the Insurance Company of the State of Pennsylvania v. Kevin Roberts and Exxon Mobil Corporation ( 2015 )

ACCEPTED
01-15-00453-cv
FIRST COURT OF APPEALS
HOUSTON, TEXAS
7/20/2015 5:28:02 PM
CHRISTOPHER PRINE
CLERK
NO. 01-15-00453-CV
In The FILED IN
1st COURT OF APPEALS
HOUSTON, TEXAS
FIRST COURT OF APPEALS
7/20/2015 5:28:02 PM
CHRISTOPHER A. PRINE
At Houston, Texas Clerk
__________
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA,
Appellant,
V.
KEVIN ROBERTS, et al,
Appellees.
__________
Appealed from the 165th District Court of
Harris County, Texas
________________________________________________________________________
APPELLANT’S BRIEF
________________________________________________________________________
Loren R. Smith
State Bar No. 18643800
Kelly & Smith, P.C.
4305 Yoakum Blvd.
Houston, Texas 77006
Tel.: (713) 861-9900
Fax: (713) 861-7100
ORAL ARGUMENT REQUESTED
NO. 01-15-00453-CV
THE INSURANCE COMPANY OF THE STATE OF PENNSYVANIA,
Appellant,
V.
KEVIN ROBERTS, et al,
Appellees.
____________________________________________________________
IDENTITY OF PARTIES & COUNSEL
____________________________________________________________
1. The Insurance Company of the State of Pennsylvania – Appellant
2. Loren R. Smith – Counsel for Appellant
State Bar No. 18643800
Kelly & Smith, P.C.
4305 Yoakum Blvd.
Houston, Texas 77006
(713) 861-9900 - Telephone
(713) 861-7100 - Facsimile
lsmith@ksmpc.com
3. Kevin Roberts – Appellee
4. Jason A. Itkin – Counsel for Kevin Roberts
State Bar No. 24032461
Arnold & Itkin
6009 Memorial Drive
Houston, Texas 77007
(713) 222-3800 - Telephone
(713) 222-3850 – Facsimile
5. Exxon Mobil Corporation – Appellee
6. Mike Morris – Counsel for Exxon Mobil Corporation
State Bar No. 14495800
Tekell, Book, Allen & Morris, L.L.P.
1221 McKinney, Suite 4300
Houston, Texas 77010-2010
ii
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(713) 222-9542 - Telephone
(713) 655-7727 – Facsimile
iii
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TABLE OF CONTENTS
IDENTITY OF PARTIES & COUNSEL...................................................................... ii, iii
TABLE OF CONTENTS ................................................................................................... iv
INDEX OF AUTHORITIES ............................................................................................... v
STATEMENT OF THE CASE .......................................................................................... ix
ISSUES PRESENTED FOR REVIEW ............................................................................... x
STATEMENT OF FACTS .................................................................................................. 1
SUMMARY OF THE ARGUMENT .................................................................................. 4
ARGUMENT....................................................................................................................... 6
ISSUE 1: . ........................................................................................................................... 6
The trial court erred in holding that ICSP’s worker’s compensation subrogation claims
were waived, as the waiver of subrogation provisions only apply to liabilities assumed
by Savage. As Savage was not obligated to indemnify Exxon for this accident, the
waiver does not apply
ISSUE 2: . ......................................................................................................................... 27
Even if there is an enforceable waiver of subrogation in favor of Exxon, the trial court
erred in holding that ICSP’s right to assert that Roberts’ and Munoz’s third-party
recovery constituted an advance against future benefits was also waived
ISSUE 3: .. ........................................................................................................................ 30
Exxon’s affidavit of T. Lynn Henagan cannot be any basis for affirming the trial
court’s summary judgment
PRAYER FOR RELIEF .................................................................................................... 34
CERTIFICATE OF SERVICE .......................................................................................... 34
CERTIFICATE OF COMPLIANCE AND WORD COUNT ........................................... 35
iv
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APPENDIX........................................................................................................................ 36
INDEX OF AUTHORITIES
Cases
Am. Risk Funding Ins. Co. v. Lambert, 59 S.W.3d 254, 259 (Tex. App.—Corpus Christi
2001, pet.denied)............................................................................................................ 31
Approach Operating, LLC v. Resolution Oversight Corp., 2012 Tex. App. LEXIS 5437,
at 7 (Tex. App. Austin July 3, 2012, no pet).................................................................... 8
Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008)........ 16
Aubris Resources LP v. St. Paul Fire & Marine Insurance Co., 566 F.3d 483 (5th Cir.
2009) .............................................................................................................................. 17
Capitol Aggregates, Inc. v. Great American Ins. Co., 408 S.W.2d 922, 923-24 (Tex.
1966) .............................................................................................................................. 27
Chambers v. Texas Employers Ins. Assoc., 693 S.W.2d 648 (Tex. App. 1985, writ ref'd
n.r.e.) .............................................................................................................................. 30
Chevron U.S.A. v. Cigna, No. 09-97-00032-CV, 1998 Tex. App. LEXIS 5043, 1998 WL
472501, at *3-4 (Tex. App.--Beaumont Aug. 13, 1998, pet. denied) .............................. 7
Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996) ................................ 33
Deepwater Horizon, 2015 Tex. LEXIS 141 (Tex. 2015)(emphasis added) ...................... 14
Delaney v. University of Houston, 835 S.W.2d 56, 58 (Tex. 1992) .................................. 34
Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex. 1993) ............. 25
Employers Casualty Company v. Henager, 852 S.W.2d 655, 659 (Tex.App.—Dallas
1993, writ den’d)............................................................................................................ 27
Energy Serv. Co. of Bowie, Inc. v. Superior Snubbing Servs., 236 S.W.3d 190, 191 (Tex.
2007) .............................................................................................................................. 21
Enserch Corp. v. Parker, 794 S.W.2d 2, 7 (Tex. 1990) .................................................... 21
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Cases (con't)
GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 307 (Tex. 2006)
........................................................................................................................................ 10
Hartford Accident & Indem. Co. v. Buckland, 882 S.W.2d 440, 444–56 (Tex.App.—
Dallas 1994, writ denied);.............................................................................................. 31
Home Indemnity Co. v. Pate, 814 S.W.2d 497 (Tex.App.-Houston[1st Dist.] 1991, no
writ)................................................................................................................................ 27
Houston General Ins. Co. v. Campbell, 964 S.W.2d 691, 695 (Tex.App.—Corpus Christi
1998, review den’d) ....................................................................................................... 28
Ischy v. Twin City Fire Ins. Co., 718 S.W.2d 885, 888 (Tex. App. Austin 1986, writ ref’d
n.r.e.) .............................................................................................................................. 30
Jackson v. Land & Offshore Services, Inc., 855 F.2d 244 (5th Cir. 1988) ........................ 31
Kelly v. Red Fox Cos. of New Iberia, Inc., 123 Fed. Appx. 595 (5th Cir. 2005)............... 31
Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 355 (Tex. 2000) ........... 7
Ken Petroleum Corp. v. Questor Drilling Corp., 976 S.W.2d 283, 290 (Tex. App. Corpus
Christi 1998) .................................................................................................................. 12
Ledig v. Duke Energy Corp., 193 S.W.3d 167, 178-79 (Tex.App.—Houston[1st Dist.]
2006, no pet.)(citing Gonzalez v. United Carpenters & Joiners, 93 S.W.3d 208, 211
(Tex.App.—Houston[14th Dist.] 2002, no pet.))............................................................ 34
Liberty Ins. Corp. v. SM Energy, 2012 U.S. Dist. LEXIS 174069 (S.D. Tex. Dec. 7, 2012)
........................................................................................................................................ 23
Nicklos Drilling Co. v. Cowart, 907 F.2d 1552 (5th Cir. 1990) ........................................ 31
Pasadena Refining System, Inc. v. McCraven, Nos. 14-10-00837-CV, 14-10-00860-CV,
2012 Tex. App. LEXIS 3823, 2012 WL 1693697 (Tex. App.--Houston [14th Dist.]
May 15, 2012, pet. dism'd by agr.)................................................................................. 17
Performance Ins. Co. v. Frans, 902 S.W.2d 582, 585 (Tex.App.---Houston [1st Dist.]
1995, writ denied) .......................................................................................................... 28
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Cases (con't)
Petro-Weld, Inc. v. Luke, 619 F.2d 418 (5th Cir. 1980) ..................................................... 31
Prewitt and Sampson v. City of Dallas, 713 S.W.2d 720, 722 (Tex.App.-Dallas 1986, writ
ref’d n.r.e.) ..................................................................................................................... 27
Reliance Ins. Co. v. Hibdon, 333 S.W.3d 364 (Tex. App.--Houston [14th Dist.] 2011, pet.
den’d) ............................................................................................................................... 8
State Farm Fire & Casualty Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993) (plurality
opinion) .......................................................................................................................... 33
Tesoro Petroleum Corp. v. Nabors Drilling United States, 106 S.W.3d 118, 133-134
(Tex. App.-Houston[1st Dist.] 2002, writ den’d). ......................................................... 20
Texas Mutual Ins. Co. v. Ledbetter, 251 S.W.3d 31, 38-39 (Tex. 2008)........................... 27
Texas Workers’ Compensation Insurance Fund v. Knight, 61 S.W.3rd 91 (Tex.App.—
Amarillo 2001, no pet.) .................................................................................................. 24
Trahan v. Liberty Mut. Ins. Co., 571 Fed. Appx. 319 (5th Cir. Tex. 2014) ........................ 2
Travelers Insurance Company v. Seidel, 705 S.W.2d 278, 281 (Tex.App.-San Antonio
1986, writ dism’d).......................................................................................................... 28
Statutes
Longshore and Harbor Workers' Compensation Act, 33 U.S.C. §§ 901–950 ................... 30
28 TEX. ADMIN. CODE § 21.202 (West 2015)................................................................ 26
TEX. REV. CIV. STAT. ANN. art. 8306, § 3(d)(Vernon Supp. 1989)(emphasis added) 22
Tex. Rule of Civ. Proc. 166a(c)........................................................................................... 2
Tex. Rule of Civ. Proc. 166a(f) ......................................................................................... 33
Tex. Rule of Civ. Proc. 94 ................................................................................................. 29
Texas Labor Code Chapter 417 ............................................................................................ 6
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NO. 01-15-00453-CV
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA,
Appellant,
V.
KEVIN ROBERTS, et al,
Appellees.
____________________________________________________________
APPELLANT’S BRIEF
____________________________________________________________
TO THE HONORABLE COURT OF APPEALS OF THE FIRST SUPREME JUDICIAL
DISTRICT:
Appellant, The Insurance Company of the State of Pennyslvania (“ICSP"), submits
this brief in appeal of the lower court's order and judgment rendered in favor of Appellees,
KEVIN ROBERTS (“Roberts”) and EXXON MOBIL CORPORATION (“Exxon"). This
appeal is from the 165th District Court of Harris County, Texas, Cause No. 2013-03033, Hon.
