Ingalls Shipbuilding v. Federal Ins. Co.
| Decision Date | 18 May 2005 |
| Docket Number | No. 03-60358.,No. 03-60557.,03-60358.,03-60557. |
| Citation | 410 F.3d 214 |
| Parties | INGALLS SHIPBUILDING, Plaintiff-Appellant-Cross-Appellee, v. FEDERAL INSURANCE CO., Defendant-Appellee, v. Transocean Offshore Inc., Cross-Appellant. Nigel S. Broussard, Plaintiff, v. Transocean Offshore Inc., et al., Defendants, Transocean Offshore Inc., Defendant-Cross Defendant-Counter Claimant-Cross-Appellant, v. Certified Employee Services Inc., Defendant-Appellee, v. MH Pyramid Inc., Defendant-Cross Claimant-Cross Defendant-Cross-Appellee, and Craft Welding & Contracting Co., Defendant-Cross Claimant-Counter Defendant-Cross-Appellee, v. Ingalls Shipbuilding, Appellant-Cross-Appellee. Transocean Offshore, Plaintiff-Appellee-Cross-Appellant, v. Tudor Insurance Co., et al., Defendants, National Union Fire Insurance Company of Pittsburgh, Pennsylvania; National Fire & Marine Insurance Company, Defendants-Appellants-Cross-Appellees. Ingalls Shipbuilding, Plaintiff, v. Federal Insurance Company, Defendant. Transocean Offshore, Plaintiff-Appellee, v. Tudor Insurance Company, et al., Defendants, National Union Fire Insurance Company of Pittsburgh, Pennsylvania; National Fire & Marine Insurance Company, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Richard P. Salloum (argued), Franke, Rainey & Salloum, Gulfport, MS, Kenneth Raymond Flottman, Northrop Grumman Ship Systems, Ingalls Operations, Pascagoula, MS, for Ingalls Shipbuilding.
Ira Matthew Williamson (argued), Miller & Williamson, New Orleans, LA, for Fed. Ins. Co.
Joe Edward Basenberg, Norman Matt Stockman (argued), Hand Arendall, Mobile, AL, for Certified Employee Services, Inc.
John Anthony Scialdone (argued), Balch & Bingham, Gulfport, MS, for Transocean Offshore, Inc.
Nancy Furey Peters (argued), Nat. Fire & Marine, Omaha, NE, for Nat. Fire. & Marine Ins. Co.
Harrison Henry Yoss (argued), John Sepehri, Thompson, Coe, Cousins & Irons, Dallas, TX, Karen Korff Sawyer, Bryant, Clark, Dukes & Blakeslee, Gulfport, MS, for Nat. Union Fire Ins. Co. of Pittsburgh, PA.
Edward J. Currie, Jr., Currie, Johnson, Griffin, Gaines & Myers, Jackson, MS, for MH Pyramid, Inc.
William Mark Edwards, Mary Winter Van Slyke, Page, Mannino, Peresich & McDermott, Biloxi, MS, for Craft Welding & Contracting Co.
Appeals from the United States District Court for the Southern District of Mississippi.
Before WIENER and PRADO, Circuit Judges, and LITTLE,* District Judge.
FACTS AND PROCEEDINGS
The underlying facts of the case are undisputed. Ingalls Shipbuilding, Inc. ("Ingalls") operates a shipyard in Pascagoula, Mississippi. In June 1998, Transocean Offshore, Inc. ("Transocean") contracted with Ingalls to install various drilling modules aboard its vessel, the DISCOVERER ENTERPRISE ("Shipyard Agreement"). In connection with the shipyard work, Transocean executed a Purchase Agreement with Pyramid Constructors, Inc. ("Pyramid") to design and manufacture a derrick structure and install its component parts. Transocean also executed a Master Service Agreement with Craft Welding and Contracting Services ("Craft") to provide welding services on the derrick.
In February 1999, Nigel Broussard sustained injuries while working on the DISCOVERER ENTERPRISE after his head was struck by a steel wedge allegedly dislodged from the vessel's drilling dock. Broussard, an employee of Certified Employment Services, Inc. ("CESI"), was working on the vessel at the time of the incident pursuant to a Contract Labor Agreement between CESI and Ingalls. The sole defendant in the original lawsuit filed by Broussard was Transocean. Broussard subsequently amended his complaint to include several contractors involved in the project—Industrial Corrosion Control, Inc. ("ICCI"), Pyramid, and Craft. Transocean brought third party complaints against Ingalls, ICCI, Pyramid, and Craft seeking insurance defense, indemnity, and coverage. The contracts that Transocean had entered into with each of these parties required that Transocean be named as an additional insured on the contractors' comprehensive general liability policies. Ingalls filed a fourth party complaint against CESI alleging that CESI was obligated to indemnify and defend Ingalls for any liability it had to Transocean.
