Maxim Crane Works, L.P. v. Zurich Am. Ins. Co.

• Decision Date: 25 August 2021
• Docket Number: No. 19-20489,19-20489
• Citation: 11 F.4th 345
• Parties: MAXIM CRANE WORKS, L.P., Plaintiff—Appellant, v. ZURICH AMERICAN INSURANCE COMPANY, Defendant—Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

11 F.4th 345

MAXIM CRANE WORKS, L.P., Plaintiff—Appellant,

v.ZURICH AMERICAN INSURANCE COMPANY, Defendant—Appellee.

No. 19-20489

United States Court of Appeals, Fifth Circuit.

FILED August 25, 2021

Peter David Laun, Attorney, Sidney Smith McClung, Jones Day, Dallas, TX, for Plaintiff—Appellant.

Blair Dancy, Zachary H. Bowman, Benjamin David Evans, Cain & Skarnulis, P.L.L.C., Austin, TX, for Defendant—Appellee.

Before Smith, Ho, and Oldham, Circuit Judges.

Per Curiam:

We withdraw the court's prior opinion of Aug. 20, 2021 and substitute the following opinion.

This is an insurance coverage dispute involving an intricate web of insurance contracts arising out of a construction project involving multiple different businesses. But the legal issue presented in this case is simply this: Who counts as an "employee" under the Texas Anti-Indemnity Act ("TAIA")? See TEX. INS. CODE §§ 151.102, 151.103. Specifically, if a person is employed by a general contractor, is that person also considered an "employee" of the subcontractor? One might think, under a traditional understanding of the term "employee," the natural answer to this question must be "no." But the TAIA does not define the term "employee" for these purposes; there are no Texas cases interpreting the TAIA; and at least one Texas court has answered the question "yes," at least as the term "employee" has been used in the Texas Workers’ Compensation Act.

We are advised that the answer to this question of statutory interpretation may affect countless Texas construction contracts. But we lack sufficient guidance from Texas courts to determine with any confidence how the Supreme Court of Texas would answer this question. "To best serve the people of Texas, th[i]s[ ] question[ ] should be answered by the only court that can issue a precedential ruling that will benefit all future litigants, whether in state or federal court." JCB, Inc. v. Horsburgh & Scott Co. , 912 F.3d 238, 239 (5th Cir. 2018). Accordingly, we certify this question to the Supreme Court of Texas.

Before we do so, we address, and reject, the contention that the district court should have dismissed this case for lack of standing, rather than enter judgment on the merits for the insurer. In doing so, we explain why there was no need for the insurer to file a cross-appeal in order to raise the issue of standing on appeal.

I.

In 2013, Skanska USA, Inc. ("Skanska"), a general contractor, hired Berkel & Co. Contractors ("Berkel") as a subcontractor on a large construction project in Houston. Skanska required all of its subcontractors, including Berkel, to participate in a contractor-controlled insurance program ("CCIP") as a condition of working on the job. The CCIP provided for general commercial liability insurance as well as workers’ compensation coverage.

Berkel leased a Link-Belt Crawler Crane from Maxim Crane Works, L.P., for use on the project. The lease was a "Bare Rental Agreement," meaning that Berkel agreed to be solely responsible for operating and maintaining the crane while it was in Berkel's possession. The lease also required Berkel to name Maxim as an additional insured under Berkel's commercial general liability insurance policy ("Berkel CGL Policy"), which was issued by Zurich American Insurance Company ("Zurich"). Because Maxim was only a leasing partner, however, it was not subject to Skanska's CCIP requirement or included in the program.

On September 30, 2013, a Berkel employee operating the crane caused the boom to collapse, crushing the leg of Tyler Lee, a project supervisor and Skanska employee on site. Lee was awarded workers’ compensation benefits under the CCIP. His leg was ultimately amputated.

In 2014, Lee filed suit against Berkel, Maxim, and others in Texas state court for injuries based on negligence. When the state court litigation commenced, Maxim sought coverage from Zurich as an additional insured under the Berkel CGL Policy. Based in part on its reading of the TAIA, Zurich denied coverage. Maxim cross-claimed against Berkel for breach of contract on the theory that Berkel was required to defend Maxim and indemnify or contribute to any of Maxim's losses.

In 2015, a jury awarded Lee $35.4 million in actual damages, allocating 90% of the fault to Berkel and 10% to Maxim. Maxim settled with Lee for $3.4 million. Maxim's independent insurance policy ("Maxim CGL Policy") also happened to be purchased from Zurich. Pursuant to that policy, Zurich initially paid the entire amount of both the settlement and the associated legal fees. However, pursuant to Maxim's deductible, Zurich billed back $3 million of the settlement and $824,839.38 in legal fees, which Maxim reimbursed to Zurich.

Following the jury verdict, Maxim moved for entry of judgment on its cross-claim against Berkel. The court denied Maxim's motion.

