Materials Evaluation and Technology Corporation v. Mid-Continent Casualty Co., 031813 FED5, 12-40186

Docket Nº:12-40186
Opinion Judge:PER CURIAM
Judge Panel:Before STEWART, Chief Judge, and DAVIS, and CLEMENT, Circuit Judges.
Case Date:March 18, 2013
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit




No. 12-40186

United States Court of Appeals, Fifth Circuit

March 18, 2013

Appeal from the United States District Court for the Eastern District of Texas USDC No. 1:10-CV-740

Before STEWART, Chief Judge, and DAVIS, and CLEMENT, Circuit Judges.


Plaintiff-Appellant Materials Evaluation and Technology Corporation ("METCO") appeals the district court's grant of summary judgment in favor of Defendant-Appellee Mid-Continent Casualty Company ("Mid-Continent"). The district court ruled that endorsement "ML 1190, " the Employers' Liability Exclusion Endorsement, precluded Mid-Continent's duty to defend under a commercial general liability insurance policy. For the following reasons, we AFFIRM the district court's grant of summary judgment.


A. Insured-Insurer Relationship between METCO and Mid-Continent

METCO first purchased a commercial general liability policy from Mid-Continent in 1997 and annually renewed its coverage through at least 2004. Of particular relevance to this case are the 2002 and 2003 policies.

The 2002 policy, which was effective from July 18, 2002 to July 18, 2003, provided, inter alia, for an Employer's Liability exclusion (the "Exclusion"). The Exclusion, which is listed in Section 1, subsection 2(e), of the Coverage A Bodily Injury and Property Damage Liability of the 2002 policy provide in relevant part:

2. This insurance does not apply to:

(e) Employer's Liability "Bodily injury" to:

(1) An "employee" of the insured arising out of and in the course of:

(a)Employment by the insured; or

(b) Performing duties related to the conduct of the insured business;

This exclusion applies:

(1) Whether the insured may be liable as an employer or in any other capacity; and

(2)To any obligation to share damages with or repay someone else who must pay damages because of the injury.

This exclusion does not apply to liability assumed by the insured under an "insured contract."

Therefore, the Exclusion did not apply to a "contract or agreement . . . under which [METCO] assume[s] tort liability of another party to pay for 'bodily injury' . . . ."

The effective dates for the 2003 policy were July 18, 2003 to July 18, 2004. The coverage for the 2003 policy also contained the same Exclusion as the 2002 policy. However, the 2003 policy differed from the 2002 policy because the 2003 policy included the Employers' Liability Exclusion Endorsement (the "Endorsement"). The Endorsement provides in relevant part:

This endorsement modifies insurance provided under the following:


This insurance does not apply:

2. To any liability or obligation for which any "insured, " or any company as its insurer, may be held liable to any person or entity, including any other "insured, " as a result of "bodily injury" to any employee sustained in the course of employment or supervision by an "insured"; or

4. To any liability of any "insured" to defend, indemnify, share payments or damages with, or repay anyone on account of any obligation arising out of "bodily injury" to any employee of the nature specified in . . . 2 above.

This exclusion shall be effective regardless of whether the liability or obligation is asserted directly or indirectly against any "insured" as an employer, contractor, subcontractor, third party defendant, or in any other capacity.

All Other Terms and Conditions Remain Unchanged. Accordingly, while the 2002 policy provided for coverage arising from an employee's injuries if liability arose from a third-party contractual relationship, the 2003 policy excluded this liability from coverage.

B. METCO-DuPont Agreement and Bertrands' Bodily Injury Claims

METCO performs materials testing for clients at various industrial sites in the Gulf Coast region, which requires METCO employees to work at these sites. In February 2003, METCO and E.I. du Pont de Nemours and Company ("DuPont") executed an agreement ("DuPont Agreement") whereby METCO agreed to provide various testing services at a DuPont facility in Beaumont, Texas. The DuPont Agreement included an indemnity clause, which required METCO and DuPont to "indemnify, defend and hold harmless the other Party" for various types of liability.

In March 2004, two of METCO's employees, Christopher and Jacqueline Bertrand, sustained bodily injuries while working at the DuPont facility. The Bertrands filed suit against DuPont in state court, which DuPont settled. Pursuant to the DuPont Agreement's indemnity clause, DuPont demanded reimbursement from METCO for fees and litigation expenses in defending and settling the Bertrands' claims. METCO refused to indemnify DuPont, and on June 29, 2010, DuPont sued METCO for breach of contract. METCO subsequently tendered the DuPont suit to its insurance carrier, Mid-Continent, for defense and indemnity.

C. Mid-Continent's Denial of Coverage and METCO and Mid-

Continent's Lawsuit

In July 2010, Mid-Continent denied METCO's request to defend, claiming that METCO's coverage was excluded under the provisions of the Coverage A Bodily Injury and Property Damage Liability insuring agreement under the 2003 policy. METCO then filed the instant action in state court seeking a declaratory judgment that Mid-Continent had a duty to defend METCO in the lawsuit brought by DuPont. METCO also advanced claims for breach of contract, breach of the duty of good faith and fair dealing, reformation of the insurance policy due to mutual mistake or fraud, and violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act. The action was removed to federal court on the basis of diversity jurisdiction. Mid-Continent subsequently asserted...

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