Opinion ID: 600770
Heading Depth: 2
Heading Rank: 1

Heading: Insurer Status

Text: 19 Under the terms of the contract between Vesta and Amoco, Vesta was only liable to Amoco for an ultimate net loss that exceeded $5,000,000. This contract defined ultimate net loss to include the total sum that Amoco or any company as its insurer became obligated to pay because of, inter alia, personal injury claims. 20 In the instant action, Amoco paid $2,715,000 directly to Gonzales, and Cantu, through its underwriters, paid Gonzales $3,500,000. If Cantu or its underwriters paid this money as Amoco's insurers, Amoco's ultimate net loss would clearly exceed $5,000,000 by $1,715,000 and Vesta would be liable to Amoco for 67.5% of that excess. Initially, therefore, we must determine whether Cantu and its underwriters paid Gonzales as Amoco's insurers. 21 Cantu contracted to operate and service wells and leases for Amoco. That contract obligated Cantu to defend, indemnify, and hold ... harmless Amoco and its insurers from and against any and all losses, costs, expenses, and causes of action ... arising out of, incident to or in connection with any and all operations under this contract. Amoco proffered no other evidence that Cantu was its insurer. 22 Although an indemnity clause in a contract for services bears some relationship to insurance principles, the mere inclusion of such a clause is insufficient to render the indemnifying party an insurer of the other party. For openers, Black's Law Dictionary provides some guidance in determining whether a contractual indemnitor is an insurer. Indemnity is defined to include a contractual or equitable right under which the entire loss is shifted from a tortfeasor who is only technically or passively at fault to another who is primarily or actively responsible, 3 and an Indemnitor is the person who is bound by an indemnity contract to indemnify or protect the other. 4 Insurance is defined as a contract whereby, for a stipulated consideration, one party undertakes to compensate the other for loss on a specified subject by specified perils, 5 and an Insurer is the underwriter or insurance company with whom a contract of insurance is made. 6 These definitions suggest a substantive distinction between a party bound by a contractual indemnity clause and an insurer. 23 In defining the business of insurance, the Supreme Court has stated, The primary elements of an insurance contract are the spreading and underwriting of a policyholder's risk. 7 This definition also appears to be distinct from Cantu's status under the contract with Amoco. 24 Our analysis cannot stop at this point, however. Federal law expressly provides that the business of insurance, and every person engaged therein shall be subject to the laws of the several states which relate to the regulation or taxation of such business. 8 Although the regulation of insurance is not exclusively delegated to the states, state law is a primary source of such regulation. No act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance ... unless such Act specifically relates to the business of insurance.... 9 We must therefore examine the relevant Texas laws. 25 In Texas, as in most if not all states, insurance is a heavily regulated business. 10 Amoco presented no evidence that Cantu complied with the statutory requirements for qualification as an insurer. Further, the term Insurance Business is statutorily defined in article 1.14-1 of the Texas Insurance Code, 11 and no conduct required of Cantu by the indemnity clause comes within the ambit of this definition. 12 We hold that one party to a contract for services is not an insurer of the other party to the contract solely because the first party indemnifies the second party pursuant to an indemnity clause in that contract.