AIG Specialty Insurance Co. v. Tesoro Corporation
840 F.3d 205
| 5th Cir. | 2016Background
- Ultramar bought the Golden Eagle Refinery from Tosco and obtained a $100 million excess policy from Chartis; Ultramar later sold the refinery to Tesoro Refining and was to assign Tosco indemnities and either endorse or assign the Chartis policy.
- Chartis issued an endorsement changing the named insured to Tesoro Corporation (the parent), not Tesoro Refining (the subsidiary purchaser); Tesoro maintains the parties intended the policy to cover Tesoro Refining.
- Tesoro Refining sued Tosco for fraud over concealed environmental liabilities and later settled; thereafter Tesoro (on corporate letterhead naming Tesoro Petroleum/Corporation) demanded coverage from Chartis, which reserved rights and investigated slowly.
- Tesoro Parties sued Chartis in 2012 seeking reformation of the policy and a breach claim as a third-party beneficiary (assuming Tesoro Refining was not a named insured); district court entered summary judgment for Chartis.
- The district court held (1) under Texas law Tesoro Refining could not recover as a third-party beneficiary and that, under California law, established precedent (American Home) barred such recovery absent express intent in the policy; and (2) the reformation claim was time-barred under Texas’s four-year limitations and the discovery rule did not delay accrual because the mistake was apparent on the face of the policy.
- This panel affirmed: third-party beneficiary claim fails under California precedent, and reformation claim is barred by the Texas statute of limitations and inapplicability of the discovery rule to an obvious contractual mistake.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Tesoro Refining may sue as an intended third-party beneficiary of the Chartis policy | The parties intended the buyer (Tesoro Refining) to be covered; extrinsic evidence should be used to effect that intent under California law | Policy language contains no express intent to benefit Tesoro Refining; insurer argues only Tesoro Corporation was named | Court: No third-party beneficiary — California precedent requires express contractual intent and the policy lacks it |
| Whether Tesoro Parties can reform the policy to add Tesoro Refining despite receipt of the incorrect policy and whether the claim is time-barred | Reformation allowed because insured relied on insurer's specialized knowledge and did not discover the mistake until later; discovery rule delays accrual | Insureds received a document showing the mistake; Texas four-year statute governs; discovery rule inapplicable to an obvious mistake; no evidence of reliance or putting the policy away without examination | Court: Reformation claim fails — no evidence of reliance; claim barred by Texas four-year limitations and discovery rule does not apply to an evident contractual mistake |
Key Cases Cited
- Am. Home Ins. Co. v. Travelers Indem. Co., 175 Cal. Rptr. 826 (Cal. Ct. App.) (policy does not inure to third party absent express intent)
- Fireman’s Fund Indem. Co. v. Boyle Gen. Tire Co., 392 S.W.2d 352 (Tex.) (receipt of policy without protest not absolute bar to reformation; reliance/put-away doctrine)
- Comput. Assocs. Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453 (Tex.) (framework for discovery rule application)
- HECI Expl. Co. v. Neel, 982 S.W.2d 881 (Tex.) (discovery rule is categorical; nature of injury determines applicability)
- Via Net v. TIG Ins. Co., 211 S.W.3d 310 (Tex.) (discovery rule inapplicable where omission is apparent on contract face)
- Cosgrove v. Cade, 468 S.W.3d 32 (Tex.) (discovery rule does not apply to plainly obvious, material omissions)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (Sup. Ct.) (summary judgment standard)
- Rogers v. Bromac Title Servs., L.L.C., 755 F.3d 347 (5th Cir.) (appellate review of summary judgment)