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Durr v. GOL, LLC

United States District Court, E.D. Louisiana

May 31, 2019

TERRY DURR
v.
GOL, LLC, REC MARINE LOGISTICS, LLC AND WOOD GROUP PSN, INC.

         SECTION M (1)

          ORDER & REASONS

          BARRY W. ASHE UNITED STATES DISTRICT JUDGE

         Before the Court are two motions to dismiss filed by third-party defendant First Mercury Insurance Company (“FMIC”).[1] Defendants and third-party plaintiffs Wood Group PSN, Inc. (“Wood Group”), REC Marine Logistics, LLC (“REC”), and GOL, LLC (“GOL”) respond in opposition, [2] and FMIC replies in further support of its motions.[3] Also before the Court is a motion to dismiss filed by third-party defendants Certain Underwriters at Lloyd's and Navigator's Insurance Company (collectively, “Certain Excess Underwriters”), [4] to which Wood Group responds in opposition.[5] Having considered the parties' memoranda and the applicable law, the Court issues this Order & Reasons.

         I. BACKGROUND

         On December 17, 2017, plaintiff Terry Durr (“Durr”), who was employed by third-party defendant Linear Controls, Inc. (“Linear”), was injured during a personnel-basket transfer from the M/V Hannah C (“Hannah C”), a vessel owned and operated by REC/GOL, to a fixed platform affixed to the Outer Continental Shelf (“OCS”) off the coast of Louisiana.[6] Defendant Fieldwood Energy, LLC (“Fieldwood”) owned the platform, and contracted with Wood Group to operate it.[7]

         At the time of the accident, the Hannah C was transporting Durr to the Fieldwood platform.[8] Durr boarded a personnel-transfer basket that was to be lifted onto the platform from the deck of the vessel by a crane located on the platform and operated by a Wood Group employee.[9] Durr alleges that, due to rough seas, the Hannah C's master lost control of the vessel, causing it to travel toward the platform and, through a sequence of events, resulted in the crane striking a chain holding the vessel's cargo, which caused Durr's injuries.[10] Durr alleges that the Hannah C's deckhand did not hold the personnel-transfer basket's tagline and the crane operator failed to abort the lift.[11] Durr sued REC, GOL, Wood Group, and Fieldwood alleging that they are all liable for his injuries due to their negligence.[12] Durr also sued REC/GOL's insurer, American Steamship Owners Mutual Protection and Indemnity Association, Inc.[13]

         Wood Group and REC/GOL filed third-party complaints against Linear; its primary general liability insurer, FMIC; and its excess insurers, Atlantic Specialty Insurance Company, Navigators Insurance Company, and Underwriters at Lloyd's, London subscribing to Policy No. TRC 407411 (collectively, “Linear's excess insurers”).[14] Wood Group and REC/GOL allege that Linear owes them defense and indemnity through the operation of the contracts among the parties involved in the accident.[15]

         Wood Group alleges that, at the time of the accident, it was working as a contractor to Fieldwood pursuant to a January 1, 2014 master services contract (“Wood Group/Fieldwood MSC”), and Linear was working as a contractor to Fieldwood pursuant to a November 1, 2013 master services contract (“Linear/Fieldwood MSC”).[16] Wood Group alleges that the Wood Group/Fieldwood MSC and the Linear/Fieldwood MSC had identical cross-indemnity-and-insurance provisions by which Linear agreed to defend and indemnify Wood Group from injury claims made by Linear's employees.[17]

         Wood Group further alleges that the Linear/Fieldwood MSC required Linear to support its indemnity obligation to Wood Group with insurance for Wood Group's express benefit, and to offer Fieldwood the option of paying Marcel premiums to Linear's insurers for the purpose of extending all of Linear' insurance policies to include coverage for Linear's indemnification obligations required by the MSCs.[18] As a result, Linear's insurance broker, Howard Risk Advisors (“Howard Risk”), sent Fieldwood an October 13, 2017 invoice in the amount of $22, 519.94 for the Marcel premiums, which Fieldwood paid on November 3, 2017.[19] Wood Group contends that, pursuant to the terms of the MSCs, Linear is obligated to defend and indemnify Wood Group from Durr's claims; and, by Fieldwood's payment of the Marcel premiums, Wood Group is entitled to coverage and defense provided by FMIC and Linear's excess insurers as an insured party under those policies.[20]

         REC/GOL's allegations against Linear and its insurers are substantially like those asserted by Wood Group. REC/GOL allege that, at the time of the accident, Kilgore Marine Services, LLC (“Kilgore”) was working as a contractor to Fieldwood pursuant to a January 1, 2014 master time charter agreement (“Kilgore/Fieldwood MTCA”), and Kilgore brokered the Hannah C from REC/GOL to Fieldwood pursuant to the Kilgore/Fieldwood MTCA.[21]REC/GOL allege that the Linear/Fieldwood MSC and the Kilgore/Fieldwood MTCA had identical cross-indemnity-and-insurance provisions by which Linear agreed to defend and indemnify REC/GOL from injury claims made by Linear's employees.[22] REC/GOL specifically allege that Linear was required to provide them with defense and indemnity as third-party contractors or members of the third-party contractor group as defined in section 13(a)(v) of the Linear/Fieldwood MSC and section 12(A)(vi) of the Kilgore/Fieldwood MTCA.[23]

