Master Service Agreements: The Oilfield Contract That Helps Decide Who Pays When You Get Hurt

Before you ever clocked in, before the rig was even rigged up, the companies had already signed a contract that helps decide what happens if you get hurt. You never saw it, and you never will, unless your lawyer goes and gets it.

That contract is called a Master Service Agreement, or “MSA.” It is the master contract between the oil company that owns the lease and every contractor and service company it hires. The MSA sets the rules for the work, the money, the insurance, and the blame. And the blame is the part that matters when a worker goes down.

This page explains what an MSA is, why a contract you never signed can shape your case, how the indemnity and insurance language inside it usually works, and the Texas law that puts limits on some of it. It is written for the people the system is hardest on: the worker who got hurt out there in the patch, and the family of a worker who was killed or catastrophically injured.

1. What a Master Service Agreement is

The Master Service Agreement is the big contract that sits behind everything else on the lease. The operator (the oil company that holds the lease and runs the project) signs one with each contractor it hires: the drilling contractor, the well-servicing company, the frac company, the wireline company, the trucking company, the tank rental company, the down-the-line subcontractor. The MSA covers all the work that contractor will ever do for that operator. It does not get signed fresh for every job. It gets signed once and it runs in the background for years.

The industry has a standard form for it, written by the International Association of Drilling Contractors and known as the IADC Model Master Service Contract. Big operators usually do not use the IADC form straight off the shelf. They start with their own version, which their lawyers have already loaded with language that helps the operator and hurts the contractor. The contractor, who needs the work and usually has less leverage at the bargaining table, signs it.

What is inside an MSA is not really a mystery. It is scope of work, payment terms, insurance requirements, audit rights, confidentiality, term and termination, and a long section on liability. The liability section is where most of the fight in your case will happen. That section is built around two big ideas, “indemnity” and “additional insured,” and the next sections explain both.

One more thing about MSAs. They are confidential. The operator and the contractor both treat them as private business documents. You are not supposed to see one. Your supervisor probably has not seen one. The roughneck on the rig floor has never seen one. But somewhere in an office at the operator and at the contractor, there is a copy, and that copy may have already shaped who is on the hook for your injuries. Getting that copy is one of the first things any qualified oilfield injury lawyer should do.

2. Why a contract you never signed can shape your case

Here is the honest part. You are not a party to the MSA. You never signed it. You never had the chance to negotiate it. The companies that signed it, however, have agreed in writing about who covers what when somebody gets hurt. And Texas courts will often enforce those agreements between the companies if the contract meets Texas rules on indemnity drafting, fair notice, and any required insurance support.

That does not mean the MSA takes away your right to bring a claim. You can still sue the company that caused your injuries. What the MSA does, in most cases, is help decide which company ends up paying once a claim is resolved. The companies can move the money around behind the scenes through the MSA, even though you are the one who got hurt.

So in plain words, here is what is going on:

• You bring a claim against the company or companies that caused the harm.
• Those companies fight you on the front end, the way any defendant fights an injured worker.
• Behind the scenes of that fight, the companies are also pointing fingers at each other under the MSA, arguing about which of them really has to pay in the end.

That second fight is largely invisible to you, but it is happening in the background, and it shapes everything. A defendant whose MSA says “the contractor at the bottom covers this loss” will dig its feet in harder. An additional insured provision can also pull a bigger insurance policy into your case than the one you started with, though whether that policy actually responds depends on the wording of the policy itself, and in some cases on whether the policy clearly incorporates the service contract.

This is why a lawyer who does not understand MSAs is missing a big part of the picture. The contract did not just decide the work. It tried to decide the lawsuit, years in advance.

3. Indemnity, the blame-shifting engine

“Indemnity” is the word that does the most work in an MSA. It is also the word most likely to confuse a normal person, so we are going to slow down on it.

Plain version: indemnity is a written promise to take the financial hit for somebody else.

In a typical oilfield MSA, the indemnity language tries to do something that should bother anyone reading it for the first time. It tries to say that even if the operator is the one who caused the harm, the contractor below it has to pay. That is called “indemnity for the indemnitee’s own negligence,” and yes, that is a real thing companies put in writing.

Texas courts do not enforce that kind of risk-shifting casually. The Texas Supreme Court laid out the rule in Ethyl Corp. v. Daniel Construction Co., 725 S.W.2d 705 (Tex. 1987). Under the “express negligence doctrine,” a company that wants another company to indemnify it for its own negligence has to state that intent in specific terms within the four corners of the contract.

There is a second protection layered on top of that one. In Dresser Industries, Inc. v. Page Petroleum, Inc., 853 S.W.2d 505 (Tex. 1993), the Texas Supreme Court held that fair notice also requires “conspicuousness.” A clause that shifts this kind of extraordinary risk has to actually attract a reasonable person’s attention. A provision hidden on the back of a work order in a series of uniformly printed paragraphs, without headings or contrasting type, is not conspicuous as a matter of law. That usually means CAPITAL LETTERS, bold print, underlined print, contrasting type, or some other formatting that would catch a reasonable person’s eye. The two requirements together, express negligence and conspicuousness, are known as the “fair notice” rules. And under Dresser, whether a clause meets them is a question of law for the court, not a question of fact for the jury.

