Opinion ID: 799890
Heading Depth: 3
Heading Rank: 1

Heading: Injury Giving Rise to the Dispute

Text: In 2009, the State of Louisiana hired Great Southern to repair docks, bulkheads, and other structures at the Turtle Cove Research Facility, near Manchac, Louisiana. To carry out the work, Great Southern chartered, among other vessels, eleven barges. Great Southern also leased a crawler crane and pile-driving equipment from Conmaco. Deville was working for Great Southern when he was injured by the crane’s hammer falling on his right arm. B. Contractual Relationships between the Various Parties When Great Southern leased the crane from Conmaco, it signed Equipment Lease No. 2684 (the “Lease”). The Lease, which was to be governed by Louisiana law, provides that Great Southern (as lessee) would be “liable for any loss or casualty which is not insured, or which is within exclusions to insurance coverage.” The Lease further provides, with respect to insurance, that Lessee is required to provide certificate or other evidence of insurance covering Equipment (as provided herein); Lessee’s Insurance coverage shall include endorsement for hired equipment and show limit; Lessee’s Insurance coverage shall not have an offshore exclusion; Lessee’s Insurance coverage shall include boom and overload protection; Lessee’s Insurance coverage shall include flood insurance; and Lessee is liable for any loss or casualty which is not insured, or which is within exclusions to insurance coverage. Additionally, appended to the lease were “General Lease Terms and Conditions.” Paragraph 3(c) of these General Terms states, in relevant part: 2 Case: 11-30477 Document: 00511856359 Page: 3 Date Filed: 05/15/2012 No. 11-30477 LESSEE SHALL AT ITS SOLE COST AND EXPENSE PROVIDE AND MAINTAIN A POLICY OF COMMERCIAL GENERAL LIABILITY INSURANCE COVERING ALL RISKS OF PHYSICAL LOSS OR DAMAGE TO PROPERTY OR INJURY TO PERSONS WITH RESPECT TO THE LESSEE’S POSSESSION AND USE OF THE EQUIPMENT, in such amounts as may from time to time be satisfactory to Lessor, including, but not limited to, coverage for contractual liability with regard to all of the obligations and indemnities of Lessee hereunder. . . . Lessee shall provide Lessor with Certificates of Insurance evidencing the coverages required above, and naming the Lessor and The CIT Group . . . as an additional named insured party under such policies . . . . In order to comply with its obligation to obtain insurance under the Lease, Great Southern obtained a policy from FFIC (the “FFIC Policy”). Despite paragraph 3(c) of the Lease’s requirement that the policy name Conmaco, the FFIC Policy did not specifically identify Conmaco as an “additional insured.” Instead, the FFIC Policy contains a blanket additional insured endorsement: “the Policy . . . is amended to include any person or organization that you are obligated by an ‘insured contract’ to include as Additional Insureds, but only with respect to liability arising out of ‘your work.’” This blanket endorsement requires the existence of an “insured contract,” which the FFIC Policy defines as [t]hat part of any other contract or agreement pertaining to your business (including an indemnification of municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization. Tort liability means any liability that would be imposed by law in the absence of any contract or agreement. With respect to the ranking of the FFIC Policy vis-à-vis other policies, the FFIC Policy stated that a. Any coverage provided hereunder will be excess over any other insurance under which the insured has been afforded insured 3 Case: 11-30477 Document: 00511856359 Page: 4 Date Filed: 05/15/2012 No. 11-30477 status, whether primary, excess (other than insurance effected by the Named Insured hereunder and specifically written as excess of this coverage), contingent, or on any other basis, whether prior or subsequent hereto, and by whomever effected directly or indirectly covering loss or damage insured hereunder, and this company shall be liable only for the excess of such loss or damage beyond the amount due from such other insurance up to, but not exceeding, the limits of this policy as set forth in the declarations. ... c. Notwithstanding paragraphs a. and b. above, this insurance shall be primary to any other insurance, but only:
(2) When required by and only to the extent of such obligation under an “insured contract.” The FFIC Policy defines “your work” as “Work or operations performed by you or on your behalf and [m]aterials, parts or equipment furnished in connection with such work or operations. Your work includes: Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of your work; and [t]he providing of or failure to provide warnings or instructions.” In addition to the FFIC Policy, Great Southern has an excess insurance policy (the “XL Policy”) issued by XL Speciality Insurance Company (“XL”) with a limit of four million dollars. Conmaco has a general liability policy through Lexington Insurance Company (“Lexington”) with a one-million-dollar limit of liability (the “Lexington Policy”). As to the Lexington Policy’s ranking with respect to other policies, it states, in relevant part, that [i]f other valid and collectible insurance is available to the insured for a loss we cover under Coverage A or B of this Policy, our obligations are limited as follows:
This insurance is primary except when b. Excess Insurance, below, applies. If this insurance is primary, our obligations 4 Case: 11-30477 Document: 00511856359 Page: 5 Date Filed: 05/15/2012 No. 11-30477 are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in c. Method of Sharing, below.
This insurance is excess over: . . .
covering liability for damages arising out of the premises or operations or the “products-completed operations hazard” for which you have been added as an additional insured by attachment of an endorsement. When this insurance is excess over other insurance, we will pay only our share of the amount of the loss, if any, that exceeds the sum of: (1) The total amount that all such other insurance would pay for the loss in the absence of this insurance; and (2) The total of all deductibles and self-insured amounts under all that other insurance. We will share the remaining loss, if any, with any other insurance that is not described in this Excess Insurance provision and was not bought specifically to apply in excess of the limits of insurance shown in the Declarations of this Policy. c. Method of Sharing If all of the other insurance permits contribution by equal shares, we will follow this method also. Under this approach each insurer contributes an equal amount until it has paid its applicable limit of insurance or none of the loss remains, whichever comes first. If any of the other insurance does not permit contribution by equal shares, we will contribute by limits. Under this method, each insurer’s share is based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers. 5 Case: 11-30477 Document: 00511856359 Page: 6 Date Filed: 05/15/2012 No. 11-30477 C. Procedural Background Deville brought suit against Conmaco, Great Southern, and their various insurers in the Eastern District of Louisiana in late 2009. Conmaco then filed a third-party complaint against FFIC, claiming that Conmaco was an additional insured under Great Southern’s policy with FFIC. In September 2010, FFIC moved for summary judgment on Conmaco’s third-party action. The district court denied that motion, reasoning that the Lease was an “insured contract” under the FFIC Policy. In October 2010, Great Southern, XL, and another insurer (Seabright Insurance Company) settled with Deville, and they were dismissed with prejudice pursuant to that settlement. A trial on all remaining claims between the parties was scheduled, but prior to that, Deville settled with Conmaco and Lexington for $1,500,000. After hearing argument on the ranking of the respective insurance policies, the district court concluded that (1) the FFIC Policy covered Conmaco, (2) the FFIC Policy was primary up to its one-million-dollar limit, and (3) Lexington and XL would share the remaining $500,000 owed to Deville in the settlement on a 4:1 basis with XL paying $400,000 and Lexington paying $100,000. FFIC timely appealed, invoking our jurisdiction under 28 U.S.C. § 1291.