Appeals from the United States District Court for the Eastern
District of Texas
JOLLY, COSTA, and ENGELHARDT, Circuit Judges.
D. ENGELHARDT, Circuit Judge.
Harbor Insurance Company ("Indian Harbor"), the
plaintiff in one of two consolidated lawsuits pending below,
appeals the district court's grant of summary judgment in
favor of defendant The Gray Insurance Company
("Gray"). Gray, in turn, "conditionally"
appeals the district court's decision to apply Texas law,
instead of Louisiana law, to the issues before it, asking us
to only consider its appeal if we conclude that we are unable
to affirm the summary judgment under Texas law. For the
reasons set forth below, we AFFIRM.
consolidated lawsuits in this matter arise out of fatal
injuries suffered by James Andrew Brenek, II
("Brenek") when he was electrocuted by an
electrically-energized generator housing cabinet on a rig in
Jefferson County, Texas. At the time of his accident, Brenek
was employed by and performing work for Guichard Operating
Company, L.L.C. ("Guichard"), a drilling
subcontractor located in Crowley, Louisiana. Guichard had
leased the generator involved in the incident from Aggreko,
L.L.C. ("Aggreko"), a Delaware company doing
business in both Louisiana and Texas. The rental agreement
between Guichard and Aggreko required Guichard to maintain a
commercial liability insurance policy during the lease period
that would cover damages arising out of use of the leased
equipment and recognize Aggreko as an additional insured.
date of Brenek's accident-July 27, 2014-Guichard had in
place a primary commercial liability policy issued by Gray
("the Gray Policy") and an excess commercial
liability policy issued by Chartis Specialty Insurance
Company, also known as "ASIC" ("ASIC").
Aggreko had in place a primary insurance policy issued by
Indian Harbor. Relevant to the issues before us, Gray is a
Louisiana corporation that has its principal place of
business in Metairie, Louisiana and regularly conducts
business in Texas. Indian Harbor is a Delaware corporation
with its principal place of business in Stamford,
their son's death, Brenek's parents ("the
Breneks") filed a tort suit in Texas state court against
Aggreko and Rutherford Oil Corporation
("Rutherford"), the owner of the rig on which
Brenek's accident occurred.Thereafter, Gray agreed, in
response to demands by Aggreko and Rutherford, to indemnify
and defend them as additional insureds under the Gray
policy.ASIC, on the other hand, advised Aggreko,
upon learning of the Breneks' lawsuit, that Aggreko did
not qualify as an additional insured under the policy it
issued to Guichard. In response, Aggreko filed suit against
ASIC in Texas state court, seeking declaratory relief with
respect to ASIC's alleged obligations to Aggreko under
its policy. ASIC then removed the suit to the United States
District Court for the Eastern District of Texas.
Aggreko's lawsuit against ASIC, Gray maintained its
defense of Aggreko with respect to the lawsuit filed by the
Breneks. The Gray policy had a liability limit of $1, 000,
000, subject to a $50, 000 self-insured retention. On
February 8, 2017, Gray and the Breneks reached two separate
agreements regarding the Breneks' claims against
Rutherford and Aggreko. With respect to Rutherford, Gray
agreed to pay the Breneks $50, 000 in exchange for a full and
complete release of any and all claims that the Breneks had
against Rutherford arising out of their son's accident
and death. With respect to Aggreko, Gray agreed to pay the
Breneks $950, 000 on behalf of Aggreko in exchange for the
Breneks' agreement to execute any subsequent judgment
obtained by the Breneks as to Aggreko only against available
insurance. On the same date, Gray issued to the Breneks and
their attorneys two checks- one in the amount of $50, 000,
and one in the amount of $950, 000. On March 3, 2017, the
Breneks executed a "Release and Settlement
Agreement" and a "Covenant Not To Execute
Agreement" ("Covenant Not To Execute") setting
forth the formal terms of the respective agreements they
entered into with Gray.
with the February 8 agreement between Gray and the Breneks
regarding Aggreko, the Covenant Not To Execute states that,
by executing the agreement, the Breneks "jointly and
severally, promise, agree and covenant that they shall
not seek to and will not execute on any Judgment obtained in
their favor and against Aggreko in the Lawsuit save and
except to the extent they can recover the Judgment from any
insurance company which provides coverage to Aggreko."
