AGIP Petroleum Co. v. Gulf Island Fabrication, Inc.

• Citation: 920 F. Supp. 1318
• Decision Date: 08 March 1996
• Docket Number: Civil Action No. H-94-3382.
• Parties: AGIP PETROLEUM CO., INC., Plaintiff, v. GULF ISLAND FABRICATION, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

920 F. Supp. 1318

AGIP PETROLEUM CO., INC., Plaintiff, v. GULF ISLAND FABRICATION, INC., et al., Defendants.

Civil Action No. H-94-3382.

United States District Court, S.D. Texas, Houston Division.

March 8, 1996.

COPYRIGHT MATERIAL OMITTED

Kent E. Westmorland, Phelps & Dunbar, Houston, Texas, for Underwriters third-party defendant.

James M. Tompkins, Galloway, Johnson, Tompkins & Burr, Houston, Texas, for Gulf Island Fabrication, Inc. defendant and third party plaintiff.

ORDER ON SUMMARY JUDGMENT

HUGHES, District Judge.

1. The court adopts the memorandum and recommendation of the United States Magistrate Judge signed January 16, 1996.

2. Gulf Island Fabrication is granted summary judgment against Underwriters subscribing to Policy Numbers SJ0002, SJ0003A, and SJ0003B.

3. Underwriters are denied partial summary judgment against Gulf Island Fabrication.

MEMORANDUM AND RECOMMENDATION

CRONE, United States Magistrate Judge.

Pending before the court are Defendant Gulf Island Fabrication, Inc.'s (Gulf Island) motion for summary judgment (# 29) and Plaintiffs Underwriters Subscribing to Policy Numbers SJ0002, SJ0003A, and SJ0003B's (Underwriters) cross-motion for partial summary judgment (# 33). Having reviewed the motions, the submissions of the parties, the pleadings, and the applicable law, this court is of the opinion that Gulf Island's motion for summary judgment should be granted and that Underwriters' cross-motion for partial summary judgment should be denied.

1. Background

AGIP Petroleum Co., Inc. (AGIP) is a Delaware corporation with its principal place of business located in Houston, Texas. Gulf Island is a Louisiana corporation with its principal place of business in Houma, Louisiana. Under a contract between AGIP and Gulf Island executed on May 5, 1993, Gulf Island was to fabricate a four pile, sixteen slot drilling/production platform jacket to be installed in Grand Isle Block 102 of the Gulf of Mexico located offshore Louisiana. The contract specifically provided that Gulf Island would:

provide all labor, supervision, equipment, machinery, ... all consumables and supplies, all fabrication support, engineering, procurement, storage and handling, transportation and drayage, fabrication, load-out and seafastening services, required for delivery to AGIP of Fabrication of the Jacket and Piles....

Fabrication of the jacket also included the attachment of mud mats to provide stability to the jacket for positioning on the ocean floor. AGIP contracted with Snamprogetti USA, Inc. (Snamprogetti) to supervise the fabrication of the jacket and with McDermott Incorporated (McDermott) to transport and install the jacket. Snamprogetti, in turn, entered into an agreement with Petro-Marine Engineering of Texas, Inc. (Petro-Marine) to design the jacket.

On October 17, 1993, the jacket was loaded out and shipped offshore from Houma, Louisiana. It was transported successfully to the installation site and offloaded from the transportation barge. The jacket's mud mats, however, were breaking loose from the structure. Repairs were done in the water, and the jacket was upended into a vertical position for landing. There were still problems with the mud mats, which eventually were removed by divers. The jacket was placed in the desired location on the ocean bed without the mud mats. During pile-driving operations, the jacket sank and toppled over on its side in water 257 feet deep. The jacket was salvaged and towed to shore for inspection and repairs. It was reinstalled successfully on January 27, 1994.

AGIP incurred damages and costs exceeding $15,000,000.00. Underwriters paid AGIP up to policy limits under builder's risk policy SJ0002 and excess policies SJ0003A and SJ0003B. Underwriters claim that they are subrogated to AGIP for the insured loss and are pursuing this claim based on the right of subrogation. On September 30, 1994, Underwriters filed this action in the name of AGIP against Gulf Island, invoking this court's diversity jurisdiction under 28 U.S.C. § 1332 and admiralty jurisdiction under 28 U.S.C. § 1333. Underwriters assert claims of negligence, breach of warranty, design defect, and misrepresentation, alleging that Gulf Island did not fabricate the mud mats in accordance with the design drawings and specifications that AGIP had submitted to Gulf Island.

