IN THE SUPREME = COURT OF TEXAS

IN THE SUPREME COURT OF TEXAS

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No. 05-0202

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Energy Service = Company of=20 Bowie, Inc., Petitioner,

Superior Snubbing = Services,=20 Inc., Respondent

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On Petition for Review from = the

Court of Appeals for the Second = District of=20 Texas

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Argued December 1,=20 2005

&nbs= p;=20 Justice Johnson, joined = by Justice Wainwright, Justice = Green, and=20 Justice Willett, = dissenting.

&nbs= p;=20 Daryll Faulk was injured while working in = the course=20 of his employment for Superior Snubbing Services, Inc. (Superior), who = carried=20 workers=92 compensation insurance and thus was a =93subscribing = employer.=94 Faulk did=20 not sue Superior=20 for his injuries.[1] But he was working at a well = site along=20 with employees of Mitchell Energy Corporation (Mitchell), Energy Service = Company=20 of Bowie, Inc. (Energy), and others when he was injured. He sued = them.

&nbs= p;=20 Energy and Superior were contractors for = Mitchell. They=20 did not execute agreements with each other, but both executed agreements = with=20 Mitchell. Their agreements with Mitchell contained indemnity provisions. = As=20 relevant to this appeal, Energy settled with Faulk and sued Superior for = indemnity.=20 Energy claimed that it was entitled to indemnity because Superior=92s = contract=20 with Mitchell provided that Superior =93shall protect, defend, indemnify = and hold=20 [Mitchell], its employees, partners, agents, representatives, invitees,=20 contractors and their employees . . . harmless from and against all = claims,=20 demands, causes of action, suits or other litigation of every kind and = character=20 for injury to . . . [Superior], its employees, partners, agents, . . . = which is=20 incident to, arising out of, within the scope of, or in connection with = the work=20 to be performed.=94

&nbs= p;=20 Superior denied that it owed indemnity = to Energy,=20 in part, on the basis of Texas Labor Code section 417.004 and the fact = that=20 Energy had not executed an indemnity agreement with Superior. = Section 417.004=20 provides:

In an=20 action for damages brought by an injured employee, a legal beneficiary, = or an=20 insurance carrier against a third party liable to pay damages for the = injury or=20 death under this Chapter that results in a judgment against the third = party or a=20 settlement by the third party, the employer is not liable to the third = party for=20 reimbursement or damages based on the judgment or settlement unless = the=20 employer executed, before the injury or death occurred, a written = agreement with=20 the third party to assume the liability. (emphasis=20 added)

I = agree with=20 the court of appeals that section 417.004 does not permit Energy to = recover=20 indemnity from Superior.

&nbs= p;=20 In construing a statute our objective is to determine and give effect to = the=20 Legislature=92s intent, which, when possible, we discern from the words = used.=20 State v. Shumake, 199 S.W.3d 279, 284 = (Tex. 2006); City of San Antonio = v. City of=20 Boerne, 111 S.W.3d 22, 25 (Tex. = 2003);=20 State v. Gonzalez, 82 S.W.3d 322, 327 (Tex. 2002); see also Tex. Gov=92t = Code =A7 312.005. We look = first to=20 the =93plain and common meaning of the statute=92s words.=94 = Gonzalez, 82 S.W.3d at 327. If the statute is clear and = unambiguous, we=20 must apply its words according to their plain and common meaning without = resort=20 to rules of construction or extrinsic aids. Fitzgerald v.=20 Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 865-66 = (Tex. 1999); St. Luke=92s Episcopal Hosp. v. = Agbor, 952 S.W.2d 503, 505 (Tex. = 1997). The=20 statute=92s words are to be read according to their ordinary meaning = unless they=20 are defined otherwise in the statute or a contrary intention is apparent = from=20 the context. See Taylor v. Firemen=92s and = Policemen=92s Civil=20 Serv. Comm=92n = of Lubbock,=20 616 S.W.2d 187, 189 (Tex. 1981). In construing = statutes=20 there are instances where courts may disregard the literal meaning of a = statute,=20 but that is only when it is perfectly plain that the literal sense works = an=20 absurdity or manifest injustice. Gilmore v. Waples, 188 S.W. 1037, 1039 (Tex. = 1916). It is=20 inappropriate for courts to enlarge the meaning of any word in a statute = beyond=20 its plain and ordinary meaning by implication when legislative intent = may be=20 gathered from a reasonable interpretation of the statute as it is = written. Sorokolit v. Rhodes, 889 S.W.2d 239, 241 (Tex. = 1994). We=20 must not give the words used by the Legislature an exaggerated, forced, = or=20 constrained meaning. See=20 City of Austin v. Sw. Bell = Tel. Co.,=20 92 S.W.3d 434, 442 (Tex. 2002). Every word of a = statute=20 must be presumed to have been used for a purpose. Eddins-Walcher = Butane Co.=20 v. Calvert, 298 S.W.2d 93, 96 (Tex. 1957). Likewise, every = word=20 excluded from a statute must also be presumed to have been excluded for = a=20 purpose. Cameron v. Terrell & Garrett, = Inc., 618=20 S.W.2d 535, 540 (Tex. 1981).

