2020 New Mexico Statutes
Chapter 56 - Commercial Instruments and Transactions
Article 7 - Indemnity Agreements
Section 56-7-2 - Oil, gas or water wells and mineral mines; agreements, covenants and promises to indemnify void.
A. An agreement, covenant or promise, foreign or domestic, contained in, collateral to or affecting an agreement pertaining to a well for oil, gas or water, or mine for a mineral, within New Mexico, that purports to indemnify the indemnitee against loss or liability for damages arising from the circumstances specified in Paragraph (1), (2) or (3) of this subsection is against public policy and is void:
(1) the sole or concurrent negligence of the indemnitee or the agents or employees of the indemnitee;
(2) the sole or concurrent negligence of an independent contractor who is directly responsible to the indemnitee; or
(3) an accident that occurs in operations carried on at the direction or under the supervision of the indemnitee, an employee or representative of the indemnitee or in accordance with methods and means specified by the indemnitee or employees or representatives of the indemnitee.
B. As used in this section, "agreement pertaining to a well for oil, gas or water, or mine for a mineral" means an agreement:
(1) concerning any 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;
(2) for rendering services in connection with a mine shaft, drift or other structure intended for use in the exploration for or production of a mineral; or
(3) to perform a portion of the work or services described in Paragraph (1) or (2) of this subsection or an act collateral thereto.
C. 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.
D. Nothing in this section:
(1) deprives an owner of the surface estate of the right to secure indemnity from a lessee, operator, contractor or other person conducting operations for the exploration of minerals on the owner's land; or
(2) affects the validity of a benefit conferred by the Workers' Compensation Act [Chapter 52, Article 1 NMSA 1978].
History: 1953 Comp., § 28-2-2, enacted by Laws 1971, ch. 205, § 1; 1999, ch. 162, § 1; 2003, ch. 309, § 2; 2003, ch. 421, § 2.
ANNOTATIONSThe 2003 amendment, effective July 1, 2003, in Subsection A, inserted "foreign or domestic" following "covenant or promise", inserted "within New Mexico" following "for a mineral"; and substituted "Paragraph" for "Paragraphs" preceding "(1) or (2)" in Subsection A and Paragraph B(3).
Laws 2003, ch. 309, § 2 and Laws 2003, ch. 421, § 2, both effective July 1, 2003, enacted identical amendments to this section. The section was set out as amended by Laws 2003, ch. 421, § 2. See 12-1-8 NMSA 1978.
The 1999 amendment, effective June 18, 1999, rewrote the section, including adding a new Subsection C to expand coverage of prohibited indemnification arrangements.
Determination of type of work to be performed. — Where a contract is so generic in nature that it is not possible to determine the type of work to be performed from the contract itself, the court will look past the contract to the nature of the work being performed at the time of an accident in order to resolve whether the circumstances of a given case are within the scope of the anti-indemnity statutes. Holguin v. Fulco Oil Servs., LLC, 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, cert. dismissed, 2011-NMCERT-010.
The anti-indemnity statute does not include any activities related to the distribution, processing, or transportation of oil and gas. Holguin v. Fulco Oil Servs., LLC, 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, cert. dismissed, 2011-NMCERT-010.
Oilfield anti-indemnity statute did not apply to natural gas processing facility. — Where a natural gas company hired contractors to perform work at a natural gas processing facility; the service contract provided that the contractors agreed to indemnify the gas company against all claims even if the claim was based in part on the negligence of the gas company; an employee of one of the contractors sued the gas company for injuries incurred during the cleaning of a "slug catcher", which is a system that removes condensate and other particles from the natural gas; and the slug catcher was not located at a well site and was not part of the production activities associated with a well head, the maintenance of the slug catcher was not within the scope of the oilfield anti-indemnity statute. Holguin v. Fulco Oil Servs., LLC, 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, cert. dismissed, 2011-NMCERT-010.
Indemnitee cannot contract away liability for own negligence. — The language in Subsection A(4), which makes void and unenforceable any agreement which purports to indemnify an indemnitee for injuries or death "arising from the . . . concurrent negligence of the indemnitee", means only that the indemnitee cannot contract away liability for his own percentage of negligence. Guitard v. Gulf Oil Co., 1983-NMCA-103, 100 N.M. 358, 670 P.2d 969; Brashar v. Mobil Oil Corp., 626 F. Supp. 434 (D.N.M. 1984); Tipton v. Texaco, Inc., 1985-NMSC-108, 103 N.M. 689, 712 P.2d 1351 (decided under prior law).
Indemnity provision holding each party responsible for its own negligence does not violate this section. — Where oil and gas well operator (operator) brought action against contractor and commercial general liability insurer (insurer), alleging that contractor breached its contractual duties to defend operator against claims asserted in underlying personal injury lawsuits arising from an accident at a well, and that insurer breached its defense and reimbursement obligations to operator, insurer's motion for summary judgment was denied because this section prohibits only those contracts that provide indemnity for one's own negligence, and the master contract in this case does not purport to relieve operator of its own negligence but seeks to indemnify operator for contractor's negligence, for which operator may be held liable. New Mexico courts have allowed indemnity agreements that seek to hold each party responsible for its own negligence. XTO Energy, Inc. v. ATD, LLC, 189 F.Supp.3d 1174 (D.N.M. 2016).
Validity of insurance contract. — Under Subsection A(4), the validity of any insurance contract is not affected where the insurance is purchased by the indemnitor to protect its interests, and not the interest of the indemnitee. Amoco Prod. Co. v. Action Well Serv., Inc., 1988-NMSC-040, 107 N.M. 208, 755 P.2d 52 (decided under prior law).
Enforcement of out-of-state indemnity. — Indemnity provisions requiring an operator to indemnify a driller for the driller's own negligence were valid under Texas law, whose public policy is consistent with New Mexico's, and were enforceable in New Mexico. Reagan v. McGee Drilling Corp., 1997-NMCA-014, 123 N.M. 68, 933 P.2d 867 (decided under prior law).
Fundamental principle of justice. — Section 56-7-2 NMSA 1978, as amended in 1999, is intended to insure the safety of persons and property at well sites within New Mexico and a choice of law provision applying Texas law, by which an indemnitee may be indemnified against its own negligence, is void as violative of the public policy of New Mexico. Pi a v. Gruy Petroleum Mgmt. Co., 2006-NMCA-063, 139 N.M. 619, 136 P.3d 1029.
Choice of law provision void. — Indemnification agreements that undermine the indemnitee's incentive to promote safety at New Mexico well sites violate a fundamental public policy of New Mexico and are void and unenforceable and agreements that purport to escape the effect of 56-7-2 NMSA 1978, as amended in 1999, by invoking foreign law are against public policy and are void and unenforceable in New Mexico courts. Pi a v. Gruy Petroleum Mgmt. Co., 2006-NMCA-063, 139 N.M. 619, 136 P.3d 1029.
Law reviews. — For article, "Statutory Adoption of Several Liability in New Mexico: A Commentary and Quasi-Legislative History," see 18 N.M.L. Rev. 483 (1988).
For note, "Contract law: New Mexico interprets the insurance clause in the oil and gas anti-indemnity statute: Amoco Production Co. v. Action Well Service, Inc.,", see 20 N.M.L. Rev. 179 (1990).
Am. Jur. 2d, A.L.R. and C.J.S. references. — Tenant's agreement to indemnify landlord against all claims as including losses resulting from landlord's negligence, 4 A.L.R.4th 798.
