Ace American Insurance v. Freeport Welding & Fabricating, Inc. ( 2012 )

Case: 12-20002 Document: 00512027043 Page: 1 Date Filed: 10/19/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 19, 2012
No. 12-20002 Lyle W. Cayce
Clerk
ACE AMERICAN INSURANCE CO.,
Plaintiff-Appellee,
v.
FREEPORT WELDING & FABRICATING, INC.,
Defendant-Appellant.
Appeal from the United States District Court for the
Southern District of Texas
Before STEWART, Chief Judge, and DeMOSS and GRAVES, Circuit Judges.
CARL E. STEWART, Chief Judge:
Freeport Welding & Fabricating, Inc. (“Freeport”) and Brand Energy
Solutions, L.L.C. (“Brand Energy”) were named defendants in a personal injury
suit in Texas state court. ACE American Insurance Company (“ACE”) insures
Brand Energy. Freeport sought defense and indemnity from ACE in the state
court proceedings as an additional insured under Brand Energy’s insurance
policy with ACE. ACE denied Freeport’s request, contending that it had no duty
under the policy to defend or indemnify Freeport in the state court proceedings.
ACE and Freeport then filed motions in federal district court seeking
summary judgment on the issue of whether ACE had a duty to defend or
indemnify Freeport in the state court proceedings. The district court rendered
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judgment in favor of ACE, holding that it did not have a duty to defend Freeport
in the state court proceedings. The district court declined to rule on the issue of
whether ACE had a duty to indemnify Freeport in the state court proceedings.
Thereafter, the parties in the state court proceedings settled their claims.
For the reasons stated herein, we AFFIRM the district court’s summary
judgment in favor of ACE holding that it had no duty to defend Freeport in the
state court proceedings. We REMAND for a determination of whether ACE has
a duty to indemnify Freeport for the cost of its settlement in the state court
proceedings.
I.
Freeport, a Texas corporation, builds vessels for use in the energy
industry. In 2008, Freeport began making plans to build a vessel called a
quench chamber. On October 22, 2008, Freeport issued a purchase order
(referred to herein as “the 2008 purchase order” or “the purchase order”) to
Brand Industrial, L.L.C. (“Brand Industrial”), a subsidiary of Brand Energy, for
the installation of a lining called refractory for the inside of the quench chamber.
The total amount of the purchase order was $456,018.
Above the signature lines on the purchase order was the following
language:
THIS ORDER INCORPORATES ALL TERMS AND
CONDITIONS LISTED ON THIS ORDER; AND
ACCEPTANCE OF THIS PURCHASE ORDER BY
SELLER TO FURNISH MATERIALS, PRODUCTS
AND/OR SERVICES CALLED FOR HEREIN
CONSTITUTES ACCEPTANCE OF ALL TERMS AND
CONDITIONS.
The purchase order also contained a “Comments” section which stated in
pertinent part:
INCLUDES LABOR, MATERIAL, PERSONNEL
QUALIFICATION, PRODUCTION TEST & THERMAL
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DRY-OUT. DETAILED SCOPE OF WORK AND
REQUIREMENTS TO FOLLOW. WORK TO BE
PERFORMED APPROX. 2ND QUARTER OF 2009.
In January 2009, prior to beginning the installation work pursuant to the
2008 purchase order, Brand Energy sent Freeport a letter stating that Brand
Industrial “has turned your work over to our parent company, Brand Energy
Solutions, LLC.” The letter further provided an address to which Freeport was
to direct future payments for “all contracts, purchase orders and bid documents.”
The letter was signed by Brand Energy’s Director and General Manager,
Lindsey M. Hebert.
Also in January 2009, Freeport and Brand Energy entered into a purchase
agreement (referred to herein as the “2009 purchase agreement” or “the
purchase agreement”), effective January 1, 2009 to evergreen,1 which was to be
applicable to purchase orders issued from Freeport to Brand Energy. The
purchase agreement stated that “in the event” that Freeport “provides notice in
writing” to Brand Energy that it is to provide goods and/or services to Freeport,
then the terms of the purchase agreement, effective January 1, 2009, “shall
apply.”2 The “Terms and Conditions” section located above the signature lines
on the first page of the purchase agreement stated that its terms and conditions
“are hereby incorporated by reference to all purchase orders issued by [Freeport]
to [Brand Energy] and shall govern all such transactions.”