&nbs= p;=20 In my view, the plain meaning of the words used in section 417.004, = =93the=20 employer is not liable to the third party for reimbursement or = damages=20 based on the judgment or settlement unless the employer executed, = before=20 the injury or death occurred, a written agreement with the third = party to=20 assume the liability=94 (emphasis added), is clear and unambiguous. The = phrase=20 =93the third party=94 is used twice in the same sentence and clearly = refers to the=20 same third party in each instance=97the third party seeking indemnity. = Because the=20 words =93executed . . . with the third party=94 in the statute are clear = and=20 unambiguous, we apply the words according to their plain and common = meaning=20 without resort to rules of construction or extrinsic aids. = Fitzgerald,=20 996 S.W.2d at 865-66; Agbor, 952 S.W.2d at 505. We should not = read the=20 statute=92s words other than according to their ordinary meaning, = because a=20 contrary intention is not apparent from the context. See Taylor, = 616 S.W.2d at 189. So read, the language precludes = indemnity=20 unless the third party was a signatory to the written agreement executed = by the=20 subscriber.

&nbs= p;=20 Further, we presume all the words in the statute were used purposely by = the=20 Legislature. See Eddins-Walcher Butane = Co.,=20 298 S.W.2d at 96. For example, the statutory = provision=20 in question formerly provided, in relevant part, that if a party other = than the=20 subscribing employer made a settlement with the injured employee, then = the=20 subscribing employer had no liability to indemnify the third party =93in = the=20 absence of a written agreement expressly assuming such liability, = executed by=20 the subscriber prior to such injury or death.=94 See former Tex. Rev. Civ. = Stat.=20 Ann. art. = 8306 =A73. The same relevant part of the current = statute=20 provides that the subscribing employer has no liability to indemnify the = third=20 party =93unless the employer executed, before the injury or death = occurred, a=20 written agreement with the third party to assume the liability.=94 Tex. Lab. = Code =A7=20 417.004. If the words =93with the third party=94 = are omitted=20 when reading the current language of section 417.004, then the section=20 effectively provides the same as did the former statute: in order to be = liable=20 for indemnity to a settling third party, the subscribing employer must = have=20 executed a written agreement assuming the indemnity obligation before = the=20 injury, but the agreement was not required to have been with the third = party=20 seeking indemnity. Direct comparison of the two statutory provisions = makes it=20 clear that for the phrase =93executed . . . with the third party=94 to = have meaning,=20 section 417.004 limits the subscribing employer=92s indemnity obligation = to=20 parties who are signatories to the agreement executed by the = subscriber.

&nbs= p;=20 In a similar vein, because the words =93third-party beneficiaries=94 do = not appear=20 in the statute, we presume they were excluded for a purpose. = Cameron,=20 618 S.W.2d at 540. Only when it is necessary = to give=20 effect to clear legislative intent can we insert, by interpretation, = additional=20 words or requirements into a statutory provision. Id. = And as the=20 Court=92s opinion demonstrates, even if we look for legislative intent = beyond the=20 statutory language itself, we find no clear legislative intent that the = words=20 =93executed . . . a written agreement with the third = party=94 were=20 intended to encompass parties not signatories to an agreement.

