Lloyd's Syndicate 457 et al v. FloaTEC LLC d/b/a FloaTEC Solutions, LLC
Filing
147
MEMORANDUM AND OPINION entered: American Global Maritime's motion for summary judgment is granted. (Docket Entry Nos. 12324). The Underwriters' request for discovery is denied. (Docket Entry No. 134 at 2930). Final judgment is separately entered. (Signed by Chief Judge Lee H Rosenthal) Parties notified.(leddins, 4)
United States District Court
Southern District of Texas
ENTERED
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
LLOYD’S SYNDICATE 457, et al.,
Plaintiffs,
VS.
FLOATEC LLC, et al.,
Defendants.
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July 09, 2019
David J. Bradley, Clerk
CIVIL ACTION NO. H-16-3050
MEMORANDUM AND OPINION
This case arises from a complex insurance arrangement memorialized in complex policies
filled with conditions, limits, cross-references, exclusions, and exceptions to exclusions. In 2014,
Chevron U.S.A., Inc. was building an oil-drilling platform, known as the “Bigfoot Project,” in the
Gulf of Mexico. Chevron insured the Bigfoot Project with an Offshore Construction Risk Policy
issued by Aon Limited and underwritten by a number of other insurance companies.1
Each underwriter took some Project risk in exchange for a share of the premium. This
arrangement spread the Project’s estimated $2 billion risk across the Underwriters.
The
Underwriters required Chevron to hire a marine warranty surveyor to review and certify the
Project’s specifications and materials before the installation. Chevron hired American Global
Maritime under a Service Contract to meet this coverage condition. The Offshore Construction
Risk Policy insured American Global Maritime as an “Other Assured” against “all risks” of
1
The insurance companies, collectively, the “Underwriters,” are: Lloyd’s Syndicates; Arch
Insurance Company (Europe) Limited; Axis Specialty Europe Limited; General Security Indemnity
Company; Houston Casualty Company; Hyundai Marine and Fire Insurance Company; Infrassure Limited;
International General Insurance Company Limited; International Insurance Company of Hannover Limited;
Lancashire Insurance Company (UK) Limited; Mitsui Sumitomo Insurance Company; National Union Fire
Insurance Company of Pittsburgh, Pennsylvania; Sompo Japan Insurance Incorporated; Statoil Forsikring
A.S.; Tokio Marine and Nichido Fire Insurance Company Limited; and Zurich Insurance PLC UK.
1
physical damage or loss to the Bigfoot Project, including from American Global Maritime’s own
negligence. (Docket Entry No. 98-1 at 56–57, 61).
The Service Contract required American Global Maritime to review the procedures for
installing the Bigfoot Project on the ocean floor, including by checking the calculations and
inspecting the parts, then certifying the installation as ready to proceed. American Global
Maritime issued the certificates. The Bigfoot Project’s installation went wrong, and parts sank to
the ocean floor. The Underwriters paid Chevron $500 million for the loss, then sued Chevron’s
contractors, including American Global Maritime, alleging negligence in certifying the
installation.
After a wave of dispositive motions and rulings, American Global Maritime is the last
defendant, and only negligence claims remain.
American Global Maritime has moved for
summary judgment on the remaining claims, and the Underwriters have responded. (Docket Entry
Nos. 123–24, 134). After the Fifth Circuit decided an appeal affirming another defendant’s
dismissal, the Underwriters and American Global Maritime submitted supplemental briefing.
(Docket Entry Nos. 138, 142). This court has carefully considered the pleadings; the motion,
response, and supplemental briefing; the court’s previous decisions; the Fifth Circuit’s opinion;
the voluminous record, including the policies and contracts; and the applicable law.
Because the undisputed facts show no basis for recovery against American Global
Maritime as a matter of law, judgment is so granted to American Global Maritime, and final
judgment is separately entered. The reasons for these rulings are detailed below.
I.
Background
The facts and procedural history have been explained at length and in detail. (See Docket
Entry No. 111). Because the other defendants have been dismissed and only negligence claims
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remain against American Global Maritime, this brief background is tailored to that party and those
claims.
In 2014, Chevron contracted with a number of companies to build an oil-drilling platform
with tension legs approximately 225 miles south of New Orleans, Louisiana. The Bigfoot Project
was designed to reach through 5,185 feet of water to oil reserves beneath the seabed. Sixteen steel
tethers, or “tendons,” would secure the platform to the seabed. While the tendons were being
installed, they would be clamped to buoyance modules to keep them afloat. Each clamp had 12
bolts.
Chevron obtained insurance for the Bigfoot Project through the Offshore Construction Risk
Policy issued by Aon. This Offshore Construction Risk Policy “insure[d] against all risks of
physical loss” and “damage” for “works executed anywhere in the world in the performance of all
contracts relating to the Project.” (Docket Entry No. 98-1 at 61 (emphasis added)). The covered
“activities” included:
[p]roject studies, engineering, contingencies, design, project management,
procurement, fabrication, construction, prefabrication, storage, load out,
loading/unloading, transportation by land, sea or air . . . , towage, mating,
installation, burying, hook-up, connection and/or tie-in operations, testing and
commissioning, existence, initial operations and maintenance, testing, trials,
pipelaying, trenching, and commissioning.
(Id. at 56). The Offshore Construction Risk Policy listed Chevron as a “Principal Assured[]” and
defined “Other Assureds” to include “Project managers” and “[a]ny other company, firm person
or party, including their contractors and/or sub-contractors and/or manufacturers and/or suppliers,
with whom the Assured(s) named . . . have entered into written contract(s) in connection with the
Project.” (Id.).
As to Other Assureds’ coverage, the Offshore Construction Risk Policy stated that:
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[t]he interest of the Other Assured(s) shall be covered throughout the entire Policy
Period for their direct participation in the venture, unless specific contract(s)
contain provisions to the contrary. The rights of any Assured under this insurance
shall only be exercised through the Principal Assureds. Where the benefits of this
insurance have been passed to an Assured by contract, the benefits passed to that
Assured shall be no greater than such contract allows and in no case greater than
the benefits provided under the insuring agreements, terms, conditions and
exclusions in the Policy.
(Id. at 57).
The Underwriters were subrogated “to all rights which the Assured may have against any
person or other entity, other than Principal Assureds and Other Assureds, in respect of any claim
or payment.” (Id.). The Underwriters waived “rights of subrogation against any Principal
Assured(s) and/or Other Assured(s).” (Id.). The Offshore Construction Risk Policy was “primary
to, and [would] receive no contribution from, any other insurance maintained by or for the
Principal Assured(s) and/or Other Assured(s).” (Id. at 69).
The Offshore Construction Risk Policy required Chevron to hire a marine warranty
surveyor to “review/attend/approve the major marine operations as appropriate.” (Id. at 4–5).
