February 13, 2015
We launch the inaugural edition of The Bassett Firm’s Texas Supreme Court Update on the same day the Supreme Court of Texas (SCOTX) released 2 important and long-awaited opinions. Every Friday, we will provide you real time information related to new cases released by SCOTX. Also, please subscribe to our blog for more in-depth commentary on recently released cases from SCOTX, the Fifth Circuit or other courts across Texas.
Nabors Well Services, Ltd. v. Romero:
In this highly anticipated opinion, SCOTX overruled its prior precedent barring evidence regarding a plaintiff’s failure to use a seat belt. Based upon the changes wrought by the Legislature’s implementation of proportionate responsibility in Chapter 33 of the Texas Civil Practice and Remedies Code along with society’s changed views on the use of seatbelts over the last 40 years, the Court held a plaintiff’s negligence in causing his injuries is appropriately evaluated by the jury. Because Chapter 33 requires a jury to assign a percentage of responsibility based upon causing or contributing to cause in any away a plaintiff’s injury, allowing such evidence furthers the Legislature’s intent and requirement that requires fact-finders consider relevant evidence of a plaintiff’s pre-occurrence, injury-causing conduct. Further, the Court noted that our existing Rules of Evidence and jury instructions are sufficient to handle any issues raised by allowing this new type of evidence in collision cases.
In re Deepwater Horizon:
SCOTX, in a 8-1 opinion, answered important questions certified by the U.S. Court of Appeals for the Fifth Circuit regarding the interplay of indemnity obligations and additional insured issues in determining additional insured status for BP under policies issued to its contractor, Transocean, related to the Deepwater Horizon explosion in the Gulf. The Fifth Circuit asked:
1. Whether Evanston Insurance Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008), compels a finding that BP is covered for the damages at issue, because the language of the umbrella policies alone determines the extent of BP’s coverage as an additional insured if, and so long as, the additional insured and indemnity provisions of the Drilling Contract are “separate and independent”?
2. Whether the doctrine of contra proferentem applies to the interpretation of the insurance coverage provision of the Drilling Contract under the ATOFINA case, 256 S.W.3d at 668, given the facts of this case?
The Court answered the first question in the negative and did not reach the second question.
The Court first analyzed the indemnity requirements in the drilling agreement between BP and Transocean, finding that the parties agreed to a “knock-for-knock” risk allocation in which each company assumed responsibility for injuries to its own employees and damage to its own property without regard to cause. Additionally, Transocean agreed to indemnify BP for above-surface pollution regardless of fault while BP agreed to indemnify Transocean for all pollution risk Transocean did not assume, including subsurface pollution. It obtained CGL insurance and multiple excess layers which provided coverage for a loss on behalf of the Insured for liability either (a) imposed upon the Insured by law or (b) assumed by the Insured under an “Insured Contract.” As is typical, the policies extended Insured status to “any person or entity to whom the ‘Insured’ is obligated by oral or written “Insured Contract” … to provide insurance such as afforded by the Policy.” The policy included the usual definition of “insured contract” found in most CGLs.
The Court soundly rejected BP’s argument that under Atofina the inquiry is limited to the 4 corners of the policy without reference to the drilling contract, instead finding it must consult the underlying contract’s indemnity obligations to the extent required by the policy’s language. The Court also rejected BP’s “million dollar comma” argument that the limitation to the additional insured contract only applied to its status as an additional insured for workers’ compensation coverage because of the failure of the scriveners to include a second comma in the additional insured provisions of the drilling contract. Instead, the Court found Transocean and its insurers arguments a reasonable interpretation and held that, because of the language in the additional insured provisions of the drilling contract, BP’s status as an additional insured was limited to “liabilities assumed by [Transocean] under the terms of [the drilling contract].” Because Transocean under the terms of the drilling contract did not assume liabilities for subsurface pollution, BP lacked additional insured status under Transocean’s policies.
Answering the first question in the negative, SCOTX declined to provide guidance on whether contra proferentum should apply to coverage disputes between sophisticated parties because it found there was no ambiguity in the policy at issue.
Two important cases to inaugurate our Texas Supreme Court update! We at The Bassett Firm hope that you find this information useful to your practice.