Assicurazioni Gen v. Crown Central ( 1996 )


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  •                IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    _____________________
    No. 95-20541
    _____________________
    ASSICURAZIONI GENERALI
    Plaintiff - Appellee
    v.
    CROWN CENTRAL PETROLEUM CORPORATION
    Defendant - Appellant
    and
    CECIL A BUFFALO; DONALD RAY HARRISON; ROBERT KEITH SUITS, JR
    Defendants
    _________________________________________________________________
    Appeal from the United States District Court
    for the Southern District of Texas
    (CA-H-95-3240)
    _________________________________________________________________
    May 23, 1996
    Before KING, WIENER and BENAVIDES, Circuit Judges.
    PER CURIAM:*
    Assicurazioni Generali SpA (“Generali”) brought an action
    *
    Pursuant to Local Rule 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    that this opinion should not be published and is not precedent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 Local Rule
    47.5.4.
    against    Crown    Central   Petroleum        Corporation    (“Crown”),   among
    others, seeking a declaratory judgment that it was not obligated to
    provide insurance coverage to Crown as an additional insured under
    an   insurance     policy   issued   to       Reactor   Services   International
    (“RSI”).    Crown appeals the district court’s granting of summary
    judgment in favor of Generali.            We reverse.
    I.    BACKGROUND
    Generali issued a comprehensive general liability insurance
    policy to RSI for the period November 1, 1991, through November 1,
    1992 (the “Generali/RSI Policy”).              The policy contained a blanket
    additional insured endorsement that provided:
    Coverage includes additional assured as required by
    contract but only in respect of work performed by or on
    behalf of the assured.
    For the purpose of preparing certificates of insurance to evidence
    this endorsement, RSI presented its insurance agent, Gow and Hanna
    Insurance, with a list of RSI’s regular customers, including Crown.
    On April 23, 1992, a tail gas recovery unit malfunctioned at
    Crown’s refinery in Pasadena, Texas.                    That afternoon, Ronnie
    Reynolds, Crown’s maintenance manager, phoned a salesperson at RSI
    about servicing the recovery unit.1              Reynolds arranged for RSI to
    1
    Presumably, the salesperson was Mike Elmore. Neither
    Reynolds or Elmore was certain that Elmore was the person contacted
    on this occasion. However, John Shank, executive vice president of
    RSI, testified as to how RSI ordinarily would come to send a work
    crew to Crown: “The most logical way is that Crown would call Mike
    Elmore, their sales rep, and indicate they had a job . . . .”
    2
    come to the refinery the next morning, April 24, 1992.                      Reynolds
    and the RSI salesperson discussed the basics of the job and
    Reynolds obtained a price estimate.                Reynolds then contacted Ed
    Lofland in Crown’s purchasing department to obtain a purchase order
    number for the job.        Lofland telephoned RSI and left a message for
    salesperson Mike Elmore, notifying him that RSI needed to sign
    Crown’s indemnification agreement.             Reynolds also called to inform
    RSI   of   the    purchase      order    number   and   the    need   to    sign   the
    paperwork; he did not discuss on the phone the specifics of Crown’s
    insurance requirements.
    Lofland prepared a written, computer-generated contract to be
    executed by Crown and RSI (the “Crown/RSI Contract”). The contract
    specified that its effective date was April 23, 1992.                      Paragraph
    1.5 of the Crown/RSI Contract required RSI to make Crown an
    additional       insured   on    RSI’s    Policy   (the       “Additional    Insured
    Requirement”):
    . . . CONTRACTOR shall at all times during the progress
    of the Work, and at CONTRACTOR’s own expense, on forms
    and with insurers acceptable to CROWN, carry and maintain
    the minimum insurance coverage which is described in
    Exhibit “A,” which Exhibit is attached to this AGREEMENT
    and made a part of this contract.       CONTRACTOR shall
    furnish to CROWN the original or copies of the insurance
    certificates which evidence such insurance coverage.