Chevron chose American Global Maritime. (Id. at 4). Chevron and American Global Maritime
entered into a Service Contract that required American Global Maritime to “review, witness,
oversee, observe, approve[,] and certify facilities as fit for transport, installation[,] and duty
pursuant to marine standards and [the Offshore Construction Risk Policy].” (Docket Entry No.
98-2 at 60, 71–72). American Global Maritime indemnified Chevron for up to $5,000,000 of
“damage or loss” arising out of the Service Contract, “prorated to the extent that [American Global
Maritime’s] negligence or fault contributed to the damage or loss.” (Id. at 28). The Service
Contract required American Global Maritime to obtain commercial general liability policy; to
name Chevron and its affiliates as additional insureds under the commercial general liability
insurance; and for the commercial general liability insurance to be “primary with respect to all
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insureds, including additional insureds, and that no other insurance carried by [Chevron] will be
considered as contributory for any loss.” (Id. at 33–34). The commercial general liability
insurance policy would not “limit or reduce [American Global Maritime’s] liability and indemnity
obligations” to Chevron. (Id. at 33).
American Global Maritime obtained a Commercial General Liability Policy that had a $2
million limit and made Chevron an “Additional Insured.” (Docket Entry No. 124-1 at 6, 11). The
Commercial General Liability Policy covered bodily injury and property damage that American
Global Maritime became “legally obligated to pay as damages.” (Id. at 13). The Commercial
General Liability Policy did not cover damages from American Global Maritime’s “professional
services,” but it did cover “operations in connection with construction work performed by
[American Global Maritime] or on [its] behalf.” (Id. at 52). As to Additional Insureds, such as
Chevron, the Commercial General Liability Policy was “primary and
NON-CONTRIBUTORY,”
meaning “that other available insurance will apply as excess and will not contribute as primary to
the insurance provided by this policy.” (Id. at 30–31, 35 (emphasis in original)).
American Global Maritime also had a Premier Design Professionals Liability Insurance
Policy. This Professional Liability Policy covered bodily injury or property damage from “any
actual or alleged act, error or omission committed or attempted solely in the performance of or
failure to perform Design Professional Services.” (Docket Entry No. 124-2 at 8, 11, 14). “Design
Professional Services” meant those services “in the Insured’s capacity as an architect, engineer,
land surveyor, landscape architect, construction manager, interior designer, land planner, space
planner, expert witness, or technical consultant” in any of those areas. (Id. at 14). American
Global Maritime’s Professional Liability Policy was “in excess of the amount of . . . any other
insurance or indemnification available to the Insured.” (Id. at 31–32).
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On May 16, 2015, American Global Maritime issued a certificate of approval stating that
it had “reviewed procedures, checked calculations and inspected preparation for float over and
installation of . . . the tendons . . . . [and] the operation is hereby approved.” (Docket Entry No.
84 at 246). The tendon installation went forward. On May 29, the tendons were connected to a
foundation on the seabed and to the buoyancy modules. Nine of the sixteen tendons sank before
they could be secured to the drilling platform. The remaining seven tendons were taken back to
shore. An inspection report stated that the clamp bolts had failed, causing the tendons to detach
from the buoyancy modules and sink. The Underwriters paid Chevron about $500 million for the
loss.
The Underwriters then sued American Global Maritime, asserting negligence and negligent
misrepresentation claims, among others. (Docket Entry No. 32 at 16–18). The Underwriters
alleged that American Global Maritime was negligent in failing to appoint competent “personnel”
and in failing “to identify and correct the glaring and obvious design errors that led to the collapse
of the tendons.” (Id. at 11). These “errors and omissions,” alleged the Underwriters, “fell far short
of the required standard of care and constitute negligence.”
(Id. at 16).
The negligent
misrepresentation allegation was based on American Global Maritime’s breach of its “legal duty
to review documents and procedures and ensure that they were correct before approving them.”
(Id. at 17).
The Underwriters alleged that American Global Maritime made material
misrepresentations by approving the tendon design and installation and by failing to “inform [the]
Underwriters of the increasing nature and degree of risk as the installation project ran far outside
its projected timelines.” (Id.). The Underwriters sought actual damages for “the loss of the
tendons, including but not limited to, costs to retrieve and store standing tendons and to replace
and reinstall all of the lost tendons and [buoyancy modules].” (Id. at 16, 21). The Underwriters
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described the “nature and type of [their] harm” as the “catastrophic failure of [] the construction
installation project.” (Id. at 17).
American Global Maritime moved to dismiss for failure to state a plausible claim, arguing
that the antisubrogation rule barred the Underwriters’ claims. (Docket Entries No. 29–30). The
court granted the motion in part and denied it in part, finding that American Global Maritime was
an “Other Assured” under the Offshore Construction Risk Policy; the Underwriters had waived
subrogated claims against “Other Assureds”; and the Underwriters asserted direct, not subrogated,
tort claims against American Global Maritime. (Docket Entry No. 63 at 18–21).
The court’s July 2017 Memorandum and Opinion explained that:
[a] Louisiana court might reject the Underwriters’ direct tort claims against
American Global Maritime as impermissible artful pleading, or find that, in this
case, public policy strongly militated against concluding that American Global
Maritime owed the Underwriters a tort duty. Or a Louisiana court could find that
this unusual set of facts justified an extension of the antisubrogation rule to bar any
claim that, while not pleaded as a subrogated claim with the insurer standing in the
shoes of its insured, would nonetheless have the functional effect of reimbursing an
insurer for payments it made under the policy. But American Global Maritime has
provided neither authority nor argument to support these approaches. . . . American
Global Maritime is free to provide authority and argument in support of its positions
at summary judgment.
(Id. at 21).
American Global Maritime predictably moved for summary judgment. It argued that the
antisubrogation rule barred the Underwriters’ claims; the Louisiana confusion doctrine
extinguished claims; and it did not owe the Underwriters a tort duty under Louisiana law.
(Document Entry No. 98 at 9–10). The Underwriters responded that American Global Maritime
is not an “Other Assured” under the Offshore Construction Risk Policy; the antisubrogation rule
does not bar direct tort claims; the Offshore Construction Risk Policy insured for property damage,
not liability, and so the confusion doctrine did not apply; the insurance and indemnity clauses in
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the Service Contract disclaimed coverage under the Offshore Construction Risk Policy; and
American Global Maritime breached duties under theories of negligent misrepresentation and
negligent-professional undertaking. (Docket Entry No. 106 at 10–12).
This court granted summary judgment for some of the claims against American Global
Maritime, but denied it as to the claims sounding in negligence. (Docket Entry No. 111 at 36–41).