One more nuance matters here. The Texas Supreme Court has held in Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190 (Tex. 2004), that if the party being charged actually knew the clause’s terms, Texas law may still allow enforcement even if the fair-notice formatting requirements were not met. But that becomes a proof issue. The party seeking enforcement has the burden to show real, actual knowledge. It is not an automatic win.

That sort of sloppy or buried drafting can be good news for workers. A company that wrote an indemnity clause that does not say what it has to say, in the way it has to say it, may not get to use it. A lot of older MSAs, and a fair number of newer ones written by lazy lawyers, still get this wrong.

Knock-for-knock, the oil patch’s favorite trick

Now we get to the version of indemnity that runs the oil patch.

Seriously re-read that definition again, because that is the whole ballgame. Knock-for-knock is the oil and gas industry’s way of saying “we will not fight each other about whose fault it was. Whoever’s worker got hurt, that worker’s company eats the loss.”

Why does the industry love it? Because it makes insurance easier to price, claims easier to predict, and lawsuits between the companies less common. From a business-to-business standpoint, it is rational. From a worker’s standpoint, it is something else entirely. It means the operator (the company that runs the project, often the one with the deepest pockets and biggest insurance program, and sometimes the one that actually caused the problem) can try to leave a smaller contractor below it holding the financial bag.

Each side covers its own, no matter who caused it. That is the trade the companies made. You did not sign it.

The blame does not flow straight to whoever caused the harm. It often flows downhill, from operator to contractor to subcontractor, by contract. That is the design.

4. Additional insured, borrowing another company’s insurance

Indemnity is one tool. The other is insurance, and the tool there is called “additional insured.”

Here is the part most people get wrong on the first read, and it is worth slowing down on. An additional insured endorsement does NOT create new dollars of coverage. It does NOT double the policy. If the contractor’s policy has a $5 million limit, naming the operator as an additional insured does not turn it into $10 million. The operator and the contractor share the same $5 million.

So where does the “more insurance” actually come from in an oilfield case? It comes from the stack. The operator has its own policy. The contractor has its own policy. The subcontractor at the bottom (very often the worker’s actual employer) has its own policy. Every one of those is a separate insurance contract, paid for by a separate company. The MSA architecture, through additional insured endorsements and “other insurance” wording, decides which policy in the stack pays first and which one sits behind it.

Most modern oilfield MSAs go one step further. They require the downstream coverage to be “primary and non-contributory” as to the upstream additional insured.

So the additional insured mechanism, plus the primary and non-contributory wording, does not add a dollar to any single policy. What it does is pull multiple companies’ separate policies into the same claim and force them to pay in a particular order. The total insurance available to satisfy a judgment in your case can end up substantially larger than what was sitting on your employer’s policy alone.

There is one more thing to know, and it is the part most people, including some lawyers, get wrong. Under modern Texas Supreme Court law, whether the operator actually gets additional insured coverage depends first on the language of the insurance policy itself, not on what the MSA says. The court goes to the policy first. It looks at the service contract only if the policy clearly tells it to, and only to the extent of that incorporation. That is the rule from ATOFINA Petrochemicals, Inc. v. Continental Casualty Co., 185 S.W.3d 440 (Tex. 2005), and In re Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015), and it has been reinforced more recently in Exxon Mobil Corp. v. Insurance Co. of the State of Pennsylvania, 568 S.W.3d 650 (Tex. 2019), and ExxonMobil Corp. v. National Union Fire Insurance Co. of Pittsburgh, Pa., 672 S.W.3d 415 (Tex. 2023).

In plain words: a certificate of insurance alone does not give the operator coverage. The MSA does not automatically rewrite the underlying policy. The policy is the starting point, and what the policy says (or pulls in from the contract by clear reference) controls.

There is one more wrinkle worth knowing. A contractual obligation to provide insurance is not exactly the same thing as a contractual indemnity obligation. The Texas Supreme Court explained in Getty Oil Co. v. Insurance Co. of North America, 845 S.W.2d 794 (Tex. 1993), that insurance-procurement obligations can sometimes survive even when an indemnity clause does not, because Texas does not treat every insurance-shifting provision as just another indemnity clause. That distinction matters, and in the right case, it can be the difference between recovery and nothing.

What this looks like in real life

Picture a drilling rig in the Permian Basin. A floorhand we will call Mike is making a connection on the drill floor. He is employed by a drilling contractor we will call Lone Star Drilling Services, which holds the standard IADC-form drilling contract with the operator, a mid-size independent we will call Big Bend Operating Company. Both names are made up for this example.

A piece of operator-supplied equipment that Big Bend insisted Lone Star run on the rig fails during the connection. Mike takes a hit that ends his career on the floor.

