Lloyd's Syndicate 457 v. Floatec LLC
| Decision Date | 09 July 2019 |
| Docket Number | CIVIL ACTION NO. H-16-3050 |
| Parties | LLOYD'S SYNDICATE 457, et al., Plaintiffs, v. FLOATEC LLC, et al., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Claude L Stuart, III, James Clifton Hall, III, Karen Klaas Milhollin, Hall Maines Lugrin, P.C., Houston, TX, for Plaintiffs.
Randell E. Treadaway, Brett Michael Bollinger, Jeffrey E McDonald, Zaunbrecher Treadaway Bollinger LLC, Covington, LA, for Defendants.
This case arises from a complex insurance arrangement memorialized in complex policies filled with conditions, limits, cross-references, exclusions, and exceptions to exclusions. In 2014, Chevron U.S.A., Inc. was building an oil-drilling platform, known as the "Bigfoot Project," in the Gulf of Mexico. Chevron insured the Bigfoot Project with an Offshore Construction Risk Policy issued by Aon Limited and underwritten by a number of other insurance companies.1
Each underwriter took some Project risk in exchange for a share of the premium.
This arrangement spread the Project's estimated $2 billion risk across the Underwriters. The Underwriters required Chevron to hire a marine warranty surveyor to review and certify the Project's specifications and materials before the installation. Chevron hired American Global Maritime under a Service Contract to meet this coverage condition. The Offshore Construction Risk Policy insured American Global Maritime as an "Other Assured" against "all risks" of physical damage or loss to the Bigfoot Project, including from American Global Maritime's own negligence. (Docket Entry No. 98-1 at 56–57, 61).
The Service Contract required American Global Maritime to review the procedures for installing the Bigfoot Project on the ocean floor, including by checking the calculations and inspecting the parts, then certifying the installation as ready to proceed. American Global Maritime issued the certificates. The Bigfoot Project's installation went wrong, and parts sank to the ocean floor. The Underwriters paid Chevron $500 million for the loss, then sued Chevron's contractors, including American Global Maritime, alleging negligence in certifying the installation.
After a wave of dispositive motions and rulings, American Global Maritime is the last defendant, and only negligence claims remain. American Global Maritime has moved for summary judgment on the remaining claims, and the Underwriters have responded. (Docket Entry Nos. 123–24, 134). After the Fifth Circuit decided an appeal affirming another defendant's dismissal, the Underwriters and American Global Maritime submitted supplemental briefing. (Docket Entry Nos. 138, 142). This court has carefully considered the pleadings; the motion, response, and supplemental briefing; the court's previous decisions; the Fifth Circuit's opinion; the voluminous record, including the policies and contracts; and the applicable law.
Because the undisputed facts show no basis for recovery against American Global Maritime as a matter of law, judgment is so granted to American Global Maritime, and final judgment is separately entered. The reasons for these rulings are detailed below.
The facts and procedural history have been explained at length and in detail. (See Docket Entry No. 111). Because the other defendants have been dismissed and only negligence claims remain against American Global Maritime, this brief background is tailored to that party and those claims.
In 2014, Chevron contracted with a number of companies to build an oil-drilling platform with tension legs approximately 225 miles south of New Orleans, Louisiana. The Bigfoot Project was designed to reach through 5,185 feet of water to oil reserves beneath the seabed. Sixteen steel tethers, or "tendons," would secure the platform to the seabed. While the tendons were being installed, they would be clamped to buoyance modules to keep them afloat. Each clamp had 12 bolts.
Chevron obtained insurance for the Bigfoot Project through the Offshore Construction Risk Policy issued by Aon. This Offshore Construction Risk Policy "insure[d] against all risks of physical loss" and "damage" for "works executed anywhere in the world in the performance of all contracts relating to the Project." (Docket Entry No. 98-1 at 61 (emphasis added)). The covered "activities" included:
[p]roject studies, engineering, contingencies, design, project management, procurement, fabrication, construction, prefabrication, storage, load out, loading/unloading, transportation by land, sea or air ..., towage, mating, installation, burying, hook-up, connection and/or tie-in operations, testing and commissioning, existence, initial operations and maintenance, testing, trials, pipelaying, trenching, and commissioning.
