568 S.W.3d 650
Tex.2019Background
- Exxon hired Savage under a written Service Contract for refinery work in Baytown, Texas; two Savage employees were injured by hot water and received workers’ compensation benefits from Savage’s insurer (the Carrier).
- The injured employees also recovered from Exxon (one settled without suit; one sued and settled). Exxon then sought a declaration that the Carrier waived subrogation/reimbursement rights under a standard Texas Department of Insurance “Texas waiver of our right to recover from others” (blanket subrogation-waiver) endorsement to Savage’s policy.
- The endorsement waives the Carrier’s recovery rights as to any person for whom Savage "has agreed by written contract to furnish this waiver" and only for bodily injury "arising out of the operations described in the Schedule where [Savage is] required by a written contract to obtain this waiver."
- Savage’s Service Contract required it to obtain insurers’ waivers of subrogation "to the extent liabilities are assumed by [Savage]." The Service Contract also contained a mutual indemnity clause that did not make Savage liable for injuries caused by Exxon’s negligence.
- Trial court granted summary judgment for Exxon; the court of appeals reversed, holding the Service Contract’s "assumed liabilities" limitation meant Savage did not have to obtain a waiver for injuries resulting from Exxon’s negligence, so the Carrier retained recoupment rights.
Issues
| Issue | Plaintiff's Argument (Exxon) | Defendant's Argument (Carrier) | Held |
|---|---|---|---|
| Whether the policy’s standard blanket subrogation-waiver is triggered by Exxon’s written contract with Savage | The endorsement requires only consulting the Service Contract to identify who and where; it does not incorporate any extrinsic limitation like "to the extent liabilities are assumed" | The endorsement’s plain text requires consulting the Service Contract, including its "assumed liabilities" limitation, so waiver applies only if Savage assumed liability | The Court held the endorsement directs consultation of the Service Contract only to identify who may claim the waiver and for which operations; it does not incorporate other contractual limitations, so waiver applies here |
| Whether the Service Contract’s phrase "to the extent liabilities are assumed" limits the insurer’s waiver to indemnity obligations | Exxon: that phrase cannot be imported into the endorsement; alternatively, it covers Savage’s workers’ compensation obligations (so waiver applies) | Carrier: phrase limits waiver to liabilities Savage contractually agreed to indemnify (not present for Exxon’s negligence), so no waiver for this claim | The Court held the phrase does not limit the policy endorsement because the endorsement did not incorporate extrinsic coverage limits; thus the assumed-liabilities limitation in the Service Contract does not defeat the waiver |
| Whether extrinsic-contract coverage limits may be considered when endorsement references an outside contract | Exxon: endorsement reference is only to identify who/where and not to import other limits | Carrier: referencing a contract permits importing its limits to ascertain whether waiver is triggered | The Court held extrinsic limits are only considered where the policy clearly incorporates them; the standard-form waiver here does not incorporate additional contract limits |
| Whether this case is controlled by Deepwater Horizon and Ken Petroleum | Exxon: those cases support restricting inquiry to the policy language and only consulting extrinsic contracts as the policy directs | Carrier: those cases require consulting the Service Contract and its assumption-of-liability language | The Court distinguished those precedents and held they do not require importing the Service Contract’s indemnity-based limits because the endorsement’s language differs |
Key Cases Cited
- In re Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015) (policy language requiring coverage “where required by written contract” can compel consulting an extrinsic contract to define coverage)
- Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 353 (Tex. App.—Houston [1st Dist.] 2000) (under a policy definition, waiver obligations were limited to liabilities the insured contractually agreed to indemnify)
- Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008) (additional-insured coverage provision that did not reference an underlying contract’s limits cannot be constrained by those limits)
- Wausau Underwriters Ins. Co. v. Wedel, 557 S.W.3d 554 (Tex. 2018) (standard Texas waiver endorsement precludes insurer recovery directly or indirectly from third parties named under the waiver)