represented various clients in marine construction, construction defect, maritime

contract and maritime tort litigation.

Won dismissal of Jones Act claims for energy exploration and drilling clients based

upon lack of vessel status of deepwater floating gas production, drilling and

quarters platform. (slip copy: 2011 WL 3021043)

Represented ship building, fabrication and heavy construction facility in

multi-phased litigation regarding alleged defects in construction of offshore drilling

platform.

Represented maritime client in action for damages sustained to wharfage and pier

structures.

Counseled maritime construction and fabrication client regarding construction lien

practices in connection with construction and modification of offshore structures.

Successfully prosecuted claim for hull and loss of use/profits damages on behalf of

maritime client resulting from vessel allision.

Represented international pipeline company in catastrophic injury litigation following

pipeline installation accident.

Achieved complete dismissal of claims in wrongful death lawsuit brought by

seaman's survivors under the Jones Act.

Successfully represented maritime client in achieving favorable settlement in

wrongful death and survival claim litigation following accident in the Houston Ship

Channel.

Represented numerous clients in premises liability and Jones Act toxic tort litigation

in connection with alleged fume and chemical exposure claims.

Represented energy exploration and drilling company in litigation arising from fatal

accident occurring in territorial waters of Angola.

Counseled numerous clients in vessel lease agreements and drafting of charter

party agreements.

Counseled international maritime client regarding manning requirements and

immigration issues under OCSLA.

Represented freight forwarder in contact, quantum meruit and promissory estoppel

litigation.

Kenneth Wayne Bullock II, Continued

Counseled and represented client in environmental permitting process under Texas Clean Water Act and Comprehensive

Environmental Response, Compensation and Liability Act ("CERCLA").

Counseled client in partnership dissolution procedure and drafting of dissolution agreement.

Counseled client in share buyback and purchase transaction and drafting of buyback agreement.

Seminars & Presentations

"What do You Mean They Can Have my E-Mails? And my Text Messages? And my …. Electronically Stored Information and the

Revised Federal Rules of Civil Procedure." Houston Claims Association CLE Presentation and Paper, 2007.

Libertarian Paternalism: The Cocaine Vaccine as a Test Case for the Sunstein/Thaler Model, 3 Rutgers J.L. & Urban Pol 'y 1 (2005)

(research assistant to author Professor Dru Stevenson).

News

Houston-based Chamberlain Hrdlicka Attorneys Recognized as 2012 Texas Rising Stars

Professional Affiliations

Texas Bar Association

State Bar of Texas Oil, Gas & Energy Resources Law Section.

State Bar of Texas Construction Law Section.

State Bar of Texas Litigation Section.

Houston Young Lawyers Association

Houston Young Lawyers Foundation

Texas Young Lawyers Association

American Inns of Court, Garland Walker Inn

Kenneth Wayne Bullock II, Continued