Additionally, on the following page titled “Purchase Agreement Terms and
Conditions” were the following paragraphs:
1
“To evergreen” is a phrase used to describe the automatic renewal of a contract after
each maturity period until one of the parties cancels.
2
The purchase agreement also states that it is applicable to Brand Energy’s
subsidiaries and assigns.
3
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5. INSURANCE. Seller3 agrees to carry the following
minimum insurance which shall be primary to any
insurance maintained by Buyer:4
Worker’s Compensation, Commercial General Liability,
including Completed Operations and Product Liability
Insurance; Blanket Contractual, with an endorsement
naming Buyer as an additional insured with minimum
limits of liability of $2,000,000 each occurrence
combined single limit.
Not later than (10) days from the date of this Order but
in any case prior to Seller’s entering Buyer’s property to
perform Services, a certificate evidencing the above
coverage shall be provided to Buyer and said certificate
shall provide that Buyer shall be given thirty (30) days
advance notice in the event of cancellation or material
modification of the coverage.
...
8. INDEMNIFICATION. Seller shall assume the sole
responsibility for any and all damage or injury
(including death) to any and all persons (including, but
not limited to employees of Seller or Buyer) and to all
property associated with the performance of the
obligations under this Order or any act or omission of
Seller, and shall defend, indemnify and save harmless
Buyer from and against any and all claims, liabilities,
expenses (including attorneys’ fees), fines, penalties,
and damages except for such claims, liabilities, etc.,
caused by the sole negligence of Buyer. Seller hereby
releases and waives all rights of subrogation against
Buyer possessed by Seller’s insurers. Seller hereby
represents that it is authorized by its insurers to grant
such release and waiver.
The purchase agreement was signed by Roy E. Yates, the President of Freeport,
and James “Bubba” Bethea, Jr., the Branch Manager for Brand Energy.
3
Brand Energy
4
Freeport
4
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Brand Energy began installation of the refractory in May 2009, and the
project was completed in August 2009. On August 21, 2009, Freeport issued a
partial payment to Brand Energy in the amount of $163,824.88. Then on
October 14, 2009, Brand Energy sent a letter to Freeport requesting full
payment of the unpaid balance, the amount of which was $368,461.09.
On May 20, 2009, several workers5 who were installing the refractory
inside the quench chamber were injured when the chamber dislodged and rolled
off of its mount. The workers brought a negligence suit against Freeport, Brand
Energy, and others in Texas state court to recover for bodily injuries resulting
from the accident.6 The state court plaintiffs claimed inter alia that Freeport
was responsible for handling the quench chamber, including its stability; that
Freeport originally hired Brand Industrial to install the refractory; and that
Freeport failed to supervise and warn the workers of the various dangers
involved in applying the refractory inside the quench chamber.
The state court plaintiffs further claimed that, although the job in question
was originally taken on by Brand Industrial, Brand Energy took over the job at
some point after the job began. Thus, Brand Energy was contractually and
legally responsible for some of the planning and most of the execution of the job
but failed to adhere to those responsibilities, and provided no oversight,
supervision, or planning. The state court pleadings do not specifically mention
the 2009 purchase agreement between Freeport and Brand Energy and,
consequently, do not allege that the purchase agreement requires Brand Energy
to provide insurance coverage to Freeport with regard to the May 20, 2009
incident.
5
Antonio Hernandez, Jesus Chavez, and Jorge Garza (Plaintiffs); and Efren Rosales
(Intervenor).
6
Cause No. 52394, Antonio Hernandez, et al. v. Freeport Welding & Fabricating, Inc.,
et al.
5
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The insurance policy between ACE and Brand Energy covers Brand
Energy and its subsidiaries, including Brand Industrial, and has a policy period
of September 30, 2008 through September 30, 2009. Under “Section I -
Coverages” the policy states:
We will pay those sums that the insured becomes
legally obligated to pay as damages because of “bodily
injury” or “property damage” to which this insurance
applies. We will have the right and duty to defend the
insured against any “suit” seeking those damages.
However, we will have no duty to defend the insured
against any “suit” seeking damages for “bodily injury”
or “property damage” to which this insurance does not
apply.