The Covenant Not to Execute further provides that the Breneks
would "enforce any and all such Judgment against the
available insurance only, and not against the assets of
Aggreko or its respective present or former directors,
officers, employees, [or] parent companies."
Additionally, the agreement indicates that the Breneks
"acknowledge and agree that Aggreko retains whatever
rights it may have under the law to reduce the amount of any
damage award against it by way of settlement credit,
proportionate responsibility, Tex. Civ. Prac. & Rem. Code
Chapter 33, the One-Satisfaction Rule, or otherwise."
the position that it had exhausted its policy limit and its
obligation to Aggreko, Gray notified Aggreko by letter dated
February 9, 2017 that it intended to withdraw its defense in
the Breneks' pending state lawsuit 30 days from the date
of the letter. In support of its position, Gray pointed to
the following language from its policy:
A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY
a. We will pay those sums that the insured becomes legally
obligated to pay as damages because of "bodily
injury" or "property damage" to which this
insurance applies . . . . But . . .
2. Our right and duty to defend end when we have used up the
applicable limit of insurance in payment of judgments or
settlements under Coverage A . . . .
Gray policy does not define the terms "judgments"
and "settlements." Noting that it had paid the $1,
000, 000 policy limit "in settlement regarding the
Brenek occurrence," Gray advised that it had no further
obligations under the policy.
subsequently denied requests of Aggreko and Indian Harbor to
maintain its defense of Aggreko. As a result, Indian Harbor
instituted a declaratory action, also in the United States
District Court for the Eastern District of Texas, seeking,
among other things, recognition that Gray maintained a duty
to defend Aggreko. Shortly thereafter, the district court
issued an order consolidating Aggreko's lawsuit against
ASIC with Indian Harbor's lawsuit against Gray.
consolidation, Gray filed a motion for summary judgment in
which it sought a declaration that it had exhausted its
policy limits and no longer had a duty to defend or indemnify
Aggreko. ASIC and Indian Harbor filed memoranda in opposition
to Gray's motion, while Aggreko filed a response stating
that its substantive arguments would be included in Indian
Harbor's memorandum. Indian Harbor also, in turn, filed a
cross-motion for summary judgment in which it asked the
district court to determine that Texas law applies to the
issues raised in the consolidated lawsuits; that the Covenant
Not to Execute did not constitute a "settlement" of
any of the Breneks' claims against Aggreko under Texas
law and, therefore, that Gray had not exhausted its policy
limit with respect to such claims; that Gray had an ongoing
duty to defend Aggreko in the Breneks' lawsuit; and that
Gray was required to reimburse Indian Harbor for any costs
spent in Aggreko's defense. Gray filed a memorandum in
opposition to Indian Harbor's motion.
district court granted Gray's motion and denied Indian
Harbor's motion, except that it determined, in accordance
with Indian Harbor's request, that Texas law-as opposed
to Louisiana law-was applicable to the issues before it.
Specifically, the court held that:
[A]s a matter of law, . . . (1) Texas law is controlling for
both the Gray Policy and the Covenant Not to Execute; and (2)
Gray's payment of the policy limits and the Breneks'
execution of the Covenant Not to Execute against Aggreko and
the release of Rutherford terminates Gray's duty to
defend and indemnify its insureds.
Harbor now appeals the district court's order. As noted
above, Gray asks this court to affirm the district
court's ruling but submits a "conditional"
cross-appeal, urging us to reverse the district court's
conclusion that Texas law applies to the issues at hand and
affirm the district court's grant of summary judgment in
favor of Gray by applying Louisiana law in the event that we
conclude the judgment cannot be maintained under Texas law.
court reviews choice-of-law determinations de novo
but reviews the district court's underlying factual
determinations for clear error. Mumblow v.Monroe Broadcasting, Inc., 401 F.3d 616, 620 (5th
Cir. 2005); see also Nat'lUnion Fire Ins.
Co. of Pittsburgh, Pa. v. Am. Eurocopter Corp., 692 F.3d
405, 408 (5th Cir. 2012) ("A district court's
choice-of-law determination is a legal conclusion."). We
also review a district court's interpretation ...