Jeff Shadwick presiding, in which Roberts was the Plaintiff, Exxon was the Defendant and
Third-Party Plaintiff, and ICSP was the Third-Party Defendant and Cross-Plaintiff.
viii
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STATEMENT OF THE CASE
Roberts filed suit against Exxon in a case assigned to the 165th District Court of Harris
County. The claims were for personal injuries sustained from an explosion and discharge of
hot water on January 12, 2013 on premises owned and controlled by Exxon. ICSP was the
worker’s compensation carrier for Savage. ICSP has paid and continues to pay workers’
compensation medical and indemnity benefits to or on behalf of Roberts and Munoz. Around
the time it reached a settlement with Roberts, Exxon joined ICSP as a third-party defendant
to Roberts’ lawsuit, on a declaratory judgment claim. The case was subsequently removed
and then remanded by the federal court. Exxon thereafter settled the claims of Munoz.
Appellants and Munoz refused to honor the subrogation claims of ICSP, contending ICSP
had waived its subrogation rights. ICSP pleaded cross-claims against Appellants for
subrogation and conversion, seeking to recover reimbursement of the amount of benefits paid
and a credit against future benefits.
ICSP and Appellants filed cross-motions for summary judgment pertaining to the
waiver issues. The sitting judge of the 165th District Court, the Hon. Elizabeth Ray, denied
Appellants’ motion for summary judgment on January 20, 2015. Shortly thereafter, Judge
Ray stepped down from the bench. Exxon thereafter filed a motion for reconsideration,
which was heard by the sitting judge of the 55th District Court, the Hon. Jeff Shadwick. On
April 15, 2015, Judge Shadwick granted the motion for rehearing, and entered a final
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summary judgment in favor of Appellants on May 11, 2015, that ICSP take nothing on its
claims for subrogation and for a credit against future benefits.
On May 13, 2015, ICSP timely filed its notice of appeal. ICSP seeks an order from
this Court reversing the trial court’s summary judgment that ICSP take nothing on its
subrogation claims, and remanding the case to the trial court for a new trial on ICSP’s claims.
ISSUES PRESENTED FOR REVIEW
ISSUE 1:
The trial court erred in holding that ICSP’s worker’s compensation subrogation claims
were waived, as the waiver of subrogation provisions only apply to liabilities assumed
by Savage. As Savage was not obligated to indemnify Exxon for this accident, the
waiver does not apply.
ISSUE 2:
Even if there is an enforceable waiver of subrogation in favor of Exxon, the trial court
erred in holding that ICSP’s right to assert that Roberts’ and Munoz’s third-party
recovery constituted an advance against future benefits was also waived.
ISSUE 3:
Exxon’s affidavit of T. Lynn Henagan cannot be any basis for affirming the trial
court’s summary judgment.
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STATEMENT OF FACTS
Legend: “CR” denotes Clerk’s Record.
On January 12, 2013, Roberts and Arturo Munoz (“Munoz”) were working for Savage
Services on a tank in the flexicoker unit of Exxon’s Baytown refinery. (CR.6; CR.79,
Exhibit 9 (Appendix “D”)) 1 While on the process of working on that tank, there was an
explosion which caused a discharge of hot water. (CR.6) As a result, Roberts and Munoz
sustained severe burns and other personal injuries. Id. Pursuant to a policy of insurance
with Savage, ICSP was called upon to pay workers’ compensation medical and indemnity
benefits to or on behalf of Roberts and Munoz. (CR.217; 79, Exhibit 9 (Appedix “D”)) As of
March 6, 2015, ICSP had paid benefits totaling $115,189.64 on behalf of Roberts, and
$571,296.88 on behalf of Munoz, as a result of the accident the subject of this lawsuit.
(CR.164, Ex.4 (Appendix “E”))
This lawsuit was filed by Roberts against Exxon on January 16, 2013. (CR.5) In
March of 2014, Exxon filed a motion for continuance of the March 31, 2014 trial setting and
a motion for leave to add ICSP as a third-party defendant. (CR.27) Both motions were
granted. (CR.32) On or about March 28, 2014, Exxon reached a settlement with Roberts of
his personal injury claims asserted in this lawsuit, in a confidential amount. (CR.53) After
ICSP filed its answer, Exxon filed a motion for summary judgment against ICSP on its
waiver defense, and set it on the Court’s submission docket for June 30, 2014. (CR.86)
1 The district clerk failed to include the summary judgment exhibits to the requested
documents in the clerk’s record. ICSP is concurrently requesting a supplemental record with
these documents. Relevant omitted portions of the Exhibits are made part of the Appendix.
1
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Exxon filed a counterclaim for indemnity against Roberts pertaining to his indemnity
obligations under the settlement agreement, on June 13, 2014. (CR52) ICSP removed the case
to federal court on June 13, 2014 based upon diversity jurisdiction. (CR.280) The Hon.
Judge Nancy Atlas originally denied remand of a related state court case filed in the 125th
District Court by Exxon against ICSP, which had been removed by co-Defendant Starr
Indemnity & Liability Insurance Company, one of Exxon’s general liability carriers. (CR.87)
However, based upon a subsequent ruling by the Fifth Circuit in Trahan v. Liberty Mut. Ins.
Co., 571 Fed. Appx. 319 (5th Cir. Tex. 2014), Judge Atlas reconsidered and remanded the
Starr Indemnity case, and on the same day remanded this case as well. Id. After remand, the
case was set for trial on the September 2, 2014 two-week docket, but was not reached. Id.
In September 2014, Exxon reached a settlement with Roberts’ co-employee, Munoz
on his personal injury claims, in a confidential amount. (CR.86.163.180) Munoz was not
represented by counsel. (CR.163; CR.165; Exhibit 5, p.12 (Appendix “F”)) As part of this
settlement, Exxon agreed to indemnify Munoz for any claim by ICSP related to the settlement,
and to be responsible for Munoz’s future worker’s compensation benefits should ICSP receive
a statutory credit against future benefits. Id.
ICSP filed a motion for partial summary judgment against Appellants on the waiver
issue on September 19, 2014. (CR.65) Exxon filed an amended motion for summary
judgment against ICSP the waiver defense on September 23, 2014. (CR.77) The motion was
a traditional motion for summary judgment on Appellant’s affirmative defense of waiver
pursuant to Tex. Rule of Civ. Proc. 166a(c), not a no-evidence motion pursuant to Tex. Rule
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of Civ. Proc. 166a(i). Id. Roberts filed a joinder with Exxon’s motion against ICSP on
September 24, 2014. (CR.190) The motions were set on the submission docket for October
13, 2014. (CR.83) Exxon also filed a motion to compel the depositions of the organizational
representatives of Savage and ICSP. (CR.98)
As admitted by Exxon’s counsel in open court in a hearing on October 20, 2014 in the
insurance coverage case which was pending in the 125th District Court,2 Exxon accepted
responsibility for this accident:
MR. MORRIS: Yes, your Honor. I think it’s important that the Court have a
overview. January 12th 2013, there is an accident out at the Baytown refinery. A
tremendously hot water was dumped on two contractors Kevin Roberts and
Arturo Munoz. Now both Mr. Roberts and Mr. Munoz were employees of
Savage.
....
That accident happens and Mr. Roberts within a few days hires Jason
Itkin who files a suit. That suit lands in the 165th. It’s against ExxonMobil.
ExxonMobil believes that it is an additional insurer on policies issued to Savage
and makes that claim. ExxonMobil also investigates the accident and determines
that it is responsible for the injuries to these men.
Mr. Munoz elects not to hire a lawyer. He represents himself. Mr. Itkin
over here aggressively prosecutes the case against ExxonMobil, requests for
production, inspections of the area and it is clear that ExxonMobil feels
responsible for what happened to these two men.
(CR.165; Exhibit 5, p.11-12 (Appendix “F”))
On February 19, 2015, the Hon. Judge Elizabeth Ray issued an order denying
Appellants’ motion for summary judgment against ICSP. (CR.158) On February 19, 2015,
Judge Ray issued an order denying Exxon’s motion to compel the depositions of the
2 The coverage case was removed for a second time by Defendant Starr Indemnity &
Liability Insurance Company on June 4, 2015.
3
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organization representatives of Savage and ICSP. (CR.160) Judge Ray never ruled on
ICSP’s motion for partial summary judgment. Shortly thereafter, Judge Ray stepped down
from the bench. Exxon thereafter filed a motion for reconsideration, which was heard by the
sitting judge of the 55th District Court, the Hon. Jeff Shadwick. (CR.212) On April 15,
2015, Judge Shadwick granted the motion for rehearing, entering a memorandum order and
opinion. (CR.241) Judge Shadwick entered a final summary judgment in favor of
Appellants on May 11, 2015, that ICSP take nothing on its claims for subrogation and for a
credit against future benefits. (CR.268) As reflected in the final summary judgment, Exxon
non-suited its cross-claim against Roberts for indemnity without prejudice. (CR.269)
On May 13, 2015, ICSP timely filed its notice of appeal. (CR.270) ICSP seeks an
order from this Court reversing the trial court’s summary judgment that ICSP take nothing on
its subrogation claims, and remanding the case to the trial court for a new trial on ICSP’s
claims.
SUMMARY OF THE ARGUMENT
ICSP appeals from the trial court’s order granting Appellants’ motion for summary
judgment, denying its right to recover past benefits paid to Roberts and Munoz, and denying
its credit against future benefits.
ICSP’s first issue asserts that the trial court erred in holding that ICSP’s worker’s
compensation subrogation claims were waived. The one sentence in the insurance clause
requiring a waiver of subrogation expressly limits the waiver to liabilities assumed by
Savage. Case law from the Texas Supreme Court and this Court interpreting this limitation
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look solely to the indemnity clause to determine if the limitation applies. As there is no
dispute that Exxon accepted responsibility for this accident and Savage was not obligated to
indemnify Exxon for this accident, the waiver does not apply. As Appellants settled without
honoring ICSP’s subrogation lien, they are liable for the amount of the lien under a cause of
action for conversion.
ICSP’s second issue asserts that even if there is an enforceable waiver of subrogation
in favor of Exxon, the trial court erred in holding that ICSP’s right to assert that Roberts’ and
Munoz’s third-party recovery constituted an advance against future benefits was also waived.
The Texas Legislature has recognized that a carrier’s right of subrogation is distinct from its
right to treat a third-party recovery by an injured worker as an advance against future
benefits. A finding that a waiver in favor of Exxon also waived ICSP’s right to assert a
statutory credit against future benefits to Roberts and Munoz would be contrary to the
provisions of the waiver endorsement, which provides that the agreement shall not operate
directly or indirectly to benefit anyone not named in the Schedule.
In the trial court’s memorandum order and opinion, it stated that it was not
considering Exxon’s summary judgment affidavits, and as such did not need to rule on
ICSP’s objections. In ICSP’s third issue, it asserts that Exxon’s affidavit of T. Lynn
Henagan cannot be the basis for affirming the trial court’s summary judgment. As the trial
court expressly did not consider the affidavits, ICSP would submit that they cannot be the
basis for affirming the trial court’s summary judgment. However, to the extent that ICSP is
incorrect, ICSP submits that any consideration of Exxon’s affidavit of T. Lynn Henagan over
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ICSP’s objections would have been erroneous, that the trial court erred in not sustaining the
objections, and the evidence should not be considered on appeal.
This Court should reverse the trial court’s summary judgment, and remand the case to
the trial court for a new trial on ICSP’s claims.
