IN RE: DEEPWATER HORIZON
No. 14-31321
United States Court of Appeals, Fifth Circuit
November 19, 2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-31321
IN RE: DEEPWATER HORIZON
______________________________________________________________
CAMERON INTERNATIONAL
number of reasons, Liberty refused to pay, so Cameron sued. The district court granted summary judgment for Cameron on its breach of contract action, granted summary judgment for Liberty on Cameron’s claim under the Texas Insurance Code, and denied Cameron’s motion for attorney’s fees. Both parties appealed.
CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT TO THE SUPREME COURT OF TEXAS, PURSUANT TO ART. 5, § 3-C OF THE TEXAS CONSTITUTION AND RULE 58.1 OF THE TEXAS RULES OF APPELLATE PROCEDURE
TO THE SUPREME COURT OF TEXAS AND THE HONORABLE JUSTICES THEREOF:
I.
This case turns, in part, on a complicated arrangement of
indemnification between
Cameron did not rely solely on indemnification to protect itself. It created an insurance “tower” of $500 million in coverage by purchasing insurance from
various insurers. Those insurance policies covered the risk that Cameron would incur liability as the blowout preventer’s manufacturer. The first $25 million in losses would be covered by one insurer, the next $25 million in losses would be covered by another, and so forth.2 Liberty sold Cameron a policy covering the $50 million in losses between the first $100 million and $150 million in losses. In other words, Liberty’s $50 million policy was excess of the policies covering the first $100 million in losses, and Cameron obtained other policies that were excess of Liberty’s policy.
Like many insurance policies, Liberty’s policy incorporated a subrogation clause. That clause provided that if Cameron could recover from a third party some or all of the losses paid under the policy, Cameron would transfer the rights to recover to Liberty, “do nothing after loss to impair these rights,” and “help [Liberty] enforce them.” For example, if Liberty paid Cameron $50 million for a covered loss, and a third party was potentially liable to Cameron for that same loss, Liberty would assert Cameron’s rights against that third party and receive any recovery up to the amount Liberty paid Cameron.
After the spill, thousands of lawsuits were filed against BP, Transocean, Cameron, and others. Cameron sought indemnity (for its potential liability for pollution) from Transocean under the sales contract, and Transocean refused; Cameron thus sued Transocean, and Transocean counterclaimed. Transocean, in turn, sought indemnity from BP under its drilling contract, and BP refused; Transocean and BP thus also sued each other. And BP sued Cameron, claiming that, as the manufacturer of the blowout preventer, Cameron was responsible for the losses that BP incurred.
As well as seeking indemnification from Transocean, Cameron notified Liberty after the spill of a potential loss covered by the policy. Initially, Liberty neither rejected nor paid Cameron’s claim.
Following extensive litigation, BP and Cameron began to discuss
settlement. The parties soon developed a framework for that settlement: BP
would indemnify
Alone among Cameron’s insurers, Liberty objected to the settlement and declined to offer its policy limits of $50 million. Liberty did not agree to a settlement that waived its subrogation rights and Cameron’s indemnification rights against Transocean, leaving Liberty on the hook for $50 million. Liberty also pointed out another clause in its policy that, in its view, meant that its obligation to pay had not yet been triggered: the Other Insurance Clause. That clause provided that “[i]f other insurance applies to a ‘loss’ that is also covered by this policy, this policy will apply excess of such other insurance.” In turn, the policy defined “other insurance” as “any type of self-insurance, indemnification or other mechanism by which an Insured arranges for funding of legal liabilities.” Liberty argued that because Cameron had not yet exhausted its legal remedies against Transocean, “other insurance”—namely,
Transocean’s indemnification—“applie[d]” to the loss, so Liberty’s policy was excess of that other insurance. Cameron disputed this interpretation.
Seeking to assuage Liberty’s concerns about subrogation, Cameron and BP inserted additional language into the settlement purportedly preserving Liberty’s subrogation rights. Then—despite Liberty’s refusal to contribute its policy limits—Cameron went ahead with the settlement, putting up $50 million of its own money in addition to the $200 million its other insurers contributed.
Because Liberty continued to refuse to offer its policy limits, Cameron filed this suit, asserting claims for breach of contract and for violations of the Texas Insurance Code. Liberty moved under Rule 12(c) for judgment on the pleadings, but the district court denied most of that motion. On cross-motions for summary judgment, the district court granted Cameron a $50 million judgment on its breach of contract action. But the district court granted judgment in favor of Liberty on Cameron’s Texas Insurance Code claims and, in a later order, denied Cameron’s request for attorney’s fees incurred in this action.
