Court Opinion

ID: 4019145
Source: CourtListenerOpinion
Date Created: 2016-07-27 07:14:47.980258+00
Date Added: 2024-06-11T07:44:57.809924
License: Public Domain

Opinion issued July 26, 2016

                                     In The

                               Court of Appeals
                                    For The

                          First District of Texas
                           ————————————
                               NO. 01-15-00406-CV
                           ———————————
          NEW HAMPSHIRE INSURANCE COMPANY, Appellant
                                        V.
    CANDIS MORA, INDIVIDUALLY, AND AS NEXT FRIEND OF
  ANTHONY LORENZO DEAN MORA, EMMA ELISHA MORA, AND
 FRANCISCO JOHN MORA, MINOR CHILDREN, AND AS PERSONAL
  REPRESENTATIVE OF AND HEIR TO THE ESTATE OF ANTHONY
             BYRON MORA, DECEASED, Appellees

                   On Appeal from the 165th District Court
                            Harris County, Texas
                      Trial Court Case No. 2011-47304

                                  OPINION

      In this appeal, we consider whether the trial court erred in granting summary

judgment declaring that a subcontractor's workers' compensation carrier had waived
its rights of subrogation entitling it to recoup payments made on behalf of its insured.

We reverse and remand.

                                  BACKGROUND

Laredo Hires Trinidad—The Relevant Contract Provisions

      Laredo Petroleum, Inc. [Laredo] was the operator of rig 204, and Trinidad

Drilling, Ltd. [Trinidad] was the contractor Laredo hired to perform drilling work

on rig 204. The Laredo/Trinidad contract provided that Laredo would obtain certain

insurance coverages and obtain certain waivers of its insurers’ subrogation rights

against Laredo. Specifically, paragraph 13 of the Laredo/Trinidad contract provided

as follows:

      During the life of this Contract, [Trinidad] shall at [Trinidad’s]
      expense, maintain, with an insurance company or companies
      authorized to do business in the state where the work is to be performed
      or through a self-insurance program, insurance coverages of the kind
      and in the amount set forth in Exhibit “A”, insuring the liabilities
      specifically assumed by [Trinidad] in Paragraph 14 of this Contract.
      [Trinidad] shall procure from the company or companies writing said
      insurance a certificate or certificates that said insurance is in full force
      and effect that the same shall not be canceled or materially changed
      without thirty (30) days prior written notice to [Laredo]. For liabilities
      assumed hereunder by [Trinidad], its insurance shall be endorsed to
      provide that the underwriters waive their right of subrogation against
      [Laredo]. [Laredo] will, as well, cause its insurer to waive subrogation
      against [Trinidad] for liability it [Laredo] assumes and shall maintain,
      at [Laredo’s] expense, or shall self-insure, insurance coverage as set
      forth in Exhibit “A” of the same kind and in the same amount as is
      required of [Trinidad], insuring the liabilities specifically assumed by
      [Laredo] in Paragraph 14 of this Contract. [Laredo] shall procure from

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      the company or companies writing said insurance a certificate or
      certificates that said insurance is in full force and effect and that the
      same shall not be canceled or materially changed without thirty (30)
      days prior written notice to [Trinidad]. [Laredo] and [Trinidad] shall
      cause their respective underwriters to name [Trinidad’s] Group and
      [Laredo’s] Group, as appropriate, as an additional insured but only to
      the extent of the risks, obligations and liabilities assumed by operation
      of this Contract, including, but not limited to, the drilling rig. (emphasis
      added).

      Worker’s Compensation Insurance is listed in Exhibit “A,” and in accordance

with its obligation under paragraph 13 of the Laredo/Trinidad contract, Trinidad

obtained worker’s compensation insurance from New Hampshire Insurance

Company [NHIC], which contained the following endorsement, providing in

relevant part:

      [NHIC has] the right to recover our payments from anyone liable for an
      injury covered by this policy. We will not enforce our right against the
      person or organization named in the Schedule, but this waiver applies
      only with respect to bodily injury arising out of the operations described
      in the Schedule where [Trinidad is] required by a written contract to
      obtain this waiver from [NHIC].

      This agreement shall not operate directly or indirectly to benefit anyone
      not named in the Schedule.

      ....

      (X) Blanket waiver
            Any person or organization for whom [Trinidad] has agreed by
            written contract to furnish this waiver.

      The Laredo/Trinidad contract also contained several indemnity provisions.

The two provisions relevant here are amended paragraph 14.8 and paragraph 14.7.

