Insurance Dispute Lawyer Blog
In contractual agreements, the validity of indemnity provisions can become a subject of contention between parties. But what happens when determining a contract’s maritime nature becomes pivotal in a case involving specialty services for drilling or production in navigable waters? As discussed below, this issue was scrutinized in a maritime appeal action filed with the United States Court of Appeals for the Fifth Circuit.
Apache Corporation (“Apache”) had a blanket master services contract (“MSC”) with Specialty Rental Tools & Supply, L.L.P. (“STS”). This MSC Had an indemnity provision that ran in favor of Apache and its contractors. The work order didn’t require a vessel, nor was it anticipated that it would be needed to perform the job. Apache contracted with Larry Doiron, Inc.
(“LDI”), to provide a crane barge that was needed for the operation. Unfortunately, a member of the STS crew was injured by LDI operators during crane usage, prompting LDI to file a limitation of liability proceeding as the crane’s owner and a complaint against STS to seek indemnity as per the MSC.
The pivotal question was whether the MSC should be classified as a maritime contract. If deemed maritime, the general maritime law would govern the enforceability of the indemnity provision. The District Court ruled in favor of maritime law and granted indemnity to LDI from STS. That ruling was appealed.
The appellate court examined whether they should apply the maritime or Louisiana law to determine if the indemnity provision should be allowed in the MSC. The Court explained that they had originally used a six-factor test per the court in Davis & Sons, Inc. v. Gulf Oil Corp. (“Davis & Sons”). The appellate court opined that most of the prongs of the test were unnecessary and excessively complicated the determination of whether the contract does fall within maritime law. Instead, the appellate court relied on Norfolk Southern Railway Co. v. Kirby and a simpler two-prong factor test, which is more straightforward.
The appellate court adopted this Kirby test which just looked to two factors only (1) the contract and services related to maritime activities and (2) if the answer is “yes,” does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract? If so, the contract is considered to be of a maritime nature.
The Court concluded that because the Kirby test focuses on the contract itself and the parties’ expectations, this was the proper approach, although some of the Davis & Sons factors can still be relevant.
Ultimately, the court concluded that the MSC in question was nonmaritime. The work commenced before the need for a vessel arose, and its involvement was minimal, unrelated to the anticipated scope of work. Therefore, the contract fell under the governance of Louisiana law, highlighting the significance of accurately determining maritime activities.
While the definition of maritime activities may remain uncertain, this case offers a more streamlined approach to such determinations. Engaging the expertise of an experienced attorney becomes crucial when navigating the complexities of litigation, ensuring proper guidance in understanding which claims may prevail under Louisiana law.
Additional Sources: LARRY DOIRON, INC. VS. SPECIALTY RENTAL TOOLS & SUPPLY, L.L.P.; OIL STATES ENERGY SERVICES, L.L.C.; ZURICH AMERICAN INSURANCE COMPANY
Written by Berniard Law Firm Writer Brianna Saroli
Additional Berniard Law Firm Articles on Maritime Law: Injured on a Boat on Land, Can you File a Lawsuit with Maritime Claims? Admiralty/Maritime