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

• Decision Date: 04 March 2022
• Docket Number: 21-0727
• Citation: 642 S.W.3d 551
• Parties: MAXIM CRANE WORKS, L.P., Appellant, v. ZURICH AMERICAN INSURANCE COMPANY, Appellee
• Court: Texas Supreme Court

642 S.W.3d 551

MAXIM CRANE WORKS, L.P., Appellant,

v.ZURICH AMERICAN INSURANCE COMPANY, Appellee

No. 21-0727

Supreme Court of Texas.

Argued December 2, 2021

OPINION DELIVERED: March 4, 2022

Sidney Smith McClung, Peter David Laun, Dallas, for Appellant.

Benjamin David Evans, Waco, Zachary H. Bowman, Christopher Blair Dancy, Austin, for Appellee.

Justice Busby delivered the opinion of the Court.

The United States Court of Appeals for the Fifth Circuit has requested our guidance on the scope of the so-called "employee exception" to the Texas Anti-Indemnity Act (TAIA). In the construction context, the TAIA generally prohibits one party (the indemnitor) from indemnifying or insuring another party (the indemnitee) against a claim caused by the negligence or other fault of the indemnitee or its employees or agents. See TEX. INS. CODE § 151.102. But an exception permits the indemnitor to indemnify or insure the indemnitee against a claim for the bodily injury or death of the indemnitor's employee, agent, or subcontractor. See id. § 151.103. The question before us is whether employee status under this exception is affected by certain provisions of the Texas Workers' Compensation Act (TWCA).

Here, a general contractor's employee injured in a crane accident obtained a negligence judgment in Texas state court against the subcontractor that operated the crane (Berkel) and the company that leased it the crane (Maxim). Berkel had provided Maxim with coverage as an additional insured, making Berkel an indemnitor and Maxim an indemnitee for TAIA purposes. Maxim settled with the injured worker and unsuccessfully sought reimbursement from Berkel's insurer (Zurich). Berkel appealed and the court of appeals reversed the judgment against it, holding that the injured worker and Berkel were "statutory co-employees" of the general contractor under the TWCA, which therefore provided the worker's exclusive remedy. Berkel & Co. Contractors, Inc. v. Lee , 543 S.W.3d 288, 296 (Tex. App.—Houston [14th Dist.] 2018), aff'd in part, rev'd in part on other grounds , 612 S.W.3d 280 (Tex. 2020).

In this separate suit, which was removed to federal court, Maxim and Zurich dispute whether the additional-insured coverage is enforceable. The resolution of their dispute turns on whether the injured worker is considered an "employee" of Berkel, the indemnitor, under TAIA section 151.103. Specifically, the Fifth Circuit asks us whether that exception "allows additional insured coverage when an injured worker brings a personal injury claim against the additional insured (indemnitee), and the worker and the indemnit[or] are deemed ‘co-employees’ ... for purposes of the TWCA."¹

We answer no. Deeming an injured worker to be a co-employee with the indemnitor for purposes of the TWCA does not make that worker an employee of the indemnitor under the plain language of the TAIA. Because the Texas Legislature expressly separated these two statutory schemes, the TWCA does not affect the enforceability of an additional-insured provision under the TAIA.

BACKGROUND

A. The parties and their insurance policies

The parties have established the relevant facts by stipulation. Skanska USA Building, Inc. was the general contractor on a 2013 construction project to build a large office campus in Houston. Skanska offered a contractor-controlled insurance program (CCIP) that included (1) workers' compensation coverage and (2) commercial general liability coverage under a policy (Skanska CGL Policy) issued by appellee Zurich American Insurance Company.

Skanska required each subcontractor on the project to enroll in its CCIP as a condition of performing work on the jobsite. But Skanska's CCIP excluded certain entities from coverage "[a]t the discretion of Skanska or subject to State regulations," including "[s]ubcontractors, and any of their respective sub-subcontractors, who do not perform any actual labor on the Project Site" as well as "[v]endors, suppliers ... and others who merely transport, pickup, deliver, or carry materials, personnel, parts or equipment or any other items or persons to or from the Project Site."

Skanska hired Berkel & Company Contractors, Inc. as a subcontractor for the project. Although Berkel enrolled in Skanska's CCIP as required, Berkel also had its own commercial general liability policy issued by Zurich (Berkel CGL Policy).

Berkel then leased a crane from appellant Maxim Crane Works, L.P. for use on the construction project. Berkel and Maxim entered into a Bare Rental Agreement (the Equipment Lease) under which Berkel agreed to be responsible for compliance with all applicable laws, regulations, and ordinances in respect to the operation and maintenance of the crane while in Berkel's possession. Berkel also agreed to name Maxim as an additional insured under Berkel's CGL policy, with limits of liability not less than $2 million for each occurrence.