ARGUMENT
ISSUE 1: The trial court erred in holding that ICSP’s worker’s compensation
subrogation claims were waived, as the waiver of subrogation provisions only apply to
liabilities assumed by Savage. As Savage was not obligated to indemnify Exxon for this
accident, the waiver does not apply.
ARGUMENT AND AUTHORITIES FOR ISSUE 1:
Texas Labor Code Chapter 417 provides a worker’s compensation carrier a “first
money” right of subrogation against any third party which may be liable for a compensable
injury. However, Appellants asserted that ICSP has waived its subrogation rights, and refused
to honor ICSP’s subrogation claim when they settled their claims last year. Additionally,
Exxon settled with Munoz, who was unrepresented, also without honoring ICSP’s subrogation
claim. As part of this settlement, Exxon agreed to indemnify Munoz for any claim by ICSP
related to the settlement, and to be responsible for Munoz’s future worker’s compensation
benefits should ICSP receive a statutory credit against future benefits. Although the settlement
amounts were confidential, it is undisputed that these settlements were well in excess of the
amount of ICSP’s subrogation claim. (CR.86.163.180)
6
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A. Waiver requirements.
ICSP’s insurance policy contains a Blanket Waiver of Subrogation Endorsement,
which provides that ICSP shall waive its subrogation rights for limited occurrences. (CR.78,
Exhibit 3, p.8 (Appendix “G”)) In particular, the endorsement provides in part:
We have the right to recover our payments from anyone liable for an injury covered by
this policy. We will not enforce our right against the person or organization named in
the Schedule, but this waiver applies only with respect to bodily injury arising out of the
operations described in the Schedule where you are required by a written contract to
obtain this waiver from us.
This agreement shall not operate directly or indirectly to benefit anyone not named in
the Schedule.
....
(X) Blanket waiver
Any person or organization for whom the Named Insured has agreed by written
contract to furnish this waiver.
This is standard form WC 42 03 04A, dated January 2000. Id. As noted by the clear language
of the endorsement, subrogation is only waived where Savage is required by a written contract
to obtain this waiver.
Both sides agree that in order to have a valid waiver of subrogation, two
conditions must be met. First, Lilly must obligate itself to a waiver pursuant to an
underlying contract with Approach (here, the MSA), and second, it must obtain a
separate endorsement from its insurance carrier waiving those rights. See, e.g.,
Chevron U.S.A. v. Cigna, No. 09-97-00032-CV, 1998 Tex. App. LEXIS 5043, 1998
WL 472501, at *3-4 (Tex. App.--Beaumont Aug. 13, 1998, pet. denied) (not
designated for publication) (enforcing waiver of subrogation clause); see also Ken
Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 355 (Tex. 2000) (noting
subrogation waiver in underlying contract and separate endorsement, but holding
insurer's claims were outside scope of waiver).
7
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Approach Operating, LLC v. Resolution Oversight Corp., 2012 Tex. App. LEXIS 5437, at 7
(Tex. App. Austin July 3, 2012, no pet). The waiver in the written contract cannot be inferred,
but must be explicit.
Approach contends the "express terms of the MSA" similarly required a waiver of
subrogation. Unlike the cases discussed above, however, the MSA contains no
explicit mention of subrogation. And Approach points to no authority indicating we
may infer a waiver of subrogation. On the contrary, Texas courts require explicit
waivers of subrogation and will not read them into contracts. For example, in
Reliance Ins. Co. v. Hibdon, the court refused to find a waiver of subrogation in favor
of a company's employee when the clause only explicitly mentioned the employer.
Id, at 14 (Tex. App. Austin July 3, 2012, no pet)(emphasis added)(citing Reliance Ins. Co. v.
Hibdon, 333 S.W.3d 364 (Tex. App.--Houston [14th Dist.] 2011, pet. den’d)). In this case,
Savage was not required to secure a waiver of subrogation under the terms of its agreement
with ExxonMobil; as such, ICSP’s subrogation rights were not waived.
B. The Exxon contract with Savage does not trigger the blanket waiver
endorsement in ICSP’s policy.
Contrary to Appellants’ assertions, Exxon’s contract with Savage does not require a
waiver of subrogation based upon the facts of this case. The paragraph cited by Appellants
in support of their waiver contention, section 14(a), provides in relevant part:
14. Insurance
(a) Coverages.
...
Notwithstanding any provision of an Order to the contrary, [Savage’s] liability
insurance policy(ies) described above shall: (i) cover [Exxon] as additional insureds in
connection with the performance of Services; and (ii) be primary as to all other
policies (including any deductibles or self-insured retentions) and self insurance
which may provide coverage. [Savage] and its insurer(s) providing coverage in this
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Section shall waive all rights of subrogation and/or contribution against [Exxon] and
its Affiliates to the extent liabilities are assumed by [Savage], except [Savage]
expressly agrees not to cause itself or its insurer(s) to waive any rights of subrogation
and/or contribution against [Exxon] and its Affiliates under any workers’
compensation and employers’ liability insurance, or similar social insurance in
accordance with law which may be applicable to those employees of [Savage], when
[Exxon] elects to furnish or arrange same.
(CR.78, Exhibit 1,p.4 (Appendix “H”)) The provision of the waiver sentence limiting the
waiver “to the extent liabilities are assumed by [Savage]” limits the waiver of subrogation to
only those liabilities for which Savage is obligated to indemnify Exxon.
In this case, the indemnity clause in fact obligates Exxon to indemnify Savage for
claims arising out of this accident, as the accident arose out of the negligence of Exxon, not
Savage:
12. Third Party Indemnity. [Exxon] and [Savage] shall indemnify, defend, and
hold each other harmless from all claims, demands, and causes of action asserted
against the indemnitee by any third party (including, without limitation, [Exxon]’s and
[Savage]’s employees) for personal injury, death, or loss of or damage to property
resulting from the indemnitor’s negligence, Gross Negligence or Willful Misconduct.
Where personal injury, death, or loss of or damage to property is the result of joint
negligence, Gross Negligence or Willful Misconduct of [Exxon] or [Savage], the
indemnitor’s duty of indemnification shall be in proportion to its allocable share of
such joint negligence, Gross Negligence or Willful Misconduct. If either party is
strictly liable under law, the other party’s duty of indemnification shall be in the same
proportion that its negligence, Gross Negligence or Willful Misconduct contributed to
the personal injury, death, or loss of damage to property for which a party is strictly
liable. The term “negligence” in these General Terms and Conditions shall include
active or passive negligence. “Gross Negligence” is defined by the law governing the
Order; however, if such law does not define the term “gross negligence,” it means any
act or failure to act (whether sole, joint or concurrent) which seriously and
substantially deviates from a diligent course of action or which is in reckless disregard
of or indifference to the harmful consequences. “Willful Misconduct” is defined by
the law governing the Order; however, if such law does not define the term “willful
misconduct,” it means and intentional disregard of good and prudent standards of
performance or of any of the terms of the Order.
9
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(CR.78, Exhibit 1,p.4 (Appendix “H”)) In particular, Roberts contended in this case that his
injuries were caused by the negligence and gross negligence of Exxon, not the negligence of
Savage.3 (CR.78, Exhibit 1,p.3) Additionally, as noted above, Exxon has admitted to
responsibility for this accident. Exxon has never contended that Savage was in any manner
negligent, nor even so much as even moved to designate Savage as a responsible third party,
in the course of over a year of litigation with Roberts. (CR.278-284;249-250) ISCP is
asserting subrogation for damages sustained by Roberts and Munoz in the accident the
subject of this lawsuit. Exxon assumed the liability for the accident and the damages
sustained by Roberts and Munoz, not Savage. As Savage did not agree in the contract to
assume the liabilities for this accident, the waiver of subrogation clause of the contract is not
triggered, and ICSP has therefore not agreed to waive its right of subrogation against Exxon.
C. The waiver of subrogation endorsement only applies to the liability of Exxon
which Savage agreed to assume via the indemnity provision.
Appellants argue that the provision “to the extent liabilities are assumed by [Savage]”
includes the obligation to purchase worker’s compensation insurance, and therefore triggers
the waiver of subrogation obligation for any insurance Savage is required to secure.
Appellants argue that the insurance purchase obligation should fairly be categorized as a
“liability” in the context of this paragraph. Essentially, under this logic, the phrase is
3 In an analogous context, the eight-corners rule provides that when an insured is sued by a
third party, the liability insurer is to determine its duty to defend solely from terms of the
policy and the pleadings of the third-party claimant. See GuideOne Elite Ins. Co. v. Fielder
Rd. Baptist Church, 197 S.W.3d 305, 307 (Tex. 2006).
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redundant, because if Savage assumes the “liability” to secure insurance, it automatically
assumes the “liability” to waive subrogation for that insurance.
The Texas Supreme Court has recognized that a clause limiting the waiver provision
to liabilities assumed did not waive the carrier’s right of subrogation, when the corresponding
indemnity clause did not apply. See Ken Petroleum Co., et al v. Questor Drilling Corp., et
al, 24 S.W.3d 344 (Tex. 2000). In Ken Petroleum Co., the contract between Ken Petroleum
and Questor contained mutual indemnification clauses, where the parties were required to
indemnify each other for claims by their respective employees. The “Insurance” clause then
provided the following waiver clause: “For liabilities assumed hereunder by contractor
[Questor], its insurance shall be endorsed to provide that the underwriters waive their
right of subrogation against Operator. Operator [Ken Petroleum] will, as well, cause its
insurer to waive subrogation against Contractor for liability it assumes.” Ken
Petroleum Co., 24 S.W.3d at 355. The Court of Appeals held the waiver was applicable:
“But in this case, KEN's policy provides that Underwriters expressly allowed for such
waiver. Appellants' argument that Underwriter's waiver of subrogation was limited only to
those situations in which KEN was required to indemnify Questor is without merit.” Ken
Petroleum Corp. v. Questor Drilling Corp., 976 S.W.2d 283, 290 (Tex. App. Corpus Christi
1998). However, the Texas Supreme Court reversed, finding that the waiver provision did
not apply to waive Ken Petroleum’s insurance carrier’s right of subrogation against Questor
for liability payments made to the family of a Questor employee killed on the job site:
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Questor's contentions are not well-founded. Ken Petroleum agreed to cause
its underwriters to waive their subrogation rights only as to amounts Ken
Petroleum might have to pay under its agreement to indemnify Questor. Ken
Petroleum did not agree to indemnify Questor for injuries to or the death of Questor's
employees. To the contrary, Questor agreed that it would indemnify Ken Petroleum if
a Questor employee were injured or killed. The foregoing provision did not waive the
rights of the Underwriters to enforce, as subrogees, the indemnity obligations Questor
owed to Ken Petroleum.
Questor next points to an endorsement to Ken Petroleum's policy with the
Underwriters entitled "WAIVER OF SUBROGATION WHEN REQUIRED BY
CONTRACT" which says:
It is agreed that, with respect to such insurance as is afforded by this
Cover Note, the company waives any right of subrogation against the
"principal" named below by reason of any payment made on account of injury,
including death resulting therefrom or on account of property damage
sustained by any person or entity while the assured is engaged in any of the
operations described in the Schedule of this Cover Note.
