Corporate & Securities Law

Lexical Ambiguity: What Does ?Offshore? Mean?

By Ken Adams

Jones v. Francis Drilling Fluids, 2009 U.S. Dist. LEXIS 21388 (Mar. 17, 2008 S.D. Tex.), concerns a worker injured while working on a floating drill barge rig located in inland waters. He had been working for Francis Drilling, which had been working as a contractor for ADTI under a master services agreement (MSA). And ADTI had been providing turnkey drilling services to TODCO. The worker sued Francis Drilling, ADTI, and TODCO, among others. Liberty Mutual was Francis Drilling’s insurance company.

TODCO and ADTI filed a third-party complaint against Liberty Mutual seeking insurance and indemnification under the MSA. Liberty Mutual moved for summary judgment on the grounds that the MSA didn’t apply to the work being done when Jones was injured. Liberty Mutual’s argument was that according to its terms, the MSA applied to the drilling of offshore wells, and the rig in question hadn’t been located offshore.

The MSA didn’t define the term “offshore.” Liberty Mutual argued it was a term of art within the oil and gas industry and referred to a location in the Gulf of Mexico and not in inland waters. TODCO and ADTI countered that drilling “offshore” could mean drilling that takes place not on land but in any water, whether fresh, brackish, or salt, and that the fact that the rig had not been located in the Gulf of Mexico had no bearing on whether the work was covered by the MSA. They argued that at the very least, “offshore” is ambiguous and that its meaning should be a question for the finder of fact rather than an issue for summary judgment.

The court denied the motion for summary judgment, holding that “offshore” could reasonably convey either meaning and that the record was insufficient to resolve the issue as a matter of law.

The moral of the story for the contract drafter is a simple one: Be attuned to the possibility that any given word might have a colloquial meaning and a more limited technical meaning. When in doubt, check with your client.

Full post as published by AdamsDrafting on March 20, 2009 (boomark / email).