Haynes and Boone, LLP
  July 31, 2013 - United States of America

Fifth Circuit Court of Appeals Addresses Insurers’ Claims to Enforce Indemnity Rights in an Insured’s MSA
  by Micah E. Skidmore

Third party insurers are not entitled to enforce an insured’s defense, indemnification or insurance rights in a master services agreement (“MSA”) according to a three-judge panel of the Fifth Circuit Court of Appeals in an opinion issued on July 5. See Duval v. Northern Assurance Company of America, __ F.3d __, 2013 WL 3367483 (5th Cir. July 5, 2013).


The insurers’ claims under the MSA originated with a bodily injury suit brought by a rig contractor (“Duval”), who was injured during a personnel transfer from a support vessel, operated by “Deep Marine,” to an offshore drilling platform, owned by “BHP.” In 2008, Duval sued Deep Marine, which in turn sought and obtained a defense from BHP under an indemnity provision in the MSA between Deep Marine and BHP. After Deep Marine filed for bankruptcy, Duval amended his complaint to seek damages from Deep Marine’s insurers (collectively “Underwriters”) under Louisiana’s direct action statute. Underwriters filed a third-party complaint against BHP for indemnity under the MSA, which the district court dismissed on cross-motions for summary judgment filed by Underwriters and BHP.


Writing for the panel, Judge Patrick Higginbotham rejected each of five arguments advanced by Underwriters and affirmed the judgment of the district court:       


The Court’s decision in Duval v. Northern Assurance Company of America is undoubtedly limited to some extent by its facts. At the same time, the court’s statements regarding (1) the application of contractual “additional insured” and “primary insurance” requirements in the MSA, when a contracting party is a self-insurer; and (2) the impact on an insurer’s subrogation rights, when the subrogor insured has experienced no loss, are both likely to prompt further discourse among contracting parties and their insurers. The issues raised by this opinion may also generate further litigation and attention from the courts. At a minimum, contracting parties should be familiar with the Court’s decision and its supporting rationale when drafting the insurance and indemnity provisions in MSAs and other contracts. 

If you have any questions about the Fifth Circuit’s recent opinion in Duval v. Northern Assurance Company of America or about insurance or indemnity agreements in general, please contact one of the Haynes and Boone Insurance Coverage Litigation Practice Group partners listed below.

Erika L. Bright
214.651.5120
[email protected]

Werner A. Powers 
214.651.5581
[email protected]

 

Matt W. Holley
214.651.5371
[email protected]

 

Micah E. Skidmore
214.651.5654
[email protected]

Ernest Martin, Jr. 
214.651.5641
[email protected]

 

David Taubenfeld
214.651.5531
[email protected]

 

Leslie C. Thorne
512.867.8445
[email protected]







Footnotes:

1 “. . . Underwriters would have no claim against BHP because ‘a subrogee can obtain no greater rights than its subrogor had.’ Deep Marine would not, and could not, incur any loss in the Duval action, so Underwriters could not seek indemnification from BHP. And, because BHP has agreed to continue providing Deep Marine with a nominal defense, Underwriters would not have a breach of contract claim against BHP.” 2013 WL 3367483, at *3.



Read full article at: http://www.haynesboone.com/indemnity-rights-in-an-insureds-msa/