Groundbreaking Ruling Redefines the Scope of the Louisiana Oilfield Anti-Indemnity Act

The Phelps appellate team obtained a victory that could broaden the scope of the Louisiana Oilfield Anti-Indemnity Act (LOAIA) to cover agreements in the mining and mineral drilling sectors.

The U.S. Fifth Circuit Court of Appeals confronted a critical question of first impression under the LOAIA. Does the act's prohibition of certain indemnity provisions extend only to contracts that pertain to wells for oil, gas or water? Alternatively, do those prohibitions also apply to contracts that pertain to drilling for minerals?

Phelps represented QBE, the insurer of two local companies contracted to perform fire prevention and electrical work at a Louisiana salt mine. QBE sought a declaratory judgment that the LOAIA invalidated the indemnity and additional-insured provisions in purchase orders the mine owner issued to the contractors, arguing that the salt mine's "drill-and-blast" operations constituted "drilling for minerals," and thus fell under the act's purview. The district court ruled that the LOAIA only applied to agreements related to a "well," which the salt mine operations did not involve. The appellate court reversed this decision, agreeing with QBE’s interpretation and finding no universal "well" requirement in the act.

This decision opens the possibility for the LOAIA to apply more broadly to contracts beyond those strictly associated with wells, potentially impacting the enforceability of certain indemnity and insurance provisions in the mining and mineral drilling sectors in Louisiana. The Phelps appellate team was led by Partner Jeremy Grabill.