AIG Specialty Insurance Company f/k/a Chartis Specialty Insurance Company v. ACE American Insurance Company et al

Filing 55

ORDER ON MOTIONS FOR SUMMARY JUDGMENT granting in part and denying in part 19 Motion for Summary Judgment; granting in part and denying in part 29 Motion for Summary Judgment.(Signed by Judge Nelva Gonzales Ramos) Parties notified.(mserpa, 2)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
AIG SPECIALTY INSURANCE
COMPANY; fka CHARTIS SPECIALTY
INSURANCE COMPANY, AS
SUBROGEE OF SHERWIN ALUMINA,
LLC,
Plaintiffs,
VS.
ACE AMERICAN INSURANCE
COMPANY, et al,
Defendants.

March 18, 2019
David J. Bradley, Clerk

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§ CIVIL ACTION NO. 2:18-CV-16
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ORDER ON MOTIONS FOR SUMMARY JUDGMENT
Plaintiff AIG Specialty Insurance Company (ASIC) filed this action against
Turner Industries Group, LLC (Turner) and Ace American Insurance Company (ACE) to
obtain reimbursement for monies paid and defense costs incurred in the course of
defending and settling a personal injury case brought by one of Turner’s employees
against ASIC’s insured, Sherwin Alumina, LLC (Sherwin). ASIC’s claims for breach of
contract are based on Turner’s agreement to indemnify Sherwin and provide insurance
under a master service agreement (MSA) and ACE’s responsibility to provide policy
proceeds to Sherwin as an additional insured on Turner’s policy.
Before the Court are summary judgment motions filed by each of the parties:
ASIC (D.E. 19), Turner (D.E. 29), and ACE (D.E. 30). Also before the Court are the
various responses, replies, and evidentiary objections of each of the parties (D.E. 30, 31,
32, 33, 35, 43, 44, 45, 50, 51, 52, 53). For the reasons set out below, the Court GRANTS
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IN PART and DENIES IN PART ASIC’s motion (D.E. 19); DENIES ACE’s motion
(D.E. 30); and GRANTS IN PART and DENIES IN PART Turner’s motion (D.E. 29) as
more fully set out below.
FACTS
A. Turner’s Agreement with Sherwin
Sherwin agreed to hire Turner as an independent contractor to perform separatelycontracted services pursuant to an MSA fully executed on March 30, 2010. D.E. 19-1.
Under the MSA, Turner agreed to maintain control of the worksite and “be responsible
for making sure that the Work is done in a safe manner [and] . . . be solely responsible for
the training, supervision, safety, and health of all [Turner] employees . . .” D.E. 19-1, ¶
4. “[Turner] is solely responsible for inspecting the Work site on a daily basis to ensure
that the Work is being done in a safe manner and that the Work is in compliance with all
safety rules and regulations.” Id.
Turner further agreed to indemnify Sherwin for certain claims for bodily injury
that might be brought against Sherwin by Turner employees and to provide insurance
through additional insured endorsements on Turner’s policies.

Id., ¶ 11.

indemnity obligation to Sherwin was set out in the MSA as follows:
11. [TURNER’S] INDEMNITY OF [SHERWIN]. (a) TO
THE EXTENT OF ITS NEGLIGENCE OR LEGAL FAULT
WHICH DIRECTLY CAUSES THOSE DAMAGES MORE
SPECIFICALLY DESCRIBED HEREIN, [TURNER]
SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS
[SHERWIN] from and against any and all claims, losses,
demands, causes of action, lawsuits, damages, costs, actions,
judgments, expenses and liabilities (including, but not limited
to, [Sherwin’s] reasonable attorneys’ fees and costs and
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Turner’s

