Opinion ID: 532067
Heading Depth: 1
Heading Rank: 2

Heading: condition precedent for coverage

Text: 5 As discussed above, Endorsement No. 2 of Illinois Union's umbrella policy requires Wild Well to obtain a Hold Harmless Agreement from Amoco as a condition precedent for coverage. Both Amoco and Wild Well argue that this provision is ambiguous, and that the district court was required to accept their not unreasonable interpretation. See Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 665-66 (Tex.1987). Their (Amoco's and Wild Well's) interpretation is that Illinois Union's policy Endorsement No. 2 allowed for coverage of Wild Well's agreement to indemnify Amoco for claims with respect to Wild Well's employees. Specifically, Amoco and Wild Well argue that Endorsement No. 2 is ambiguous for the following reasons: 1) that the umbrella policy's coverage is meant to follow that of the primary policy, which includes Wild Well's contractual liability, and furthermore that the exception to the exclusion of worker's compensation claims expressly affords coverage for Wild Well's contractual assumption of Amoco's liability; 2) that Endorsement No. 2 neither defines Hold Harmless Agreements nor specifies the type of perils for which such agreements are required; 3) that Endorsement No. 2 does not expressly alter the umbrella policy's coverage for Wild Well's contractual liability; and 4) that if Hold Harmless Agreements were required for all types of claims, there would have been no reason for Wild Well to obtain this umbrella policy. 6 Amoco and Wild Well rely to a great degree on the special state laws of construction of insurance coverage. Specifically, that courts should construe such contracts in favor of coverage. Furthermore, that courts should adopt the interpretation of the insured unless the insurer demonstrates that the insured's interpretation is unreasonable. However, these special rules of construction only apply if the terms of the agreement are ambiguous, that is, if the terms are susceptible to more than one reasonable interpretation. Barnett, 723 S.W.2d at 665-66; Harbor Ins. Co. v. Trammell Crow Co., Inc., 854 F.2d 94, 99 (5th Cir.1988); Holcomb v. Prudential Ins. Co. of America, 673 F.2d 102, 105-06 (5th Cir.1982) (citing Texas law with approval). Therefore, in the present case, the special rules would apply if the term Hold Harmless Agreement is ambiguous. For the following reasons, Amoco and Wild Well have failed to persuade this Court that the term Hold Harmless is ambiguous. 7 First, while it is true that most umbrella policies generally follow the coverage provided for under the primary policy, Illinois Union expressly limited its policy's coverage by including Endorsement No. 2. This Court determines that effect should be given to this limitation. Furthermore, this Court is not persuaded by the argument that coverage in this case is afforded under the following insurance policy proviso: This policy shall not apply: 8