Nabors Drilling Technologies USA, Inc. v. Liberty Mutual Fire Insurance Company

October 21, 2021

Nathan Ochsner, Clerk

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

NABORS DRILLING § CIVIL ACTION NO.

TECHNOLOGIES § 4:19-cv-02854

USA INC and NABORS §

INDUSTRIES INC, §

Plaintiffs, §

§

§

vs. § JUDGE CHARLES ESKRIDGE

§

§

DEEPWELL ENERGY §

SERVICES LLC and §

LIBERTY MUTUAL §

FIRE INSURANCE §

COMPANY, §

§

Defendants. §

OPINION AND ORDER

GRANTING SUMMARY JUDGMENT IN PART

Plaintiffs Nabors Drilling Technologies USA Inc and

Nabors Industries Inc and Defendants Deepwell Energy

Services LLC and Liberty Mutual Fire Insurance Company

have all moved for partial or full summary judgment. See

Dkts 21 (Deepwell), 22 (Liberty Mutual), and 23 (Nabors

entities). Each motion is granted in part and denied in part.

In summary, Texas law governs the obligations of the

parties under the Master Service Agreement at issue;

Liberty Mutual has a duty to defend and indemnify the

Nabors entities if they qualify as additional insureds under

the policy; if Nabors is assigned any liability in the

underlying action and Deepwell is required to indemnify,

then the coverage cannot exceed $500,000; and the action

will be abated pending resolution of the underlying liability

determination.

1. Background

Plaintiffs Nabors Drilling Technologies USA Inc and

Nabors Industries Inc are both subsidiaries of the same

parent corporation. Dkt 4. They will be referred to together

as Nabors.

Nabors entered into a Master Service Agreement with

Defendant Deepwell Energy Services LLC in October 2015.

Dkt 23-1 (MSA). Under the MSA, “Deepwell was approved

as a full cycle rigger in all regions, and approved to perform

work in any state except for the State of North Dakota.”

Dkt 21-1 at 31 (objections and answers to Deepwell’s first

set of interrogatories).

The following are the MSA provisions most pertinent

to this action.

Section 9 of the MSA pertains to insurance. It provides

in relevant part:

a. As a separate and independent obli-

gation and without limiting the indemnity

obligation of Contractor or its insurers, at

any and all times during the term of the

Agreement, Contractor shall, at Contrac-

tor’s sole expense, carry insurance . . . for

the types of insurance and in minimum

amounts as follows:

. . . .

iii. Comprehensive General Liability

Insurance on an occurrence basis,

including contractual liability, sudden and

accidental pollution, and products

liability/completed operations coverage,

including without limitation insurance for

the indemnity agreements set forth in the

Agreement, with limits of not less than

$1,000,000 per occurrence covering to [sic]

bodily injury, sickness or death, personal

injury, broad form, property damage

premises/operations, independent contrac-

tors, underground resources, underground

property damage, loss of or damage to

property.

. . . .

b. The Nabors Group shall be named as

additional insured in each of Contractor’s

policies, except Workers’ Compensation.

c. All policies shall be endorsed to provide

that underwriters and insurance com-

panies of Contractor shall not have any

right of subrogation against the Nabors

Group or their underwriters and insurance

companies.

. . . .

f. It is hereby understood . . . that any

coverage provided to Nabors Group by

Contractor’s insurance under the Agree-

ment is primary insurance with respect to

the obligations of Contractor under any

Contract, and shall not be considered

contributory insurance with any insurance

policies of Nabors Group.

Dkt 23-1 at 4–5 (MSA); Dkt 22 at 4–5.

Section 10 of the MSA pertains to risk allocation and

indemnity. It provides in relevant part:

c. Contractor shall be liable for, and hereby

releases, all claims against Nabors Group

with respect to all losses, costs, damages,

expenses and legal fees which Contractor

may suffer, sustain, pay or incur directly or

indirectly arising from or on account of

bodily injury to or death of any persons in

the Contractor Group or damage to or loss

of property owned by a member of the

Contractor Group arising out of or relating

to the Agreement or any Contract. In

addition, Contractor shall defend, indem-

nify, and hold harmless Nabors Group

against all Claims arising from or related

to (1) bodily injury to or death of any person

in the Contractor Group, or loss of or

damage to any property owned by a

member of the Contractor Group (2) bodily

injury or death of any person or loss of or

damage to any property resulting from any

negligent act or willful misconduct of any

person within the Contractor Group.

d. Except as otherwise specified herein, the

liability, release and indemnity provisions

contained in this Agreement shall apply

notwithstanding any breach or alleged

breach of this Agreement or any Contract

and shall be without regard to cause or

causes, including without limitation pre-

existing defects in equipment or materials,

the negligence, whether sole, concurrent,

active, passive, primary or secondary, of

either party or any other person including

without limitation the party or person

being released or indemnified, or

otherwise, strict liability or the unsea-

worthiness of any vessel ingress and

egress, loading and unloading.

. . . .

h. The indemnity obligations contained in

this Agreement or any Contract with

respect to the injury to or death of any

person in the Contractor Group or damage

to or loss of property of any member of the

Contractor Group shall be supported by

liability insurance coverage in the amounts

set forth in article 9 above.

i. The parties are cognizant of statutes in

various jurisdictions that nullify in whole

or in part the indemnity obligations

contained herein to the extent of the

indemnitee’s negligence (including but not

limited to Tex. Civ. Prac. & Rem. Code

§ 127.001, et seq, La. Rev. Stat. 9:2780,

N.M. Stat. Ann. §56-7-2 and Wyo. Stat.

§30-1-131, et seq.) and of the public policy

considerations underlying those statutes.

Notwithstanding those statutes, the public

policy considerations and the cases decided

under those statutes, the parties confirm

their intent to voluntarily honor and abide

by the terms of the indemnity provisions in

this Agreement, despite any nullifying

effect the statutes or cases may have

thereon.

Dkt 23-1 at 5–7 (MSA).

Deepwell furnished certificates of liability insurance in

conjunction with executing the MSA. These certificates

represented that its policies provided Nabors “Blanket

Additional Insured Primary and Non-Contributory”

coverage along with general commercial and excess

liability coverages. Dkt 23-3 at 1–2. Deepwell reaffirmed

that its general commercial liability policy provided that

same blanket coverage in a 2018 certificate of liability

insurance that identified Liberty Mutual as its insurer. Id

at 3. Indeed, Liberty Mutual issued Commercial General

Liability Policy No TB2-641-445005-018 to Deepwell as the

first-named insured with an effective date from July 1,

2018 to July 1, 2019. Dkt 30-5 (insurance policy).

The CGL policy generally covers “bodily injury and

property damage liability,” but it doesn’t apply if the

insured assumed such liabilities by contract. Id at 15–16.

But that exclusion itself doesn’t apply when the insured

assumes the tort liability of another to pay for bodily

injuries to third persons through an insured contract.

Id at 16, 28. The MSA is an insured contract, as Deepwell

assumed the tort liability of Nabors to pay for bodily

injuries to any of its employees or contractors performing

work under the MSA. Dkt 23-1 at 5–7. So the policy covers

liabilities for bodily injuries arising under the MSA, and it

extends such coverage to additional insureds, which (as

discussed below) Nabors may be. Ibid; Dkt 30-5 at 15–16,

28, 57; Dkt 23-3 at 1–2.

A Deepwell employee named Rashaan Jones was

injured on a drilling rig owned and operated by Nabors in

Eddy County, New Mexico in August 2018. Dkt 21-1 at 20

(incident report); Dkt 22-1 at 2 (state petition). Jones

claims he “was attempting to remove a pin on a gas buster

on the rig” and ultimately severed two of his fingers.

Dkt 22-1 at 2; Dkt 21-1 at 20. Jones is a citizen of

Louisiana. But he brought action in December 2018

against Nabors in Texas state court, seeking compensatory

and punitive damages on claims for negligence and gross

negligence. See Dkt 22-1, citing Jones v Nabors Drilling

Technologies USA Inc, No 2018-87021, in the 125th

District Court, Harris County, Texas.