This coverage provision applies to the “named insured[s]” in the policy, i.e.,
Brand Energy and its subsidiaries, as well as to the “additional insured[s]” in the
policy.
The policy contains the following three “additional insured” endorsements:
(1) “Any person or organization whom you have agreed to include as an
additional insured under a written contract, provided such contract was
executed prior to the date of loss”; (2) “Any person or organization the insured
is required by contract to provide said coverage”; and, (3) “Any Owner, Lessee or
Contractor whom you have agreed to include as an additional insured under a
written contract, provided such contract was executed prior to the date of loss.”
On July 17, 2009, relying on the 2009 purchase agreement, counsel for
Freeport tendered Freeport’s defense in the state court suit to Brand Energy and
requested that the tender be forwarded to Brand Energy’s insurance carrier,
ACE. ACE denied the tender of defense via written letters dated August 27,
2009 and April 1, 2010. ACE then filed for declaratory judgment in the federal
district court seeking a ruling that it had no duty to defend or indemnify
Freeport as an additional insured under Brand Energy’s insurance policy.
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Freeport filed a counter-claim against ACE seeking a declaratory judgment that
it was covered as an additional insured under Brand Energy’s insurance policy
and therefore entitled to defense and indemnity by ACE in the state court
proceedings.
The district judge rendered summary judgment in favor of ACE and
against Freeport, holding that ACE did not have a duty to defend Freeport in the
state court proceedings as an additional insured under Brand Energy’s
insurance policy. Additionally, reasoning that “the insurer’s duty to indemnify
cannot be determined until after the underlying suit has been resolved,”
Columbia Cas. Co. v. Ga. & Fla. RailNet, Inc., 542 F.3d 106, 111 (5th Cir. 2008),
the district judge declined to rule on whether ACE had a duty to indemnify
Freeport in the state court case.
Freeport appeals the district court’s summary judgment in favor of ACE
holding that it did not have a duty to defend Freeport in the state court
proceedings.7 Additionally, in consideration of the settlement recently reached
among the parties in the state court proceedings, Freeport now moves this court
to rule on the issue of whether ACE has a duty to indemnify Freeport as an
additional insured under Brand Energy’s insurance policy.
II.
A.
7
In the declaratory judgment proceedings, both ACE and Freeport filed motions to
strike. The district court denied ACE’s motion to strike the following: (1) the affidavit of Roy
E. Yates; (2) the August 21, 2009 check from Freeport to Brand Energy; (3) the October 14,
2009 letter from Brand Energy to Freeport; (4) the depositions of Chris Roland, James “Bubba”
Bethea, Jr., and Lindsay Hebert; and (5) the registration records concerning Brand Industrial.
The district court denied as moot ACE’s motion to strike the following: (1) the January 2009
letter from Brand Energy to Freeport; and (2) the unsigned purchase order drafted by
Freeport. Additionally, the district court denied as moot Freeport’s motion to strike the
following: (1) ACE’s argument concerning the unsigned purchase order; and (2) portions of the
affidavits of Rob Englebert and Lindsey Hebert. ACE does not appeal the district court’s
rulings on its motion to strike. Freeport does appeal the district court’s ruling on its motion
to strike.
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This court reviews a district court’s grant of summary judgment de novo.
Nat’l Cas. Co. v. W. World Ins. Co., 669 F.3d 608, 612 (5th Cir. 2012). Summary
judgment is appropriate when the evidence before the court shows that “there
is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” FED. R. CIV. P. 56(a). The moving party bears the
initial burden of demonstrating the absence of a genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this
burden, the non-moving party must then come forward and establish the specific
material facts in dispute. Matshushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986). If the non-moving party is unable to identify
anything in the record to support its claim, summary judgment is appropriate.
Stahl v. Novartis Pharm. Corp., 283 F.3d 254, 263 (5th Cir. 2002).
The interpretation of an insurance contract is also reviewed de novo. Nat’l
Cas. Co., 669 F.3d at 612.
B.
Where federal jurisdiction is based on diversity of citizenship, a federal
court looks to the substantive law of the forum state. See Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 78 (1938); Colony Ins. Co. v. Peachtree Constr., Ltd.,
647 F.3d 248, 252 (5th Cir. 2011). The parties do not dispute that Texas law
applies in these proceedings.
“Under Texas law, an insurer may have two responsibilities relating to
coverage - the duty to defend and the duty to indemnify.” Gilbane Bldg. Co. v.