"Principal" means any party to whom the named assured is contractually
obligated to waive its legal rights of indemnification.
Questor is not a party to the contract of insurance between Ken Petroleum and
its Underwriters. Questor must look to its own contract with Ken Petroleum to
determine what subrogation rights it may insist that Ken Petroleum require its insurers
to waive. Sections 13 and 14.9 of the drilling contract require Ken Petroleum to cause
its insurers to waive their subrogation rights only with regard to Ken Petroleum's
agreement to indemnify Questor for the death of or injury to Ken Petroleum
employees and certain others. The drilling contract does not require Ken Petroleum to
cause its insurers to waive subrogation rights when they pay amounts that Questor
should have paid under its agreement to indemnify Ken Petroleum. If Ken Petroleum
is not contractually obligated to Questor to enforce a waiver of subrogation, Questor
cannot insist that Ken Petroleum assert a waiver of subrogation when Ken Petroleum
and the Underwriters both agree that the Underwriters stepped into Ken Petroleum's
shoes by paying $ 450,000 to settle the Hemphill litigation.
Ken Petroleum Co., 24 S.W.3d at 355-56 (emphasis added). The Court in Ken Petroleum
recognized that Ken Petroleum had the obligation to secure insurance, yet did not consider
this obligation to be one of the “liabilities assumed.”
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Similarly, the Texas Supreme Court held earlier this year that an insurance obligation
dependent on “liabilities assumed” was only triggered if there is an enforceable indemnity
agreement. The following is the Court’s summary of its holdings:
As to the first question, we hold that (1) the Transocean insurance policies
include language that necessitates consulting the drilling contract to determine BP's
status as an "additional insured"; (2) under the terms of the drilling contract, BP's
status as an additional insured is inextricably intertwined with limitations on the
extent of coverage to be afforded under the Transocean policies; (3) the only
reasonable construction of the drilling contract's additional-insured provision is that
BP's status as an additional insured is limited to the liabilities Transocean assumed
in the drilling contract; and (4) BP is not entitled to coverage under the Transocean
insurance policies for damages arising from subsurface pollution because BP, not
Transocean, assumed liability for such claims. We therefore answer the first certified
question in the negative, and based on our analysis of that issue, do not reach the
second question.
In re Deepwater Horizon, 2015 Tex. LEXIS 141 (Tex. 2015)(emphasis added). The case
arose out of “the April 2010 explosion and sinking of the Deepwater Horizon oil-drilling rig,
which claimed eleven lives and resulted in subsurface discharge of oil into the Gulf of
Mexico at alarming rates for nearly three consecutive months.” The Court accepted a
certified question from the Fifth Circuit as to whether BP was entitled to coverage for
subsurface pollution under an additional insured endorsement of Transocean’s insurance
policy. The analysis and holding of the Court relevant to this case follows:
In the Drilling Contract, BP and Transocean agreed to a "knock-for-knock"
allocation of risk that is standard in the oil and gas industry. Among other indemnity
provisions, Transocean agreed to indemnify BP for above-surface pollution
regardless of fault, and BP agreed to indemnify Transocean for all pollution risk
Transocean did not assume, i.e., subsurface pollution.
Without limiting Transocean's indemnity obligations, the Drilling Contract
further required Transocean to carry multiple types of insurance at its own expense.
Among the required policies, Transocean was obliged to carry comprehensive general
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liability insurance, including contractual liability insurance for the indemnity
agreement, of at least $10 million. Transocean was also charged with naming BP, its
affiliates, officers, employees, and a host of other related individuals and entities:
as additional insureds in each of [Transocean's] policies, except Workers'
Compensation for liabilities assumed by [Transocean] under the terms of
[the Drilling] Contract. (Emphasis added.)
To the extent the terms of the Drilling Contract are incorporated into
Transocean's insurance policies, the proper construction of the emphasized portion of
the foregoing additional-insured provision becomes central to the resolution of the
coverage issue before us.
....
After BP made a demand for coverage, the Insurers sought a declaration that
BP would not be entitled to additional-insured coverage for subsurface-pollution
claims arising from the Deepwater Horizon incident because the Drilling Contract
limits the additional-insured obligation to "liabilities assumed by [Transocean]
under the terms of [the Drilling] Contract."
....
There is no dispute that (1) BP is an additional insured under the Transocean
policies for some purposes, (2) the Drilling Contract is an Insured Contract as defined
by the insurance policies, and (3) the Insurers are not parties to the Drilling Contract.
The parties, however, join issue regarding whether and to what extent the policies
incorporate provisions in the Drilling Contract that may limit BP's status as an
additional insured.
....
In sum, BP contends that its worldwide operations are automatically covered for
all "liability imposed by law," including subsurface pollution from the Deepwater
Horizon incident, because it is undisputed that (1) the Drilling Contract is an "Insured
Contract," (2) the Drilling Contract obligates Transocean to provide additional-
insured coverage, (3) BP is thereby an "Insured" as that term is specially defined in
the insurance policies, and (4) no limitations on the scope of coverage are expressly
included in the policies.
....
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As Urrutia demonstrates, an insurance policy may incorporate an external limit
on additional-insured coverage. In such cases, the external limit is, in effect, an
endorsement to the insurance policy that "suppl[ies] the limits of coverage and
extend[s] those benefits to the customer identified therein as accepting the [insured's]
offer of insurance." Id. at 443. By tying additional-insured coverage to the terms of an
underlying agreement, the parties procure only the coverage the insured is
contractually obligated to provide, thereby minimizing the insurer's exposure under
the policy and the named insured's premiums. See id. ("The endorsement . . . allowed
[the insured] to determine in the rental contracts themselves which customers would
be insured and the amount of their respective coverage.").
....
Applying the only reasonable construction of the additional-insured provision, we
conclude that BP is an additional insured only as to liabilities assumed by
Transocean under the Drilling Contract and no others. Because Transocean did
not assume liability for subsurface pollution, Transocean was not "obliged" to
name BP as an additional insured as to that risk. Because there is no obligation to
provide insurance for that risk, BP lacks status as an "Insured" for the same.
....
Second, BP's argument conflates duty with scope. We have long recognized
that the contractual duties to indemnify and to maintain insurance may be separate and
independent.n17 Consequently, a statute invalidating an indemnification clause does
not relieve a party of a separate duty to obtain insurance. See Getty, 845 S.W.2d at
804; see also Tex. Civ. Prac. & Rem. Code § 127.005 (exempting from the Texas
Oilfield Anti-Indemnity Act certain indemnity agreements supported by liability
insurance furnished by the indemnitor). But simply because the duties to indemnify
and maintain insurance may be separate and independent does not prevent them from
also being congruent; that is, a contract may reasonably be construed as extending the
insured's additional-insured status only to the extent of the risk the insured agreed to
assume.
FOOTNOTES
n17 See ATOFINA, 256 S.W.3d at 670 ("We disapprove the view that this kind
of additional insured requirement fails to establish a separate and independent
obligation for insuring liability." (emphasis added)); Getty Oil Co. v. Ins. Co.
of N. Am., 845 S.W.2d 794, 804 (Tex. 1992) ("[T]he additional insured
provision of the contract does not support the indemnity agreement, but rather
is a separate obligation." (emphasis added)).
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Such is the case here. The Drilling Contract required Transocean to name BP
as an additional insured only for the liability Transocean assumed under the contract.
Accordingly, Transocean had separate duties to indemnify and insure BP for certain
risk, but the scope of that risk for either indemnity or insurance purposes extends only
to above-surface pollution. Article 20.1 of the Drilling Contract, on which BP relies,
provides that Transocean's duty to maintain insurance does not alleviate its duty to
indemnify BP. This merely confirms our holding in Getty Oil Co. v. Insurance Co. of
North America that indemnity and insurance clauses can impose separate and
independent duties. 845 S.W.2d at 804. Article 20.1 does not provide that the scope of
the indemnity and insurance duties are different. Instead, the additional-insured clause
confirms they are congruent regarding the risk at issue by requiring Transocean to
insure BP "for liabilities assumed by [Transocean] under the terms of this
Contract." Because the scope of Transocean's duty to indemnify governs the
scope of Transocean's duty to insure BP, we decline BP's request to ignore the
indemnity obligation when construing the Drilling Contract.
In sum, we answer the first certified question in the negative because BP is not
covered for the damages at issue by virtue of the limitations on the scope of its
additional-insured status imposed in the Drilling Contract and incorporated into the
Transocean insurance policies by reference.
Id, at 5 – 40 (emphasis added). The analysis in determining whether an additional insured
endorsement is triggered under Deepwater Horizon is no different that the analysis in this
case as to whether a waiver of subrogation endorsement is triggered in this case. Indeed,
Appellants recognize that these endorsements are analogous, arguing in a summary judgment
response: “The language at issue in Pasadena Refining, while it did apply to additional
insured coverage rather than a waiver of subrogation issue, is undeniably similar to the
language found in the ICSP Endorsement. Both the ICSP Policy and the Pasadena Refining
policy provide for either a waiver of subrogation or additional insured coverage when
required by contract.” (CR.206) As did BP in Deepwater Horizon, Appellants rely heavily
on the opinions of Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660
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(Tex. 2008), Aubris and Pasadena Refining.4 Appellants make the similar argument that
ATOFINA, Aubris and Pasadena Refining support their contention that “the insurance
requirement which Savage assumed liability for in the Exxon-Savage contract, including
liability to secure a workers’ compensation insurance policy containing waiver of workers’
compensation subrogation rights in favor of Exxon, is separate and independent and not
remotely interconnected with any contractual indemnity provisions contained in the
ExxonMobil-Savage contract.” (CR.197) The Court in Deepwater Horizon distinguished
these cases, holding: “But simply because the duties to indemnify and maintain insurance
may be separate and independent does not prevent them from also being congruent; that is, a
contract may reasonably be construed as extending the insured's additional-insured status
only to the extent of the risk the insured agreed to assume.” Deepwater Horizon, at 39.
Appellants argue: “Here, all the necessary language to determine whether the waiver
of subrogation applies is contained in paragraph 14 of the Savage contract. One does not
have to look to the indemnity clause in paragraph 12.” (CR.260) To the contrary, as this
case involves damages sustained by a third parties to the contract (Roberts and Munoz), the
indemnity clause must necessarily be referenced to determine whether Exxon or Savage
assumed liability for those damages. The need to reference the indemnity clause is supported
by paragraph 14(b) of the contract, which provides in part: “Supplier’s insurance shall apply to
4 “In addition to ATOFINA, BP relies on Aubris Resources LP v. St. Paul Fire & Marine
Insurance Co., 566 F.3d 483 (5th Cir. 2009), and Pasadena Refining System, Inc. v.
McCraven, Nos. 14-10-00837-CV, 14-10-00860-CV, 2012 Tex. App. LEXIS 3823, 2012 WL
1693697 (Tex. App.--Houston [14th Dist.] May 15, 2012, pet. dism'd by agr.), as supporting
a construction of the insurance policies that does not permit consideration of the Drilling
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Supplier’s indemnity and defense obligations under the Order except, with respect to Services
subject to the law of the State of Texas, each party agrees to maintain the insurance and limits
as specified in this Section or self insurance during the duration of this Agreement in support of
the mutual indemnifications, if any, agreed to in Sections 11, 12, and 13 above.” (CR.78;
Exhibit 1, p.4 (Appendix “H”)) 5 Under Appellants’ logic, the Court in Deepwater Horizon
could have held that Transocean’s obligation to secure an additional insured endorsement in
favor of BP was a “liability assumed” under the agreement, rendering BP an additional
insured irrespective of whether Transocean was required to indemnify BP for a particular
risk. BP in fact argued that it was “automatically covered for all ‘liability imposed by law,’ .
