Continental Cas. Co. v. Fina Oil & Chemical

Decision Date26 June 2003
Docket NumberNo. 01-02-00449-CV.,01-02-00449-CV.
Citation126 S.W.3d 163
CourtTexas Court of Appeals
PartiesCONTINENTAL CASUALTY CO., Appellant, v. FINA OIL & CHEMICAL CO., Appellee. Fina Oil & Chemical Co., Appellant, v. Continental Casualty Co., Appellee.

Jane A. McClaine, Drucker, Rutledge, Ward & Smith, L.L.P., Spring, Richard C. Rutledge, Drucker, Rutledge, Ward & Smith, L.L.P., Woodlands, for appellant.

Christopher A. Prine, George W. Lederer Jr., Vance Christopher, Crain, Caton & James, Houston, for appellee.

Panel consists of Justices HEDGES, NUCHIA, and KEYES.

OPINION

SAM NUCHIA, Justice.

Continental Casualty Company (Continental) appeals the trial court's judgment declaring that Fina Oil & Chemical Company (Fina) was an additional insured under a commercial general liability insurance policy issued by Continental to A & B Builders, Inc. (A & B) and awarding damages to Fina for its claim of breach of contract. Continental specifically argues that (1) Fina was not an additional insured and (2) if Fina was an additional insured, coverage was excluded for Fina's claims. Fina appeals the trial court's determination that Continental did not waive its right to subrogation. We reverse the judgment and render judgment that Fina take nothing.

BACKGROUND

On August 12, 1997, A & B wrote a letter to Fina proposing to perform steel erection for three buildings. The letter stated,

A & B Builders, Inc. is pleased to offer our proposal to furnish labor, tools, material (not furnished by Fina), equipment, insurance and supervision to complete steel erection for the above referenced buildings....

....

We appreciate the opportunity to quote this work to Fina Oil & Chemical and look forward to hearing from you in the near future. If you have any questions or require additional information, please feel free to contact our office.

On that same date, Fina issued two purchase requisitions that, together, comprised the work proposed by A & B in its quote.

On August 18, A & B's insurance agent issued a certificate of insurance showing A & B as the insured and Fina as the certificate holder. The certificate contained the following disclaimer: "This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below." Under the heading, "Additional Insured," the certificate provided:

FINA, its parent, subsidiaries and affiliated companies, and their respective employees, officers and agents shall be named as additional insured in each of Contractor's policies, except Workers' Compensation; however, such extention [sic] of coverage shall not apply with respect to any obligations for which FINA has specifically agreed to indemnify Contractor.

The certificate also provided, under the heading, "Subrogation":

All policies shall be endorsed to provide that underwriters and insurance companies of Contractor shall not have any right of subrogation against FINA, its parent, subsidiaries and affiliated companies, and their respective agents, employees, officers, invitees, servants, contractors, subcontractors, underwriters and insurance companies.

The Additional Insured Endorsement provided:

IF YOU ARE REQUIRED TO ADD ANOTHER PERSON OR ORGANIZATION AS AN ADDITIONAL INSURED ON THIS POLICY UNDER A WRITTEN CONTRACT OR AGREEMENT CURRENTLY IN EFFECT, OR BECOMING EFFECTIVE DURING THE TERM OF THE POLICY, AND A CERTIFICATE OF INSURANCE HAS BEEN ISSUED, THEN WHO IS AN INSURED (SECTION II) IS AMENDED TO INCLUDE AS AN INSURED THAT PERSON, OR ORGANIZATION (CALLED "ADDITIONAL INSURED")[.]

THE INSURANCE FOR THAT ADDITIONAL INSURED IS LIMITED AS FOLLOWS:

1. THAT PERSON, OR ORGANIZATION, IS ONLY AN ADDITIONAL INSURED FOR ITS LIABIITY ARISING OUT OF PREMISES "YOU" OWN, RENT, LEASE OR OCCUPY OR FOR "YOUR WORK" FOR OR ON BEHALF OF THE ADDITIONAL INSURED; AND

2. THE INSURANCE AFFORDED THE ADDITIONAL INSURED UNDER THIS ENDORSEMENT DOES NOT APPLY TO (a) PUNITIVE OR EXEMPLARY DAMAGES IN WHATEVER FORM ASSESSED AGAINST THE ADDITIONAL INSURED AND/OR (b) ANY LIABILITY ARISING

OUT OF ANY ACT, ERROR OR OMISSION OF THE ADDITIONAL INSURED, OR ANY OF ITS EMPLOYEES.

....

The policy also contained the following endorsement providing for the waiver of transfer rights of recovery against others:

THIS ENDORSEMENT MODIFIES INSURANCE PROVIDED UNDER THE FOLLOWING:

COMMERCIAL GENERAL LIABILITY COVERAGE PART OWNERS AND CONTRACTORS PROTECTIVE LIABILITY COVERAGE PART

NAME OF PERSON OR ORGANIZATION: "ANY PERSON OR ORGANIZATION WITH WHOM YOU AGREE IN WRITING TO WAIVE YOUR RIGHT TO RECOVER AGAINST THEM. YOU MUST AGREE TO THIS WAIVER PRIOR TO THE DATE OF THE LOSS."

