Knock-for-Knock Indemnity in Oilfield MSAs, Explained

The short version

Knock-for-knock means each side takes responsibility for injuries to its own people and damage to its own property, regardless of who caused the accident.
Operators use it because it cuts out fault fights between companies on the same location and lets each side insure its own people and equipment.
The usual carve-outs are third-party claims, pollution (often split by whether it starts above or below the surface), reservoir and well damage, well control, and sometimes gross negligence or willful misconduct.
In Texas, a knock-for-knock clause that covers the other side’s negligence generally has to be backed by insurance agreed in writing, so your GL contractual liability, umbrella and waivers are part of the deal.

Knock-for-knock in one paragraph

In a knock-for-knock clause, the operator and the contractor each agree to cover their own. If one of your hands gets hurt on location, you defend and indemnify the operator, even if the operator's company man caused it. If the operator's employee gets hurt, the operator covers you, even if your crew caused it. Same with equipment: your pump truck, your problem. Their wellhead, their problem.

The phrase you will see is "regardless of fault." A real MSA quoted in a Fifth Circuit opinion required the parties to indemnify each other from claims "regardless of fault, involving: (a) damage to or loss of any equipment or property of any member of the contractor group, or (b) personal injury, illness, or death of any member of [the] contractor group" (Cimarex v. CP Well Testing). That is knock-for-knock.

Texas law has a name for it. Chapter 127 calls it a "mutual indemnity obligation": the parties "agree to indemnify each other and each other's contractors and their employees" against injury, death and property damage "of the respective employees, contractors or their employees, and invitees of each party" (§127.001(3)).

Indemnity language should be reviewed by your attorney. Our job is to make sure your insurance actually pays for what the clause says you owe.

Knock-for-knock allocation

Each side takes responsibility for its own people and its own property, no matter whose negligence caused the loss. The contractor's side of that promise is only as good as the insurance behind it, which is why the MSA also asks for additional insured status and waivers of subrogation.

Why operators use it

On a busy location you might have the operator, a well servicing rig, a hot oiler, a water hauler, a roustabout crew and an inspector, all working for the same operator under separate MSAs. If every injury led to a fight over which company was at fault, every claim would turn into several lawsuits.

Knock-for-knock replaces that with a simple rule: follow the paycheck. Whoever employs the injured worker, or owns the damaged equipment, takes it. That gives each company a predictable exposure it can insure:

Your people are covered by your workers comp and employer's liability, and claims against the operator by your people come back to you through the indemnity, paid by your GL's contractual liability coverage.
Your equipment is covered by your equipment policy, with a waiver of subrogation so your insurer does not chase the operator.

When every contractor on location signs the same structure with the operator, the pieces fit together. When one contractor's MSA is different, or its insurance does not fund the promise, the gap shows up on the worst day.

Who is in "Company Group" and "Contractor Group"

The definitions decide who is on your side of the line. Read them as carefully as the indemnity itself.

Contractor Group usually means you, your parent and affiliates, your subcontractors of any tier, and all of their officers, directors, employees and invitees.

Company Group usually means the operator, its affiliates, its co-owners and joint venturers, its other contractors (sometimes), and their employees and invitees.

Two definitions drive a lot of risk:

"Subcontractors of any tier" in Contractor Group means you are indemnifying the operator for injuries to your subs' employees. If your sub has not given you the same indemnity, backed by insurance, you are carrying their people. That is a flow-down problem.
"Other contractors" in Company Group means the operator covers you for injuries to other contractors' people, typically because the operator has its own knock-for-knock with them. Some MSAs leave other contractors out, which pushes those claims back to ordinary fault.

The usual carve-outs

Knock-for-knock is rarely absolute. Most MSAs carve out categories where the "your people, your stuff" rule does not apply. The table shows the common ones and how they are typically allocated. Your MSA may differ, so read yours.