expenses of defense), which is [sic] directly connected with
or arise out of performance of the Work, including but not
limited to actual or alleged bodily injury (including illness or
death). Subject to the foregoing, this indemnity, as defined
above, shall include, but is not limited to, claims or damages
brought by third persons, Subcontractors, or agents or
employees of either of the parties to this Agreement, damage
to or destruction of any property, real personal or otherwise,
or any other matters in any way connected with the Work, or
any action on or condition of the Owner’s premises associated
with performance of the Work.
It is further acknowledged that a portion of the price to be
paid to [Turner] by [Sherwin] for the work serves as
consideration for [Turner’s] indemnity obligations under this
contract. Subject to the foregoing, [Turner] shall defend
[Sherwin] in such proceeding at [Turner’s] expense with a
maximum of $500,000 consequential damages exposure, but
only to the extent such consequential damages are valid and
collectible under [Turner’s] Commercial General Liability
insurance, or, if [Sherwin] elects to handles [sic] its own
defense, [Turner] shall promptly reimburse [Sherwin] for all
of [Sherwin’s] attorneys’ fees and costs and expenses of
raising a defense against any such claims as referenced
herein, including expenses, costs of suit and attorneys’ fees.
D.E. 19-1, ¶ 11. The insurance paragraph of the MSA further states:
10. INSURANCE. (a) [Turner] shall not commence
performance of the Work until it has furnished [Sherwin] with
certificates of insurance satisfactory to [Sherwin] certifying
that valid insurance policies are in effect and will remain in
effect until the Work has been fully performed. Such policies
shall provide for (i) Workers' Compensation insurance in
statutory limits and including a provision far waiver of
subrogation to the extent of [Turner’s] indemnification
obligations expressly assumed under Article 11 of this
Contract . . . (ii) Employer's Liability insurance . . . (iii)
Comprehensive General Liability Insurance (including, but
not limited to, coverage for Broad Form Property Damage,
Contractual Liability and Personal Injury) with a combined
single limit of liability of $10,000,000 per occurrence for
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bodily injury and property damage, and (iv) Comprehensive
Automobile Liability insurance . . . .
(b) To the extent of [Turner’s] indemnification obligations
expressly assumed under Article 11 of this Contract, [Turner]
agrees that, except for the Worker's Compensation insurance,
[SHERWIN] SHALL BE NAMED AS ADDITIONAL
INSURED IN ALL OF THE FOREGOING INSURANCE
POLICIES with a statement to that effect set forth in the
certificates of insurance furnished to [Sherwin]. . . .
(c) The foresaid insurance coverage is intended to protect
[Sherwin], against any and all claims, losses, damages, costs,
action, judgments, expenses and liabilities which is are [sic]
directly connected with or arise out of the performance of the
Work, wherever such may occur. . . .
D.E. 19-1, ¶ 10.
Turner did, in fact, obtain the insurance policies that the MSA required. The ACE
Comprehensive General Liability Insurance Policy No. HDOG26437593 at the center of
this case was effective March 1, 2012 through March 1, 2013, and includes additional
insured endorsements #27 and #109. D.E. 19-9, p. 70; 29-1, p. 28; D.E. 29-1, p. 25.
And the Certificate of Liability Insurance issued to Sherwin does indicate that the policy
contains an additional insured endorsement and a waiver of subrogation. D.E. 29-1, p.
26.
B. The Warren Injury and Claim
On November 15, 2012, Edward Warren (Warren), as Turner’s employee, went to
the Sherwin plant to perform emergency descaling work, involving washing down the
top, mezzanine, and bottom floors of the press floor. D.E. 19-5, 19-6. While working on
a platform attached to a catwalk structure, the tack welds on a square of metal grating
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below Warren’s feet gave way, causing him to fall through the resulting hole, suffering
serious and permanent bodily injuries. See Warren’s Petition, D.E. 29-1.
Warren received benefits from Turner’s workers compensation policy, barring him
from making any additional claims against Turner.1 Warren then sued Sherwin and its
plant manager2 as owner and operator of the property, alleging negligence in the form of
premises liability and gross negligence, as well as failing to maintain a safe work
environment. Id.
Sherwin contends that any defect in the catwalk grating was caused by Turner in
that Sherwin had previously hired Turner as an independent contractor to perform work
that required cutting through the grating to obtain access to certain facilities and the
subsequent repair of the grating once the work was done. Furthermore, at the time
Warren was on the premises, Turner had agreed under the MSA to assume liability for
the safety of the work environment and all employees. D.E. 19-1. Sherwin named
Turner as a responsible third party and made a demand for a defense and indemnity from
Turner and ACE. See D.E. 19-3, 19-7, 19-8, 9-14. Turner and ACE denied the claim on
the basis that the indemnity agreement in the MSA was limited, did not require Turner to
indemnify for the negligence or gross negligence of Sherwin or its plant manager, and
violated the express negligence rule. D.E. 19-3, 19-12, 19-14.

