Short answer
If you carry Texas workers comp, your comp policy pays the employee’s benefits, and comp is generally the employee’s exclusive remedy against you. But the employee can still sue third parties, including the operator, and your insurer can seek to recover what it paid from them.
- That is where the MSA comes in. In a typical knock-for-knock MSA, you agreed to defend and indemnify the operator for injuries to your own people, and you agreed to back that promise with insurance. The suit against the operator can come back to you and your policies.
- The first hours matter: get the employee care, report to OSHA if the injury is serious enough, notify your insurer, and tell the operator under the MSA’s notice terms.
Step one: the claim against you
If you have workers comp, Texas Labor Code Section 408.001(a) makes recovery of workers comp benefits the exclusive remedy of a covered employee against the employer and its agents and employees for a work-related injury. There is a narrow exception: the surviving spouse or heirs of a deceased employee may recover exemplary damages when the death was caused by the employer's intentional act or omission or gross negligence.
If you do not have workers comp, you are a nonsubscriber. Under Labor Code Section 406.033, in a suit by an injured employee you lose the defenses that the employee was contributorily negligent, assumed the risk, or was hurt by a fellow employee's negligence. Most oilfield MSAs require comp for this reason. See what a Texas nonsubscriber is.
Your commercial auto and general liability policies are not built for this claim. The ISO auto form excludes bodily injury to your own employees, for example, and leaves it to workers comp and employers liability. See what employers liability coverage is.
Step two: the suit against the operator
Comp does not stop the employee from suing someone else. Labor Code Section 417.001 lets an injured employee seek damages from a third party who is liable for a compensable injury while also claiming comp benefits. If benefits are paid, the comp insurer is subrogated to the employee's rights and can enforce the third party's liability to recover what it paid.
On a lease, the operator and other contractors on location are third parties. So a single injury can produce:
- a comp claim under your policy
- a lawsuit by your employee against the operator or another contractor
- a subrogation claim by your comp insurer against those same parties
The MSA is written to manage the second and third items. A waiver of subrogation in the operator's favor stops your comp insurer from pursuing the operator. See the Texas workers comp waiver of subrogation.
Knock-for-knock allocation
Step three: the MSA decides who pays the operator’s defense
Most Texas MSAs use a knock-for-knock structure: each party is responsible for injuries to its own employees, regardless of fault. Under that structure, the operator will tender your employee's lawsuit to you and ask you to defend and indemnify it.
Whether that promise is enforceable is shaped by the Texas Oilfield Anti-Indemnity Act. Civil Practice and Remedies Code Section 127.003 voids indemnity for the other party's own negligence in agreements pertaining to a well, unless an exception applies. The main exception, Section 127.005, applies when the parties agree in writing that the indemnity will be supported by liability insurance. For a mutual indemnity, the obligation is limited to the coverage each party agreed to obtain. For a one-way indemnity, the insurance required may not exceed $500,000.
This is a legal question, and your attorney should review the contract. Our part is making sure the insurance does what the contract promises: contractual liability coverage for the indemnity, additional insured status for the operator, and employers liability limits and an umbrella sized to match. See Chapter 127 and knock-for-knock indemnity.
The first 24 hours: deadlines and notices
Several clocks start at once.
| Who | What | Deadline and source |
|---|---|---|
| You, to OSHA | Work-related fatality | Within 8 hours (29 CFR 1904.39) |
| You, to OSHA | In-patient hospitalization, amputation or loss of an eye | Within 24 hours (29 CFR 1904.39) |
| Employee, to you | Notice of injury | Not later than the 30th day after the injury (Tex. Labor Code 409.001) |
| You, to your comp insurer | Report of injury when the employee misses more than one day of work | Not later than the 8th day after the absence (Tex. Labor Code 409.005) |
| You, to the operator | Incident notice | As the MSA and the operator’s site rules require |
| You, to your liability insurers | Notice of an occurrence that may lead to a claim, including a tender from the operator | As your policies require; do it early |
Do not sit on the operator’s tender letter
When the operator sends a demand for defense and indemnity, send it to your agent the same day. Late notice to your liability insurers can create problems you do not need.
Common questions
Can my injured employee sue me if I carry workers comp?
Generally no. Texas Labor Code 408.001 makes comp benefits the exclusive remedy against a covered employer, with a narrow exception for exemplary damages in death cases caused by intentional acts or gross negligence.
Why would the operator’s lawsuit end up with my insurer?
Because in a knock-for-knock MSA you agreed to defend and indemnify the operator for injuries to your employees, usually backed by insurance. Your liability policies may respond through contractual liability coverage and additional insured endorsements, depending on their wording.
Does the operator’s insurance pay anything?
That depends on the MSA, the endorsements and the facts. Operators usually require your policies to be primary and non-contributory for claims within your indemnity.
What if the operator was clearly at fault?
Knock-for-knock is designed to apply regardless of fault, subject to Chapter 127 and Texas case law. Whether it reaches gross negligence is a separate question for your attorney.
Sources
- Texas Labor Code, Chapter 408. Section 408.001: workers comp as exclusive remedy; exemplary damages exception.
- Texas Labor Code, Chapter 417. Section 417.001: third-party suits and insurer subrogation.
- Texas Labor Code, Chapter 409. Section 409.001 (employee notice within 30 days) and 409.005 (employer report to carrier by the 8th day).
- Texas Labor Code, Chapter 406. Section 406.033: common-law defenses lost by nonsubscribers.
- Texas Civil Practice and Remedies Code, Chapter 127. Sections 127.003 (void indemnity), 127.005 (insurance exception and $500,000 unilateral cap).
- 29 CFR 1904.39, Reporting fatalities, hospitalizations, amputations and losses of an eye (Cornell LII). 8-hour and 24-hour OSHA reporting deadlines.
- ISO CA 00 01 10 13, Business Auto Coverage Form (copy hosted by Touchpoint Markets). Employee indemnification and employer’s liability exclusion.
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 knock-for-knock mean in my MSA, and what insurance does it take?
Contract requirements
What does the Texas Oilfield Anti-Indemnity Act mean for my MSA and my insurance?
Questions
What is employers liability coverage on a workers comp policy?
Questions
What is the Texas workers comp waiver of subrogation (WC 42 03 04)?
Questions
Do oilfield contractors need workers comp in Texas?