Cameron appealed the district court’s judgment against it on its claim under Chapter 541 of the Texas Insurance Code and on its claim for attorney’s fees. Liberty cross-appealed the district court’s judgment in favor of Cameron on its breach of contract claim.
II.
This court reviews de novo the district court’s grants of summary
judgment. Morris v. Equifax Info. Servs., LLC, 457 F.3d 460, 464 (5th Cir.
2006). Summary judgment is proper if “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.”
Liberty contends that the district court erred in granting Cameron’s motion for partial summary judgment (and in denying Liberty’s cross-motion for partial summary judgment) on its breach of contract claim. First, Liberty argues that Cameron is not entitled to recover under the policy because the Other Insurance Clause makes the policy apply only in excess of Cameron’s (unexhausted) indemnity claim against Transocean. Second, Liberty argues that Cameron, not Liberty, breached the policy by impairing Liberty’s subrogation rights in the BP settlement. We address each argument in turn.
a.
To begin with, it is undisputed that the policy covers the loss that Cameron suffered. But Liberty, pointing to the Other Insurance Clause, contends that because Cameron has an indemnification agreement with Transocean, “other insurance” “applies” to that loss. Thus, argues Liberty, Cameron is not yet entitled to coverage because Cameron has not exhausted that indemnification or obtained a judicial determination that it is not entitled to indemnification. Cameron responds that its disputed indemnity claim against Transocean does not “appl[y]” to its loss because Transocean refused Cameron’s demands for indemnification. Cameron also argues that its disputed indemnity claim against Transocean does not constitute “other insurance” at all.
To refresh, the Other Insurance Clause provides that “[i]f other insurance applies to a ‘loss’ that is also covered by this policy, this policy will apply excess of such other insurance.” In turn, the policy defines “other insurance” as “any type of self-insurance, indemnification or other mechanism by which an Insured arranges for funding of legal liabilities.” “‘Other insurance’ clauses are generally designed by insurers to ‘avoid an insured’s temptation or fraud of over-insuring . . . property or inflicting self-injury.’” St.
Paul Mercury Ins. Co. v. Lexington Ins. Co., 78 F.3d 202, 206 (5th Cir. 1996) (quoting Hardware Dealers Mut. Fire Ins. Co. v. Farmers Ins. Exch., 444 S.W.2d 583, 586 (Tex. 1969)).
Liberty argues that the district court should have interpreted the Other Insurance Clause to read, in effect, that if “other insurance” potentially applies to Cameron’s loss, Liberty’s policy is excess of that insurance. Until a final judicial determination that Transocean does not have to indemnify Cameron, then, Liberty’s obligation to pay the policy benefits is not triggered, and thus it could not have breached the contract.
Cameron counters that the district court properly interpreted the Other Insurance Clause to mean that Liberty’s policy is excess of other insurance if, but only if, that “other insurance” actually and presently applies. Thus, because Transocean refused to indemnify Cameron, Liberty was obligated to pay the policy benefits.
In our view, Cameron’s interpretation is reasonable and Liberty’s is not.
The plain language of the clause supports Cameron’s reading. Liberty’s policy
is excess only if other insurance “applies,” present tense. See Parrot Ice-Drink
Prods. Of Am., Ltd. v. K & G Stores, Inc., No. 14-09-00008-CV, at *4, 2010 WL
1236322 (Tex. App.—Houston [14th Dist.] March 30, 2010, no pet.) (mem. op.)
(use of present tense in contract establishes “relevant time period”). Liberty’s
interpretation requires the court to read the word “potentially” into the
contract. Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 646 (Tex. 1996)
(noting that “courts will not rewrite agreements to insert provisions parties
could have included”). Moreover, the clause provides that Liberty’s policy being
excess
(Tex. App.—Houston [1st Dist.] 2014, no pet.) (finding that to interpret clause to impose requirement of conclusive determination before recovery where “explicit statement of such a requirement is wholly absent” would be unreasonable). That reading would transform the Other Insurance Clause from a protection against double-insuring into a clause that makes Liberty’s policy a policy of last resort.4 Given the purpose for which Cameron obtained the policy—specifically, to be the primary insurance for the $100 million-$150 million layer of its insurance tower—the clause cannot bear that weight.
