In the Oil Patch: Case Law, Trends, Issues

Injuries in the oil & gas Industry are common throughout Texas. In terms of potential risks and accidents, it is one of the most hazardous industries in the world. With such dangerous operations taking place, most injuries are either fatal or leaves workers permanently handicapped, and unable to return to the workforce. From 2013 to 2017, 489 oil and gas extraction workers were killed on the job. Thousands more were left disabled with debilitating injuries.

As with most things in Texas, everything fluctuates with the volatile oil & gas prices. When the market is up, the oil and gas industry is swamped with unsafe companies looking to make a quick buck, and when the market is down, the industry cuts corners to stay afloat. The higher the amount per barrel, the more safety regulations are ignored in order to get the product from the ground the fastest.

These cases are typically complex, expensive, and lengthy. Our firm has been successful enough to not only try these cases but to successfully work many of these cases throughout Texas, including cases with injuries such as wrongful death, life-changing burns, and career-ending damages. Here are a few tricks that we have learned along the way.

Oil & Gas 101
Oil & gas cases are their own animal. The industry uses unique terminology for not only for equipment, but for processes, procedures, and the flow of operations in the oilpatch. Oil & gas cases typically involve multiple contractors, operators, and various contracts.

A. Terminology

• Surface Owner: The owner of the most visible aspects on a property. Surface rights include physical structures, trees, and plants. Many oil and natural gas leases today contain provisions expressly providing for compensation or other benefits to the owner surface estate. Due to Ch. 95, it is not advisable to sue this entity outside of extenuating circumstances that would show overt control.

• Mineral Owner: These are the minerals, including oil & gas, under the surface. Texas Courts consider this to be the dominate estate. The owner of the minerals typically has an implied easement to use the surface in a manner that is reasonably necessary to develop the minerals. Again, due to Ch. 95, it is not advisable to sue this entity outside of extenuating circumstances that show overt control.

• Leaseholder: This refers to the lease the oil company or operator will enter into with the mineral rights owner.

• Working Interest: This means the interest in an oil and gas lease that gives the owner of the interest the right to drill and produce oil and gas on the leased acreage. It requires the owner to pay a share of the costs of drilling and production operations.

• Operator: The company that serves as the overall manager and decision-maker of a drilling project. Generally, but not always, the operator will have the largest financial stake in the project. At the successful completion of logging the target zones, or the goal depth for the well, the decision to complete the drilling or plug and abandon generally has partner input and potential override clauses, depending on the contract. As far as the drilling contractor and service companies are concerned, the designated operator is paying for the entire operation, and the operator is responsible for recouping some of that expense from the partners, and typically, despite their assurances, oversees everything at the wellsite.

• Company Man: The representative of the oil company or operator on a drilling location. For land operations, the company man is responsible for operational issues on the location, including the safety and efficiency of the project. Even administrative managers are expected to respond to the direction of the company man when they are on the rig site. All workers on the wellsite will say that the company man is the single person in charge. Nowadays, operators evoke multiple contracts to add extra layers of people, including the company man, between themselves and the workers onsite. Thus, the company man typically works for his own separate entity apart from the operator, with its own insurance policy.

• Drilling Contractors: Drilling contractor refers to those individuals or group of individuals who own a drilling rig. Drilling contractors contract their services mainly for drilling wells. Drilling contractors also provide equipment, people and their expertise to drill wells, which can be either offshore or onshore. Drilling contractors are also persons who make holes for the purpose of finding oil. The equipment called a drilling rig helps in finding the oil. Drilling rigs come in all shapes and sizes and work both in land and offshore.

• Subs or Subcontractor: The individual, partnership, firm, or corporation that is hired to do a specific job or service, such as a production operator, drilling or well servicing contractor or to provide contract employees to an owner/operator; a contractor is also the individual, partnership, firm, or corporation retained by the owner or operator to perform other work or provide supplies or equipment. The term contractor also includes subcontractors. Subs will typically have a particular specialty within the industry that can offer some sort of service to the operators. Operators will have numerous subs onsite to protect the operators from liability, and the more subs onsite, typically means the more diluted the safety standards.

• Completions Operations: A generic term used to describe the assembly of downhole tubulars (i.e.: oilfield pipe) and equipment required to enable safe and efficient production from an oil or gas well. The point at which the completion process begins may depend on the type and design of well. However, there are many options applied or actions performed during the construction phase of a well that have significant impact on the productivity of the well.

