Saturday, March 18, 2017

Liberty Surplus Insurance Corp. et al. v. Exxon Mobil Corp.: Texas chemical plant explosion award upheld by Texas Supreme Court

Texas Justices Won't Disturb Exxon's $4M Blast Coverage Win

By Michelle Casady Law360, Houston (February 17, 2017, 2:20 PM EST) -- 

The Texas Supreme Court on Friday declined a request from AIG subsidiary Commerce and Industry Insurance Co. asking the high court to review a lower court ruling holding it liable for more than $4 million in personal injury claims paid by Exxon Mobil Corp. in the wake of a Texas chemical plant explosion.
In February 2016, Commerce and Industry argued that although Exxon was listed as an “additional insured” on policies it and Liberty Surplus Insurance Corp. issued to an Exxon subcontractor, coverage is limited to performance of the subcontractor's services. A lower court erred by not constructing the underlying services contract to find Exxon was only covered for ongoing operations, the insurer told the court.

In a June response to the petition for review, Exxon told the high court that there was no need to review the court of appeals' “excellent opinion,” because there had been no error to correct, and Commerce and Industry simply doubled down on arguments already rejected by the other courts. Their main argument, Exxon told the court, is that “performance” is an active verb, and thus must refer only to ongoing operations.

“The court of appeals tactfully used a footnote to answer this, pointing out that 'performance’ is a noun, and can be used to refer to a future performance, an ongoing performance, or a past performance,'” the brief reads. “If C&I’s odd claim about performance being an active verb were a sideshow, our response would not mention it. But it is the aorta of C&I’s argument.”

Despite requesting and receiving three extensions to file a petition for review, court records show that Liberty never filed a petition with the high court.

Todd Spitler, spokesman for Exxon, told Law360 on Friday that the company believes the court of appeals and Supreme Court ruled correctly in the matter.

The insurers were fighting court rulings requiring them to cover Exxon under the additional insured provisions for policies held by subcontractor Wyatt Field Service Co., which worked at Exxon's Baytown, Texas, plant three years before the explosion that caused the injuries at issue.

Wyatt was hired as a subcontractor in 2007 to perform work at the Baytown plant. As part of the contract, Exxon required Wyatt to obtain a $2 million policy from Liberty and a $25 million policy from Commerce and Industry to cover its work at the plant, according to court records. Wyatt completed its work at the plant in 2008.

In 2011, employees of a different contractor were injured in an explosion that involved some of the same equipment that Wyatt had worked on. The injured workers sued both Exxon and Wyatt, alleging equipment had been improperly installed. Exxon settled with the workers before trial, then turned to the insurers to cover the cost.

A Harris County district court found on summary judgment Exxon was an additional insured under Wyatt's Commerce and Industry and Liberty policies. The Fourteenth Court of Appeals in December 2015 upheld the decision, holding Exxon proved it wouldn't have been sued but for the work of the subcontractor and showed the claims against it fall within the scope of the additional-insured coverage.

Counsel for Commerce did not return a call seeking comment Friday

Commerce and Industry is represented by Robert Siegel, Brendan Doherty and Charlotte Fields of Gieger Laborde & Laperouse LLC.

Liberty is represented by Kevin Risley, Brian S. Martin and Rodrigo Garcia Jr. of Thompson Coe Cousins & Irons LLP.

Exxon is represented by David Gunn, John Adcock and Erin Huber of Beck Redden LLP and Mike Morris and Danny Van Winkle of Tekell Book Allen & Morris LLP.

The case is Liberty Surplus Insurance Corp. et al. v. Exxon Mobil Corp., case number 16-0074, in the Supreme Court of the State of Texas.