Context also indicates that Cameron’s reading is correct. The policy states that it is “excess” to both other insurance and the underlying insurance (the first $100 million in the tower). As to the underlying insurance, however, the policy expressly provides that even if an underlying insurer is unable or refuses to pay, Liberty will not “drop down” in coverage. In other words, no matter what, Liberty’s policy is excess to the underlying policies. The Other Insurance Clause contains no such provision; Liberty’s policy is excess to other insurance only if other insurance “applies.” Liberty thus asks us to read language into the Other Insurance Clause stating that the policy is excess even to “other insurance” that is uncollectible. But we refuse Liberty’s invitation to read a provision into the policy, particularly because the policy includes that provision elsewhere in a similar context.
As the district court noted, moreover, under Liberty’s reading, Cameron would be better off with no indemnification agreement at all—having both insurance and a disputed indemnity claim would leave Cameron less protected
than it would be with only insurance. Yet the policy does not specifically
reference Cameron’s indemnity agreement with Transocean, nor does it
require Cameron to maintain any such agreement. See AMHS Ins. Co. v. Mut.
Ins. Co. of Az., 258 F.3d 1090, 1097 (9th Cir. 2001) (rejecting argument that
“other insurance” clause required insured to exhaust other policy that insured
was not required to maintain and that was not mentioned in policy). So because
Cameron chose to maintain a potential alternative source of protection for its
loss—something Liberty did not require it to do—Cameron would have to
litigate with that alternative source before recovering anything from Liberty.
See 2 Allan D. Windt, Insurance Claims & Disputes § 6:13, at 6-212 (6th ed.
2013) (noting that “[s]uch a result would be manifestly unfair and improper”
and that “the insured should not be penalized because the additional insurance
the insured happened to obtain proves to be uncollectible”); cf. Hardware
Dealers, 444 S.W.2d at 586 (explaining that court must interpret competing
“other insurance” clauses so that “the insured . . . [does not] have less coverage
than if [it] had been protected by only one of the policies”). In short, we do not
read the Other Insurance Clause to require that
Liberty offers several counterarguments, but none convince. First, Liberty points to Sherwin-Williams Co. v. Insurance Co. of Pennsylvania, 105 F.3d 258 (6th Cir. 1997), and Manpower Inc. v. Insurance Co. of Pennsylvania, 807 F. Supp. 2d 806 (E.D. Wis. 2011), as supporting its argument. But those cases merely explain that an insured must exhaust its primary insurance before seeking coverage from its excess insurer; they do not involve an “other insurance” clause. See Cardtronics, 438 S.W.3d at 779-80 (distinguishing Sherwin-Williams and Manpower on that basis). Second, Liberty argues that the district court erred by finding that the Transocean indemnification
agreement is not “other insurance” at all. The district court found no such thing. The district court explained the principle that when an insured has two policies with competing “other insurance” clauses, those policies should not be construed to leave the insured with less coverage than if the insured had only one policy. Then, while acknowledging that the Other Insurance Clause covered indemnification, the district court simply pointed out that when the competing policy is not even an insurance policy—which it is not—that principle likely applies with even more force. Third, Liberty contends that Cameron’s interpretation reads the word “excess” out of the Other Insurance Clause. It does not. Instead, it recognizes that Liberty’s policy is excess of other insurance, but only if that other insurance actually applies; if other insurance does actually apply, the Other Insurance Clause preserves Liberty’s right to sue that other insurer for contribution. Fourth, Liberty asserts that under Cameron’s interpretation, Cameron would never need to attempt to enforce its indemnification agreement. That, however, ignores Liberty’s subrogation rights: If Cameron refuses to seek indemnification, Liberty can pay the policy and then itself sue Transocean for indemnification.
For all these reasons, we hold that Cameron’s interpretation of the Other Insurance Clause is reasonable and that Liberty’s is unreasonable; thus, the Other Insurance Clause did not permit Liberty to withhold the policy benefits.5
b.
The above holding regarding the Other Insurance Clause does not end the matter. That is because Liberty argues that even if Cameron’s interpretation of the Other Insurance Clause is correct, Cameron forfeited its right to coverage by breaching the policy’s subrogation clause in settling with
BP. But because Liberty breached the contract by wrongfully denying coverage, thereby waiving its rights under the subrogation clause before Cameron settled, we do not reach whether Cameron’s settlement violated the subrogation clause.
Our conclusion that Liberty breached the contract follows from our
holding that Liberty’s interpretation of the Other Insurance Clause was
erroneous. The district court found that Liberty breached the policy before the
settlement by wrongfully constructively denying Cameron’s claim and by
violating the policy’s requirement that Liberty “promptly pay” Cameron’s
claim.6 Before Cameron and BP settled,
We thus agree with the district court that Liberty breached the contract, before Cameron settled with BP, by constructively denying coverage and by violating the policy’s “prompt payment” requirement. Because Liberty breached the contract, it waived its rights under the subrogation clause. Thus, even if Cameron violated that clause in its settlement with BP—a question that we do not reach—Liberty breached first.
