832 F.3d 246
5th Cir.2016Background
- Raylin Richard (Offshore employee) was injured on a drillship in 2009; he sued in 2011 and Offshore was later added as a third‑party defendant.
- Offshore settled with Richard and sought reimbursement from its insurers; this appeal concerns only Offshore’s claim against excess insurer Valiant.
- Valiant’s excess policy contains a drilling‑rig exclusion barring coverage for liability "arising out of the ownership, use or operation of drilling rigs, drilling barges, drilling tenders, platforms..." but excepting craft serving those facilities (e.g., supply boats, tugs).
- Valiant was notified of the accident in 2011 but did not become a party to the suit until 2014; it asserted the drilling‑rig exclusion in its 2014 answer.
- The district court granted summary judgment for Valiant, holding the exclusion unambiguously covers drillships and that Valiant did not waive coverage defenses by delay; the Fifth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy’s drilling‑rig exclusion cover injuries on a drillship? | Offshore: a drillship is not necessarily a "drilling rig," so exclusion shouldn’t bar coverage. | Valiant: the exclusion’s plain language "drilling rigs" clearly encompasses drillships. | Held: exclusion unambiguously covers drillships; exclusion bars coverage. |
| Does applying the exclusion produce an absurd result that requires limiting it? | Offshore: construing exclusion to bar most of its business is absurd and should be avoided. | Valiant: exclusion is limited to ownership/use/operation of listed facilities and excludes servicing craft; parties could have contracted differently. | Held: no absurdity found; plain terms control; exclusion stands. |
| Did Valiant waive coverage defenses by waiting and failing to issue a reservation‑of‑rights? | Offshore: Valiant’s multi‑year delay and no reservation of rights induced reasonable belief it relinquished defenses (relying on Steptore). | Valiant: it never assumed Offshore’s defense and only became a party in 2014; mere delay/no reservation without defense assumption does not waive rights. | Held: no waiver—Steptore distinguishable because Valiant never assumed the defense; no conduct showing relinquishment. |
| Is parol evidence (underwriter testimony) sufficient to show intent to waive? | Offshore: underwriter testimony shows Valiant intended to provide coverage in such situations. | Valiant: testimony is extrinsic and does not demonstrate actual relinquishment of rights. | Held: underwriter testimony insufficient to show waiver or alter the clear policy language. |
Key Cases Cited
- Cadwallader v. Allstate Ins. Co., 848 So. 2d 577 (La. 2003) (insurance policies interpreted under general contract‑interpretation rules to ascertain parties’ intent)
- Steptore v. Masco Constr. Co., 643 So. 2d 1213 (La. 1994) (insurer may waive coverage defenses by assuming defense without reservation when facts indicate noncoverage)
- Cash v. Liberty Ins. Underwriters, Inc., 624 F. App’x 854 (5th Cir.) (applying identical drilling‑rig exclusion to preclude coverage for platform‑related injury)
- Janex Oil Co. v. Hanover Compressor Co., 694 So. 2d 415 (La. App. 4 Cir. 1997) (similar exclusion construed to exclude platforms from coverage)
- Clovelly Oil Co. v. Midstates Petroleum Co., 112 So. 3d 187 (La. 2013) (courts should avoid contract constructions that produce absurd results)
- Malin Int’l Ship Repair & Drydock, Inc. v. Oceanografia, S.A. de C.V., 817 F.3d 241 (5th Cir. 2016) (standard of review for summary judgment and related principles referenced)