Nabors sent a tender for defense, indemnity, and

coverage as additional insured to Deepwell in February

2019 and asked it to notify Liberty Mutual. Dkt 23-5.

Nabors there insisted that Jones was an employee of

Deepwell at the time of his injury and was working in the

course and scope of his employment under the MSA.

Deepwell forwarded the letter to Liberty Mutual, which

denied the tender in April 2019. Dkt 23-6. It reasoned that

Nabors isn’t entitled to additional-insured status under the

policy because the New Mexico Oilfield Anti-Indemnity Act

“nullifies the indemnification provisions of an agreement

pertaining to an oil well or gas well.” Id at 4. Even so, a

Liberty Mutual representative sent an email to Deepwell

in September 2019 acknowledging that “under Texas law,

Nabors may ultimately qualify as an additional insured,

but Liberty has no present duty to defend. If Deepwell or

Jones himself is partly responsible for the injury, Nabors

will be entitled to indemnity coverage as an additional

insured.” Dkt 23-7.

Nabors brought this action against Deepwell and

Liberty Mutual in Texas state court in June 2019. It seeks

a declaration affirming that it’s entitled to defense and

indemnity for costs arising out of the underlying tort

action. And it seeks a further declaration affirming that it’s

entitled to defense and indemnity as an additional insured

pursuant to the policy issued by Liberty Mutual. Dkt 1-2

at 1–9.

Liberty Mutual removed the action with Deepwell’s

consent in August 2019 pursuant to 28 USC §§ 1332, 1441,

and 1446. Dkt 1–2. Liberty Mutual then filed an amended

answer and counterclaim for declaratory relief in February

2020. Dkt 16. It requests a declaration that New Mexico

law applies to the indemnity and insurance disputes in this

case, and that the New Mexico Oilfield Anti-Indemnity Act

voids any additional-insured duties that Liberty Mutual

would otherwise owe to Nabors. But if determined that

Texas law applies, it requests declarations in the

alternative that it has no present duty to defend Nabors

against the allegations in Jones’s lawsuit, and that the

policy limits any indemnity obligation in that underlying

suit to $500,000. Dkt 16 at 10–11.

Liberty Mutual and Nabors moved for summary

judgment. Dkts 22 & 23. Deepwell has moved for partial

summary judgment. Dkt 21.

2. Legal standard

Rule 56(a) of the Federal Rules of Civil Procedure

requires a court to enter summary judgment when the

movant establishes that “there is no genuine dispute as to

any material fact and the movant is entitled to judgment

as a matter of law.” A fact is material if it “might affect the

outcome of the suit under the governing law.” Sulzer

Carbomedics Inc v Oregon Cardio-Devices Inc, 257 F3d 449,

456 (5th Cir 2001), quoting Anderson v Liberty Lobby Inc,

477 US 242, 248 (1986). And a dispute is genuine if the

“evidence is such that a reasonable jury could return a

verdict for the nonmoving party.” Royal v CCC & R Tres

Arboles LLC, 736 F3d 396, 400 (5th Cir 2013),

quoting Anderson, 477 US at 248.

The summary judgment stage doesn’t involve weighing

the evidence or determining the truth of the matter. The

task is solely to determine whether a genuine issue exists

that would allow a reasonable jury to return a verdict for

the nonmoving party. Smith v Harris County, 956 F3d 311,

316 (5th Cir 2010), quoting Anderson, 477 US at 248.

Disputed factual issues must be resolved in favor of the

nonmoving party. Little v Liquid Air Corp, 37 F3d 1069,

1075 (5th Cir 1994). All reasonable inferences must also be

drawn in the light most favorable to the nonmoving

party. Connors v Graves, 538 F3d 373, 376 (5th Cir 2008),

citing Ballard v Burton, 444 F3d 391, 396 (5th Cir 2006).

The moving party typically bears the entire burden to

demonstrate the absence of a genuine issue of material

fact. Nola Spice Designs LLC v Haydel Enterprises Inc,

783 F3d 527, 536 (5th Cir 2015); see also Celotex Corp v

Catrett, 477 US 317, 322–23 (1986). But when a motion for

summary judgment by a defendant presents a question on

which the plaintiff bears the burden of proof at trial, the

burden shifts to the plaintiff to proffer summary judgment

proof establishing an issue of material fact warranting

trial. Nola Spice, 783 F3d at 536. To meet this burden of

proof, the evidence must be both “competent and

admissible at trial.” Bellard v Gautreaux, 675 F3d 454, 460

(5th Cir 2012).

When parties file opposing motions for summary

judgment on the same issue, the court reviews each motion

independently, each time viewing the evidence and

inferences in the light most favorable to the nonmoving

party. Amerisure Insurance Co v Navigators Insurance Co,

611 F3d 299, 304 (5th Cir 2010). Each movant must

establish that no genuine dispute of material fact exists,

such that judgment as a matter of law is in order. Ibid; see

also Tidewater Inc v United States, 565 F3d 299, 302

(5th Cir 2009).

3. Motion for partial summary judgment by

Deepwell

Deepwell raises three arguments in favor of its motion

for partial summary judgment. These largely overlap with

issues presented by Nabors and Liberty Mutual. They are

addressed at length here, with resolution of the other two

motions following consistently from such determinations.

Deepwell first argues that the law of New Mexico—and

not Texas—should apply to the indemnity and insurance

issues in this case. Dkt 21 at 8–17. On assumption that this

means that the New Mexico Oilfield Anti-Indemnity Act

applies to the MSA, it next argues that this nullifies any

indemnity obligation. Id at 17–18. And Deepwell argues in

the alternative that “Nabors may qualify as an additional

insured” under its policy with Liberty Mutual because it

“complied with the insurance obligations of the MSA and

with the requirement of its policy.” Id at 7, 18–19. But to

be clear, Deepwell doesn’t request any specific relief in its

motion other than asking for a general determination as to

the choice of law issue and related consequences.

a. Choice of law and the MSA

Section 22 of the MSA is a choice-of-law provision that

provides in relevant part:

The interpretation and performance of this

Agreement and each Contract hereunder

shall be governed by and interpreted in

accordance with the general maritime law,

without regard to its rules on conflict of

laws. In the event general maritime law is

deemed inapplicable to any indemni-

fication provision(s) and/or obligation(s) in

this Agreement or any Contract, the

indemnification provision(s) and/or obli-

gation(s) shall be governed by and

interpreted in accordance with the laws of

the State of Texas, without regard to its

rules on conflict of laws.

Dkt 21-1 at 11.

No one asserts that general maritime law applies here.

But the parties join issue as to whether the alternative

selection of Texas law should be displaced by that of New

Mexico.

i. Texas and New Mexico law compared

“The New Mexico and Texas legislatures have enacted

statutes that generally void agreements that purport to

create indemnity for an oilfield indemnitee’s sole or

concurrent negligence.” North American Tubular Services

LLC v BOPCO LP, 2018 WL 4140635, *4 (Tex App—Fort

Worth 2018, no pet), citing NM Stat Ann § 56-7-2 and Tex

Civil Practice & Remedies Code Ann § 127.003(a). But

Texas allows for exceptions to its general rule, while New

Mexico doesn’t.

The Texas Oilfield Anti-Indemnity Act provides:

(a) Except as otherwise provided by this

chapter, a covenant, promise, agreement,

or understanding contained in, collateral

to, or affecting an agreement pertaining to

a well for oil, gas, or water or to a mine for

a mineral is void if it purports to indemnify

a person against loss or liability for damage

that:

(1) is caused by or results from the sole or

concurrent negligence of the indemnitee,

his agent or employee, or an individual

contractor directly responsible to the

indemnitee; and

(2) arises from:

(A) personal injury or death;

(B) property injury; or

(C) any other loss, damage, or expense that

arises from personal injury, death, or

property injury.