Although Maxim qualified as an "Additional Insured" under the Berkel CGL Policy, subject to any applicable provisions or exclusions, Maxim also had its own commercial general liability policy issued by Zurich (Maxim CGL Policy). Maxim did not enroll in Skanska's CCIP.

B. Maxim's settlement of the state-court suit against it and Zurich's refusal to cover Maxim under Berkel's policy

On September 30, 2013, a Berkel employee was operating Maxim's crane at the construction site when the crane boom collapsed. Part of the crane crushed the leg of Skanska employee Tyler Lee, which ultimately had to be amputated above the knee

.

Lee applied for and received workers' compensation benefits under Skanska's CCIP. Lee and his wife then sued Berkel, Maxim, and other defendants in Texas state court, alleging various theories of negligence. Although no employee of Maxim was present on the construction site at the time of the accident, the Lees alleged that Maxim was independently liable for its own negligence.

Maxim sought coverage under the Berkel CGL policy, requesting defense, indemnity, and additional-insured status with respect to the Lees' claims. Zurich denied coverage based on sections 151.102 through 151.104 of the TAIA, explaining that "the indemnity provision(s) in the [Equipment Lease] is void and unenforceable because this loss involved an employee of the general contractor, Skanska."

Maxim then filed cross-claims against Berkel in the Lees' state-court action, alleging breach of contract and seeking defense, indemnity, and contribution under Texas statutory and common law. Maxim alleged that Berkel breached the Equipment Lease by, among other things,² "refusing to defend and indemnify MAXIM" and "refusing to meet its contractual obligation to [e]nsure that MAXIM was provided coverage as an additional insured under Berkel's insurance policy(ies)."

The Lees' suit was tried before a jury. Although Maxim requested that the jury be asked whether Berkel breached the lease, the trial court sustained Berkel's objection to including the question in the charge. The jury found both Maxim and Berkel negligent and awarded the Lees actual damages of $35,443,006. The jury placed 90% of the responsibility on Berkel and 10% on Maxim.

After trial but prior to final judgment, the Lees and Maxim reached a settlement for $3,444,300.60. Zurich paid the Lees that amount under the Maxim CGL Policy and Maxim reimbursed Zurich for $3 million of the settlement costs, per the deductible endorsement in the policy. Zurich also billed Maxim $824,839.38 for defense costs, which Maxim reimbursed.

Maxim filed a motion for entry of judgment on its cross-claims against Berkel. The trial court denied the motion, concluding that "pursuant to the jury's findings as to the negligence questions in the Court's Jury Charge, and Chapter 151 of the Texas Insurance Code, Maxim is not entitled to reimbursement of [its] Defense Fees, Costs, and Expenses of and from Berkel."

The court ultimately "render[ed] judgment for Berkel against Maxim on Maxim's Cross Action."

Both Berkel and Maxim appealed the trial court's judgment. The Fourteenth Court of Appeals reversed the judgment against Berkel, holding that the workers' compensation scheme provided the Lees' exclusive remedy. Berkel & Co. , 543 S.W.3d at 295–96.

The TWCA provides that recovery of workers' compensation benefits is a covered employee's exclusive remedy against his employer and co-employees for work-related injury. See TEX. LAB. CODE § 408.001(a). Although Berkel "is not Lee's actual employer or co-employee," the court of appeals explained that section 406.123 of the TWCA "allow[s] the general contractor to be deemed the statutory employer of the subcontractor and the subcontractor's employees ‘[only] for purposes of the workers' compensation laws of this state’ " if the general contractor has agreed in writing to provide them with workers' compensation insurance. Berkel & Co. , 543 S.W.3d at 296 (quoting TEX. LAB. CODE § 406.123(e) ). "Thus, for purposes of the [TWCA], Skanska is Berkel's statutory employer, and Lee, as Skanska's actual employee, is Berkel's statutory co-employee." Id. "As a co-employee [of Lee], Berkel [was] entitled to rely on the [TWCA's] exclusive-remedy provision," and "the trial court erred by rendering judgment against Berkel on the findings that Berkel was negligent and grossly negligent." Id.

The court of appeals affirmed the trial court's judgment against Maxim in a separate opinion without reaching the merits of Maxim's TAIA argument. See Maxim Crane Works, L.P. v. Berkel & Co. Contractors, Inc. , No. 14-15-00614-CV, 2016 WL 4198138 (Tex. App.—Houston [14th Dist.] Aug. 9, 2016, pet. denied).³ Maxim subsequently filed a petition for review in this Court, which we denied.

C. Maxim's coverage suit against Zurich

In April 2018, Maxim made another demand on Zurich for coverage as an additional insured under Berkel's CGL Policy, seeking "reimbursement of [the] defense costs [Maxim] incurred in defending the underlying lawsuit ... and reimbursement of the indemnity monies used to settle the...