Indem. Ins. Co. of N. Am. v. W&T Offshore, Inc., 13–20512.

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: EDITH BROWN CLEMENT
• Citation: 756 F.3d 347
• Parties: INDEMNITY INSURANCE COMPANY OF NORTH AMERICA; New York Marine & General Insurance Company; Navigators Insurance Company; National Liability & Fire Insurance Company, (“Starr Marine”), Plaintiffs–Appellees v. W & T OFFSHORE, INCORPORATED, Defendant–Appellant. XL Specialty Insurance Company, Plaintiff–Appellee v. W & T Offshore, Incorporated, Defendant–Appellant. Liberty Mutual Insurance Company, Plaintiff–Appellee v. W & T Offshore, Incorporated, Defendant–Appellant. Navigators Insurance Company; New York Marine & General Insurance Company, Plaintiffs–Appellees v. W & T Offshore, Incorporated, Defendant–Appellant.
• Docket Number: No. 13–20512.,13–20512.
• Decision Date: 23 June 2014

756 F.3d 347

INDEMNITY INSURANCE COMPANY OF NORTH AMERICA; New York Marine & General Insurance Company; Navigators Insurance Company; National Liability & Fire Insurance Company, (“Starr Marine”), Plaintiffs–Appellees
v.
W & T OFFSHORE, INCORPORATED, Defendant–Appellant.
XL Specialty Insurance Company, Plaintiff–Appellee
v.
W & T Offshore, Incorporated, Defendant–Appellant.
Liberty Mutual Insurance Company, Plaintiff–Appellee
v.
W & T Offshore, Incorporated, Defendant–Appellant.
Navigators Insurance Company; New York Marine & General Insurance Company, Plaintiffs–Appellees
v.
W & T Offshore, Incorporated, Defendant–Appellant.

No. 13–20512.

United States Court of Appeals,
Fifth Circuit.

June 23, 2014.

[756 F.3d 349]

Kenneth G. Engerrand, I, Esq. (argued), Robert M. Browning, Jr., Brown Sims, P.C., David Andrew Kirby, Strong Pipkin Bissell & Ledyard, L.L.P., James Clifton Hall, III, Karen Klaas Milhollin, Candace A. Ourso, Hall Maines Lugrin, P.C., Allison Marie Hooker, Fowler Rodriguez Valdes–Fauli, Houston, TX, Jon Daniel Picou, Esq., Larzelere Picou Wells Simpson Lonero, L.L.C., Metairie, LA, Edward Francis LeBreton, III, Fowler Rodriguez, New Orleans, LA, for Plaintiff–Appellee.

Matthew Sean Parish, Esq., Norman E. Snyder, Jr., Esq., Keith R. Taunton, Esq., Tucker, Taunton, Snyder & Slade, Warren W. Harris (argued), Jeffrey L. Oldham Bracewell & Giuliani, L.L.P., Houston, TX, for Defendant–Appellant.

Appeal from the United States District Court for the Southern District of Texas.
Before HIGGINBOTHAM, CLEMENT, and HIGGINSON, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

W & T Offshore (“W & T”)—an energy exploration and development company—sustained significant damage to its operations as a result of Hurricane Ike. Anticipating that W & T would seek recovery for its Removal of Debris (“ROD”) expenses under its Umbrella/Excess Insurance Policies (“Umbrella Policies”), the four Umbrella Insurers Underwriters (“Underwriters”) sought a declaratory judgment that they were not liable for W & T's ROD damages. In their motion for summary judgment, Underwriters argued that the Umbrella policies only take effect if W & T's underlying/primary insurance is exhausted by claims that would be covered by the Umbrella Policies. Because W & T's underlying insurance was admittedly exhausted by claims not covered by the Umbrella Policies, the insurers argued that they have no liability. In its cross-motion for summary judgment, W & T argued that the Umbrella Policies takes effect once all underlying insurance is exhausted, regardless of how that exhaustion occurred. The district court granted summary judgment in favor of Underwriters, holding that the plain terms of the Umbrella Policies state that it only takes effect if the underlying policies are exhausted by claims that would be covered under the Umbrella Policies themselves. We reverse and render summary judgment in favor of W & T.

Facts and Proceedings

W & T purchased three types of insurance policies to indemnify itself against hurricanes: (1) a commercial general liability policy (MS–S–2773) (the “Primary Liability” policy); (2) five Energy Package Policies (“Energy Package”); and (3) four Umbrella/Excess Liability Policies. Plaintiff–Appellant Underwriters provided the

[756 F.3d 350]

Umbrella Policies, which are identical in all relevant aspects. The Umbrella Policies are the only policies at issue.