• Frac Valve: A high-pressure isolation valve fitted to the top of the wellhead on a well that is about to be hydraulically fractured. The frac valve can be closed to isolate the treating equipment from the wellbore.

• Workover Contractor: The process of performing major maintenance or remedial treatments on an oil or gas well. In many cases, workover implies the removal and replacement of the production tubing string after the well has been killed and a workover rig has been placed on location. Through-tubing workover operations, using coiled tubing, snubbing or slickline equipment, are routinely conducted to complete treatments or well service activities that avoid a full workover where the tubing is removed. This operation saves considerable time and expense. Operators typically contract this work out to smaller companies.

B. Ch. 95

Ch. 95 will always serve as a defense in an oil and gas case for the operator, as well as other defendants. Due to the constant litigation in the oil patch, every contactor or sub in the field is under contract and designated as an “independent contractor”. A defendant, who is typically the entity with most of the insurance coverage, will invoke Ch. 95 as a defense to liability.

Ch. 95 provides that a property owner is not liable for personal injury, death, or property damage to a contractor, subcontractor, or an employee of a contractor or subcontractor who constructs, repairs, renovates, or modifies an improvement to real property, including personal injury, death, or property damage arising from the failure to provide a safe workplace unless:

(1) the property owner exercises or retains some control over the manner in which the work is performed, other than the right to order the work to start or stop or to inspect progress or receive reports; and
(2) the property owner had actual knowledge of the danger or condition resulting in the personal injury, death, or property damage and failed to adequately warn.

Traditionally, this defense only dealt with construction projects. However, Ineos USA, LLC v. Elmgren, 505 S.W.3d 555 (Tex. 2016), expanded this defense to include oil and gas operations. Since this case came out, every single operator has alleged this defense.

In Ineos USA, LLC v. Elmgren, the plaintiff was an independent contractor who provided maintenance services at a petrochemical plant. 505 S.W.3d 555, 559 (Tex. 2016). The plaintiff was injured while replacing a valve on a furnace heater when a burst of gas exploded from one of the pipes, causing burns to his body. Id. One of the issues before the Texas Supreme Court was whether each furnace in the plant was a separate “improvement” even though all of the furnaces were connected. Id. at 567. This was a crucial determination because the explosion originated at a different furnace than the one the Plaintiff was working on. Id. Although the court did state that Chapter 95 only applies when the injury results from a condition or use of the same improvement on which the contractor is working when the injury occurs (citing Hernandez), the court held that the term “improvement” is broadly defined to include “all additions to the freehold except for trade fixtures that can be removed without injury to the property.” See Id. at 567-68. Based on this broad definition, the court stated that “[t]he valves and furnaces, though perhaps ‘separate’ in a most technical sense, were all part of a single processing system within a single plant on Ineos’ property,” and the entire system was a single “improvement” under Chapter 95. Id. at 568.

The Texas Supreme Court’s expansion of this defense means that a Defendant will attempt to apply this to every oil and gas case. To get around the Chapter 95 defense and before taking any depositions, a game plan needs to be in place on how to address the control issue.

Animations: A Necessity for Any Oil & Gas Case

A. Every Oil & Gas Case Needs an Animation

Most of the incidents take place during some operation or failure of equipment. Juries’ eyes inevitably gloss over when terms such as “heater treater”, “poly flow lines”, “open top tank” and other types of equipment jargon. Oil and gas terminology is complicated. Our experience is that such terms are most helpful when laid out in an animation for the jury not only to visualize but understand what these terms mean.

Not only will an animation provide an opportunity to show the jury your entire theory of the case, but the animation can serve as an opportunity to show all the key equipment, including how it worked on the date of the incident, and how it SHOULD have worked. These are important components in any case, but vastly important for oil and gas cases.

B. Case Law Regarding Admittance at Trial

Once the animation is completed, produce it to the other side. Just make sure your expert agrees
with the format and can speak to its accuracy through either affidavit or deposition. The sooner the other side gets the animation, the better. The core objective to remember is that the animation serves only as a demonstrative and is not direct evidence. Much like a chart, or graph or a picture, it only serves to help the jury to better understand facts of the case.