The district court determined that Ingalls had failed to obtain insurance as required by the Shipyard Agreement, and granted Transocean's summary judgment motion for breach of contract. Ingalls then filed a separate suit against CESI's insurer, Federal Insurance ("Federal"), alleging breach of contract and bad faith. Transocean's summary judgment motions against ICCI, Pyramid and Craft were denied because these contractors had obtained insurance in accordance with the agreements that Transocean had entered into with them. Transocean then filed a parallel suit against ICCI's insurer, Tudor Insurance Co. ("Tudor"); Craft's insurer, National Fire and Marine Insurance Co. ("National Fire"); and Pyramid's insurer, National Union Fire Insurance Co. ("National Union"), alleging breach of insurance contract and bad faith for failing to defend Transocean in the Broussard litigation. In October 2001, Ingalls's suit against Federal was consolidated with its fourth party complaint against CESI, and Transocean's claims against ICCI, Craft, and Pyramid were consolidated with its claims against Tudor, National Fire, and National Union.
In February 2002, Broussard settled his claims against Transocean, ICCI, Craft, and Pyramid for $829,000. Transocean paid him $320,000, ICCI paid $279,000, Pyramid paid $120,000, and Craft paid $110,000. Transocean continued its litigation against the contractors and their insurers for reimbursement for its share of the amount of the settlement with Broussard and for attorneys' fees. In April 2002, Transocean settled its claim against ICCI and Tudor.
In September 2002, the district court granted Transocean's motion for summary judgment against National Fire, National Union, and Ingalls on their duties to defend, but found no bad faith. National Fire, National Union, and Ingalls, as primary insurers, were each held responsible to Transocean for an equal share of Transocean's settlement amount, with a reduction for the settlement with Tudor and ICCI, plus reasonable attorneys' fees, costs and expenses. The district court directed defense costs to be measured from the date Transocean served its claims against Ingalls, Pyramid, and Craft. Costs were calculated to include expenditures incurred by Transocean in pursuing its present breach of contract claims.
In June 2003, the district court entered a final judgment for the amounts owed by the parties to Transocean. National Fire and National Union appealed this judgment. Transocean filed a limited appeal in the event that the district court's decision is reversed, appealing the denial of its summary judgment motion against Craft and Pyramid for indemnification and coverage. In addition, Transocean asks that, in the event that the holding against one of the insurers is reversed, the damages be reallocated to the remaining insurers.
In March 2003, the district court granted CESI and Federal summary judgment on Ingalls's claims. This decision was appealed by Ingalls, which appeal was then consolidated with the appeals of National Fire and National Union.
We review the grant of summary judgment de novo, applying the same standards as the district court.1 Summary judgment is appropriate when there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law.2
CESI provided Ingalls with skilled laborers (one of whom was Broussard) on an as-required basis under the Contract Labor Agreement. Broussard did not sue Ingalls for his injury; rather, Ingalls was drawn into the fray by Transocean, which filed a third party complaint against Ingalls for contractual indemnity and insurance coverage under the Shipyard Agreement between the two companies. As noted, Ingalls filed a fourth party complaint against CESI, claiming that CESI was required by the Contract Labor Agreement to indemnify Ingalls for, and procure insurance covering Ingalls for, liability arising out of the Contract Labor Agreement. The district court granted Transocean's summary judgment motion on its claim against Ingalls. The court held that by failing to procure insurance as required by the Shipyard Agreement, Ingalls breached the contract and thus is deemed to have assumed the position of Transocean's underwriter. Ingalls did not appeal the decision.
Ingalls filed suit against Federal, CESI's underwriter, for coverage under CESI's insurance policy. Ingalls's fourth party complaint against CESI was consolidated with the suit against Federal.
CESI and Federal filed motions for summary judgment and Ingalls likewise filed a motion for summary judgment. The district court granted CESI's and Federal's motions, finding that the indemnity language in the Contract Labor Agreement did not cover damages from Ingalls's breach of contract with Transocean, and that the insurance CESI was required to procure did not cover Ingalls's breach.
The Contract Labor Agreement between Ingalls and CESI contains the following provision:
XVII. Insurance
A. INSURANCE
. . . caused by or resulting from or arising out of any act or omission on the part of [CESI], its subcontractors, agents and employees under or in connection with this Purchase Order or the prosecution of the work hereunder and shall indemnify and save harmless [Ingalls], its officers, agents, and employees against and from risk of claims, demands or damages by third persons arising or alleged to have risen out of the performance of this Purchase Order. [...
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