Lexington Ins. Co. v. Ace Am. Ins. Co.

• Decision Date: 07 July 2014
• Docket Number: CIVIL ACTION NO. H-12-0531
• Parties: LEXINGTON INSURANCE COMPANY, Plaintiff, v. ACE AMERICAN INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Texas

LEXINGTON INSURANCE COMPANY, Plaintiff, v. ACE AMERICAN INSURANCE COMPANY, Defendant.

CIVIL ACTION NO. H-12-0531

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

SIGNED: July 7, 2014

OPINION AND ORDER OF SUMMARY JUDGMENT

Pending before the Court in the above referenced action, arising out of an insurance coverage dispute regarding whether Defendant ACE American Insurance Company ("ACE") had a duty to defend Midcontinent Express Pipeline, LLC ("MEP") and its affiliates, Kinder Morgan, Inc. and Kinder Morgan NatGas Operator, LLC (collectively, the "MEP Parties") in eight underlying lawsuits arising out of a natural gas explosion, are cross motions for summary judgment filed by Plaintiff Lexington Insurance Company ("Lexington")(#23) and by ACE (#27, titled "First Amended Cross-Motion for Summary Judgment").

In its Second Amended Complaint for Declaratory Judgment (#19) and in its motion for summary judgment (#23), Lexington asks the Court to construe two Lexington-issued insurance policies: (1) a commercial general liability policy number 021435609¹ ("Lexington Primary Policy," providing limits of $1 million per occurrence and$10 million general aggregate) and (2) commercial umbrella liability policy number 021404409 ("Lexington Umbrella Policy," providing limits of $5 million per occurrence and $5 million general aggregate)(collectively, "Lexington Policies"), both issued by Lexington to named insureds Valarco, LLC and Grand Bluff Constructions Services ("Grand Bluff") and effective September 16, 2008-September 16, 2009. It also seeks construction of an ACE commercial general liability policy, number HDO G2374918A,² effective January 31, 2009 to January 31, 2010 ("ACE Policy," providing limits of $2 million per occurrence), issued to John Wood Group, Inc. Mustang Engineering L.P. ("Mustang") is insured under the ACE Policy. Lexington asks the Court for a declaratory judgment that

(1) [MEP Parties] are additional insureds under [the ACE Policy] . . .; (2) the MEP Parties, as additional insureds under the ACE American policy, are entitled to a defense of underlying lawsuits related to a gas pipeline explosion; and (3) ACE American is liable to Lexington for the costs and expenses that have and will be incurred defending the MEP Parties in the underlying lawsuits.

#19 at p. 1.

Standard of Review

Summary judgment under Federal Rule of Civil Procedure 56(c) is appropriate when "the pleadings, depositions, answers to interrogatories and admissions on file, together with theaffidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R, Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A fact is material if it might affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute of material fact is "genuine" if the evidence would allow a reasonable jury to find in favor of the nonmovant. Id. "'On cross-motions for summary judgment'" the court should "'review each party's motion independently, viewing the evidence and inferences in the light most favorable to the nonmoving party.'" Star-Tex Resources, LLC v. Granite State Ins. Co., ___ Fed. Appx. ___, 2014 WL 60192, at *2 (5^th Cir. Jan. 8, 2014), citing Ford Motor Co. v. Tex. Dept. of Transp., 264 F.3d 493, 498 (5^th Cir. 2001). The court must consider all evidence and draw all inferences from the factual record in the light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); National Ass'n of Gov't Employees v. City Pub. Serv. Board, 40 F.3d at 712-13.

The application of the rule depends upon which party bears the burden of proof at trial. If the movant bears the ultimate burden at trial, the movant must provide evidence to support each element of its claim and demonstrate the lack of a genuine issue of material fact regarding that claim. Rushing v. Kansas City S. Ry., 185 F.3d 496, 505 (5^th Cir. 1999), cert. denied, 528 U.S. 1160(2000).

If the nonmovant bears the burden of proof at trial, the movant may either offer evidence that undermines one or more of the essential elements of the nonmovant's claim or point out the absence of evidence supporting essential elements of the nonmovant's claim; the movant may, but is not required to, negate elements of the nonmovant's case to prevail on summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Lujan v. National Wildlife Federation, 497 U.S. 871, 885 (1990); Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5^th Cir. 1998); International Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264 (5^th Cir. 1991); Saunders v. Michelin Tire Corp., 942 F.2d 299, 301 (5^th Cir. 19991).

If the movant meets this burden, the nonmovant must then present competent summary judgment evidence to support each of the essential elements of the claims on which it bears the burden of proof at trial and to demonstrate that there is a genuine issue of material fact for trial. National Ass'n of Gov't Employees v. City Pub. Serv. Board, 40 F.3d 698, 712 (5^th Cir. 1994). "[A] complete failure of proof concerning an essential element of the nonmoving party's case renders all other facts immaterial." Celotex, 477 U.S. at 323.

If the movant does not bear the burden of proof at trial, after it points out the absence of evidence of one essentialelement of the nonmovant's claim, Celotex, 477 U.S. at 325, the nonmovant must go beyond its pleadings and identify specific facts showing that there is a genuine issue of material fact for trial. Id. at 324. If the nonmovant fails, all other facts are immaterial and summary judgment is mandatory. Little v. Liquid Air Corp., 37 F.3d 1069, 1075-76(5^th Cir. 1994)( en banc).

