The New Mexico Oilfield Anti-Indemnity Act

New Mexico has enacted an oilfield anti-indemnity act, much like the legislation enacted in Texas, Louisiana and Wyoming, and previously discussed in other blogs. While the New Mexico Oilfield Anti Indemnity Act (the “Act”) is similar to other states' oilfield anti-indemnity acts in many respects, it does also contain a few distinguishing characteristics.

The New Mexico legislature enacted the Act to promote safety by precluding usual operators of wells or mines from delegating their duty to ensure safe operation of the well to contractors and subcontractors. In this regard, the New Mexico legislature used the same rationale as the legislatures that enacted similar oilfield anti-indemnity acts in Texas, Louisiana and Wyoming. Additionally, New Mexico courts have consistently struck down choice of law provisions drafted as an attempt to circumvent the Act. The state courts of Texas, Louisiana and Wyoming have also followed this approach, consistently refusing to let parties circumvent the oilfield anti indemnity acts set out by their state's legislature.

Historically, New Mexico courts had allowed parties to use written insurance contracts to circumvent the Act. However, the New Mexico legislature amended Section 56-7-2 of the Act, expressly declaring that indemnity agreements covered by insurance are prohibited as against public policy. The statutory amendment reads "A provision in an insurance contract indemnity agreement naming a person as an additional insured or a provision in an insurance contract or any other contract requiring a waiver of rights of subrogation or otherwise having the effect of imposing a duty of indemnification on the primary insured party that would, if it were a direct or collateral agreement described in Subsections A and B of this section, be void, is against public policy and void." Therefore, New Mexico courts will no longer allow parties to circumvent the prohibition on indemnity agreements through written insurance contracts.

However, a distinguishing characteristic of the Act is that, unlike the Texas and Louisiana acts, the Act does not limit the type of damages indemnity provisions cover. Accordingly, the provisions of the Act relate to death, personal injury, property damage, and situations involving radioactivity, pollution and wild-well control, a broader scope of damages than the types recoverable under the Texas and Louisiana acts.

Even though the New Mexico Act is more liberal than other states' acts by not limiting the types of damages the act applies to, the New Mexico Act is more restrictive with regards to what actions it applies to. Specifically, the Act only concerns operations related to drilling, deepening, reworking, repairing, improving, testing, treating, perforating, acidizing, logging, conditioning, altering, plugging or otherwise rendering services in connection with a well drilled for the purpose of producing or disposing of oil, gas or other minerals or water. This differentiates from the other states' acts, which generally apply to work being done at the well, and do not limit specifically based upon the type of work performed.

This more restrictive nature of the Act is seen in the way New Mexico courts have limited the Act's application. On one instance, a New Mexico court held the Act did not apply to work being performed by a contractor at a well, because at the time of the accident the contractor's specific work did not pertain to the oil or gas well. See Holguin v. Fulco Oil Services, L.L.C., 245 P.3d 42 (N.M. Ct. App. 2010). By taking this approach, and excluding work done on the well that was not necessarily regarding the well, New Mexico Courts have limited the scope of their Act more than other states have thus far.

For Donato, Brown & Pool blog articles on other states' oilfield anti-indemnity acts click on the following links: Texas, Louisiana, Wyoming.