(Id. at 56). The Offshore Construction Risk Policy listed Chevron as a "Principal Assured[ ]" and defined "Other Assureds" to include "Project managers" and "[a]ny other company, firm person or party, including their contractors and/or sub-contractors and/or manufacturers and/or suppliers, with whom the Assured(s) named ... have entered into written contract(s) in connection with the Project." (Id. ).
As to Other Assureds' coverage, the Offshore Construction Risk Policy stated that:
[t]he interest of the Other Assured(s) shall be covered throughout the entire Policy Period for their direct participation in the venture, unless specific contract(s) contain provisions to the contrary. The rights of any Assured under this insurance shall only be exercised through the Principal Assureds. Where the benefits of this insurance have been passed to an Assured by contract, the benefits passed to that Assured shall be no greater than such contract allows and in no case greater than the benefits provided under the insuring agreements, terms, conditions and exclusions in the Policy.
(Id. at 57).
The Underwriters were subrogated "to all rights which the Assured may have against any person or other entity, other than Principal Assureds and Other Assureds, in respect of any claim or payment." (Id. ). The Underwriters waived "rights of subrogation against any Principal Assured(s) and/or Other Assured(s)." (Id. ). The Offshore Construction Risk Policy was "primary to, and [would] receive no contribution from, any other insurance maintained by or for the Principal Assured(s) and/or Other Assured(s)." (Id. at 69).
The Offshore Construction Risk Policy required Chevron to hire a marine warranty surveyor to "review/attend/approve the major marine operations as appropriate." (Id. at 4–5). Chevron chose American Global Maritime. (Id. at 4). Chevron and American Global Maritime entered into a Service Contract that required American Global Maritime to "review, witness, oversee, observe, approve[,] and certify facilities as fit for transport, installation[,] and duty pursuant to marine standards and [the Offshore Construction Risk Policy]." (Docket Entry No. 98-2 at 60, 71–72). American Global Maritime indemnified Chevron for up to $5,000,000 of "damage or loss" arising out of the Service Contract, "prorated to the extent that [American Global Maritime's] negligence or fault contributed to the damage or loss." (Id. at 28). The Service Contract required American Global Maritime to obtain commercial general liability policy; to name Chevron and its affiliates as additional insureds under the commercial general liability insurance; and for the commercial general liability insurance to be "primary with respect to all insureds, including additional insureds, and that no other insurance carried by [Chevron] will be considered as contributory for any loss." (Id. at 33–34). The commercial general liability insurance policy would not "limit or reduce [American Global Maritime's] liability and indemnity obligations" to Chevron. (Id. at 33).
American Global Maritime obtained a Commercial General Liability Policy that had a $2 million limit and made Chevron an "Additional Insured." (Docket Entry No. 124-1 at 6, 11). The Commercial General Liability Policy covered bodily injury and property damage that American Global Maritime became "legally obligated to pay as damages." (Id. at 13). The Commercial General Liability Policy did not cover damages from American Global Maritime's "professional services," but it did cover "operations in connection with construction work performed by [American Global Maritime] or on [its] behalf." (Id. at 52). As to Additional Insureds, such as Chevron, the Commercial General Liability Policy was "primary and NON-CONTRIBUTORY ," meaning "that other available insurance will apply as excess and will not contribute as primary to the insurance provided by this policy." (Id. at 30–31, 35 (emphasis in original)).
American Global Maritime also had a Premier Design Professionals Liability Insurance Policy. This Professional Liability Policy covered bodily injury or property damage from "any actual or alleged act, error or omission committed or attempted solely in the performance of or failure to perform Design Professional Services." (Docket Entry No. 124-2 at 8, 11, 14). "Design Professional Services" meant those services "in the Insured's capacity as an architect, engineer, land surveyor, landscape architect, construction manager, interior designer, land planner, space planner, expert witness, or technical consultant" in any of those areas. (Id. at 14). American Global Maritime's Professional Liability Policy was "in excess of the amount of ... any other insurance or indemnification available to the Insured." (Id. at 31–32).
On May 16, 2015, American Global Maritime issued a certificate of approval stating that it had (Docket Entry No. 84 at 246). The tendon installation went forward. On May 29, the tendons were connected to a foundation on the...
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