Dinh v. LA Cmerc & Trd Assn ( 2008 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 2, 2008
No. 08-30580 Charles R. Fulbruge III
Summary Calendar Clerk
SAU DINH
Plaintiff - Appellant
v.
LOUISIANA COMMERCE AND TRADE ASSOCIATION SELF INSURERS’
FUND
Defendant - Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:06-CV-9653
Before JOLLY, BENAVIDES, and HAYNES, Circuit Judges.
PER CURIAM:*
Plaintiff Sau Dinh, an employee of Structure Services, suffered injuries
while performing work for his borrowed employer, KYE, Inc. Following an
administrative case holding KYE the responsible employer for Dinh’s benefits
under the Longshore and Harbor Workers’ Compensation Act (LHWCA), 33
U.S.C. § 901, et seq., Dinh sued Structure’s insurance carrier, the Louisiana
*
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
No. 08-30580
Commerce and Trade Association Self Insurer Fund (the Fund), arguing that it
ought nonetheless be responsible for his LHWCA benefits. The district court
granted summary judgment in favor of the Fund, finding that its coverage
obligations did not extend to the benefits at issue. We affirm.
I. FACTS
This appeal arises from a dispute over whether the Certificate of
Insurance (Certificate) issued by the Fund to Structure provides coverage for
benefits owed under the LHWCA to Dinh, a payroll employee of Structure who
sustained injuries while working for KYE as a borrowed employee.
The Fund was the workers’ compensation carrier for Structure. Pursuant
to an Out Source Agreement, Structure provided laborers, including Dinh, to
work at KYE’s shipyard. While working aboard a KYE vessel, Dinh sustained
injuries entitling him to benefits under the LHWCA. The Fund, as Structure’s
carrier, began paying these benefits.
Thereafter, Dinh filed a tort suit against a number of defendants,
including KYE. The Fund intervened in the suit and sought reimbursement
from KYE for the compensation benefits it had paid Dinh. The Fund argued that
KYE, as Dinh’s “borrowed employer,” was Dinh’s employer under the LHWCA
and, as such, was solely responsible for the payment of his worker’s
compensation benefits. See Temp. Employment Servs. v. Trinity Marine Group,
Inc., 261 F.3d 456, 459-60 (5th Cir. 2001) (citing Total Marine Servs., Inc. v. Dir.,
OWCP, 87 F.3d 774, 779 (5th Cir. 1996)) (“If the contractor is the employee’s
‘employer’ under the borrowed servant doctrine, the contractor is liable” for
compensation benefits under the LHWCA.). The district court held that Dinh
was KYE’s borrowed employee, but that an indemnity clause in the Out Source
Agreement between KYE and Structure barred the Fund’s claim against KYE
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for reimbursement of LHWCA benefits that the Fund had paid to Dinh.1 The
Fund appealed that ruling and we affirmed. Dinh v. Am. Freedom Vessel, 155
F. App’x 137 (5th Cir. 2005) (unpublished). As a result of the finding that KYE
was the borrowing employer of Dinh, the Fund ceased paying Dinh compensation
benefits.
After the Fund ceased paying Dinh’s benefits, he filed a claim with the
United States Department of Labor for his LHWCA benefits against Structure,
the Fund, and KYE. The administrative law judge found that KYE, as Dinh’s
borrowing employer, was the party responsible for paying Dinh’s benefits under
the LHWCA. Dinh also contended that the indemnity clause between Structure
and KYE, in conjunction with the Certificate between Structure and the Fund,
obligated the Fund to pay Dinh’s LHWCA benefits. The administrative law
judge did not reach this issue. Rather, he determined that he lacked
jurisdictional authority to construe the relevant contracts based on our decision
in Trinity, 261 F.3d at 456. Although Dinh had a statutory right to appeal the
administrative ruling, he declined to do so. See 33 U.S.C. § 921(b) (1984).
Dinh subsequently filed this lawsuit, seeking to hold the Fund responsible
for his LHWCA benefits. The parties filed cross-motions for summary judgment;
the district court granted the Fund’s motion and denied Dinh’s motion. In so
ruling, the district court focused primarily on the Certificate between Structure
and the Fund. The district court determined that, regardless of Structure’s
obligation to indemnify KYE under the Out Source Agreement, the unambiguous
language of the Certificate limited the Fund’s coverage to Structure’s obligations
1
In relevant part, the Out Source Agreement provides:
Structure Services, Ltd. Agrees to indemnify and hold [KYE]
harmless from any claim due to negligence or injuries of their
employees or by any governmental claim for withholding taxes,
F.I.C.A. taxes and unemployment taxes attributable to covered
workers.