1

Tex. Labor Code § 408.001.

2

Chester Leo Ingersoll, Jr., Sherwin’s plant manager, was named in Warren’s suit. Because the master service
agreement defines “Owner” as Sherwin, along with its directors, officers, employees, agents, and representatives,
the Court’s reference to Sherwin includes Ingersoll without distinction.

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After ACE denied the claim, Sherwin settled the case for the ASIC policy limits.3
ASIC then filed this breach of contract action as Sherwin’s subrogee for reimbursement
of that amount, along with its defense costs.
STANDARD OF REVIEW AND APPLICABLE LAW
Texas Law. This action is before the Court pursuant to its diversity jurisdiction.
28 U.S.C. § 1332. D.E. 1. The law of the forum state thus governs the substantive
disposition of ASIC’s state law breach of contract claims. Erie R. Co. v. Tompkins, 304
U.S. 64, 78 (1938). Texas law further applies to “Any contract of insurance payable to
any citizen or inhabitant of this State by any insurance company or corporation doing
business within this State.” Tex. Ins. Code art. 21.42. Furthermore, the indemnity
agreement at issue here provides that Texas law shall govern any contract dispute. D.E.
19-1, ¶ 30.
Question of Law. The parties’ respective motions seek construction of a policy of
insurance and an indemnity agreement.
Under Texas law, insurance policies are construed according
to ordinary contract principles. “The interpretation of an
insurance policy is a question of law” for the court to
determine. “In construing a written contract, the primary
concern of the court is to ascertain the true intentions of the
parties as expressed in the instrument.” All of the provisions
of the policy must be considered with reference to the whole
instrument, so that no single provision alone is given
controlling effect.
Lawyers Title Ins. Corp. v. Doubletree Partners, L.P., 739 F.3d 848, 858 (5th Cir. 2014).
3

The Confidential Settlement Agreement and Release that resolved the Warren claim has been tendered to the
Court for in camera inspection pursuant to the Court’s Order of October 22, 2018 (D.E. 28) to be considered as part
of the summary judgment record, but has not been filed in the public record of this case.

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Summary Judgment. Summary judgment is proper if there is no genuine issue as
to any material fact and the moving party is entitled to judgment as a matter of law. Fed.
R. Civ. P. 56(c). A genuine issue exists “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). The Court must examine “whether the evidence presents a
sufficient disagreement to require submission to a jury or whether it is so one-sided that
one party must prevail as a matter of law.” Id. at 251–52. In making this determination,
the Court must consider the record as a whole by reviewing all pleadings, depositions,
affidavits, and admissions on file, and drawing all justifiable inferences in favor of the
party opposing the motion. Caboni v. Gen. Motors Corp., 278 F.3d 448, 451 (5th Cir.
2002).
The moving party bears the initial burden of showing the absence of a genuine
issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving
party demonstrates an absence of evidence supporting the nonmoving party's case, then
the burden shifts to the nonmoving party to come forward with specific facts showing
that a genuine issue for trial does exist. Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986). To sustain this burden, the nonmoving party cannot
rest on the mere allegations of the pleadings. Fed. R. Civ. P. 56(e); Anderson, 477 U.S.
at 248. “After the nonmovant has been given an opportunity to raise a genuine factual
issue, if no reasonable juror could find for the nonmovant, summary judgment will be
granted.” Caboni, 278 F.3d at 451.