Admiral Ins. Co., 664 F.3d 589, 594 (5th Cir. 2011) (citing D.R. Horton-Tex., Ltd.
v. Markel Int’l Ins. Co., 300 S.W.3d 740, 743 (Tex. 2009)). The Texas Supreme
Court has explained that the two duties are distinct, and they are to be decided
separately. Gilbane Bldg. Co., 664 F.3d at 594.
In order to decide whether there is a duty to defend under the policy, the
court must first determine whether the party alleging coverage qualifies as an
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additional insured under the policy. Id. If the party alleging coverage does
qualify as an additional insured, the court must then determine whether, under
Texas’s eight-corners rule, the facts alleged in the underlying state court
proceedings are sufficient to trigger the duty to defend under the policy. Id. An
affirmative answer to both is required to hold that there is a duty to defend. Id.The party alleging coverage bears the burden on each of these issues. Id.(citation omitted).
Under the eight-corners rule, “[t]wo documents determine an insurer’s
duty to defend - the insurance policy and the third-party plaintiff’s pleadings in
the underlying litigation[.]” Id. If the underlying pleadings allege facts that
may fall within the scope of coverage, the insurer has a duty to defend; if the
pleading only alleges facts excluded by the policy, there is no duty to defend.
Ooida Risk Retention Group, Inc. v. Williams, 579 F.3d 469, 472 (5th Cir. 2009)
(citation omitted).
Moreover, the duty to defend does not rely on the truth or falsity of the
underlying allegations; an insurer is obligated to defend the insured if the facts
alleged in the petition, taken as true, potentially assert a claim for coverage
under the insurance policy. Colony Ins. Co., 647 F.3d at 253 (citing GuideOne
Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006)).
Because the only two documents relevant to the duty-to-defend inquiry are the
insurance policy and the petition, an insurer’s duty to defend can be determined
at the moment the petition is filed. Id. at 253. “Resort to evidence outside the
four corners of these two documents is generally prohibited.” Id. (citing
GuideOne Elite Ins. Co., 197 S.W.3d at 307).
“In performing its eight-corners review, a court may not read facts into the
pleadings, look outside the pleadings, or speculate as to factual scenarios that
might trigger coverage or create an ambiguity.” Gilbane Bldg. Co., 664 F.3d at596-97 (citing Nat’l Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d
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139, 142 (Tex. 1997)). “Moreover, ‘[t]he Texas Supreme Court has never
recognized any exception to the strict eight corners rule.’” Id. at 597 (citing
Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 529, 531 (5th Cir.
2004)). “Although ambiguities will be resolved in favor of coverage, ‘[t]he fact
that the parties disagree as to coverage does not create an ambiguity.’” Id. at 597
(citing Valmont Energy Steel, Inc. v. Commercial Union Ins. Co., 359 F.3d 770,
773 (5th Cir. 2004)).
Only a few Texas appellate courts have held that the examination of
extrinsic evidence was warranted under an exception to the eight-corners rule.
Ooida Risk Retention Group, Inc., 579 F.3d at 475 (citing Mid-Continent Cas. Co.
v. Safe Tire Disposal Corp., 16 S.W.3d 418, 421 (Tex. App.–Waco, 2000, pet.
denied); State Farm Fire & Cas. Co. v. Wade, 827 S.W.2d 448, 452-53 (Tex.
App.–Corpus Christi, 1992, writ denied); Gonzales v. Am. States Ins. Co., 628
S.W.2d 184, 187 (Tex. App.–Corpus Christi, 1982, no writ)). The exception to
this rule is limited to cases where “it is initially impossible to discern whether
coverage is potentially implicated and when the extrinsic evidence goes solely
to a fundamental issue of coverage which does not overlap with the merits of or
engage the truth or falsity of any facts alleged in the underlying case.” Ooida
Risk Retention Group, Inc., 579 F.3d at 475 (citation omitted).
“The duty to indemnify, on the other hand, is ‘a matter dependent on the
facts and circumstances of the alleged injury-causing event, [and] parties may
introduce evidence during coverage litigation to establish or refute the duty to
indemnify.’” Gilbane Bldg. Co., 664 F.3d at 594 (quoting D.R. Horton-Tex., 300
S.W.3d at 741).