Berkel appealed the jury verdict. In 2018, the state court of appeals reversed judgment against Berkel, finding that because Berkel and Skanska were both covered under the CCIP, Lee was Berkel's "statutory coemployee" for purposes of the Texas Workers’ Compensation Act ("TWCA"). Berkel & Co. Contractors, Inc. v. Lee , 543 S.W.3d 288, 296 (Tex. App.—Houston [14th Dist.] 2018, pet. denied), reh'g granted in part (Jan. 23, 2018), reh'g denied (Mar. 6, 2018). Consequently, it held Berkel could not be sued in tort because the exclusive remedy for workplace injuries against employers was workers’ compensation.

Maxim separately appealed the state court's judgment on its cross-claim against Berkel. The court of appeals affirmed, holding Maxim had not preserved arguments relating to the applicability of the TAIA. The Texas Supreme Court denied further review.

In April 2018, Maxim made another demand on Zurich to reimburse Maxim for the costs of the legal defense and the judgment. Zurich again denied coverage.

In September 2018, Maxim filed suit in state court against Zurich seeking declaratory relief and contract damages. Specifically, Maxim argued Zurich had improperly denied it coverage as an additional insured under Berkel's CGL Policy. Zurich removed to federal court on diversity jurisdiction grounds. As only legal issues were in dispute, the parties agreed to a joint stipulation of facts and to file cross-motions for summary judgment. In 2019, the district court granted Zurich's motion for summary judgment and denied Maxim's motion for summary judgment. The district court concluded: (1) Maxim had standing to pursue its claim, and (2) the TAIA precluded Maxim from coverage as an additional insured. Maxim appealed and Zurich cross-appealed, with Maxim arguing the TAIA did not bar coverage and Zurich arguing Maxim did not have standing. After oral argument, Zurich filed an unopposed motion to dismiss its cross appeal, which we granted. Maxim has also filed an opposed motion to stay proceedings in this Court and to certify the TAIA question to the Texas Supreme Court.

II.

We review a district court's grant of summary judgment de novo, applying the same standard as the district court. Nola Spice Designs, L.L.C. v. Haydel Enters., Inc. , 783 F.3d 527, 536 (5th Cir. 2015). Summary judgment is appropriate "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." FED. R. CIV. P . 56(a). Where, as here, "the only issue[s] before the court [are] [ ] pure question[s] of law," "summary judgment is appropriate." Sheline v. Dun & Bradstreet Corp. , 948 F.2d 174, 176 (5th Cir. 1991).

The parties agreed to a joint stipulation of facts, and the two issues for resolution on appeal are pure questions of law: (1) does Maxim have standing, and (2) does the employee exception under the TAIA preclude Maxim from seeking coverage as an additional insured? Texas law governs the latter question.

III.

Before turning to our standing analysis, we first address a few procedural issues. During oral argument, we inquired as to whether Zurich's cross-appeal was proper or necessary. After oral argument, Zurich moved to dismiss its cross-appeal. We previously granted that motion and now explain why.

In its motion to dismiss its cross-appeal, Zurich requested that "the grounds therein be considered alternate grounds for affirmance of the District Court's judgment or preserved grounds to address in the event the Court reverses the district court's judgment."

Zurich's motion to dismiss is well taken. "[A]rguments that support the judgment as entered can be made without a cross-appeal." 15A C. WRIGHT & A. MILLER FEDERAL PRACTICE AND PROCEDURE § 3904 (2d ed. 2021). And unnecessary cross-appeals should generally be avoided. "Appeal procedure is streamlined in desirable ways if arguments to support the judgment are made in brief without filing an unnecessary cross-appeal. Cross-appeal procedure complicates briefing schedules and the number and length of the briefs in ways that may generate more confusion than enlightenment." Id.

As discussed below, Zurich's "standing" argument is based not on the lack of an Article III injury, but on the absence of contractual standing. That is, Zurich argues that Maxim does not have a contractual right to bring this suit. And such questions do not go to the court's subject matter jurisdiction, but are instead part of the inquiry into the merits of a particular claim. Cf. Lexmark Int'l, Inc. v. Static Control Components, Inc. , 572 U.S. 118, 128 n.4, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014). "[U]nlike a dismissal for lack of constitutional standing, which should be granted under Rule 12(b)(1), a dismissal for lack of prudential or statutory standing is properly granted under Rule 12(b)(6)." Harold H. Huggins Realty, Inc. v. FNC, Inc. , 634 F.3d 787, 795 n.2 (5th Cir. 2011). Likewise, "[c]ontractual standing is distinct from Article III standing and does not implicate subject-matter jurisdiction."

SM Kids, LLC v. Google LLC , 963 F.3d 206, 211 (2d Cir. 2020). " Article III standing speaks to the power of a court to adjudicate...