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The evidence must be evaluated under the summary judgment standard to
determine whether the moving party has shown the absence of a genuine issue of material
fact. “[T]he substantive law will identify which facts are material. Only disputes over
facts that might affect the outcome of the suit under the governing law will properly
preclude the entry of summary judgment.” Anderson, 477 U.S. at 248.
DISCUSSION AS TO ASIC/ACE MOTIONS
A. ACE’s Liability on its Policy
There is no dispute that the ACE policy covers ASIC’s claim as Sherwin’s
subrogee if Sherwin is an additional insured for Warren’s claim.

ASIC’s claim to

coverage is based on the policy’s additional insured endorsement #27, the construction of
which is hotly contested:

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ASIC claims that the only requirement for being treated as an additional insured is clearly
satisfied: Prior to November 15, 2012, Turner executed the MSA in which it agreed to
provide additional insured status to Sherwin.
ACE’s defense is based on a number of arguments spanning the MSA,
Endorsement #27, Endorsement #109, and the Certificate of Insurance issued to Sherwin.
They can be summarized as follows:
 Certificate of Insurance. The language of the Certificate of Insurance
shows the intent of the additional insured endorsements to extend
coverage commensurate only with the extent of the indemnity
obligations of the MSA.
 Endorsement #27, first sentence. The scope of coverage available to
Sherwin is impliedly commensurate with the scope of the indemnity
obligation in the MSA, the written contract triggering Endorsement #27.
The MSA does not require Turner to indemnify Sherwin for Sherwin’s
own negligence and gross negligence. Therefore, Endorsement #27
does not confer coverage for Warren’s claims.
 Endorsement #109, first sentence. The policy endorsement that applies
is #109, not #27. Endorsement #109 expressly limits additional insured
status to situations to which the duty of indemnity in the underlying
contract extends. Therefore, Sherwin is not entitled to additional
insured coverage, again arguing that the MSA does not provide for
indemnity for Sherwin’s own negligence and gross negligence.
 Predetermination Requirement; Endorsements #27 and #109, second
sentence. Under both Endorsements #27 and #109, the policy
obligations require a second triggering mechanism: the named insured’s
acceptance of the duties to defend and indemnify or a judicial
determination, neither of which has occurred.
 Waiver and Estoppel. ASIC may not invoke matters outside the policy
to suggest that the ACE policy offers coverages that its terms do not.
 ASIC Policy. No decision regarding ASIC’s rights as Sherwin’s
subrogee can be made without consideration of ASIC’s policy. That
policy may reveal a failure to cover Ingersoll (the plant manager) and
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may have a pro-rata requirement for coordinating with the ACE
coverage, if any.
Each of these arguments is discussed, in turn, below.
1. ACE Policy
a. Certificate of Insurance
ACE notes that a Certificate of Liability Insurance (D.E. 29-1, pp. 25-26) issued to
Sherwin shows that additional insured coverage is offered “only to the extent of the
named insured’s obligations to indemnify, defend and/or hold harmless the certificate
holder.” Assuming for now that the MSA does not require Turner to indemnify Sherwin
for Warren’s claim, ACE suggests that the Certificate evidences that limitation on
coverage. The Court does not agree.
In addition to the fact that the Certificate is dated March 22, 2018, long after
Warren suffered his injury and filed his lawsuit against Sherwin, by its own terms it does
not evidence coverage. A preamble in the Certificate states:
THIS CERTIFICATE IS ISSUED AS A MATTER OF
INFORMATION ONLY AND CONFERS NO RIGHTS
UPON THE CERTIFICATE HOLDER.
THIS
CERTIFICATE DOES NOT AFFIRMATIVELY OR
NEGATIVELY AMEND, EXTEND OR ALTER THE
COVERAGE AFFORDED BY THE POLICIES BELOW.
THIS CERTIFICATE OF INSURANCE DOES NOT
CONSTITUTE A CONTRACT BETWEEN THE ISSUING
INSURER(S), AUTHORIZED REPRESENTATIVE OR
PRODUCER, AND THE CERTIFICATE HOLDER.
D.E. 29-1, p. 25. The Court rejects any argument that the Certificate evidences the scope
of the disputed insurance coverage afforded by the policy at issue here, consistent with