1. Freeport’s Status as an Additional Insured
This court’s holding in Gilbane requires that our analysis begin with a
determination of whether Freeport qualifies as an “additional insured” under
Brand Energy’s insurance policy, which includes a review of the 2009 purchase
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agreement. Gilbane Bldg. Co., 664 F.3d at 594. If we determine that Freeport
qualifies as an additional insured during the relevant time period, our analysis
will then proceed to the eight-corners rule to decide if the facts alleged in the
underlying state court proceedings were sufficient to trigger ACE’s duty to
defend Freeport as an additional insured under Brand Energy’s insurance policy.
Id. at 594.
Freeport argues that it is an additional insured under Brand Energy’s
insurance policy with ACE. We agree with Freeport that it qualified as an
additional insured under Brand Energy’s insurance policy during the 2009
purchase agreement’s term of coverage. For the following reasons, however, we
do not agree with Freeport’s argument that it qualified as an additional insured
under Brand Energy’s insurance policy with respect to the underlying state court
claims.
Brand Energy’s insurance policy provides coverage for Brand Energy and
its subsidiaries, including Brand Industrial, and has a policy period of
September 30, 2008 through September 30, 2009. The policy states under
“Section I - Coverages” that “[ACE] will pay those sums that the insured
becomes legally obligated to pay as damages because of ‘bodily injury’ or
‘property damage’ to which this insurance applies. [ACE] will have the right and
duty to defend the insured against any ‘suit’ seeking those damages.” This
coverage provision applies to the Brand Energy and its subsidiaries, the named
insureds under the policy, as well as to those named as additional insureds
under the policy. Three “additional insured” endorsements are included in the
policy: (1) “Any person or organization whom [Brand Energy has] agreed to
include as an additional insured under a written contract, provided such
contract was executed prior to the date of loss”; (2) “Any person or organization
[Brand Energy] is required by contract to provide said coverage”; and, (3) “Any
Owner, Lessee or Contractor whom [Brand Energy has] agreed to include as an
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additional insured under a written contract, provided such contract was
executed prior to the date of loss.”
Consequently, in order for Freeport to qualify as an additional insured
under Brand Energy’s insurance policy with ACE, there must be in existence a
contract wherein Brand Energy has agreed to provide insurance coverage for
Freeport. The 2009 purchase agreement is such a contract. The purchase
agreement between Brand Energy and Freeport, effective January 1, 2009 to
evergreen, applies to purchase orders issued by Freeport to Brand Energy during
the term of coverage and contains the following paragraphs on the page titled
“Purchase Agreement Terms and Conditions”:
5. INSURANCE. Seller agrees to carry the following
minimum insurance which shall be primary to any
insurance maintained by Buyer:
Worker’s Compensation, Commercial General Liability,
including Completed Operations and Product Liability
Insurance; Blanket Contractual, with an endorsement
naming Buyer as an additional insured with minimum
limits of liability of $2,000,000 each occurrence
combined single limit.
A plain reading of the purchase agreement indicates that it applies to all
purchase orders entered into by Brand Energy and Freeport during its term of
coverage. Accordingly, we conclude that Freeport qualified as an additional
insured under Brand Energy’s insurance policy with ACE for all purchase orders
entered into between Freeport and Brand Energy during the 2009 purchase
agreement’s term of coverage, i.e., from January 1, 2009 through the end of the
term of coverage.
Now, we consider whether Freeport is covered as an additional insured
under Brand Energy’s insurance policy with respect to the underlying state court
claims that stemmed from the 2008 purchase order. Freeport argues that the
2009 purchase agreement is applicable to the 2008 purchase order, and thus,
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Freeport qualifies as an additional insured with respect to the underlying state
court claims. We do not agree.
“Under Texas law, the interpretation of an unambiguous contract is a
question of law for the court to decide by ‘looking at the contract as a whole in
light of the circumstances present when the contract was entered.’” Gonzalez v.
Denning, 394 F.3d 388, 392 (5th Cir. 2004) (quoting Philadelphia Am. Life Ins.
Co. v. Turner, 131 S.W.3d 576, 587 (Tex. App.–Fort Worth, 2004)). “The primary
concern of a court construing a written contract is to ascertain the true intent of
the parties as expressed in the instrument.” Id. at 392 (citing Nat’l Union Fire
Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995)).
