One Beacon Insurance Company v. Blanchard Contractors, Inc.
Filing
30
ORDER & REASONS granting defendant's 12 Motion for Summary Judgment and denying plaintiff's 17 Motion for Summary Judgment. Signed by Judge Martin L.C. Feldman on 5/12/2014. (caa)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ONE BEACON INSURANCE CO.
CIVIL ACTION
v.
13-5013
BLANCHARD CONTRACTORS, INC.
SECTION "F"
ORDER AND REASONS
Before the Court are cross motions for summary judgment.
For
the reasons that follow, the plaintiff's motion is DENIED and the
defendant's motion is GRANTED.
Background
This lawsuit involves the casualty of the spud barge KODA in
a gas line explosion.
On December 4, 2009, TJ Rental Services executed a Master
Service Contract (MSC) under which it agreed to provide goods and
services to Hilcorp Energy Company and its contractors for use in
connection with oil and gas operations.
The MSC was in effect on
March 24, 2013, when TJ Rental bareboat chartered a spud barge, the
KODA, to Hilcorp for work on a compressor station. Hilcorp had also
chartered a tugboat from Blanchard Contractors, which it used to
maneuver the KODA.
While working on the compressor station, the
KODA allided with a gas lift line causing it to rupture and
resulting in an explosion.
The KODA suffered significant damage
and TJ Rental's insurer, One Beacon, paid the total loss value
pursuant to a hull and machinery policy.
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On July 9, 2013, One Beacon filed a subrogation suit against
Blanchard seeking to recover the insurance payment.
On February
14, 2014, Blanchard answered and filed a Third Party Complaint
against TJ Rental seeking to enforce a defense and indemnity
provision in the MSC.
Now before the Court are One Beacon's and
Blanchard's cross motions for summary judgment on the issues of
indemnity and waiver of subrogation.
I. Summary Judgment Standard
Federal Rule of Civil Procedure 56 instructs that summary
judgment is proper if the record discloses no genuine issue as to
any material fact such that the moving party is entitled to
judgment as a matter of law. No genuine issue of fact exists if the
record taken as a whole could not lead a rational trier of fact to
find for the non-moving party. See Matsushita Elec. Indus. Co. v.
Zenith Radio., 475 U.S. 574, 586 (1986). A genuine issue of fact
exists only “if the evidence is such that a reasonable jury could
return a verdict for the non-moving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986).
The Court emphasizes that the mere argued existence of a
factual dispute does not defeat an otherwise properly supported
motion. See id. Therefore, “[i]f the evidence is merely colorable,
or
is
not
significantly
probative,”
summary
judgment
is
appropriate. Id. at 249-50 (citations omitted). Summary judgment is
also proper if the party opposing the motion fails to establish an
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essential element of his case. See Celotex Corp. v. Catrett, 477
U.S. 317, 322-23 (1986). In this regard, the non-moving party must
do more than simply deny the allegations raised by the moving
party. See Donaghey v. Ocean Drilling & Exploration Co., 974 F.2d
646, 649 (5th Cir. 1992). Rather, he must come forward with
competent evidence, such as affidavits or depositions, to buttress
his claims. Id. Hearsay evidence and unsworn documents do not
qualify as competent opposing evidence. Martin v. John W. Stone Oil
Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987). Finally, in
evaluating the summary judgment motion, the court must read the
facts
in
the
light
most
favorable
to
the
non-moving
party.
Anderson, 477 U.S. at 255.
II. Defense and Indemnity
All parties agree that maritime law governs this dispute.
Randall v. Chevron U.S.A., Inc., 13 F.3d 888, 894 (5th Cir. 1994)
(overruled on other grounds).
The interpretation of a contractual
indemnity provision is a question of law.
Becker v. Tidewater,
Inc., 586 F.3d 358, 369 (5th Cir. 2009).
When interpreting a
maritime contract, the general rules of contract construction and
interpretation
apply.
See
Marine
Overseas
Servs.,
Inc.
v.
Crossocean Shipping, Co. Inc., 791 F.2d 1227 (5th Cir. 1986); Ogea
v. Loffland Bros. Co., 622 F.2d 186 (5th Cir. 1980).
The contract
"should be read as a whole and its words given their plain meaning
unless the provision is ambiguous." Becker, 586 F.3d at 369. Each
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provision of the contract must be read in light of others so as to
give each the meaning reflected by the contract as a whole.
Sw.
Eng'g Co. v. Cajun Elec. Power Co-op., Inc., 915 F.2d 972 (5th Cir.
1990). Finally, each provision of a contract must be given a
meaning
which
renders
it,
along
with
all
other
provisions,
effective rather than meaningless. See Lewis v. Hamilton, 652 So.2d
1327 (La. 1995).