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the Fifth Circuit’s decision in Lexington Ins. Co. v. Autobuses Lucano Inc., 256 F. App'x
682, 684 (5th Cir. 2007) (per curiam).
b. Endorsement #27
Setting aside, for now, the predetermination argument addressed below,
Endorsement #27 affords Sherwin additional insured coverage for the Warren settlement
through its first sentence.

The parties devoted substantial briefing to the question

whether the additional insured coverage was limited by the terms of the MSA. In
particular, they debated whether the insurance coverage was limited to the scope of
Turner’s indemnity obligation or its duty to provide coverage for non-completed
operations.
The Texas Supreme Court very recently reiterated its test regarding the extent to
which the terms of an external contract can be held to modify the terms of an insurance
policy: Exxon Mobil Corp. v. Insurance Co. of State of Pennsylvania, No. 17-0200, 2019
WL 638992, at *9 (Tex. Feb. 15, 2019). The court wrote, “we determine the scope of
coverage from the language employed in the insurance policy, and if the policy directs us
elsewhere, we will refer to an incorporated document to the extent required by the
policy.” (emphasis in original, quoting In re Deepwater Horizon, 470 S.W.3d 452, 460
(Tex. 2015)).
The additional insured language in Endorsement #27 only requires reference to the
written contract (MSA) to determine if Turner agreed to make Sherwin an additional
insured prior to the date of loss. By not referencing the written contract for any other
purpose, ACE does not get the benefit of any limitation on Turner’s indemnity obligation
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that might be supported by full incorporation of the MSA into the policy’s terms. The
fact that the carrier’s obligation to provide insurance to an additional insured might
exceed the scope of the named insured’s liability is a risk taken when the carrier fails to
reference the terms of the outside contract for purposes of determining the scope of
liability.
ACE concedes the import of the Exxon case. DE 51. However, it contends that
Endorsement #27 does not apply for other reasons addressed below.
c. Endorsement # 109
ACE argues that Endorsement #27 does not apply because Endorsement #109 was
issued later and is a better fit for the purpose of the obligations imposed on Turner under
the MSA. Even assuming that a later endorsement governs over a conflicting earlier
one,4 ACE has failed to demonstrate that Endorsement #109 was in effect before the date
of loss. The evidence to which ACE refers, the December 18, 2018 Affidavit of Thomas
M. Sandahl (D.E. 44-1), shows that Endorsement #109 was issued to replace
Endorsement #40 (not Endorsement #27) after the inception of the policy and was made
effective as of the inception of the policy. But it does not say whether that happened
prior to November 15, 2012. The Court cannot apply an alternative endorsement that the
evidence fails to show to have been in effect at the time of loss.
Additionally, ACE has not shown that Endorsement #109 necessarily conflicts
with Endorsement #27.

Instead, ACE concedes that both Endorsement #27 and

Endorsement #109 are “potentially applicable.”
4

D.E. 44, p. 8.

“[I]f a contract of

INA of Texas v. Leonard, 714 S.W.2d 414, 417 (Tex. App.—San Antonio 1986, writ ref’d n.r.e.).

