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Ironshore Specialty Ins. Co. v. Aspen Underwriting, Ltd.

United States Court of Appeals, Fifth Circuit

June 10, 2015

IRONSHORE SPECIALTY INSURANCE COMPANY, Plaintiff - Appellant
v.
ASPEN UNDERWRITING, LIMITED; DORNOCH, LIMITED, Defendants - Appellees

Appeal from the United States District Court for the Western District of Texas.

For Ironshore Specialty Insurance Company, Plaintiff - Appellant: Randell Edward Treadaway, Esq., Michelle M. O'Daniels, Zaunbrecher Treadaway, L.L.C., Covington, LA.

For Aspen Underwriting, Limited, Dornoch, Limited, Defendants - Appellees: Chester Joseph Makowski, David John Plavnicky, Plavnicky, Kinzel, Makowski, L.L.P., Houston, TX.

Before STEWART, Chief Judge, and WIENER and COSTA, Circuit Judges.

OPINION

Page 457

GREGG COSTA, Circuit Judge

Despite the steady march of technological progress in the oil and gas industry, drilling remains dangerous. When tragic accidents happen--such as the fire at a Texas oil well owned by Endeavor Energy Resources that killed two men employed by Basic Energy Services and set this case in motion--the resulting litigation often turns into a coverage dispute between the insurers of the entities involved in the drilling activity.

That is the case here. Endeavor and Basic entered into a master services agreement (MSA) containing an indemnity provision in which they agreed to cover any liability resulting from claims brought by their own employees, even if the other party was at fault. They separately agreed to obtain at least $5 million of insurance that would cover claims asserted by their own employees against the other party. The policies Basic obtained do not expressly limit the coverage for additional insureds like Endeavor to this $5 million.

With the total liability for the two fatalities likely exceeding $5 million, Endeavor's excess insurer, Ironshore Specialty Insurance Corporation, brought this case against Basic's excess insurers for a declaratory judgment. Ironshore contends that Basic's insurers are obligated to provide coverage up to the full limits of their policies because the policies do not expressly limit the coverage available to an additional insured like Endeavor.

In response, Defendants contend that the insurance policies incorporate a $5 million limit because the policies refer to the MSA. We agree, and affirm the district court's ruling in favor of Defendants. We reach this decision based in large part on In re Deepwater Horizon, __ S.W.3d __, 2015 WL 674744 (Tex. Feb. 13, 2015), which issued after oral argument in this case.[1]

I.

Endeavor owned and operated an oil well in Martin County, Texas. Basic contracted with Endeavor to perform services, including pumping brine into the well.[2] The MSA between Endeavor and Basic contained mutual indemnity provisions stating that each party would release the other from any liability for " all claims, demands, and causes of action of every kind and character, without limit," brought

Page 458

on behalf of each party's respective employees. ROA 1048. In other words, regardless of which party is sued or at fault, Basic would be liable for claims brought by Basic employees and Endeavor would be liable for claims brought by Endeavor employees.

Another section of the MSA specified that the parties were required to obtain insurance:

To support the indemnification provisions in this Contract but as a separate and independent obligation, each party shall . . . maintain, with an insurance company or companies . . .
(b) Commercial (or Comprehensive) General Liability Insurance, including contractual obligations covered in this Contract and proper coverage for all other obligations assumed in this Contract., [sic] in the amount of $1,000,000 combined single limit per occurrence for Bodily Injury and Property Damage. . . .
(d) Excess Liability Insurance over that required in Paragraph . . . (b) . . . in the amount of $4,000,000, specifically ...

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