“In construing a contract under Texas law, courts must examine and consider
the entire writing and give effect to all provisions such that none are rendered
meaningless.” Id. (citing Int'l Turbine Servs., Inc. v. VASP Brazilian Airlines,
278 F.3d 494, 497 (5th Cir. 2002)). “The terms used in the [contract] are given
their plain, ordinary meaning unless the [contract] itself shows that the parties
intended the terms to have a different, technical meaning.” Id. (citing Am. Nat’l
Gen. Ins. Co. v. Ryan, 274 F.3d 319, 323 (5th Cir. 2001)). “To be legally binding,
‘[t]he parties must have a meeting of the minds, and each must communicate his
consent to the terms of the agreement.’” Crisalli v. ARX Holding Corp., 177 F.
App’x 417, 419-20 (5th Cir. 2006) (citing Smith v. Renz, 840 S.W.2d 702, 704
(Tex. App.–Corpus Christi, 1992)).
“If a written contract is so worded that it can be given a definite or certain
legal meaning, then it is not ambiguous.” Gonzalez, 394 F.3d at 392 (quoting
Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 907 S.W.2d at 520). “If, however, the
language of the contract is subject to two or more reasonable interpretations or
meanings, it is ambiguous.” Id. at 392 (citation omitted). “A contract is not
ambiguous merely because the parties to an agreement proffer conflicting
interpretations of a term.” Id. (quoting Int’l Turbine Servs., Inc. v. VASP
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Brazilian Airlines, 278 F.3d 494, 497 (5th Cir. 2002)). Under Texas law, a
contract generally is construed against its drafter only as a last resort, after
application of ordinary rules of construction leave reasonable doubt as to its
interpretation. Forest Oil Corp. v. Strata Energy, Inc., 929 F.2d 1039, 1043-44
(5th Cir. 1991) (citation omitted). In order to determine whether a contract has
retroactive application, a court looks to the language of the contract itself.
Gardiner, Kamya & Assocs., P.C. v. Jackson, 467 F.3d 1348, 1353 (Fed. Cir.
2006).
The 2009 purchase agreement is not ambiguous. It clearly defines its term
of coverage as commencing on January 1, 2009 and remaining effective “to
evergreen.” Accordingly, the purchase agreement applies to purchase orders
entered into between the parties from January 1, 2009 forward, until one of the
parties cancels the agreement. A review of the remainder of the 2009 purchase
agreement indicates that there is no provision in the agreement evidencing its
retroactive application to the 2008 purchase order between Freeport and Brand
Energy, nor to any other purchase order entered into between the parties prior
to January 1, 2009. Further, we are not persuaded by Freeport’s argument that
the 2009 purchase agreement’s language that it applies to “all purchase orders”
somehow evidences its application to the 2008 purchase order, or any other
purchase order in existence prior to the purchase agreement’s term of coverage.8
To draw such a conclusion would render the purchase agreement’s term of
coverage entirely meaningless.
Furthermore, the 2008 purchase order, which clearly pre-dates the 2009
purchase agreement, makes no mention of the projected application of the 2009
8
We also find unpersuasive Freeport’s several arguments that general wording in the
purchase agreement that does not specifically mandate its application to future purchase
orders somehow renders the agreement applicable to orders in existence prior to its January
1, 2009 term of coverage. As an example, Freeport points to wording such as “[a]s specified
by buyers order” as opposed to “to be specified” or “as specified by future buyers order.”
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purchase agreement to the 2008 purchase order. Nor does the 2008 purchase
order provide for the projected application of any other type of insurance
coverage to be provided by Brand Energy to Freeport. The only language in the
2008 purchase order that could be construed as anticipating any future dealings
between the parties is found in the “comments” section of the order which states
“Detailed scope of work and requirements to follow. Work to be performed
approx. 2nd quarter of 2009.” This language, however, does not pertain to
insurance coverage between the parties, nor does it pertain to the 2009 purchase
agreement or to any other purchase agreement. As a result, neither the terms
of the 2008 purchase order, nor the terms of the 2009 purchase agreement,
result in the applicability of the 2009 purchase agreement to the 2008 purchase
order.
In conclusion, it is clear that the 2009 purchase agreement does not apply
to the 2008 purchase order giving rise to the claims in the state court
proceedings. Accordingly, we hold that Freeport is not covered as an additional
insured under Brand Energy’s insurance policy with respect to the underlying
state court claims arising out of the 2008 purchase order.