On December 5, 1994, Gulf Island filed a counterclaim, or alternatively, a third party complaint against Underwriters, alleging breach of insurance contract, breach of warranty, fraud, misrepresentation, breach of the duty of good faith and fair dealing, and violations of various provisions of the Texas Insurance Code and the Texas Deceptive Trade Practices Act. Gulf Island asserts that the builder's risk policy issued to AGIP provided coverage to Gulf Island as an "other assured" and that in the event that Gulf Island is found liable to AGIP, then Gulf Island is entitled to coverage and indemnity from AGIP and its Underwriters. Underwriters, however, deny that Gulf Island is covered as an "other assured."

On October 18, 1994, AGIP filed suit for the recovery of its uninsured losses, including damages for lost production revenues against Gulf Island, McDermott, Snamprogetti, and Petro-Marine, alleging negligence, gross negligence, breach of contract, breach of warranty, and products liability. On February 17, 1995, that action was consolidated into this action. On June 19, 1995, Gulf Island filed its motion for summary judgment on all of Underwriters' claims. On June 30, 1995, Underwriters filed its cross-motion for partial summary judgment against Gulf Island.

The crux of this dispute centers on the interpretation of the term "additional assured" as it is defined in the builder's risk insurance policy. AGIP was the principal, named insured on the policy. Gulf Island claims that it was an additional insured under the policy and that Underwriters are precluded from maintaining a lawsuit against it. Underwriters assert that Gulf Island is not an additional insured under the policy as a matter of law, and, therefore, Gulf Island is amenable to suit. Alternatively, Underwriters contend that even if Gulf Island is an additional assured under the policy, controlling case law allows for a subrogation suit against Gulf Island for the subject loss.

2. Analysis

A. The Standard for Summary Judgment

Rule 56(c) provides that "summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Williams v. Adams, 836 F.2d 958, 960 (5th Cir.1988). Once a proper motion has been made, the non-moving party may not rest upon mere allegations or denials in the pleadings, but must set forth specific facts showing the existence of a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. at 322-23, 106 S.Ct. at 2552-53; Anderson v. Liberty Lobby, 477 U.S. at 257, 106 S.Ct. at 2514; Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 506 U.S. 825, 113 S.Ct. 82, 121 L.Ed.2d 46 (1992). Summary judgment is mandated if the non-movant fails to make a showing sufficient to establish the existence of an element essential to the nonmovant's case on which it bears the burden of proof at trial. Celotex v. Catrett, 477 U.S. at 322, 106 S.Ct. at 2552.

B. Choice of Law

A marine insurance contract is a marine contract within federal admiralty jurisdiction. New Hampshire Ins. Co. v. Martech U.S.A., Inc., 993 F.2d 1195, 1198 (5th Cir.1993); Albany Ins. Co. v. Anh Thi Kieu, 927 F.2d 882, 886 n. 2 (5th Cir.), cert. denied, 502 U.S. 901, 112 S.Ct. 279, 116 L.Ed.2d 230 (1991). The construction of maritime contracts is governed by federal maritime law. Randall v. Chevron U.S.A., Inc., 13 F.3d 888, 894 (5th Cir.), modified on other grounds, 22 F.3d 568 (5th Cir.), cert. denied, ___ U.S. ___, 115 S.Ct. 498, 130 L.Ed.2d 408 (1994); Theriot v. Bay Drilling Corp., 783 F.2d 527, 538 (5th Cir.1986). The Fifth Circuit, however, has repeatedly recognized that in the absence of clearly controlling federal precedent, state law applies. See 5801 Assocs., Ltd. v. Continental Ins. Co., 983 F.2d 662, 665 (5th Cir.1993); Magnolia Marine Transp. Co. v. Laplace Towing Corp., 964 F.2d 1571, 1577 (5th Cir.1992); Albany Ins. Co., 927 F.2d at 886; Employers Ins. of Wausau v. Trotter Towing Corp., 834 F.2d 1206, 1210 (5th Cir.1988); Ingersoll-Rand Fin. Corp. v. Employers Ins. of Wausau, 771 F.2d 910, 912 (5th Cir.1985), cert. denied, 475 U.S. 1046, 106 S.Ct. 1263, 89 L.Ed.2d 573. "This presumption of state law is, by now, `axiomatic.'" Albany Ins. Co., 927 F.2d at 886 (quoting INA of Texas v. Richard, 800 F.2d 1379, 1380 (5th Cir.1986)). Therefore, the regulation of marine insurance generally is left to the states. New Hampshire Ins. Co., 993 F.2d at 1198 (citing Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 321, 75 S.Ct. 368, 374, 99 L.Ed. 337 (1955)); 5801 Assocs., Ltd., 983 F.2d at 665.

The Fifth Circuit has listed three factors the court is to consider when determining whether to apply state rather than federal law:

1. whether the federal maritime rule constitutes "entrenched federal precedent," which is consistently used to control the conduct of maritime actors;

2. whether the state has a substantial and legitimate interest in

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