Oklahoma Supreme Court calls into question indemnity provisions in oilfield service contracts

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On May 21, 2024, the Oklahoma Supreme Court issued an opinion in Knox v. Oklahoma Gas and Electric Co., 2024 OK 37, holding that an employer cannot contractually create or assume liability where liability is based on the same physical injury used by the employee to recover a worker’s compensation award.

In Knox, an employee died at a construction site while working for his employer, BJ Oilfield Construction. The decedent’s spouse brought claims against another contractor on site who, relying on its status as third-party beneficiary in BJ Oilfield’s contract, tendered demand for defense and indemnity against BJ Oilfield. The relevant indemnity provision provided that BJ Oilfield agreed to: “defend, indemnify, and hold harmless . . . from and against any claim, cost, expense or liability . . . attributable, to bodily injury, sickness, disease, or death, . . . caused by, arising out of, resulting from, or occurring in connection with the performance of the work by” BJ Oilfield. The Supreme Court held that this indemnity provision violated the exclusive remedy provisions of the Oklahoma Workers Compensation Act and was, therefore, unenforceable as to claims for negligence. Indemnity for intentional tort claims remain viable.

We recommend that companies review the current indemnity structure in active service contracts to determine whether amendments are necessary.

If you have any questions or need a review of your service contracts, please contact one of the Energy and Natural Resources attorneys at McAfee & Taft.