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.
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