"'[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment . . . .'" State Farm Life Ins. Co. v. Gutterman, 896 F.2d 116, 118 (5^th Cir. 1990), quoting Anderson v. Liberty Lobby, Inc.. 477 U.S. 242, 247-48 (1986). "Nor is the 'mere scintilla of evidence' sufficient; 'there must be evidence on which the jury could reasonably find for the plaintiff.'" Id., quoting Liberty Lobby, 477 U.S. at 252. The Fifth Circuit requires the nonmovant to submit "'significant probative evidence.'" Id., quoting In re Municipal Bond Reporting Antitrust Litig., 672 F.2d 436, 440 (5^th Cir. 1978), and citing Fischbach & Moore, Inc. v. Cajun Electric Power Co-Op., 799 F.2d 194, 197 (5^th Cir. 1986); National Ass'n of Gov't Employees v. City Pub. Serv. Board, 40 F.3d at 713. Conclusory statements are not competent evidence to defeat summary judgment. Turner, 476 F.3d at 346-479 (plaintiff "must offer specific evidence refuting the factual allegations underlying [defendant's] reasons for her termination), citing Topalian v. Ehrman, 954 F.2d 1125, 1131 (5^th Cir. 1992). "If the evidence ismerely colorable, or is not significantly probative, summary judgment may be granted." Thomas v. Barton Lodge II, Ltd., 174 F.3d 636, 644 (5^th Cir. 1999), citing Celotex, 477 U.S. at 322, and Liberty Lobby, 477 U.S. at 249-50.

Allegations of Lexington's Second Amended Complaint (#19)

MEP and Mustang entered into a Professional Services Agreement ("PSA")(copy at #23, Ex. D, in which MEP is referred to as "Company" and Mustang as "Contractor" or "Consultant"),³ effective January 1, 2007, which in relevant part provides,

13. GENERAL INDEMNITY

CONTRACTOR SHALL DEFEND, INDEMNIFY, AND HOLD COMPANY HARMLESS FROM AND AGAINST ALL CLAIMS, DAMAGES, LIABILITY, LOSSES AND EXPENSES INCLUDING, BUT NOT LIMITED TO, ATTORNEY'S FEES AND OTHER COSTS OF DEFENSE ATTRIBUTABLE TO BODILY INJURY, SICKNESS, DISEASE, DEATH OR INJURY TO THE EMPLOYEES OF CONTRACTOR OR DESTRUCTION OF PROPERTY OF CONTRACTOR, INCLUDING LOSS OF USE RESULTING THEREFROM AND ARISING OUT OF OR RESULTING FROM THIS AGREEMENT OR THE PERFORMANCE OF WORK HEREUNDER, IRRESPECTIVE OF COMPANY'S FAULT OR NEGLIGENCE. LIKEWISE COMPANY SHALL DEFEND, INDEMNIFY AND HOLD CONTRACTOR HARMLESS FROM AND AGAINST ALL CLAIMS, DAMAGES, LIABILITY, LOSSES AND EXPENSES INCLUDING BUT NOT LIMITED TO ATTORNEY'S FEES AND OTHER COSTS OF DEFENSE ATTRIBUTABLE TO BODILY INJURY, SICKNESS, DISEASE, DEATH OR INJURY TO THE EMPLOYEES OF COMPANY OR DESTRUCTION OF PROPERTY OF COMPANY, INCLUDING LOSS OF USE RESULTING THEREFROM AND ARISING OUT OF OR RESULTING FROM THIS AGREEMENT OR THE PERFORMANCE OF WORK THEREUNDER, IRRESPECTIVE OF CONTRACTOR'S FAULT OR NEGLIGENCE. WHEN ANY INJURIES, DEATH OR ILLNESS OR DAMAGE TO PROPERTY ARE SUSTAINED BY THIRD PARTIES, AND ARE THE CONCURRENT CONTRIBUTION OF BOTH COMPANY AND CONTRACTOR, EACH PARTY'S DUTY OF INDEMNIFICATION SHALL BE IN THE SAME PROPORTION THAT THE ACTS OR OMISSIONS OF EACH PARTY CONTRIBUTED TO THE

INJURIES, DEATH OR ILLNESS OR DAMAGE TO PROPERTY.

14. INSURANCE

14.1 Contractor agrees to carry and maintain the following insurance, from carriers with an A.M. rating of at least A-/VIII⁴: . . . .

14.1.3 Commercial General Liability Insurance insuring the indemnity agreement set forth in this contract with a single limit of not less than $2,000,000 per occurrence and in the aggregate. All policies shall include coverage for blanket contractual liability assumed hereunder . . . .

14.2 Solely to the extent of Consultant's indemnity obligation (with the exception of Worker's Compensation) all insurance policies carried by the Contractor hereunder shall name (i) Midcontinent Express Pipeline LLC, (ii) its respective affiliates, and (iii) its and their affiliates' respective directors, officers, agents, and employees, and (iv) the respective successors and assigns of all the foregoing entities and persons as additional insureds with respect to liability arising out of work performed by Contractor or subcontractor, as applicable. . . .

[14.4 Before commencing any performance under this Agreement, Contractor shall

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