The court had previously determined that “the anti-subrogation rule bars only subrogated actions,”
not direct tort claims, and found that “the record and arguments provide[d] no basis” for changing
that decision. (Id. at 41). But the court noted that Louisiana’s confusion doctrine could extinguish
the negligence claims if the Underwriters had a duty to indemnify American Global Maritime for
the losses sought through those negligence claims. (Id. at 43–44). Noting that the Offshore
Construction Risk Policy permitted American Global Maritime to alter coverage through contract,
and the Service Contract required American Global Maritime to indemnify Chevron and obtain
commercial general liability insurance, the court declined to rule on the confusion doctrine until
the parties addressed these aspects of the negligence claims. (Id. at 46–55). The court denied the
summary judgment motion, without prejudice, allowing American Global Maritime to try again.
This motion followed.
American Global Maritime again argues that the Louisiana confusion doctrine extinguishes
the Underwriters’ negligence claims and that the antisubrogation rule bars them. (Docket Entry
No. 124 at 12–25). The Underwriters respond that neither the confusion doctrine nor the
antisubrogation rule applies because of American Global Maritime’s contractual arrangement with
Chevron and because the negligence claims are direct claims. (Docket Entry No. 134 at 6–8). The
parties’ arguments are examined in detail below.
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II.
The Legal Standard on Summary Judgment
“Summary judgment is appropriate only when ‘the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.’”
Shepherd on Behalf of Estate of Shepherd v. City of Shreveport, 920 F.3d 278, 282–83 (5th Cir.
2019) (quoting FED. R. CIV. P. 56(a)). “A material fact is one that might affect the outcome of the
suit under governing law,” and “a fact issue is genuine if the evidence is such that a reasonable
jury could return a verdict for the non-moving party.” Renwick v. PNK Lake Charles, L.L.C., 901
F.3d 605, 610 (5th Cir. 2018) (quotations omitted). The moving party “always bears the initial
responsibility of informing the district court of the basis for its motion,” and identifying the record
evidence “which it believes demonstrate the absence of a genuine issue of material fact.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986).
“Where the non-movant bears the burden of proof at trial, ‘the movant may merely point
to the absence of evidence and thereby shift to the non-movant the burden of demonstrating that
there is an issue of material fact warranting trial.’” Kim v. Hospira, Inc., 709 F. App’x 287, 288
(5th Cir. 2018) (alteration omitted) (quoting Nola Spice Designs, L.L.C. v. Haydel Enters., Inc.,
783 F.3d 527, 536 (5th Cir. 2015)). The moving party must demonstrate the absence of a genuine
issue of material fact, but it need not negate the elements of the nonmovant’s case. Austin v.
Kroger Tex., L.P., 864 F.3d 326, 335 (5th Cir. 2017). “If the moving party fails to meet [its] initial
burden, the motion must be denied, regardless of the nonmovant’s response.” Pioneer Expl.,
L.L.C. v. Steadfast Ins. Co., 767 F.3d 503, 511 (5th Cir. 2014) (quoting Kee v. City of Rowlett, 247
F.3d 206, 210 (5th Cir. 2001)).
“When the moving party has met its Rule 56(c) burden, the nonmoving party cannot
survive a summary judgment motion by resting on the mere allegations of its pleadings.” Duffie
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v. United States, 600 F.3d 362, 371 (5th Cir. 2010). The nonmovant must identify specific
evidence in the record and articulate “the precise manner in which” that evidence supports that
party’s claim. Willis v. Cleco Corp., 749 F.3d 314, 317 (5th Cir. 2014) (quoting Forsyth v. Barr,
19 F.3d 1527, 1537 (5th Cir. 1994)). “A party cannot defeat summary judgment with conclusory
allegations, unsubstantiated assertions, or only a scintilla of evidence.” Lamb v. Ashford Place
Apartments L.L.C., 914 F.3d 940, 946 (5th Cir. 2019) (quotation omitted). In deciding a summary
judgment motion, “the evidence of the nonmovant is to be believed, and all justifiable inferences
are to be drawn in his or her favor.” Waste Mgmt. of La, L.L.C. v. River Birch, Inc., 920 F.3d 958,
972 (5th Cir. 2019) (alterations omitted) (quoting Tolan v. Cotton, 572 U.S. 650, 656 (2014) (per
curiam)).
III.
Analysis
The first step is to look to the Policies, the Service Contract, and the parties’ contentions
about what they mean. The second step is to analyze whether the confusion doctrine applies. The
third step is to consider antisubrogation and whether the Underwriters’ negligence claims, which
are pleaded as direct causes of action, are prohibited under the rule that an insurer cannot sue its
insured for a covered risk.
A.
The Policies and Service Contract
Like many insurance disputes involving a number of named and other insureds and layers
of insurance, piecing the insurance policies and related contracts together is a difficult puzzle with
a lot of money turning on how it fits together. The puzzle pieces include who must pay for the
damage and losses to the Bigfoot Project; in what order they must pay; and whether the
Underwriters may recover against American Global Maritime for negligently causing the damage
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and losses. Some points, so basic that they deserve repeating, are set out below; the parties know
them well, but the court finds the reminders helpful.
the Offshore Construction Risk Policy insured Chevron and American Global Maritime
against “all risks of” damage to the Bigfoot Project;
the Service Contract laid out American Global Maritime’s duties, obligations, and
requirements as Chevron’s marine warranty surveyor for the Project;
the Commercial General Liability Policy insured American Global Maritime for property
damage or bodily injury that American Global Maritime became “legally obligated to pay,”
but not for liability “arising out of the rendering of or failing to render any professional
services”; and
the Professional Liability Policy insured American Global Maritime against liability for its
services “as an architect, engineer, land surveyor, landscape architect, construction
manager, interior designer, land planner, space planner, expert witness, or technical
consultant.”
(Docket Entry No. 124-2 at 14; Docket Entry No. 124-1 at 13, 52; Docket Entry No. 98-2; Docket
Entry No. 98-1 at 56, 61).
Louisiana contract-interpretation principles apply. See 43 U.S.C. § 1333(a)(2)(A); (Docket
Entry No. 111 at 13; Docket Entry No. 63 at 3–4). “An insurance policy is a contract between the
parties and should be construed employing the general rules of interpretation of contracts.” Myers
v. Welch, 233 So. 3d 49, 55 (La. App. 1st Cir. 2017). Under Louisiana law, as in many states, all
contracts, including insurance policies, are “interpreted in a common-sense fashion.” Clovelly Oil
Co., LLC v. Midstates Petro. Co., LLC, 112 So. 3d 187, 192 (La. 2013) (quoting Prejean v.