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Amended Paragraph 14.8 provides:

     [Trinidad’s] Indemnification of [Laredo]: [Trinidad] shall release
     [Laredo] and [Laredo’s] Parties from any liability for, and shall protect,
     defend and indemnify [Laredo] and [Laredo’s] Parties, its officers,
     directors, employees and joint owners from and against all claims
     demands and causes of action of every kind and character, without
     limit and without regard to the cause or causes of action thereof or the
     negligence of any party or parties, arising in connection herewith in
     favor of [Trinidad’s] employees or [Trinidad’s] subcontractors or their
     employees, or [Trinidad’s] invitees (collectively . . . “[Trinidad’s]
     Parties”), on account of bodily injury, death or damage to the
     property. [Trinidad] shall further release [Laredo] and [Laredo’s]
     Parties of any liability for, and protect, defend and indemnify [Laredo],
     its officers, directors, employees and joint owners from and against all
     claims, demands and causes of action of every kind and character,
     without limit, arising in connection herewith in favor of any third party
     or parties (excluding “[Laredo’s] Parties”), on account of bodily injury,
     death or damage to property caused by the negligent or willful acts of
     [Trinidad’s] Parties. Likewise, [Trinidad] shall be responsible and shall
     protect, defend and indemnify [Laredo], its officers, directors,
     employees and joint owners from and against any fines or sanctions
     imposed by any governmental agency or authority arising from any
     unlawful act or acts committed by [Trinidad’s] Parties while in the
     course of performance of this Contract. [Trinidad’s] indemnity under
     this paragraph shall be without regard to and without any right to
     contribution from any insurance maintained by [Laredo] pursuant to
     Paragraph 13. If it is judicially determined that the monetary limits of
     insurance required hereunder or of the indemnities voluntarily assumed
     under Paragraph 14.8 (which [Trinidad] and [Laredo] hereby agree will
     be supported either by available liability insurance, under which the
     insurer has no right of subrogation against the indemnities, or
     voluntarily self-insured, in part of whole) exceed the maximum limits
     permitted under applicable law, it is agreed that said insurance
     provisions of this paragraph shall be subject to those contained
     elsewhere in this contract (including Paragraph 14.11). In case of
     conflict, the other provisions of this contract shall govern. (emphasis
     added).

                                         4
The Trinidad/Laredo contract also has a specific indemnity provision for “materials”

furnished by Laredo in paragraph 14.7, which provides:

      Inspection of Materials Furnished by [Laredo]: [Trinidad] agrees to
      visually inspect all materials furnished by [Laredo] before using same
      and to notify [Laredo] of any apparent defects therein. [Trinidad] shall
      not be liable for any loss or damage resulting from the use of
      materials furnished by [Laredo], and [Laredo] shall release [Trinidad]
      from, and shall protect, defend and indemnify [Trinidad] from and
      against, any such liability. (emphasis added).

Trinidad’s Worker is Killed and His Family Receives Worker’s Compensation
Benefits

      On February 7, 2011, Trinidad’s employee, Anthony Bryan Mora, was killed

while working on Laredo’s rig. Mora was electrocuted while working with an

electric transfer pump, which Laredo had leased and provided for Trinidad’s use at

the well site.   Because Mora was killed during the course and scope of his

employment with Trinidad, Trinidad’s worker’s compensation insurer, NHIC, paid

benefits to his family. As of September 8, 2014, the total amount of benefits paid

by NHIC was $143,242, and NHIC was continuing to pay benefits to Mora’s widow

and children.

The Lawsuit

      On August 10, 2011, the Mora family filed suit against multiple defendants

asserting wrongful death and survival claims. In May 2014, NHIC intervened in the

suit to establish its subrogation rights. On September 8, 2014, the Moras and certain

                                         5
defendants filed a motion for summary judgment related to NHIC’s subrogation

claims, and NHIC filed its response shortly thereafter.

      In October 2014, the Moras entered into a confidential settlement with the

defendants. NHIC’s subrogation claims as intervenor remained pending.             On

February 13, 2015, the trial court entered summary judgment in favor of the Moras

and against NHIC on its subrogation claims.

      On February 27, 2015, the trial court signed a stipulation between the Moras

and NHIC, wherein the Moras agreed to “escrow the sum of $250,000 out of the

settlement to cover the anticipated amount of past and future death benefits to be

paid by NHIC during the pendency of an appeal of this case.” Based on this escrow

agreement, NHIC is solely pursuing its subrogation rights against the Moras on

appeal.