Common knock-for-knock carve-outs and typical allocation
Carve-out	Typical allocation in operator MSAs	Insurance that responds
Third-party claims (people and property outside both groups)	Often by comparative fault, sometimes each party indemnifies to the extent of its negligence	Your GL and auto liability, umbrella
Pollution originating above the surface from contractor’s equipment	Commonly contractor	GL pollution buyback or contractors pollution liability; auto pollution if from a vehicle
Pollution originating below the surface or from the well or reservoir	Commonly operator	Operator’s coverage; confirm you are not assuming it
Reservoir, underground damage, loss of the hole, well bore	Commonly operator, sometimes with exceptions for contractor downhole equipment	Operator’s coverage; your GL underground resources terms matter if any is allocated to you
Wild well control and blowout costs	Commonly operator	Operator’s control of well coverage
Contractor’s downhole equipment lost in the hole	Varies; some MSAs have operator pay depreciated value if not caused by contractor negligence	Your equipment policy, subject to its downhole terms
Gross negligence or willful misconduct	Some MSAs exclude these from the indemnity; others include them expressly	Depends on policy terms and the law; ask your attorney about enforceability

Which policy answers a pollution loss

General patterns, not a promise of coverage: the policy wording, reporting deadlines and endorsements decide every claim. The gray areas (loading and unloading especially) are where contractors get caught between their GL and auto policies, so get the answer in writing before the work starts.

How Chapter 127 interacts with knock-for-knock

Because knock-for-knock has you indemnifying the operator even when the operator was negligent, it runs straight into the Texas Oilfield Anti-Indemnity Act. Section 127.003 voids indemnity against the indemnitee's own "sole or concurrent negligence" in an oilfield agreement unless an exception applies.

The exception that saves knock-for-knock is §127.005: the act does not apply "if the parties agree in writing that the indemnity obligation will be supported by liability insurance coverage to be furnished by the indemnitor." For mutual indemnity, the obligation is then "limited to the extent of the coverage and dollar limits of insurance or qualified self-insurance each party as indemnitor has agreed to obtain for the benefit of the other party as indemnitee."

Three consequences:

The insurance requirements are part of the indemnity. Without a written agreement to support it with insurance, the knock-for-knock may not be enforceable to the extent it covers the other side's negligence.
The amounts matter. Texas and Fifth Circuit decisions have measured the indemnity by the insurance each side agreed to carry for the other. In one, a contractor's indemnity was capped at the MSA's $3 million minimum because its excess policy limited coverage for contractual indemnitees to the contract minimum (Cimarex).
Several carve-outs sit outside the act. Section 127.004 says the chapter does not apply to property injury from pollution, reservoir or underground damage, radioactivity, or wild well control. Indemnities in those areas are not limited by Chapter 127.

Chapter 127: how insurance caps indemnity

Illustrative amounts. Under Tex. Civ. Prac. & Rem. Code §127.005(b), a mutual indemnity is enforceable to the extent of the insurance each side agreed to carry; when the amounts differ, Texas courts have limited both sides to the lower amount (Ken Petroleum Corp. v. Questor Drilling Corp., Tex. 2000). A one-way indemnity can require no more than $500,000 of insurance (§127.005(c)).

The insurance that backs knock-for-knock

A knock-for-knock promise is only as good as the policies behind it. Here is how each piece lines up.

General liability: contractual liability for an "insured contract"

When your employee sues the operator and the operator tenders to you under the MSA, your GL pays because the MSA is an "insured contract." On standard GL forms, the exclusions for contractual liability and for injury to your own employees each carry an exception for liability you assume under an insured contract. That exception is what makes your indemnity insurable. If your GL has a contractual liability limitation like ISO's CG 21 39, that exception largely disappears and your indemnity is uninsured.

Umbrella or excess

Serious injury claims can exceed a $1 million GL limit, which is why operators set umbrella minimums (see what limits operators require). Your umbrella has to follow form on contractual liability. Read what it says about parties you are obligated by contract to insure or indemnify; some excess policies limit those parties to the minimum limits your contract requires. See oilfield umbrella insurance.