Evidentiary rulings are committed to the trial court’s sound discretion. Owens-Corning Fiberglass Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998); Enbridge Pipelines (E. Tex.) L.P. v. Avinger Timber, L.L.C., 386 S.W.3d 2256, 262 (Tex. 2012). Admission of demonstrative evidence rests with the sound discretion of the trial court, and the court’s discretion in deciding whether a proper predicate has been laid for admission of the evidence is very broad. Baker v. State, 879 S.W.2d 218, 220 (Tex. App.—Houston [14th Dist.] 1994, pet. ref’d). The admission of charts or diagrams which are designed to summarize or emphasize a witness’s testimony is a matter which lies within the sound discretion of the trial court.” Schenck v. Ebby Halliday Real Estate, 803 S.W.2d 361, 369 (Tex. App.—Fort Worth 1990, no writ). It is a clearly established principle of Texas jurisprudence that “[c]harts and diagrams that summarize, or perhaps emphasize, testimony, are admissible if the underlying information has been admitted into evidence, or is subsequently admitted into evidence.” Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 342 (Tex. 1998); see also Houston Lighting & Power Co. v. Klein Indep. Sch. Dist., 739 S.W.2d 508, 519, (Tex. App.—Houston [14th Dist.] 1987, writ denied).

A significant body of case law expounds on the admissibility of exhibits which serve the same purpose as the animation in question—summarizing complex and voluminous evidence for the benefit of the jury. For example, in Uniroyal Goodrich Tire Company, supra, the defendants objected to a timeline chart prepared by plaintiffs’ expert witness. Id. The purpose of the exhibit was to summarize the testimony for the jury. Id. Defendants argued that the statements on the timeline amounted to self-serving hearsay evidence which was irrelevant to the issues in the lawsuit and unfairly prejudicial. Id. The Court held that the chart was admissible reasoning all the evidence contained thereon had already been admitted (largely through plaintiffs’ expert’s testimony), and defendants had not objected to its introduction. Id.

In Speier v. Webster College, 616 S.W.2d 617, 618-19 (Tex. 1981), the court overruled defendants’ objection and admitted a chart reflecting the plaintiff’s oral testimony on damages which was created by the plaintiff’s attorney during the course of the trial and placed in the jury’s view. Id. at 618. The court relied on Champlin Oil & Refining Company v. Chastain, 403 S.W.2d 376 (Tex. 1965), for the proposition that demonstrative exhibits designed to synthesize evidence are admissible within the discretion of the trial court. Id. The Supreme Court “recognize[d] that such summaries are useful and oftentimes essential, particularly in complicated lawsuits, to expedite trials and to aid juries in recalling the testimony of witnesses.” Id. at 618-19 (citing Manges v. Willoughby, 505 S.W.2d 379, 383 (Tex. App.—San Antonio 1974, writ ref’d n.r.e.).

In Prestige Ford Co., Ltd. P’ship v. Gilmore, 56 S.W.3d 73 (Tex. App.—Houston [14th Dist.] 2001, pet. denied), the Houston Court of Appeals expounded even further on the trial court’s extremely broad discretion in permitting the jury to view summations of evidence. During closing argument in the underlying trial, the court permitted the plaintiffs’ attorney—over defendants’ objections—to show the jury a demonstrative exhibit outlining plaintiff’s damages. Id. at 78. On appeal, defendants argued that the exhibit was never admitted into evidence. Id. The appellate court held that defendants’ argument “[was] of no merit because the exhibit was demonstrative.” Id. at 79. Further, the court held that “a trial court does not abuse its discretion by permitting evidence to be summarized by means of a visual aid.” Id. (citing Bobo v. State, 757 S.W.2d 58, 64 (Tex. App.—Houston [14th Dist.] 1988, pet. ref’d)).

Texas courts have also been confronted with arguments that video animations are inadmissible. In North American Van Lines, Inc. v. Emmons, 50 S.W.3d 103 (Tex. App.—Beaumont 2001, pet. denied), the appellants argued that the trial court abused its discretion in admitting a computer animation through the testimony of an engineering expert. Id at 129. Appellants argued that the computer animation “did not meet the Robinson standards of scientific reliability,” thereby causing the jury to render an improper verdict. Id. (citing E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549 (Tex. 1995). The appellate court found that the appellants had waived their objection to the animation because they did not timely object to the expert testimony of which the animation was duplicative, even though they objected to the animations themselves. Id. at 130. Because the expert was permitted to express his opinion, which was illustrated by the computer animation, the court held that appellants could not argue on appeal that the animations were inadmissible. Id. “Video animation and other demonstrative evidence that ‘summarize, or perhaps emphasize, testimony, are admissible if the underlying testimony has been admitted into evidence or is subsequently admitted into evidence.’” Id. (quoting Uniroyal Goodrich Tire Co., 977 S.W.2d at 342; Spier, 616 S.W.2d at 618).

