ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc.

Decision Date19 October 2012
Docket NumberNo. 12–20002.,12–20002.
Citation699 F.3d 832
CourtU.S. Court of Appeals — Fifth Circuit
PartiesACE AMERICAN INSURANCE CO., Plaintiff–Appellee, v. FREEPORT WELDING & FABRICATING, INC., Defendant–Appellant.

OPINION TEXT STARTS HERE

Martin Samuel Schexnayder, Marjorie Leigh Cohen (argued), Wilson, Elser, Moskowitz, Edelman & Dicker, L.L.P., Houston, TX, for PlaintiffAppellee.

Charles Michael Brackett (argued), Thomas Khleber Moore, III, Glast, Phillips & Murray, Houston, TX, for DefendantAppellant.

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

Before STEWART, Chief Judge, and DeMOSS and GRAVES, Circuit Judges.

CARL E. STEWART, Chief Judge:

Freeport Welding & Fabricating, Inc. (Freeport) and Brand Energy Solutions, L.L.C. (“Brand Energy”) were named defendants in a personal injury suit in Texas state court. ACE American Insurance Company (ACE) insures Brand Energy. Freeport sought defense and indemnity from ACE in the state court proceedings as an additional insured under Brand Energy's insurance policy with ACE. ACE denied Freeport's request, contending that it had no duty under the policy to defend or indemnify Freeport in the state court proceedings.

ACE and Freeport then filed motions in federal district court seeking summary judgment on the issue of whether ACE had a duty to defend or indemnify Freeport in the state court proceedings. The district court rendered judgment in favor of ACE, holding that it did not have a duty to defend Freeport in the state court proceedings. The district court declined to rule on the issue of whether ACE had a duty to indemnify Freeport in the state court proceedings. Thereafter, the parties in the state court proceedings settled their claims.

For the reasons stated herein, we AFFIRM the district court's summary judgment in favor of ACE holding that it had no duty to defend Freeport in the state court proceedings. We REMAND for a determination of whether ACE has a duty to indemnify Freeport for the cost of its settlement in the state court proceedings.

I.

Freeport, a Texas corporation, builds vessels for use in the energy industry. In 2008, Freeport began making plans to build a vessel called a quench chamber. On October 22, 2008, Freeport issued a purchase order (referred to herein as “the 2008 purchase order” or “the purchase order”) to Brand Industrial, L.L.C. (“Brand Industrial”), a subsidiary of Brand Energy, for the installation of a lining called refractory for the inside of the quench chamber. The total amount of the purchase order was $456,018.

Above the signature lines on the purchase order was the following language:

THIS ORDER INCORPORATES ALL TERMS AND CONDITIONS LISTED ON THIS ORDER; AND ACCEPTANCE OF THIS PURCHASE ORDER BY SELLER TO FURNISH MATERIALS, PRODUCTS AND/OR SERVICES CALLED FOR HEREIN CONSTITUTES ACCEPTANCE OF ALL TERMS AND CONDITIONS.

The purchase order also contained a “Comments” section which stated in pertinent part:

INCLUDES LABOR, MATERIAL, PERSONNEL QUALIFICATION, PRODUCTION TEST & THERMAL DRY–OUT. DETAILED SCOPE OF WORK AND REQUIREMENTS TO FOLLOW. WORK TO BE PERFORMED APPROX. 2ND QUARTER OF 2009.

In January 2009, prior to beginning the installation work pursuant to the 2008 purchase order, Brand Energy sent Freeport a letter stating that Brand Industrial “has turned your work over to our parent company, Brand Energy Solutions, LLC.” The letter further provided an address to which Freeport was to direct future payments for “all contracts, purchase orders and bid documents.” The letter was signed by Brand Energy's Director and General Manager, Lindsey M. Hebert.

Also in January 2009, Freeport and Brand Energy entered into a purchase agreement (referred to herein as the 2009 purchase agreement” or “the purchase agreement”), effective January 1, 2009 to evergreen,1 which was to be applicable to purchase orders issued from Freeport to Brand Energy. The purchase agreement stated that “in the event” that Freeport “provides notice in writing” to Brand Energy that it is to provide goods and/or services to Freeport, then the terms of the purchase agreement, effective January 1, 2009, “shall apply.”2 The “Terms and Conditions” section located above the signature lines on the first page of the purchase agreement stated that its terms and conditions “are hereby incorporated by reference to all purchase orders issued by [Freeport] to [Brand Energy] and shall govern all such transactions.”

Additionally, on the following page titled “Purchase Agreement Terms and Conditions” were the following paragraphs:

5. INSURANCE. Seller3 agrees to carry the following minimum insurance which shall be primary to any insurance maintained by Buyer: 4

Worker's Compensation, Commercial General Liability, including Completed Operations and Product Liability Insurance; Blanket Contractual, with an endorsement naming Buyer as an additional insured with minimum limits of liability of $2,000,000 each occurrence combined single limit.

Not later than (10) days from the date of this Order but in any case prior to Seller's entering Buyer's property to perform Services, a certificate evidencing the above coverage shall be provided to Buyer and said certificate shall provide that Buyer shall be given thirty (30) days advance notice in the event of cancellation or material modification of the coverage.

