513 F.3d 146 (5th Cir. 2008), 06-41785, XL Specialty Ins. Co. v. Kiewit Offshore Services, Ltd.

Docket Nº:06-41785.
Citation:513 F.3d 146
Party Name:XL SPECIALTY INSURANCE CO., Plaintiff-Appellant, v. KIEWIT OFFSHORE SERVICES, LTD., Defendant-Appellee, RBT Welders, Inc., Defendant-Appellant.
Case Date:January 02, 2008
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 146

513 F.3d 146 (5th Cir. 2008)

XL SPECIALTY INSURANCE CO., Plaintiff-Appellant,

v.

KIEWIT OFFSHORE SERVICES, LTD., Defendant-Appellee,

RBT Welders, Inc., Defendant-Appellant.

No. 06-41785.

United States Court of Appeals, Fifth Circuit.

January 2, 2008

Page 147

Franklin H. Jones, III, Michael L. McAlpine (argued), McAlpine & Cozad, New Orleans, LA, for Plaintiff-Appellant.

Andrew Todd McKinney, IV (argued), McKinney & Cooper, Houston, TX, for Defendant-Appellee.

James Patrick Magee, Baldwin, Haspel, Burke & Mayer, LLC, New Orleans, LA, James H. Robichaux (argued), Branscomb, PC, Corpus Christi, TX, for Defendant-Appellant.

Page 148

Appeal from the United States District Court for the Southern District of Texas.

Before KING, GARZA and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

This appeal is from a declaratory judgment ruling that the plaintiff insurance company had a duty to defend and indemnify the defendant general contractor in an underlying state wrongful death suit. It involves the application of Texas's express negligence rule to an indemnity contract between a general contractor, the indemnitee, and a sub-contractor, the indemnitor. Applying Texas precedent, we conclude that the language in the indemnity provision satisfied the requirement that the contract must unambiguously state a party's intent to indemnify the indemnitee for all liability caused by the indemnitee's own future negligence. Additionally, we reject the challenge to the reasonableness of the settlement. We affirm.

I. BACKGROUND

Defendant-Appellee Kiewit Offshore Services (Kiewit) was the general contractor performing welding services on the Skyway Bridge San Francisco Bay Project. Kiewit entered into a subcontract with Defendant-Appellant R.B.T. Welders, Inc. (RBT). Pursuant to this contract, RBT provided welders to Kiewit to work on the project at Kiewit's facility in Ingleside, Texas.

On January 6, 2003, at the facility, Mann Nguyen, an employee of RBT, entered a confined space, which resembled a large steel box, to perform a weld repair. The gas in the steel box ignited, and the resulting explosion blew off the roof. Nguyen, who was conscious after the explosion, suffered third degree burns over sixty-five percent of his body. He was transported to the Brooks Army Medical Center and died one week later. Ernesto Moreno, a Kiewit employee, had been standing on the roof at the time of the explosion and was killed instantly.

The families of Moreno and Nguyen brought suit against Kiewit and RBT in Texas state court, alleging that Kiewit and RBT were negligent for operating the Ingleside Plant without implementing an adequate safety program for welding in confined spaces. At the time of the explosion, RBT had the following insurance policies: (1) an excess liability policy through XL Specialty Insurance Company (the Plaintiff-Appellant in the instant declaratory judgment action); (2) a commercial general liability insurance policy from Atlantic Insurance Company; (3) and a worker's compensation policy through American Interstate Insurance Company. After receiving service, Kiewit demanded that XL Specialty defend and indemnify Kiewit as an additional insured. XL Specialty refused, and Atlantic tendered a defense.

RBT settled with the Moreno family for four million dollars and the Nguyen family for one million dollars. Kiewit subsequently began negotiating with the Nguyen family. During this time, Kiewit's counsel prepared a report analyzing Kiewit's potential liability to the Nguyen family. The report was prepared based on Kiewit's internal investigation and initial discovery in the underlying suit.

The evidence demonstrated that Kiewit was hired to construct bridge footings, a type of project that Kiewit had not previously undertaken. Kiewit usually worked on offshore platforms. Unlike offshore platforms, the welding on bridge footings had to be done in an enclosed space. Kiewit's safety officer had no experience working on structures like bridge footings. Kiewit had no provision for ventilating the enclosed space during welding. Although

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Kiewit provided fans for welders in the enclosed spaces, these fans did not have "explosive proof" switches and were not placed fully outside the enclosed space when in use.

Kiewit's counsel concluded that the operating procedures created a foreseeable risk of an explosion and that such procedures did not adequately protect the employees from the hazards of welding in enclosed spaces. The report concluded that Kiewit was potentially liable to the Nguyen family for: (1) failing to properly execute the confined space entry permit system; (2) failing to implement a proper confined space ventilation system; and (3) providing a ventilation fan that potentially was the ignition source for the explosion. It also estimated that Nguyen's survival damages for the week in the hospital suffering third-degree burns could be twenty million dollars, with perhaps fifty to sixty percent of the fault attributed to Kiewit. Because Kiewit owned the facility, the report stated the percentage of fault could be higher.

Kiewit, using RBT's settlement with the Moreno family as a guidepost, settled with the Nguyen claimants for four million dollars. Subsequent to the settlements, XL Specialty filed a...

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