506 S.W.3d 498
Tenn. Ct. App.2016Background
- Exxon contracted with Savage (June 2007) to perform work at a Baytown refinery; the contract required Savage to obtain insurance and certain waivers of insurers’ subrogation rights, but limited those waivers “to the extent liabilities are assumed by [Savage].”
- Savage obtained workers’ compensation coverage from ICSP, including a Texas blanket endorsement waiving ICSP’s right to recover from persons for whom Savage had contractually agreed to obtain the waiver.
- Two Savage employees (Roberts and Munoz) were severely injured on Exxon’s site; ICSP paid workers’ compensation benefits to both. Exxon’s negligence was not disputed.
- Exxon sued (and moved for summary judgment) seeking a declaratory judgment that ICSP waived subrogation against Exxon; the trial court ultimately granted summary judgment for Exxon that ICSP had waived subrogation.
- ICSP appealed, arguing the waiver endorsement only applied where Savage had “assumed liability” (i.e., had a contractual indemnity obligation), which did not exist here because Savage did not agree to indemnify Exxon for Exxon’s own negligence.
Issues
| Issue | Plaintiff's Argument (Exxon) | Defendant's Argument (ICSP) | Held |
|---|---|---|---|
| Whether ICSP waived subrogation by endorsement | Endorsement language controls; Savage agreed by written contract to obtain a waiver, so waiver applies | Endorsement is triggered only where Savage has "assumed liability" under the underlying contract (i.e., agreed to indemnify); Savage did not assume liability for Exxon’s negligence | Court held waiver not triggered because the contract limited waivers to liabilities Savage assumed, and Savage had no indemnity duty for Exxon’s negligence |
| Whether court should look only to the insurance policy or also to the underlying contract | Focus on policy language alone | Policy references the underlying contract, so the contract must be consulted to determine scope | Court held policy incorporated the underlying contract language; therefore indemnity clause governs whether waiver is triggered |
| Scope of “liabilities ... assumed by [Savage]” in the insurance clause | Broadly means any contractual responsibilities (e.g., to provide workers’ comp), so waiver applies | Narrow: refers to liabilities Savage agreed to indemnify (indemnity clause); only those assumed liabilities trigger the waiver | Court adopted the narrower construction: "liabilities assumed" means indemnity obligations; phrase limits the waiver |
| Whether ICSP waived any future-credit/advance rights (certified but not reached on appeal) | (Exxon) waiver extended to credits/advance adjustments | (ICSP) trial court erred if it waived advance/credit rights | Not decided by appellate court (court reversed on primary issue and declined to reach other issues) |
Key Cases Cited
- In re Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015) (policy language that references underlying contract may require consulting that contract to determine scope of coverage)
- Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344 (Tex. 2000) ("liabilities assumed" language interpreted by reference to indemnity obligations)
- Tesoro Petroleum Corp. v. Nabors Drilling USA, Inc., 106 S.W.3d 118 (Tex. App.—Houston [1st Dist.] 2003) (insurer’s waiver of subrogation is limited where indemnity clause does not require indemnification for the owner’s negligence)
- Texas Mutual Ins. Co. v. Ledbetter, 251 S.W.3d 31 (Tex. 2008) (workers’ compensation carrier’s right to first recovery from tortfeasor)
- Argonaut Ins. Co. v. Baker, 87 S.W.3d 526 (Tex. 2002) (subrogation prevents double recovery; releases between insured and tortfeasor can extinguish insurer’s subrogation rights)