A federal appeals court has overturned a lower court ruling in favor of W.R. Berkley Corp. in its dispute with an Arch Insurance Group Inc. unit over indemnification for a worker’s injuries in an oil rig explosion.

The dispute stems from payments Arch Insurance Co. made to settle a personal injury lawsuit filed against Parkersburg, West Virginia-based HG Energy LLC and Duson, Louisiana-based Stric-Lan Cos. LLC, according to Tuesday’s ruling by the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, in Arch Insurance Co. and Steadfast Insurance Co. v. Berkley National Insurance Company; Stric-Lan Cos., LLC  and HG Energy LLC.

In 2012, HG Energy, which operates oil and gas wells in West Virginia, and Stric-Lan, a provider of well-site services, entered into a master service and supply agreement that required Stric-Lan to procure insurance and name HG Energy as an additional insured. The agreement included defense and indemnity obligations for both companies, according to the ruling.

To comply with the master agreement, Stric-Lan obtained insurance from Berkley unit Berkley National Insurance Co., and HG Energy obtained insurance through Arch Insurance, as well as Zurich Insurance Group unit Steadfast Insurance Co.

Stric-Lan employee Tyler Kunz was severely injured by an explosion at an HG Energy worksite when he lit a cigarette next to an active natural gas well, the ruling said. He sued HG Energy and Stric-Lan, alleging HG Energy had failed to provide him with a safe workplace and that Stric-Lan was liable under West Virginia’s deliberate-intent statute.

After Stric-Lan and Berkley refused the case, it was settled by Arch and Steadfast, with Arch required to pay Mr. Kunz $5 million and Steadfast $1 million, with both insurers to pay defense costs.

Arch and Steadfast filed suit against Berkley and Strict-Lan in U.S. District Court in Charleston, West Virginia, seeking a ruling that Berkley had to contribute to the defense and settlement.

The court ruled the master agreement provided Stric-Lan had to pay only for indemnity arising out of its negligence.

It concluded that because the settlement rested on HG Energy’s negligence, not Stric-Lan’s, Arch had no right to indemnity from either Stric-Lan or Berkley. Steadfast reached a settlement in the case and is not a party to the current litigation.

The ruling was unanimously overturned by a three-judge appeals court panel, which said the lower court “relied on the incorrect fault-apportionment statutes” in its analysis.

If “Kunz’s injury stemmed at all from Stric-Lan’s negligence, and HG Energy is left to pay Kunz damages, Stric-Lan must indemnify HG Energy for its percentage of fault,” the panel said in vacating the lower court decision and remanding the case for further proceedings.

Attorneys in the case had no comments or did not respond to requests for comment.