Exxonmobil Corp. v. Electrical Reliability Services, Inc.
2017 U.S. App. LEXIS 16031
| 5th Cir. | 2017Background
- Exxon contracted with ERS (2008) to perform electrical work; contract contained separate indemnity (§12) and insurance/additional-insured (§14) provisions. ERS was required to name Exxon as an additional insured and its insurance had a $3 million deductible.
- ERS subcontracted work to MMR; MMR employee John Burnham was seriously injured and sued Exxon (later added ERS). Exxon settled Burnham’s claims for $2.5 million and sought reimbursement from ERS and ERS’s insurer, Old Republic Insurance Company (ORIC).
- ERS and ORIC denied coverage/reimbursement. Exxon sued for declaratory judgment and damages in Texas state court; ERS removed to federal court on diversity grounds.
- The district court found ERS breached its obligation to pay the deductible and ORIC breached by failing to defend/cover amounts above the deductible; it awarded Exxon damages, fees, costs, and interest. The judgment was vacated and remanded by the Fifth Circuit for consideration in light of In re Deepwater Horizon; on remand the district court reinstated the judgment (with amended interest/fee rulings).
- Appeals: ERS challenged its obligation to pay the deductible and the pre-judgment interest period; ORIC challenged being held jointly and severally liable for the full award; Exxon cross-appealed denial of certain attorney’s fees.
Issues
| Issue | Plaintiff's Argument (Exxon) | Defendant's Argument (ERS/ORIC) | Held |
|---|---|---|---|
| Whether ERS’s duty to pay policy deductible for Exxon (as additional insured) is limited by the contract’s indemnity clause | §14 insurance obligation is separate and independent from §12 indemnity; ERS must pay deductible for Exxon’s settlement/defense | §12 indemnity allocates liability for claims from Exxon’s negligence to Exxon, so ERS need not pay deductible for harms resulting from Exxon’s sole negligence | Court: ERS must pay deductible; §14’s additional-insured/deductible language is broad and not limited by §12 (affirms district court) |
| Whether pre- and post-judgment interest should run from 2012 judgment or later remand judgment | Pre-judgment interest should run to the 2012 judgment date and post-judgment interest from that date (original judgment was essentially correct) | District court awarded interest through the later (2016) judgment date | Court: Post-judgment interest accrues from the 2012 judgment date; reversed portion awarding interest to 2016 and remanded |
| Whether ORIC may be held jointly and severally liable for entire award despite $3M deductible in ERS’s policy | Exxon effectively conceded ORIC should be liable only for fees/costs not subject to deductible and any covered amounts above deductible | ORIC: liability limited by policy deductible; should not be jointly/severally liable for amounts within deductible | Court: Vacates joint-and-several liability for full amount; remands to limit ORIC’s liability to amounts above or not subject to the $3M deductible |
| Whether Exxon is entitled to attorney’s fees for initial appeal and for fees it did not previously request | Exxon seeks fees for defending the initial appeal and additional fees incurred post-trial but not previously requested | ERS argues initial appeal was successful (vacatur) so fees not recoverable; district court denied previously-unrequested fees as untimely | Court: Exxon is entitled to fees for the initial appeal (reverses denial) but not entitled to previously-unrequested fees (denial affirmed) |
Key Cases Cited
- Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794 (Tex. 1992) (insurance and indemnity provisions may create separate independent obligations)
- Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008) (additional-insured language can create an independent duty to insure regardless of indemnity carve-outs)
- In re Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015) (additional-insured coverage may be limited to the scope of contractual indemnity when language ties insurance to liabilities assumed under the contract)
- Brooks v. United States, 757 F.2d 734 (5th Cir. 1985) (post-judgment interest may run from original judgment date where that judgment was essentially correct)
- Art Midwest, Inc. v. Clapper, 805 F.3d 611 (5th Cir. 2015) (federal post-judgment interest analysis when remand and multiple judgments exist)