Ironshore Specialty Ins. Co. v. Aspen Underwriting Ltd.

• Decision Date: 29 April 2014
• Docket Number: Civil Action No. 7:12–cv–33–JRN.
• Citation: 40 F.Supp.3d 807
• Parties: IRONSHORE SPECIALTY INSURANCE COMPANY, Plaintiff v. ASPEN UNDERWRITING LIMITED ; and Dornoch, Ltd., Defendants.
• Court: U.S. District Court — Western District of Texas

40 F.Supp.3d 807

IRONSHORE SPECIALTY INSURANCE COMPANY, Plaintiff

v.ASPEN UNDERWRITING LIMITED ; and Dornoch, Ltd., Defendants.

Civil Action No. 7:12–cv–33–JRN.

United States District Court, W.D. Texas, Midland–Odessa Division.

Signed April 29, 2014.

Christine Bergeron Alphonso, Randell E. Treadaway, Zaunbrecher Treadaway, LLC, Covington, LA, Michelle M. O'Daniels, Zaunbrecher Treadaway, Metairie, LA, for Plaintiff.

David J. Plavnicky, Chester J. Makowski, Plavnicky Kinzel & Makowski, LLP, Houston, TX, for Defendants.

AMENDED ORDER

JAMES R. NOWLIN, District Judge.

Before the Court is Plaintiff's Motion for Summary Judgment (Dkt. No. 34), Defendants' Motion for Summary Judgment (Dkt. No. 25), Plaintiffs Response to Defendants' Motion for Summary Judgment (Dkt. No. 33), Defendants' Response to Plaintiffs' Motion for Summary Judgment (Dkt. No. 37), and Plaintiffs' Reply to Defendants' Response to Plaintiffs Motion for Summary Judgment (Dkt. No. 42).

I. BACKGROUND

The dispute now before this Court arises out of an incident involving a flash fire that took place on August 19, 2010 at the Herren 5–8 # 4 in Martin County, Texas. (Dkt. No. 21 at ¶ 16). The well was owned and operated by Endeavor Energy Resources, L.P. (“Endeavor”). (Id. ). At the time the fire occurred, one of Endeavor's affiliates, Exxcel Well Service, Inc. (“Exxcel”), was performing a work over of the operations of the well. (Id. at ¶ 18). To assist in that effort, Exxcel contracted with an organization called Basic Energy Services L.P. (“Basic”) to provide services and generally assist Exxcel in its work over of the Herren # 4 well. (Id. ). The contract called for Basic to do things like provide a tank truck loaded with brine water or provide a pump truck to pump the brine water into the well. (Id. ). Exxcel and Basic spelled out the various terms and conditions of their new relationship in a master services agreement (“MSA”). (Id. ). In the MSA, both parties agreed to defend and indemnify each other and their subsidiaries for all “claims, demands, and causes of action,” asserted by or on behalf of their respective employees for bodily injury or death (except in cases involving claims of gross negligence or willful misconduct). (Id. ). To support this agreement, but as a separate and independent obligation, the MSA requires Basic to: (1) obtain primary liability insurance coverage in the amount of $1 million; (2) obtain excess insurance coverage in the amount of $4 million; (3) have its primary and excess insurance policies endorsed to name Endeavor and Exxcel as additional insureds; (4) have the policies endorsed to waive subrogation against Endeavor and Exxcel; and (5) have the policies endorsed to be primary and non-contributory with any other liability insurance available to Endeavor and Exxcel for any occurrence, accident, or claim arising out of personal injuries to or the death of Basic employees. (Dkt. No. 34–1 at 5–6).

On August 19, 2010, a fire broke out and two Basic employees—Abel Garcia and Fernando Zamora—were killed. (Id. at 4–5). Their families subsequently filed suit against Basic, Exxcel, and Endeavor¹ for damages arising out of the deaths of their loved ones. (Id. ).

