In a third-party liability case involving an oil and gas operator, an oilfield services company, and the services company’s liability insurer, the Eastland Court of Appeals has denied the operator’s petition for writ of mandamus seeking to lift a trial court order abating its declaratory judgment action against the insurer pending the outcome of the underlying tort action.
In re Clear Fork, Inc. (No. 11-25-00136-CV; August 29, 2025) arose from a dispute between an oil and gas operator and an oil field services company. Clear Fork and Red Diamond Energy Services, Inc., entered into a Master Service Agreement (MSA) which required Red Diamond to indemnify and defend Clear Fork against all claims regardless of fault, even if an insurer or other party were required to pay or make contribution to any claim. In addition, Red Diamond was required to carry a CGL policy with at least $1,000,000 in coverage and an excess policy of $1,000,000. The MSA further required Red Diamond to list Clear Fork as an additional insured on the policies. In December 2020 Berkley National Insurance Company issued a CGL policy to Red Diamond with policy limits of $1,000,000 per occurrence. It also issued a commercial umbrella liability policy to Red Diamond with policy limits of $20,000,000 per occurrence.
In 2021 a Red Diamond employee was killed at a workover when the rig’s traveling block failed, causing the employee to be struck in the head by the elevator bell. His family filed suit against Red Diamond and Clear Fork. Clear Fork’s liability insurer made a written demand for indemnity on Berkley. Berkley responded by tendering a defense under reservation of rights, informing Clear Fork that excess coverage, which would be limited to $1,000,000, would not be triggered until Clear Fork had exhausted coverage under its CGL policy. After the employee’s family filed suit in Ector County, Clear Fork filed a separate suit in Taylor County against Berkley and Red Diamond, seeking declaratory relief against Berkley, with separate breach of contract claims against Red Diamond. In the declaratory judgment action, Clear Fork challenged Berkley’s position that it had to exhaust its CGL policy before triggering excess coverage and asserted that pursuant to the MSA, Berkley should provide a total of $9,000,000 in coverage to Clear Fork. Berkley filed a motion to abate Clear Fork’s dec action pending the outcome of the Ector County case. The trial court agreed and abated Clear Fork’s action as to both Berkley and Red Diamond. Clear Fork sought mandamus relief. It later denied Clear Fork’s motion to lift the abatement order.
In an opinion by Justice Bailey, the court of appeals denied the writ. Clear Fork asserted that the trial court abused its discretion by abating its breach-of-contract claims against Red Diamond, thereby “creat[ing] uncertainty over Red Diamond’s obligations.” But, as the court noted, Clear Fork’s dec action also seeks a determination of Red Diamond’s and Berkley’s obligation to indemnify Clear Fork in the employee lawsuit. The court observed that the parties did not dispute that Berkley had defended and would continue to defend Clear Fork in the employee’s lawsuit. Likewise, there was no dispute that Berkley had confirmed its obligation to indemnify Clear Fork under Red Diamond’s CGL for the first $1,000,000 of a judgment arising out of Clear Fork’s ordinary negligence. It further observed that the determination of Red Diamond’s liability remained contingent on the outcome of the employee’s lawsuit, which could result in a no liability finding against Clear Fork It might also be the case that the, should the jury assign liability to Clear Fork, the judgment would be within the limits of Berkley’s primary coverage. “In either instance,” the court reasoned, “the outcome of the [employee’s] lawsuit would likely narrow, if not eliminate, many of the issues that were then pending in the declaratory judgment lawsuit, resulting in a substantial savings of time and resources, both for the trial court and parties.” And even if a judgment against Clear Fork exceeded the limits of Berkley’s policy, Clear Fork might still prevail on its claims against Berkley, limiting or eliminating its claims against Red Diamond.
Based on these “practical considerations,” the court ruled that the trial court could reasonably conclude that Clear Fork’s claims against Red Diamond “should be abated for purposes of convenience of the parties and/or a more orderly presiding.” Writ denied.
TCJL Intern Satchel Williams researched and prepared the first draft of this article.