. . because . . .(2) the Drilling Contract obligates Transocean to provide additional-insured
coverage. . . .” Deepwater Horizon, at 12-13. This rejected argument mirrors Appellants’
argument in this case that the obligation to secure worker’s compensation insurance is one of
the “liabilities assumed” by Savage. Quite simply, the Court’s holding in Deepwater Horizon
forecloses Appellants’ argument that the waiver of subrogation clause in its contract with
Savage is independent of the indemnity clause.
This Court, in following Ken Petroleum, has also applied the term “liabilities
assumed” solely to the indemnity requirement, holding that while there was a waiver of
Contract.” Deepwater Horizon, at 12.
5 Section 11 is an additional indemnity clause, which covers damages to Savage’s tools,
equipment and rented items, and damages to Exxon’s adjacent property. Section 13 is an
additional indemnity clause for each party’s gross negligence and willful misconduct.
Notably, Roberts pleaded the accident was the result of the gross negligence of Exxon, a
claim for which Exxon agreed to “bear full responsibility” under Section 13. CR.13,Ex.4,p.3
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subrogation for claims which the carrier’s insured assumed liability under the indemnity
agreement, there was no waiver for claims for which there was no indemnity requirement.
In this case, the indemnity agreement between Nabors and Tesoro plainly limits the
parties' waiver of subrogation to the liabilities each assumed under the drilling
contract. Nabors did not assume liability for losses to its rig caused by Tesoro's gross
negligence. Tesoro remained liable for such losses. Nabors, however, recovered its
losses from its insurance carrier, Zurich. Therefore, if Nabors were to bring suit
against Tesoro to recover for the loss of its rig, it would be seeking a double recovery
for the same loss from both Zurich and Tesoro. We hold, therefore, that Zurich, in
subrogation to Nabors's rights against Tesoro for gross negligence, is not barred from
seeking recovery from Tesoro of the insurance proceeds Zurich paid Nabors.
We overrule Zurich's issue three to the extent it contends that Zurich has a right
of subrogation to those claims against Tesoro as to which Nabors assumed liability
under the indemnity agreement in the drilling contract and waived its insurers'
subrogation rights. We sustain issue three to the extent it contends that Zurich is not
barred from bringing suit against Tesoro in subrogation to Nabors's claims for losses
to Nabors's due to Tesoro's gross negligence or willful misconduct, which are beyond
the scope of the indemnity agreement.
Tesoro Petroleum Corp. v. Nabors Drilling United States, 106 S.W.3d 118, 133-134 (Tex.
App.-Houston[1st Dist.] 2002, writ den’d).6 It is important to note that in Ken Petroleum,
the Court held that Ken Petroleum was entitled to subrogate against Questor for its liability
payments and defense costs, even though it had agreed in the contract to secure its own
coverage for its own liability to the injured worker.7 As such, the Court did not apply the
waiver of subrogation to Ken Petroleum’s insurance by the mere fact that it had contractually
agreed to secure this coverage. This is, however, what Appellants have argued – that the
6 As noted above, Roberts pleaded gross negligence claims in this lawsuit, as well. (CR.7)
7 Similarly, in Tesoro Petroleum, “Nabors obtained a certificate of insurance listing Zurich
as its insurer for damage to Nabor’s drilling rig.” Tesoro Petroleum Corp. v. Nabors Drilling
United States, 106 S.W.3d at 122. After the blowout, Zurich sought subrogation against
Tesoro for the damage to the rig.
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mere fact that Savage agreed to secure worker’s compensation insurance under the policy
constitutes a per se agreement to waive subrogation under that policy. Indeed, the very
Pasadena Refining and ATOFINA cases cited by Appellants would suggest that the
contractual assumption of liability is separate from the contractual obligation to secure
insurance.
Texas Labor Code § 417.004, which is a section of the Chapter which addresses the
worker’s compensation carrier’s subrogation rights, also uses the liabilities assumed language
in describing an indemnity obligation. In particular, this section provides:
Sec. 417.004. EMPLOYER LIABILITY TO THIRD PARTY. In an action for
damages brought by an injured employee, a legal beneficiary, or an insurance carrier
against a third party liable to pay damages for the injury or death under this chapter
that results in a judgment against the third party or a settlement by the third party, the
employer is not liable to the third party for reimbursement or damages based on the
judgment or settlement unless the employer executed, before the injury or death
occurred, a written agreement with the third party to assume the liability.
Acts 1993, 73rd Leg., ch. 269, Sec. 1, eff. Sept. 1, 1993.
The Texas Supreme Court has interpreted the “written agreement with the third party to
assume the liability” under Section 417.004 to mean an indemnity agreement. See Energy
Serv. Co. of Bowie, Inc. v. Superior Snubbing Servs., 236 S.W.3d 190, 191 (Tex. 2007)(”The
new Act referred instead to an agreement ‘executed . . . with the third party’ seeking
indemnity.”); Enserch Corp. v. Parker, 794 S.W.2d 2, 7 (Tex. 1990)(“The Texas Workers'
Compensation Act provides that a subscribing employer has no liability to reimburse or hold
another person harmless for a judgment or settlement resulting from injury or death of an
employee "in the absence of a written agreement expressly assuming such liability." TEX.
REV. CIV. STAT. ANN. art. 8306, § 3(d)(Vernon Supp. 1989)(emphasis added). This
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provision, commonly referred to as the Texas Workers' Compensation Bar, prohibits
indemnity in a workers' compensation context unless one party expressly agrees to indemnify
the other in writing.”). Under Appellant’s logic, if an employer entered into a contract with a
third party that it included an obligation to secure worker’s compensation insurance for its
own employees, the third party could join the employer as a defendant to the lawsuit even in
the absence of an indemnity agreement.
In a case from the Southern District of Texas involving the application of a waiver
clause to a worker’s compensation carrier’s subrogation rights, the reviewing court also
referenced the contract’s indemnity clause in interpreting the scope of the limiting term of the
waiver clause “as respects risks and liabilities assumed by Contractor. . . .” In that case, the
indemnity clause was so broad that it was clear that the employer was assuming the
defendant’s liability: “The state-court suit is a claim against St. Mary ‘arising out of or
related to bodily injury or death’ of Select's employees for ‘medical, compensation or other
benefits.’ (Id., ¶ 11.2). Under the unambiguous language of the MSC, Select assumed St.
Mary's liability in that suit.” Liberty Ins. Corp. v. SM Energy, 2012 U.S. Dist. LEXIS
174069 (S.D. Tex. Dec. 7, 2012). However, in this case the indemnity clause in Exxon’s
contract is not nearly as broad, and does not call for Savage to assume liability for the claims
of Roberts and Munoz.
In the memorandum order of April 15, 2015, the trial court provided the following
comment: “ISCP’s argument only works if Exxon’s settlement payments were for Savage’s
liability (the contractual exclusion ICSP focuses upon.) This defies common sense and is
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not supported by the evidence. Robert’s Petition is against Exxon, not Savage. Exxon’s
settlement with Roberts is in resolution of its own liability, not Savage’s.”
(CR.242)(emphasis added) This comment suggests confusion on the part of the trial court.
The parties have never argued that Exxon’s settlement payments were for Savage’s liability.8
ICSP agrees that such an argument would defy common sense; however, this is not ICSP’s
argument. ICSP recognizes, and fact urges that Exxon’s settlements with Roberts and Munoz
were in resolution of Exxon’s own liability. ICSP’s argument is that there is no waiver of
subrogation unless Savage assumes Exxon’s liability, via the indemnity clause. It is
undisputed that Savage did not agree to indemnify Exxon for this accident. Given that no
one has asserted that Savage was liable for the accident, the trial court’s comment is
puzzling.
An assumed liability is the agreement on the part of one party to pay for damages
sustained by another party; it not the agreement to pay insurance premiums prior to the work
being performed or any damages ever being sustained. Bootstrapping the insurance purchase
requirements to the “assumed liabilities” of the waiver clause would result in a reading that is
nonsensical. Under Appellants’ interpretation, the clause would be translated as follows:
“[Savage] and its insurer(s) providing coverage in this Section shall waive all rights of
subrogation and/or contribution against [Exxon] and its Affiliates [for Savage’s obligation to
secure worker’s compensation insurance. . . .]” In other words, Savage is required to waive
8 Savage could have never been held liable for the accident, as it had worker’s compensation
coverage, and therefore was immune from liability to Roberts or Munoz pursuant to Tex.
Labor Code § 408.001(also known as the exclusivity provision or worker’s compensation
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subrogation against Exxon for the insurance premiums it is required to pay. However, a
worker’s compensation carrier can only subrogate for “damages” sustained by an injured
employee. See Tex. Labor Code § 417.001(a; Texas Workers’ Compensation Insurance
Fund v. Knight, 61 S.W.3rd 91 (Tex.App.—Amarillo 2001, no pet.). Insurance premiums
required to by paid by an employer are not damages. The Exxon / Savage contract only
obligated Savage to pay premiums to an insurance carrier to secure a worker’s compensation
policy. It did not obligate Savage to pay worker’s compensation benefits itself to its own
employees. ICSP is not seeking subrogation against Exxon for the insurance premiums paid
by Savage. ICSP is seeking subrogation for the insurance benefits it, not Savage, made to
Roberts and Munoz, for the damages Roberts and Munoz sustained as a result of the conduct
of Exxon. ICSP, not Savage was liable to pay worker’s compensation benefits to Roberts. In
fact, Texas allows an employer to decline to participate in the worker’s compensation system.
In that event, however, the employer loses its common law defenses to claims by its own
employees; i.e. becomes a “bare employer.”
D. The indemnity clause is unenforceable as it does not comply with the fair notice
doctrine.
Additionally, Section 12, the indemnity clause, is unenforceable, as it does not comply
with the express negligence doctrine by providing that Savage is required to indemnify
Exxon for its own negligence, and it does not comply with the conspicuousness requirement
as nothing appears on the face of the contract to attract the attention of a reasonable person
when he looks at it. See Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508
bar).
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(Tex. 1993). By contrast, Section 11 contains a provision complying with the fair notice
doctrine: “. . . EVEN IF THE LOSS OR DAMAGE RESULTS FROM PURCHASER’S
NEGLIGENCE.” (CR.78, Exhibit 1,p.3 (Appendix “H”)) As there is no indemnity
obligation on the part of Savage, there are no liabilities assumed by Savage, and there is no
waiver of subrogation.