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insurance is susceptible of more than one reasonable interpretation, we must resolve the
uncertainty by adopting the construction that most favors the insured.” Nat'l Union Fire
Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991). The
Court rejects ACE’s argument that Endorsement #109 applies instead of Endorsement
#27 as contrary to the evidence, contrary to the language on the face of the endorsements,
and as contrary to the rules of construction.
d. Predetermination Requirement
ACE further argues that it does not matter which endorsement applies because
they both contain the identical predetermination requirement:
The Company, however, shall have no obligation to defend or
indemnify any such person or organization unless and until
the Named Insured’s obligation to defend and indemnify is
accepted by the Named Insured and agreed to by the
Company or determined by judgment.
Endorsement #27, #109; D.E. 19-9, pp. 70, 178. In essence, ACE interprets this sentence
as modifying the scope of policy coverage commensurate with a judicial determination of
the terms of the MSA indemnity agreement, without the necessity of expressly
incorporating the MSA. Construing all of the terms of the policy together, the Court does
not reach the same conclusion.
First, ACE’s construction renders both additional insured endorsements illusory.
Sherwin, the additional insured, would be entitled to no policy benefits unless Sherwin
obtained a judgment that Turner was liable. That means Sherwin would not be entitled to
a defense in the Warren case until Sherwin was able to collect against Turner, putting the
cart before the horse and essentially leaving Sherwin without a defense. And Sherwin
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would recover nothing more than the policy benefits that would be owed to Turner—a
result that can be obtained without necessity of an additional insured endorsement.
Under those conditions, status as an additional insured is meaningless. A contract is
illusory if the obligations of a party cannot be triggered under any circumstances. See,
e.g., In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 677 (Tex. 2006).
Second, ACE’s construction renders the first sentence of both additional insured
endorsements meaningless. There is no reason to set out the manner of determining who
is an additional insured and the scope of that coverage in the first sentence of each
endorsement if it is overridden by the terms of the second sentence of the same
endorsement.

In fact, ACE’s construction makes the first and second sentences of

Endorsement #109 functionally repetitive.
To harmonize and give meaning to both endorsements and all of the language in
each endorsement, the only reasonable construction treats the first sentence as
determining the scope of additional insured coverage and the second sentence as
determining the timing of the obligation to provide policy benefits. In that regard, the
judgment referred to in the final phrase of the predetermination sentence relates to a
judgment that ACE’s obligation to provide coverage to Sherwin has been triggered
pursuant to the scope set out in the first sentence.
Removing the alternative of Turner accepting and ACE agreeing, the sentence
reads:
[ACE], however, shall have no obligation to defend or
indemnify [Sherwin] unless and until . . . determined by
judgment.
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While ACE argues that this is not grammatically correct, the Court disagrees. It is
equivalent to saying that ACE shall have no obligation unless and until the Court says so.
What is determined by judgment is the obligation to defend or indemnify (pursuant to the
first sentence of the endorsement). That is consistent with “unless and until” referring to
the invocation of the additional insured endorsement and the timing issues governing
insurance carriers and claims.

This is further consistent with the well-established

procedure in insurance law of seeking a declaratory judgment on the duty to defend at the
outset of the underlying case.
e. Waiver and Estoppel
While there have been suggestions that representatives of ACE have made
admissions against interest regarding the interpretation of the additional insured
endorsements, ASIC has conceded that it does not seek to establish coverage by waiver
or estoppel. D.E. 32, p. 13. Rather, it references prior denials of Sherwin/ASIC’s claim
to show that the denials are wrongful, thereby eliminating ACE’s right to challenge the
reasonableness of the Warren settlement.

Evanston Ins. Co. v. ATOFINA

Petrochemicals, Inc., 256 S.W.3d 660, 671-74 (Tex. 2008).
The Court does not apply Evanston on this summary judgment record because the
Court’s interpretation of Endorsement #27 and its predetermination requirement raises
questions that the parties have not addressed. In particular, is ACE’s denial of coverage
(even if for the wrong reason) sufficient to establish wrongful denial when neither of two
alternative predicate acts stated in the additional insured endorsement have taken place:
(1) the Named Insurer’s (Turner’s) acceptance of the obligation to defend or indemnify;
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or (2) a court has determined ACE’s obligation to defend and indemnify? The Court
reserves that question for future proceedings.
f. Conclusion
In sum, the Court holds that Sherwin is entitled to additional insured status on the
ACE policy under Endorsement #27 for the Warren claim and that the scope of the policy
is determined by its own terms without reference to any limitations on the indemnity
obligations of Turner in the MSA.