    CROWN shall be added as an additional named insured in
    all such certificates, except insurance providing
    protection against worker’s or workmen’s compensation
    claims.
    On the afternoon of April 23, 1992, RSI’s salesperson told
    Leon Bryce, a superintendent for RSI, to go to the refinery the
    3
    next morning to sign Crown’s paperwork.          On the morning of April
    24, 1992, purchasing manager James Davis signed the Crown/RSI
    Contract on behalf of Crown. Shortly before noon, Bryce arrived at
    Crown’s offices to sign the Crown/RSI Contract as he had been
    instructed.    However, because the Crown representative with whom
    Bryce was to meet had stepped out of the office, Bryce proceeded to
    the RSI job site without signing the contract.
    Thirty to forty-five minutes later, a fire occurred at the RSI
    job site on Crown’s premises.         Two members of the RSI crew were
    injured (the “Accident”).        Approximately three hours after the
    Accident,    Bryce   returned    to   Crown’s   offices   and   signed    the
    Crown/RSI   Contract.     Four    months   later,   the   two   injured   RSI
    employees sued Crown in the 189th District Court of Harris County,
    Texas.    The lawsuit, styled Donald Ray Harrison and Robert Keith
    Suits, Jr. v. Crown Central Petroleum Corp. And Cecil A. Buffalo,
    Civil Action No. 92-035808, resulted in monetary loss to Crown.
    Generali brought a declaratory action in the United States
    District Court for the Southern District of Texas to determine the
    legal rights of certain parties under the Generali/RSI Policy.
    Crown filed a third-party complaint against Gow and Hanna Insurance
    and others. Cigna intervened. Generali moved for summary judgment
    against Crown,2 arguing that (1) RSI was not contractually bound to
    2
    This was an amended motion for summary judgment; Generali
    earlier filed a motion for summary judgment that was withdrawn and
    is not at issue in this appeal.
    4
    include Crown as an additional insured at the time of the Accident,
    (2) the known-loss rule under Texas law precluded making insurance
    coverage retroactive when the insured had knowledge of the incident
    at the time coverage was created, and (3) the Accident was not an
    “occurrence” as defined by the Generali/RSI Policy.        The district
    court entered a memorandum and order granting Generali’s motion for
    summary judgment on April 4, 1995.       The order was not appealable
    because it did not dispose of Generali’s claims against the other
    defendants,     Crown’s   third-party   claims,   or   Cigna’s   claims.
    Therefore, Crown filed an unopposed motion for severance.        On May
    17, 1995, the district court signed an order severing Generali’s
    claims against Crown into a new case and subsequently the district
    court amended the order to renumber the severed case.       Crown filed
    a notice of appeal eight days after the severance.         On September
    25, 1995, the district court entered a Rule 58 separate-document
    judgment; that same day, Crown filed a notice of appeal from the
    Rule 58 judgment.3
    II. ANALYSIS
    We review the granting of summary judgment de novo, applying
    the same criteria used by the district court in the first instance.
    3
    There was a question as to whether the severance order of
    May 19, 1995, could be treated as a Rule 58 judgment and, thus,
    whether Crown’s first notice of appeal was timely filed. Fed. R.
    Civ. P. 58. This question became moot after the district court
    entered the Rule 58 judgment on September 25, 1995, and Crown
    timely filed a second notice of appeal.
