Opinion ID: 6320573
Heading Depth: 2
Heading Rank: 1

Heading: The parties and their insurance policies

Text: The parties have established the relevant facts by stipulation. Skanska USA Building, Inc. was the general contractor on a 2013 construction project to build a large office campus in Houston. Skanska offered a contractor-controlled insurance program (CCIP) that included (1) workers’ compensation coverage and (2) commercial general liability coverage under a policy (Skanska CGL Policy) issued by appellee Zurich American Insurance Company. Skanska required each subcontractor on the project to enroll in its CCIP as a condition of performing work on the jobsite. But Skanska’s CCIP excluded certain entities from coverage “[a]t the discretion of 1 We note (and the parties agree) that there appears to be a typographical error in the certified question, the unaltered version of which requests guidance on the operation of section 151.103 when “the worker and the indemnitee are deemed ‘co-employees’ of the indemnitor for purposes of the TWCA.” As we explain further below, the injured worker in this dispute was previously deemed the co-employee of the indemnitor (Berkel) for purposes of the TWCA but was never deemed a co-employee of the indemnitee (Maxim). Skanska or subject to State regulations,” including “[s]ubcontractors, and any of their respective sub-subcontractors, who do not perform any actual labor on the Project Site” as well as “[v]endors, suppliers . . . and others who merely transport, pickup, deliver, or carry materials, personnel, parts or equipment or any other items or persons to or from the Project Site.” Skanska hired Berkel & Company Contractors, Inc. as a subcontractor for the project. Although Berkel enrolled in Skanska’s CCIP as required, Berkel also had its own commercial general liability policy issued by Zurich (Berkel CGL Policy). Berkel then leased a crane from appellant Maxim Crane Works, L.P. for use on the construction project. Berkel and Maxim entered into a Bare Rental Agreement (the Equipment Lease) under which Berkel agreed to be responsible for compliance with all applicable laws, regulations, and ordinances in respect to the operation and maintenance of the crane while in Berkel’s possession. Berkel also agreed to name Maxim as an additional insured under Berkel’s CGL policy, with limits of liability not less than $2 million for each occurrence. Although Maxim qualified as an “Additional Insured” under the Berkel CGL Policy, subject to any applicable provisions or exclusions, Maxim also had its own commercial general liability policy issued by Zurich (Maxim CGL Policy). Maxim did not enroll in Skanska’s CCIP. B. Maxim’s settlement of the state-court suit against it and Zurich’s refusal to cover Maxim under Berkel’s policy On September 30, 2013, a Berkel employee was operating Maxim’s crane at the construction site when the crane boom collapsed. Part of the crane crushed the leg of Skanska employee Tyler Lee, which ultimately had to be amputated above the knee. Lee applied for and received workers’ compensation benefits under Skanska’s CCIP. Lee and his wife then sued Berkel, Maxim, and other defendants in Texas state court, alleging various theories of negligence. Although no employee of Maxim was present on the construction site at the time of the accident, the Lees alleged that Maxim was independently liable for its own negligence. Maxim sought coverage under the Berkel CGL policy, requesting defense, indemnity, and additional-insured status with respect to the Lees’ claims. Zurich denied coverage based on sections 151.102 through 151.104 of the TAIA, explaining that “the indemnity provision(s) in the [Equipment Lease] is void and unenforceable because this loss involved an employee of the general contractor, Skanska.” Maxim then filed cross-claims against Berkel in the Lees’ statecourt action, alleging breach of contract and seeking defense, indemnity, and contribution under Texas statutory and common law. Maxim alleged that Berkel breached the Equipment Lease by, among other things,2 “refusing to defend and indemnify MAXIM” and “refusing to meet its contractual obligation to [e]nsure that MAXIM was provided coverage as an additional insured under Berkel’s insurance policy(ies).” 