         REC/GOL further allege that the Linear/Fieldwood MSC required Linear to support its indemnity obligation to REC/GOL with insurance for their express benefit, and to offer Fieldwood the option of paying Marcel premiums to Linear's insurers for the purpose of extending all of Linear' insurance policies to include coverage for Linear's indemnification obligations required by the Linear/Fieldwood MSC and Kilgore/Fieldwood MTCA.[24] REC/GOL contend that, pursuant to the terms of the MSC and MTCA, Linear is obligated to defend and indemnify them from Durr's claims; and by Fieldwood's November 3, 2017 payment of the Marcel premiums to Howard Risk, they are entitled to coverage and defense provided by FMIC and Linear's excess insurers as an insured party under those policies.[25]

         Additionally, if FMIC is deemed not to insure Wood Group and REC/GOL, Wood Group and REC/GOL assert breach-of-contract claims against Linear for failure to honor its insurance-procurement obligations.[26] Finally, Wood Group and REC/GOL seek recovery of penalties, costs, and attorney's fees to the extent that the third-party defendants refuse to provide insurance coverage to them.[27]

         II. PENDING MOTIONS

         FMIC and Certain Excess Underwriters filed the instant motions to dismiss Wood Group and REC/GOL's third-party claims arguing that the contractual indemnity-and-insurance provisions are void by operation of the Louisiana Oil Field Indemnity Act (“LOIA”), La. R.S. 9:2780, et seq., and that the exception of paying a Marcel premium does not apply.[28] Thus, FMIC and Certain Excess Underwriters argue that the third-party plaintiffs did not - and cannot - state claims for relief against them because it is undisputed that neither Wood Group nor REC/GOL paid the Marcel premiums on their own behalves, they are not named as insureds in the policy, and they are not additional insureds.[29] FMIC and Certain Excess Underwriters argue that Wood Group and REC/GOL are not part of Fieldwood's “Company Group, ” as that term is defined in the Linear/Fieldwood MSC, but rather are third-party contractors for which Linear is not obligated to provide indemnity and insurance by operation of the LOIA.[30]

         Wood Group and REC/GOL argue that they have stated sufficient facts in their third-party complaints to allege that they are additional insureds under the policies as Fieldwood's invitees for purposes of the “Company Group” designation in the Linear/Fieldwood MSC.[31]Wood Group and REC/GOL also argue that they are “Third Party Contractors” entitled to indemnity-and-insurance coverage under the Linear/Fieldwood MSC.[32]

         III. LAW & ANALYSIS

         A. Rule 12(b)(6) Standard

          The Federal Rules of Civil Procedure require a complaint to contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 8 “does not require ‘detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The statement of the claim must “‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.'” Twombly, 550 U.S. at 555 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A pleading does not comply with Rule 8 if it offers “labels and conclusions, ” “a formulaic recitation of the elements of a cause of action, ” or “‘naked assertion[s]' devoid of ‘further factual enhancement.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555-57).

         Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a party to move to dismiss for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). A claim is plausible on the face of the complaint “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. at 556). Plausibility does not equate to probability, but rather “it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of “entitlement to relief.”'” Id. (quoting Twombly, 550 U.S. at 557). Thus, if the facts pleaded in the complaint “do not permit the court to infer more than a mere possibility of misconduct, the complaint has alleged - but it has not ‘show[n]' - ‘that the pleader is entitled to relief.'” Id. at 679 (quoting Fed.R.Civ.P. 8(a)(2)).

         In considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court employs the two-pronged approach utilized in Twombly. The court “can choose to begin by identifying pleadings that, because they are no more than conclusions [unsupported by factual allegations], are not entitled to the assumption of truth.” Id. However, “[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. Motions to dismiss are disfavored and rarely granted. Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (citing Harrington v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009)).

         A court's review of a Rule 12(b)(6) motion to dismiss “is limited to the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.” Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000)). A court may also take judicial notice of certain matters, including public records and government websites. Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2007); see also Kitty Hawk Aircargo, Inc. v. Chao., 418 F.3d 453, 457 (5th Cir. 2005). Thus, in weighing a Rule 12(b)(6) motion, district courts primarily look to the allegations found in the complaint, but courts may also consider “documents incorporated into the complaint by reference or integral to the claim, items subject to judicial notice, matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint whose authenticity is unquestioned.” Meyers v. Textron, Inc., 540 Fed.Appx. 408, 409 (5th Cir. 2013) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).