    5
    Norman v. Apache Corp., 
    19 F.3d 1017
    , 1021 (5th Cir. 1994);
    Conkling v. Turner, 
    18 F.3d 1285
    , 1295 (5th Cir. 1994).                        First, we
    consult the applicable law to ascertain the material factual
    issues.      King v. Chide, 
    974 F.2d 653
    , 655-56 (5th Cir. 1992).                     We
    then review the evidence bearing on those issues, viewing the facts
    and inferences to be drawn therefrom in the light most favorable to
    the nonmoving party.               Lemelle v. Universal Mfg. Corp., 
    18 F.3d 1268
    , 1272 (5th Cir. 1994); FDIC v. Dawson, 
    4 F.3d 1303
    , 1306 (5th
    Cir. 1993), cert. denied, 
    114 S. Ct. 2673
     (1994).                     Summary judgment
    is       proper       "if    the     pleadings,         depositions,     answers      to
    interrogatories,            and    admissions      on   file,    together      with   the
    affidavits, if any, show that there is no genuine issue as to any
    material fact and that the moving party is entitled to judgment as
    a matter of law."            Fed. R. Civ. P. 56(c).          Where the evidence is
    such     that     a   reasonable     jury     could     return   a   verdict    for   the
    nonmoving party, a dispute about a material fact is “genuine.”
    Meadowbriar Home for Children, Inc. v. Gunn, 
    81 F.3d 521
    , 533 (5th
    Cir. 1996)(citing Anderson v. Liberty Lobby, Inc., 
    477 U.S. 242
    ,
    248 (1986); Amburgey v. Corhart Refractories Corp., Inc., 
    936 F.2d 805
    , 809 (5th Cir. 1991).
    In the instant case, the district court concluded that, under
    Texas law,4 the known-loss doctrine precluded coverage for Crown
    under      the    Additional        Insured       Requirement    of    the     Crown/RSI
    4
    The parties agree that Texas substantive law governs this
    dispute.
    6
    Contract.5   According to the known-loss doctrine, an attempt to
    create   insurance   coverage   retroactively    for   an    accident   that
    predates the policy’s coverage is legally ineffective if either the
    insurer or the insured knew of the accident at the time the
    coverage is created.    Burch v. Commonwealth County Mut. Ins. Co.,
    
    450 S.W.2d 838
    , 840-41 (Tex. 1970).      Because it is undisputed that
    Bryce did not sign the Crown/RSI Contract on behalf of RSI until
    after the Accident and because the Additional Insured Requirement
    was not discussed explicitly before Bryce signed the contract, the
    district court found that Crown did not become an additional
    insured under the Generali/RSI Policy until after the Accident.
    Crown   argues,   however,   that   RSI   accepted     Crown’s   offer,
    including the Additional Insured Requirement, on April 23, 1992,
    when RSI agreed to sign Crown’s paperwork, or at the latest, when
    RSI began servicing Crown’s tail gas recovery unit on April 24,
    1992.    Accordingly, Crown maintains that, because the complete
    Crown/RSI Contract was formed and became effective before the
    Accident, the known-loss doctrine is not implicated in the case at
    bar. Based on the summary judgment evidence and Texas law, we find
    that there is a fact question as to whether the Additional Insured
    Requirement was in effect at the time the Accident occurred.
    5
    In its amended motion for summary judgment, Generali
    argued, inter alia, that the Accident did not meet the definition
    of “occurrence” under the terms of the Generali/RSI Policy because
    it was “expected or intended.”       Although the district court
    acknowledged but did not address this argument, Generali reurges it
    on appeal.
    7
    A binding contract between two parties requires an offer and
    acceptance. Nickerson v. E.I.L. Instruments, Inc., 
    874 S.W.2d 936
    ,
    939 (Tex. App.--Houston [1st Dist.] 1994, writ denied); see also
    Crest Ridge Constr. Group, Inc. v. Newcourt Inc., 
    78 F.3d 146
    , 152
    (5th Cir. 1996)(Benavides, J., specially concurring).                 There must
    be a meeting of the minds as to all of the contract’s essential
    terms.      Smith v. Renz, 
    840 S.W.2d 702
    , 704 (Tex. App.-Corpus
    Christi 1992, writ denied); Calvin V. Koltermann v. Underream
    Piling Co., 
    563 S.W.2d 950
    , 956 (Tex. Civ. App.--San Antonio 1977,
    writ ref’d n.r.e.); see also Mesa Petroleum Co. v. Coniglio, 
    629 F.2d 1022
    , 1026 (5th Cir. 1980).              In order to accept the offer,
    however, it is not necessary that a party know all of the terms.