In light of our holding that Freeport does not qualify as an additional
insured under Brand Energy’s insurance policy with respect the underlying state
court claims, we need not reach the second part of the analysis under Gilbane
with respect to the eight-corners rule. Gilbane Bldg. Co., 664 F.3d at 594. For
the same reason, we also pretermit the following additional arguments
submitted by Freeport: (1) that the 2008 purchase order and the 2009 purchase
agreement should be read together as forming a single contract which is
reasonably susceptible to the interpretation that the purchase agreement
applied to both existing and future purchase orders once it was issued; (2) that
the 2009 purchase agreement is not unenforceably vague when read in
conjunction with the 2008 purchase order; (3) that the purchase agreement
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applies to Brand Energy and its subsidiaries, including Brand Industrial; (4)
that ACE’s parol evidence (portions of the affidavits of Rob Englebert and
Lindsey Hebert) of its intent that the 2009 purchase agreement would not apply
to refractory work should not have been admitted by the district court, i.e., the
district court erroneously denied Freeport’s motion to strike this evidence;9 (5)
that given the district court’s finding that the 2009 purchase agreement was
ambiguous, summary judgment was inappropriate; (6) that ACE should be
precluded from arguing that the 2009 purchase agreement was not supported by
consideration since it did not plead so as an affirmative defense; and further,
that ACE failed to provide evidence or proof of lack of consideration;10 and (7)
Freeport’s supplemental brief arguments that the law implies a mutual
obligation on the part of the buyer and seller as consideration for the 2009
purchase agreement; and, alternatively, that the purchase agreement was
supported by adequate consideration due to the “applicable law” provision in the
agreement. Finally, because the underlying state court proceedings have been
settled, we also pretermit Freeport’s argument that the suit in federal court
should be dismissed without prejudice pending the resolution of the state court
suit.
2. Duty to Indemnify
Since the underlying state court proceedings remained pending when the
summary judgment proceedings were held in the district court, the district judge
declined to rule on the issue of whether ACE had a duty to indemnify Freeport
as an additional insured under Brand Energy’s insurance policy. As stated,
9
Because the district court did not consider this evidence in the proceedings below, it
“denied as moot” Freeport’s motion to strike.
10
This argument refers to the district court’s ruling denying Freeport’s motion to strike
ACE’s argument pertaining to this issue. Because the district court did not consider this
evidence in the proceedings below, it “denied as moot” Freeport’s motion to strike.
16
Case: 12-20002 Document: 00512027043 Page: 17 Date Filed: 10/19/2012
No. 12-20002
however, the parties in the state court proceedings have now reached a
settlement. In light of this development, Freeport now moves this court to rule
on the issue of whether ACE has a duty to indemnify Freeport.
“The duty to indemnify is separate and distinct from the duty to defend.”
Gilbane Bldg. Co., 664 F.3d at 601 (citing Zurich Am. Ins. v. Nokia, Inc., 268
S.W.3d 487, 490-91 (Tex. 2008)). “The duty to defend is circumscribed by the
eight-corners doctrine; the duty to indemnify, on the other hand, is controlled by
the facts that establish liability in the underlying suit.” Id. at 601 (citing Pine
Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d 650, 656 (Tex.
2009)). Consequently, the insurer’s duty to indemnify generally cannot be
determined until the underlying suit has been resolved. Columbia Cas. Co., 542
F.3d at 111 (citing Collier v. Allstate Cnty. Mut. Ins. Co., 64 S.W.3d 54, 62 (Tex.
App.–Fort Worth, 2001)). Since, however, the parties have now settled their
claims in the underlying state court litigation, the issue of whether ACE has a
duty to indemnify Freeport as an additional insured under Brand Energy’s
insurance policy is now ripe for consideration by the district court. Accordingly,
we remand for a determination of whether ACE has a duty to indemnify
Freeport for the cost of its settlement in the state court proceedings.
III.
For the foregoing reasons, we AFFIRM the district court’s summary
judgment in favor of ACE holding that it had no duty to defend Freeport. We
REMAND for a determination of whether or not ACE has a duty to indemnify
Freeport for the cost of its settlement in the state court proceedings.
17