This holding satisfies the predetermination

requirement of the second sentence of Endorsement #27, and—as a matter of timing—
any obligations ACE owes under its policy are now fully triggered, whether or not they
were previously triggered, an issue the Court need not address at this time.
2. ASIC Policy
ACE defends against the amount of ASIC’s subrogation claim on the basis that it
did not submit evidence of its own policy covering Sherwin, leaving Sherwin’s proof
inadequate on three issues: (1) whether ASIC did, in fact, owe coverage to Sherwin
rather than voluntarily defending the Warren case and paying to settle the claim; (2)
whether ASIC’s policy covered Ingersoll as well as Sherwin such that any settlement of
Ingersoll’s liability can be included in the subrogation claim; and (3) whether that
coverage was subject to only a pro-rata recovery based on the respective policies’
coordination of benefits provisions.
ASIC first notes that the ASIC policy had been provided to ACE, such that ACE
could have submitted the policy to the Court if it supported its defense or was necessary
to a claim for offset. ASIC then attached a copy of its policy covering Sherwin and
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defining “insured” to include its managers and employees, such as Ingersoll. D.E. 32-2,
p. 30, 32. And the “Other Insurance” provisions make the ASIC policy excess over the
ACE policy. Id. at 37. After ASIC provided its policy, ACE did not dispute any of these
propositions related to its terms.
The Court holds that any prerequisites for ASIC’s claim as subrogee of Sherwin,
which includes Ingersoll, have been satisfied.
3. Evidentiary Objections
ACE and ASIC both made objections to each other’s summary judgment evidence,
primarily on hearsay and parole evidence grounds. The Court’s holdings do not depend
on the content of any of the evidence to which objections were made. The Court
OVERRULES the objections as moot.
DISCUSSION AS TO TURNER’S MOTION
ASIC has sued Turner for breach of the MSA with respect to Turner’s alleged
failures to provide insurance and indemnity. As set out above, the Court has concluded
that Turner did, in fact, secure insurance in the form of the ACE policy with the
additional insured endorsement. Therefore, the Court DISMISSES the breach of contract
claim based on paragraph 10 of the MSA. D.E. 19-1, p. 2.
Turner’s defense against any obligation of indemnity is twofold: (1) Warren’s
claims against Sherwin were based solely on Sherwin’s own negligence and gross
negligence and the MSA does not satisfy the requirements for making Turner indemnify
Sherwin for its own negligence or gross negligence; and (2) under workers compensation
law, Warren’s claim against Sherwin cannot be used to make an end-run around the
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protection afforded an employer by the bar against additional claims after the employer’s
workers compensation benefits have been conferred.
A. Indemnity for Sherwin’s Own Negligence and Gross Negligence
It is undisputed that the indemnity agreement in the MSA does not expressly and
conspicuously call for Turner to indemnify Sherwin for Sherwin’s own negligence.
Ordinarily, that would be fatal to ASIC’s indemnity claim. Ethyl Corp. v. Daniel Const.
Co., 725 S.W.2d 705, 708 (Tex. 1987). However, ASIC argues that Turner’s actual
knowledge of the indemnity agreement eliminates both the requirement that indemnity
for Sherwin’s own negligence be expressed and be conspicuous. The Court disagrees.
The indemnity agreement begins with the qualification “TO THE EXTENT OF
ITS NEGLIGENCE OR LEGAL FAULT WHICH DIRECTLY CAUSES THOSE
DAMAGES MORE SPECIFICALLY DESCRIBED HEREIN, CONTRACTOR SHALL
DEFEND, INDEMNIFY AND HOLD HARMLESS OWNER . . . .” D.E. 19-1, ¶ 11.
Without determining whether an actual notice exception applies to the express negligence
rule of Ethyl, the Court holds that this conspicuous qualification of Turner’s indemnity
obligation expressly limits Turner’s liability to its own negligence or fault.
This construction of the indemnity agreement thus leaves open the question
whether ASIC, as Sherwin’s subrogee, can establish that its settlement with Warren
included liability based on responsibilities that Turner had contractually assumed, raising

