Michael Cash v. Unocal Corporation , 624 F. App'x 854 ( 2015 )

Case: 14-31072 Document: 00513182864 Page: 1 Date Filed: 09/04/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-31072 United States Court of Appeals
Fifth Circuit
FILED
MICHAEL CASH, September 4, 2015
Lyle W. Cayce
Plaintiff Clerk
v.
LIBERTY INSURANCE UNDERWRITERS, INCORPORATED,
Defendant - Appellant-Cross Appellee
v.
MAX WELDERS, INCORPORATED,
Defendant - Appellee-Cross Appellant
Appeals from the United States District Court
for the Western District of Louisiana
USDC No. 6:04-CV-1648
Before STEWART, Chief Judge, and BARKSDALE and PRADO, Circuit
Judges.
PER CURIAM:*
This case involves a dispute arising over the interpretation of a marine
insurance policy. The district court ruled that the policy at issue provided
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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coverage and ordered Defendant-Appellant insurance company to reimburse
Defendant-Appellee insured for the full settlement amount resulting from the
underlying suit, in addition to attorney’s fees, costs and interest. All other
pending claims were dismissed. For the following reasons, we reverse in part.
I. Facts & Procedural History
In 2003, Union Oil Company of California (“Unocal”) retained Shaw
Global Energy Services, Inc. (“Shaw”) to provide painting and sandblasting on
a fixed platform located on the outer continental shelf off the coast of
Louisiana. The Shaw employees were housed in an adjacent platform to the
fixed platform where they provided labor for Unocal. They were transported
from the housing platform to Unocal’s platform on the M/V LYTAL ANDRE, a
vessel owned by Lytal Enterprises (“Lytal”). 1
On August 11, 2003, the underlying incident giving rise to this insurance
coverage dispute occurred when Michael Cash (“Cash”), 2 an employee of Shaw,
sustained severe injuries while being transferred by crane from a platform to
a supply vessel. The crane operator 3 who was transporting Cash during the
time of the incident was an employee of Max Welders, Inc. (“Max Welders”).
On August 6, 2004, Cash filed suit in federal district court against, inter alia,
Max Welders, Max Welders’ primary insurer, Lexington Insurance Company
(“Lexington”), and Max Welders’ marine excess insurer, Liberty Insurance
Underwriters, Inc. (“Liberty”).
During the time of the incident, Liberty had issued to Max Welders a
“Marine Excess (‘Bumbershoot’) Liability Policy” (“Bumbershoot Policy”). The
policy was effective June 1, 2003 through June 1, 2004. The general purpose
1 Unocal regularly retained Lytal to transport Unocal contractors, including
employees of Shaw, to Unocal’s various platforms located in the Gulf of Mexico.
2 Michael Cash died in an automobile accident on September 5, 2010. His estate was
substituted as a party in the underlying proceedings in April 2011.
3 Glenn Ellerbee.
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of the Bumbershoot Policy was to provide certain specified coverage in excess
of Max Welders’ other primary insurance policies. 4 Specifically, the
Bumbershoot Policy provided in part:
A. Coverage
The Policy shall indemnify the Insured with respect to the
operations listed in Item 7 of the Declarations 5 for the
following . . .
1. All Protection and Indemnity risks covered by the
underlying Protection and Indemnity Insurance . . . .
2. General average, marine collision liabilities, salvage,
salvage charges and related sue and labor arising from
any cause whatsoever.
3. All other sums which Insured shall become legally
liable to pay as damages on account of:
a. personal injuries, including death at any time
resulting therefrom, or
b. property damage
caused by or arising out of each occurrence happening
anywhere in the world.
The exclusions section of the policy provided the following:
A. This insurance does not apply to:
...
11. Any liability for, or any loss, damage, injury or
expense caused by, resulting from or incurred by
reason of:
4 At the time of the incident, Max Welders carried comprehensive general liability
insurance, automobile insurance, employers’ liability insurance, maritime employers’
liability insurance, and protection and indemnity insurance, in addition to the marine excess
liability policy issued by Liberty.
5 Item 7 of the Declarations reads: “Description of Insured Operations: Oilfield
Offshore Contractor.”
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...
d. any liability or expense arising out of the
ownership, use or operation of . . . platforms . . . but
this exclusion shall not apply to craft serving the
foregoing such as crew, supply, or utility boats,
tenders, barges or tugs.
In June 2007, Max Welders submitted notice to Liberty that Cash’s claim
might exceed the limits of its primary liability insurance policy. On February
10, 2009, Liberty advised Max Welders it was declining coverage for Cash’s
injuries, on the basis of the exclusion involving the use of platforms in section
III.A.11.(d) (referred to hereinafter as “the Platform Exclusion”). Liberty sent
a Notice of Declination of Coverage to Max Welders, stating that the incident
involving Cash fell within the parameters of the Platform Exclusion since he
sustained direct or indirect bodily injury while using or operating the platform.
Shortly thereafter in June 2009, while proceedings were pending in
district court, Max Welders brought a cross-claim against Liberty seeking
judgment that Liberty: (1) waived any right to contest coverage and/or raise
exclusions under the Bumbershoot Policy; (2) violated duties owed to Max
Welders pursuant to La. R.S. 22:1892 and La. R.S. 22:1973; (3) “breached its
agreement to provide insurance to Max Welders, Inc. and breached its duties
in bad faith”; and (4) violated the Louisiana Unfair Trade Practices Act.
Through an amended cross-claim, Max Welders added a detrimental reliance
claim against Liberty and further sought judgment that no exclusions in the
Bumbershoot Policy applied to this matter.
In September 2009, Max Welders entered into a settlement agreement
with Cash. In accordance with the settlement agreement, Lexington agreed to
pay Cash the policy limit amount of $1,000,000, Max Welders agreed to pay
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Cash $400,000, and other named defendants in the underlying suit agreed to
pay Cash a total of $50,000.
In May 2010, upon the joint motion of the parties, all claims in the
proceedings were dismissed except: (1) Cash’s claim against Max Welders; 6 and
(2) Max Welders’ cross-claim against Liberty seeking coverage and aspects
relating thereto. The parties agreed to a trial on the briefs for the remaining
claims. The primary issue in dispute was whether the Platform Exclusion
applied thereby precluding coverage, and more specifically, whether the term
“use” included the activities of Max Welders’ employeesincluding the crane
operator’s transporting of Cashon the Unocal platform.
The district court issued a Ruling in July 2012 wherein it stated that the
Bumbershoot Policy’s language was ambiguous because the term “use” was
subject to more than one meaning. The district court reasoned that there was
uncertainty as to how broadly the Platform Exclusion should be read within
the context of the entire policy and its declared purpose. On those grounds,
the district court permitted the submission of extrinsic evidence by both
parties, which included the deposition testimony of several insurance
underwriters who had experience with bumbershoot policies and the marine
insurance industry. The district court then concluded that the parties’ intent
when entering into the Bumbershoot Policy was to provide Max Welders with
insurance coverage for liability arising out of the operations it conducted as an
offshore oilfield contractor, which clearly included activities on platforms. In
the district court’s view, to apply the broadest definition of “use” and
“operation” as urged by Liberty would lead to an absurd result, because
virtually no coverage would be available for Max Welders’ work activities.
6 The parties agreed that Max Welders would only be liable to Cash to the extent of
collectible insurance coverage provided by Liberty.
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Employing the Black’s Law Dictionary’s definition of “use,” i.e., the
“employment of a thing for the purpose for which it is adapted,” 7 the district
court found that Max Welders’ incidental use of the platformto transfer a
service contractor from the platform to a vesselwould not trigger the
application of the Platform Exclusion because the platform’s true intended use
was for the purpose of extracting energy. Thus, the district court ruled, Liberty
owed coverage to Max Welders pursuant to the Bumbershoot Policy for liability
arising out of the incident involving Cash in 2003.
Liberty filed a motion for “new trial/reconsideration” and an alternative
motion to certify the district court’s ruling for immediate appeal which were
both subsequently denied. Max Welders also filed a motion for reconsideration,
a motion for leave to file a supplemental trial brief, and a motion for post-ruling
relief. The district court denied the motions for reconsideration and for leave
to file supplemental briefing but granted the motion for post-ruling relief and
instructed Max Welders to file a motion to fix attorney’s fees, which was
referred to the Magistrate Judge (“MJ”) for a Report and Recommendation
(“R&R”).
In December 2013, the MJ issued his R&R and recommended that Max
Welders be awarded $173,557.75 in attorney’s fees and $18,699.60 in expenses,
for a total award of $192,257.35. The district court declined to adopt the MJ’s
R&R and remanded the matter because Max Welders, in its motion to fix
attorney’s fees, had specifically requested fees incurred in its defense against
Cash’s claims but not those incurred in pursuing coverage. See, e.g., Steptore
v. Masco Constr. Co., 643 So. 2d 1213, 1218 (La. 1994). On remand, the MJ
recommended an adjusted award of $3,187.50 in attorney’s fees and $1,660.87
7 BLACK’S LAW DICTIONARY (9th ed. 2009).
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in expenses, for a total of $4,848.37. The district court adopted the R&R on
remand.
In September 2014, the district court entered a final judgment
incorporating the findings of the July 2012 ruling and ordering Liberty to
reimburse Max Welders for the total amount of the $400,000 settlement
payment it had issued to Cash. The judgment awarded Max Welders
attorney’s fees in the amount of $4,848.37, pursuant to the terms of the
Bumbershoot Policy, and interest and costs accruing from the date Max
Welders issued the $400,000 settlement payment to Cash. Additionally, the
judgment dismissed Max Welders’ remaining claims against Liberty because
Max Welders failed to brief those claims. 8
Liberty appeals the district court’s grant of coverage to Max Welders,
including the district court’s final judgment of September 1, 2014, and the two
district court rulings that form the basis of that judgment dated July 25, 2012
and August 13, 2013. Max Welders cross-appeals the district court’s award of
attorney’s fees and also argues on appeal that Liberty’s 20-month delay in
declining coverage amounted to waiver of its defense to coverage. We address
each of the parties’ arguments in turn.
II. Standard of Review
“The standard of review for a bench trial is well established: findings of
fact are reviewed for clear error and legal issues are reviewed de novo.”
Lehmann v. GE Glob. Ins. Holding Corp., 524 F.3d 621, 624 (5th Cir. 2008)
(internal quotation marks and citation omitted); see also Fed. R. Civ. P. 52(a).
We also review a district court’s interpretation of an insurance policy de novo.
See In re TransTexas Gas Corp., 597 F.3d 298, 309 (5th Cir. 2010).
8 This part of the judgment is not at issue on appeal.
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III. Analysis
A. Coverage Under the Bumbershoot Policy
The parties do not dispute that Louisiana law applies in this case. See
Albany Ins. Co. v. Anh Thi Kieu, 927 F.2d 882, 886–87 (5th Cir. 1991). “To
determine Louisiana law, we look to the final decisions of the Louisiana
Supreme Court.” Bradley v. Allstate Ins. Co., 620 F.3d 509, 517 n.2 (5th Cir.
2010) (citations omitted). “In the absence of a final decision by the Louisiana
Supreme Court, we must make an Erie guess and determine, in our best
judgment, how that court would resolve the issue if presented with the same
case.” Id.
Pursuant to Louisiana law, “[a]n insurance policy is a contract between
the parties and should be construed by using the general rules of interpretation
of contracts . . . .” Cadwallader v. Allstate Ins. Co., 848 So. 2d 577, 580 (La.
2003). This court’s role in interpreting insurance contracts is “to ascertain the
common intent of the parties to the contract,” id. at 580, because their intent,
“as reflected by the words of the policy, determine[s] the extent of coverage.”
Reynolds v. Select Props., Ltd., 634 So. 2d 1180, 1183 (La. 1994). “The words
of a contract must be given their generally prevailing meaning [and] [w]ords of
art and technical terms must be given their technical meaning when the
contract involves a technical matter.” La. Civ. Code art. 2047. Further,
“[w]hen the words of a contract are clear and explicit and lead to no absurd
consequences, no further interpretation” is required to determine the parties’
intent. La. Civ. Code art. 2046.
“In Louisiana, ‘[p]arol or extrinsic evidence is generally inadmissible to
vary the terms of a written contract unless there is ambiguity in the written
expression of the parties’ common intent.’” Total E & P USA, Inc. v. Kerr-
McGee Oil & Gas Corp., 719 F.3d 424, 435 (5th Cir. 2013) (alteration in
original) (citation omitted). “A contract is considered ambiguous on the issue
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of intent when it lacks a provision bearing on that issue or when the language
used in the contract is uncertain or is fairly susceptible to more than one
interpretation.” Id. (internal quotation marks omitted). However, “if the
language of [a policy] exclusion is subject to two or more reasonable
interpretations, the interpretation which favors coverage must be applied.”
Elliott v. Cont’l Cas. Co., 949 So. 2d 1247, 1254 (La. 2007) (citation omitted).
“[I]t is the burden of the insured to prove the incident falls within the
policy’s terms,” and “the insurer bears the burden of proving the applicability
of an exclusionary clause within a policy.” Doerr v. Mobil Oil Corp., 774 So. 2d
119, 124 (La. 2000). If the insurer “cannot unambiguously show an exclusion
applies, the Policy must be construed in favor of coverage.” Martco Ltd. P’ship
v. Wellons, Inc., 588 F.3d 864, 880 (5th Cir. 2009) (citation omitted).
Liberty argues that the term “use” as provided in the Platform Exclusion
is unambiguous and excludes coverage. We agree.
The district court reached the conclusion that the term “use” in the
Bumbershoot Policy was ambiguous after it considered and distinguished two
cases which had nearly identical language to Platform Exclusion at issue
herein. Upon closer review of those two cases, we find them to be dispositive.