    Lone Star Steel Co. v. Scott, 
    759 S.W.2d 144
    , 152 (Tex. App.--
    Texarkana    1988,      writ   denied)    (citing    Restatement    (Second)    of
    Contracts § 23 cmt. e).          A contract may be formed as long as the
    parties    know   the    substance,      if   not   all   the   details,   of   the
    agreement.    Karl Rove & Co. v. Thornburgh, 
    39 F.3d 1273
    , 1293 n.87
    (5th Cir. 1994).
    The district court did not explicitly reject, and Generali
    does not necessarily dispute, Crown’s contention that a contract
    between Crown and RSI existed at the time of the Accident.6
    6
    In Generali’s reply to Crown and Cigna’s responses to its
    amended motion for summary judgment, Generali stated that it “does
    not necessarily disagree that RSI and Crown Central may have
    reached some agreement prior to the execution of the written
    Agreement by RSI.”
    8
    Generali’s primary argument appears to be that the Additional
    Insured Requirement was an essential term of the Crown/RSI Contract
    and, because this term was not specifically discussed or agreed
    to--as all essential terms must be, the Crown/RSI Contract was not
    effective until Bryce actually signed the instrument containing the
    Additional    Insured   Requirement.          Generali     appears   to   argue
    alternatively that, while a contract may have existed at the time
    of the Accident, the Additional Insured Requirement was not a part
    of that contract.7
    According to Texas law, acceptance of an offer need not be in
    writing.     “[P]arties may enter into an oral contract even though
    they are contemplating a formal writing.”            Cothron Aviation, Inc.
    v. Avco Corp., 
    843 S.W.2d 260
    , 263 (Tex. App.--Fort Worth 1992,
    writ denied).     Moreover, performance of the act which the offeree
    was   requested    to   promise   to       perform   may   constitute     valid
    acceptance.     Thomas v. Reliance Ins. Co., 
    617 F.2d 122
    , 128 (5th
    Cir. 1980); United Concrete Pipe Corp. v. Spin-Line Co., 
    430 S.W.2d 360
    , 364 (Tex. 1968); see also Restatement (Second) of Contracts §§
    31-32.    “The rule in Texas is that a contract in writing signed by
    one party and expressly accepted orally by the other, o[r] the
    terms thereof performed and the benefits thereof accepted, is in
    law the written contract of the parties and binding on both.”
    7
    Generali concedes that RSI accepted an offer from Crown
    before the Accident. However, the contract so created cannot be
    the Crown/RSI Contract if the Additional Insured Requirement was an
    essential term of the Crown/RSI Contract as Generali suggests.
    9
    Turner, Collie & Braden v. Brookhollow, Inc., 
    624 S.W.2d 203
    , 213
    (Tex. Civ. App.--Houston [1st Dist.] 1981), aff’d in part and rev’d
    in part on other grounds, 
    642 S.W.2d 160
     (Tex. 1982); Rubin v.
    Polunsky, 
    366 S.W.2d 234
    , 236 (Tex. Civ. App.--San Antonio 1963,
    writ ref’d n.r.e.).
    Whether RSI accepted the entire Crown/RSI Contract before the
    Accident is a jury question.     Because “[p]arties rarely express a
    direct intention as to the moment when they conceive themselves to
    be bound by a contract[,] . . . intention is usually an inference
    to be drawn by the fact finder from other facts and circumstances
    in evidence.”   Cothron 843 S.W.2d at 263-64.      Crown maintains that
    RSI was required to assent to all of the terms and conditions
    contained in the Crown paperwork in order to secure the job
    servicing Crown’s malfunctioning tail gas recovery unit. According
    to Crown, therefore, as of April 23, 1992, the Additional Insured
    Requirement was a part of its offer to RSI--a term without which
    Crown would not have contracted with RSI.      Stated differently, the
    Additional Insured Requirement was a condition precedent to the
    formation of the contract.          Under Texas law, whether parties
    intended to form a contract is a question for the jury.               Crest
    Ridge, 
    78 F.3d at 151
    .      Thus, “to the extent that the [condition
    precedent] concern[s] contract formation, it present[s] a jury
    question.”   