Tex Civil Practice & Remedies Code Ann § 127.003(a).

Oilfield indemnity agreements are thus generally void

under Texas law if they purport to indemnify an entity

against loss or liability for damages contrary to the terms

of § 127.003(a). See North American Tubular Services,

2018 WL 4140635 at *5.

But Texas law doesn’t preclude oilfield indemnity

agreements if “the parties agree in writing that the

indemnity obligation will be supported by liability

insurance coverage to be furnished by the indemnitor.”

Tex Civil Practice & Remedies Code Ann § 127.005(a).

Such clauses must also “meet certain fair notice

requirements” to be valid. Chesapeake Operating Inc v

Nabors Drilling USA Inc, 94 SW3d 163, 169 (Tex App—

Houston [14th Dist] 2002, no pet, en banc), citing Dresser

Industries Inc v Page Petroleum Inc, 853 SW2d 505, 509

(Tex 1993). Texas law affords this exception because of a

related and clearly stated legislative finding:

(c) The legislature finds that joint

operating agreement provisions for the

sharing of costs or losses arising from joint

activities, including costs or losses attri-

butable to the negligent acts or omissions

of any party conducting the joint activity:

(1) are commonly understood, accepted,

and desired by the parties to joint

operating agreements;

(2) encourage mineral development;

(3) are not against the public policy of this

state; and

(4) are enforceable unless those costs or

losses are expressly excluded by written

agreement.

Tex Civil Practice & Remedies Code Ann § 127.002(c).

Like its Texas counterpart, the New Mexico Oilfield

Anti-Indemnity Act provides in relevant part:

A. An agreement, covenant or promise,

foreign or domestic, contained in, collateral

to or affecting an agreement pertaining to

a well for oil, gas or water, or mine for a

mineral, within New Mexico, that purports

to indemnify the indemnitee against loss or

liability for damages arising from the

circumstances specified in Paragraph (1),

(2) or (3) of this subsection is against public

policy and is void:

(1) the sole or concurrent negligence of the

indemnitee or the agents or employees of

the indemnitee;

(2) the sole or concurrent negligence of an

independent contractor who is directly

responsible to the indemnitee; or

(3) an accident that occurs in operations

carried on at the direction or under the

supervision of the indemnitee, an employee

or representative of the indemnitee or in

accordance with methods and means

specified by the indemnitee or employees or

representatives of the indemnitee.

. . . .

C. A provision in an insurance contract

indemnity agreement naming a person as

an additional insured or a provision in an

insurance contract or any other contract

requiring a waiver of rights of subrogation

or otherwise having the effect of imposing

a duty of indemnification on the primary

insured party that would, if it were a direct

or collateral agreement described in

Subsections A and B of this section, be void,

is against public policy and void.

NM Stat Ann § 56-7-2(A), (C). “By requiring an indemnitee

to remain responsible for its own negligence, Section 56-7-2

protects third parties whose person or property would be

placed at risk by the indemnitee’s indifference to safety.”

Pina v Gruy Petroleum Management Co, 136 P3d 1029,

1034 (NM Ct App 2006). This means that § 56-7-2

subordinates “public policies favoring the freedom to

contract to the safety goals promoted by the section.” North

American Tubular Services, 2018 WL 4140635 at *5, citing

United Rentals Northwest Inc v Yearout Mechanical Inc,

237 P3d 728, 734 (NM 2010).

But unlike the Texas Legislature, the New Mexico

Legislature hasn’t enacted a corresponding provision that

exempts certain oilfield indemnity agreements from the

general prohibition. Oilfield indemnity agreements are

therefore unenforceable under New Mexico law without

exception.

As such, the laws of Texas and New Mexico are

squarely in conflict, with the indemnity provision at issue

enforceable under the former but not under the latter. This

means that a choice must be made between them.

ii. Choice of applicable law

Deepwell argues that New Mexico law governs the

interpretation of the MSA notwithstanding the choice

within the MSA itself in favor of Texas. Dkt 21 at 8. In

support, Deepwell asserts that “application of Texas law

under the clause would be contrary to a fundamental policy

of New Mexico, as the state with a materially greater

interest in this dispute than Texas.” Id at 9.

“When sitting in diversity, federal courts apply the

substantive state law of the state in which the district court

sits, including the forum state’s choice-of-law rules.”

Boudreaux v C J R Framing Inc, 744 F App’x 208, 209

(5th Cir 2018, per curiam), citing Klaxon Co v Stentor

Electric Manufacturing Co, 313 US 487, 496–97 (1941).

And “Texas law recognizes the ‘party autonomy rule’ that

parties can agree to be governed by the law of another

state.” Exxon Mobil Corp v Drennen, 452 SW3d 319, 324

(Tex 2014). Indeed, respecting the choice-of-law provisions

of the parties “advances the policy of protecting their

expectations.” DeSantis v Wackenhut Corp, 793 SW2d 670,

677 (Tex 1990).

But this contractual freedom isn’t unlimited. For

example, the parties can’t “require that their contract be

governed by the law of a jurisdiction which has no relation

whatever to them or their agreement” or attempt to

“thwart or offend the public policy of the state the law of

which ought otherwise to apply.” Ibid. The Fifth Circuit has

thus observed that “although Texas courts permit choice-

of-law agreements and the default position is that they are

enforceable, it is not uncommon for a party to overcome

them.” Cardoni v Prosperity Bank, 805 F3d 573, 581

(5th Cir 2015) (collecting cases).

The Texas Supreme Court has adopted § 187 of the

Restatement (Second) of Conflict of Laws to determine

whether a choice of law provision is enforceable. Drennen,

452 SW3d at 324–25, citing DeSantis, 793 SW2d at 677–

78. Section 187(1) provides, “The law of the state chosen by

the parties to govern their contractual rights and duties

will be applied if the particular issue is one which the

parties could have resolved by an explicit provision in their

agreement directed to that issue.” Section 187(2) then

further specifies:

The law of the state chosen by the parties

to govern their contractual rights and

duties will be applied, even if the particular

issue is one which the parties could not

have resolved by an explicit provision in

their agreement directed to that issue,

unless either

(a) the chosen state has no substantial

relationship to the parties or the

transaction and there is no other

reasonable basis for the parties’ choice,

or

(b) application of the law of the chosen

state would be contrary to a

fundamental policy of a state which has

a materially greater interest than the

chosen state in the determination of the

particular issue and which, under the

rule of § 188, would be the state of the

applicable law in the absence of an

effective choice of law by the parties.

Two points are readily apparent. The first is that the

parties specified Texas law as applicable to later disputes

that might arise under the MSA. The pertinent question is

whether that conscious, objective choice should be

displaced.

The second is that § 187(2)(a) plainly doesn’t apply.

Nabors has its principal places of business in Texas, and

Deepwell does business in Texas. Dkt 1-2 at ¶¶ 1–3. Texas

therefore has a substantial relationship to the parties,

providing an eminently reasonable basis for the parties’

choice to apply Texas law under the MSA. See Drennen,

452 SW3d at 325.

The controlling inquiry thus turns on § 187(2)(b). It

internally references § 188, which sets out the standard for

determining what state “has the most significant

relationship to the transaction and the parties under the

principles stated in § 6.” (emphasis added). This is a

complex inquiry, focusing on a comparison of the

contractual selection with the alternative selection argued

by the challenging party. In short, the parties’ selection

controls unless the other state “(1) has a more significant

relationship with the parties and the transaction at issue

than the chosen state does under Restatement § 188;

(2) has a materially greater interest than the chosen state

does in the enforceability of a given provision; and (3) has

a fundamental policy that would be contravened by the

application of the chosen state’s law.” Cardoni, 805 F3d

at 582, citing Drennen, 452 SW3d at 325–27.

All three elements must be satisfied before a Texas

court may deviate from the contract’s choice of law. Banta

Oilfield Services Inc v Mewbourne Oil Co, 568 SW3d 692,

710–11 (Tex App—Texarkana 2018, pet denied), quoting

Gator Apple LLC v Apple Texas Restaurants Inc, 442 SW3d

521, 533 (Tex App—Dallas 2014, no pet).

A. More significant relationship under

§ 187(2)(b)

As noted, the initial element considered under

§ 187(2)(b) is “whether there is a state the law of which

would apply under section 188 of the Restatement absent

an effective choice of law by the parties.” Drennen, 452

SW3d at 325, quoting DeSantis, 793 SW2d at 678

(quotation marks omitted). Section 188(1) then provides,

“The rights and duties of the parties with respect to an

issue in contract are determined by the local law of the

state which, with respect to that issue, has the most

significant relationship to the transaction and the parties.”

This itself entails a two-part inquiry. First, a court must

assess the contacts by reference to those contacts set forth

in § 188(2) and weigh them “not by their number, but by

their quality.” Minnesota Mining & Manufacturing Co v

Nishika Ltd, 955 SW2d 853, 856 (Tex 1996). Second, those

weighted contacts must be considered “in light of the basic

conflict of laws principles of section 6 of the Restatement.”

Id at 736; DeSantis, 793 SW2d at 678 & n 2; Maxus

Exploration Co v Moran Brothers, 817 SW2d 50, 54 (Tex

1991).

I. Contacts under § 188(2)

assessed and weighed

Texas courts consider the contacts listed in § 188(2)

when determining which state has a more significant

relationship to the relevant transaction and parties. Those

contacts include:

o First, the place of contracting;

o Second, the place of negotiation of the contract;

o Third, the place of performance;

o Fourth, the location of the subject matter of the

contract, and

o Fifth, the domicile, residence, nationality,

place of incorporation and place of business of

the parties.

Chesapeake, 94 SW3d at 170, citing Restatement (Second)

of Conflict of Laws § 188(2); see also Cardoni, 805 F3d

at 582, citing Restatement (Second) of Conflict of Laws

§ 188(2). Determining which contacts to consider in

deciding which state’s law governs “involves a factual

inquiry.” Hughes Wood Products Inc v Wagner, 18 SW3d

202, 204 (Tex 2000). “Thus, a movant for summary

judgment seeking to have the law of another state applied

must satisfy its burden of proof with respect to fact

questions necessary to the choice of law decision.” Id at 205.

Once it’s determined which state is the appropriate

contact as to each of the above, those contacts must then be

evaluated “according to their relative importance with

respect to the particular issue” implicated in the dispute.

Chesapeake, 94 SW3d at 173. The contacts are weighed in

this regard “not by their number, but by their quality.”

Ibid, citing Minnesota Mining & Manufacturing, 955 SW2d

at 856.

As to the place of contracting. The place of contracting

is “where occurred that last act necessary . . . to give the

contract binding effect.” 3D/International Inc v Romano,

811 F App’x 244, 249 (5th Cir 2020, per curiam) (applying

Texas law), quoting Restatement (Second) of Conflict of

Laws § 188, comment e. But it is readily apparent that the

place of contracting is “a relatively insignificant contact.”

Sonat Exploration Co v Cudd Pressure Control Inc, 271

SW3d 228, 233 n 22 (Tex 2008), quoting Restatement

(Second) of Conflict of Laws § 188, comment e.

Nabors executed the MSA in Texas, and Deepwell

executed it in Mississippi. See Dkt 21 at 4; Dkt 21-1 at 30.

It’s unclear which party last signed the MSA, thus making

it binding. But what’s quite clear is that this contact in no

way favors New Mexico. At best, it weighs in favor of

applying Texas law. Regardless, it will be assigned little

significance.

As to the place of negotiation of the contract. The place

where the parties negotiate and agree on the terms of their

contract is ordinarily considered “a significant contact.”

Restatement (Second) of Conflict of Laws § 188, comment e.

But this contact “is of less importance . . . when the parties

do not meet but rather conduct their negotiations from

separate states by mail or telephone.” Sonat Exploration,

271 SW3d at 233 n 22, quoting Restatement (Second) of

Conflict of Laws § 188, comment e.

The latter scenario is what happened here. Nabors

negotiated the MSA from Texas, and Deepwell negotiated

it from Mississippi. Dkt 21 at 4; Dkt 21-1 at 30. Again, the

contact in no way favors New Mexico. At best, it slightly

favors applying Texas law. But like the first contact, it will

be assigned little significance.

As to the place of performance. “The state where

performance is to occur under a contract has an obvious

interest in the nature of the performance and in the party

who is to perform.” Restatement (Second) of Conflict of

Laws § 188, comment e. But there are two possible mean-

ings of the place of performance in the context of an MSA

involving an oilfield indemnity provision. One is the place

“where the drilling services were performed,” and the other

is “where the indemnity obligation was performed (by

defending against the injured employee’s suit).”

Chesapeake, 94 SW3d at 171, quoting Maxus, 817 SW2d at

53. Given that it is the indemnity clause at issue in this

dispute, the latter meaning will guide the inquiry.

Jones was injured in New Mexico. But every other

meaningful measure points to Texas as the place of

performance. Jones brought action against Nabors in

Texas. Dkt 21-1 at 22–26. Nabors and Deepwell agreed

between themselves that jurisdiction would “lie exclusively

with the state and federal courts in Houston” if any dispute

relating to the MSA (or any obligation thereunder) arose.

Dkt 22-2 at 9. And Nabors of course brought this action

against Deepwell and Liberty Mutual in Texas. This means

that any judgments in both actions will be entered in

Texas, the attorney fees sought in both cases have been and

will continue to be incurred in Texas, and the impact of any

indemnification between Nabors and Deepwell will be felt

primarily in Texas, where the former is domiciled and

headquartered.

This means that Texas has a more significant

relationship with the place of performance. See

Chesapeake, 94 SW3d at 171–72. Indeed, Deepwell

essentially concedes this point. Dkt 21 at 10–11.

Significant weight is appropriately assigned to this contact.

As to the location of the subject matter of the contract.

“When the contract deals with a specific physical thing,

such as land or a chattel, or affords protection against a

localized risk, such as the dishonesty of an employee in a

fixed place of employment, the location of the thing or of

the risk is significant.” Restatement (Second) of Conflict of

Laws § 188, comment e. But the location of the subject

matter isn’t significant “when the parties contemplate

services in several different states.” Sonat Exploration,

271 SW3d at 233, citing Restatement (Second) of Conflict

of Laws § 188, comment e.

Relying on CMA-CGM (America) Inc v Empire Truck

Lines, Deepwell contends that “the subject matter factor

weighs decidedly in favor of the application of New Mexico

law” because “the work being performed and/or services

being provided at the time of the Incident” took place in

New Mexico. Dkt 21 at 11, citing 416 SW3d 495, 514

(Tex App—Houston [1st Dist] 2013, pet denied). But the

CMA-CGM court held that the location of the subject

matter of that contract was Texas because the plaintiff

hired the defendant to move its equipment “from one Texas

location to another Texas location.” 416 SW3d at 514.

Nothing here establishes that the parties ever executed

any contract specific to New Mexico (or any other state).

There are instead two possible understandings of the

location of the subject matter of the contract here. One is the

location of the subject matter of the contract as a whole—

in this case, drilling services. But that’s an unnatural

application of the phrase, where choice-of-law analysis

drills down in a much more particularized way to the

pertinent issues in dispute and the state policies that

might impact its resolution. Regardless, the contact would

carry little significance if so construed. Under the MSA,

“Deepwell was approved as a full cycle rigger in all regions,

and approved to perform work in any state except for the

State of North Dakota.” Dkt 21-1 at 31. The parties

therefore contemplated that Deepwell would provide

services to Nabors in forty-nine states, with the MSA never

specifically mentioning New Mexico. Per Sonat

Exploration, this means that the precise location carries

little weight. 271 SW3d at 233.

