Totalenergies Petrochemicals & Ref. USA, Inc. v. Kinder Morgan Petcoke, LP

• Decision Date: 15 September 2022
• Docket Number: 14-20-00661-CV
• Citation: 658 S.W.3d 647
• Parties: TOTALENERGIES PETROCHEMICALS & REFINING USA, INC. fka Total Petrochemicals & Refining USA, Inc. and ACE Property & Casualty Insurance Co., Appellants/Cross-Appellees v. KINDER MORGAN PETCOKE, LP and Kinder Morgan Petcoke GP LLC, Appellees/Cross-Appellants
• Court: Texas Court of Appeals

658 S.W.3d 647

TOTALENERGIES PETROCHEMICALS & REFINING USA, INC. fka Total Petrochemicals & Refining USA, Inc. and ACE Property & Casualty Insurance Co., Appellants/Cross-Appellees

v.KINDER MORGAN PETCOKE, LP and Kinder Morgan Petcoke GP LLC, Appellees/Cross-Appellants

NO. 14-20-00661-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed September 15, 2022

Thomas R. Phillips, Michael Cotton, Austin, James M. Bettis Jr., D. Mitchell McFarland, Justin Ratley, Houston, Caroline Schadle, for Appellee.

Jack G. Carnegie, Sarah Smith, Allison Griswold, Houston, Wallace B. Jefferson, Austin, Rachel A. Ekery, Houston, for Appellant.

Panel consists of Justices Jewell, Bourliot, and Poissant.

Kevin Jewell, Justice

Total Petrochemicals & Refining USA, Inc. and Kinder Morgan Petcoke, LP are parties to a contract under which Kinder Morgan performed petrochemical work at Total's refinery.¹ The issues before us concern whether Kinder Morgan complied with contractual obligations to procure and maintain certain insurance; whether the contract required Kinder Morgan to name Total and its employees as additional insureds on all insurance Kinder Morgan carried; and whether any breaches caused damages. The contract disputes emanate from the tragic death of a Kinder Morgan employee while performing work under the contract, and the parties’ joint contribution to a settlement of the employee's lawsuit against Total and Kinder Morgan. Following the settlement, Total sued Kinder Morgan, claiming Total lacked insurance coverage that would have paid for at least some of its defense and settlement costs had Kinder Morgan not breached its contractual promise to make Total and its employees additional insureds on Kinder Morgan's insurance policies.

The trial court resolved all claims on summary judgment, granting relief on some of Total's claims, rejecting other claims, and rendering a $1 million judgment for Total and its subrogated insurer, Ace Property and Casualty Insurance Co. ("Chubb"). All parties appeal.

For reasons explained below, we hold:

1. Appellants conclusively established Kinder Morgan breached the contract in three respects: (a) by failing to maintain the minimum coverages required by the contract; (b) by failing to ensure that Total and its employees qualified as additional insureds on Kinder Morgan's excess policy; and (c) by failing, before the accident, to provide written notice of a material change made to Kinder Morgan's insurance policies that affected Total's additional insured status.

2. Appellants’ alleged damages are not consequential damages and therefore are not excluded by the contract's consequential damages exclusion.

3. Appellants have not conclusively proven damages for any of the above breaches, and we remand for determination of damages.

4. The trial court did not err in ruling that appellants’ damages resulting from Kinder Morgan's failure to maintain the minimum required coverages are limited to $6 million.

5. Because the issue of damages remains for resolution on remand, we do not reach the parties’ arguments regarding Kinder Morgan's claims to an offset or to recover its settlement contribution.

Accordingly, we affirm the judgment in part, reverse and render judgment in part, and remand the case for further proceedings consistent with this opinion.

Background

In 2009, Total signed a contract with TGS Development, LP, by which TGS agreed to perform certain work at Total's Port Arthur, Texas refinery (the "Contract"). Through a series of assignments, Kinder Morgan acquired TGS's interest in the Contract.

In September 2015, Gary Counts, a Kinder Morgan employee, died while performing work under the Contract. Counts's family filed wrongful death and survival claims against Kinder Morgan, Total, and some Total employees (the "Counts Lawsuit"). The Counts family non-suited Kinder Morgan after the Department of Insurance Division of Workers’ Compensation determined that their claims were covered under Kinder Morgan's worker's compensation insurance. Subsequently, Total and its insurer, Chubb, along with Kinder Morgan, jointly funded a settlement of the Counts Lawsuit. Total and Kinder Morgan contributed equal amounts to the settlement. Chubb contributed a lesser amount. Though all agreed that the settlement amount was reasonable, Total, Chubb, and Kinder Morgan disputed ultimate responsibility for funding the settlement, and they reserved their respective rights against each other.

