ExxonMobil Corp. v. Elec. Reliability Servs., Inc.

• Citation: 868 F.3d 408
• Decision Date: 22 August 2017
• Docket Number: No. 15-20751,15-20751
• Parties: EXXONMOBIL CORPORATION, Plaintiff-Appellee Cross-Appellant v. ELECTRICAL RELIABILITY SERVICES, INCORPORATED; Old Republic Insurance Company, Defendants-Appellants Cross-Appellees
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

868 F.3d 408

EXXONMOBIL CORPORATION, Plaintiff-Appellee Cross-Appellant
v.
ELECTRICAL RELIABILITY SERVICES, INCORPORATED; Old Republic Insurance Company, Defendants-Appellants Cross-Appellees

No. 15-20751

United States Court of Appeals, Fifth Circuit.

Filed August 22, 2017

Glenn Richard Legge, Karen A. Conticello, Legge, Farrow, Kimmitt, McGrath & Brown, L.L.P., Houston, TX, for Plaintiff-Appellee Cross-Appellant.

Timothy G. O'Neill, Attorney, James D. Kilroy, Esq., Jessica E. Yates, Esq., Attorney, Snell & Wilmer, L.L.P., Denver, CO,

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for Defendant-Appellant Cross-Appellee ELECTRICAL RELIABILITY SERVICES, INCORPORATED.

Brett Lee Myers, Robert J. Palmer, Fox Rothschild, L.L.P., Dallas, TX, for Defendant-Appellant Cross-Appellee OLD REPUBLIC INSURANCE COMPANY.

Before DAVIS, DENNIS, and SOUTHWICK, Circuit Judges.

JAMES L. DENNIS, Circuit Judge:

This diversity case under Texas law involves a dispute between ExxonMobil (Exxon), on one hand, and Exxon's contractor, Electrical Reliability Services (ERS), and ERS's insurer, Old Republic Insurance Company (ORIC), on the other. The dispute arises out of a personal injury lawsuit filed by an employee of a subcontractor of ERS against Exxon and ERS. Exxon settled that lawsuit for $2.5 million and sought reimbursement from ERS and ORIC, contending that ERS's contractual obligation to insure Exxon as an additional insured and the insurance policy issued by ORIC required ERS and ORIC to pay for the settlement of the suit and the cost of litigation. In a 2012 judgment, the district court concluded that ORIC breached its obligation to provide coverage and that ERS breached its obligation to pay the policy's $3 million deductible. The court therefore awarded Exxon over $3 million in damages, attorney's fees, costs, and interest. ERS appealed, but a prior panel of this court vacated the district court's judgment and remanded for reconsideration in light of the intervening decision by the Supreme Court of Texas in In re Deepwater Horizon , 470 S.W.3d 452 (Tex. 2015). On remand, the district court determined that the intervening case did not affect its decision and essentially reinstated its 2012 judgment.

ERS again appealed, challenging the district court's conclusion as to its obligation to pay the deductible. Alternatively, ERS contends that the district court erred in its award of pre-judgment interest through the date of the judgment on remand rather than only through the date of the 2012 judgment. ORIC also appeals, claiming that the district court erred by holding it jointly and severally liable with ERS for the full amount of the judgment. Exxon cross-appeals, challenging the district court's denial of certain attorney's fees.

I. BACKGROUND

In 2008, Exxon contracted with ERS for the performance of electrical work and services at Exxon's chemical facility and refinery in Beaumont, Texas. The contract between the parties contained indemnity and insurance provisions. The indemnity provision, contained in § 12 of the contract, required that each party indemnify the other from third party claims resulting from the first party's negligence. It provided, in relevant part:

12. Third Party Indemnity . Purchaser [Exxon] and Supplier [ERS] shall indemnify, defend, and hold each other harmless from all claims, demands, and causes of action asserted against the indemnitee by any third party ... for personal injury, death, or loss of or damage to property resulting from the indemnitor's negligence.

The insurance provisions, contained in § 14, required ERS to purchase commercial general liability and other types of insurance and to name Exxon as an additional insured on the policies. Section 14, in pertinent part, provided:

14. Insurance.

(a) Coverages. Supplier [ERS] shall carry and maintain in force at least the following insurances and amounts: ...