E. The waiver only applies to general liability coverage.
Alternatively, the limitation in the Exxon waiver clause, Section 14(a), limiting the
waiver “to the extent liabilities are assumed by [Savage]”, should be interpreted to limit the
waiver only to Savage’s general liability insurance coverage, and not its worker’s
compensation coverage. The worker’s compensation policy does not provide coverage for any
indemnity obligation assumed by Savage. Worker’s compensation coverage only provides for
the payment of medical or indemnity benefits to the policyholder’s employees, or death
benefits to the employees’ beneficiaries. Worker’s compensation coverage is not third party
liability coverage;9 it is first party insurance coverage.10 The worker’s compensation policy is
a three party agreement between the carrier, employer and employee. Aranda v. Ins. Co. of N.
Am., 748 S.W.2d 210, 212 (Tex. 1988). General liability insurance may provide coverage to
companies other than the policyholder in support of an indemnity obligation. The worker’s
compensation policy does not provide coverage for any indemnity obligation assumed by
Savage, nor can an unaffiliated company such as Exxon be added as an additional insured to
9 See 28 TEX. ADMIN. CODE § 21.202 (8) (West 2015(“Third-party coverage--Benefits and
other rights provided by an insurance contract to any person other than the insured.)
10 See 28 TEX. ADMIN. CODE § 21.202 (5) (West 2015)(“ First-party coverage--Benefits and
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Savage’s worker’s compensation coverage, as Exxon is not an alternate employer for Savage’s
employees.
F. Appellants are liable for the amount of ICSP’s lien as a result of their settlement.
Both Roberts and Munoz settled their claims against Exxon, without honoring ICSP’s
subrogation claims. As part of the Roberts settlement, Roberts agreed to indemnify Exxon for
any claim by ICSP related to the settlement. However, as part of the Munoz settlement, Exxon
agreed to indemnify Munoz for any claim by ICSP related to the settlement, and to be
responsible for Munoz’s future worker’s compensation benefits should ICSP receive a statutory
credit against future benefits. Appellants’ settlement, and the payment of settlement funds to
Roberts and Munoz without reimbursing ICSP’s first-money subrogation lien, constitutes
conversion. See Texas Mutual Ins. Co. v. Ledbetter, 251 S.W.3d 31, 38-39 (Tex. 2008)
(“When an injured worker settles a case without reimbursing a compensation carrier,
everyone involved is liable to the carrier for conversion – the plaintiffs, the plaintiffs’
attorney, and the defendants.”); see also Capitol Aggregates, Inc. v. Great American Ins. Co.,
408 S.W.2d 922, 923-24 (Tex. 1966)(”The carrier was held entitled to recover from the third
party and the workman, jointly and severally, the amount of the settlement to the extent
necessary to reimburse itself as provided in Section 6a.”); Prewitt and Sampson v. City of
Dallas, 713 S.W.2d 720, 722 (Tex.App.-Dallas 1986, writ ref’d n.r.e.); Home Indemnity Co.
v. Pate, 814 S.W.2d 497 (Tex.App.-Houston[1st Dist.] 1991, no writ); Employers Casualty
Company v. Henager, 852 S.W.2d 655, 659 (Tex.App.—Dallas 1993, writ den’d); Houston
other rights provided by an insurance contract to an insured.”)
25
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General Ins. Co. v. Campbell, 964 S.W.2d 691, 695 (Tex.App.—Corpus Christi 1998, review
den’d) (“If a third-party tortfeasor and its insurer wrongfully pay out to the employee money
that belongs to the compensation carrier, the third-party tortfeasor and its insurance company
are liable for the total amount paid by the carrier.”); Performance Ins. Co. v. Frans, 902
S.W.2d 582, 585 (Tex.App.---Houston [1st Dist.] 1995, writ denied); Travelers Insurance
Company v. Seidel, 705 S.W.2d 278, 281 (Tex.App.-San Antonio 1986, writ dism’d). ICSP
pleaded claims against Appellants for conversion, and since subrogation was not waived,
ICSP was entitled to recover from Appellants the amount of its lien against the Roberts
settlement, and from Exxon in the amount of its lien against the Munoz settlement.
G. Conclusion.
Since waiver is an affirmative defense, it is Appellants’ burden to prove it applies as a
matter of law.11 Additionally, as Appellants filed a traditional motion for summary
judgment, they had the burden to prove as a matter of law that waiver applies. As Appellants
did not prove their affirmative defense of waiver as a matter of law, this Court should reverse
the trial court’s summary judgment, and remand the case to the trial court for further
proceedings.
11 See Tex. Rule of Civ. Proc. 94; Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d
26
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ISSUE 2: Even if there is an enforceable waiver of subrogation in favor of Exxon, the
trial court erred in holding that ICSP’s right to assert that Roberts’ and Munoz’s third-
party recovery constituted an advance against future benefits was also waived.
ARGUMENT AND AUTHORITIES FOR ISSUE 2:
Even if ICSP’s subrogation rights have been waived, this does not waive ICSP’s right
to assert a credit against future benefits which may be owing to Roberts and Munoz pursuant
to Tex. Labor Code § 417.002(b) in the respective amounts of their recovery. Tex. Labor
Code § 417.002 provides:
Sec. 417.002. RECOVERY IN THIRD-PARTY ACTION. (a) The net amount
recovered by a claimant in a third-party action shall be used to reimburse the insurance
carrier for benefits, including medical benefits, that have been paid for the compensable
injury.
(b) Any amount recovered that exceeds the amount of the reimbursement
required under Subsection (a) shall be treated as an advance against future benefits,
including medical benefits, that the claimant is entitled to receive under this subtitle.
(c) If the advance under Subsection (b) is adequate to cover all future benefits,
the insurance carrier is not required to resume the payment of benefits. If the advance is
insufficient, the insurance carrier shall resume the payment of benefits when the
advance is exhausted.
The Legislature has recognized that a carrier’s right of subrogation is distinct from its right to
treat a third-party recovery by an injured worker as an advance against future benefits (under
Tex. Labor Code § 417.002(b)). In particular, Tex. Labor Code § 417.003(d) provides that
the worker’s attorney can only recover attorney’s fees out of the carrier’s recovery for
amounts paid in the past, not the amount of future benefits the carrier is relieved from paying
pursuant to Tex. Labor Code § 417.002(b):
505, 508 (Tex. 1993).
27
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(d) For purposes of determining the amount of an attorney's fee under this
section, only the amount recovered for benefits, including medical benefits, that have
been paid by the insurance carrier may be considered.
Prior to this amendment to the statute in 1993, Texas appellate courts had allowed attorneys
to recover attorney’s fees from the carrier for not only the past amount of benefits
reimbursement, but also the present value of the benefits the carrier was relieved of paying
pursuant to the advance provision. See Ischy v. Twin City Fire Ins. Co., 718 S.W.2d 885, 888
(Tex. App. Austin 1986, writ ref’d n.r.e.); Chambers v. Texas Employers Ins. Assoc., 693
S.W.2d 648 (Tex. App. 1985, writ ref'd n.r.e.).
In an analogous context involving a carrier’s credit rights for future worker’s
compensation benefits to be paid under the the Longshore and Harbor Workers'
Compensation Act, 33 U.S.C. §§ 901–950, the Fifth Circuit has held no fewer than five times
that an enforceable waiver of subrogation does not waive the carrier’s right to a credit against
future benefits. See Petro-Weld, Inc. v. Luke, 619 F.2d 418 (5th Cir. 1980); Petroleum
Helicopters, Inc. v. Collier, 784 F.2d 644 (5th Cir. 1986); Nicklos Drilling Co. v. Cowart, 907
F.2d 1552 (5th Cir. 1990); Jackson v. Land & Offshore Services, Inc., 855 F.2d 244 (5th Cir.
1988); Kelly v. Red Fox Cos. of New Iberia, Inc., 123 Fed. Appx. 595 (5th Cir. 2005); but see
Hartford Accident & Indem. Co. v. Buckland, 882 S.W.2d 440, 444–56 (Tex.App.—Dallas
1994, writ denied); Am. Risk Funding Ins. Co. v. Lambert, 59 S.W.3d 254, 259 (Tex. App.—
Corpus Christi 2001, pet.denied).12 The right of offset or credit under the Texas Worker’s
12 The Texas Supreme Court has never addressed this issue. Lambert followed Buckland
without further analysis. Buckland based its holding on the Ischy and Chambers opinions
which were subsequently abrogated by statute. Buckland also noted that its holding was
28
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Compensation Act for a third party recovery is substantially the same as the right provided
under Section 933(f) of the Longshore Act. The Texas statute dictates that any third-party
recovery by a claimant be treated as an “advance” against future benefits, and that until the
advance is exhausted, the carrier is not obligated to pay any future benefits. As it categorizes
any third party recovery by the claimant as an advance fund which must first be exhausted, it
is similar to “Section 33(f) [, which] fixes the liability of the employer-carrier for
compensation in the future after a third party settlement or judgment has been obtained. It
simply cannot be read to mean that the employer-carrier is liable to presently pay
compensation in addition to the amount received from the third party without first exhausting
that fund, and thus provide a double recovery in this case . . . .” See Petro-Weld, Inc., 619
F.2d at 420-421. There is no rational basis to distinguish these holdings based upon the fact
that they involve different statutes. They both involve worker’s compensation statutes that
have similar offset or credit provisions in their third-party recovery statutes. They are similar
in that they provide a first money right of reimbursement to the carrier, and are intended to
reduce the burden of insurance to the general public.13 Finally, a finding that a waiver in
favor of Exxon also waived ICSP’s right to assert a statutory credit against future benefits to
Roberts and Munoz would be contrary to the provisions of the waiver endorsement, which
“governed by former article 8307, section 6a of the Texas Revised Civil Statutes since
Buckland's injuries occurred prior to January 1, 1991.” Buckland, 882 S.W.2d at 441, fn.1.
13 “First-money reimbursement is crucial to the worker's compensation system because it
reduces costs for carriers (and thus employers, and thus the public) and prevents double
recovery by workers.” Tex. Mut. Ins. Co. v. Ledbetter, 251 S.W.3d 31, 35 (Tex. 2008).
29
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provides that the agreement shall not operate directly or indirectly to benefit anyone not
named in the Schedule.
ISSUE 3: Exxon’s affidavit of T. Lynn Henagan cannot be any basis for affirming the
trial court’s summary judgment.
ARGUMENT AND AUTHORITIES FOR ISSUE 3:
ICSP objected to portions of Exxon’s affidavit of T. Lynn Henagan (CR.79; Exhibit 8
(Appendix “I”)) pursuant to Tex. Rule of Civ. Proc. 166a(f), and provided a proposed order
supporting the objections. (CR.87-89) The trial court indicated in its opinion that it was not
basing its opinion on the affidavits filed by Appellants: “The parties have agreed that all
remaining issues in this case are entirely issues of law. The parties agree, and this Court
rules, that the contracts in play are not ambiguous. Accordingly, this Court did not use and
does not need to rule on the Affidavits and objections thereto which purport to tell the Court
how to interpret the contracts.” (CR.241-242)
As the trial court expressly did not consider the affidavits, ICSP would submit that
they cannot be the basis for affirming the trial court’s summary judgment. See Cincinnati
Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996); State Farm Fire & Casualty Co. v.
