672 S.W.3d 415
Tex.2023Background
- ExxonMobil contracted Savage Refinery Services; the service agreement required Savage to obtain minimum commercial general liability (CGL) insurance and name Exxon as an additional insured, with Savage’s insurance to be primary.
- Savage procured multiple policies: a National Union primary CGL policy, a National Union umbrella policy, and a Starr bumbershoot (umbrella) policy.
- A refinery accident injured two Savage employees; settlements exceeded $24 million. About $5 million came from some primary policies (including National Union’s), which were exhausted; Exxon paid the remainder and sought reimbursement from the umbrella insurers.
- Exxon sued National Union and Starr for breach of contract after both denied umbrella coverage. The trial court held National Union liable under its umbrella; the court of appeals reversed, finding the umbrella incorporated the primary policy and, through it, the service agreement limits.
- The Texas Supreme Court reversed the court of appeals: the umbrella policy incorporated the primary policy only for identifying who is an insured, not the service agreement’s payout limits; incorporation by reference requires a clear manifestation in the policy text.
- The Court explained that ‘coverage’ in the umbrella policy refers to the risks covered (not payout limits), the service agreement sets a minimum (not a maximum) of required insurance, and the umbrella’s limiting language does not clearly incorporate the service agreement’s limits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the umbrella policy incorporates payout limits in the Exxon–Savage service agreement, barring umbrella recovery | Exxon: umbrella covers additional insureds recognized under underlying policies; Exxon seeks same coverage at umbrella limits after primary exhaustion | National Union: umbrella incorporates primary, which incorporates the service agreement limits, limiting Exxon to primary-only coverage | Court: No. Umbrella only incorporates primary to identify who is insured; it does not clearly incorporate the service agreement’s payout limits |
| Whether the umbrella clause that disclaims ‘broader coverage’ incorporates payment limits (making umbrella inapplicable once primary exhausted) | Exxon: ‘broader coverage’ means risks, not limits; Exxon seeks same coverage at higher umbrella limits | National Union: ‘broader coverage’ should be read to adopt limits from underlying contract, rendering umbrella inapplicable | Court: ‘Coverage’ refers to risks covered; nothing in policy clearly adopts service-agreement limits; interpreting otherwise would render umbrella self-defeating |
| Whether the umbrella incorporates extrinsic ‘type’ or other provisions of the primary/service agreement beyond identification of insureds | Exxon: umbrella’s text only imports who qualifies as an insured under underlying insurance | National Union: primary defines additional insured as one entitled to the ‘type’ of insurance required by contract, thereby limiting umbrella | Court: Irrelevant — umbrella does not incorporate those primary provisions; extrinsic documents are consulted only to the extent the umbrella policy clearly requires |
Key Cases Cited
- Goddard v. E. Tex. Fire Ins. Co., 1 S.W. 906 (Tex. 1886) (insurance-policy incorporation by reference requires clear manifestation of intent)
- Urrutia v. Decker, 992 S.W.2d 440 (Tex. 1999) (separate contract can be incorporated only by explicit reference clearly indicating intent)
- In re Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015) (policy language controls; extrinsic documents considered only to the extent the policy requires)
- ExxonMobil Corp. v. Insurance Co. of the State of Pennsylvania, 568 S.W.3d 650 (Tex. 2019) (prior decision arising from same accident limiting use of underlying contract terms beyond identification of insureds)
- Evanston Ins. Co. v. ATOFINA Petrochems., Inc., 256 S.W.3d 660 (Tex. 2008) (analysis of whether umbrella extends beyond coverage provided by underlying policy)
- Traders State Bank v. Cont'l Ins. Co., 448 F.2d 280 (10th Cir. 1971) (the term ‘coverage’ is a term of art referring to risks assumed under a policy)
- Aid Ass'n for Lutherans v. U.S. Postal Serv., 321 F.3d 1166 (D.C. Cir. 2003) (the word ‘coverage’ usually refers to inclusion or exclusion of specific risks under an insurance policy)