Texas Indemnity And Express Negligence

A recent Texas Court of Appeals decision (Tutle & Tutle Trucking v. EOG Resources, Inc., Waco Court of Appeals 2012) illustrates the importance of carefully drafting indemnity clauses in oil and gas Master Service Agreements. EOG had a Master Services Agreement with Tutle, a trucking company. Frac Source was a contractor of EOG's and had a separate MSA with EOG. Tutle's employee, Henderson, was injured, apparently in Texas, while assisting Frac Source in unloading sand from a Frac Source truck. Henderson sued Frac Source and Tutle for negligence, but never made a claim directly against EOG, claiming that Frac Source had modified or removed a safety device from its equipment, rendering such equipment unreasonably dangerous. Frac Source then made demand on EOG to defend and indemnify it under the EOG/Frac Source MSA. EOG, in turn, demanded indemnity from Tutle under the EOG/Tutle MSA.1

Paragarph 6 of the EOG/Tutle MSA set out the parties indemnity obligations. Paragraph 6A of the EOG/Tutle MSA contained an indemnification (in all capital letters) under which Tutle agreed to indemifiy EOG, its related companies, partners, etc., but did not include its contractors or subcontractors, against claims asserted by Tutle's employees "arising in connection [with the MSA]." However, since (a) Henderson (Tutle's employee) had not sued EOG and (b) the claim for which EOG sought indemnity from Tutle was a contractual claim which had been made by EOG's contractor (Frac Source), Paragraph 6 A of the EOG/Tutle did not provide any protection to EOG.

Nevertheless, the EOG/Tutle indemnity provisions also included Paragraph 6E (in lower case letters) which the parties called the "pass through" provision and provided as follows:

6E. The terms and provisions of this Paragraph 6 [the indemnification paragraph] shall have no application to claims or causes of action asserted against Company [EOG] or Contractor [Tutle] by reason of any agreement of indemnity with a person or entity not a party to this Agreement in those instances where such contractual indemnities are not related to or ancillary to the performance of the work contemplated under the Agreement or a indemnities uncommon to the industry. The terms and provisions of this Paragraph 6 shall expressly apply to claims or causes of action asserted against Company or Contractor by reason of any agreement of indemnity with a person or entity not a party to this Contract where such contractual indemnities are...