         B. Applicable Law

         The Outer Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. § 1331, et seq., contains a choice-of-law provision that provides, in pertinent part:

(1) The Constitution and laws and civil and political jurisdiction of the United States are extended to the subsoil and seabed of the outer Continental Shelf and 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, to the same extent as if the outer Continental Shelf were an area of exclusive Federal jurisdiction located within a State ... .
(2)(A) To the extent that they are applicable and not inconsistent with this subchapter or with other Federal laws and regulations of the Secretary now in effect or hereafter adopted, the civil and criminal laws of each adjacent State, now in effect or hereafter adopted, amended, or repealed are declared to be the law of the United States for that portion of the subsoil and seabed of the outer Continental Shelf, and artificial islands and fixed structures erected thereon, which would be within the area of the State if its boundaries were extended seaward to the outer margin of the outer Continental Shelf … .

43 U.S.C. § 1333(a).

         There are three criteria that must be met for an adjacent state's law to apply as surrogate federal law under the OCSLA. Union Tex. Petroleum Corp. v. PLT Eng'g, Inc., 895 F.2d 1043, 1047 (5th Cir. 1990) (“the PLT test”). First, the controversy must arise on a situs covered by the OCSLA, namely, the subsoil, seabed, or an artificial structure permanently or temporarily attached thereto. Id. Second, “[f]ederal maritime law must not apply of its own force.” Id. Third, the applicable state law must not be inconsistent with federal law. Id.

         A claim for indemnity is based in contract, not tort. Grand Isle Shipyard, Inc. v. Seacor Marine, LLC, 589 F.3d 778, 787 (5th Cir. 2009). Thus, the location of the tort is immaterial to the choice-of-law analysis for contractual indemnity claims. Id. Rather, courts “apply a focus-of-the-contract test and say that a contractual dispute - the ‘controversy' under the first condition of the PLT test - arises under an OCSLA situs if a majority of the work called for by the contract is on stationary platforms or other enumerated OCSLA situses.” Id.

         FMIC and Certain Excess Underwriters argue that, pursuant to the OCSLA, Louisiana law applies to interpret the insurance-and-indemnity provisions at issue, and the LOIA invalidates those contractual provisions.[33] Citing Grand Isle Shipyard, Wood Group agrees that Louisiana law applies to the Wood Group/Fieldwood MSC and the Linear/Fieldwood MSC because those contracts were for the purpose of providing personnel to work on a platform affixed to the OCS off the coast of Louisiana.[34] REC/GOL recognize that Louisiana law might apply to the Kilgore/Fieldwood MTCA and the Linear/Fieldwood MSC.[35] However, the issue is less clear because the Kilgore/Fieldwood MTCA was for the procurement of vessels to transport personnel to the platform. Thus, the contracts call for work on the seas and the platform. Neither FMIC nor REC/GOL examine the choice-of-law analysis in their memoranda.[36] Rather, both sides present arguments regarding the effects of the LOIA if Louisiana law indeed applies.[37]

         C. The LOIA and Marcel Premiums

         The LOIA provides, in pertinent part:

B. Any provision contained in, collateral to, or affecting an agreement pertaining to a well for oil, gas, or water, or drilling for minerals which occur in a solid, liquid, gaseous, or other state, is void and unenforceable to the extent that it purports to or does provide for defense or indemnity, or either, 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.

La. R.S. 9:2780(B).

         The statute was enacted to prevent “an inequity foisted on certain contractors and their employees by the defense and indemnity provisions ... contained in some agreements pertaining to wells for oil, gas, or water, or drilling for minerals ... to the extent those provisions apply to death or bodily injury to persons.” Id. 9:2780(A). The Louisiana legislature intended “to declare null and void and against public policy of the state of Louisiana” any such provision. Id. The LOIA also applies to insurance coverage procured by the contractor:

Any provision in any agreement arising out of the operations, services, or activities [covered by the LOIA] which requires waivers of subrogation, additional named insured endorsements, or any other form of insurance protection which would frustrate or circumvent the prohibitions of [the LOIA], shall be null and void and of no force and effect.

Id. 9:2780(G). Applying subsection G, “courts generally hold that contractual provisions requiring the contractor to extend its insurance coverage to cover the principal's acts of negligence or fault are void under the LOIA because these insurance arrangements frustrate the purpose of the Act.” Rogers v. Samedan Oil Corp., 308 F.3d 477, 481 (5th Cir. 2002) (citations omitted). However, in Marcel v. Placid Oil Co., 11 F.3d 563 (5th Cir. 1994), the Fifth Circuit recognized an exception to this rule finding that, “when the principal pays the entire cost of its own insurance coverage by securing an endorsement naming it as an insured in the contract or policy, the purposes of the LOIA are not frustrated, and the insurance coverage is valid and enforceable.” Rogers, 308 F.3d at 481 (citing Marcel, 11 F.3d at 569-70).

         D. Contractual ...


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