....

WE WAIVE ANY RIGHT OF RECOVERY WE MAY HAVE AGAINST THE PERSON OR ORGANIZATION SHOWN IN THE SCHEDULE BECAUSE OF PAYMENTS WE MAKE FOR INJURY OR DAMAGE ARISING OUT OF "YOUR WORK" DONE UNDER A CONTRACT WITH THAT PERSON OR ORGANIZATION. THE WAIVER APPLIES ONLY TO THE PERSON OR ORGANIZATION SHOWN IN THE SCHEDULE.

On August 22 and 25, Fina issued two purchase orders, showing A & B as the vendor, for the proposed work. The reverse side of the purchase orders contained terms and conditions of the sale. These terms and conditions made no reference to the provision of insurance by the seller to the buyer.

On August 14, 1997, Larry Wisdom, an employee of A & B, was injured when a load of steel beams, which was being unloaded on the Fina work site, fell. Wisdom sued Fina and two other corporations who were involved in the work, alleging negligence. Specifically, Wisdom alleged that Fina was negligent in (1) failing to supervise properly, (2) issuing a permit to unload unbanded steel with a forklift, (3) failing to supply a cherry picker for unloading the unbanded steel, (4) rushing the unloading process, (5) failing to supply a safe workplace, and (6) allowing an unsafe activity on its premises. Wisdom did not sue A & B, his employer, through whom he was receiving worker's compensation benefits.

A & B was insured by Continental under several policies, including worker's compensation insurance and commercial general liability insurance. As the insurer, Continental paid medical expenses and wage benefits to Wisdom. In August 1999, after learning of Wisdom's lawsuit, Continental filed a petition in intervention, asserting a lien in the amount of $107,979.04 on the first monies paid to Wisdom, stating that Wisdom continued to receive medical treatment and wage benefits, and seeking judgment of at least $107,979.04. Four days later, counsel for Fina sent a letter to A & B, with a copy to Continental, demanding a defense and indemnity under the terms of the certificate of insurance. On September 16, 1999, Fina sent a letter by fax to Continental, with a copy to A & B, reiterating Fina's demand for a defense and indemnity.

Fina filed a counterclaim to Continental's petition in intervention, alleging that Fina was an additional insured under A & B's insurance policies and asserting that Continental had breached its duties under the policies by refusing to defend and indemnify Fina and by seeking to enforce a lien against Fina for benefits paid to Wisdom. Continental generally denied Fina's allegations. Both parties filed motions for summary judgment. Continental contended that Fina was not an additional insured under A & B's insurance policies and that Continental did not waive its subrogation rights. Fina argued that it was an additional insured and was entitled to a defense and indemnification and that Continental waived its subrogation rights. The trial court granted both motions in part, declaring that Fina was an additional insured under the policy on the date of Wisdom's accident and that Continental did not waive its subrogation rights. Meanwhile, Fina and the two other defendants in the underlying lawsuit settled with Wisdom. Fina paid $115,000, and the other defendants paid a total of $122,500.

After the trial court granted the partial summary judgments, the court granted Continental's unopposed motion to sever the breach-of-contract issues from the rest of the case. The issue of attorney's fees relating to the breach-of-contract issues was tried to the court. The parties stipulated that Fina's costs of defense, in the amount of $56,484.75, relating to Wisdom's cause of action were reasonable and necessary. The trial court awarded Fina $166,269.44 as attorney's fees and expenses for the trial of the breach-of-contract claim, $115,000 for settlement of Wisdom's claim, and $56,484.75 for costs of defense of Wisdom's claim. The total award to Fina against Continental, including prejudgment interest, was $365,751.61.

DISCUSSION
I. Standard of Review

Insurance policies are controlled by rules of interpretation and construction applicable to contracts generally. Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995). The primary concern of a court in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument. Id. Terms in contracts are given their plain, ordinary, and generally accepted meaning unless the contract itself shows that particular definitions are used to replace that meaning. W. Reserve Life Ins. v. Meadows, 152 Tex. 559, 261 S.W.2d 554, 557 (1953). If a written contract is so worded that it can be given a definite or certain legal meaning, it is not ambiguous. Nat'l Union Fire, 907 S.W.2d at 520. The interpretation of an unambiguous contract is a question of law for the court. Perry v. Houston Indep. Sch. Dist., 902 S.W.2d 544, 547 (Tex.App.-Houston [1st Dist.] 1995, writ dism'd w.o.j.). If an insurance policy is ambiguous, however, it will be interpreted in favor of the insured. Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex.1997).

II. Continental's Appeal
A. Additional Insured

In its first issue, Continental contends that Fina was not an...

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