The other is the location of the subject matter of the

particular issue to be resolved under the contract—here,

the indemnification obligation. This is the better

understanding, and it weighs substantially in favor of

Texas for the same reasons expressed above. Quite simply,

the indemnity clause is intended to eliminate or minimize

the risk of liability to Nabors. This localizes to Texas

because the headquarters of Nabors are here. What’s more,

any judgment will be entered in Texas because the parties

agreed that “the state and federal courts in Houston,

Harris County, Texas” will exercise exclusive jurisdiction

over any claim arising out of the MSA. Dkt 21-1 at 11.

As to the domicile, residence, nationality, place of

incorporation, and place of business of the parties. Each of

these represents an enduring relationship to a particular

state, but their significance “depends largely upon the

issue involved and upon the extent to which they are

grouped with other contacts.” Restatement (Second) of

Conflict of Laws § 188, comment e. “The fact that one of the

parties is domiciled or does business in a particular state

assumes greater importance when combined with other

contacts, such as that this state is the place of contracting

or of performance or the place where the other party to the

contract is domiciled or does business.” Ibid. The

Restatement emphasizes that “a corporation’s principal

place of business is a more important contact than the

place of incorporation, and this is particularly true in

situations where the corporation does little, or no, business

in the latter state.” Ibid. Moreover, state and federal courts

generally apply “the law of the parties’ domiciles when

considering conflicting indemnity laws.” Chesapeake,

94 SW3d at 173 (collecting cases).

Nabors is a Delaware corporation and Deepwell is a

Mississippi LLC. Dkt 1-2 at 1; Dkt 21 at 4. Deepwell also

concedes that Nabors is domiciled and headquartered in

Texas, while it is domiciled and headquartered in

Mississippi. Dkt 21 at 11. This contact thus heavily favors

Texas, particularly when combined with the prior

conclusion that Texas is the place of performance and the

location of the subject matter of the contract. Cf Maxus

Exploration Co v Moran Brothers Inc, 817 SW2d 50, 54, 57

(Tex 1991) (declining to apply Texas law to indemnification

dispute between two Texas companies arising from

personal injury action in Kansas state court that began

after they contracted to drill single oil well in Kansas with

no choice-of-law selection). And once again, nothing about

this contact favors New Mexico.

II. Contacts considered in light of

§ 6 factors

The number of contacts that weigh in favor of a

jurisdiction “is less important than the qualitative nature

of those contacts as affected by the policy factors” of § 6.

Murthy v Abbott Laboratories, 847 F Supp 2d 958, 966

(SD Tex 2012), citing Gutierrez v Collins, 583 SW2d 312,

319 (Tex 1979).

The weighted contacts above must therefore be

evaluated in light of the principles articulated under

Restatement (Second) of Conflict of Laws § 6. See Maxus,

817 SW2d at 54, 57, citing Restatement (Second) of Conflict

of Laws § 188(2). These principles include:

o First, the needs of the interstate and

international systems;

o Second, the relevant policies of the forum;

o Third, the relevant policies of other interested

states and the relative interests of those states

in the determination of the particular issue;

o Fourth, the protection of justified expectations;

o Fifth, the basic policies underlying the

particular field of law;

o Sixth, certainty, predictability and uniformity

of result; and

o Seventh, ease in the determination and

application of the law to be applied.

Chesapeake, 94 SW3d at 175, citing Restatement (Second)

of Conflict of Laws § 6. These principles must be considered

because “the parties’ expectations as stated in their

contract should not be frustrated by applying a state law

that would invalidate the contract, at least not unless those

expectations are substantially outweighed by the interests

of the state with the invalidating rule.” Sonat Exploration,

271 SW3d at 235.

As to the needs of the interstate and international

systems. The Restatement observes, “Probably the most

important function of choice-of-law rules is to make the

interstate and international systems work well.”

Restatement (Second) of Conflict of Laws § 6 comment d.

Choice-of-law rules thus “should seek to further

harmonious relations between states and to facilitate

commercial intercourse between them.” Ibid. “Industry and

commerce cannot operate in a climate that allows a

contracting party who makes a bad bargain to change the

terms of a deal at its option.” Chesapeake, 94 SW3d at 177.

Deepwell agreed to be bound by Texas law should any

dispute arise out of its contract with Nabors. And the MSA

includes an indemnity provision in accord with Texas law.

Deepwell now seeks to repudiate that bargain to avoid its

indemnification duties. Giving sanction to such strategy

would undermine the needs of the interstate and

international systems of commerce by promoting

uncertainty and increasing transaction costs. As such, this

principle weighs heavily in favor of applying Texas law—

and not Deepwell’s expedient arguments in favor of New

Mexico law.

As to the relevant policies of the forum. Texas has a

“strong commitment to the principle of contractual

freedom.” Churchill Forge Inc v Brown, 61 SW3d 368, 371

(Tex 2001). The Texas Supreme Court further instructs,

“When a contract involves oilfield work in many states,

sophisticated parties should generally be free to designate

the law that will govern their relationship and have that

choice respected.” Sonat Exploration, 271 SW3d at 236.

The parties expressly agreed to the application of

Texas law when executing the MSA. Dkt 21-1 at 11. Texas

policy strongly favors enforcing that choice.

As to the relevant policies of other interested states and

the relative interests of those states in the determination of

the particular issue. The New Mexico Oilfield Anti-

Indemnity Act “protects third parties whose person or

property would be placed at risk by the indemnitee’s

indifference to safety.” Pina, 136 P3d 1029, 1034 (NM Ct

App 2006). New Mexico certainly maintains an interest in

protecting anyone within its borders from injury. This is

true even as to Jones, who isn’t a domiciliary of New Mexico

but was injured there while working. Dkt 21-1 at 23. But

New Mexico can’t be said to have a strong interest in this

particular dispute, where nothing suggests that New

Mexico (or one of its citizens) will bear any resulting

burden from either this or the underlying lawsuit.

As to the protection of justified expectations. “In cases

with a choice-of-law provision in an agreement, protection

of the justified expectations of the parties is the most

significant and important factor in the choice-of-law

analysis.” VTX Communications LLC v AT&T Inc,

2020 WL 4465968, *3 (SD Tex), citing Sonat Exploration,

271 SW3d at 235.

The MSA governs a complex arrangement between

Nabors and Deepwell, whereby the latter would move the

oil-drilling rigs of the former as directed between and

among forty-nine states. Dkt 21-1 at 3–13 (MSA). And they

agreed that Texas law would apply regardless of any

particular location that might be relevant to a dispute.

Id at 11. Nabors is thus quite justified when expecting

Texas law to apply, since that’s precisely what Deepwell

agreed to. On the other hand, nothing suggests that New

Mexico or its law pertains in any way to the interpretation

and enforcement of the MSA.

As to the basic policies underlying the particular field

of law. At base, this is a contract dispute as to issues of

indemnification and insurance coverage. And a basic policy

underlying Texas contract law is, not surprisingly,

“[p]rotection of the justified expectations of the parties.”

Chesapeake, 94 SW3d at 176, quoting Restatement

(Second) of Conflict of Laws §188 comment b (quotation

marks omitted) (alteration in original), and citing

DeSantis, 793 SW2d at 677.

New Mexico policy is in accord, evincing a strong policy

in favor of protecting legitimate contractual interests—

unless the contract “clearly contravenes” some other public

policy. Miller v Cincinnati Insurance Co, 323 F Supp 3d

1253, 1260 (D NM 2018) (cleaned up). “New Mexico’s public

policy of freedom to contract has frequently been found

stronger than the policies alleged to be violated by contract

provisions.” Security Insurance Co of Hartford v Clovis

Insurance Center Inc, 2006 WL 8444163, *7 (D NM).

As to certainty, predictability, and uniformity of result.