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under the worker’s compensation law. Because KYE was the responsible
employer for Dinh’s LHWCA benefits, the district court determined that his
injuries did not implicate the Certificate between Structure and the Fund. This
appeal ensued.
II. DISCUSSION
The scope of our inquiry in this appeal is limited. As mentioned, we have
already held that the Out Source Agreement between Structure and KYE
contains a valid indemnification clause, obligating Structure to indemnify KYE
for any compensation benefits KYE owes to a borrowed employee. See Dinh, 155
F. App’x 137. Additionally, the administrative law judge has determined that
KYE, as the borrowing employer, is the responsible employer for Dinh’s LHWCA
benefits, and Dinh has not appealed that ruling.2 Thus, the sole issue before this
Court is whether the Certificate extends the Fund’s coverage obligations to
compensation benefits that Structure owes under an indemnity agreement. We
agree with the district court that it does not.
We review a grant of summary judgment de novo, applying the same
standard as the district court. Chacko v. Sabre, Inc., 473 F.3d 604, 609 (5th Cir.
2006). A district court properly grants summary judgment “if the pleadings, the
discovery and disclosure materials on file, and any affidavits show that there is
no genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law.” FED. R. CIV. P. 56(c).
The parties agree that Louisiana law must guide our interpretation of the
Certificate. Under Louisiana law, an insurance policy is a contract that courts
should construe by employing the general rules of interpretation set forth in the
Louisiana Civil Code. Reynolds v. Select Properties, Ltd., 634 So. 2d 1180, 1183
2
The time for Dinh to appeal this ruling has expired. Section 921(b) provides that a
compensation order becomes effective when filed with the deputy commissioner and becomes
final unless an appeal is filed within thirty days thereafter. The compensation order in this
case was filed with the deputy commissioner on March 14, 2006.
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(La. 1994) (citations omitted). Under the Civil Code, “[t]he parties’ intent, as
reflected by the words of the policy, determine[s] the extent of coverage.” Id.“Each provision [of the policy] must be interpreted in light of the other provisions
so that each is given the meaning suggested by the [policy] as a whole.” LA. CIV.
CODE ANN. art. 2050 (1985). We must avoid construing the policy in an
“unreasonable or a strained manner so as to enlarge or to restrict its provisions
beyond what is reasonably contemplated by its terms or so as to achieve an
absurd conclusion.” Reynolds, 634 So. 2d at 1183 (citations omitted). “Where
the language in the policy is clear, unambiguous, and expressive of the” parties’
intent, we must enforce the agreement as written. Id.
The Certificate is an insurance contract between Structure and the Fund
– KYE is not a party to that agreement. The Certificate contains two provisions
potentially applicable here. Part One states “[The Fund] will pay promptly when
due the benefits required of [Structure] by the Worker’s Compensation Law of
Louisiana.” The Fund does not contest that Part One provides coverage for
benefits required of Structure under the LHWCA despite contrary language in
the policy. Under Part Two, the Fund agrees to:
[P]ay on behalf of [Structure] all sums which [Structure] shall
become legally obligated to pay as damages because of bodily injury
by accident or bodily injury by disease, including death resulting
therefrom, sustained only within the State of Louisiana by any
employee of [Structure] arising out of and in the course of his
employment by [Structure] in operations within the State of
Louisiana only.
Part Two, however, excludes “[l]iability assumed under contract” from the
Fund’s coverage obligations.3
3
Part Two also excludes coverage for bodily injury resulting from work covered by the
LHWCA. It further excludes coverage for any “obligation imposed by a Workers’ Compensation
. . . law, or any other similar law.”
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No. 08-30580
It is clear that neither of these provisions extends the Fund’s coverage
obligations to liabilities which Structure assumes under an indemnity
agreement. The coverage afforded to Structure by Part Two explicitly excludes
liabilities assumed by contract. Part One, by its express terms, applies only to
“benefits required of [Structure] by the Worker’s Compensation Law of
Louisiana.” Payments that Structure owes to KYE under the indemnity
provision of the parties’ Out Source Agreement are not benefits required of
Structure by the compensation law; rather, they are liabilities that Structure
has assumed under contract. Indeed, Dinh has already obtained an
administrative ruling that KYE is the responsible employer for the purpose of
Dinh’s LHWCA benefits. That decision establishes that the compensation law
does not require Structure to pay Dinh any benefits for injuries he suffered while
working for KYE as a borrowed employee. In order to extend the Fund’s
coverage obligations to Dinh’s LHWCA benefits, we would have to ignore Part
Two’s explicit exclusion of contractual liabilities or Part One’s express limitation
to the benefits owed by Structure under Louisiana’s worker’s compensation law.