    Id.
     at 151 n.4; see Calvin, 563 S.W.2d at 956.
    Reynolds   testified    that    Crown   and   RSI   “discussed    the
    particulars of the job” by phone on April 23, 1992.       He stated that
    10
    Crown and RSI agreed to the location of the job, the specific work
    to be done, the time the work was to start, the materials RSI
    needed to bring with them, and a price estimate.            We believe that
    a reasonable jury could find that Crown and RSI did not consider
    the   Additional    Insured   Requirement     an   essential    term   of   the
    Crown/RSI Contract, but that Crown and RSI intended to be bound,
    before the Accident occurred, by the entire Crown/RSI Contract,
    including    the   Additional    Insured    Requirement.       We   believe   a
    reasonable jury could determine that RSI accepted Crown’s offer, on
    April 23, 1992, orally--or, on April 24, 1992, by performance.
    Lofland testified that he called Elmore at RSI and told the
    receptionist “to have somebody come by to sign our indemnification
    agreement.” Shank, executive vice president at RSI, testified that
    customers of RSI routinely included insurance requirements and
    hold-harmless clauses in their contracts.            He indicated that the
    Crown/RSI Contract was “a very typical agreement between RSI and
    one of its customers.”     RSI superintendent Bryce testified that it
    was his understanding that RSI had agreed to undertake the job at
    the Crown refinery.    He stated that an RSI salesperson told him, on
    April 23, 1992, that RSI was sending a crew to begin a job at Crown
    the next day.      There is no dispute that RSI sent a crew to the
    Crown refinery and began performing the servicing required under
    the Crown/RSI Contract before the Accident occurred.
    From   the   evidence     presented    to    the   district   court,    a
    reasonable fact finder could conclude that RSI routinely entered
    11
    into contracts with regular customers without knowing more about
    their respective hold-harmless and insurance requirements than that
    RSI must accept them.           Testifying that, in order to work for a
    customer, RSI typically was required to agree to the customer’s
    terms, Shank added: “We agree to their terms and conditions, as
    long as they fall within our guidelines.”                  He stated that he knew
    of nothing in the Crown/RSI Contract that would have prevented RSI
    from agreeing to it.
    In its Memorandum and Order, the district court did not
    address the issue of whether the Additional Insured Requirement was
    an essential term of the Crown/RSI Contract or expressly resolve
    the issue of whether RSI’s assent by phone to Crown’s offer, the
    beginning of performance, or both, constituted acceptance.                         The
    district court focused instead on one aspect of the parties’ course
    of dealing.   The court found that Crown’s prior course of dealing
    was   insufficient       to     establish         that   the    Additional    Insured
    Requirement   was    a   term     of    the       Crown/RSI    Contract   before   the
    Accident:
    The summary judgment evidence precludes Crown Central’s
    argument that because of its past course of dealing with
    RSI, RSI as a matter of law agreed to make Crown Central
    an additional insured even before RSI signed the
    agreement.
    However, in order to defeat Generali’s motion for summary judgment,
    it was not necessary for Crown to show that RSI, as a matter of
    law, agreed to the Additional Insured Requirement before the
    Accident.     Rather,         Crown    was    required     to   show   only   that   a
    12
    reasonable jury could find that RSI agreed to the Additional
    Insured Requirement before the Accident.                    Meadowbriar, 
    81 F.3d at 533
    .