Guillory, 38 So. 3d 274, 279 (La. 2010)). “Word and phrases . . . [must] be construed using their
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generally prevailing meaning, unless the words have acquired a technical meaning.” Myers, 233
So. 3d at 55. A contract may not “be interpreted in an unreasonable or a strained manner so as to
enlarge or to restrict its provisions beyond what is reasonably contemplated by its terms or so as
to achieve an absurd conclusion.” Id. If the language is “clear, unambiguous, and expressive of
the intent of the parties, the agreement must be enforced as written.” Id.; see LA. CIV. CODE ANN.
art. 2046. Each provision is to be read “in light of the other provisions” to consture “the contract
as a whole.” Clovelly Oil, 112 So. 3d at 192 (citing LA. CIV. CODE ANN. art. 2050).
The Offshore Construction Risk Policy, the Commercial General Liability Policy, and the
Service Contract reflect the Bigfoot Project’s scale and expense. The Project involved an
estimated $2 billion, with commensurate risks of loss. (Docket Entry No. 98-1 at 24–25, 93, 102).
Chevron paid the Underwriters $30,176,582 in premiums to insure against many of those risks.
(Id. at 38). The Underwriters split Chevron’s premium payment and spread the risks among
themselves, so that no insurer had the full burden. The Underwriters agreed that their insurance
would be “primary” and that they would “receive no contribution from[] any other insurance” for
damage or loss to the Bigfoot Project. (Id. at 69).
The Underwriters’ insuring obligations were expansive. The Offshore Construction Risk
Policy had a $2 billion limit for “any one occurrence” and insured against “all risks of” physical
loss or damage to “works executed anywhere in the world in the performance of all contracts
relating to the Project.” (Id. at 24–25, 61, 56). This “all risk” insurance covered “fortuitous
losses,” including property damage caused by negligence. See U.S. Indus., Inc. v. Aetna Cas. &
Sur. Co., 690 F.2d 459, 461–62 (5th Cir. 1982); Morrison Grain Co., Inc. v. Utica Mut. Ins. Co.,
632 F.2d 424, 431 (5th Cir. 1980). But the Offshore Construction Risk Policy did not cover legal
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liabilities arising from the Bigfoot Project work. The Policy instead expressly crossed out
“liabilities” coverage. (Docket Entry No. 98-1 at 56).
The Offshore Construction Risk Policy extended coverage to “Other Assureds”—any
person that “entered into written contract(s) [with Chevron] in connection with the Project”—and
the Underwriters waived their subrogation rights against both Chevron and the Other Assureds.
(Id. at 56–57). Although the Underwriters maintain that American Global Maritime is not an
“Other Assured” under this definition, (Docket Entry No. 134 at 29), American Global Maritime’s
written Service Contract with Chevron makes clear that American Global Maritime is an “Other
Assured.” (See Docket Entry No. 111 at 41; Docket Entry No. 63 at 15); cf. Lloyd’s Syndicate 457
v. FloaTEC, L.L.C., 921 F.3d 508, 518–19 & n.9 (5th Cir. 2019). A coverage waiver or
indemnification obligation would change the extent of American Global Maritime’s coverage, but
not its Other Assured status. The Underwriters point out that only Chevron could exercise “[t]he
rights of any Assured,” but this does not change American Global Maritime’s status under the
Offshore Construction Risk Policy. (Docket Entry No. 98-1 at 57).
As an Other Assured, American Global Maritime was covered for damage or loss to any
“property destined to become a part of the completed [P]roject, or used up or consumed in the
completion of the [P]roject.” (Docket Entry No. 98-1 at 61). The Offshore Construction Risk
Policy allowed Other Assureds to alter this coverage, with restrictions:
The interest of the Other Assured(s) shall be covered throughout the entire Policy
Period for their direct participation in the venture, unless specific contract(s)
contain provisions to the contrary. The rights of any Assured under this insurance
shall only be exercised through the Principal Assureds. Where the benefits of this
insurance have been passed to an Assured by contract, the benefits passed to that
Assured shall be no greater than such contract allows and in no case greater than
the benefits provided under the insuring agreements, terms, conditions and
exclusions in the Policy.
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(Id. at 57). The Underwriters contend that this and related provisions show that American Global
Maritime “contractually waived any coverage under the [Offshore Construction Risk Policy] by
agreeing to indemnify and insure Chevron and make Chevron’s insurance non-contributory.”
(Docket Entry No. 134 at 11).
In its Service Contract with Chevron, American Global Maritime agreed to “[i]ssue
Certificates of Approval to proceed for individual tendon installations,” which would certify that
each tendon “meets marine and insurance requirements and is ready to commence the offshore
installation activities.” (Docket Entry No. 98-2 at 71–72). American Global Maritime agreed to
indemnify Chevron for up to $5,000,000 of damages or losses from the Service Contract. (Id. at
28). The Service Contract required American Global Maritime to obtain:
Commercial General Liability (Bodily Injury and Property Damage) Insurance,
including the following supplemental coverages: Contractual Liability to cover the
liabilities assumed in this Contract; Products and Completed Operations;
Explosion, Collapse and Underground Hazards; and Sudden and Accidental
Pollution. The policy territory coverage must include all areas where the Services
are to be performed. The policy limits must not be less than US$2,000,000
combined single limit per occurrence.
(Id. at 33). This Commercial General Liability Insurance was to name Chevron and its affiliates
as additional insureds, be “primary with respect to all insureds, including additional insureds,” and
state that “no other insurance carried by [Chevron] will be considered as contributory for any loss.”
(Id. at 34). The Commercial General Liability Insurance limits did not affect American Global
Maritime’s “liability and indemnity obligations in th[e Service] Contract.” (Id. at 33).
The Commercial General Liability Policy that American Global Maritime obtained
covered bodily injury or property damage that it became “legally obligated to pay” because of an
“OCCURRENCE,” but excluded injuries or damages from “PROFESSIONAL SERVICES.” (Docket Entry
No. 124-1 at 13, 52 (emphasis in original)). As the Service Contract required, the Commercial
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General Liability Policy made Chevron an Additional Insured and stated that “this policy will be
primary and NON-CONTRIBUTORY if [American Global Maritime] and the Additional Insured have
agreed [so].” (Id. at 31 (emphasis in original)). The Commercial General Liability Policy defined
“NON-CONTRIBUTORY” to mean “that other available insurance will apply as excess and will not
contribute as primary to the insurance provided by this policy.” (Id. at 35 (emphasis in original)).
The Offshore Construction Risk Policy, the Service Contract, and the Commercial General
Liability Policy all contained primary and noncontributory clauses. The Underwriters argue that
these clauses in the Service Contract and in the Commercial General Liability Policy waived or
abrogated American Global Maritime’s coverage under the Offshore Construction Risk Policy.
While the terms “primary” and “contribution” have different meanings, both concern the
relationships and rights of insurers covering the same risks for the same insured.
An insurer that issues a “primary” policy has to “pay out its entire limit first, followed by
payments under policies that were intended to be excess.” Certain Underwriters v. Ill. Nat’l Ins.