IV.
Cameron argues that the district court erred in dismissing its claim
under Texas Insurance Code Chapter 541. Chapter 541 authorizes
policyholders to file private actions against insurers in order to recover “actual
damages” caused by an insurer’s “unfair method of competition or an unfair or
deceptive act or practice in the business of insurance,” and permits treble
damages in certain circumstances.
Liberty argued below that under this court’s decision in Great American Insurance Co. v. AFS/IBEX Financial Services, Inc., to maintain a Chapter 541 claim, Cameron was required to assert some injury other than the policy benefits and attorney’s fees. 612 F.3d 800, 808 & n.1 (5th Cir. 2010). Cameron countered that the district court should have instead applied the Supreme Court of Texas’s decision in Vail v. Texas Farm Bureau Mutual Insurance Co., 754 S.W.2d 129 (Tex. 1988). There, the Supreme Court of Texas held that an insured who is wrongfully denied policy benefits need not show any injury independent from the denied policy benefits. 754 S.W.2d at 136. The district court agreed with Cameron that, under Texas law, Cameron need not assert any injury independent from the policy benefits as actual damages. Even so, the district court held that it was bound by this court’s language to the contrary
in Great American and granted judgment for Liberty on Cameron’s Chapter 541 claim.
Cameron argues on appeal that Vail is still good law in Texas—a
proposition with which the district court agreed—and
Because this issue turns on an important question of Texas state law,
and because subsequent decisions from the Supreme Court of Texas and
Texas’s intermediate appellate courts arguably cast doubt on Vail’s continued
vitality, we certify the question to the Supreme Court of Texas. See
The question here involves an important state interest—namely, the
availability of a cause of action under the Texas Insurance Code where the
insurer wrongfully denied the policy benefits but caused the insured no
damages other than those denied benefits. Had this issue arisen immediately
following Vail, there likely would have been “controlling [Texas] Supreme
Court precedent” counseling against certification.
754 S.W.2d at 136. But in Great American, this court interpreted a more recent case from the Supreme Court of Texas, Provident American Insurance Co. v. Castañeda, 988 S.W.2d 189, 198-99 (Tex. 1998), as setting out the opposite rule from that in Vail.9 612 F.3d at 808 & n.1. And since we decided Great American, the Supreme Court of Texas has not addressed the issue—although some recent decisions from Texas intermediate appellate courts indicate that (contrary to the view we expressed in Great American) Vail, not Castañeda, governs the issue. See United Nat’l Ins. Co. v. AMJ Invs., LLC, 447 S.W.3d 1, 11 (Tex. App.—Houston [14th Dist.] 2014, pet. dism’d) reh’g overruled (Oct. 7, 2014), rev. dismissed (Mar. 27, 2015) (explicitly rejecting insurer’s independent-injury argument, citing Vail and distinguishing Castañeda); USAA Tex. Lloyd’s Co. v. Menchaca, No. 13-13-00046-CV, 2014 WL 3804602, at *9 (Tex. App.—Corpus Christi, July 31, 2014, pet. filed) (mem. op.) (approvingly quoting Vail’s holding that independent injury is not required). Rather than second-guess our reading of current Texas law, we find it prudent to obtain clarity from Texas itself. The parties’ arguments regarding whether Vail remains good law “illuminate the magnitude and wide ramifications . . . for insurance law” that this issue presents. In re Deepwater Horizon, 728 F.3d 491, 500 (5th Cir. 2013), certified question answered, No. 13-0670, 2015 WL 674744 (Tex. Feb. 13, 2015), reh’g withdrawn (May 29, 2015). We thus conclude that certification is appropriate here.
V.
Cameron argues that the district court abused its discretion in denying
its motion for attorney’s fees. After the district court granted Cameron’s motion
for summary judgment and awarded Cameron $50 million plus interest,
Cameron moved for attorney’s fees under
In the district court’s view, by the time Cameron moved for attorney’s fees, the district court “twice ha[d] considered and dismissed Cameron’s theories regarding attorney’s fees.” Thus, because the district court had “already expended considerable time and effort to resolve [the parties’] dispute, which has included two claims for attorneys’ fees,” and because the dispute “represents only a fraction of a percent of this massive and very active multidistrict litigation” (MDL 2179, In re Deepwater Horizon), the district court was “simply not inclined to hear a third theory concerning [Liberty’s] purported liability for attorneys’s [sic] fees when that theory could have been presented before the Court issued the” judgment for Cameron. Put another way, the district court found that Cameron should have included its request for attorney’s fees in its summary judgment briefing.