The rules of contractual construction allow us to do neither. See Reynolds, 634
So. 2d at 1183.
Dinh argues that the Certificate is ambiguous because the coverage
afforded by Part One does not explicitly exclude liability assumed under contract
as does the coverage afforded by Part Two. Dinh’s argument ignores the fact
that an exclusion is required only if an event otherwise would be covered by the
language of the policy. Part One does not cover indemnity obligations and,
therefore, does not need an exclusion for such assumed liabilities. Unlike Part
One, the coverage afforded by Part Two could cover liabilities that Structure
contractually assumed were it not for the explicit exclusion. Thus, no ambiguity
exists.
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Dinh argues further that ambiguity in the Certificate exists because, while
the language of Part One limits coverage to claims under Louisiana
compensation law, the Fund admits that coverage under this part extends to
LHWCA claims (claims under federal law). Such extrinsic evidence, however,
is inadmissible to make ambiguous an otherwise unambiguous contract. See
Grant v. Ouachita Nat’l Bank, 536 So. 2d 647, 652 (La. Ct. App. 1988). The fact
that the parties, by practice, have extended the Fund’s obligations beyond the
Certificate’s explicit terms cannot be used to create an ambiguity in the
language of the Certificate where none exists.
Nor can Dinh’s expectations bind the Fund without its knowledge or
consent. A valid contract requires the mutual consent of all contracting parties.
See LA. CIV. CODE ANN. art. 1927 (1985). Here, regardless of Structure and
KYE’s expectations concerning the scope of the Fund’s coverage, only the Fund
could agree to cover Structure for indemnity payments owed to KYE. See
generally Evanston Ins. Co. v. Atofina Petrochemicals, Inc., 256 S.W.3d 660, 664
(Tex. 2008) (applying Texas law).4
In support of his argument that the Certificate itself covers the benefits
at issue here, Dinh notes that the Certificate provides the Fund a right to adjust
Structure’s insurance premiums based on its actual exposure risk. To give effect
to this right, the Certificate requires that Structure maintain records and
contracts relevant to coverage and provides the Fund with the right to conduct
an audit. The right to adjust premiums does not constitute an agreement to
insure an unknown contract. As previously discussed, the indemnity clause of
the Out Source Agreement between Structure and KYE is not relevant to the
4
In Evanston, the Texas Supreme Court was faced with the question of whether an
indemnity agreement between the parties that formed the basis for one party’s purchase of
insurance covering the other could limit the terms of the policy actually purchased. It held
that the insurance policy, not the indemnity agreement, governed the insurer’s obligations.
256 S.W.3d at 664.
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Fund’s coverage obligations, because Structure’s contractual obligations do not
come within the scope of the Certificate’s coverage provisions.5
Finally, Dinh argues that, under the “reasonable expectations doctrine,”
we must construe the Certificate in favor of coverage because Structure
reasonably expected its LHWCA coverage with the Fund to extend to KYE. As
the district court correctly noted, however, the “reasonable expectations
doctrine” applies only if the contract at issue is first found to be ambiguous. See
Coleman v. Sch. Bd. of Richland Parish, 418 F.3d 511, 517 (5th Cir. 2005) (The
“reasonable expectations doctrine” provides that “ambiguities within an
insurance policy will be resolved by ascertaining how a reasonable insurance
policy purchaser would construe the clause at the time the insurance contract
was entered.” (internal quotations omitted)). As the Certificate here is
unambiguous, the doctrine does not apply. Given the plain wording of the
Certificate, Structure could only ensure coverage for its indemnity obligations
under the Out Source Agreement by obtaining the Fund’s consent. Because
Structure failed to obtain this consent, the district court’s judgment must be
affirmed.
III. CONCLUSION
The district court’s judgment is AFFIRMED.
5
Dinh also argues that The Fund did in fact conduct an audit of Structure’s records and
identified and considered Dinh’s wages in calculating Structure’s adjusted premium. As
mentioned, however, The Fund only became aware of the Out Source Agreement following
Dinh’s injuries and thus did not include the specific risks associated with his work for KYE
when making this calculation. Regardless, the parties’ actions cannot trump the plain
language of the Certificate which excludes Dinh’s compensation benefits from coverage.
8