The key difference between the Umbrella Policies and the Energy/Primary Liability policies is that the Umbrella Policies do not cover (1) property damage or (2) operators' extra expenses (“OOE”) that are incurred by W & T itself; they cover only claims against W & T by a third-party. All relevant policies have been endorsed to cover ROD claims.

On September 12, 2008, Hurricane Ike struck the Gulf of Mexico, allegedly causing damage to over 150 offshore platforms in which W & T had an interest. Braemer Steege—the loss adjuster for W & T's claims—submitted over $150 million in claims for OOE and property damage under the Energy Package. The Energy Package contains a $10 million self-insured retention (“SIR”), which W & T has to exhaust prior to submitting any claims. Once that threshold is met, coverage proceeds in order through five policies, which provide a total of $150 million in coverage over-and-above the $10 million SIR. Because submitted expenses for OOE and property damage exceeded $150 million, Braemer Steege forecasted that W & T would submit all of its ROD claims—estimated to exceed $50 million—to the Umbrella Policies.

In anticipation of these claims, Underwriters filed separate suits seeking declaratory judgments that W & T's claims are not covered under the Umbrella Policies because the Retained Limit of those policies had not been exhausted. The “Retained Limit” is the triggering mechanism for the “Coverage” provision of the Insuring Agreement, which provides:

INSURING AGREEMENTS

I. COVERAGE

We will pay on behalf of the Insured those sums in excess of the Retained limit that the Insured becomes legally obligated to pay by reason of liability imposed by law or assumed by the Insured under an Insured Contract because of Bodily Injury, Property Damage, Personal Injury or Advertising Injury that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world. The amount we will pay for damages is limited as described in INSURING AGREEMENT III, LIMITS OF INSURANCE.

The “Retained Limit” is defined in Insuring Agreement § III.E:

E. Retained Limit

We will be liable only for that portion of damages in excess of the Insured's Retained Limit which is defined as the greater of either:

1. The total of the applicable limits of the underlying policies listed in the SCHEDULE OF UNDERLYING INSURANCE and the applicable limits of any other underlying insurance providing coverage to the Insured; or

2. The amount stated in the SPECIAL DECLARATIONS as Self Insured Retention as a result of any one Occurrence not covered by the underlying policies listed in the SCHEDULE OF UNDERLYING INSURANCE nor by any other underlying insurance providing coverage to the Insured;

And then up to an amount not exceeding the Each Occurrence Limit as stated in the SPECIAL DECLARATIONS.

Underwriters argue that the Retained Limit of the coverage has not been met because W & T exhausted its underlying policies, (i.e., the “total of the applicable

[756 F.3d 351]

limits of the underlying policies”), using claims that are not covered by the Umbrella Policies, ( i.e., the $150 million of OOE and property damage claims). In support, Underwriters cite § III.D, which provides:

D. Subject to B. and C. above, whichever applies, the Each Occurrence Limit is the most we will pay for the sum of damages covered under INSURING AGREEMENT [§] I because of all Bodily Injury, Property Damage, Personal Injury and Advertising Injury arising out of any one Occurrence.

If the applicable limits of insurance of the policies listed in the SCHEDULE OF UNDERLYING INSURANCE or of other insurance providing coverage to the Insured are reduced or exhausted by payment of one or more claims that would be insured by our Policy we will:

1. In the event of reduction, pay in excess of the reduced underlying limits of insurance; or

2. In the event of exhaustion of the underlying limits of insurance, continue in force as underlying insurance.

W & T argues that this section does not govern the circumstances under which the Retained Limit is depleted, but rather describes the Underwriter's duties and obligations if the underlying insurance policies “are reduced or exhausted by payment of one or more claims that would be insured by our Policy.” Because the “total of the applicable limits of the underlying policies listed in the SCHEDULE OF UNDERLYING INSURANCE and the applicable limits of any other underlying insurance providing coverage to the Insured” has been exhausted, W & T argues that Underwriters are liable “for that portion of damages in excess of the Insured's Retained Limit.”

The district court granted Underwriters' motion for summary judgment, finding that the “underlying insurance can only be exhausted by claims that are also covered by the Excess Liability policies themselves.” Because W & T exhausted the underlying policies with its OOE and property damage claims, the court held that “coverage under the Excess Liability policies has not been triggered and there is no coverage for the costs for removal of wreck or debris.”

W & T appeals, raising the same arguments it did in the court below.

Standard of Review

“We review de novo the district court's grant of summary judgment.” Greenwood 950, L.L.C. v. Chesapeake Louisiana, L.P., 683 F.3d 666, 668 (5th Cir.2012). “Summary judgment is appropriate...