&nbs= p;=20 Nor is it =93perfectly plain=94 that giving the = statutory language=20 its literal, plain, and common meaning works an absurdity or manifest=20 injustice. See Gilmore, 188 S.W. at 1039. First, the = statute=20 effectively provides that parties such as Mitchell who require indemnity = agreements from subscribing employers may contract only for their own = right to=20 indemnity. That concept is not absurd. It does not offend established = contract=20 presumptions. See MCI Telecomms. Corp. v. Tex. Utils.=20 Elec. Co., 995 S.W.2d 647, 652 (Tex. 1999) (=93[T]here is a = presumption=20 against, not in favor of, third-party beneficiary agreements.=94); = Corpus=20 Christi Bank & Trust v. Smith, 525 S.W.2d 501, 503-04 (Tex. = 1975)=20 (noting the presumption that parties contract for themselves and not for = third-party beneficiaries). And reading the statute according to its = plain=20 language, which limits a subscribing employer=92s indemnity obligation, = furthers=20 the main inducement for employers to provide workers=92 compensation = insurance:=20 limited exposure to common-law damage claims of an employee injured in = the=20 course of employment. See Tex.=20 Lab. Code =A7 406.034; Tex. = Workers=92 Comp.=20 Comm=92n v. Garcia, 893 S.W.2d 504, = 510-11=20 (Tex. 1995); Massey v. Armco Steel = Co.,=20 652 S.W.2d 932, 933 (Tex. 1983) (noting that the = Workers=92=20 Compensation Act bars an employee=92s common law action for negligence = against his=20 employer). The benefit of a subscribing employer=92s immunity from = claims by an=20 injured employee is diminished whenever the employer is made subject to=20 indemnity claims for common-law damages recovered by the injured = employee from=20 third parties. Narrowing the exception to immunity to those parties with = whom=20 the employer executed a written agreement is wholly consistent with the=20 overarching theory of workers=92 compensation: immediate benefits to = injured=20 workers in exchange for employer immunity from claims. The former = statute did=20 not require the employer to have a pre-injury agreement =93executed . . = . with the=20 third party=94 before the employer could be called on for indemnity. And = the 1989=20 amendments were not a mere recodification of = prior law=20 such as Texas=20 statutes have been undergoing for some years. See Fleming Foods of = Tex.,=20 Inc., v. Rylander, 6 S.W.3d 278, 283 = (Tex. 1999) = (=93In 1963, the=20 Legislature charged the Texas Legislative Council with the task of = planning and=20 executing a permanent statutory revision program to =91clarify and = simplify the=20 statutes and to make the statutes more accessible, understandable, and = usable.=92=20 Tex. Gov=92t Code =A7 323.007(a). The = Legislature=20 directed, however, that =91the council may not alter the sense, meaning, = or effect=20 of [a] statute.=92 Id. =A7=20 323.007(b).=94). The 1989 changes to the workers=92 compensation = statute were=20 extensive and controversial. The driving force behind the 1989 changes = was the=20 system=92s increasing cost to employers which had pushed the system to a = crisis=20 point. Garcia, 893 S.W.2d at 512. = Business=20 groups claimed that the increasing cost of compensation insurance forced = large=20 businesses to locate operations elsewhere and forced small businesses to = cease=20 operations or opt out of coverage. Id. The parties and = amicus Texas=20 Oil and Gas Association naturally focus their arguments on the = statute=92s effects=20 on the oil and gas industry. But the crisis which generated the 1989 = changes=20 encompassed all Texas employers. See id. = Indemnity=20 agreements such as the Mitchell agreement attempt to, in effect, = circumvent some=20 of the financial inducement provided by the 1989 changes for employers = to become=20 and remain subscribers. One effect of enforcing such broad indemnity = agreements=20 is that the subscribing employer pays premiums for workers compensation=20 insurance, yet remains liable for common-law damages to an employee by = reason of=20 having to indemnify numerous third parties for judgments or settlements = in the=20 employee=92s common-law damages suit. This case was disposed of in the = trial court=20 by summary judgment. The record contains no evidence of how either=20 interpretation of the statute contended for by the parties might affect = the=20 economics of the state=92s workers=92 compensation system and its cost = to Texas = employers. But=20 Superior=92s=20 workers=92 compensation policy was part of the summary judgment record. = The=20 employer=92s liability part of the policy excludes coverage for = contractually=20 assumed liabilities, which would presumably include liabilities such as = the=20 indemnity agreement. Even assuming subscribing employers purchase = separate=20 liability insurance to cover contractually assumed indemnity agreements = (as was=20 required by Superior=92s contract with Mitchell) so as to minimize their = personal=20 liability for indemnity, the indemnity agreements result in employers = paying for=20 both compensation insurance and liability insurance for injuries to its = own=20 employees. Intuitively, the broader the indemnity agreement and the = greater the=20 exposure to claims, the greater the cost of liability insurance will be = to=20 subscribing employers.