In Greenwood Motor Lines, Inc. v. Bush, No. 05-14-01148-CV, 2016 WL 43855456, at *6 (Tex. App.—Dallas Aug. 17, 2016, no pet. h.), a trial court permitted the introduction of a video animation which was referred to by the expert who created it as “not an exact replication of what happened,” but “an accurate representation of what occurred.” Id. As in North American Van Lines, supra, the court noted that the defendants had objected to the video animation but had failed to object to the expert’s testimony upon which the video animation was based. Id. Therefore, any objection to the video animation was waived. Id. The appellate court held that the video animation and other demonstrative exhibits which summarized the evidence was admissible provided that underlying testimony was previously or subsequently admitted. Id. (see also Cantu on Behalf of Estate of Cantu v. Gen. Motors Corp., No. 04-98-00259-CV, 1999 WL 15955, at *3-4 (Tex. App.—San Antonio Jan. 13, 1999, pet. denied) (holding that computer-generated depiction of accident created by reconstruction expert which was not timely produced was illustrative and cumulative of expert’s testimony, and trial court’s admission of the video animation was harmless error).

C. Best Use at Trial

If done early enough, most animations can be used throughout the mediation process. Animations are especially useful when the defense has not been honest with their adjuster about the potential risk involved at trial. Typically, it is a good idea to use the animation the earlier the better approach to show the adjuster the facts of the case and the associated risks that the defense must overcome if these animations are admissible.

For trial, different versions will be used depending on the Court, the County where the case is being tried, and the defense counsel. Each time, the defense will file a Motion to Exclude, so the above case law is all the appellate law we could find on admissibility on animations at trial. As previously discussed, it is a discretionary decision of the trial court, and highly unlikely, whether admissible or excluded, to be reversible error.

The different animations typically depend on where we believe the judge will decide on the Motion to Exclude. The three versions we have ready are:

A. The full animation with identifying text and testimony.
B. The full animation with no text.
C. A cut version of the animation without any text and removing any “how it should   have been” segments.

The rationale behind multiple versions is that it could be a close call for the judge and any animation is better than no animation at all. These options allow the judge to find a middle ground without fully excluding the animation.

Finally, it is important to deal with this issue head-on. The best use of the animation is to convince the judge to play it during opening statement. Insurance defendants will never spend the money to prepare a counter-animation. Thus, if you play it during opening, it allows you to essentially show your entire case-in-chief to the jury without interruption or a counter-animation. This is the best practice to start convincing the jury to agree with your side, as the Defendants won’t have much of a counter to oppose it.

Animations are a key component of any of our oil and gas cases. It summarizes the evidence and keeps the jury’s attention on our interpretation of what happened on the date of injury.

Worker’s Compensation in the Oil Patch and the MSA/IDAC

In any oil and gas case involving an injury, 99% of the time Texas worker’s compensation (“Comp”) will be involved attempting to get their money back. This typically is a large sum of money, and the client has a difficult time understanding why another insurance company gets paid before they do. Luckily, if there is a Master Service Agreement (“MSA”) or an International Associate of Drilling Contractors Contract (“IADC”) in place that covered the incident’s time frame, Comp no longer gets their lien as it is included within the MSA/IADC that Comp waives all liens associated with the incident.

A. What Worker’s Comp Tells You

As soon as these cases are filed, Comp will be sending out letters not only to your office, but also to the insurance carriers for the defendants. Typically, Comp and the Defendants will maintain that there is lien associated with the case, no matter the arguments against them. If settlement is in reach, Comp will continue to offer the same 1/3 reduction, unless they have intervened in the case. No one will bring up the MSA/IDAC or any associated terms within it.

B. What They DON’T Tell You

Now, as soon as you have one of these cases, request the MSA or the IADC from the operator, even if the operator is not in the case. The key document you are looking for is the contract between the operator and your client’s employer. There are a couple of differences between the two, but mainly the contract is either a MSA or an IADC which covers actions of the companies depending on the operation being performed at the time of the injury.

The MSA is a contract used by oil and gas companies to enter into an agreement in advance with their contractors that specifies the terms and conditions that will govern the contractors’ work. The agreement is typically used for on-site services performed by oilfield service contractors on a repetitive basis, such as equipment maintenance, well services, and cementing services. Its goal is to speed up and simplify future contracts for long-term client/vendor relationships.

An IADC is a standard onshore drilling contract that is formed by the world-wide contractor trade organization. It typically favors contractors over the operators. It is more likely that this contract is used when the injury occurs while drilling a new well, as opposed to workover or completions operations.