The Fifth Circuit has noted that “[a] contract of indemnity
should be construed to cover all losses, damages, or liabilities
which reasonably appear to have been within the contemplation of
the parties.” Corbitt v. Diamond M. Drilling Co., 654 F.2d 329, 333
(5th Cir. 1981). However, the Fifth Circuit cautions, “it should
not be read to impose liability for those losses or liabilities
which
are
neither
expressly
within
its
terms
nor
of
such
a
character that it can be reasonably inferred that the parties
intended to include them within the indemnity coverage.” Id.
The indemnity provision (Section 16) of the MSC provides that
TJ Rental will protect, indemnify, defend and hold harmless Hilcorp
and its contractors from any claims that "arise out of or are
related in any way to the subject matter of the Contract and
which":
(i)
are asserted for any damage to or destruction of
[TJ Rental]'s tools, equipment, or other materials
from any cause while in use on [Hilcorp]'s
property; . . ..
The parties do not dispute that Blanchard was Hilcorp's contractor,
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and thus, is entitled to defense and indemnification against any
claims arising out of damage to TJ Rental's "tools, equipment, or
other
materials."
Instead,
One
Beacon
argues
that
"tools,
equipment, or other materials" does not include the spud barge
KODA.
The Court disagrees.
Section 1 of the MSC provides that Hilcorp will "purchase or
rent goods, equipment, or facilities" from TJ Rental and that TJ
Rental will perform "work and services" including "barges, tugs,
winches,
spud
barges."
The
contract
repeatedly
refers
to
"equipment" provided by TJ Rental, and the record demonstrates that
TJ Rental was in the business of renting and selling equipment
including spud barges and other watercraft. To read "equipment" as
not including watercraft would render not just the indemnity
provision but the entire contract meaningless.
The entire purpose
of the MSC was for TJ Rental to provide Hilcorp with spud barges
and other "equipment" for use in connection with its oil and gas
operations.
Accordingly, the Court finds that "tools, equipment,
or other materials" includes the spud barge KODA.
The Court's conclusion is supported by the plain meaning of
"equipment."
Although the MSC does not define the term, Merriam-
Webster defines "equipment" as "the implements used in an operation
or activity" or as "all the fixed assets other than land and
buildings
of
a
business
merriam-webster.com,
enterprise."
Equipment
Definition,
http://wwww.merriam-webster.com/dictionary/
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equipment (last visited May 9, 2014). Under these definitions,
"equipment" clearly encompasses the spud barge KODA.
Tellingly,
One Beacon points to no other common understanding of the term.
One Beacon's claims for damage to the KODA falls squarely within
the scope of the indemnity provision.
One Beacon's submission is
advocacy without reason or logic.
III. Waiver of Subrogation
As an extension of the argument that TJ Rental is obligated to
indemnify Blanchard for One Beacon's claims, Blanchard contends
that TJ Rental was obligated to name it as an additional insured
and to waive subrogation.
Section 16(c) of the MSC provides that
TJ Rental must carry and maintain its own insurance to support its
indemnity obligation, and that the insurance must name Hilcorp and
its contractors as additional assureds "but only to the extent of
the
liabilities
insured."
expressly
assumed
hereunder
by
the
primary
Exhibit "B" to the MSC specifies that, "if watercraft
are used in [TJ Rental's] operations," then TJ Rental must carry
P&I and hull insurance policies, add Hilcorp and its contractors as
additional assureds, and waive subrogation.
In compliance with
these obligations, TJ Rental maintained a Hull & Machinery policy
on the KODA, which, although it does not explicitly name Hilcorp
and
Blanchard
as
additional
assureds,
includes
a
blanket
"additional assured/waiver of subrogation clause" (Section 18) that
states:
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It is further agreed that to the extent that the Named
Assured [TJ Rental Services] is obligated by written
contract to name any one person or organization as
Additional Assureds hereunder, and/or waive rights of
subrogation in favor thereof, the Underwriters agree that
such persons or company shall be considered as Additional
Assureds and rights of subrogation are hereby waived but
only with respect to the Vessel(s) working for the
Additional Assured(s) and/or operations performed by or
on behalf of the Named Assured(s).
One Beacon asserts that the plain language of this clause
provides that additional assured status and waiver of subrogation
are limited to the extent explicitly obligated by written contract.
The Court agrees.
However, One Beacon would also have this Court
find that its claims against Blanchard fall outside the scope of
the "liabilities expressly assumed" by TJ Rental in the MSC, and
so, there is no obligation by written contract to name Blanchard as
an additional assured or to waive subrogation. The Court is not
persuaded. Because this Court has already found that the indemnity
obligation exists, the Court also finds that TJ Rental (and thus
One Beacon as plaintiff in subrogation) is required to provide
additional assured status to Blanchard and to waive subrogation.
Accordingly,
Blanchard's
motion
for
summary
judgment
is
GRANTED and One Beacon's motion is DENIED. The claims in this case
are hereby DISMISSED with prejudice.
New Orleans, Louisiana, May 12, 2014
____________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE
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