S.S., 858 S.W.2d 374, 380 (Tex. 1993) (plurality opinion); Delaney v. University of Houston,
835 S.W.2d 56, 58 (Tex. 1992). However, to the extent that ICSP is incorrect, ICSP submits
that any consideration of Exxon’s affidavit of T. Lynn Henagan over ICSP’s objections
would have been erroneous, that the trial court erred in not sustaining the objections, and the
evidence should not be considered on appeal. ICSP reurges the objections to the extent the
evidence could form the basis of any opinion by this Court, as follows:
30
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A. General Objections.
Any consideration of paragraphs 6 – 7 and 9 - 11 of Henagan’s affidavit , a supervisor
for Exxon Risk Management, would have been erroneous as inadmissible parol evidence.
“Parol evidence is only admissible to show ‘(1) the execution of a written agreement was
procured by fraud, (2) an agreement was to become effective only upon certain
contingencies, or (3) the parties’ true intentions if the writing is ambiguous.’” Ledig v. Duke
Energy Corp., 193 S.W.3d 167, 178-79 (Tex.App.—Houston[1st Dist.] 2006, no pet.)(citing
Gonzalez v. United Carpenters & Joiners, 93 S.W.3d 208, 211 (Tex.App.—Houston[14th
Dist.] 2002, no pet.)). Appellants did not argue that Exxon’s standard form “Standard
Procurement Agreement for Downstream or Chemical Services with Incidental Goods” the
basis of their waiver claim was either (1) procured by fraud; (2) effective only upon certain
contingencies, or (3) ambiguous. As such, the parol evidence offered by Henagan is
inadmissible. It was presumably offered as an attempt to broaden the reach of the waiver of
subrogation clause.
Additionally, ICSP objected to Henagan’s attempts to interpret the contract in
paragraphs 6 – 7 and 9 - 11. The contract speaks for itself. The interpretation of the contract
is a question of law for the Court, not a question of law or fact for Henagan to interpret.
Henagan then proceeds to misinterpret the contract.
31
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B. Specific Objections.
1. Paragraph 6.
In paragraph 6, Henagan states that “Savage assumed liability to maintain workers’
compensation and employer’s liability insurance. . . .” Henagan’s self-serving use of the
term “assumed liability” is misplaced; “assumed responsibility” is a more accurate
description of the requirement. The act of securing first party worker’s compensation
insurance covering Savage’s own employees (not Exxon’s), is not an act of “assuming
liability.” The only possible reason for Henagan’s misuse of this term is to support an
argument by Exxon that the act of securing worker’s compensation insurance constitutes one
of the “liabilities” “assumed by Supplier” under the waiver provision of section 14(a) of
Exxon’s form contract.
The last two sentences of paragraph 6 of Henagan’s affidavit are improper in that they
state a legal conclusion as to insurance coverage, and are conclusory, as to the responsibility
of Savage’s insurance carriers to secure coverage. This is a question of law for the Court, not
a question of law or fact for Henagan to interpret. Henagan has not laid any foundation as an
attorney to provide a legal conclusion.
2. Paragraph 7.
In paragraph 7 of Henagan’s affidavit, Henagan states that under section 14(a) of
Exxon’s form contract “Savage agreed that Savage and its insurers providing coverage under
paragraph 14(a) were to waive all rights of subrogation.” This states an improper legal
conclusion, is conclusory and violates the parol evidence rule. It misstates the waiver clause,
32
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because Savage did not agree to waive “all rights of subrogation”; Savage only agreed to
waive subrogation for liabilities assumed by Savage.
3. Paragraph 9.
Paragraph 9 attempts to describe Exxon’s course and dealing, “practice, and intent,”
which constitutes inadmissible parol evidence.
4. Paragraph 10.
Paragraph 9 attempts to describe Exxon’s course and dealing, “practice, and intent,”
which constitutes inadmissible parol evidence. Additionally, the second sentence, that “the
cost of the premiums for such coverage including waiver of subrogation is passed through to
ExxonMobil in the pricing and compensation to be paid under the contract” is conclusory,
unsupported and without any foundation. The witness, who works in Risk Management,
does not lay and foundation for his alleged knowledge of contract and pricing negotiations
between Savage and Exxon.
5. Paragraph 11.
In paragraph, Henagan provides an impermissible legal conclusion that Savage waived
subrogation for this accident. The paragraph is inadmissible as violative of the parol
evidence rule, conclusory, unsupported and without any foundation. The witness, who works
in Risk Management, does not lay and foundation for his alleged knowledge of contract and
pricing negotiations between Savage and Exxon.
33
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PRAYER FOR RELIEF
WHEREFORE, ICSP prays that this Court reverse the trial court’s summary judgment
that ICSP take nothing as to its claims pertaining to Roberts, Munoz and Exxon, remand the
case to the trial court for a new trial on ICSP’s intervention interests; that ICSP recover its
taxable costs of Court, and for such other and further relief as just.
Respectfully submitted,
KELLY & SMITH, P.C.
/s/ Loren R. Smith__________________
Loren R. Smith
Texas Bar No. 18643800
4305 Yoakum Blvd.
Houston, Texas 77006
713/861-9900
713/861-7100 - FAX
ATTORNEYS FOR APPELLANT THE
INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA
CERTIFICATE OF SERVICE
I hereby certify that on July 21, 2015, a true and correct copy of the foregoing was
forwarded by electronic transmission to the following counsel of record:
Jason A. Itkin Mike Morris
Arnold & Itkin Tekell, Book, Allen & Morris, L.L.P.
6009 Memorial Drive 1221 McKinney, Suite 4300
Houston, Texas 77007 Houston, Texas 77010-2010
Attorneys for Plaintiff Kevin Roberts Attorneys for Third-Party Plaintiff Exxon
Mobil Corporation
/s/ Loren R. Smith__________________
Loren R. Smith
34
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CERTIFICATE OF COMPLIANCE AND WORD COUNT
I hereby certify that this document was produced on a computer using Microsoft Word
and contains 10,013 words, as determined by the computer software’s word-count function,
excluding the sections of the document listed in Texas Rule of Appellate Procedure 9.4(i)(1).
/s/ Loren R. Smith__________________
Loren R. Smith
35
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APPENDIX
APPENDIX “A”: Trial Court’s memorandum order and opinion granting Exxon’s
Motion for Rehearing, signed April 15, 2015
APPENDIX “B”: Final Summary Judgment, signed May 11, 2015
APPENDIX “C”: Texas Labor Code Chapter 417
APPENDIX “D”: Stipulation of Facts
APPENDIX “E”: Affidavit of Lisa Dean
APPENDIX “F”: Portion of Transcript of October 20, 2014 Hearing in 125th
APPENDIX “G”: Waiver of Subrogation Endorsement from ICSP Policy
APPENDIX “H”: Relevant Portions of Exxon / Savage Contract
APPENDIX “I”: Affidavit of T. Lynn Henagan
36
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CAUSE NO. 2013-03033
.ifP.~h.
KEVIN ROBERTS § IN THE DISTRICT COURT OF' rJ(
§
§
!i i.. M0b1'l
I ,:'\
vs ~ HARRIS COUNTY, T ~ ! ~9 ._.
§ .... ;- I :;'::::!• ..i
';!
i:I
o
O
--t n·III
7138617100 P. 02/33
. T
STIPULATION OF FACTS
This stipulation of facts is being entered into between The Insurance Company of the State
of Pennsylvania (hereinafter "ICSP") and Exxon Mobil Corporation (hereinafter referred to as
"ExxonMobil").
1. On January 12, 2013, Savage Refinery Services, LLC ("Savage") employees, Kevin
Roberts ("Roberts") and Arturo Munoz ("Munoz") sustained bodily injuries in the
course and scope of their employment for Savage.
2. The January 12, 2013 accident in the ExxonMobil Delayed Coker Unit involving
Savage employees, Roberts and Munoz, was reported that day to Savage's insurance
broker and select underwriters, including Savage's workers' compensation insurance
carrier in Texas, The Insurance Company of The State of Pennsylvania ("ICSP").
3. At the time of the January 12, 2013 accident in the ExxonMobil Delayed Coker Unit,
both Roberts and Munoz were performing services for Savage pursuant to the
Agreement for Downstream or Chemical Services with Incidental Goods No.:
2088773 (sometimes referenced as A2088773) between ExxonMobil and Savage.
(Pertinent parts of Agreement No.: 2088773 including Amendment 6 and 7 and
Exhibits A and A~l redacted to remove references to pricing, are attached as Exhibit
I).
4. The producer, Marsh USA Risk & Insurance Services, issued the Certificate of
Liability Insurance attached as Exhibit 2.
5. Savage paid an additional premium to add Endorsement WC420304A titled, "Texas
Waiver of Our Right to Recover from Others Endorsement" to ICSP Policy No.
WC009-87-6293. Pertinent copies of the workers' compensation and employer
liability insurance policy issued by ICSP to Savage redacted to remove references ro
premium amounts is attached hereto as Exhibit 3.
So stipulated this day of _
By authorized r tative of The Insurance
Company oft~ State(Pennsylvania. '
~~
By Authorized Representative ofExxon Mobil
q-.v.~11
Corporation
EXHIBIT
Page l of J
APPENDIX D
CAUSE NO. 2013-03033
KEVIN ROBERTS IN THE DISTRICT COURT
VS. 165th JUDICIAL DISTRICT
EXXON MOBIL CORPORATION HARRIS COUNTY, TEXAS
AFFIDAVIT
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, personally appeared Lisa Dean who, being by
me duly sworn, deposed as follows:
"My name is Lisa Dean. I am of sound mind, over the age of eighteen (18) years, am fully
competent to make this Affidavit, and have personal knowledge of the facts herein stated.
I am employed as a Senior Technical Specialist, Workers' Compensation for AIG. In that
capacity, I am a duly authorized representative of the third-party defendant, The Insurance
Company of the State of Pennsylvania ("ICSOP") as it pertains to the worker's compensation
claims involving Kevin Roberts and Arturo Munoz. ICSOP has paid benefits to or on behalf of Mr.
Roberts in the total amount of $115,189.64 (all medical) as a result of the accident the subject of this
lawsuit. Attached as Exhibit "A" to this affidavit is a true and correct copy of ICS OP's payment
ledgers for Mr. Roberts' claim, documenting these payments. ICSOP has paid benefits to or on
behalf of Mr. Munoz in the total amount of $571,296.88 (medical of $514,205.58 and indemnity of
$57,091.30) as a result of the accident the subject of this lawsuit. Attached as Exhibit "B" to this
affidavit is a true and correct copy of ICSOP's payment ledgers for Mr. Munoz's claim,
documenting these payments.
"I am a custodian of records for the attached business records of ICSOP. Attached hereto
are twenty-three (23) pages of records from ICSOP regarding the above-referenced claims. These
said pages of records are kept by ICSOP in the regular course of business, and it was the regular
course of business of ICSOP for an employee or representative of ICSOP with knowledge of the act
or event recorded to make the record or to transmit information thereof to be included in such
record; and the record was made at or near the time or reasonably soon thereafter. The records
attached hereto are the original or exact duplicates of the original."
AIG/Roberts/Affidavit
APPENDIX E EXHIBIT 4
Name Printed; Lisa Dean
SUBSCRIBED and SWORN TO before me, by SQ1k:S Sci who is
known personally to me, the undersigned Notary Public, on this day of
, 2015, to certify which witness my hand and seal of office.