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questions of Turner’s own negligence or fault.5 What is eliminated from consideration is
only the claim that the full settlement amount is Turner’s obligation on its face.
B. Workers Compensation Bar
While Warren’s claims were asserted exclusively against Sherwin and Ingersoll
(and not Turner), that is not a function of Turner being free of liability for its own
negligence or fault. Rather, it is the result of the statutory workers compensation bar,
preventing Warren from making additional claims against his employer, Turner, after
obtaining workers compensation benefits. Tex. Labor Code § 408.001. The Labor Code
acknowledges that an employee may, instead, make his claims against a third party, such
as Sherwin. In that event, the following applies:
In an action for damages brought by an injured employee . . .
against a third party liable to pay damages for the injury or
death under this chapter that results in . . . 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.
Tex. Labor Code § 417.004 (emphasis added).
Under the MSA, Turner agreed to assume liability for its employee’s “supervision,
safety, and health.” D.E. 19-1, ¶ 4. “Contractor is solely responsible for inspecting the
Work site on a daily basis to ensure that the Work is being done in a safe manner and that
the Work is in compliance with all safety rules and regulations.” Id. The indemnity
5

Turner cites International Proteins Corp. v. Ralston-Purina Co., 744 S.W.2d 932, 934 (Tex. 1988) and Beech
Aircraft Corp. v. Jinkins, 739 S.W.2d 19, 22 (Tex. 1987) as holding that a defendant’s settlement of tort claims does
not preserve contribution rights under common law or the comparative negligence statute. But ASIC is not seeking
statutory or common law contribution. It is seeking Turner’s indemnity for a contractually assumed liability for its
employee’s personal injury claims arising out of work in the course and scope of employment.

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provision further indemnifies against claims brought by Turner’s employees for “any
other matters in any way connected with the Work, or any action on or condition of the
Owner’s premises associated with performance of the Work.” Id., ¶ 11(a).
These provisions clearly contemplate Turner’s liability to Sherwin for allegations
of negligence in the nature of premises liability and allegations for the failure to provide a
safe workplace, the claims Warren asserted and Sherwin settled.

Because Turner

accepted these obligations in a contract executed before Warren’s injury occurred, ASIC,
as Sherwin’s subrogee, is entitled to pursue its breach of contract claim against Turner to
establish what amount of damages, if any, were caused by Turner’s negligence or fault
and are thus covered by the indemnity agreement.
C. Evidentiary Objections
Again, the Court’s decision does not rest on any of the evidence to which
objections were made. Therefore, all evidentiary objections are OVERRULED as moot.
CONCLUSION
For the reasons set out above,
 ASIC’s motion for summary judgment (D.E. 19) is GRANTED IN PART
insofar as the Court holds that Sherwin was an additional insured under
ACE’s general liability policy (through Endorsement #27) and that ASIC,
as Sherwin’s subrogee, is entitled to pursue damages owed under the
policy. ASIC’s motion (D.E. 19) is DENIED IN PART without prejudice
insofar as ASIC seeks reimbursement of the full amount paid in settlement
of the Warren claim.
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 ACE’s cross-motion for summary judgment (D.E. 30) is DENIED in its
entirety.
 Turner’s motion for summary judgment (D.E. 29) is GRANTED IN PART
insofar as the Court holds that Turner has complied with its obligation to
provide insurance under MSA ¶ 10 and Turner is not required to indemnify
Sherwin or Ingersoll for their own negligence or gross negligence under
MSA ¶ 11. The motion (D.E. 29) is DENIED IN PART insofar as Turner
seeks a take-nothing judgment on ASIC’s claim for indemnity; the Court
holds that ASIC may pursue claims against Turner that all or part of the
Warren settlement represents payment for damages caused by Turner’s
negligence or fault.
ORDERED this 18th day of March, 2019.
___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE

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