The contracts on this job look like this:

• Big Bend has an MSA with Lone Star, written knock-for-knock, with mutual insurance support.
• Lone Star is required by the MSA to carry $5 million in general liability coverage and to name Big Bend as an additional insured on it, primary and non-contributory.
• Lone Star’s actual policy contains an additional insured endorsement consistent with the MSA’s wording (the important caveat under ATOFINA and Deepwater Horizon: the policy text has to back this up, not just the MSA).
• Big Bend carries its own $50 million corporate liability policy.

Here is what happens for Mike.

Mike cannot sue Lone Star directly. Lone Star is his employer, and Lone Star carried workers’ comp. So Mike sues Big Bend as a third party, for sending defective equipment to the rig and for directing the way the work was done.

When Big Bend gets sued, two separate insurance contracts respond, and the order is set by the MSA and the policy language together:

• Lone Star’s $5 million policy pays first, because the policy includes an additional insured endorsement naming Big Bend, primary and non-contributory. Lone Star’s insurer defends Big Bend and pays up to that $5 million.
• Then Big Bend’s own $50 million corporate policy takes over for anything above the first $5 million.

That is up to $55 million of insurance potentially available for one worker’s injury, even though Lone Star (Mike’s own employer) only carried $5 million. The additional insured endorsement did not double Lone Star’s policy. It did not turn $5 million into $10 million. What it did was force Lone Star’s $5 million to pay first on a claim against Big Bend, which means Big Bend’s $50 million sits behind it, fully available for the excess.

Now flip the same facts. If Lone Star’s policy did not actually include an additional insured endorsement that responds to this claim (or if the policy’s exclusions or “additional insured” wording cut Big Bend out), then when Big Bend gets sued, Lone Star’s $5 million does not respond. The money on the table is Big Bend’s $50 million alone. That is the part the Texas Supreme Court has been hammering for two decades: the MSA is a starting point. The policy text is where the fight actually gets won.

That is the real story. The MSA promises a path. Whether the path is open depends on the policy.

The “additional insured” move comes with its own legal fights. Carriers argue that the language was unclear, that the loss falls outside the scope of the additional insured coverage, that the policy did not incorporate the service contract, or that other policies should pay first. The point for you to know is that the MSA, plus the insurance certificates, plus the underlying policies, plus the endorsements, all have to be pulled and read together, in the order Texas law requires. None of them sits on a desk in your worker’s office. Your lawyer has to go get them.

5. The Texas Oilfield Anti-Indemnity Act, the limit on the game

Texas did not just let the industry run wild with indemnity language. There is a law that limits some of it. It is called the Texas Oilfield Anti-Indemnity Act, and it lives at Chapter 127 of the Texas Civil Practice and Remedies Code. You can read the actual statute on the Texas Legislature’s website.

The act applies to “agreements pertaining to a well for oil, gas, or water or to a mine for a mineral.” That covers most of the MSAs in the patch. The legislature wrote, on the face of the statute, that “an inequity is fostered on certain contractors” by these indemnity provisions. That is the legislature saying out loud what we already knew, that the smaller companies at the bottom were getting squeezed.

Here is how the statute actually works in plain words.

The basic rule. If an oil and gas MSA contains an indemnity provision that requires one party to indemnify the other for that other party’s sole or concurrent negligence (or for strict liability), the provision is void to that extent unless it falls within the statute’s insurance-supported framework. That is Chapter 127, section 127.003.

The big exception. Section 127.005 allows certain indemnity obligations to remain enforceable when the parties have a written agreement to support the indemnity with liability insurance or qualified self-insurance. For “unilateral” indemnity (one-way, where only one party indemnifies the other), the insurance support cannot exceed five hundred thousand dollars in coverage. For “mutual” indemnity (both parties indemnify each other, knock-for-knock style), the parties can agree to higher limits, and the two sides do not have to carry identical amounts. But under Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344 (Tex. 2000), the mutual indemnity is enforceable only up to the coverage that applies equally to both sides. In plain words, the lower of the two carriers sets the ceiling on how much one company can claw back from the other through indemnity. The dollars above that ceiling stay with whoever bought them.

What that means in practice. Most modern oilfield MSAs are written to take advantage of the insurance-supported exception. The industry figured out a long time ago that if it paired knock-for-knock indemnity with written insurance support, much of the risk-shifting would survive the Anti-Indemnity Act. And as Section 4 explained, the additional insured side of the deal lives or dies on the policy text, not the contract text alone. So both halves of the MSA, the indemnity and the insurance, have to be read carefully against the statute and against the policies.

So here is the honest summary. The Anti-Indemnity Act is real, and it can knock out the most aggressive indemnity language. But the insurance-supported exception is also real, and the industry knows how to write around the basic rule. The act is a limit on the game. It is not the end of the game.

The reason the MSA fight matters as much as it does is that the people getting hurt in the oil patch are mostly contractor and subcontractor workers, the very people the MSA is built to push the cost onto.

6. What this means for you and your family

7. Questions to ask any lawyer you are considering

You do not have to take anyone’s word, including mine. Test any lawyer you talk to. These questions will tell you fast whether they know this area.

A lawyer who knows this work will welcome these questions. A lawyer who gets weird, vague, or defensive is telling you exactly what you need to know.

Common questions

Keep reading

Back to the full The South Texas Oilfield Injury Guide