810 F.3d 986
5th Cir.2016Background
- Seahawk operated the J/U SEAHAWK 3000 jack-up rig whose three legs became misaligned after a February 2010 storm; Seahawk repeatedly repaired the hydraulic-jacking system (chronic wear-and-tear) but never fixed the misaligned legs.
- In April 2010 a hydraulic-jacking failure prevented the rig from performing a Hilcorp contract; Seahawk provided a replacement rig and sought $1,092,000 from insurers for the loss of the contract.
- The rig later completed a calm-weather contract in early July using an improvised jacking method; on July 21, 2010, during severe weather the rig slid down its legs after an attempted jack-up, floated for ~30 hours, and sustained further damage.
- Seahawk submitted an insurance claim (about $16.97 million) for physical repairs and loss of contract under a policy with a $10 million deductible per ‘‘occurrence,’’ a wear-and-tear exclusion, and a loss-of-charter (Contract) provision tied to recoverable physical damage.
- The district court found two separate occurrences (triggering two $10M deductibles) and applied the concurrent-cause doctrine to reject Contract-Provision recovery; insurers won at bench trial and Seahawk appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Number of occurrences (meaning of “arising from”/occurrence) | ‘‘Arising from’’ requires only but‑for causation: February storm caused later losses, so one occurrence | ‘‘Arising from’’ requires proximate causation; July storm was intervening proximate cause, so two occurrences | Policy’s ‘‘arising from’’ incorporates proximate-cause analysis; two occurrences affirmed |
| Proximate cause of post‑July losses | February storm (misaligned legs) materially caused the July losses | July storm was the proximate, intervening cause; misalignment was only a contributing factor | District court’s finding that July storm was proximate cause is not clearly erroneous; affirmed |
| Applicability of concurrent-cause doctrine to Contract Provision | Contract Provision requires only that some covered physical damage be ‘‘recoverable’’; doctrine shouldn’t bar recovery | Concurrent-cause doctrine applies where covered and excluded perils combine; insured must allocate damages | Concurrent-cause doctrine applies to Contract Provision; insured must segregate covered portion; Seahawk failed to do so |
| Allocation burden under concurrent-cause doctrine | Allocation not required to establish a theoretically recoverable covered contribution | Insured must produce a reasonable basis to apportion damage; failure bars recovery | Seahawk presented no evidence to apportion damages; claim denied under doctrine |
Key Cases Cited
- Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010) (insurance-policy interpretation follows general contract rules)
- Utica Nat’l Ins. Co. of Tex. v. Am. Indem. Co., 141 S.W.3d 198 (Tex. 2004) (interpreting “arise out of” as requiring a causal connection but context matters)
- Goose Creek Consol. Indep. Sch. Dist. v. Cont’l Cas. Co., 658 S.W.2d 338 (Tex. App. 1983) (separate events in time/space are separate occurrences despite common but‑for cause)
- U.E. Tex. One‑Barrington, Ltd. v. Gen. Star Indem. Co., 332 F.3d 274 (5th Cir. 2003) (focus on specific events that caused loss for occurrence count)
- H.E. Butt Grocery Co. v. Nat’l Union Fire Ins. Co., 150 F.3d 526 (5th Cir. 1998) (intervening independent acts create multiple occurrences)
- Wallis v. United Servs. Auto. Ass’n, 2 S.W.3d 300 (Tex. App. — San Antonio 1999) (concurrent‑cause doctrine: recover only portion caused solely by covered perils)
- Travelers Indem. Co. v. McKillip, 469 S.W.2d 160 (Tex. 1971) (insured must provide reasonable basis to estimate proportionate damage caused by covered risk)