      On April 15, 2015, the trial court entered a final order of dismissal of the

Mora’s claims against the defendants, and thereafter the trial court entered an agreed

final judgment and minor settlement approval. These orders made the interlocutory

summary judgment against NHIC final and appealable, and this appeal by NHIC

followed.

                              ISSUES ON APPEAL

Issues Presented

      NHIC asserted the following three issues on appeal:

                                          6
      1. The trial court erred in holding that NHIC’s worker’s compensation
         subrogation claims were waived, as the waiver of subrogation
         provisions only pertain to general liability insurance coverage that
         the parties were required to secure for their indemnity obligations.

      2. The trial court erred in holding that NHIC’s worker’s compensation
         subrogation claims were waived, as Trinidad did not assume the
         liabilities of the defendants for this accident.

      3. The trial court erred in holding that NHIC waived its rights of
         subrogation against the non-Laredo defendants, as any possible
         waiver of subrogation as to worker’s compensation benefits is
         limited to claims against Laredo.

Standard of Review and Applicable Law

      We review a summary judgment under a de novo standard. Provident Life &

Acc. Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). The well-settled principles

governing the review of summary judgments apply in insurance disputes. See

Hanson v. Republic Ins. Co., 5 S.W.3d 324, 327 (Tex. App.—Houston [1st Dist.]

1999, pet. denied). The movant for a traditional summary judgment must show that

there is no genuine issue of material fact and that it is entitled to judgment as a matter

of law. TEX. R. CIV. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v.

Fielding, 289 S.W.3d 844, 848 (Tex. 2009). A defendant is entitled to summary

judgment if the defendant negates at least one essential element of the plaintiff's

cause of action. See Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.

1997). Once the defendant establishes its right to summary judgment as a matter of

law, the burden shifts to the plaintiff to present evidence raising a genuine issue of

                                            7
material fact. Walker v. Harris, 924 S.W.2d 375, 377 (Tex. 1996). We review the

summary judgment evidence in the light most favorable to the nonmovant, crediting

evidence favorable to the nonmovant if reasonable fact finders could, and

disregarding contrary evidence unless reasonable fact finders could not. Mann

Frankfort, 289 S.W.3d at 848; see also Joe v. Two Thirty Nine Joint Venture, 145
S.W.3d 150, 156 (Tex. 2004).

      “Subrogation” is the right of one who has paid an obligation that another

should have paid to be indemnified by the other. Tex. Ass’n of Sch. Bds., Inc. v.

Ward, 18 S.W.3d 256, 258 (Tex. App.—Waco 2000, pet. denied). The object of such

subrogation is to prevent the insured from receiving a double recovery. Argonaut

Ins. Co. v. Allstate Ins. Co., 869 S.W.2d 537, 541 (Tex. App.—Corpus Christi 1993,

writ denied). An insurer’s right to subrogation derives from the rights of the insured

and is limited to those rights. Interstate Fire Ins. Co. v. First Tape, Inc., 817 S.W.2d
142, 145 (Tex. App.—Houston [1st Dist.] 1991, writ denied). A release between the

insured and an offending party prior to a loss destroys the insurance company’s

rights by way of subrogation. Id.

      Texas law requires that the first money recovered by an injured worker from

a tortfeasor go to the worker’s compensation carrier, and until the carrier “is paid in

full the employee or his representatives have no right to any funds.” Tex. Mut. Ins.

Co. v. Ledbetter, 251 S.W.3d 31, 33 (Tex. 2008) (quoting Argonaut Ins. Co. v. Baker,

                                           8
87 S.W.3d 526, 530 (Tex. 2002)). However, subrogation rights may be waived or

altered by contract. Trinity Universal Ins. Co. v. Bill Cox Constr., Inc., 75 S.W.3d 6,

8 (Tex. App.—San Antonio 2001, no pet.).

      When interpreting an insurance policy, we follow the “general rules of

contract construction to ascertain the parties’ intent.” Gilbert Tex. Constr., L.P. v.

Underwriters at Lloyd's London, 327 S.W.3d 118, 126 (Tex. 2010). We begin with

the language of the policy because we presume the parties intend what the words of

their contract say. Id. Courts must try to give effect to all contractual terms so none

will be rendered meaningless. Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980
S.W.2d 462, 464 (Tex. 1998). Courts must read all provisions together and give each

provision its intended effect. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133

(Tex. 1994).

                 WAIVER OF SUBROGATION RIGHTS BY NHIC?

      In issue two, which we address first because we find it to be dispositive, NHIC

contends the trial court erred in granting the Moras’ Motion for Summary Judgment.