Co., 99 F. Supp. 3d 400, 404 (S.D.N.Y. 2015). “An insurer providing excess coverage is generally
only liable for the amount above what might be collected from primary insurance.” N. Am.
Capacity Ins. Co. v. Colony Specialty Ins. Co., 273 F. Supp. 3d 711, 715 (S.D. Tex. 2017); see
Penton v. Hotho, 601 So. 2d 762, 767 (La. App. 1st Cir. 1992) (“[T]he primary insurance . . . must
be exhausted before the excess policy is required to contribute anything.”). The term “primary”
relates to the order of payment among insurers covering the same risk.
In contrast, “the right to contribution arises when several insurers are obligated to
indemnify or defend the same loss or claim, and one insurer has paid more than its share of the
loss or defended the action without any participation by the others.” 15 COUCH ON INSURANCE
§ 217:4 n.25 (3d ed. 2019); see Am. Indem. Lloyds v. Travelers Prop. & Cas. Ins. Co., 335 F.3d
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429, 435 (5th Cir. 2003). The insurer that paid a loss or defended an action may “seek payment
from the other insurers of their fair share of the loss.” 15 COUCH
ON INSURANCE
§ 217:4.
“[C]ontribution affects only the relationship of the [insurers] among themselves, and has no direct
effect on the rights of a given insured,” because “the insurers’ contractual obligation to the
policyholder is to cover the full extent of the policyholder’s liability up to the policy limit.” Id.
§ 217:4 & n.28.
If a policy is primary and noncontributory, the insurer “is responsible for indemnifying an
insured up to the applicable policy limit before any other insurer covering the same liability is
obligated to indemnify, and the latter insurers are not obligated to share in the primary and noncontributory insurer’s costs.” U.S. Liab. Ins. Co. v. First Mercury Ins. Co., No. C. 15-2293, 2015
WL 4911820, at *1 n.1 (N.D. Cal. Aug. 17, 2015); see First Mercury Ins. Co. v. Great Divide Ins.
Co., 241 F. Supp. 3d 1028, 1037 n.3 (N.D. Cal. 2017) (“A non-contributing or non-contributory
policy does not seek contributions from other policies covering the same risk.”); RSC Equip.
Rental, Inc. v. Cincinnati Ins. Co., 54 F. Supp. 3d 480, 488 (W.D. Va. 2014) (“[T]he primary and
noncontributory language suggests that . . . the insurance . . . must pay before other applicable
policies . . . and without seeking contribution from other policies that also claim to be primary.”
(internal quotation marks omitted)).
Because this case does not involve loss allocation among insurers, the court need not dive
into what happens when an insured has multiple primary-and-noncontributory policies, but the
insurers generally share the loss. See Emp’rs Cas. Co. v. Emp’rs Commercial Union Ins. Co., 632
F.2d 1215, 1218 (5th Cir. 1980) (“In a case where two or more insurance carriers have primary
coverage, they share the liability either equally or in proportion to the limits of each policy as
compared to the combined limits of all policies.”); 15 COUCH ON INSURANCE § 219:23 (“Where
16
several policies of marine insurance are issued upon the same property and risk, and contain no
clause as to apportionment of the liability of the insurers, the insured may recover a proportionate
part of the loss from each of the insurers.”).
What is important is that under the primary and noncontributory clauses in the Offshore
Construction Risk Policy, the Service Contract, and the Commercial General Liability Policy, the
Offshore Construction Risk Policy and Commercial General Liability Policy insurers must pay
first and the insurers cannot seek payment from other insurers for the same risks. Even assuming
that the Service Contract and the Commercial General Liability Policy turned the Offshore
Construction Risk Policy into excess coverage, which is far from clear,2 American Global
Maritime would still be entitled to Offshore Construction Risk Policy coverage after the
Commercial General Liability Policy limit was reached. See Certain Underwriters, 99 F. Supp.
3d at 404 (“[A] policy that identifies itself as primary must pay out its entire limit first, followed
by policies that were intended to be excess.”).
The noncontribution clauses have “no direct effect on the rights of” American Global
Maritime. 15 COUCH
ON INSURANCE
§ 217:4 (“The principle of contribution affects only the
relationship of the co-obligors among themselves, and has no direct effect on the rights of a given
insured.”). The Underwriters’ obligation is to provide coverage “up to the policy limit.” Id.
§ 217:4 n.28. The Underwriters’ argument that the primary and noncontributory clauses waived
2
The Offshore Construction Risk Policy permitted American Global Maritime to alter coverage
by contract, and the Commercial General Liability Policy stated that “other available insurance will apply
as excess and will not contribute as primary.” (Docket Entry No. 124-1 at 31, 35). But neither the Service
Contract nor the Commercial General Liability Policy contains a clause stating that the Offshore
Construction Risk Policy would be considered excess.
17
or abrogated American Global Maritime’s Offshore Construction Risk Policy coverage is
unpersuasive.3
The Underwriters’ indemnification argument has a similar problem. The Underwriters
argue that the “Fifth Circuit has held . . . that [an] indemnity agreement controls over the terms of
the policies purchased to support the indemnity obligations when determining which policies
apply,” citing American Indemnity Lloyds v. Travelers Property and Casualty Insurance
Company, 335 F.3d 429 (5th Cir. 2003). (Docket Entry No. 134 at 7). In American Indemnity,
the Fifth Circuit identified the Texas rule as requiring that indemnity agreements have “controlling
effect” over “‘other insurance’ or similar clauses” allocating losses among insureds. 335 F.3d at
436. Assuming that the Louisiana courts would recognize this rule, the Service Contract “capped”
American Global Maritime’s liability at $5,000,000. (Docket Entry No. 98-2 at 28). Once that
cap was reached and the Commercial General Liability Policy limits were exhausted, American
Global Maritime would be entitled to coverage under the Offshore Construction Risk Policy. The
indemnification clause did not shift the “entire loss” to American Global Maritime, as the
Underwriters argue. Am. Indem., 335 F.3d at 436 (quoting 15 COUCH ON INSURANCE § 219:1 (3d
ed. 1999)).
Neither the primary-and-noncontributory nor the indemnification clauses eliminated
American Global Maritime’s Offshore Construction Risk Policy coverage. At most, those clauses
required American Global Maritime to pay $5,000,000—about one percent of what the
3
The parties argue about whether American Global Maritime’s work fell under the Commercial
General Liability Policy’s professional-services exclusion, but the court need not resolve that issue. Even
if the Commercial General Liability Policy covered the losses from American Global Maritime’s allegedly
negligent work on the Bigfoot Project, American Global Maritime would still be entitled to Offshore
Construction Risk Policy coverage after the Commercial General Liability Policy’s $2,000,000 limit was
reached. See 15 COUCH ON INSURANCE § 217:16 (“An insurer seeking indemnification in accordance with
a provision in a contract between its insured and another party has no greater rights than are provided for
in the contract.”).
