Aubris Resources v. St. Paul Fire and Marine Ins.

• Decision Date: 23 April 2009
• Docket Number: No. 07-41272.,07-41272.
• Citation: 566 F.3d 483
• Parties: AUBRIS RESOURCES LP, formerly known as United Resources LP, formerly known as United Oil and Minerals Limited Partnership, Plaintiff-Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE CO., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

566 F.3d 483

AUBRIS RESOURCES LP, formerly known as United Resources LP, formerly known as United Oil and Minerals Limited Partnership, Plaintiff-Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE CO., Defendant-Appellee.

No. 07-41272.

United States Court of Appeals, Fifth Circuit.

April 23, 2009.

David W. Green (argued), Darrell L. Barger, Kathryn F. Green, Hartline, Dacus, Barger, Dryer & Kern, LLP, Corpus Christi, TX, for Plaintiff-Appellant.

Levon G. Hovnatanian (argued), Kennetha Waynne Lucas, Christopher Weldon Martin, Diana Perez, Martin, Disiere, Jefferson & Wisdom, Joseph Anthony Ziemianski, Cozen O'Connor, Houston, TX, for Defendant-Appellee.

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

Before JOLLY, DAVIS and DeMOSS, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

In this appeal we decide what effect a general indemnity provision in an oilfield services agreement has on the scope of additional insured coverage required by the same agreement. United Oil and Minerals filed this action in federal court, seeking a declaratory judgment that St. Paul Fire and Marine Insurance Company has a duty to defend United in state court lawsuits arising from an explosion at an oilfield that was serviced by St. Paul's insured, J&R Valley Oil Services. Under its services agreement with J&R Valley, United was J&R Valley's additional insured. St. Paul, however, denied additional insured coverage, citing a general indemnity provision in the services agreement whereby United agreed to indemnify J&R Valley for causes of action arising from United's own negligence. St. Paul argued, and the district court agreed, that the general indemnity provision necessarily limited the scope of United's additional insured coverage under the services agreement. We conclude, however, that Texas case law instructs otherwise and construe the services agreement in favor of coverage. Accordingly, we vacate summary judgment for St. Paul and render judgment in favor of United.

I.

We begin with the relevant facts.

United hired J&R Valley to service its oilfield properties in April 2002. Their services agreement required that J&R Valley carry commercial general liability insurance and name United an additional insured under that policy. The agreement also contained a general indemnity provision, whereby United agreed to indemnify J&R Valley for causes of action arising from United's own negligence.

On October 20, 2003, an explosion at one of United's oilfields severely injured two J&R Valley employees, Ernesto Garza and Carlos Figueroa. Garza later died from his injuries. Thereafter Garza's estate and Figueroa sued both J&R Valley and United in a Texas state court, alleging negligence. J&R Valley was dismissed from the lawsuits because under the Texas Workers' Compensation Act neither employee could recover from J&R Valley under a theory of simple negligence.¹ The lawsuits against United, however, proceeded.

The practical question here is who will pay for United's expense in the Garza litigation. J&R Valley purchased its commercial general liability insurance policy from St. Paul Fire and Marine Insurance Company. That policy covers additional insureds, but only where specifically required in a written agreement. United contends that under its services agreement with J&R Valley it is an additional insured, and therefore St. Paul had a duty to defend it in the Garza litigation. St. Paul counters that United is not an additional insured for causes of action arising from United's own negligence.

United and St. Paul dispute whether two of the services agreement's provisions— the additional insured provision and the general indemnity provision—interrelate. The additional insured provision states that United is an additional insured except with respect "to any obligations for which UNITED has specifically agreed to indemnify" J&R Valley; the general indemnity provision states that United will indemnify J&R Valley for causes of action arising from United's own negligence. St. Paul reads the two provisions together, such that there is no coverage in causes of action arising from United's own negligence. United, on the other hand, argues there is no relationship between the two provisions, and coverage is determined by reference only to the additional insured provision. United reads the additional insured provision to provide that United is an additional insured unless it separately and extra-contractually agrees to indemnify J&R Valley. Because it has not separately agreed to indemnify J&R Valley in connection with the Garza litigation, United insists the Garza litigation is covered under the St. Paul policy.

The district court, in granting summary judgment for St. Paul, rejected United's interpretation as unreasonable because it agreed with St. Paul that the general indemnity provision necessarily limited additional insured coverage. We conclude, however, that in the light of recent Texas case law United's interpretation is at least reasonable and therefore construe the disputed provisions in favor of coverage.

II.

We review the district court's grant of summary judgment de novo, applying the same legal standards as the district court. United States v. Corpus, 491 F.3d 205, 209 (5th Cir.2007). Summary judgment is appropriate only "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c).

Where federal jurisdiction is based on diversity of citizenship, a federal court applies the substantive law of the forum state. See Foradori v. Harris, 523 F.3d 477, 486 (5th Cir.2008) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78-79, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)); see also Empire Fire & Marine Ins. Co. v. Brantley Trucking, Inc., 220 F.3d 679, 680-81 (5th Cir.2000). The parties agree that the substantive law of Texas applies in this case.

Under Texas law, the same general rules apply to the interpretation of contracts and insurance policies. See, e.g., Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex.2003). The contract should be "considered as a whole" and "each part of the contract should be given effect." Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex.1994). Our primary concern is to ascertain the parties' true intent, as expressed in the language of the policy. Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998). "We cannot adopt a construction that renders any portion of a policy meaningless, useless, or inexplicable." Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660, 668 (Tex.2008).

If a provision has more than one reasonable interpretation, a court must interpret it in favor of the insured, provided that interpretation is not unreasonable, and even if the insurer's interpretation is more reasonable. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex.1991). "In particular, exceptions or limitations on liability are strictly construed against the insurer and in favor of the insured." Id. We therefore adopt United's interpretation in this case if in our review we conclude it is at least reasonable.

III.

A.

Our starting point is the insurance policy itself. The St. Paul insurance policy is a standard commercial general liability policy that includes the following additional insured endorsement:

Any person or organization that you agree in a written contract for insurance to add as an additional protected person under this agreement is also a protected person for the following if that written contract for insurance specifically requires such coverages for that person or organization....

(Emphasis added.)

We then turn to the services agreement with United, i.e., the "written contract for insurance," and ask whether it requires coverage in the underlying Garza litigation. We look to the services agreement's additional insured provision, which appears in section 10.2. That provision states, in relevant part:

UNITED and its subsidiaries, affiliated companies, co-owners, partners and joint venturers (if any), and their respective members, managers, officers, directors, agents, and employees shall be named as additional insureds in each of Contractor's policies, except Workers' Compensation; however, such extension of coverage shall not apply with respect to any obligations for which UNITED has specifically agreed to indemnify Contractor.

(Emphasis added.)

Section 10.2 plainly requires that J&R Valley name United an additional insured. The present dispute, however, arises from section 10.2's stipulation that there will be no additional insured coverage for "any obligations for which UNITED has specifically agreed to indemnify [J&R Valley]." St. Paul argues this exclusionary language in section 10.2 refers to United's agreement, in section 11.1, to indemnify J&R Valley for causes of action arising from its own negligence. Section 11.1, which is titled "GENERAL INDEMNITY," states, in relevant part:

UNITED SHALL PROTECT, DEFEND, INDEMNIFY, AND HOLD HARMLESS J&R AND ITS OFFICERS, DIRECTORS, AGENTS, AND EMPLOYEES FROM AND AGAINST ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION ASSERTED BY ANY PERSON (INCLUDING BUT NOT LIMITED TO EMPLOYEES OF J&R AND UNITED) THAT ARISE OUT OF OR ARE RELATED TO WORK AND ARE CAUSED BY OR ARISE OUT OF UNITED'S NEGLIGENT ACTS OR OMISSIONS ....

B.

Thus, to determine the additional insurance coverage question presented in this appeal, we now turn to consider the relationship between and among the policy, the additional insured provision in the services agreement, and the indemnity provision in the services agreement.

St. Paul argues that because in section 11.1 United agreed to indemnify J&R Valley for causes of action arising out of its own negligence, United is not an additional insured in the Garza...