Specifically, NHIC contends that the subrogation waiver in the endorsement to

policy it provided to Trinidad was never triggered in this case because Trinidad “did

not assume the liabilities of the defendants for this accident.”

Framework for Addressing Waiver-of-Subrogation Claims

                                           9
      This Court recently considered a similar waiver-of-subrogation rights issue in

The Insurance Company of the State of Pennsylvania v. Roberts, 01-15-00453-CV,

2016 WL 3902163 (Tex. App.—Houston [1st Dist.] July 14, 2016, no pet. h.). In

doing so, the Court established a framework for addressing such claims. First, we

must look to the language of the policy itself to determine whether there is a waiver-

of-subrogation provision. Id. at *3. Second, if there is a waiver-of-subrogation

provision in the insurance contract, we next consider whether the language of the

insurance contract requires us to look to the terms of another contract referenced

therein to determine the waiver’s applicability. Id. at *4. If the insurance policy

provides that the waiver is only applicable when “required by a written contract,”

we necessarily look to the insurance terms in the referenced contract to determine

whether the waiver is required. Id. Finally, if the referenced contract limits the

waiver-of-subrogation rights to “liabilities assumed” by the insured, we must

consider the indemnity provisions of the contract to determine which liabilities the

insured assumed. Id. at *5–6. If the indemnity provisions require the insured to

indemnify another party for the accident, the insured has “assumed liability” for the

accident, the waiver-of-subrogation provision in the insurance policy is “required by

contract,” and the waiver-of-subrogation provision in the insurance policy is

applicable and prevents the insurer from exercising its subrogation rights. Id. at *7.

In Roberts, we held that the waiver-of-subrogation endorsement did not apply, the

                                         10
worker’s compensation insurer did not waive its subrogation rights, and its insured

had not “assumed liability” for the accident because the underlying contract, to

which reference was made in the insurance policy, did not require the insured to

indemnify another party for the accident. Id., compare with Liberty Ins. Corp. v. SM

Energy, 2012 WL 6100303 (S.D. Tex. 2012) (holding waiver-of-subrogation clause

in policy did apply because insured, under broad indemnification clause in

referenced contract, had an obligation to indemnify other party to contract).

Application

      Here, the waiver-of-liability endorsement provides that it applies in favor of

anyone for whom Trinidad “has agreed by written contract to furnish this waiver.”

Thus, we look to the insurance provisions of the Laredo/Trinidad contract to

determine whether Trinidad has agreed to provide such a waiver. Roberts, at *4.

The insurance clause of the Laredo/Trinidad contract requires Trinidad to obtain

such a waiver from its insurer “for liabilities assumed hereunder.” Therefore, we

must look to the indemnity provisions of the contract to determine whether Trinidad

assumed liability for the death of its employee. Id. at *5-6.

      The Moras argue that Trinidad assumed liability for the accident in paragraph

14.8, which provides that “[Trinidad] shall release [Laredo] . . . from any liability

for, and shall . . . indemnify [Laredo] . . . from and against all claims . . , without

limit and without regard to the cause or causes of action thereof or the negligence of

                                          11
any party or parties, arising in connection herewith in favor of [Trinidad’s]

employees . . . on account of bodily injury, death or damage to the property.”

          We agree that, under this very broad indemnification paragraph, Trinidad

agrees to indemnify Laredo for claims arising out of the death of Trinidad’s

employees. Were we to stop our analysis here, we would necessarily conclude that,

since Trinidad assumed liability for the death of its employee, the waiver-of

subrogation clause was triggered and NHIC would have no subrogation rights to

assert.

          However, as pointed out by NHIC, this is not the only indemnity clause in the

Laredo/Trinidad contract. Paragraph 14.7 provides that “[Trinidad] shall not be

liable for any loss or damage resulting from the use of materials furnished by

[Laredo], and [Laredo] shall release [Trinidad] from, and shall protect, defend and

indemnify [Trinidad] from and against, any such liability.” NHIC argues that, under

this indemnity provision, Trinidad does not “assume liability” for Mora’s death

because the death was caused was caused by a defective electric transfer pump,

which was a “material” furnished by Laredo. The Moras, however, argue that the

transfer pump is not a “material,” but “equipment.” As “equipment,” the Moras

contend that paragraph 14.7 does not apply, and that if 14.7 does not apply,

paragraph 14.8 does, and that Trinidad did assume liability under paragraph 14.8.