18
Underwriters paid for the losses from the tendon detachment—before the Offshore Construction
Risk Policy coverage kicked in.
B.
The Confusion Doctrine
The fuller record, the parties’ additional argument and authorities, and their briefs support
finding that the confusion doctrine does not extinguish the Underwriters’ negligence claims against
American Global Maritime. Under the confusion doctrine, “[w]hen the qualities of obligee and
obligor are united in the same person, the obligation is extinguished by exhaustion.” LA. CIV.
CODE ANN. art. 1903. “[W]hen a person is placed in the position of owing money to herself, the
obligation is extinguished by confusion.” Goers v. Mayfield, 195 So. 3d 1, 2 (La. App. 2d Cir.
2016); see Langley v. Police Jury of Calcasieu Par., 201 So. 2d 300, 304–05 (La. App. 3d Cir.
1967) (en banc); see, e.g., Matter of Dibert, Bancroft & Ross Co., Ltd., 117 F.3d 160, 170–71 (5th
Cir. 1997) (the confusion doctrine applies, for example, when a “promissory note that is secured
by [a] mortgage is acquired by its maker” or “an encumbered building is acquired by the
mortgagee” (emphasis omitted)). The confusion doctrine requires that the same person “acquire
the full and perfect ownership of both sides of the obligation.” Langley, 201 So. 2d at 305
(quotation omitted). The doctrine may apply to extinguish a contract or tort cause of action.
McAuslin v. Grinnell Corp., Civ. A. No. 97-775, 2000 WL 1191073, at *3 (E.D. La. Aug. 22,
2000).
The Underwriters argue that the Offshore Construction Risk Policy covered damage to the
Bigfoot Project from all risks, including negligence, but the Policy did not cover liability for
causing that damage through negligence. (Docket Entry No. 134 at 11–13). The court agrees.
The Offshore Construction Risk Policy covered “physical damage . . . incurred by the Assureds,”
but it did not provide “liabilities” coverage. (Docket Entry No. 98-1 at 56). The Offshore
19
Construction Risk Policy “provides property insurance for” the Bigfoot Project and “reimburses
[Chevron], or any party with an insurable interest . . . for the accidental loss, damage, or destruction
of the property, regardless of fault.” Data Specialties, Inc. v. Transcon. Ins. Co., 125 F.3d 909,
914 (5th Cir. 1997). It did not cover Chevron’s or an Other Assured’s liability. (See Docket Entry
No. 98-1 at 61 (“[T]his policy insures against all risks of physical loss of and/or physical damage
to the property covered.”)). The Underwriters are not obligated to cover American Global
Maritime for the losses or damages it was obligated to pay from its work on the Bigfoot Project.
The Underwriters assert negligence against American Global Maritime to recover the
payments they made to Chevron under the Offshore Construction Risk Policy. While this claim
runs against the rule that “[g]enerally, insureds may not be made liable to their insurers for covered
losses,” it does not implicate the confusion doctrine. Wal-Mart Stores, Inc. v. RLI Ins. Co., 292
F.3d 583, 593 (8th Cir. 2002). Because the Underwriters have no duty to pay for American Global
Maritime’s negligence, they are not on both sides of the obligation, and confusion does not
extinguish their negligence claim. See Langley, 201 So. 2d at 305. Whether the Underwriters are
otherwise precluded from seeking to recover from an “Other Assured” for a covered risk, after
waiving subrogation rights, is a separate issue.
C.
Subrogation
Insurance policies often give the insurer subrogation rights allowing that insurer to assert
the insured’s legal rights against a third party. See AGIP Petroleum Co., Inc. v. Gulf Island
Fabrication, Inc., 920 F. Supp. 1318, 1326 (S.D. Tex. 1996) (collecting cases). A subrogated
claim is one asserted by the insurer, standing in the insured’s shoes, to recover against a third party
that caused the loss paid by the insurer. See id.; White v. Allstate Ins. Co., No. 95-55824, 1996
WL 601476, at *7 (9th Cir. Oct. 18, 1996) (per curiam) (“Subrogation is an equitable doctrine
20
which entitles the insurer to ‘stand in the shoes’ of its insured to seek indemnification from third
parties whose wrongdoing has caused a loss for which the insurer is bound to reimburse.”); 16
COUCH ON INSURANCE § 222:5 (“[O]n paying a loss, an insurer is subrogated in a corresponding
amount to the insured’s right of action against any other person responsible for the loss, such that
the insurer is entitled to bring an action against this third party whose negligent or other tortious
or wrongful conduct caused the loss.”).
It is “fundamental” that “an insurer may not sue its own insured to recover under the
insurance policy.” Peavey Co. v. M/V ANPA, 971 F.2d 1168, 1177 (5th Cir. 1992) (collecting
cases). An insurer, even by subrogation, cannot “recover against its insured or an additional
assured any part of its payment for a risk covered by the policy.”4 Peavey, 971 F.2d at 1177;
Chenevert v. Travelers Indem. Co., 746 F.3d 581, 587 (5th Cir. 2014) (“[T]he prohibition of
insurers’ subrogation against their own insured applies to claims arising from the very risk for
which the insured was covered by that insurer.” (quotation omitted)); Dow Chem. Co. v. M/V
Roberta Tabor, 815 F.2d 1037, 1043 (5th Cir. 1987) (“[A]n insurer cannot by way of subrogation
recover against its insured or an additional assured any part of its payment for a risk covered by
the policy.”); Shelter Mut. Ins. Co. v. State Farm Mut. Auto. Ins. Co., 993 So. 2d 236, 240 (La.
App. 1st Cir. 2008) (“It is well settled that an insurer cannot be subrogated against its own
insured”); Stafford Metal Works, Inc. v. Cook Paint & Varnish Co., 418 F. Supp. 56, 58 (N.D. Tex.
1976) (“[A]n insurer cannot subrogate itself against its own insured where the injury was caused
by the negligence of the insured himself.”).
4
Some cases suggest that an insurer may assert a subrogated claim against an insured or additional
assured if there is “express policy language” allowing it. See, e.g., U.S. Fid. & Guar. Co. v. Williams, 676
F. Supp. 123, 126 (E.D. La. 1987). A leading treatise has observed: “[w]hile there is some indication that
a sufficiently clear agreement between insurer and insured . . . might be effective to allow subrogation
against the insured, examination of such statements usually reveals that it is reimbursement from the
insured, not subrogation against a third party, that really is at issue.” 16 COUCH ON INSURANCE § 224:1.
