What is a hold harmless clause in an oilfield contract?

IRMI describes hold harmless agreements by how much liability they shift. The three common forms:

Oilfield MSAs often go past these categories with "knock-for-knock" language: each party releases, defends and indemnifies the other's group for injuries to its own people and damage to its own property, "regardless of fault." That is broad by design. It replaces fault-finding with a simple rule about whose people and whose equipment.

The clause is commonly split into pieces:

• Personnel. Each side covers injury or death of its own group members.
• Property and equipment. Each side covers its own equipment, often with special rules for downhole equipment and the well itself.
• Third parties. Claims by people outside both groups are often allocated by fault.
• Pollution. Often allocated by where it starts, such as above-surface from your equipment versus below-surface from the reservoir.

See knock-for-knock indemnity for the full structure, and what Company Group means for who sits on each side.

Texas courts require clear drafting before a party can shift the consequences of its own negligence to someone else. As a Houston appeals court summarized the Texas Supreme Court's rules:

• Express negligence. Under Ethyl Corp. v. Daniel Construction Co. (Tex. 1987), "a party demanding indemnity from the consequences of its own negligence must express that intent in specific terms," and that intent must be stated "within the four corners of the contract."
• Conspicuousness. In Dresser Industries, Inc. v. Page Petroleum, Inc. (Tex. 1993), the court applied the "fair notice" requirements of express negligence and conspicuousness to releases as well as indemnity agreements, when they relieve a party in advance of liability for its own negligence.

That is why MSA indemnity sections are often in bold or capital letters and say outright that they apply even when the indemnitee is negligent. Whether a particular clause meets these rules is a question for your attorney.

For well and mine service agreements, Texas adds a statute on top of the case law. Civil Practice and Remedies Code Section 127.003 voids indemnity for the other party's "sole or concurrent negligence" in these agreements, unless an exception applies. Section 127.005 is the key exception: the chapter does not apply if the parties agree in writing that the indemnity will be supported by liability insurance furnished by the indemnitor. Mutual obligations are limited to the coverage each party agreed to obtain; insurance required for a one-way obligation is capped at $500,000. See does Chapter 127 apply to my work.

The insurance that backs your side of the clause is your GL's contractual liability coverage. On the standard ISO form, liability you assume in an "insured contract" is covered, which includes the part of a business contract where you assume another party's tort liability for bodily injury or property damage to a third person.