The Texas Supreme Court holds, “Enforcing contracts

according to their own terms . . . enhances certainty,

predictability, and uniformity of result.” Sonat

Exploration, 271 SW3d at 235 (citations omitted). “Texas

courts have also recognized that applying the law of the

forum fosters certainty, predictability, and uniformity, if

for no other reason than the forum court’s familiarity with

the forum’s law.” Bonn Operating Co v Devon Energy

Production Co, 2009 WL 484218, *7 (ND Tex), aff’d

613 F3d 532 (5th Cir 2010).

The MSA provides that Texas law would govern any

dispute under it, with the forum to resolve it being

Houston. Dkt 21-1 at 11 (MSA). When so agreeing, the

parties recognized that such disputes could arise from

operations anywhere across forty-nine different states. The

notion of certainty, predictability, and uniformity of result

take on added weight in such light.

As to ease in the determination and application of the

law to be applied. The ease in the determination and

application of the law to be applied “points to applying the

law of the state where the injured party brought suit.”

Chesapeake, 94 SW3d at 177, citing Maxus, 817 SW2d

at 57. All parties alleging injury brought action in Texas

state court—Jones versus Nabors, and Nabors versus

Deepwell. See Dkt 21-1 at 22–26; Dkt 1-2 at 1–9. This

principle thus weighs in favor of applying Texas law.

In sum, the weighted contacts under § 188(2) of the

Second Restatement indicate that Texas has a more

significant relationship with the MSA both generally and

as to the indemnification clause specifically.

B. Other factors § 187(2)(b)

As noted above, the remaining factors under § 187(2)(b)

include whether New Mexico “has a materially greater

interest” than Texas in the enforceability of the contractual

provision in dispute, and whether New Mexico “has a

fundamental policy” that would be contravened by the

application of the parties’ chosen law. But such an inquiry

needn’t be undertaken where the more-significant-

relationship test itself points to the parties’ chosen law. See

Banta Oilfield Services, 568 SW3d at 710–11; Mary Kay,

146 SW3d at 816.

The foregoing section established that Texas has a

more significant relationship with the parties and

transaction at issue than New Mexico. As such, the

remaining factors under § 187(2)(b) needn’t be considered.

iii. Choice of law determination

In sum, the factors outlined in § 187(2)(b) compel the

application of Texas law to this dispute. The contrary

request for summary judgment by Deepwell will be denied.

b. New Mexico Oilfield Anti-Indemnity Act

Section 12(d) of the MSA provides:

In the event any provision of this

Agreement is inconsistent with or contrary

to any applicable law, rule, or regulation,

said provision shall be deemed to be

modified to the extent required to comply

with said law, rule or regulation, and this

Agreement, as so modified, shall remain in

full force and effect.

Dkt 21-1 at 9. Deepwell argues under this provision that

“the defense, indemnity, and additional insured provisions”

of the MSA don’t “comply with the applicable New Mexico

law” and should therefore “be nullified.” Dkt 21 at 17–18.

It has been determined above that Texas law governs

this indemnification action. The contrary request for

summary judgment by Deepwell will be denied.

c. Nabors as an additional insured under the

insurance policy

Foreseeing the possibility that Texas law would apply

to the MSA, Deepwell raises the fallback argument that it

has complied with the terms of its policy with Liberty

Mutual such that “Nabors may be deemed as an additional

insured” thereunder. Dkt 21 at 18–19 (emphasis added).

This would mean that Liberty Mutual “should defend

Nabors per the policy and indemnify Nabors against an

adverse judgment, if any.” Id at 19.

This implicates several provisions of the CGL policy

that Liberty Mutual issued to Deepwell.

As to coverage and exclusions, the policy in relevant

part provides:

2. Exclusions

This insurance does not apply to:

. . . .

b. Contractual Liability

“Bodily injury” or “property damage” for

which the insured is obligated to pay

damages by reason of the assumption of

liability in a contract or agreement. This

exclusion does not apply to liability for

damages:

(1) That the insured would have in the

absence of the contract or agreement; or

(2) Assumed in a contract or agreement

that is an “insured contract”, provided the

“bodily injury” or “property damage” occurs

subsequent to the execution of the contract

or agreement. Solely for the purposes of

liability assumed in an “insured contract”,

reasonable attorneys’ fees and necessary

litigation expenses incurred by or for a

party other than an insured are deemed to

be damages because of “bodily injury” or

“property damage”, provided:

(a) Liability to such party for, or for the cost

of, that party’s defense has also been

assumed in the same “insured contract”;

and

(b) Such attorneys’ fees and litigation

expenses are for defense of that party

against a civil or alternative dispute

resolution proceeding in which damages to

which this insurance applies are alleged.

Dkt 30-5 at 16 (insurance policy) (emphasis added). And an

insured contract is defined by the policy to include:

f. That part of any other contract or

agreement pertaining to your busi-

ness . . . under which you assume the tort

liability of another party to pay for “bodily

injury” or “property damage” to a third

person or organization. Tort liability

means a liability that would be imposed by

law in the absence of any contract or

agreement.

Id at 28.

The CGL policy also contains the following

endorsement, extending coverage to an additional insured

when required by contract:

A. Section II – Who Is An Insured is

amended to include as an additional

insured any person or organization for

whom you are performing operations

when you and such person or

organization have agreed in writing in a

contract or agreement that such person

or organization be added as an

additional insured on your policy. Such

person or organization is an additional

insured only with respect to liability for

“bodily injury”, “property damage” or

“personal and advertising injury”

caused, in whole or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on

your behalf;

in the performance of your ongoing

operations for the additional insured.

However, the insurance afforded to such

additional insured:

1. Only applies to the extent permitted by

law; and

2. Will not be broader than that which you

are required by the contract or

agreement to provide for such

additional insured.

Dkt 30-5 at 59.

Deepwell points to the email from a claims specialist at

Liberty Mutual in September 2019. Dkt 21 at 19; Dkt 21-1

at 36. It contends that Liberty Mutual there “conceded that

Nabors may qualify as an additional insured if Deepwell

and/or Jones was assigned a percentage of liability in the

Underlying Lawsuit.” Dkt 21 at 19. Deepwell also contends

that it complied “with the terms of the applicable insurance

policy” and “the terms of the MSA by obtaining the

requisite insurance.” Ibid. Deepwell says this is so because

it “identified Nabors as an Additional Insured” in its

Certificate of Insurance. Ibid; Dkt 21-1 at 34. Indeed,

Section 9 of the MSA required Deepwell to obtain several

types of insurance in various amounts and to name Nabors

as an additional insured on those policies, and the

insurance policy contains several endorsements (including

the one depicted above) regarding additional insureds.

Dkt 23-1 at 4–5 (MSA); Dkt 30-5 at 57–64. Deepwell thus

concludes that, if Texas law applies and Nabors qualifies

as an additional insured, then Liberty Mutual “should

defend Nabors per the policy and indemnify Nabors against

an adverse judgment, if any.” Dkt 21 at 19.

Nabors insists that Deepwell must defend and

indemnify it in the underlying action and that Liberty

Mutual must provide coverage of $500,000 because the

MSA is an insured contract as defined in the policy. Dkt 30

at 23. This appears to be in accord with Deepwell’s

alternative argument that Liberty Mutual should defend

and indemnify Nabors if it qualifies as an additional

insured. Dkt 21 at 19.

Finally, for its part, Liberty Mutual says that it has no

duty to defend Nabors but that it may have a duty to

indemnify Nabors. Dkt 22 at 10–12.

“Whether an insurer has a duty to defend its insured is

a question of law.” Lyda Swinerton Builders Inc v

Oklahoma Surety Co, 903 F3d 435, 445 (5th Cir 2018).

Texas courts apply what’s known as the eight-corners

doctrine to answer that question. By this, a court must

compare allegations within the four corners of the

plaintiff’s pleadings in the underlying action with

provisions within the four corners of the insurance policy.

