INDEMNITY INSURANCE COMPANY OF NORTH AMERICA; NEW YORK MARINE & GENERAL INSURANCE COMPANY; NAVIGATORS INSURANCE COMPANY; NATIONAL LIABILITY & FIRE INSURANCE COMPANY, (" Starr Marine" ), Plaintiffs - Appellees,
W & T OFFSHORE, INCORPORATED, Defendant - Appellant. XL SPECIALTY INSURANCE COMPANY, Plaintiff - Appellee,
W & T OFFSHORE, INCORPORATED, Defendant - Appellant. LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff - Appellee,
W & T OFFSHORE, INCORPORATED, Defendant - Appellant. NAVIGATORS INSURANCE COMPANY; NEW YORK MARINE & GENERAL INSURANCE COMPANY, Plaintiffs - Appellees,
W & T OFFSHORE, INCORPORATED, Defendant - Appellant
Appeal from the United States District Court for the Southern District of Texas.
For Indemnity Insurance Company of North America, New York Marine & General Insurance Company, Navigators Insurance Company, Plaintiffs - Appellees: Kenneth G. Engerrand I, Esq., Robert M. Browning Jr., Brown Sims, P.C., Houston, TX; David Andrew Kirby, Strong Pipkin Bissell & Ledyard, L.L.P., Houston, TX; Jon Daniel Picou, Esq., Larzelere Picou Wells Simpson Lonero, L.L.C., Metairie, LA.
For NATIONAL LIABILITY & FIRE INSURANCE COMPANY, (" Starr Marine" ), Plaintiff - Appellee: James Clifton Hall III, Karen Klaas Milhollin, Candace A. Ourso, Hall Maines Lugrin, P.C., Houston, TX.
For W & T Offshore, Incorporated, Defendant - Appellant: Matthew Sean Parish, Esq., Norman E. Snyder Jr., Esq., Keith R. Taunton, Esq., Tucker, Taunton, Snyder & Slade, Houston, TX; Warren W. Harris, Jeffrey L. Oldham, Bracewell & Giuliani, L.L.P., Houston, TX.
For Xl Specialty Insurance Company, Plaintiff - Appellee: Robert M. Browning Jr., Kenneth G. Engerrand I, Esq., Brown Sims, P.C., Houston, TX; David Andrew Kirby, Strong Pipkin Bissell & Ledyard, L.L.P., Houston, TX.
For Liberty Mutual Insurance Company, Plaintiff - Appellee: Edward Francis LeBreton III, Fowler Rodriguez, New Orleans, LA; Allison Marie Hooker, Fowler Rodriguez Valdes-Fauli, Houston, TX.
Before HIGGINBOTHAM, CLEMENT, and HIGGINSON, Circuit Judges.
EDITH BROWN CLEMENT,
W& T Offshore (" W& T" )--an energy exploration and development company--sustained significant damage to its operations as a result of Hurricane Ike. Anticipating that W& T would seek recovery for its Removal of Debris (" ROD" ) expenses under its Umbrella / Excess Insurance Policies (" Umbrella Policies" ), the four Umbrella Insurers Underwriters (" Underwriters" ) sought a declaratory judgment that they were not liable for W& T's ROD damages. In their motion for summary judgment, Underwriters argued that the Umbrella policies only take effect if W& T's underlying / primary insurance is exhausted by claims that would be covered by the Umbrella Policies. Because W& T's underlying insurance was admittedly exhausted by claims not covered by the Umbrella Policies, the insurers argued that they have no liability. In its cross-motion for summary judgment, W& T argued that the Umbrella Policies takes effect once all underlying insurance is exhausted, regardless of how that exhaustion occurred. The district court granted summary judgment in favor of Underwriters, holding that the plain terms of the Umbrella Policies state that it only takes effect if the underlying policies are exhausted by claims that would be covered under the Umbrella Policies themselves. We reverse and render summary judgment in favor of W& T.
Facts and Proceedings
W& T purchased three types of insurance policies to indemnify itself against hurricanes: (1) a commercial general liability policy (MS-S-2773) (the " Primary Liability" policy); (2) five Energy Package Policies (" Energy Package" ); and (3) four Umbrella / Excess Liability Policies. Plaintiff-Appellant Underwriters provided the
Umbrella Policies, which are identical in all relevant aspects. The Umbrella Policies are the only policies at issue.
The key difference between the Umbrella Policies and the Energy / Primary Liability policies is that the Umbrella Policies do not cover (1) property damage or (2) operators' extra expenses (" OOE" ) that are incurred by W& T itself; they cover only claims against W& T by a third-party. All relevant policies have been endorsed to cover ROD claims.
On September 12, 2008, Hurricane Ike struck the Gulf of Mexico, allegedly causing damage to over 150 offshore platforms in which W& T had an interest. Braemer Steege--the loss adjuster for W& T's claims--submitted over $150 million in claims for OOE and property damage under the Energy Package. The Energy Package contains a $10 million self-insured retention (" SIR" ), which W& T has to exhaust prior to submitting any claims. Once that threshold is met, coverage proceeds in order through five policies, which provide a total of $150 million in coverage over-and-above the $10 million SIR. Because submitted expenses for OOE and property damage exceeded $150 million, Braemer Steege forecasted that W& T would submit all of its ROD claims--estimated to exceed $50 million--to the Umbrella Policies.
In anticipation of these claims, Underwriters filed separate suits seeking declaratory judgments that W& T's claims are not covered under the Umbrella Policies because the Retained Limit of those policies had not been exhausted. The " Retained Limit" is the triggering mechanism for the " Coverage" provision of the Insuring Agreement, which provides:
We will pay on behalf of the Insured those sums in excess of the Retained limit that the Insured becomes legally obligated to pay by reason of liability imposed by law or assumed by the Insured under an Insured Contract because of Bodily Injury, Property Damage, Personal Injury or Advertising Injury that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world. ...