In Janex Oil Co., Inc. v. Hanover Compressor Co., a suit was filed alleging that
an employee of the insured negligently failed to properly supervise activities
on a platform, which ultimately led to the occurrence of a fire and explosion on
the platform. 694 So. 2d 415, 416 (La. App. 4 Cir. 2/19/97). The parties had
entered into a bumbershoot insurance policy contract with an exclusion
containing nearly identical language to the one at issue herein. Id. The
exclusion stated that the insurer would not cover liability or expense arising
“from ownership, use or operation of drilling rigs, drilling barges, drilling
tenders, platforms [and/or] lose lines . . . .” Id. The Louisiana Fourth Circuit
Court of Appeals agreed with the insurer’s argument in that case that “the
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purpose of [the] exclusion was to limit coverage to vessels while excluding
drilling platforms.” Id. (stating that “[t]he actions of [the insured] were
involved in the operation of the platform and under any reasonable reading of
the policy language [arose] out of the operation of the platform/drilling rig”).
In Underwriters at Lloyd’s London v. OSCA, Inc., an employee of the
insured was attempting to set a bridge plug in a well located on a platform
when a blowout occurred causing damages. Nos. 03-21021, 03-20817, 2006 WL
941794, at *2 (5th Cir. Apr. 12, 2006) (per curiam). Again, the parties had
entered into a bumbershoot insurance policy contract with an exclusion
containing nearly identical language to the one herein. Id. at *22. The
exclusion stated that the insurer was excluded from liability “arising from:
ownership, use, or operation of drilling rigs, drilling barges, drilling tenders,
platforms, flow lines, gathering stations, and or pipelines . . .” Id. This court
held that the exclusion applied and barred recovery. Id. at *23 (declining to
view the platform as nothing more than a location for the well and therefore
incidental to where the actual damage occurred).
As the court did in Janex, and as this court did in Lloyd’s, we find herein
that the policy exclusion at issuecontaining essentially identical language to
the policy exclusions in those casesapplies in this case to exclude coverage.
The term “use” as contained in the Platform Exclusion is not ambiguous. See
Elliott, 949 So. 2d at 1254. It is clear from the plain language of the policy
here, as it was to the court in Janex, that the parties intended to exclude
platforms from coverage. See Cadwallader, 848 So. 2d at 580. If the parties
had intended for the use or operation of the platforms to be covered under the
policy, they could have drafted the contractual language that way or omitted
the term “platform” from the exclusions section, but they did not.
Moreover, it is clear from the record that the actions of Max Welders in
this casemoving Shaw employees between the platform and the vessels to
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perform their job dutiesclearly involved the use of the platform. See Janex,
694 So. 2d at 416. Further, similar to the court’s observation in Lloyd’s, the
platform as it was used by Max Welders was not merely a location for the crane
and therefore incidental to the damage that occurred there. See Lloyd’s
London, 2006 WL 941794, at *23. The platform was being used by the crane
operator to transport Shaw employees in connection with the work they were
doing for Unocal. Although it may be true, as the district court concluded, that
one intended use of a platform is to extract energy, it is also possible that
platforms can have more than one use in connection with that intended
purposeas was the case here.
In conclusion, we hold that the district court erred in finding that Liberty
owed coverage to Max Welders under the Bumbershoot Policy. 9
B. Attorney’s Fees
On cross-appeal, Max Welders argues that not only was it entitled to
attorney’s fees and costs associated with its defense against Cash’s claims, but
that it was also entitled to attorney’s fees and costs incurred in its pursuit of
coverage from Liberty.
In light of our holding reversing the trial court’s ruling that Liberty owed
coverage to Max Welders under the Bumbershoot policy, we also reverse the
district court’s award of attorney’s fees, costs and interest to Max Welders. As
such, we decline to address Max Welders’ argument that it is entitled to
additional attorney’s fees and costs incurred in the pursuit of coverage from
Liberty.
9In light of this holding, it is not necessary that we address Liberty’s third argument
with regard to whether the district court erred in assigning relevance as to whether the crane
was a component part of the platform. For this same reason, we also decline to discuss Max
Welders’ waiver argument regarding Liberty’s 20-month delay in declining coverage.
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IV. Conclusion
For the foregoing reasons, the portion of the district court’s final
judgment 10 ordering Liberty to provide coverage under the Bumbershoot Policy
to Max Welders, and ordering Liberty to pay to Max Welders reimbursement
of $400,000, attorney’s fees, costs and interest, is REVERSED. All other
aspects of the district court’s judgment are AFFIRMED.
10 Dated September 1, 2014, including any portions of the Rulings dated July 25, 2012
and August 13, 2013, to the extent that they were relied upon or incorporated into the part
of the district court’s September 1, 2014 final judgment that is reversed herein.
12