National Union Fire Insurance Co v Merchants Fast Motor

Lines Inc, 939 SW2d 139, 141 (Tex 1997, per curiam). When

doing so, “allegations in the petition must be construed

liberally in favor of the insured, and all doubts must be

resolved in favor of the duty to defend.” Lyda Swinerton

Builders, 903 F3d at 446. “If the petition pleads facts

sufficient to create the potential of covered liability, then

the insurer has a duty to defend the entire case, even if

some of the alleged injuries are not covered.” Id at 447

(emphasis in original). But if the petition only alleges facts

excluded by the policy, then the insurer has no duty to

defend. Northfield Insurance Co v Loving Home Care Inc,

363 F3d 523, 528 (5th Cir 2004). “Facts ascertained before

suit, developed in the process of litigation, or determined

by the ultimate outcome of the suit do not affect the duty

to defend.” Ibid.

Liberty Mutual contends that the eight-corners

doctrine prevents consideration of anything besides “the

third-party plaintiff’s pleadings . . . in light of the policy

provision.” Dkt 22 at 10. But a narrow exception to the

eight-corners doctrine provides an avenue of discrete

supplementation. The Fifth Circuit holds that the doctrine

doesn’t apply in the “very limited circumstances . . . when

it is initially impossible to discern whether coverage is

potentially implicated and when the extrinsic evidence

goes solely to a fundamental issue of coverage which does

not overlap with the merits of or engage the truth or falsity

of any facts alleged in the underlying case.” Northfield

Insurance, 363 F3d at 531 (emphasis in original). The

Texas Supreme Court hasn’t expressly adopted this

exception, though it has cited Northland Insurance with

approval. State Farm Lloyds v Richards, 784 F App’x 247,

251 (5th Cir 2019). And while the Fifth Circuit recently

certified the question to the Texas Supreme Court, it has

yet to issue a ruling. Bitco General Insurance Corp v

Monroe Guaranty Insurance Co, 846 F App’x 248, 252

(5th Cir 2021): “Is the exception to the eight-corners rule

articulated in [Northfield Insurance] permissible under

Texas law?”. Consequently, Northland Insurance remains

binding here.

The application of this doctrine to the issues at hand

reveals the need for discrete supplementation. The policy

at issue without question applies to bodily injuries “for

which the insured is obligated to pay damages by reason of

the assumption of liability in a contract or agreement”—

but only if such liability is assumed through an insured

contract as defined in the CGL policy. Dkt 30-5 at 16

(insurance policy). Yet the operative underlying pleadings

don’t reference the MSA or policy at all, much less

illuminate whether the former is an insured contract or

whether Nabors is an additional insured under the policy.

See Dkt 22-1. Indeed, even though Jones was a Deepwell

employee when he was injured, he doesn’t acknowledge

that critical fact in his petition. See ibid; Dkt 20-1 at 20

(incident report). Nor does he even reference the state in

which he was allegedly injured. See Dkt 22-1.

This makes it (as phrased in Northfield Insurance)

“initially impossible to discern whether coverage is

potentially implicated” based on the eight-corners doctrine.

363 F3d at 531. Extrinsic evidence is thus permitted

because these issues—whether the MSA is an insured

contract, whether Nabors is an additional insured, and

whether the injuries Jones allegedly sustained are covered

by the policy—are questions that go “solely to a

fundamental issue of coverage” and don’t “overlap with the

merits of or engage the truth or falsity of any facts alleged

in the underlying case.” Ibid. Extrinsic evidence is also

necessary to meaningful evaluation of the parallel

arguments by Deepwell and Nabors regarding the duty to

defend despite Liberty Mutual’s contrary contention. See

Dkt 21 at 19; Dkt 30 at 23; Dkt 22 at 10–12.

Extrinsic evidence establishes that the MSA is an

insured contract under the CGL policy. The MSA provides

that Deepwell “shall defend, indemnify, and hold harmless

Nabors Group against all Claims arising from or related to

(1) bodily injury to or death of any person in the Contractor

Group,” with the latter term including Deepwell employees

like Jones. Dkt 23-1 at 6. This brings it within the

definition of insured contract set out above, being a

contract under which the insured assumes the tort liability

of another party to pay for bodily injury. Dkt 30-5 at 28

(insurance policy).

Extrinsic evidence also establishes that Nabors could

potentially be an additional insured under the CGL policy.

The MSA provides, “The Nabors Group shall be named as

additional insured in each of Contractor’s policies, except

Workers’ Compensation.” Dkt 23-1 at 5. And the policy

defines an additional insured as an organization that’s

held liable for a bodily injury that’s “caused, in whole or in

part” by the acts or omissions of the insured or those acting

on its behalf. Dkt 30-5 at 57. Jones’ severed fingers

inarguably constitute a bodily injury. Dkt 21-1 at 20

(incident report). Thus, for Nabors to be an additional

insured in this action, Deepwell (or Jones as its employee)

must be held liable to some extent in the underlying state

court action. It’s thus at present unclear whether Nabors is

an additional insured. Indeed, a Liberty Mutual employee

acknowledged this very point. See Dkt 23-7.

Summing up, if Texas law applies (which it does) and

Nabors qualifies as an additional insured (which it might),

then Liberty Mutual must defend Nabors according to

Deepwell’s policy and provide Nabors with up to $500,000

in contractual indemnity for any liability. Summary

judgment is thus appropriate to specify that Liberty

Mutual (on behalf of Deepwell) must defend Nabors in the

underlying action if Deepwell or Jones is assigned liability

thereby making Nabors an additional insured.

d. Conclusion as to the motion for partial

summary judgment by Deepwell

The motion by Deepwell for partial summary judgment

will be granted in part and denied in part.

It will be denied as to the requests to apply New Mexico

law and the New Mexico Oilfield Anti-Indemnity Act.

It will be granted as to the request for determination

that Liberty Mutual (on behalf of Deepwell) has a duty to

defend and indemnify Nabors if Nabors qualifies as an

additional insured under the CGL policy.

4. Motion for summary judgment by Liberty

Mutual

Two arguments raised by Liberty Mutual in its motion

for summary judgment are foreclosed by the disposition

above. One is contention that New Mexico law should

govern the claims in this action. Dkt 22 at 6–9. Instead, it

has been determined that Texas law applies. The other is

contention that Liberty Mutual has no duty to defend

Nabors even if Texas law applies because Jones doesn’t

allege in the underlying state court action that Deepwell

caused his injury. Dkt 22 at 10. Instead, it has been

determined that Liberty Mutual may have such a duty.

Two other arguments by Liberty Mutual concern

whether the indemnification claim is ripe for

determination, and whether such claim is subject to a

$500,000 limit. Id at 11.

a. Ripeness

Liberty Mutual argues that the claim by Nabors for

indemnification isn’t yet ripe and so should be dismissed.

Id at 11. Nabors agrees that its indemnification claim isn’t

ripe, but it seeks abatement rather than dismissal. Dkt 30

at 23–24.

Unlike the duty to defend, the duty to indemnify isn’t

constrained by the eight-corners doctrine or determinable

at the outset or in the midst of litigation. Instead, it’s “well

settled that the facts actually established in the underlying

suit control the duty to indemnify.” DR Horton-Texas Ltd v

Markel International Insurance Co, 300 SW3d 740, 744

(Tex 2009) (quotation marks omitted). This typically means

that “an insurer’s duty to indemnify generally cannot be

ascertained until the completion of litigation, when

liability is established, if at all.” Colony Insurance Co v

Peachtree Construction Ltd, 647 F3d 248, 253 (5th Cir

2011). But the Texas Supreme Court holds that “the duty

to indemnify is justiciable before the insured’s liability is

determined in the liability lawsuit when the insurer has no

duty to defend and the same reasons that negate the duty

to defend likewise negate any possibility the insurer will

ever have a duty to indemnify.” Farmers Texas County

Mutual Insurance Co v Griffin, 955 SW2d 81, 84 (Tex 1997)

(emphasis omitted).

It has already been determined that Liberty Mutual

may have a duty to defend Nabors. And Liberty Mutual

concedes that it may also have a duty to indemnify Nabors.