2 Maxim also alleged that Berkel breached the Equipment Lease by: failing to operate the crane safely and in accordance with its operator’s manual, OSHA and ANSI standards, and other applicable laws and regulations; failing to ensure the crane was operated by experienced and competent persons; operating the crane in excess of manufacturer safety requirements and rated load capacities; and subjecting the crane to careless and needlessly rough usage. The Lees’ suit was tried before a jury. Although Maxim requested that the jury be asked whether Berkel breached the lease, the trial court sustained Berkel’s objection to including the question in the charge. The jury found both Maxim and Berkel negligent and awarded the Lees actual damages of $35,443,006. The jury placed 90% of the responsibility on Berkel and 10% on Maxim. After trial but prior to final judgment, the Lees and Maxim reached a settlement for $3,444,300.60. Zurich paid the Lees that amount under the Maxim CGL Policy and Maxim reimbursed Zurich for $3 million of the settlement costs, per the deductible endorsement in the policy. Zurich also billed Maxim $824,839.38 for defense costs, which Maxim reimbursed. Maxim filed a motion for entry of judgment on its cross-claims against Berkel. The trial court denied the motion, concluding that “pursuant to the jury’s findings as to the negligence questions in the Court’s Jury Charge, and Chapter 151 of the Texas Insurance Code, Maxim is not entitled to reimbursement of [its] Defense Fees, Costs, and Expenses of and from Berkel.” The court ultimately “render[ed] judgment for Berkel against Maxim on Maxim’s Cross Action.” Both Berkel and Maxim appealed the trial court’s judgment. The Fourteenth Court of Appeals reversed the judgment against Berkel, holding that the workers’ compensation scheme provided the Lees’ exclusive remedy. Berkel & Co., 543 S.W.3d at 295–96. The TWCA provides that recovery of workers’ compensation benefits is a covered employee’s exclusive remedy against his employer and co-employees for work-related injury. See TEX. LAB. CODE § 408.001(a). Although Berkel “is not Lee’s actual employer or coemployee,” the court of appeals explained that section 406.123 of the TWCA “allow[s] the general contractor to be deemed the statutory employer of the subcontractor and the subcontractor’s employees ‘[only] for purposes of the workers’ compensation laws of this state’” if the general contractor has agreed in writing to provide them with workers’ compensation insurance. Berkel & Co., 543 S.W.3d at 296 (quoting TEX. LAB. CODE § 406.123(e)). “Thus, for purposes of the [TWCA], Skanska is Berkel’s statutory employer, and Lee, as Skanska’s actual employee, is Berkel’s statutory co-employee.” Id. “As a co-employee [of Lee], Berkel [was] entitled to rely on the [TWCA’s] exclusive-remedy provision,” and “the trial court erred by rendering judgment against Berkel on the findings that Berkel was negligent and grossly negligent.” Id. The court of appeals affirmed the trial court’s judgment against Maxim in a separate opinion without reaching the merits of Maxim’s TAIA argument. See Maxim Crane Works, L.P. v. Berkel & Co. Contractors, Inc., No. 14-15-00614-CV, 2016 WL 4198138 (Tex. App.— Houston [14th Dist.] Aug. 9, 2016, pet. denied).3 Maxim subsequently filed a petition for review in this Court, which we denied. C. Maxim’s coverage suit against Zurich In April 2018, Maxim made another demand on Zurich for coverage as an additional insured under Berkel’s CGL Policy, seeking 3 Because Maxim failed to provide a complete reporter’s record or clerk’s record, the court of appeals concluded that the record Maxim had provided was inadequate to show preservation of error or evaluate any harm to Maxim. Maxim, 2016 WL 4198138, at  & n.3. “reimbursement of [the] defense costs [Maxim] incurred in defending the underlying lawsuit . . . and reimbursement of the indemnity monies used to settle the underlying lawsuit, post-verdict.” Zurich denied coverage again for the same reasons it asserted in response to Maxim’s prior demand. Maxim then sued Zurich in state court, seeking coverage under the Berkel CGL Policy. Zurich removed the suit to federal court and the parties agreed to file cross-motions for summary judgment with a joint stipulation of facts. The federal district court concluded that absent an exception, the TAIA applies to the Equipment Lease and to the Berkel CGL Policy’s designation of Maxim as an additional insured. See Maxim Crane Works, L.P. v. Zurich Am. Ins. Co., 392 F. Supp. 3d 731, 740 (S.D. Tex. 2019). Rejecting Maxim’s suggestion that the terms “co-employee” and “co-employer” are interchangeable under the TAIA and TWCA, the district court concluded that the TAIA’s employee exception was inapplicable and therefore granted summary judgment for Zurich, dismissing Maxim’s claims with prejudice. Id. at 745–46. Maxim appealed the district court’s decision and asked the Fifth Circuit to certify the TAIA question to this Court, which it did. See Maxim Crane Works, L.P. v. Zurich Am. Ins. Co., 11 F.4th 345 (5th Cir. 2021). We accepted the question. See TEX. CONST. art. V, § 3–c(a); TEX. R. APP. P. 58.1.