In Re: Diamond Svcs ( 2001 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 01-30641
Summary Calendar
_____________________
IN RE: DIAMOND SERVICES CORPORATION,
on behalf of Diamond Dredge No. 9, for exoneration
from or limitation of liability:
DIAMOND SERVICES CORPORATION, on behalf of Diamond Dredge No. 9,
Petitioner-Appellant,
versus
TENNESSEE GAS PIPELINE COMPANY; ET. AL.,
Claimants,
COMMERCIAL UNDERWRITERS INSURANCE COMPANY,
Claimant-Appellee.
Appeal from the United States District Court
for the Eastern District of Louisiana
(00-CV-156-L; 00-CV-708-L; 00-CV-1116-L)
November 26, 2001
Before HIGGINBOTHAM, WIENER, and BARKSDALE, Circuit Judges.
PER CURIAM:*
At issue is whether the district court erred in holding: that
the liability coverage afforded Chet Morrison Contractors, Inc.
(CMC), and its subcontractor Diamond Services Corporation (Diamond)
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
under Diamond’s Protection and Indemnity (P&I) insurance policy was
primary to CMC’s obligation to indemnify Diamond for property
damage; and that, consequently, the P&I policy limits must be
exhausted before CMC is required to indemnify. Diamond contests:
the denial of its summary judgment motion; and the summary judgment
awarded CMC’s insurer, Commercial Underwriters Insurance Company
(CUIC). We AFFIRM essentially for the reasons stated in the
district court’s 16 May 2001, comprehensive opinion, discussed
infra.
CMC entered into a maritime Master Service Contract (Contract)
with Diamond, under which, as a subcontractor for CMC, Diamond was
to furnish vessel services/perform certain work in burying the
Tennessee Gas pipeline. The Contract required Diamond to procure,
in part: (1) comprehensive general liability (CGL) insurance
“covering all liabilities arising as a result of ... damage to
property, including, but without limitation, contractual liability
coverage”; and (2) protection and indemnity (P&I) insurance “naming
CMC ... as [an] additional assured[]”. With respect to both
policies, the Contract provides: “All said insurance policies must
contain clauses to the effect that ... the coverage required by
this contract is to be primary”. Finally, the Contract contains
reciprocal indemnity provisions for personal injury and property
damage, providing in part: “CMC will ... indemnify [Diamond for]
all suits, actions, claims and demands based on property damage ...
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arising from or relating in any way to the performance of the work
hereunder”.
While performing the Contract, Diamond’s Dredge No. 9
allegedly damaged the Tennessee Gas pipeline. CMC repaired the
pipeline, and “Diamond’s P&I underwriters agreed, without
prejudice, to pay CMC’s claim as an additional assured ...
reserving all rights to seek reimbursement from CMC and/or CMC’s
insurers”. In re Diamond Services, No. 00-0156 (E.D. La. 16 May
2001) (order granting summary judgment motion to CUIC).
At issue is whether, in granting summary judgment to CMC’s
insurer, CUIC, the district court erred in holding: that Diamond’s
P&I policy is primary to CMC’s indemnification obligation; and,
consequently, that the limits of the P&I policy must be exhausted
before that indemnity obligation is triggered. “We review the
grant or denial of summary judgment de novo, applying the same
standards as did the district court.” Babcock v. Hartmarx Corp.,
182 F.3d 336, 338 (5th Cir. 1999). “Summary judgment is
appropriate if the record ‘show[s] that there is no genuine issue
as to any material fact and that the moving party is entitled to
[a] judgment as a matter of law.’” Id. (quoting FED. R. CIV. P.
56(c)) (second alteration added).
As the district court correctly observed, our court has, since
Ogea v. Loffland Bros. Co., 622 F.2d 186 (5th Cir. 1980), construed
insurance procurement requirements as primary to indemnity
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provisions contained in the same contract. See id. at 189-90; see
also Tullier v. Halliburton Geophysical Servs., Inc., 81 F.3d 552,
554-55 (5th Cir. 1996); Klepac v. Champlin Petroleum Co., 842 F.2d
746, 748 (5th Cir. 1988). Diamond attempts to distinguish this
case from the Ogea line of cases on the fact that the Contract does
not require “contractual liability coverage” under the P&I policy.
Diamond asserts that the absence of such a requirement evinces an
intent that the P&I policy would not respond to CMC’s contractual
indemnification obligation to Diamond. Diamond does not, however,
dispute that CMC is an additional assured under Diamond’s P&I
policy. Moreover, as the district court noted in dicta, a fair
reading of the P&I policy’s contractual liability extension
provision extends coverage to CMC on the present facts.
In any event, as the district court also noted, it is not
necessary to posit a definitive interpretation of the P&I policy,
for the principles announced in, and developed since, Ogea dispose
of this appeal. As our court noted in Tullier, “[t]he controlling
fact in Ogea ... is the existence of ‘additional assured’ coverage
whereby an indemnitee agreed to procure insurance coverage for the
benefit of the indemnitor”. Tullier, 81 F.3d at 554. That
controlling fact is present in, and dispositive of, this case.
We must read the indemnity and insurance procurement
provisions “in conjunction with each other in order to properly
interpret the meaning of the contract”. Ogea, 622 F.2d at 190;
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Tullier, 81 F.3d at 553-54. The only credible meaning of the
Contract — which contains a requirement that CMC indemnify Diamond
but that Diamond procure P&I coverage naming CMC an additional
assured — is that CMC is required to indemnify Diamond only beyond
the limits of Diamond’s P&I policy.
In a line of cases commencing with Ogea ...
this court has held that a party ... who has
entered into a contractual indemnity provision
but who also names the indemnitor ... as an
additional assured under its liability
policies, must first exhaust the insurance it
agreed to obtain before seeking contractual
indemnity.
Tullier, 81 F.3d at 553 (internal citation omitted).
AFFIRMED
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