C. Get the Lien Waived

Fundamentally, an MSA and an IADC are contracts that roughly cover the same terminology. Once suit has been filed, if there is a settlement or verdict, and if you have a good relationship with the operator’s counsel, they can be helpful in pointing you to the correct section. If not, once you obtain the MSA or the IADC between the operator and your client’s employer in the oilpatch, the section you need to look for is the section regarding insurance and/or the indemnity agreement.

These sections will need to be taken from the document and sent over to the Comp carrier to start the process. As evidenced above, the operator’s do not want any claims made against them, thus, they make the insurance carriers for the contractors agree to waive their subrogation and liens in the event of an accident. It boils down to the fact that operators want to be left alone, so they have left this surprise benefit for us to grab.

Not surprisingly, it will take some time and effort to make Comp understand that the lien has been waived. Counsel for your client’s employer might be able to jump in and support your argument. However, if you continue to press Comp with these provisions, they will back down and fully release their lien.

The Comp Bar is NOT a Guarantee in the Oil Patch

A. Fight the Comp Bar Defense: Worker’s Comp and the Safety Department

Don’t forget that in the oil patch, the employer of your client might have a viable target on its back! The comp bar is, sometimes, not a viable defense, despite the assurances of their legal counsel. Typically, the bigger the company, and the more subsidiaries, the more likely that someone made a mistake in arranging the company.

The Comp bar is only granted to the subsidiary who actually employs the injured party and does not extend out to the parent company. Little v. Delta Steel, Inc., 409 S.W.3d 704 (Tex. App.––Ft. Worth 2013, no pet.). Thus, if there are multiple subsidiaries and a larger parent company, it is possible that only the one who is directly employing the client will get access to the Comp bar. This means if you start digging around the company to see which employees work for which subsidiary, there could be some low-hanging fruit with large insurance policies that the other defendants would want to help target.

Below is an example of the typical corporate structure where there is potential liability:

The key to liability is if the safety department was run by any employee ASIDE from your client’s direct employer. If that is the case, then it is time to start digging. Since only the direct employer of your client gets the Comp bar, the parent company or any of its other subsidiaries do NOT get that defense.

If the safety department is run by an employee of these other entities, then you have a case to build. The parent company is responsible under Section 324A of the RESTATEMENT (SECOND) OF TORTS, which states:

One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if:

(a) his failure to exercise reasonable care increases the risk of such harm; or
(b) he has undertaken to perform a duty owed by the other to the third person;
(c) the harm is suffered because of reliance of the other or the third person upon the undertaking.

When the parent company runs the safety department in this fashion, a non-protected entity of your client’s employer then has a non-delegable duty to provide for the Plaintiff’s safety and provide a safe place to work. Furthermore, it shows the key element of control. At this point, you still need to prove up vice principal, but now there is another potential defendant, with, hopefully, deep pockets.

B. Case Law Regarding Parent Corporation Liability and Its Effect on the Comp Bar

While parent corporations generally do not have a duty to control their subsidiaries, Little v. Delta Steel, Inc., 409 S.W.3d 704, 717 (Tex. App.—Fort Worth 2013, no pet.), Texas law holds that parent companies can be liable for negligence in maintaining a safe workplace if it can be shown “that the party it asserts had the duty to provide a safe workplace had actual control or a right of control over the specific aspect of the safety and security of the premises that led to the plaintiffs injury.” Morris v. Scotsman Indus., Inc., 106 S.W.3d 751, 754 (Tex. App—Fort Worth 2003, no pet.) (citing Exxon Corp. v. Tidwell, 867 S.W.2d 19, 23 (Tex. 1993)) (emphasis supplied); see also Torrington Co. v. Stutzman, 46 S.W.3d 829, 837 (Tex. 2000) (holding the Texas Supreme Court has “recognized that a duty to use reasonable care may arise when a person undertakes to provide services to another, either gratuitously or for compensation.”).

The standard of a parent corporation’s liability was effectively demonstrated in a 1984 Fifth Circuit Case, Johnson v. Abbe Engineering Company, in which the court extended liability to a parent corporation for injuries to a subsidiary’s employees. 749 F.2d 1131 (5th Cir. 1984). In Johnson, an employee was severely burned in an explosion and fire which occurred while he was working for AMF Tubescope, a wholly owned subsidiary of AMF, Inc. Id. at 1132. In determining the parent company had a duty to the employee, the Court cited evidence demonstrating the parent company had undertaken to inspect the plant at which the employee was injured, the parent company’s safety manager had reviewed and approved the subsidiaries’ safety practices and procedures, and the parent company’s safety manager expected the subsidiary to follow his directives and suggestions regarding safety. Id. The subsidiary’s plant manager testified that he relied on the parent company’s safety representatives for safety training and accident prevention. Id. at 1133-34. He also testified that he followed their recommendations. Id. Therefore, the Court found the jury “could reasonably find reliance and lulling into a false sense of security.” Id. at 1134.

