DocketNumber： 01-15-00453-CV
Filed Date： 7/20/2015
Status： Precedential
Modified Date： 9/29/2016
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 -- (713) 222-9542 - Telephone (713) 655-7727 – Facsimile iii -- 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 -- 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 v -- 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 vi -- 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 vii -- 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 -- 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 ix -- 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. x -- 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 -- 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 2 -- 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 -- 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 4 -- 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 5 -- 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 -- 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 -- 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 8 -- 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 -- (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). 10 -- 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 PetroleumCo., 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: 11 -- 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 PetroleumCo., 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.” 12 -- 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 13 -- 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. .... 14 -- 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. Seeid. ("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. SeeGetty, 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 SeeATOFINA, 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)).
15
--
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
16 -- (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 17 -- 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 18 -- 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 UnitedStates, 106 S.W.3d at 122
. After the blowout, Zurich sought subrogation against Tesoro for the damage to the rig. 19 -- 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 20 -- 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 21 -- 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 22 -- 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). 23 -- (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 24 -- 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 -- 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
-- 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 -- (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 -- 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 -- 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 -- 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