At the time the accident occurred, Basic had three layers of liability insurance coverage in effect: (1) a primary Commercial General Liability Policy issued by National Union Fire Insurance Company of Pittsburgh, PA (“National Union”), which provided a $1 million per occurrence limit of liability (“the Basic Primary Policy”); (2) a first layer excess liability insurance policy subscribed to by Aspen and other subscribing underwriters, which provided a $10 million limit of liability (“the First Layer Excess Policy”); and (3) a second layer excess liability insurance policy subscribed to by defendant, Dornoch, and other subscribing underwriters, which provided a $40 million limit of liability (“the Second Layer Excess Policy”), which was excess of the First Layer Excess Policy. (Id. ). Endeavor also had three layers of liability insurance coverage in effect at the time of the accident: (1) a primary Commercial General Liability Policy issued by National Union, which provided a $1 million per occurrence limit of liability (“the Endeavor Primary Policy”); (2) a Commercial Excess Liability insurance policy issued by Plaintiff, Ironshore, which provided a $10 million limit of liability (“the Ironshore Excess Policy”); and (3) a second layer excess liability insurance policy issued by Axis Surplus Insurance Company, which provided a $10 million limit of liability excess of the Ironshore Excess Policy. (Id. ).

Basic's First and Second Layer Excess policies both contain identical definitions of “Insured” and “Insured Contract.” The policies define “Insured” as “any person or entity to whom the ‘Insured’ is obliged by a written ‘Insured Contract’ entered into before any relevant ‘occurrence’ and/or ‘claim’ to provide insurance such as afford by this policy but only with respect to ... liability arising out of operations conducted by the named ‘Insured’...” (Dkt. No. 25 at 13). Both policies define “Insured Contract” as “any written contract or agreement entered into by the ‘insured’ and pertaining to business under which the ‘insured’ assumes the tort liability of another party ...” (Id. at 13–14).

On October 28, 2010, after the lawsuits were filed, Endeavor/Exxcel informed Basic's primary insurance provider, National Union, of the Endeavor/Exxcel lawsuits. (Dkt. No. 34–1 at 6–7). National Union acknowledged that it was contractually obligated to provide coverage to Endeavor/Exxcel and the insurance company appointed counsel to defend Endeavor/Exxcel against the underlying lawsuits. (Id. ).

The dispute that gave rise to this case began in April of 2011. (Id. at 7). After settlement negotiations yielded offers well in excess of the limit of the National Union Primary Policy and the First Layer Excess Policy, Endeavor/Exxcel, along with Plaintiff Ironshore, made a demand on Basic's excess insurers for coverage up to the full limits of liability provided by the First and Second Layer Excess policies. (Id. ). In other words, Endeavor/Exxcel and Plaintiff argued that they were entitled to up to $51 million of coverage from Basic's insurers under the First and Second Layer Excess Policies.²

While Defendants acknowledged a limited contractual obligation to provide some coverage to Endeavor/Exxcel, they had a dramatically different understanding than did Plaintiff as to the scope of their contractual obligation to Endeavor/Exxcel. Pointing to the underlying MSA (which both parties concede is the “insurance contract” in this case), Defendants took the position that Endeavor/Exxcel were entitled to a total of $5 million in coverage—$1 million from the primary policy and $4 million from the First Excess Policy. (Dkt. No. 25).

Plaintiff Ironshore is one of Endeavor/Exxcel's insurance providers that found itself on the hook for any damages not covered by Basic's insurers pursuant to Basic's indemnity obligations under the MSA. Hoping to avoid a hefty bill, Plaintiff filed a Complaint for Declaratory Judgment pursuant to 28 U.S.C. §§ 2201 et seq. and Rule 57 of the Federal Rules of Civil Procedure seeking a judicial determination of the total amount of “OTHER INSURANCE” available to Endeavor/ Exxcel under the First Layer Excess Policy and under the Second Layer Excess Policy issued to Basic. (Dkt. No. 21). Since that original filing, both sides have filed motions for summary judgment (Dkt. Nos. 25 and 34).

II. STANDARD OF REVIEW

The court must grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a) ; Celotex Corp. v. Catrett, 477 U.S. 317, 323–25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Washburn v. Harvey, 504 F.3d 505, 508 (5th Cir.2007). A dispute regarding a material fact is “genuine” if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Washburn, 504 F.3d at 508.

Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary-judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586, 106 S.Ct. 1348. Mere conclusory allegations are not competent summary-judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir.2007). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary-judgment evidence. Id. The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his claim. Adams v. Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir.2006). Rule 56 does not impose a duty on the court to “sift through the record in search of evidence” to support the nonmovant's opposition to the motion for summary judgment. Id. “Only disputes over facts that might affect the outcome of the suit under the governing laws will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Disputed fact issues which are “irrelevant and unnecessary” will not be considered by a court in ruling on a summary judgment motion. Id. If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear...