In September 2018, Maxim Crane Works, LP sued Zurich American Insurance Company in Texas state court, alleging breach of contract and seeking a declaratory judgment that Zurich must reimburse Maxim for defense costs, a $3.5 million judgment, and other losses Maxim sustained in a related lawsuit. (Docket Entry No. 1-3). Zurich timely removed. (Docket Entry No. 1). The parties cross-moved for summary judgment, responded, and replied. (Docket Entry Nos. 20, 22, 25, 26, 29, 31).
Based on the motions, responses, and replies; the record evidence; and the applicable law, the court grants Zurich's summary judgment motion, (Docket Entry No. 22), and denies Maxim's summary judgment motion. (Docket Entry No. 20). Final judgment is entered by separate order.
The reasons for these rulings are detailed below.
I. Background
A. The Construction Project and Accident
In 2013, Skanska USA Building, Inc., a general contractor, was constructing an office campus in Houston and hired Berkel & Company Contractors as a subcontractor. (Docket Entry No. 19 at ¶¶ 1-3). Skanska had a contractor-controlled insurance program that included worker's compensation coverage. (Id. at ¶ 4). Skanska required Berkel and other subcontractors to enroll and obtain coverage for the project.
Berkel leased a crane from Maxim for the project. (Id. at ¶ 5). Berkel's Lease Agreement with Maxim stated:
THE EQUIPMENT IS RENTED TO LESSEE ON A BARE RENTAL BASIS ONLY , in its "As Is" condition. Lessee, at its own expense, shall transport, operate, inspect, maintain and repair the Equipment....LESSEE IS RESPONSIBLE FOR ENSURING COMPLIANCE BY IT AND ITS EMPLOYEES/AGENTS, AND OF THE EQUIPMENT ITSELF, WITH ALL APPLICABLE LAWS, REGULATIONS AND ORDINANCES....Lessor shall have no responsibility of any kind for compliance with any such laws, regulations or ordinances during the period the Equipment is in Lessee's possession or control.
(Docket Entry No. 19-1 at 514). Although Maxim had a separate Commercial General Liability policy with Zurich (the "Maxim Policy"), the Lease Agreement for the crane required Berkel to add Maxim as an additional insured under the Berkel Policy. (Docket Entry No. 19 at ¶¶ 7, 10; Docket Entry No. 19-1 at 514). The parties have stipulated that Maxim is an "Additional Insured" under the Berkel Policy. (Docket Entry No. 19 at ¶ 9). As an Additional Insured, Maxim was a "person or organization to whom or to which [Berkel is] required to provide additional insured status in a written contract or written agreement prior to the loss except where such contract or agreement is prohibited by law." (Docket Entry No. 19-1 at 617; see Docket Entry No. 19 at ¶¶ 6-8). Maxim did not enroll in Skanska's contractor-controlled insurance program. (Docket Entry No. 19 at ¶ 4).
Later in 2013, a Berkel employee overtaxed the crane, causing it to fall over. Part of the crane fell on Tyler Lee, the project superintendent and a Skanska employee. (Id. at ¶ 11); Berkel & Co. Contractors, Inc. v. Lee ,
B. The State-Court Litigation
In 2014, Lee sued Berkel, Maxim, and other defendants in state court, alleging negligence and other state-law claims. (Id. at ¶ 13). When the state court litigation began, Maxim sought coverage from Zurich under the Berkel Policy as an Additional Insured, but Zurich denied coverage. (Id. at ¶ 14). Maxim also cross-claimed against Berkel for breach of contract, arguing that Berkel was required to defend Maxim and indemnify or contribute to any loss to Maxim. (Id. at ¶ 15).
In 2015, a jury awarded Lee more than $35 million in damages, allocating 90% of the fault to Berkel and 10% to Maxim. (Id. at ¶ 16). Maxim settled with Lee for $3,444,300.60, and Zurich paid Lee that amount under the Maxim Policy. (Id. at ¶ 17). Maxim reimbursed Zurich for $3,000,000 of the settlement costs, as required under the Maxim Policy's Deductible Endorsement. (Id. ). Zurich also paid Maxim's defense costs under Maxim's individual policy, and Maxim reimbursed Zurich for the $824,839.38 Zurich paid in defense costs. (Id. at ¶ 19).
After the jury verdict, Maxim moved for entry of judgment on its cross-action against Berkel. (Id. at ¶ 18). The state trial court entered an amended final judgment
In September 2015, Berkel appealed. (Docket Entry No. 19 at ¶ 20). In 2018, the Texas court of appeals reversed the judgment against Berkel, concluding that because Berkel and Skanska were covered under the contractor-controlled insurance program, "Skanska is Berkel's statutory employer" under the Texas Workers' Compensation Act and "Lee, as Skanksa's actual employee, is Berkel's co-employee." Berkel & Co. Contractors ,
Maxim also appealed the state-court judgment. (Docket Entry No. 19 at ¶ 22; Docket Entry No. 19-4 at 125-72). The Texas appellate court concluded that Maxim had "not preserv[ed] error as to its issues regarding the applicability of [the Texas Anti-Indemnity Act]," and the Texas Supreme Court denied review. Maxim Crane Works, L.P. v. Berkel & Co. Contractors, Inc. , No. 14-15-00614-CV,
Maxim again demanded that Zurich cover its defense and settlement costs under the Berkel Policy. Zurich denied coverage because the Texas Anti-Indemnity Act prohibited Maxim's additional-insured coverage under the Berkel Policy. (Docket Entry No. 19 at ¶ 24; Docket Entry No. 19-4 at 261-62). This lawsuit followed.
C. The Federal-Court Litigation
In September 2018, Maxim sued Zurich in state court, seeking coverage under the Berkel Policy. (Docket Entry No. 1-3). Zurich timely removed, and the parties agreed to file cross-motions for summary judgment with a joint stipulation of facts because the disputed issue is one of law. (See Docket Entry Nos. 1, 13).
II. The Legal Standard for Summary Judgment
"Summary judgment is appropriate only when 'the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.' " Shepherd on Behalf of Estate of Shepherd v. City of Shreveport ,
"Where the non-movant bears the burden of proof at trial, 'the movant may merely point to the absence of evidence and thereby shift to the non-movant the burden of demonstrating' " that "there is an issue of material fact warranting trial." Kim v. Hospira, Inc. ,
"When the moving party has met its Rule 56(c) burden, the nonmoving party cannot survive a summary judgment motion by resting on the mere allegations of its pleadings." Duffie v. United States ,
III. Issue Preclusion
Zurich moved for summary judgment that issue preclusion, or collateral estoppel, bars Maxim's claim because Maxim litigated the same coverage claim in state court. (Docket Entry No. 22 at 18-20). In its reply, Zurich explains that it "has reviewed the pleadings from the Underlying Lawsuit in conjunction with Maxim's collateral estoppel response argument" and "is withdrawing its collateral estoppel defense." (Docket Entry No. 29 at 4). Because Zurich has abandoned this argument, the court need not address it.
IV. Standing
While Maxim argues that it is entitled to recover under the Berkel Policy because it named Maxim as an Additional Insured, Zurich's standing argument focuses on Maxim's separate policy with Zurich, the Maxim Policy. Zurich argues that Maxim does not have standing to assert its claims because the Maxim Policy "includes a [d]eductible endorsement that effectively assigns Zurich the very claims that Maxim is asserting against Zurich." (Docket Entry No. 22 at 11).
The Maxim Policy requires Maxim to reimburse Zurich for all defense costs, including the first $3 million of any settlement or judgment. (Docket Entry No. 19-1 at 669). According to Zurich, the Maxim Policy's Deductible Endorsement assigns all rights of recovery to Zurich. (Docket Entry No. 22 at 11, 20-27). The Deductible Endorsement states:
[Zurich has] your rights and the rights of persons entitled to the benefits of this insurance to recover sums that are reimbursable under this endorsement and any Deductible Amount from anyone liable for the injury or damages. You will do everything necessary to protect those rights for us and to help us enforce them.
If we recover any payment made under this policy from anyone liable for injury or damages, the recovered amount will first be applied to any payments made by us in excess of the Deductible Amount. The remainder of the recovery, if any, will then be applied to reduce theDeductible Amount reimbursed or reimbursable by you as respects that injury or damages.
(Docket Entry No. 19-1 at 673). The section further explains that the policy applies:
irrespective of the application of any Deductible Amount(s), including those with respect to...[Zurich's] right and duty to investigate or defend the insured against any "suits" seeking those damages; and...[Maxim's] duties in the event of a claim or circumstances likely to result in a claim.
(Id. at 673-74). The parties' duties under the Deductible Endorsement "may continue after this policy expires or is cancelled." (Id. at 674). The parties agree that Pennsylvania law applies to the Maxim Policy. (Docket Entry No. 22 at 24 n.13; Docket Entry No. 25 at 16 n.7).
The jury in the underlying litigation awarded Lee actual damages of $35,443,006.00 and placed 10% of the fault on Maxim. (Docket Entry No. 19-2 at 11-26). Maxim later settled with Lee for $3,444,300.60. (Docket Entry No. 19 at ¶ 17). Zurich paid this settlement amount, and Maxim reimbursed Zuirch $3,000,000 under the Deductible Endorsement to the Maxim Policy. (Id. ). Zurich billed Maxim $824,839.38 in defense costs, which Maxim paid. (Id. at ¶ 19).
Zurich argues that the assignment under the Deductible Endorsement "includes claims against Berkel and its insurer," Zurich. (Docket Entry No. 22 at 22). According to Zurich, the Deductible Endorsement unambiguously gives Zurich the exclusive right to recover reimbursable sums under the Maxim Policy. (Id. ). Maxim responds that Zurich's construction overlooks the distinction between "reimbursable" and "reimbursed" expenses and that the Deductible Endorsement's assignment provision does not apply once the insured, Maxim, has reimbursed the insurer, Zurich. (Docket Entry No. 25 at 15-20).
Zurich relies on Zurich American Insurance Co. v. Wausau Business Insurance Co. , No. 16-CV-3643,
Zurich argues that the Wausau holding is consistent with its interpretation of the Maxim Policy and that neither Pennsylvania nor Texas law conflicts with New York law on this issue. (Docket Entry No. 22 at 24; id. at 24 n.13). According to Zurich, "Maxim is in materially the same position as [the contracting company] in the
Maxim responds that in Wausau , unlike this litigation, "Zurich actively pursued its subrogation rights" and that " Wausau involved two different insurers, rather than the same insurer ...on both sides of the claim." (Docket Entry No. 25 at 19). Maxim also argues that the different applicable law in Wausau and this case has a substantive impact. "Zurich's self-interested decision not to pursue any subrogation rights that were allegedly assigned to it results in a waiver of those rights under Pennsylvania law." (Id. at 20 (citing Valora ex rel. Valora v. Pa. Emps. Benefit Tr. Fund ,
Maxim cites the Deductible Endorsement as well. (Docket Entry No. 25 at 15-16). Maxim argues that the Deductible Endorsement's assignment provision is triggered only when reimbursable costs are at issue. (Id. at 16-17). According to Maxim, Zurich's interpretation of the Deductible Endorsement conflates the terms "reimbursable" and "reimbursed," while the Deductible Endorsement distinguishes "reimbursable" from "reimbursed" in outlining the process for allocating recoveries between Zurich and Maxim. (Id. at 17).
The Deductible Endorsement states that "the recovered amount will be first applied to any payments made by [Zurich] in excess of the Deductible Amount," and "[t]he remainder of the recovery, if any, will then be applied to reduce the Deductible Amount reimbursed or reimbursable by [Maxim] as respects that injury or damage." (Docket Entry No. 19-1 at 673). Maxim explains that it already reimbursed Zurich for the settlement and defense costs in the underlying lawsuit, the same amount Maxim now seeks under the Berkel Policy. While Maxim admits that it assigned Zurich Maxim's right to recover reimbursable amounts, Maxim argues that it did not assign the right to recover "amounts that Maxim has actually reimbursed to Zurich." (Docket Entry No. 25 at 17 (emphasis omitted)). According to Maxim, this "is the only logical construction...because Zurich would have no right to seek recovery from third parties for losses Maxim (and not Zurich) actually incurred." (Id. ). Maxim argues that because Zurich is entitled to reimbursement and recovery from liable third parties, "[i]t would be ludicrous for Zurich to be able to prevent Maxim from recovering money from a liable insurer" like Zurich, noting that "Zurich has self-interested reasons for declining to exercise those rights as to its small portion of the Lee settlement." (Docket Entry No. 25 at 16).
Zurich replies that Maxim's distinction between "reimbursable" and "reimbursed" in interpreting the Deductible Endorsement
Maxim's interpretation is the reasonable one. The Deductible Endorsement states that Zurich has the exclusive right to recover costs "that are reimbursable," not those already reimbursed. (Docket Entry No. 19-1 at 673). Under Pennsylvania law, the "rules of construction do not permit words in a contract to be treated as surplusage...if any reasonable meaning consistent with the other parts can be given to it." Clarke v. MMG Ins. Co. ,
There is a distinction between "reimbursed" and "reimbursable" in the Maxim Policy. While Wausau has some similarities to this case, the factual differences that the insured in Wausau had not yet reimbursed Zurich, but was instead seeking coverage for reimbursable (and not reimbursed) amounts from a different insurer make it unhelpful as persuasive precedent. Zurich's critique of Maxim's interpretation of the Deductible Endorsement's explanation of how recovered payments will be allocated also overstates the implications of Maxim's reading. To find that the Maxim Policy distinguishes between "reimbursed" and "reimbursable" amounts in stating that "[t]he remainder of the recovery, if any, will then be applied to the Deductible Amount reimbursed or reimbursable" does not mean, as Zurich argues, that it could never recover reimbursable costs, even if not reimbursed.
Under the Maxim Policy, Maxim must reimburse Zurich for defense costs and the first $3 million of any settlement or judgment. (Docket Entry No. 19-1 at 673). Maxim has reimbursed Zurich for those costs in the underlying lawsuit. Under the most logical reading of the Policy, Zurich may recover "reimbursable" amounts, but it is not assigned the right to also seek recovery from other sources of amounts that the insured has already reimbursed to Zurich.
Alternatively, the parties' different interpretations show that the Deductible Endorsement is ambiguous with respect to whether only Zurich may assert claims for reimbursable funds. To the extent that there is ambiguity about whether an insured can seek recovery of reimbursable costs from another party, any ambiguity "is generally construed against the insurance company as the drafter of the agreement" and "policy exclusions are to be construed narrowly in favor of coverage." Mut. Benefit Ins. Co. v. Politsopoulos ,
V. The Texas Anti-Indemnity Statute
A. Background
The Texas Anti-Indemnity Statute applies to "a construction contract for a construction project" in which an indemnitor gives or procures insurance. TEX. INS. CODE § 151.101 ; see
Except as provided by Section 151.103, a provision in a construction contract, or in an agreement collateral to or affecting a construction contract, is void and unenforceable as against public policy to the extent that it requires an indemnitor to indemnify, hold harmless, or defend a party, including a third party, against a claim caused by the negligence or fault, the breach or violation of a statute, ordinance, governmental regulation, standard, or rule, or the breach of contract of the indemnitee, its agent or employee, or any third party under the control or supervision of the indemnitee, other than the indemnitor or its agent, employee, or subcontractor of any tier.
The Statute also limits allowable additional-insured coverage in construction contracts. Additional-insured coverage is void "to the extent that it requires or provides coverage the scope of which is prohibited under this subchapter for an agreement to indemnify, hold harmless, or defend."
Section 151.102's broad rule making indemnity agreements in construction contracts void is limited. It:
does not apply to a provision in a construction contract that requires a person to indemnify, hold harmless, or defend another party to the construction contract or a third party against a claim for the bodily injury or death of an employee of the indemnitor, its agent, or its subcontractor of any tier.
Reading these sections together, the Anti-Indemnity Statute prohibits additional-insured coverage when the insurance contract requires the insuring party to provide coverage of a claim caused by the Additional Insured's "negligence or fault, the breach or violation of a statute, ordinance, governmental regulation, standard, or rule, or the breach of contract of the indemnitee," or those of the additional-insured's agent, employee, or third party under its control or supervision.
Under Berkel's Lease Agreement with Maxim, Berkel had to name Maxim as an Additional Insured in the Berkel Policy. Berkel was required to provide:
comprehensive general liability insurance, including contractual liability, protecting against liability for property damage and personal injury or death arising out of the possession, use, operation, maintenance and repair of the Equipment, with limits of liability not less than $2,000,000 each occurrence; and a $2,000,000 general aggregate.
(Docket Entry No. 19-1 at 515). That insurance was "deemed primary, non-contributory insurance of [Maxim]" and had to "name [Maxim] as an additional insured party ... and loss payee."
The undisputed facts show that the Anti-Indemnity Statute applies to Berkel's and Maxim's Lease Agreement and to the Berkel Policy's designation of Maxim as an additional insured. Berkel and Maxim entered into the Lease Agreement because Berkel, a project subcontractor, leased a crane from Maxim to construct "a building, structure, appurtenance, or other improvement to or on public or private real property" that was not for "a single family house townhouse, [or] duplex." TEX. INS. CODE §§ 151.001(2), 151.001(5), 151.101. The underlying lawsuit alleged that Maxim was independently liable for its own negligence, not for any negligence of Berkel. (See Docket Entry No. 19-1 at 742-88). Unless an exception applies, the Statute voids the additional-insured coverage because that coverage requires the Berkel Policy to cover Maxim "against a claim caused by [Maxim's] negligence or fault." TEX. INS. CODE §§ 151.102, 151.001(6).
B. Interpreting the Statute
Both parties suggest that, absent an exception, the Anti-Indemnity Statute prohibits the Berkel Policy from covering Maxim's costs arising from the underlying litigation. (See Docket Entry No. 20 at 19-20; Docket Entry No. 22 at 31). Whether an exception applies requires the court to interpret the Statute. The parties debate the approach the court should take.
Texas law and the law of most states requires courts to begin with the plain language. See Leland v. Brandal ,
Maxim urges the court to consider the legislative history of the Anti-Indemnity Statute, which Maxim characterizes as a recent change to address "the disparity in bargaining power between upper-tier contractors and lower-tier subcontractors." (Docket Entry No. 20 at 15 (citing Taylor R. Beaver, The Texas Anti-Indemnity Act , 45 ST. MARY'S L.J. 535, 538 (2014) )). According to Maxim, the Statute "must be considered in light of decades of well-established Texas common law that allowed broad indemnification, including for one's own negligence." (Id. at 16). Maxim contends that the Statute has significant ambiguities, which require the court to consider legislative intent and to "liberally construe[ the law] to achieve [its] purpose and to promote justice. (Id. at 18 (quoting TEX. GOV'T CODE § 312.006(a) )). Maxim argues that the Statute's exceptions show that "the [Texas] legislature plainly intended to restrict the scope of the anti-indemnity provisions, permitting indemnification in a variety of situations." (Docket Entry No. 20 at 19). According to Maxim, these situations include "indemnification for personal injuries to employees protected under the Texas workers' compensation regime." (Id. ).
Zurich emphasizes that Texas law requires "first looking to the statutory language for the Legislature's intent, and only if [the court] cannot discern legislative intent in the language of the statute itself," is the court allowed to consider "canons of construction" and policy concerns. (Docket Entry No. 26 at 8 (quoting Tex. Lottery Comm'n v. First State Bank of DeQueen ,
Zurich is correct insofar as it outlines the steps a court must use to analyze the two Texas laws at the heart of this dispute. A court's primary objective in construing a Texas statute is "to ascertain and give effect to the Legislature's intent." TGS-NOPEC Geophysical Co. v. Combs ,
The Texas Anti-Indemnity Statute's Employee Exception states that the general prohibition against indemnification in construction contracts does not apply to a construction contract requiring indemnification "against a claim for the bodily injury or death of an employee of the indemnitor, its agent, or its subcontractor of any tier." TEX. INS. CODE § 151.105(5). Maxim argues that the Employee Exception applies to Lee's claims against Maxim because Maxim was expressly covered under the Berkel Policy, which covered injuries to Berkel's employees caused by Maxim's negligence. (Docket Entry No. 20 at 13). Maxim argues that because Berkel "has been deemed to be the functional equivalent of Lee's employer," the Berkel Policy covers Maxim's defense against, and settlement with, Lee. (Id. ).
Zurich responds that Berkel was deemed only Lee's "coemployee," not his employer. (Docket Entry No. 26 at 7). Zurich asserts that neither the Texas Workers' Compensation Act, which was the basis for the state court's finding that Berkel was a statutory "coemployee," nor the Anti-Indemnity Statute allows Berkel to be considered Lee's employer. (Id. at 12-15; Docket Entry No. 22 at 34-37). Because Lee was not a Berkel employee, "co" or otherwise, outside the narrow context of the Workers' Compensation Act, Zurich argues that Maxim cannot take advantage of the Anti-Indemnity Statute Employee Exception. (Docket Entry No. 22 at 31; Docket Entry No. 26 at 10).
One issue is whether the Texas appellate court's conclusion in the underlying litigation that Berkel was Lee's statutory "coemployee" under the Texas Workers' Compensation Act was the same as concluding that Berkel was Lee's statutory "coemployer." A second issue is whether, if Berkel was Lee's "coemployer," Lee's claim against Maxim was "a claim for the bodily injury or death of an employee of the indemnitor." If Maxim wins both arguments, it can take advantage of the Employee Exception under the Texas Anti-Indemnity Statute and has coverage under the Berkel Policy.
1. "Coemployee" and "Coemployer" Under the Texas Workers' Compensation Act
Maxim and Zurich agree that Lee was a Skanska employee in 2013. (Docket Entry No. 19 at ¶ 12). Berkel appealed from the underlying lawsuit judgment. The Texas court of appeals concluded that Berkel was Lee's coemployee and Skanska's employee under the Act. The court explained that because of this coemployee status, Berkel was "immune from suit under the 'exclusive remedy' provision of [that Act]." (Docket Entry No. 20 at 21-22 (citing TEX. LAB. CODE § 408.001(a) ; Berkel v. Lee ,
Under the Texas Workers' Compensation Act, an employer is "a person who makes a contract for hire, employs one or more employees, and has workers' compensation coverage." TEX. LAB. CODE § 401.012. An employee is a "person in the service of another under a contract for hire, whether express or implied, or oral or written," and includes:
(1) an employee employed in the usual course and scope of the employer's business who is directed by the employer temporarily to perform services outside the usual course and scope of the employer's business;
(2) a person, other than an independent contractor or the employee of an independent contractor, who is engaged in construction, remodeling, or repair work for the employer at the premises of the employer; and
(3) a person who is a trainee under the Texans Work program established under Chapter 308.
TEX. LAB. CODE § 401.012.
Under these definitions, Lee was not Berkel's employee, nor was Berkel Lee's employer. Maxim has not offered or identified record evidence that Berkel directed Lee to perform services, that Lee worked at Berkel's premises, that Lee was Berkel's trainee, or that Berkel had a contract with, employed, or provided workers' compensation coverage, to Lee.
Section 406.123 of the Texas Workers' Compensation Act provides that in certain circumstances, a general contractor may be deemed the statutory employer of a subcontractor and the subcontractors' employees. TEX. LAB. CODE § 406.123. If a general contractor and a subcontractor have a written contract for the general contractor to "provide[ ] workers' compensation insurance coverage to the subcontractor and the employees of the subcontractor," that contract "makes the general contractor the employer of the subcontractor and the subcontractor's employees."
Maxim argues that the Texas appellate court's conclusion that Berkel was Lee's coemployee under § 406.123 was "functionally identical to a determination that Berkel was Lee's employer," because Berkel was found to be immune under the Texas Workers' Compensation Act. (Docket Entry No. 20 at 22). According to Maxim, the "co-employee" versus "co-employer" labels are interchangeable. Maxim points to state-court cases that have used both labels to refer to the same relationships among tiers of contractors under insurance programs. (Id. at 22 (citing Austin Bridge & Road, LP v. Suarez ,
Maxim relies on Austin Bridge & Road, LP v. Suarez ,
In Austin Bridge , Baylor University owned the worksite of a construction project and maintained an owner-controlled insurance program that covered the project's general contractor, subcontractors, and sub-subcontractors. Austin Bridge ,
The Texas appellate court acknowledged that § 406.123 can make a general contractor the "statutory 'employer' of [a] subcontractor and its employees for purposes of applying the exclusive-remedy provision of the [Texas Workers' Compensation Act]."
Maxim stretches the Austin Bridge court's interpretation of § 406.123. The court's conclusion that Austin Bridge was "a deemed co-employee/co-employer" does not make the terms interchangeable. The specific contractual relationships among the parties were critical. Austin Bridge was its subcontractor's coemployer by virtue of its contract with Austin Commercial, which incorporated the provision in Austin Commercial's contract with Baylor University that required enrollment in the owner-controlled insurance program that included workers' compensation coverage. See id. at 386. Austin Bridge was also a coemployee with Derr & Isbell because Austin Bridge's contract with Derr & Isbell incorporated the requirement that the subcontractor enroll in the owner-controlled insurance program. See id. The injured employee was the employee of the lowest-tiered subcontractor, and the contractual requirement for workers' compensation benefits was incorporated into the contracts down the tiers of subcontractors.
In contrast to Austin Bridge , the injured employee here is not the employee of the lowest-tiered subcontractor, Berkel. Instead, Lee was the employee of the general contractor, Skanska. (See Docket Entry No. 19 at ¶ 12). Skanska subcontracted with Berkel. That subcontract required Berkel to enroll in Skanska's contractor-controlled insurance program. (Id. at ¶¶ 4-5). Because Berkel enrolled, Berkel can be Skanska's deemed employee under § 406.123(e). TEX. LAB. CODE § 406.123(a), (e). It was that status that led the Texas court of appeals to conclude that Berkel was Lee's coemployee. See Berkel & Co. Contractors, Inc. v. Lee ,
A survey of cases in which Texas courts have found subcontractors to be deemed coemployers of workers suggests that Berkel cannot be Lee's coemployer under § 406.123(e). To have that status,
2. Whether "Coemployer" Status Can Be Imported to the Texas Anti-Indemnity Statute
Even if Maxim succeed in arguing that Berkel was also Lee's statutory "coemployer," the question remains whether an employee of a deemed "coemployer" under the Texas Workers' Compensation Act is also deemed an employee under the Texas Anti-Indemnity Statute. The Employee Exception under the Statute states that the general rule against indemnification for an indemnitee's own negligence "does not apply to a provision...that requires a person to indemnify ...another party to the construction contract or a third party against a claim for the bodily injury or death of an employee of the indemnitor, its agent, or its subcontractor of any tier." TEX. INS. CODE § 151.103.
Maxim does not address whether "coemployer" or "coemployee" status can be imported to the Texas Anti-Indemnity Statute. Instead, Maxim appears to assume that once a subcontractor is deemed a "coemployer" of a worker under the Texas Workers' Compensation Act, the subcontractor is also then a coemployer under the Texas Anti-Indemnity Statute as well. (See Docket Entry No. 20 at 22-23; Docket Entry No. 31 at 8). Zurich responds that "even if [the Texas Workers' Compensation Act] deemed Berkel the statutory employer of Lee, such status would be limited to workers' compensation laws and would not extend to other statutes such as the Texas Anti-Indemnity Statute." (Docket Entry No. 26 at 7). Maxim argues that "the Texas legislature intended the [Workers' Compensation Act] and the [Anti-Indemnity Statute] to work together," pointing to the Workers' Compensation Exclusion in the Anti-Indemnity Statute. (Docket Entry No. 25 at 22 (citing TEX. INS. CODE § 151.105(5) )).
The Texas Workers' Compensation Act has a qualifier in § 406.123, the section stating that "the general contractor shall be treated as the employer of the subcontractor" under specific circumstances. The qualifier states "[a]n agreement under this section makes the general contractor the employer of the subcontractor and the subcontractor's employees only for purposes of the workers' compensation laws of this state." TEX. LAB. CODE § 406.123(e). This language supports Zurich's interpretation that "coemployer" and "coemployee" status are limited to laws specifically concerning workers' compensation. Neither party argues that the Texas Anti-Indemnity Statute is a workers' compensation law. While Maxim is correct that the Anti-Indemnity Statute provides that it "does not affect...the benefits and protections under the workers' compensation laws of this
Neither party has pointed to cases applying deemed "coemployees" or "coemployers" outside the Workers' Compensation Act. Other Texas laws use different definitions of "employee," suggesting that "coemployee" status is not universal across Texas law. See TEX. CIV. PRAC. & REM. CODE § 101.001 (defining "employee"); TEX. HEALTH & SAFETY CODE § 312.007(a) (same).
Because the Texas Workers' Compensation Act supports finding the terms "coemployer" or "coemployee" apply only to that context, and because Maxim has not offered a persuasive argument or precedent supporting the exportation of that status to the Anti-Indemnity Statute, Maxim has not succeeded in showing that, if Berkel is Lee's "coemployer," it would also be Lee's coemployer under the Anti-Indemnity Statute. Without that connection, Maxim's argument that the Employee Exception in the Anti-Indemnity Statute applies to Lee's claims against Maxim fails.
D. The Workers' Compensation Exception
The Workers' Compensation Exclusion is a second exception to the Texas Anti-Indemnity Statute's broad prohibition against indemnification in construction contracts for an indemnitee's own negligence. The Statute excludes from its coverage agreements that affect "the benefits and protections under the workers' compensation laws of this state." TEX. INS. CODE § 151.105(5). It appears that no court has yet construed this section.
Maxim argues that the Act's Workers' Compensation Exclusion requires Zurich to cover its claims and "provid[es] an independent basis for concluding that [the Act] does not void Maxim's coverage as an Additional Insured under the Berkel CGL Policy." (Docket Entry No. 20 at 24). According to Maxim, the exclusion is meant "to allow full indemnification (and insurance for such indemnification) for claims arising from third-party over actions, like the Lee Suit, where workers' compensation is available to the injured party." (Docket Entry No. 20 at 24). Maxim contends that because "Lee and Berkel received benefits and protections under the [Texas Workers' Compensation Act]," full indemnification is proper here. (Docket Entry No. 20 at 24).
Zurich responds that the exclusion is inapplicable because it "applies solely to the benefits and protections under Texas's workers' compensation laws," and because "Maxim has not shown any benefit or protection that is affected by the application of the Texas Anti-Indemnity Statute" because both Lee and Berkel have received the benefits of the Texas Workers' Compensation Act. (Docket Entry No. 26 at 20). Zurich argues that Maxim's interpretation of the Workers' Compensation Exclusion would make it "superfluous and meaningless" because it would be "redundant" with the Employee Exception. (Id. at 20-21). According to Zurich, the Employee Exception is meant to "eliminat[e] liability and coverage disputes between [defendants] and streamlin[e] personal injury suits." (Id. at 21). The goal is to protect workers, not third parties that might be sued.
The lack of legislative history, case law, and secondary sources discussing the Anti-Indemnity Statute make this or any purposive reading of this section difficult. See Beaver, 45 ST. MARY'S L.J. at 538 n.21 ("There is little legislative intent or history on this Act, as is typical in Texas. The only statement of intent given concerns the duration of insurance programs currently in place, in that there is no requirement as to how long a contractor must maintain insurance for a given construction contract."
The statutory language itself shows that the court need not try to decipher the few clues about the legislators' intent. The Statute states that it is not meant to affect "the benefits and protections under the workers' compensation laws." TEX. INS. CODE § 151.105(5). A party seeking to avoid the Statute must identify some preexisting workers' compensation benefit or protection under Texas law and explain how making the indemnification agreement void would affect that benefit or protection.
Maxim has not identified a preexisting benefit or protection that the Anti-Indemnity Statute would undermine or vitiate here. Maxim argues only that "[t]his case is deeply intertwined with workers' compensation" because "Berkel received the protection of immunity under the [Texas Workers' Compensation Act], and Lee received the benefit of workers' compensation payments." (Docket Entry No. 31 at 10). But applying the Statute to relieve Zurich of the obligation to indemnify Maxim would not affect a benefit or protection of the Texas workers' compensation laws. Lee would have, and did, receive his workers' compensation benefits in any event. Maxim has not explained how a ruling for Zurich would alter or substantively impact that result.
Because Maxim has not shown that applying the Anti-Indemnity Statute would affect a benefit or protection of the Texas workers' compensation laws, the Workers' Compensation Exclusion does not apply to Maxim's claims for coverage under the Berkel Policy, entitling Zurich to summary judgment.
VI. The Berkel Policy
Because the court concludes that the Texas Anti-Indemnity Act voids Maxim's Additional-Insured coverage under the Berkel Policy for the damages and losses in the underlying litigation, the court need not address whether the Berkel Policy precludes or limits Maxim's recovery.
VII. Conclusion
The court grants Zurich's summary judgment motion, (Docket Entry No. 22), and denies Maxim's summary judgment motion, (Docket Entry No. 20). Final judgment is separately entered.
Notes
Maxim looks beyond the Maxim Policy language to argue that Zurich's assertion that Maxim lacks standing is precluded by the unclean-hands doctrine. Maxim argues Zurich has not performed its duty under the policy in good faith. (Docket Entry No. 25 at 18). Because the court concludes that the Policy does not deprive Maxim of standing, it does not consider these arguments.
Zurich also argues that if the court finds that Maxim has standing to pursue its claims, "Zurich remains entitled to a reimbursement" or a "setoff for any and all reimbursable amounts paid by Zurich to Maxim under the Maxim CGL Policy that have not [been] previously reimbursed to Zurich by Maxim." (Docket Entry No. 22 at 26-27). Because, as discussed below, the court concludes that Texas law bars Maxim's recovery, this argument need not be addressed.
The Statute went into effect in 2012. Few courts have reviewed it. See, e.g. , Union Pac. R.R. Co. v. Brown , No. 04-17-00788-CV,