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(2) its normal and customary commercial general liability insurance coverage and policy limits or at least $1,000,000, whichever is greater, providing coverage for injury, death or property damage resulting from each occurrence.... Notwithstanding any provision of an Order to the contrary, Supplier's liability insurance policy(ies) described above shall: (i) cover Purchaser [Exxon] and Affiliates as additional insureds in connection with the performance of Services; and (ii) be primary as to all other policies (including any deductibles or self-insured retentions) and self insurance which may provide coverage.

(b) Other Insurance Requirements. The above obligations of Supplier [ERS] and/or its Insurers shall apply to Supplier's [ERS's] self-insured retentions and/or deductibles. The minimum insurance requirements as set forth above shall not limit or waive a party's legal or contractual responsibilities to the other party or others. Supplier's insurance shall apply to Supplier's indemnity and defense obligations under the Order except, with respect to Services subject to the law of the State of Texas, each party agrees to maintain the insurance and limits as specified in this Section or self insurance during the duration of this Agreement in support of the mutual indemnifications, if any, agreed to in Sections 11, 12, and 13 above.

ERS purchased an insurance policy from ORIC that provided for a $3 million deductible. An endorsement to the policy also provided for additional-insured coverage where ERS had "agreed by any contract" to so provide, but, it qualified, "Any additional insureds are additional insureds only in respect to their interest in the operations of the Named Insured and only for such terms and limits which are the lesser of the policies hereon or the written requirements between the Named Insured and the Certificate Holder."

ERS subcontracted part of the work and services at the Exxon facility to MMR, Inc. John Burnham, an MMR employee, was severely injured while working at the facility. Burnham brought negligence claims against Exxon in state court and later added ERS as a defendant. Exxon sent ERS a demand for coverage as an additional insured, but ERS subsequently denied coverage. Exxon ultimately settled Burnham's claims against it for $2.5 million, while disclaiming liability. Burnham later voluntarily dismissed his claims against ERS. Exxon then sought insurance coverage for its settlement payment and related defense fees, costs, and interest, but ERS and ORIC denied coverage. Exxon brought suit for declaratory judgment in Texas state court against ERS and ORIC, contending that ERS was required to insure Exxon under the 2008 contract and that ORIC, as ERS's insurer, was obligated to provide coverage to Exxon for the settlement of the Burnham suit and attorney's fees incurred in connection with that suit.

ERS removed that action to the United States District Court for the Southern District of Texas based on diversity jurisdiction. Exxon and ERS filed cross-motions for summary judgment on the issue of whether ERS was contractually obligated to name Exxon as an additional insured. ERS argued that the relevant contract was a prior 2007 agreement between the parties, which did not require ERS to insure Exxon as an additional insured. Alternatively, ERS contended that under the 2008 contract ERS was obligated to cover Exxon as an additional insured only to the extent of the parties' mutual indemnification obligations. ERS argued that it was therefore not obligated to provide coverage for harms resulting from Exxon's sole

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negligence, which, according to ERS, included Burnham's injuries. Ruling on the parties' cross-motions, the district court determined that the operative contract was the 2008 contract, that the contract required ERS to provide additional-insured coverage for Exxon, and that this insurance obligation was not limited by the indemnity provision of that contract. However, the district court also ruled that ERS had complied with its obligation through the additional-insured endorsement to its policy with ORIC.

Despite the district court's partial summary judgment ruling on the issue of coverage, ERS and ORIC continued to refuse to reimburse Exxon in connection with the Burnham settlement. ERS and Exxon disagreed as to which party was responsible for payment of the policy's $3 million deductible. Among other arguments ERS raised in this respect, it reasserted its previously-rejected position that the indemnity provision in the 2008 contract served to limit its obligations under the insurance provision. Following this argument, ERS maintained that the indemnity provision mandated that Exxon pay the deductible because, according to ERS, Burnham's injuries resulted from Exxon's sole negligence. ORIC, for its part, claimed that it was not responsible for any payment because, according to ORIC, the relevant amounts owed were less than the amount of the $3 million deductible and therefore did not trigger ORIC's responsibility to make payments on Exxon's claim. Following a bench trial, the district court held: (1) ERS breached the contract by failing to pay the deductible, and (2) ORIC breached the insurance policy by failing to provide Exxon with a defense in the Burnham lawsuit and failing to cover any amounts above the deductible. The district court made no finding as...