124 Ken Petroleum Corporation v. Questor Drilling Corporation

Richard F. Brown

 
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
 
Ken Petroleum Corporation v. Questor Drilling Corporation, 24 S.W.3d 344 (Tex. 2000), construes the Texas Oilfield Anti-Indemnity Act (“Act”). The ACT has specific application to drilling contracts, and it was intended to make sure that the risk could not be forced on an uninsurable party. The Act requires parties to mutual indemnity agreements to agree in writing to procure insurance or self-insurance to support the mutual indemnity obligations. The agreement does not have to specify the amount of insurance to be provided, and the agreement is not void if the parties obtain differing amounts of insurance. The indemnities are void as to both parties for amounts greater than the lesser amount of insurance provided.
 
The court based its opinion upon an analysis of legislative history and determined that the legislature’s intent was to prevent overreaching by one party against another. There was no intent that insurance policies must match, nor did the legislature intend that the parties must adjust their insurance policy with every drilling contract. The statute requires a writing to memorialize only that “each party as indemnitor has agreed to provide” insurance or self-insurance to support the indemnity obligations.