Cameron, however, did not waive its claim for attorney’s fees, impliedly or otherwise. To impliedly waive its claim, Cameron must have, through some “act from which an intention to waive may be inferred or from which waiver follows as a legal result,” misled Liberty to its prejudice “into the honest belief
that such waiver was intended or consented to.” Wells Fargo Bus. Credit v. Ben
Kozloff, Inc., 695 F.2d 940, 947 (5th Cir. 1983). Cameron requested fees in its
amended complaint and moved for fees within fourteen days after the district
court entered judgment as required by
First, as discussed above, Liberty moved for summary judgment on
Cameron’s claim for recovery under Chapter 541 of the Texas Insurance Code,
arguing that Cameron had not suffered any “actual damages.” Cameron
responded that its actual damages were the withheld policy benefits and its
attorney’s fees in litigating this action. After rejecting Cameron’s argument
that the withheld policy benefits constituted actual damages, the district court
also rejected Cameron’s argument that its attorney’s fees—standing alone—
could constitute actual damages, and granted judgment for Liberty on
Cameron’s Chapter 541 claim. The district court did not, however, address
Cameron’s entitlement
Second, both parties moved for summary judgment on Cameron’s claim that, under the policy, Liberty had to reimburse Cameron for its attorney’s fees related to the underlying MDL proceedings—proceedings distinct from this litigation. The district court granted summary judgment for Liberty, finding that it did not have to reimburse Cameron for those fees. Put differently, the district court denied one of Cameron’s substantive claims for relief in this
litigation; again, it did not address Cameron’s entitlement to attorney’s fees incurred in this litigation.
To sum up, Cameron did not present a claim for attorney’s fees incurred in this litigation on either purported “claim”—and the issue was certainly not “squarely presented,” as Liberty contends. None of Cameron’s arguments during summary judgment regarded its entitlement to attorney’s fees incurred in this litigation. Nor did the district court reject any claim for attorney’s fees incurred in this litigation—indeed, the district court acknowledged that Texas law provides for recovery of attorney’s fees in cases like this. Because Cameron did not present any claim for attorney’s fees incurred in this litigation until it filed its motion for attorney’s fees, Cameron did not waive that claim.
Liberty counters that whether Cameron waived its right to attorney’s fees is a procedural issue governed by federal law.11 But this argument is both meritless and irrelevant.12 Liberty contends that, under federal law, because Cameron discussed attorney’s fees during summary judgment, but did not raise the present argument regarding attorney’s fees, that argument is waived. See Brady Nat’l Bank v. Gulf Ins. Co., 94 F. App’x 197, 205 (5th Cir. 2004) (holding that federal law applies to bar party from presenting argument on appeal where party did not present argument below); see also Kiewit E. Co. v. L & R Constr. Co., 44 F.3d 1194, 1203-04 (3d Cir. 1995) (holding that where plaintiff raised argument for recovery of attorney’s fees from one defendant during summary judgment, alternative argument for recovery of attorney’s fees from another defendant raised for first time after trial was waived). But as discussed, Cameron did not present a claim for attorney’s fees incurred
during this litigation during summary judgment and then present a new argument regarding that claim in its later motion for attorney’s fees, as in Brady and Kiewit. Instead, Cameron merely discussed attorney’s fees in the context of arguments regarding other issues unrelated to its entitlement to attorney’s fees incurred in this litigation. So the federal waiver rule that Liberty cites both does not apply (because the question is whether Cameron waived a claim, not an argument) and is irrelevant (because Cameron never presented any claim for attorney’s fees incurred in this litigation during summary judgment).
In sum, Cameron did not waive, impliedly or otherwise, its claim for
attorney’s fees incurred in this litigation. And as Cameron points out, moving
for attorney’s fees during summary judgment would
VI.
For the reasons described above, we AFFIRM the district court’s grant of summary judgment for Cameron on its breach of contract claim. We REVERSE the district court’s denial of Cameron’s motion for attorney’s fees
and REMAND for a determination of the proper amount of those fees. And we certify the following question to the Supreme Court of Texas:
Whether, to maintain a cause of action under Chapter 541 of the Texas Insurance Code against an insurer that wrongfully withheld policy benefits, an insured must allege and prove an injury independent from the denied policy benefits?
We disclaim any intention or desire that the Supreme Court of Texas confine its reply to the precise form or scope of the question certified.