Ken Petroleum Corp. v. Questor Drilling Corp.
24 S.W.3d 344 | Texas Supreme Court | 2000
What This Case Means for Subcontractors
A Texas court ruled that mutual indemnity agreements in oilfield contracts are enforceable even when the parties agree to carry different amounts of insurance. The court rejected the argument that both parties must carry identical insurance coverage amounts. Instead, the indemnity obligation is limited to whichever insurance amount is lower. This decision allows drilling contractors and operators to negotiate indemnity deals with flexibility on insurance amounts, as long as they put their agreement in writing.
Key Takeaways
- •Get mutual indemnity agreements in writing and specify what insurance each party will carry—different amounts are allowed, but the indemnity obligation caps at the lower amount
- •Don't assume identical insurance requirements are mandatory; you can negotiate lower coverage amounts if both parties agree in writing
- •Make sure your written agreement clearly states the insurance amounts each party will provide to avoid disputes about enforceability later
Mutual indemnity obligations are limited to the lower amount of insurance.
Frequently Asked Question
Can we have a mutual indemnity agreement if we carry different amounts of insurance?
Yes. Texas law allows mutual indemnity agreements even when parties carry different insurance amounts, as long as you agree in writing. Your indemnity obligation will be limited to whichever insurance amount is lower. Make sure the written agreement clearly states what each party will carry.
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