                                            12
      This Court has considered and rejected the Moras’ argument in Sonerra

Resources Corp. v. Helmerich & Payne Intern’l Drilling Co., No. 01-11-00459-CV,

2012 WL 3776428, at *6 (Tex. App.—Houston [1st Dist.] Aug. 30, 2012, pet. ref’d).

In Sonerra, the plaintiff, McDaniel, sued Sonerra, the operating company that

provided the rotating-control device that injured McDaniel while he was working

for H&P, a drilling contractor for Sonerra. Id. at *1. Sonerra filed a cross-claim

against H&P, claiming that an indemnity provision in the contract required H&P to

indemnify Sonerra. Id. The contract provision at issue in Sonerra is almost identical

to the provision in the present case and provides:

      Inspection of Materials furnished by [Sonerra]: [H&P] agrees to
      visually inspect all materials furnished by [Sonerra] before using same
      and to notify [Sonerra] of any apparent defects therein. [H&P] shall
      not be liable for any loss or damage resulting from the use of materials
      furned by [Sonerra], and [Sonerra] shall release [H&P] from, and shall
      protect, defend and indemnify [H&P] from and against, any such
      liability.

Id. Sonerra argued that the above-referenced indemnity provision did not apply

because the injury was caused by a defective seal on a rotating-control device that

was “equipment,” not a “material.” Id. at *5. This Court, after examining the entire

contract, disagreed, stating, “Although the term “materials” is not expressly defined

in the drilling contract, it is a term that is used throughout the contract in conjunction

with other similar terms, including “equipment.” Id. The Court then noted several

other placed in the contract where “equipment” and “materials” were used

                                           13
interchangeably. Id. In support of its conclusion, the Court pointed to several

clauses in the Sonerra/H&P contract that referred to both “materials” and

“equipment” without distinguishing between those terms. Id. Specifically, the court

focused on Exhibit A to the contract, and pointed out that several paragraphs in

Exhibit A listed “machinery, equipment, tools, materials, supplies, instruments,

services, and labor” to be provided by each party while making “no effort to identify

whether each of the [listed] items constitutes ‘machinery,’ ‘equipment,’ ‘tools,’

‘materials,’ or ‘supplies.’” Id. The Court also pointed to a paragraph in the contract

wherein Sonerra agreed to reimburse H&P for certain costs of “material” and

“equipment,” and a paragraph wherein the parties set forth indemnity obligations for

consequential damages relating to “equipment” and “materials.”            Id.   After

examining the Sonerra/H&P contract as the whole, this Court concluded that “there

is simply no indication in the written contract that [the terms “materials” and

“equipment”], as used throughout the contract are mutually exclusive and refer to a

distinct set of items.” Id. “The plain language of article 14.7, when considered in

the context of the drilling contract, indicates that the parties used the term

“materials” to generally refer to the physical items that were to be provided by

Sonerra at the well.” Id. at *6.

      The present case is indistinguishable from Sonerra. The Laredo/Trinidad

contract contains all of the same provisions that this Court relied on in deciding

                                         14
Sonerra. Thus, we are bound by the holding in Sonerra,1 which compels the

conclusion that, under paragraph 14.7 of the contract, Trinidad did not “assume

liability” for damage caused by the transfer pump, which was provided by Laredo.

Indeed, Laredo under paragraph 14.7, Laredo was required to indemnify Trinidad.

Summary

      Because Trinidad was not required to indemnify Laredo under the indemnity

provisions of section 14.7 of the Laredo/Trinidad Contract, it did not “assume

liability” under insurance provisions of section 13 of the Laredo/Trinidad Contract.

Because Trinidad did not “assume liability” for the damages alleged in this suit, it

was not contractually obligated to cause its insurer to waive its subrogation rights.

Because the Laredo/Trinidad contract did not require Trinidad to obtain a waiver of

subrogation from NHIC under these circumstances, the policy endorsement

containing the waiver by NHIC is not applicable. Thus, we conclude that NHIC has

not waived its right to seek subrogation, and the trial court erred in holding

otherwise. We sustain NHIC’s second issue on appeal. In light of our disposition

of NHIC’s second issue, we need not address its remaining two issues, and we

decline to do so.

                                 CONCLUSION

1
      We decline to revisit the holding of Sonerra or to hold that it was “incorrectly
      decided,” as urged by the Moras.
                                         15
      We reverse the judgment and remand for further proceedings.

                                             Sherry Radack
                                             Chief Justice

Panel consists of Chief Justice Radack and Justices Jennings and Lloyd.

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