See Dkt 22 at 11. It’s therefore appropriate to abate this

action, pending the resolution of the underlying state court

action. See Lopez v Canal Insurance Co, 2015 WL 5097358,

*3–5 (WD Tex); Chartis Specialty Insurance Co v JSW Steel

(USA) Inc, 2015 WL 4378366, *3 (SD Tex).

The motion for summary judgment seeking dismissal

on ripeness grounds will be denied. The action will instead

be abated.

b. The safe-harbor provision of the Texas

Oilfield Anti-Indemnity Act

Liberty Mutual seeks summary judgment on its

counterclaim for declaratory judgment by arguing that the

Court should declare that the parties’ indemnity

agreement is unilateral and thus subject to the coverage

cap of the TOAIA. Dkt 22 at 11.

The TOAIA caps coverage under a unilateral

indemnity obligation at $500,000. Id at § 127.005(c).

Section 127.001(6) defines a unilateral indemnity

obligation as:

an indemnity obligation in an agreement

pertaining to a well for oil, gas, or water or

to a mine for a mineral in which one of the

parties as indemnitor agrees to indemnify

the other party as indemnitee with respect

to claims for personal injury or death to the

indemnitor’s employees or agents or to the

employees or agents of the indemnitor’s

contractors but in which the indemnitee

does not make a reciprocal indemnity to the

indemnitor.

Deepwell agreed to (and ultimately did) purchase

liability insurance to support its indemnity obligation to

Nabors. Dkt 23-1 at 4–5, 12 (MSA); Dkt 30-5 (insurance

policy). But Nabors didn’t have any indemnity obligation to

Deepwell. The MSA thus falls squarely within the

definition of unilateral indemnity obligation established by

the TOAIA—a point which Nabors concedes. Dkt 18 at ¶ 8.

The coverage under the obligation is therefore capped at

$500,000. See Tex Civil Practice & Remedies Code Ann

§ 127.005.

Summary judgment will be granted to Liberty Mutual

on its counterclaim for declaratory judgment.

c. Conclusion as to the motion for summary

judgment by Liberty Mutual

The motion by Liberty Mutual for summary judgment

will be granted in part and denied in part.

It will be granted as to its counterclaim for declaratory

judgment. As such, if Nabors is assigned any liability in the

underlying action and Deepwell is required to indemnify it,

then the amount of coverage for that obligation cannot

exceed $500,000.

It will be denied as to the requests to apply New Mexico

law and the New Mexico Oilfield Anti-Indemnity Act. It

will also be denied as to contention that Liberty Mutual has

no duty to defend Nabors. And it will be denied as to

argument that the lack of ripeness of the indemnification

claim means the action should be dismissed. The

indemnification claim will instead be abated.

5. Motion for partial summary judgment by

Nabors

Nabors brought its claim for declaratory judgment

under the Texas Declaratory Judgment Act. Dkt 1-2 at

¶ 17. But “the TDJA is a procedural, and not a substantive,

provision and therefore does not apply to actions in federal

court.” Vera v Bank of America, 569 Fed App’x 349, 352

(5th Cir 2014). Even so, district courts may upon removal

construe an action under the TDJA “as one brought under

the federal Declaratory Judgment Act.” Honey Holdings I

Ltd v Alfred L. Wolff Inc, 81 F Supp 3d 543 (SD Tex 2015);

see 28 USC § 2201, et seq. The declaratory judgment claims

by Nabors will be so construed.

Nabors raises five arguments in favor of partial

summary judgment on its claims, covering much the same

ground as above.

First, Nabors seeks a declaration that Texas law

governs the parties’ rights and obligations under the MSA.

Dkt 23 at 12–19. It argues under the Restatement (Second)

of Conflict of Laws and Chapter 271 of the Texas Business

and Commerce Code. Id at 12–19. Deepwell and Liberty

Mutual argue that Chapter 271 of the Texas Business and

Commerce Code is inapplicable and wasn’t invoked in a

timely manner. Dkt 31 at 5–9; Dkt 32 at 2–3. The details

of that dispute aren’t pertinent, as it has already been

determined that Texas law applies to this dispute pursuant

to the Restatement. The motion will be granted in that

respect only.

Second, Nabors insists that Deepwell owes it

contractual defense, indemnity, and attorney fees. Id

at 19–21. But it has already been determined that Liberty

Mutual may have a duty in those respects—with may being

the operative phrasing because it’s presently unclear

whether Liberty Mutual will have a duty to defend or

indemnify Nabors, as no liability has been assigned in the

underlying action. As such, it can’t yet be definitively

determined that Deepwell (or Liberty Mutual on its behalf)

owes Nabors contractual defense, indemnity, and attorney

fees. The motion will be denied in that respect.

Third, Nabors seeks a definitive declaration that

“Liberty must provide coverage of $500,000 in accordance

with TOAIA’s safe harbor provision.” Dkt 23 at 23. But it’s

presently impossible to calculate the exact amount of

coverage that Liberty Mutual must provide, even

supposing that it will be required to do so at all. The only

aspect established with certainty is that any such coverage

may not exceed $500,000. Because Nabors appears to ask

for a more definitive determination, the motion will be

denied in that respect.

Fourth, Nabors argues that the additional insurance

and breach-of-contract claims should be abated pending

the underlying state court action. Id at 23. It has already

been determined that the indemnification claim will be

abated because it isn’t ripe. The additional insurance and

breach-of-contract claims will also be abated pending

resolution of the underlying state court action, as the facts

and issues in that action are directly relevant to the claims

here. The motion will be granted in that respect, thus

abating the entire case.

Fifth, while the action remains in abatement, Nabors

“seeks a declaration it is owed the separate and

independent additional insurance coverage Deepwell was

required to procure.” Dkt 23 at 23. But it has already been

determined that Nabors could be an additional insured

under the policy—without any determination as to

coverage at this juncture because no liability has been

assigned to any party in the underlying action. The motion

will be denied in that respect.

Deepwell and Liberty Mutual object to certain

summary judgment evidence as to the above contained in

an affidavit submitted by Nabors. Dkt 31 at 2–3; Dkt 32 at

2–3. That evidence needn’t be specified because the

objections are moot. None of that evidence was necessary

to the foregoing conclusions.

6. Conclusion

The various motions for summary judgment or partial

summary judgment are all GRANTED IN PART and DENIED

IN PART.

The motion for partial summary judgment by

Defendant Deepwell Energy Services LLC is GRANTED as to

the request for determination that Liberty Mutual has a

duty to defend and indemnify Nabors if Nabors qualifies as

an additional insured under the policy. It is DENIED as to

the requests to apply New Mexico law and the New Mexico

Oilfield Anti-Indemnity Act. Dkt 21.

The motion for summary judgment by Defendant

Liberty Mutual Fire Insurance Company is GRANTED as to

its counterclaim for declaratory judgment regarding the

$500,000 coverage cap. It is DENIED as to its requests to

apply New Mexico law and the New Mexico Oilfield Anti-

Indemnity Act, as to argument that it has no duty to defend

Nabors, and as to argument to dismiss the indemnification

claim as unripe. Dkt 22.

The motion for partial summary judgment by Nabors

Drilling Technologies USA Inc and Nabors Industries Inc

is GRANTED as to the request for declaration that Texas law

governs the parties’ rights and obligations under the MSA

and the request to abate the action pending resolution of

the underlying liability determination. It is DENIED as to

the requests for determination that Deepwell definitively

owes it contractual defense, indemnity, and attorney fees,

that Liberty Mutual must provide coverage of exactly

$500,000, and that Deepwell (and thereby Liberty Mutual)

currently owes it additional insurance coverage. Dkt 23.

This action is ABATED until the resolution of Jones v

Nabors Drilling Technologies USA Inc, No 2018-87021, in

the 125th District Court, Harris County, Texas, at which

time Nabors must provide notice to all parties and this

Court.

SO ORDERED.

Signed on October 21, 2021, at Houston, Texas.

CL 2 Ealadye =

Hon. Charles Eskridge

United States District Judge

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