21
The prohibition on subrogation against an insured has roots in logic, equity, and public
policy. See Stafford Metal Works, 418 F. Supp. at 58; cf. Nat’l Union Fire Ins. Co. of Pittsburgh
v. Hartford Ins. Co. of Midwest, 248 A.D.2d 78, 85 (N.Y. App. Div. 1998). One justification is
that an insurer “cannot be subrogated against an insured because an insurer who seeks subrogation
stands in the shoes of the insured,” and an insured cannot sue itself. Aldous v. Darwin Nat’l
Assurance Co., 851 F.3d 473, 488 (5th Cir. 2017) (quotation omitted). Another is that subrogation
against an insured “would permit an insurer, in effect, to pass the incidence of the loss, either
partially totally, from itself to its own insured, and thus avoid the coverage which its insured
purchased.” AGIP Petroleum, 920 F. Supp. at 1326 (quoting Taylor v. Bunge Corp., 845 F.2d
1323, 1329 (5th Cir. 1988)). Allowing an insurer to assert subrogated claims against its insured
threatens the relationship between them; gives the insurer an incentive “to secure information . . .
under guise of policy provisions . . . for later use in a subrogated action against the insured”; and
creates an appearance of “judicial sanction to breach the policy of insurance.” Stafford Metal
Works, 418 F. Supp. at 58–59; White, 1996 WL 601476, at *7 (“Public policy requires this . . . rule
both to prevent the insurer from passing the incidence of loss to its insured and to guard against
the potential conflict of interest that may affect the insurer’s incentive to provide a vigorous
defense for its insured.”).
Even if subrogated claims are barred, “there may be causes of action by an insurer outside
the policy.” Peavey, 971 F.2d at 1177. Two cases, United States v. Parish of St. Bernard, 56 F.2d
1116 (5th Cir. 1985), and Peavey Co. v. M/V ANPA, 971 F.2d 1168, are instructive.
In St. Bernard, the United States sued Louisiana parishes “to recover for any property the
parishes owned and insured under the [National Flood Insurance Program],” because the parishes
allegedly violated contract and regulatory obligations.
22
756 F.2d at 1119.
While “it is a
fundamental principle of insurance law that an insurer may not sue its own insured on the insurance
policy,” the court stated, “there may be causes of action by an insurer outside the policy, i.e. fraud.”
Id. at 1127. The court declined to foreclose the claims “prior to any real discovery having
occurred,” cautioning that “none of the claims that may be articulated in subrogation actions
against the parishes are available to the United States as an insurer.” Id. at 1128. The court also
warned that “any action by the United States against the parishes for the value of the property
which the parishes insured under the [policies] must not be in violation of the fundamental
principle of insurance law that an insurer cannot sue its insured.” Id.
In Peavey Co. v. M/V ANPA, a ship crashed into a wharf on the Mississippi River, and the
ship owner blamed the company that had designed the ship’s fumigation system. 971 F.2d at
1170–71. The fumigation company failed to notify its insurer of the potential claim until after the
ship’s cargo had been emptied, the surveys completed, and the ship had sailed away. Id. The
shipowners sued, and the insurer paid to defend and settle the case. Id. The insurer then sued the
fumigation company to recover the $675,000 paid in defense and settlement costs, contending that
the untimely notice had caused prejudice. Id. at 1171. Citing St. Bernard, the panel noted that
“there may be causes of action by an insurer outside the policy.” Id. at 1177. Because the insurer
“did not volunteer itself to pay the settlement fees” and “reserved its rights to dispute the coverage
matter,” the action was “not one of subrogation but one of reimbursement.” Id. The court held
that the suit was “not against public policy.” Id.
St. Bernard and Peavey carved narrow paths for insurers. St. Bernard recognized that an
insurer may, in “extremely limited” circumstances, sue its insured “outside the policy” to recover
for losses. 756 F.2d at 1127–28. The St. Bernard court noted that “actions for fraud have
traditionally been recognized at common law as a means of recovery from insureds by their
23
insurers,” without suggesting what other claims might be permissible. Id. at 1128. Peavey has
been described as allowing an insurer to “bring a reimbursement action against its insured for
recovered property or an insurer[’]s overpayment for losses, even where a subrogation action is
forbidden.” Adams v. Unione Mediterranea Di Sicurta, 364 F.3d 646, 656 (5th Cir. 2004) (citing
16 COUCH ON INSURANCE § 226:4 (3d ed. 2000)); see also Vesta Ins. Co. v. Amoco Prod. Co., 986
F.2d 981, 987 (5th Cir. 1993) (citing Peavey, 971 F.2d at 1176–78)). Reimbursement is “the
contractual right of an insurer to a refund directly from the insured when the insured also receives
payment for those same expenses from another source.” 16 COUCH ON INSURANCE § 226:4.
The related antisubrogation rule means that “once an insurance underwriter waives
subrogation as to a named insured, the underwriter cannot recover from that insured any portion
of the proceeds paid to settle a loss covered by the policy.” Hvide Marine Int’l, Inc. v. Emp’rs Ins.
of Wausau, No. 88 CIV 1523, 1989 WL 140280, at *5 (S.D.N.Y. Nov. 16, 1989) (citing Marathon
Oil Co. v. Mid-Continent Underwriters, 786 F.2d 1301, 1304 (5th Cir. 1986); Wiley v. Offshore
Painting Contractors, Inc., 711 F.2d 602 (5th Cir. 1983)). “[T]he rule applies even when [an]
additional assured is not covered under the policy for the specific risk at issue.” FloaTEC, 921
F.3d at 521; see Lanasse v. Travelers Ins. Co., 450 F.2d 580, 585 (5th Cir. 1971).
In the seminal case, Marathon Oil Co. v. Mid-Continent Underwriters, the Fifth Circuit
held:
when underwriters issue a policy covering an additional assured and waiving “all
subrogation” rights against it, they cannot recoup from the additional assured any
portion of the sums they have paid to settle a risk covered by the policy, even on
the theory that the recoupment is based on the additional assured’s exposure for
risks not covered by the policy.
786 F.2d at 1302; see FloaTEC, 921 F.3d at 521.
24
Marathon Oil Co. had chartered a ship from a ship-rental company. The ship-rental
company purchased insurance from underwriters covering Marathon as an additional assured, but
“only for claims arising out of the operation of the vessel,” and waiving the underwriters’ “rights
of subrogation” against Marathon. Id. at 1303 (quotation omitted). A seaman working aboard the
ship was injured “through the negligence, at least in part,” of a crane operator on an oil platform.
Id. The seaman filed two lawsuits, one that included the underwriters and another against only
Marathon. Id. The underwriters settled with the seaman for $60,000, on the condition that he pay
them “the first $30,000 he recovered from Marathon.” Id. While the underwriters insured
Marathon for liability arising from operating the rented ship, not the oil platform, the court held
that the underwriters could not recover from Marathon because “the provision of insurance
necessarily implies that the insurer will not seek to recoup amounts paid by it to satisfy insured
claims,” and because they “had waived ‘all subrogation’” rights and could not have sued “to
recover from Marathon any part of the $60,000” paid to the seaman. Id. at 1303–04.