A. Summary of contract terms

The disputed issues concern primarily whether Kinder Morgan complied with Contract provisions requiring it to: (1) procure and maintain certain minimum types and amounts of insurance coverage; (2) make Total and its employees additional insureds on Kinder Morgan's insurance policies; and (3) give Total thirty days’ written notice of any cancellation or material modification of its policies. Kinder Morgan's insurance-related obligations are set forth in Article 9 and Exhibit X of the Contract, which state in relevant part:

ARTICLE 9 — INSURANCE

Before any of the Work is commenced and during the entire progress of the Work, [Kinder Morgan] shall, at [Kinder Morgan]’s own cost and expense, cause to be issued and maintained insurance coverages as set forth on Exhibit "X" attached hereto and made a part hereof for all purposes. As outlined in greater detail in Exhibit X, all insurance carried by [Kinder Morgan], except Worker's Compensation and Employer[s]’ Liability, whether required hereby, shall, be endorsed to make [TOTAL] and its partners, partnerships, joint ventures, joint venture partners, parents, subsidiaries, and affiliated companies and their respective employees, officers, directors, and agents additional insureds (Additional Insureds) and all insurance carried by [Kinder Morgan] shall be endorsed to provide that underwriters and insurance companies of [Kinder Morgan] shall not have any right of subrogation against the Additional Insureds. Prior to commencing the Work, [Kinder Morgan] shall supply to TOTAL insurance certificates evidencing that the minimum insurance is in full force and effect and that thirty (30) days written notice shall be given to TOTAL prior to any cancellation or material modification of any policies.

* * *

EXHIBIT X

INSURANCE REQUIREMENTS

1.1 MINIMUM REQUIRED COVERAGES. [Kinder Morgan] shall provide and maintain in effect, from the time of commencement of Work hereunder until full completion of the Work and of all of [Kinder Morgan]’s obligations under the Contract ..., with insurance companies reasonably acceptable to [TOTAL], with the equivalent of an A.M. BEST rating of B or better, the following minimum amounts and types of insurance:

* * *

(b) COMMERCIAL GENERAL LIABILITY INSURANCE

Including, but not limited to, coverage for death, bodily injury and property damage, broad form contractual liability insuring the indemnity agreement, if any, set forth in this Contract and products-completed operations coverage with limits of not less than $1,000,000 applicable to bodily injury, sickness or death for any one occurrence and $1,000,000 for loss of or damage to property for any one occurrence....

* * *

(d) EXCESS LIABILITY INSURANCE

Excess (umbrella) liability coverage following form^[2] and in excess of the limits and terms of (a), (b), and (c) above, with a combined single limit for death, bodily injury and/or property damage of not less than $5,000,000 for each occurrence.

* * *

1.3 ADDITIONAL INSUREDS. [TOTAL], its partners, partnerships, joint ventures, joint venture partners, parents, subsidiaries, and affiliated companies, and their respective employees, officers, directors, and agents (collectively referred to as Additional Insureds) shall be named as additional insureds to the extent required by the Contract, except Workers’ Compensation and Employers’ Liability. Further, [Kinder Morgan]’s indemnity obligation shall not be limited by the insurance requirement.

(a) SUBROGATION

All policies shall be amended or endorsed to provide that underwriters and insurance companies of [Kinder Morgan] shall not have any right of subrogation against the Additional Insureds.

(b) PRIMARY INSURANCE

Any coverage provided to the Additional Insureds by [Kinder Morgan] under this Contract is primary insurance and shall not be considered contributory insurance with any insurance policies of the Additional Insureds.

(c) OCCURRENCE MADE BASIS

It is agreed that all policies and coverages required by the Contract shall extend to all occurrences that occurred from the time of commencement of Work until completion of Work and removal of all remaining materials, supplies and personnel from the Work Site. If any coverage is written on a claims-made basis, the policy date or retroactive date shall predate this Contract and the termination date of the policy or applicable extended reporting period shall be not earlier than twenty-four (24) months from [Kinder Morgan]’s completion of the Work. If the Commercial General Liability insurance coverage is an "occurrence" policy, it shall contain no "sunset clause" or similar provision intending to cancel coverage on claims following any cancellation or non-renewal of such coverage.

* * *

1.6 DEDUCTIBLES. Any and all deductibles in the above-described insurance policies shall be assumed by, for the account of and at [Kinder Morgan]’s sole risk.

B. Summary of the disputes

Among the "minimum required coverages" described in Section 1.1³ are commercial general liability ("CGL") insurance and excess liability insurance. From March 2009 until at least June 2013, TGS or Kinder Morgan maintained general liability insurance policies. All agree that Article 9 and Section 1.3 require Kinder Morgan to ensure that Total and its employees are named as additional insureds on the minimum required coverages. We are told that Total and its employees qualified as additional insureds under the general liability policies in effect from March 2009 to June 2013. Kinder Morgan's general liability...