Xl Specialty Ins. Co. v. Kiewit Offshore Services
| Decision Date | 02 January 2008 |
| Docket Number | No. 06-41785.,06-41785. |
| Citation | 513 F.3d 146 |
| Parties | XL SPECIALTY INSURANCE CO., Plaintiff-Appellant, v. KIEWIT OFFSHORE SERVICES, LTD., Defendant-Appellee, RBT Welders, Inc., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Appeal from the United States District Court for the Southern District of Texas.
Before KING, GARZA and BENAVIDES, Circuit Judges.
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.
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 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 declaratory judgment action in federal district court, seeking a judgment that it had no duty to defend or indemnify Kiewit for Kiewit's settlement with the Nguyen claimants because Kiewit was not an additional insured under the XL Specialty policy. Kiewit filed a third-party claim against RBT and a cross-claim against XL Specialty, asserting that RBT had a duty to defend and indemnify Kiewit under the indemnification provision in the RBT/Kiewit subcontract. Kiewit further asserted that the XL Specialty policy provided coverage for RBT's liability under the indemnification provision.
The district court granted summary judgment, holding that RBT had contracted to indemnify Kiewit for Kiewit's negligence with respect to the explosion, and the XL Specialty policy provided coverage for RBT's contractual duty to indemnify. RBT and XL Specialty now appeal.
This Court reviews a district court's grant of summary judgment de novo, applying the same standards as the district court. E.g., Hirras v. Nat'l R.R. Passenger Corp., 95 F.3d 396, 399 (5th Cir.1996). Summary judgment is proper if the record reflects "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(c).
Appellants RBT and XL Specialty contend that the district court erred in finding that the indemnity provision at issue expressly provided that RBT would indemnify Kiewit for Kiewit's own negligence. Appellants argue that the indemnity clause did not satisfy the express negligence rule. Texas's express negligence rule is a "rule of contract interpretation that applies specifically to agreements to indemnify another party for the consequences of that party's own negligence." Quorum Health Resources v. Maverick County Hospital District, 308 F.3d 451, 458 (5th Cir.2002). Under this rule, "contracting parties seeking to indemnify one party from the consequences of its, own negligence must express that intent in specific terms, within the four corners of the document." Id. (citing Ethyl Corp. v. Daniel Const. Co., 725 S.W.2d 705, 707-08 (Tex.1987)). The Texas Supreme Court adopted this stringent rule because indemnification of a party for the consequences of that party's negligence was an "extraordinary shifting of risk." Id. at 458-59. Whether an indemnity provision satisfies the express negligence rule, is a question of law for the court to determine. Id. at 459.
The instant indemnification provision reads as follows:
To the fullest extent permitted by law, Subcontractor [RBT] specifically obligates itself to Contractor [Kiewit], Contractor's partners, individually, and all Kiewit companies (defined as any company or business entity in which Peter Kiewit Sons, Inc. directly or indirectly holds a controlling interest). Contractor's surety, Owner and any other party required to be indemnified under the Prime Contract, jointly and severally, (hereinafter "Contractor Indemnified Parties") in the following respects, towit:
....
(b) TO DEFEND AND INDEMNIFY THEM AGAINST AND SAVE THEM HARMLESS FROM ANY AND ALL CLAIMS, SUITS OR LIABILITY FOR DAMAGES TO PROPERTY, INCLUDING LOSS OF USE THEREOF, INJURIES TO PERSONS, INCLUDING DEATH, AND FROM ANY OTHER CLAIMS, SUITS OR LIABILITY ON ACCOUNT OF ACTS OR OMISSIONS OF SUBCONTRACTOR, OR ANY OF ITS SUBCONTRACTORS, SUPPLIERS, OFFICERS, AGENTS, EMPLOYEES OR SERVANTS, WHETHER OR NOT CAUSED COMPENSATION ACT OR SIMILAR STATUTE.
(emphasis added).
Texas precedent persuades us that this language would satisfy the express negligence rule. In Payne & Keller, Inc. v. P.P.G. Industries, Inc., the Texas, Supreme Court held that similar language expressed the parties' clear intent that Payne & Keller would indemnify P.P.G. for P.P.G.'s own concurrent negligence:
By its terms, the Payne & Keller/P.P.G. contract required Payne & Keller to indemnify P.P.G. for work-related claims "arising out of ... the acts or omissions ... of [Payne & Keller] or its ... employees ... in the performance of the work ... irrespective of whether [P.P.G.] was concurrently negligent ... but excepting where the injury or death ... was caused by the sole negligence of [P.P.G.]."
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