&nbs= p;=20 The plain language of section 417.004 respects the freedom of = subscribing=20 employers to contract away their statutory immunity from liability, yet = protects=20 them from economic pressures to enter broad indemnity agreements = contracting=20 away their immunity as to third parties with whom the employers do not = have=20 direct contractual agreements. The effect of interpreting section = 417.004 to=20 include persons or entities who are not signatories and direct parties = to the=20 agreements means that subscribing employers signing such indemnity = agreements=20 remain in the position they were in before the 1989 amendments: having = no=20 control over whom they may be called upon to indemnify because the owner = or=20 other actual contracting party with whom the employers executed the = agreements=20 remain able to contract with any third-party contractor they desire.

&nbs= p;=20 Energy asserts that reading the statute to apply only to direct parties = to the=20 agreement will be in derogation of the Texas Oilfield Anti-Indemnity Act = (TOAIA)[2] and disruptive to the oil and = gas=20 industry. But a significant reason for passage of the TOAIA was to = protect=20 certain contractors who could not effectively protect themselves from = being=20 economically pressured into executing broad indemnity contracts in order = to get=20 oilfield work. See Tex. = Civ.=20 Prac. & Rem. Code =A7 127.002(a),(b); Getty Oil Co. v. = Ins. Co. of=20 N. Am., 845 S.W.2d 794, 802-03 (Tex. 1992). The primary thrust of = the TOAIA=20 is to generally make certain oilfield indemnification agreements void = and=20 unenforceable and to limit the enforceability of other such = agreements,=20 not to enhance enforceability of broad oilfield indemnity = agreements. The=20 TOAIA allows enforcement of certain specified types of indemnity = agreements=20 subject to its provisions by excluding those types of agreements from = the=20 operation of its general language. See Tex. Civ. Prac. & Rem.=20 Code =A7=A7 = 127.003-.005.=20 The TOAIA does not, however, specifically address the anti-indemnity = provision=20 of the workers=92 compensation statutes, much = less=20 provide that the TOAIA negates such provision. The closest the TOAIA = comes to=20 addressing the workers=92 compensation anti-indemnity provision is = section=20 127.006, which provides that the TOAIA is not intended to affect = the=20 validity of an insurance contract or a benefit conferred by the = workers=92=20 compensation statutes.[3]

&nbs= p;=20 In my view, the Court=92s construction of section 417.004: (1) does not = comport=20 with the literal, plain meaning of the statute; (2) dilutes subscribing=20 employers=92 immunity from common-law damages claims of the employers=92 = injured=20 employees which is a key concept underlying the workers=92 compensation = statutes;=20 and (3) does not square with one of the main reasons for the 1989 = revision of=20 the workers=92 compensation statutes=97reducing costs to subscribing = employers. I=20 would hold that language in Superior=92s contract=20 with Mitchell, which requires Superior to indemnify Energy, a nonsignatory to the contract, conflicts with = section 417.004=20 and that, to the extent of the conflict, the contractual language is = invalid. I=20 would affirm the judgment of the court of appeals.

&nbs= p; = ; = &= nbsp; &n= bsp; =20 ________________________________________

&nbs= p; = ; = &= nbsp; &n= bsp; =20 Phil Johnson

&nbs= p; = ; = &= nbsp; &n= bsp; =20 Justice

OPINION = DELIVERED: August=20 24, 2007

^[1]=20 The Workers=92 Compensation Act provides that employees of subscribing = employers=20 waive their common law claims against their employer unless the = employees elect=20 otherwise. See Tex. = Lab. Code =A7 = 406.034(a).

^[2]=20 Tex. Civ. Prac. &=20 Rem. Code =A7=A7=20 127.001-.007.

^[3]=20 This case does not require us to interpret the language of section = 127.006.=20 Superior=20 responds to Energy=92s argument by positing that statutory abrogation of = certain=20 common-law claims an employee might otherwise have against a subscribing = employer is a benefit to the employer. Energy points to the definition = of=20 =93benefit=94 in the Workers=92 Compensation Act to argue that it is=20 not.