Contract Indemnity Provision Voided Under Louisiana Oilfield Anti-Indemnity Act: Legislative Intent Irrelevant When a Statute is Clear

Samuel Silverman Jr. was injured while working for BJ Services Company, a contractor for Bass Enterprises Production Company, hired to provide services on an oil well in Cado Parish. The injury was to Silverman’s knee and occurred because a hoist operator employed by another contractor at the site, Mike Rogers’ Drilling Company, dropped a cement head and pinned his knee against a derrick.

Silverman sued Rogers’ Drilling, alleging that the negligence of their employee (the hoist operator), caused the accident. Rogers’ Drilling tried to get around liability by filing a third-party demand against Bass under a provision in the contract between Rogers’ and Bass wherein Bass, as operator, agreed to indemnify Rogers, as contractor.

According to the provision, indemnification included a release of any liability and agreement to protect, defend, and indemnify against all claims, demands, and causes of any kind without regard to negligence of any party. Can such a strong indemnity clause be upheld under Louisiana law and the Louisiana Oilfield Anti-indemnity Act (LOAIA)? The trial court found the provision to be against the LOAIA and thus null and void, and in a decision this summer, the Louisiana Court of Appeals agreed.

The LOAIA, or La.R.S. 9:2780 provides as:

null and void and against public policy of the state of Louisiana any provision in any agreement which requires defense and/or indemnification, for death or bodily injury to persons, where there is negligence or fault (strict liability) on the part of the indemnitee, or an agent or employee of the indemnitee, or an independent contractor who is directly responsible to the indemnitee.

The law specifically applies to contracts involving wells for oil, gas, water, or drilling for minerals and was enacted to stop perceived inequities faced by certain contractors.

Bass filed peremptory exceptions of no cause of action where he argued that the indemnity provision he was sued under was in violation of the LOAIA and against the public policy of the State of Louisiana. Rogers’ Drilling disagreed and argued that the LOAIA should be interpreted according to a legislative intent theory and that as such should not prevent small oilfield contractors (like himself) from receiving indemnity under a Louisiana contract. According to Rogers’, he essentially “worked for” Bass, and smaller contractors were what the statute was intended to protect .

The trial court and Court of Appeals disagreed however and found that the statute should be interpreted according to its plain language only. As long as the law is “clear and does not lead to absurd consequences,” it should be applied as it was written. Courts only need to look to context, or legislative intent, when the text of a law is ambiguous. The language of the LOAIA is not ambiguous in the least. Any indemnity agreement pertaining to an oil well which requires an indemnitor to indemnify an indemnitee for an indemnitee’s own negligence that caused death or bodily injury is null and void.

This case teaches an important lesson about statutory interpretation in Louisiana. Courts will not look beyond the text of a statute to determine what it means unless they have to. That is, unless the words in the statute are susceptible to more than one meaning, an examination into legislative history and intent will not be undertaken.