    Reiterating verbatim the language of Generali’s amended motion
    for summary judgment, the district court noted that, of the jobs
    performed    by    RSI    in   the     dozen    years      preceding    the    Crown/RSI
    Contract,    “[o]nly      four    of    the     jobs      involved    agreements   that
    required RSI to make Crown Central an additional insured on its
    [Generali] policy” while, “on at least four occasions[,]” the jobs
    did not involve such a requirement.                  In light of the totality of
    the summary       judgment     evidence,        we   do    not   find   this   evidence
    determinative.
    More telling, we believe, was the course of dealing with
    regard to RSI’s acceptance of the terms and conditions included in
    Crown’s     written      contracts.        Crown       produced      summary   judgment
    evidence that RSI regularly agreed to Crown’s terms, sight unseen,
    and signed Crown’s contracts without reading them. Shank testified
    that, in the case of routine customers, RSI considered itself bound
    by the terms and conditions of purchase orders received after the
    commencement of work.            He was asked whether RSI had a policy of
    reviewing “the language contained in a purchase order before
    agreeing to do work for the customer[:]”
    A.   Yes, we reviewed the language in a contract before
    we’d do work with them on a first-time basis.
    Q.    Then after that you would not typically say, “Well,
    13
    wait a minute, I have to read” --
    A.   I don’t read    every   purchase   order   on   routine
    customers, no.
    Q.   Is there anything unusual, to your understanding,
    back in April of 1992 for a salesperson of RSI to agree
    to sign a customer’s paperwork in order to do the work?
    A.   For routine customers, it was not.
    Davis testified that there was no misunderstanding or confusion
    between Crown and RSI as to the nature of their contractual
    relationship.8   Bryce testified that, on June 23, 1992, he was
    instructed to go to Crown for a specific purpose--“[t]o sign a work
    order for the work.”
    Generali directs our attention to a number of contract cases
    in support of its contention that Crown and RSI had not agreed to
    the terms of the Crown/RSI Contract at the time of the Accident.
    8
    In a deposition taken on September 15, 1994, Davis was
    asked if RSI and Crown entered into a master service agreement in
    May 1992 to “avoid any confusion or misunderstandings in the
    future.”
    A.   There never was any confusion between us and RSI
    about a contract.    The confusion is when there’s an
    incident and attorneys get involved.
    . . . .
    Q.   At the time you signed the blanket agreement with
    RSI in May of 1992, did you form an opinion at that
    particular    time   that   there   had    been   some
    misunderstandings  or   confusion  about   what  legal
    obligations Crown had or that third-party contractors
    had?
    A.   Absolutely none between Crown and RSI. They had
    absolutely no problem with signing our agreement because
    I felt like it was their understanding. This was nothing
    more than what they had been doing all along.
    14
    In each of these cases, however, the existence of a contract, or
    the existence or meaning of one or more of its terms, was disputed
    by one of the purported parties to the contested contract.                   The
    case sub judice involves nothing of the sort.                  In this case,
    neither Crown or RSI contests the existence of the Crown/RSI
    Contract; neither party disputes the meaning or the validity of any
    of   its     terms,   the   Additional       Insured   Requirement   included.
    “[Texas] courts rightfully assume that the parties to a contract
    are in the best position to know what was intended by the language
    they employed, by their subsequent acts relative to it.”               Droemer
    v. Transit Mix Concrete, 
    457 S.W.2d 332
    , 335 (Tex. Civ. App.--
    Corpus Christi 1970, no writ) (citation omitted).
    We find that there was sufficient summary judgment evidence as
    to when there was a meeting of the minds on the various terms of
    the Crown/RSI Contract, essential and otherwise, to carry these
    issues to the jury.         Thus, summary judgment was improper on the
    issue   of    whether   Crown    was   an    additional   insured    under   the
    Generali/RSI Policy when the Accident occurred. Because this issue
    must be left to the jury, there is no need to consider the known-
    loss issue or the “occurrence” issue raised by Generali.
    III.   CONCLUSION
    For the foregoing reasons, the judgment of the district court
    is REVERSED and the case is remanded for further proceedings
    15
    consistent with this opinion.
    16