LISA S. GILES
- -be Notary Public. State of Texas
/ 4w Commission Expires Notary Public In and For
vvIt'"
%Alt& July 29, 2017 The State of Ix
Ala/Roberts/Affidavit
11
Motion hearing
October 20, 2014
1 in the 165th.
2 THE COURT: Yes, sir. Thank you very
3 much. Response?
4 MR. MORRIS: Yes, your Honor. I think
5 it's important that the Court have a overview.
6 January 12th 2013, there is an accident out at the
7 Baytown refinery. A tremendously hot water was dumped
8 on two contractors Kevin Roberts and Arturo Munoz. Now
9 both Mr. Roberts and Mr. Munoz were employees of Savage.
10 Savage was a contractor of ExxonMobil and when they
11 entered into a contract for the work out there,
12 ExxonMobil and Savage sat down and said we want all
13 employees to be covered by worker's compensation
14 insurance but we are going to have an election here.
15 Either Exxon will carry the comp or Savage will carry
16 the comp and they look at the premium charges and in
17 this particular case the parties agreed that Savage
18 would be liable to carry the worker's compensation
19 insurance and that further in that event they would
20 secure a waiver of worker's compensation subrogation
21 rights from the carrier. Just the opposite occurred if
22 Exxon elected to furnish the worker's comp under an
23 older controlled insurance program. In that situation
24 Savage agreed not to secure a waiver of subrogation
25 rights.
Kendra Garcia, CSR, RPR
125th District Court
713-368-6144
APPENDIX F
12
Motion hearing
October 20, 2014
1 So that happens before the accident. That
2 accident happens and Mr. Roberts within a few days hires
3 Jason Itkin who files a suit. That suit lands in the
4 165th. It's against ExxonMobil. ExxonMobil believes
5 that it is an additional insurer on policies issued to
6 Savage and makes that claim. ExxonMobil also
7 investigates the accident and determines that it is
8 responsible for the injuries to these men.
9 Mr. Munoz elects not to hire a lawyer. He
10 represents himself. Mr. Itkin over here aggressively
11 prosecutes the case against ExxonMobil, requests for
12 production, inspections of the area and it is clear that
13 ExxonMobil feels responsible for what happened to these
14 two men.
15 So immediately Itkin, Mr. Itkin, spends a
16 lot of time putting together his expert reports, the
17 medical. ExxonMobil reviews that. We begin to
18 negotiate with our carriers to try to come involved, to
19 try to resolve the case, they refuse to do it to some
20 extent and eventually the Roberts case gets concluded.
21 Now during all of this, as the Court knows, the waiver
22 of worker's compensation subrogation is a key to getting
23 the third party cases settled and a decision has to be
24 made who is going to be responsible for that and of
25 course Exxon and, I believe, Mr. Roberts believe that
Kendra Garcia, CSR, RPR
125th District Court
713-368-6144
- --. .._
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0'110l'06
Case 4:14-cv-00053 Document 44 Filed in TXSD on 09/10/14 Page 1 of 4
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
THE INSURANCE COMPANY OF THE §
STA TE OF PENNSYLVANIA §
§
VS. § CIVIL ACTION NO. 4: 14-cv-00053
§
§
EXXON MOBIL CORPORATION §
§
AFFIDAVIT OFT. LYNN HENAGAN
STATE OF TEXAS §
§
COUNTY OF HARRIS §
BEFORE ME, the undersigned authority, on this day personally appeared T. Lynn
Henagan, known to me to be the person whose name is subscribed hereto, and after being
duly sworn, the witness stated on oath as follows:
1. "My name is T. Lynn Henagan. I am over eighteen years of age. I am fully
competent to make this affidavit. The factual statements contained herein are
within my personal knowledge and are true and correct."
2. "I am currently a supervisor with ExxonMobil Risk Management a division of
Exxon Mobil Corporation. I have worked for ExxonMobil Risk Management
since 1989."
3. "I was part of an ExxonMobil team assembled to respond to the January 12,
2013 accident in the ExxonMobil Coker Unit in the ExxonMobil Baytown
refinery involving Savage Refinery Services, LLC employees, Kevin Roberts
and Arturo Munoz."
4. "Among other findings and conclusions, the team's investigation determined
that Kevin Roberts and Arturo Munoz were bolting and unbolting flanges on
piping to coker drums 3 and 4 in the ExxonMobil Coker Unit, when hot water
exited a flange on piping of coker drum 3, causing burn injuries to Kevin
Roberts and Arturo Munoz. This work was being performed in the Coker Unit
EXHIBIT
j s
APPENDIX I
Case 4:14-cv-00053 Document 44 Filed in TXSD on 09/10/14 Page 2 of 4
which consists of various piping, drums and vessels which are affixed to the
land on which the Refinery sits."
5. "At the time of the accident, both Kevin Roberts and Arturo Munoz were
performing services for Savage Refinery Services, LLC (Savage) pursuant to
the Agreement for Downstream or Chemical Services with Incidental Goods
No. 2088773 (sometimes referenced as A2088773) between ExxonMobil and
Savage. (Pertinent parts of Agreement No. 2088773 including Amendment 6
and 7 and Exhibits A and A-1 redacted to remove references to pricing, are
attached to my affidavit as Exhibit 1 ). As noted above, Savage employees,
Roberts and Munoz, were performing services on ExxonMobil premises at the
time of the accident in question. Savage employees' presence, including that
of Roberts and Munoz, on ExxonMobil's premises arose from work and
services they performed for Savage in connection with Agreement No.
2088773 ("Savage Contract") between Savage and ExxonMobil."
6. "Pursuant to the Savage Contract No. A2088773 paragraph 14 attached as
Exhibit I, Savage assumed liability to maintain workers' compensation and
employer's liability insurance in accordance with applicable law and liability
insurance coverages for the benefit ofExxonMobil including Savage's normal
and customary commercial general liability insurance coverage and policy
limits or at least $2,000,000.00, whichever is greater, providing coverage for
injury, death, or property damage resulting from each occurrence. The Savage
Contract, attached as Exhibit l , required that Savage's liability policies cover
ExxonMobil as an additional insured in connection with the performance of
services. The Savage Contract further required that any additional insured
coverage is primary to all other policies (including any deductibles or self-
insured retentions) and self-insurance which may provide coverage."
7. "Pursuant to the Savage Contract, attached as Exhibit l, paragraph 14(a) on
page 4, Savage agreed that Savage and its insurers providing coverage under
paragraph 14(a) were to waive all rights of subrogation."
8. "As a member of the ExxonMobil Risk Management Department and as part
of my responsibilities to the ExxonMobil team assembled to respond to the
January 12, 2013 accident, I contacted my counter-parts in the Savage Risk
Management Department and requested documentation of the workers'
compensation coverage. and liability coverages that Savage had assumed
liability to provide under the Savage "Contract. .Savage's Risk Management
Department provided a policy of workers' compensation insurance issued by
2
Case 4:14-cv-00053 Document 44 Filed in TXSD on 09/10/14 Page 3 of 4
The Insurance Company of the State of Pennsylvania (ICSP) and insuring
employees of Savage injured in the course and scope of employment for
Savage at the ExxonMobil Baytown Refinery. (Pertinent parts of ICSP's
PoJicy No. WC XXX-XX-XXXX redacted as to estimated total annual
remuneration and estimated annual premiums is attached to my affidavit as
Exhibit 2). Savage, through its brokers and agents, also forwarded certificates
of liability insurance, copies of which are attached to my affidavit as Exhibit
3."
9. "As a long time employee of the ExxonMobil Risk Management Department,
I have personal knowledge of the workers' compensation insurance, liability
insurance, additional insured, and waiver of subrogation requirements
contained in the Standard Procurement Agreement for Downstream or
Chemical Services with Incidental Goods which ExxonMobil negotiates with
its contractors like Savage. ExxonMobil does not specify the manner and
method by which a contractor chooses to put its liability insurance program in
place, but does contractually require the contractor like Savage to make
ExxonMobil an additional insured on the contractor's normal and customary
commercial general liability insurance coverage leaving to the contractor like
Savage to decide whether to structure that commercial general liability
insurance coverage with primary, excess, umbrella, bumbershoot policies
together with various deductibles and self-insured retentions that the contractor
like Savage would contractually agree to satisfy. ExxonMobil's practice, and
intent, is to require contractors like Savage to add ExxonMobil as an additional
insured on all of Savage's policies that provide commercial general liability
insurance coverage."
10. "ExxonMobil's practice, and intent, is also for all workers, like Kevin Roberts
and Arturo Munoz, at the ExxonMobil Baytown refinery to be covered by
workers' compensation insurance coverage either by a policy of workers'
compensation insurance furnished or arranged by ExxonMobil or a policy of
workers' compensation insurance furnished or arranged by the worker's direct
employer. When the worker's employer assumes liability to secure and
provide workers' compensation insurance coverage, the cost of the premiums
for such coverage including waiver . of subrogation is passed through to
ExxonMobil in the pricing and compensation to be paid under the contract.
When ExxonMobil elects to assume liability to furnish and arrange to provide
workers' compensation insurance coverage, for workers' like Kevin Roberts
and Arturo Munoz, the contract expressly provides that the contractor will not
cause itself or its insurers to waive subrogation."
3
Case 4:14-cv-00053 Document 44 Filed in TXSD on 09/10/14 Page 4 of 4
11. "In the present cue, Savage agreed to assume liability to provide workers'
compensation insurance coverage for its employees, Kevin Roberts Ind Arturo
Munoz, aocl to secure waiver ot wortcen' compensedon subroption rights in
favor of ExxonMobil fiom its workers' compensation insurance carrier,
pusing the cost ofsuch workers' componntioo insunocecovenac and waiver
of subropdon ripts onto ExxonMobil."
12. "On or about March 28, 2014, Kevin Roberti entered into a confidential
settlement aaz-eoment, th1 consJderation for which was not fully tendered by
Chanis Europe Limited under LiabJlity Policy No. CUOO I 1508 and NatJonal
Union Piro Insurance Company of Pittsburgh. Pa. under Liability Poliey No.
OL-972-50-90until on or about Juno 4, 2014."
13. "On August 27, 2014, Arturo Munoz and wife, Candice Reyes, si111ed a
confidential seulement qreement. the consideration for whJcb was not 1\al)y
fbndad until Septembor l. 2014. National Union Fire lnswance Company of
Pittsburgh. Pa. (Nadoaal Union) under Liability Poliey No. OL-972.,0-90
apeed co contribute. buthu not yet paid, t 5', of the Arturo Mwioz seulement
based on the other liability imurmce provisions contained In tho National
Union and Starr Indemnity A Liability Company policies."
14. "National Union dcni~ c,ovmge to Exxon Mobil Corporacion under Liability
PolicyNo. 13273101 based inpart'on NationalUnion's contention that Starr's
Liability Policy No. MASll.SB 00005012 must be exhlmted beton National
Uai011's Polley No. 132?3101 is trigend."
"Further, Afflant saycth not."
SWO~JO AND SUBSCRIBEDBEFORE ME by the said T. LYNN HE!NAOAN
on this the~day of September, 2014.
'NoYPUBc
~ ANii~
nm STATE OF TEXAS
4
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