In Little v. Delta Steel, Inc., an employee of Delta Steel was killed when an electromagnetic crane he was operating lost power and dropped a steel plate. 409 S.W.3d 704, 706 (Tex. App.—Fort Worth 2013, no pet.). The employee’s family sued both Delta Steel and its parent company, Reliance Steel and Aluminum, alleging the parent company had undertaken the responsibility to ensure safety for the subsidiary’s employees and had negligently and grossly negligently failed to perform its duties. Id. at 707. The parent company argued it was entitled to summary judgment on all of the employee’s family’s claims because it was a distinct legal entity; it did not have a duty to control Delta Steel’s daily operations and it owed no duty of care to the employee. Id. Finding that summary judgment for the parent company was improper, the appellate court discussed the elements of a negligence claim and the fact that the existence of a duty is a legal prerequisite to such a claim. Id. at 717. The court held that subsidiary employees seeking to impose negligence parent companies must show the parent company had control or a right of control over a specific aspect of safety which led to the employee’s injury. Id. Section 324A of the Restatement (Second) of Torts is invoked when a parent company undertakes to provide safety services to a subsidiary. Id.

The evidence presented in Little revealed that the parent company audited its subsidiaries’ plants for compliance with its safety standards, it expected all subsidiaries to comply with its safety manual, and it shared safety inspection forms with its subsidiaries. The parent company employed a regional safety inspector who oversaw subsidiaries’ safety audits. Id. at 719. Its safety director testified that he communicated his expectations to subsidiaries. Id. at 720. Even though the parent company was not involved in some aspects of its subsidiaries’ safety programs, the court found sufficient evidence where the parent corporation undertook a duty owed by the subsidiary to the employee’s safety. Id. at 721. “. . . [A]lthough the evidence demonstrates that . . . [the parent company] does not regulate all aspects of . . . [the subsidiary’s] business, it establishes that . . . [the parent company] asserts that it has controlling, primary authority for maintaining safety” at the subsidiary’s facility.” Id. “. . . [S]ection 324A applies in this case because even if . . . [the parent company] did not completely supplant . . . [the subsidiary’s] duty to provide safety to . . . [the deceased employee], the evidence establishes that . . . [it] assumed the primary responsibility” for workplace safety. Id. at 722.

In Seay, a hospital maintenance employee died after the safety valve of a boiler malfunctioned and discharged scalding water on him. Seay v. Travelers Indemnity Company, 730 S.W.2d 774, 775 (Tex. App.—Dallas 1987, no writ). The defendant in Seay insured the hospital boilers and its employees inspected them yearly, consistently giving favorable reports regarding their function. Id. The employee’s family sued the insurance company, which inspected the valves, claiming it had negligently inspected the malfunctioning boiler and that Travelers was liable pursuant to §324A of the Restatement (Second) of Torts. Id. at 775-76. The Court found, Travelers undertook the duty and could therefore be sued for negligence by the employee’s family.

In addition, the Texas Supreme Court has recently reviewed the exclusive affirmative provision in Garza v. Excel Logistics, Inc. 161 S.W.3d 473, 476 (Tex. 2005). The Texas Supreme Court held that in course with the definition obtained in the Texas Workers’ Compensation Act (“TWCA”), a Plaintiff’s claim may be barred with the exclusive affirmative provision if a Defendant establishes (1) it was the Plaintiff’s employer within the meaning of the TWCA; and (2) it was covered by the Workers’ Compensation Insurance policy. See Garza, 161 S.W.3d at 475, 477. In determining whether the Defendant was the Plaintiff’s employer, the Texas Supreme Court considered whether the Plaintiff was the client company’s employee within the meaning of the TWCA. See Id. at 476, 477. In answering that question, the Texas Supreme Court stated: “we consider traditional indicia, such as the exercise of the actual control over the details of the work that gave rise to the injury”. See Id. at 477.

C. Conclusion

This comes up often in oil and gas cases. The executives want as many layers as possible in their company between themselves and their working employees. However, they will still cut corners! If there is an oil and gas company with a lot of employees and different subsidiaries, chances are that there is a single safety department that is running the whole show.

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