* * *

8. INDEMNIFICATION. Seller shall assume the sole responsibility for any and all damage or injury (including death) to any and all persons (including, but not limited to employees of Seller or Buyer) and to all property associated with the performance of the obligations under this Order or any act or omission of Seller, and shall defend, indemnify and save harmless Buyer from and against any and all claims, liabilities, expenses (including attorneys' fees), fines, penalties, and damages except for such claims, liabilities, etc., caused by the sole negligence of Buyer. Seller hereby releases and waives all rights of subrogation against Buyer possessed by Seller's insurers. Seller hereby represents that it is authorized by its insurers to grant such release and waiver.

The purchase agreement was signed by Roy E. Yates, the President of Freeport, and James “Bubba” Bethea, Jr., the Branch Manager for Brand Energy.

Brand Energy began installation of the refractory in May 2009, and the project was completed in August 2009. On August 21, 2009, Freeport issued a partial payment to Brand Energy in the amount of $163,824.88. Then on October 14, 2009, Brand Energy sent a letter to Freeport requesting full payment of the unpaid balance, the amount of which was $368,461.09.

On May 20, 2009, several workers5 who were installing the refractory inside the quench chamber were injured when the chamber dislodged and rolled off of its mount. The workers brought a negligence suit against Freeport, Brand Energy, and others in Texas state court to recover for bodily injuries resulting from the accident.6 The state court plaintiffs claimed inter alia that Freeport was responsible for handling the quench chamber, including its stability; that Freeport originally hired Brand Industrial to install the refractory; and that Freeport failed to supervise and warn the workers of the various dangers involved in applying the refractory inside the quench chamber.

The state court plaintiffs further claimed that, although the job in question was originally taken on by Brand Industrial, Brand Energy took over the job at some point after the job began. Thus, Brand Energy was contractually and legally responsible for some of the planning and most of the execution of the job but failed to adhere to those responsibilities, and provided no oversight, supervision, or planning. The state court pleadings do not specifically mention the 2009 purchase agreement between Freeport and Brand Energy and, consequently, do not allege that the purchase agreement requires Brand Energy to provide insurance coverage to Freeport with regard to the May 20, 2009 incident.

The insurance policy between ACE and Brand Energy covers Brand Energy and its subsidiaries, including Brand Industrial, and has a policy period of September 30, 2008 through September 30, 2009. Under Section I—Coverages” the policy states:

We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply.

This coverage provision applies to the “named insured[s] in the policy, i.e., Brand Energy and its subsidiaries, as well as to the “additional insured [s] in the policy.

The policy contains the following three “additional insured” endorsements: (1) “Any person or organization whom you have agreed to include as an additional insured under a written contract, provided such contract was executed prior to the date of loss”; (2) “Any person or organization the insured is required by contract to provide said coverage”; and, (3) “Any Owner, Lessee or Contractor whom you have agreed to include as an additional insured under a written contract, provided such contract was executed prior to the date of loss.”

On July 17, 2009, relying on the 2009 purchase agreement, counsel for Freeport tendered Freeport's defense in the state court suit to Brand Energy and requested that the tender be forwarded to Brand Energy's insurance carrier, ACE. ACE denied the tender of defense via written letters dated August 27, 2009 and April 1, 2010. ACE then filed for declaratory judgment in the federal district court seeking a ruling that it had no duty to defend or indemnify Freeport as an additional insured under Brand Energy's insurance policy. Freeport filed a counter-claim against ACE seeking a declaratory judgment that...

To continue reading

Request your trial
203 cases
  • Alejandro Garcia De La Paz v. U.S. Custom & Border Prot. Officers Jason Coy & Mario Vega & the United States
    • United States
    • U.S. District Court — Western District of Texas
    • June 21, 2013
    ...must come forward with specific facts that establish the existence of a genuine issue for trial. ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d 832, 839 (5th Cir.2012). In deciding whether a fact issue has been created, “the court must draw all reasonable inferences in f......
  • McGowan & Co. v. Bogan
    • United States
    • U.S. District Court — Southern District of Texas
    • March 17, 2015
    ...to the non-movant's claim in which there is an “absence of a genuine issue of material fact.” ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d 832, 839 (5th Cir.2012). The moving party, however, need not negate the elements of the nonmovant's case. Coastal Agric. Supply, I......
  • Jenkins v. City of San Antonio Fire Dep't, Civil No. 5:12–CV–787–DAE.
    • United States
    • U.S. District Court — Western District of Texas
    • April 17, 2014
    ...must come forward with specific facts that establish the existence of a genuine issue for trial. ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d 832, 839 (5th Cir.2012). “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving ......
  • Enerquest Oil & Gas, LLC v. Exploration
    • United States
    • U.S. District Court — Western District of Texas
    • November 7, 2013
    ...must come forward with specific facts that establish the existence of a genuine issue for trial. ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d 832, 839 (5th Cir.2012). In deciding whether a fact issue has been created, “the court must draw all reasonable inferences in f......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT