Bott v. JF Shea Company Inc , 299 F.3d 508 ( 2002 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________________
No. 01-40848
__________________________
John Bott,
Plaintiff
Mid-Continent Casualty Company,
Intervenor Plaintiff - Counter Defendant - Appellee
versus
J.F. Shea Company, Incorporated; Shea/Keefe,
Defendants - Third Party Plaintiffs - Counter Claimants -
Appellants
versus
Gulf Coast Grouting, Incorporated,
Third Party Defendant - Appellee.
___________________________________________________
Appeal from the United States District Court
for the Southern District of Texas
___________________________________________________
August 2, 2002
Before KING, Chief Judge, PARKER, and CLEMENT, Circuit Judges.
CLEMENT, Circuit Judge:
I. Facts and Proceedings
This case arises out of a personal injury suit brought by John
Bott (“Bott”) against a joint venture known as Shea/Keefe and J.F.
Shea Co., Inc. In an attempt to bid and win a construction
project, J.F. Shea entered into a joint venture with L.J. Keefe
Co.1 Shea/Keefe was awarded construction projects to build five
portions of a sewer line for the City of Houston. Shea/Keefe hired
Gulf Coast Grouting, Inc. (“Gulf Coast”) to do the grouting work on
the project. The contract provided that Shea/Keefe must receive
certificates of insurance before work could commence and further
provided that Gulf Coast was to secure insurance coverage naming
Shea/Keefe as an additional insured.
Gulf Coast obtained insurance from Mid-Continent Casualty
Company (“Mid-Continent”) listing J.F. Shea as an additional
insured. By letter, Shea/Keefe instructed Gulf Coast to name J.F.
Shea as the additional insured although the subcontract provided
that Shea/Keefe was to be named as an additional insured. After
the insurance was obtained from Mid-Continent, Gulf Coast sent
certificates of insurance to Shea/Keefe indicating that J.F. Shea
was an additional insured on the policy on two separate occasions.
Shea/Keefe did not object to the certificates naming J.F. Shea as
an additional insured and allowed work to commence on the project.
On February 9, 1998, Bott, an employee of Gulf Coast, was
injured while working in a sewer line tunnel shaft. Bott filed a
negligence suit against Shea/Keefe and J.F. Shea. Gulf Coast and
Mid-Continent were joined as third party defendants. Shea/Keefe
1
The joint venture agreement provided that J.F. Shea would
oversee the daily operations of the project. Interests of the
joint venture in profits and losses were proportionally divided
such that J.F. Shea was responsible for 80% of the job and Keefe
for only 20%.
2
filed a third party complaint against Gulf Coast for indemnity
under the Construction Subcontract Agreement (“subcontract”) or,
alternatively, for breach of contract. Bott’s claims against
Shea/Keefe were settled by Shea/Keefe and cross motions for summary
judgment were filed by all parties on the issues of indemnity and
additional insured coverage.
Shea/Keefe requested indemnity from Mid-Continent for Bott’s
suit and subsequent settlement which was denied. It then filed a
motion for summary judgment against Gulf Coast on the indemnity
issue and sought coverage as an additional insured from Mid-
Continent. The district court denied the summary judgment motions
of Shea/Keefe and Gulf Coast as to the indemnity claim. After a
jury trial to allocate negligence between Shea/Keefe and Gulf
Coast, the jury found that Bott’s injuries were caused solely by
Shea/Keefe.
Shea/Keefe then filed a summary judgment motion alleging that
Gulf Coast breached the subcontract by failing to have insurance
coverage naming Shea/Keefe as an additional insured. Gulf Coast
filed a summary judgment motion arguing, among other defenses, that
Shea/Keefe was estopped from asserting the breach of contract
claim. The district court held that the doctrine of quasi-estoppel
precluded Shea/Keefe’s summary judgment on the breach of contract
issue. It further concluded that Shea/Keefe was not an additional
insured because it was not named as such in the policy. It also
held that J.F. Shea, while named as an additional insured, was not
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entitled to coverage because its liability was the result of
activities stemming from the joint venture with Keefe. Shea/Keefe
and J.F. Shea filed a motion for new trial which was denied.
Notice of appeal was then timely filed.
II. Analysis
A. Whether Shea/Keefe is an Additional Insured under the Policy
and Therefore Entitled to Coverage.
The district court’s determination that Shea/Keefe was not an
additional insured is reviewed de novo. See Mid-Continent Casualty
Co. v. Swift Energy Co., 206 F.3dd 487, 491 (5th Cir. 2000), citing,
National Union Fire Ins. Co. of Pittsburgh, Penn. V. Kasler, 906
F.2d 196, 197 (5th Cir. 1990)(“The interpretation of an insurance
contract, including the question of whether the contract is
ambiguous, is a legal determination meriting de novo review.”)
Shea/Keefe submits that the district court erred in deny
Shea/Keefe additional insured coverage under the Mid-Continent
policy. Mid-Continent refused to provide coverage to Shea because
the subcontract was between Gulf Coast and Shea/Keefe such that
liability did not arise out of operations performed for Shea.
Mid-Continent’s primary basis for denying coverage to Shea is
because the joint venture clause of the policy precludes such
coverage.2 Even if Shea was an additional insured, it would still
2
Mid-Continent also argued that Shea is not an additional
insured, but admits that, pursuant to this Court’s decisions in
Mid-Continent Casualty Co. v. Swift Energy Co., 206 F.2d 487 (5th
Cir. 2000), and Mid-Continent Casualty Co. v. Chevron Pipe Line
4
be subject to the exclusions in the policy. Section II of the
policy, defining who is an insured, contains a final clause stating
that “no person or organization is an insured with respect to the
conduct of any current or past partnership or joint venture that is
not shown as a Named Insured in the Declarations.” Because
liability arose out of the joint venture which is not an insured,
Shea is not entitled to coverage.
Shea first argues that it is seeking coverage for its own
liability and not that of the joint venture. It attempts to
persuade the Court that it is entitled to coverage because, while
the project may have been conducted under the auspices of
Shea/Keefe, it was Shea that managed the daily operations of the
project. Shea has failed to demonstrate how its liability is
separate from that of the joint venture. Shea’s involvement in the
project was as the managing partner of a joint venture. Its
activities related to the project were not individual. It was the
joint venture which contracted with the City of Houston, and it was
the joint venture which contracted with Gulf Coast. Additionally,
the jury found both Shea and Shea/Keefe liable for Bott’s injury.
Second, Shea asserts that the additional insured endorsement
renders the joint venture exclusion inapplicable, and the policy
language is ambiguous because it does not refer to additional
insureds. The policy is not ambiguous nor does the additional
Co., 205 F.3d 222 (5th Cir. 2000), Shea is so qualified because
its liability has a sufficient connection to Gulf Coast’s work.
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insured endorsement render the joint venture clause inapplicable.
The endorsement clearly states that Shea is to be an insured. It
specifically states that Section II, defining who is an insured,
“is amended to include as an insured the person or organization
shown in the Schedule.” The joint venture exclusion states that
“any organization you newly acquire or form, other than a
partnership or joint venture, and over which you maintain ownership
or majority interest, will qualify as a Named Insured if there is
no other similar insurance available to that organization.” The
policy makes Shea an insured, but liability arose out of a joint
venture which is expressly excluded from coverage. Shea/Keefe is
not covered. We therefore affirm the district court’s
determination that Shea/Keefe was not entitled to coverage.
B. Whether the District Court Erred in Holding That the Doctrine
of Quasi-Estoppel Barred Shea/Keefe’s Breach of Contract Claim
Against Gulf Coast.
The district court granted summary judgment on the issue of
whether Shea was estopped from asserting its breach of contract
claim. This Court reviews the granting of summary judgment de
novo. Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380
(5th Cir. 1998).
In determining that Shea was estopped from asserting the
breach of contract claim, the district court held that “it would be
unconscionable” to find a breach for failure to name Shea/Keefe as
an additional insured after Shea/Keefe acquiesced in Gulf Coast’s
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noncompliance by accepting the certificates naming Shea and by
allowing Gulf Coast to complete its work. The court concluded that
Shea/Keefe took an inconsistent position and acquiesced in Gulf
Coast’s breach and was therefore estopped from asserting it. We
disagree.
The doctrine of quasi-estoppel
precludes a party from asserting, to another’s
disadvantage, a right inconsistent with a position [it
has] previously taken. The doctrine applies when it
would be unconscionable to allow a person to maintain a
position inconsistent with one to which he acquiesced, or
from which he accepted a benefit.
Stinnett v. Colorado Interstate Gas Co., 227 F.3d 247, 258 (5th Cir.
2000), citing, Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d
857, 864 (Tex. 2000). We recently analyzed the basis of the
estoppel doctrine under Texas law in Long v. Turner, 134 F.3d 312,
318 (5th Cir. 1998). In Long, we noted that a precise description
of the core basis of estoppel is that “one who retains benefits
under a transaction cannot avoid its obligations and is estopped to
take an inconsistent position.” Id., citing, Vessels v. Anschutz
Corp., 823 S.W.2d 762, 766 (Tex.App.-Texarkana 1992, writ
denied)(citations omitted). We noted that quasi-estoppel is
“inapplicable where the conduct allegedly giving rise to the
estoppel is not shown to have benefitted a party sought to be
estopped.” Long, 314 F.3d at 318. Several Texas courts and this
Court have subsequently interpreted the doctrine to “appl[y] when
it would be unconscionable to allow a person to maintain a position
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inconsistent with one to which he acquiesced, or from which he
accepted a benefit.” Stinnett v. Colorado Interstate Gas Co., 227
F.3d 247 (5th Cir. 2000); Lopez v. Munoz, Hockema & Reed, L.L.P.,
22 S.W.3d 857, 864 (Tex. 2000); Atkinson Gas Co. v. Albrecht, 878
S.W.2d 236, 240 (Tex.App.--Corpus Christi 1994, writ denied);
Vessels v. Anschutz Corp., 823 S.W.2d 762, 765-66
(Tex.App.--Texarkana 1992, writ denied).
Gulf Coast also argued to the district court that Shea/Keefe
waived any claim that Gulf Coast breached the subcontract based on
Shea/Keefe’s intentional and inconsistent conduct.3 Waiver is
defined in Texas as the intentional relinquishment of a known
right, or intentional conduct inconsistent with claiming that
right. Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d 35, 37
(Tex. 1987). Shea/Keefe submits that the fact that Gulf Coast was
allowed to commence work and was paid for completing that work does
not constitute a release of Shea/Keefe’s contractual rights.
Section 11 of the subcontract states that
Contractor’s failure to enforce any of the provisions of
this Section 11 shall not act as a waiver of
Subcontractor’s obligation to procure the required
insurance or as a waiver to enforcement of any of these
previous provisions at a later date.
Gulf Coasts contends that the non-waiver position does not preclude
a finding that Shea/Keefe waived its claim. While non-waiver
3
The district court did not rely on the waiver issue in
granting summary judgment.
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clauses are evidence that a party did not waive a contractual
right, the parties actions may nonetheless constitute waiver. See
Enserch Corp. v. Rebich, 925 S.W.2d 75, 82 (Tex.App.-Tyler
1996)(citations omitted).
This case simply does not give rise to a claim of quasi-
estoppel. The factual scenario is based on mutual negligence and
incompetence. Gulf Coast and Shea/Keefe entered into a contract
which, in pertinent part, required Gulf Coast to obtain insurance
coverage for the joint venture. The contract was unambiguous on
this point. Subsequent to the signing of the contract, a letter
was sent from Shea/Keefe to Gulf Coast instructing it to obtain
insurance naming J.F. Shea. Gulf Coast asserts that it merely
followed the instructions of Shea/Keefe to name J.F. Shea as an
insured under the Mid-Continent policy. Gulf Coast’s reliance on
a letter, when it was aware of the unambiguous terms of the
contract, was careless at the very least. In the same vein,
Shea/Keefe was negligent in sending a letter requiring Gulf Coast
to obtain insurance for J.F. Shea and not Shea/Keefe.
Additionally, the contract provided that Gulf Coast could not
commence work until it provided Shea/Keefe with the appropriate
certificates of insurance. Gulf Coast, on two occasions, presented
certificates to Shea/Keefe naming J.F. Shea as an insured. At no
time did Shea/Keefe question or correct the improper party listed
on the certificates. Furthermore, Shea/Keefe not only allowed Gulf
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Coast to commence work but to complete it. These facts set up a
claim for waiver and not estoppel. It was inappropriate for the
district court to grant summary judgment based on an equitable
defense when there was a contract in place with provisions that
would adequately address the issues arising from these facts.
Whether or not Shea/Keefe’s actions constituted a waiver of the
waiver clause provision of the subcontract, however, is a fact
bound inquiry which we cannot address.
III. Conclusion
We affirm the district court’s grant of summary judgment as to
Mid-Continent’s position that Shea/Keefe was not afforded coverage
under the policy. The policy clearly named J.F. Shea as an
additional insured, and the joint venture exclusion of the policy
prevented Shea/Keefe from being covered thereunder. We reverse the
district court’s grant of summary judgment to Gulf Coast on the
theory of quasi-estoppel and remand for further proceedings
consistent with this opinion.
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