Workers comp and employer's liability

Your comp pays your injured employee's benefits. The Texas waiver of subrogation endorsement (WC 42 03 04) stops your comp carrier from suing the operator to recover what it paid. The Texas Supreme Court has held that a carrier that signs this waiver cannot recover indirectly from the worker's settlement with the waived party either (Wausau v. Wedel, 2018). Without the waiver, your carrier could pursue the operator, and the operator would tender that claim right back to you under the indemnity.

Equipment and property

Your inland marine or equipment policy covers your own iron. Add a waiver of subrogation in favor of Company Group so a property claim does not boomerang. See oilfield equipment insurance.

Additional insured status

Additional insured status gives the operator direct rights under your policy, separate from your indemnity. Texas courts have treated an additional insured requirement that does not support an indemnity as a separate obligation (Getty Oil, 1992). Make sure the AI endorsement is scoped the way the MSA intends.

Knock-for-knock promise and the policy that funds it
What you promised	Policy that pays	Endorsement or wording to check
Indemnify operator for your employee’s injury claim	GL (contractual liability), then umbrella	Insured contract definition intact; no CG 21 39; umbrella follows form
Your employee’s comp benefits	Workers comp	Texas waiver of subrogation, WC 42 03 04
Employer’s liability suits by your employee against you	Employer’s liability (Part Two of the WC policy), then umbrella	EL limits meet MSA; umbrella schedules EL as underlying
Your equipment damaged on location	Equipment / inland marine	Waiver of subrogation in favor of Company Group
Operator protected as an insured	GL, auto, umbrella	AI endorsements (CG 20 10 / blanket, CA 20 48), primary and non-contributory (CG 20 01)
Pollution from your equipment above surface	GL pollution buyback or contractors pollution, auto pollution	Coverage trigger, reporting window, limits

Gross negligence and willful misconduct

Many MSAs say the indemnity does not apply to a party's gross negligence or willful misconduct. Others say it applies "including gross negligence." Some are silent.

From the insurance side, the questions are:

What did you promise? If your MSA's indemnity expressly covers the operator's gross negligence, your GL contractual liability may be asked to respond to something unusual. Your attorney should tell you whether that promise is enforceable.
What does your policy say? Policy terms and Texas law on insurability of certain damages interact. We review the policy wording; your attorney addresses enforceability.
Is it consistent with your subs? If you take on gross negligence from the operator but your subcontract excludes it, the gap is yours.

For a short answer, see does knock-for-knock cover gross negligence.

Separately, Texas courts require indemnities covering a party's own negligence to meet fair notice requirements: the intent must be stated in specific terms (Ethyl Corp., 1987), and the provision must be conspicuous (Dresser Industries, 1993). That is why the clauses are in capital letters.

Where knock-for-knock breaks down for small contractors

The structure is fair on paper. In practice, small contractors get hurt in a few predictable ways.

The insurance does not match the promise. A GL with restricted contractual liability, an umbrella that does not follow form, or no Texas comp waiver. The MSA says you are covered; the policies say otherwise.

Subcontractors are on your side of the line, uninsured. You signed "subcontractors of any tier" into Contractor Group, then hired a sub with no written subcontract. Their injured hand becomes your indemnity claim.

Nonsubscriber comp. Texas lets employers opt out of comp (Labor Code §406.002), but a nonsubscriber loses common-law defenses like contributory negligence and assumption of risk in employee injury suits (§406.033). Most operator MSAs require comp, and knock-for-knock assumes it. See do oilfield contractors need workers comp in Texas.

Mismatched limits. You agreed to carry an amount for the operator's benefit and carry less, or the umbrella's wording caps what it will pay for indemnitees.

Pollution assumed without coverage. The MSA puts above-surface pollution from your equipment on you, and your GL has a total pollution exclusion with no buyback. See oilfield pollution liability, and if you run trucks, oilfield auto and MCS-90.