In Marathon Oil, although the insurance did not cover “liability arising” from oil-platform
operations, it was enough that the insurance covered “the type of risk that occurred.” Roberta
Tabor, 815 F.2d at 1045 (emphasis in original). In one of the appeals from this case, the Fifth
Circuit described Marathon Oil’s “forbidden scenario” as one in which: (1) the insurers would
recoup from an additional assured the sums paid to settle a risk covered by the policy; (2) the
policy waived subrogation against the additional assured; and (3) the insurers seek to recoup based
on risks either covered or not covered by the policy. FloaTEC, 921 F.3d at 522.
The Underwriters allege that American Global Maritime, the Bigfoot Project’s marine
warranty surveyor, breached the standard of care owed to them, causing them to pay Chevron
under the Offshore Construction Risk Policy. These claims are direct; they are not subrogated.
25
The Underwriters do not dispute that the Offshore Construction Risk Policy covered damage to
the Bigfoot Project arising from negligence, including negligence in providing the sort of services
that American Global Maritime performed. American Global Maritime is an “Other Assured”
under the Offshore Construction Risk Policy. The Underwriters waived subrogation rights against
American Global Maritime. The Underwriters paid Chevron for the damages and losses from the
tendon detachment, then sued American Global Maritime for the same damages and losses. The
question is whether the “fundamental principle” that “an insurer may not sue its own insured”
forecloses this claim. Peavey, 971 F.2d at 1177.
The Underwriters assert that their claim is to recover for American Global Maritime’s
alleged negligence, not to recover the insurance benefits paid for the damages and losses to the
Bigfoot Project as a result of that negligence. (Docket Entry No. 134 at 26–29; Docket Entry No.
142 at 3). The Third Amended Complaint alleges that American Global Maritime was negligent
“in certifying unsafe designs and operations that precluded Underwriters from preventing the loss
or withdrawing coverage.” (Docket Entry No. 134 at 15). To prevail on their negligence claim,
the Underwriters must plead and prove the damages caused by American Global Maritime’s breach
of the duty it owed to the Underwriters. See Perkins v. Entergy Corp., 782 So. 2d 606, 611 (La.
2001) (a negligence claim requires “proof of actual damages”). The Third Amended Complaint
alleges that American Global Maritime caused the Underwriters damage “by the loss of the
tendons, including but not limited to, costs to retrieve and store standing tendons and to replace
and reinstall all of the lost tendons and [buoyancy modules].” (Docket Entry No. 32 at 16–17).
The Underwriters’ only alleged damages are the money they paid Chevron under the Offshore
Construction Risk Policy for the losses and damages from the tendon detachment. While the
26
Underwriters clothe these damages in negligence dress, they are the damages the Underwriters
paid Chevron under the Offshore Construction Risk Policy.
The Underwriters are suing American Global Maritime for “the sums they have paid to
settle a risk covered by the [Offshore Construction Risk Policy]”—the damages or losses American
Global Maritime’s alleged negligence caused to the Bigfoot Project. Marathon Oil, 786 F.2d at
1302. The Underwriters’ claim is not for reimbursement. See 16 COUCH ON INSURANCE § 226:3
(recovery on a reimbursement theory is “contingent upon an actual recovery by the insured from
some third party”). The Underwriters have pointed to no case permitting an insurer to sue an
additional assured for negligently causing property damage, when the insurance policy covered
the property damage from that negligence. The Fifth Circuit has noted that the common law
permits insurers to assert fraud claims against insureds, but there are no allegations of fraud or
other willful misconduct against American Global Maritime, and other claims available outside
the insurance policy are “extremely limited.” St. Bernard, 756 F.2d at 1128.
The Underwriters state that the Offshore Construction Risk Policy did not cover American
Global Maritime’s professional liability. That statement is true, but it misses the point. The
Offshore Construction Risk Policy insured Chevron and American Global Maritime against “all
risks of” damages or losses to the Bigfoot Project, including those caused by negligence. (Docket
Entry No. 98-1 at 61). The Underwriters are suing American Global Maritime for damages from
its negligence, a covered risk. Because the Underwriters sue American Global Maritime, an “Other
Assured,” to recover for covered damages to the Bigfoot Project, their lawsuit runs afoul of the
principle that an insurer may not sue an insured to recover money paid for the risk that the insurer
promised to insure. Peavey, 971 F.2d at 1177; Roberta Tabor, 815 F.2d at 1044–45; Marathon
Oil, 786 F.2d at 1302. The negligence claims may not proceed. The Underwriters were paid about
27
$30 million for assuming the risks specified in the Offshore Construction Risk Policy. In May
2015, one of those risks became reality when the tendons sank to the seafloor, and, negligence or
not, the Underwriters had to pay.
The Underwriters request additional discovery, stating that “[t]he lack of discovery
presents evidentiary impediments to Underwriters’ burden of proof.” (Docket Entry No. 134 at
29–30). The Underwriters state that “no substantive discovery has taken place.” (Id. at 29). To
obtain additional discovery, Underwriters may not “simply rely on vague assertions that additional
discovery will produce needed, but unspecified, facts.” Am. Family Life Assurance Co. of
Columbus v. Biles, 714 F.3d 887, 894 (5th Cir. 2013) (quoting Raby v. Livingston, 600 F.3d 552,
561 (5th Cir 2010)). They “must ‘set forth a plausible basis for believing that specified facts,
susceptible of collection within a reasonable time frame, probably exist and indicate how the
emergent facts, if adduced, will influence the outcome of the pending summary judgment
motion.’” Id. (quoting Raby, 600 F.3d at 561).
The Underwriters’ response to the second motion for summary judgment identifies no
specific facts likely to emerge from discovery that are likely to change the outcome. (See Docket
Entry No. 134 at 29–30). The Underwriters cite their response to the first motion for summary
judgment, which sought additional discovery on the relationship between the Underwriters and
American Global Maritime. (See Docket Entry No. 104 at 8–9). The court considered and denied
that discovery request. (Docket Entry No. 111 at 32–34, 54). The Underwriters have not
articulated how additional discovery would likely reveal otherwise unknown facts that bear on the
issues in this case. There has already been extensive record development and motions practice,
and the undisputed facts show that the Underwriters’ only remaining claim is foreclosed as a matter
of law. The Underwriters identify no basis to change this result. The discovery request is denied.
28
IV.
Conclusion
American Global Maritime’s motion for summary judgment is granted. (Docket Entry
Nos. 123–24). The Underwriters’ request for discovery is denied. (Docket Entry No. 134 at 29–
30). Final judgment is separately entered.
SIGNED on July 9, 2019, at Houston, Texas.
_______________________________________
Lee H. Rosenthal
Chief United States District Judge
29
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