Every one of these is fixable before a claim. None of them is fixable after.

The 15-minute self-check

Find the indemnity section, the definitions of Company Group and Contractor Group, and the insurance exhibit. For each thing you promised to cover, write down which policy pays and which endorsement proves it. Any blank is a gap.

Common questions

Does knock-for-knock mean I pay even if the operator caused the accident?

For injuries to your own people and damage to your own property, generally yes. That is the point of "regardless of fault." In exchange, the operator covers its own people and property even if your crew caused the accident. In Texas, that kind of indemnity generally has to be backed by insurance the parties agreed to in writing.

What insurance do I need to back a knock-for-knock clause?

General liability that treats the MSA as an insured contract, an umbrella that follows form, workers comp with employer’s liability and a Texas waiver of subrogation, equipment coverage with a waiver of subrogation, and additional insured and primary and non-contributory endorsements as the MSA requires.

Does knock-for-knock cover third parties?

Usually not. Knock-for-knock covers the two groups’ own people and property. Claims by outsiders, like a passing motorist or a neighboring landowner, are typically allocated by fault or by a separate clause. Your GL, auto and umbrella respond to those.

Who is responsible for pollution under knock-for-knock?

Commonly the contractor takes pollution that starts above the surface from its own equipment, and the operator takes pollution from the well or reservoir below the surface. Your MSA controls. Note that Chapter 127 does not apply to property injury from pollution, so these indemnities are not limited by the act.

Do my subcontractors have to sign knock-for-knock too?

If your MSA puts your subcontractors in Contractor Group, you are covering their people to the operator. You should get the same indemnity, insurance, additional insured status and waivers from them in a written subcontract.

Does knock-for-knock cover gross negligence?

It depends on the clause. Some MSAs carve out gross negligence and willful misconduct, some include them, some are silent. Whether a particular clause is enforceable is a question for your attorney. We check whether your insurance responds to what you promised.

Is this legal advice?

No. Indemnity language should be reviewed by your attorney. We are an insurance agency, and our role is making sure your policies fund the indemnity and insurance obligations in your MSA.

Sources

Tex. Civ. Prac. & Rem. Code ch. 127 (Indemnity Provisions in Certain Mineral Agreements). Statutory definition of mutual indemnity obligation, the negligence rule, the insurance exception and the §127.004 exclusions for pollution, reservoir damage and wild wells.
Cimarex Energy Co. v. CP Well Testing, L.L.C., No. 20-50892 (5th Cir. Feb. 14, 2022). Example knock-for-knock wording ("regardless of fault") and the effect of excess policy wording on indemnity limits.
Wausau Underwriters Ins. Co. v. Wedel, No. 17-0462 (Tex. 2018). Texas workers comp waiver of subrogation endorsement WC 42 03 04 and its effect.
Getty Oil Co. v. Insurance Co. of North America, 845 S.W.2d 794 (Tex. 1992). Additional insured provision not supporting an indemnity treated as a separate obligation.
Ethyl Corp. v. Daniel Construction Co., 725 S.W.2d 705 (Tex. 1987). Express negligence doctrine.
Dresser Industries, Inc. v. Page Petroleum, Inc., 853 S.W.2d 505 (Tex. 1993). Conspicuousness and express negligence (fair notice) requirements.
Tex. Labor Code ch. 406 (Workers’ Compensation Insurance Coverage). Workers comp elective (§406.002); nonsubscriber loss of common-law defenses (§406.033).
ISO form CG 21 39, Contractual Liability Limitation (form text). Contractual liability limitation and the insured contract definition.
IRMI glossary: Primary and noncontributory. Primary and noncontributory form.

This page explains insurance, not law. Have your attorney review indemnity and contract language; our job is making the insurance match it.

Keep reading

Contract requirements

What does the Texas Oilfield Anti-Indemnity Act mean for my MSA and my insurance?