Court Opinion

ID: 26024
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:47:05+00
Date Added: 2024-06-11T11:49:56.006370
License: Public Domain

UNITED STATES COURT OF APPEALS
                         FOR THE FIFTH CIRCUIT
                         _____________________

                             No. 01-30641
                           Summary Calendar
                        _____________________

                IN RE: DIAMOND SERVICES CORPORATION,
         on behalf of Diamond Dredge No. 9, for exoneration
                   from or limitation of liability:

DIAMOND SERVICES CORPORATION, on behalf of Diamond Dredge No. 9,

                                                Petitioner-Appellant,

                                versus

               TENNESSEE GAS PIPELINE COMPANY; ET. AL.,

                                                           Claimants,

             COMMERCIAL UNDERWRITERS INSURANCE COMPANY,

                                                  Claimant-Appellee.

            Appeal from the United States District Court
                for the Eastern District of Louisiana
              (00-CV-156-L; 00-CV-708-L; 00-CV-1116-L)

                          November 26, 2001

Before HIGGINBOTHAM, WIENER, and BARKSDALE, Circuit Judges.

PER CURIAM:*

     At issue is whether the district court erred in holding: that

the liability coverage afforded Chet Morrison Contractors, Inc.

(CMC), and its subcontractor Diamond Services Corporation (Diamond)

     *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
under Diamond’s Protection and Indemnity (P&I) insurance policy was

primary to CMC’s obligation to indemnify Diamond for property

damage; and that, consequently, the P&I policy limits must be

exhausted before CMC is required to indemnify.    Diamond contests:

the denial of its summary judgment motion; and the summary judgment

awarded CMC’s insurer, Commercial Underwriters Insurance Company

(CUIC).    We AFFIRM essentially for the reasons stated in the

district court’s 16 May 2001, comprehensive opinion, discussed

infra.

     CMC entered into a maritime Master Service Contract (Contract)

with Diamond, under which, as a subcontractor for CMC, Diamond was

to furnish vessel services/perform certain work in burying the

Tennessee Gas pipeline.   The Contract required Diamond to procure,

in part:    (1) comprehensive general liability (CGL) insurance

“covering all liabilities arising as a result of ... damage to

property, including, but without limitation, contractual liability

coverage”; and (2) protection and indemnity (P&I) insurance “naming

CMC ... as [an] additional assured[]”.       With respect to both

policies, the Contract provides: “All said insurance policies must

contain clauses to the effect that ... the coverage required by

this contract is to be primary”.     Finally, the Contract contains

reciprocal indemnity provisions for personal injury and property

damage, providing in part:   “CMC will ... indemnify [Diamond for]

all suits, actions, claims and demands based on property damage ...

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arising from or relating in any way to the performance of the work

hereunder”.

      While    performing      the    Contract,           Diamond’s   Dredge   No.    9

allegedly damaged the Tennessee Gas pipeline.                     CMC repaired the

pipeline,     and     “Diamond’s      P&I       underwriters      agreed,      without

prejudice,    to     pay    CMC’s    claim      as   an    additional    assured    ...

reserving all rights to seek reimbursement from CMC and/or CMC’s

insurers”.     In re Diamond Services, No. 00-0156 (E.D. La. 16 May

2001) (order granting summary judgment motion to CUIC).

      At issue is whether, in granting summary judgment to CMC’s

insurer, CUIC, the district court erred in holding: that Diamond’s

P&I policy is primary to CMC’s indemnification obligation; and,

consequently, that the limits of the P&I policy must be exhausted

before that indemnity obligation is triggered.                        “We review the

grant or denial of summary judgment de novo, applying the same

standards as did the district court.”                 Babcock v. Hartmarx Corp.,

182   F.3d    336,    338    (5th    Cir.       1999).       “Summary    judgment    is

appropriate if the record ‘show[s] that there is no genuine issue

as to any material fact and that the moving party is entitled to

[a] judgment as a matter of law.’”                   Id. (quoting FED. R. CIV. P.

56(c)) (second alteration added).

      As the district court correctly observed, our court has, since

Ogea v. Loffland Bros. Co., 622 F.2d 186 (5th Cir. 1980), construed

insurance     procurement       requirements          as    primary     to   indemnity

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provisions contained in the same contract.          See id. at 189-90; see

also Tullier v. Halliburton Geophysical Servs., Inc., 81 F.3d 552,

554-55 (5th Cir. 1996); Klepac v. Champlin Petroleum Co., 842 F.2d

746, 748 (5th Cir. 1988).         Diamond attempts to distinguish this

case from the Ogea line of cases on the fact that the Contract does

not require “contractual liability coverage” under the P&I policy.

Diamond asserts that the absence of such a requirement evinces an

intent that the P&I policy would not respond to CMC’s contractual

indemnification obligation to Diamond.        Diamond does not, however,

dispute that CMC is an additional assured under Diamond’s P&I

policy.   Moreover, as the district court noted in dicta, a fair

reading   of   the   P&I   policy’s   contractual    liability   extension

provision extends coverage to CMC on the present facts.

     In any event, as the district court also noted, it is not

necessary to posit a definitive interpretation of the P&I policy,

for the principles announced in, and developed since, Ogea dispose

of this appeal.      As our court noted in Tullier, “[t]he controlling

fact in Ogea ... is the existence of ‘additional assured’ coverage

whereby an indemnitee agreed to procure insurance coverage for the

benefit of the indemnitor”.           Tullier, 81 F.3d at 554.        That

controlling fact is present in, and dispositive of, this case.

     We   must    read     the   indemnity   and   insurance   procurement

provisions “in conjunction with each other in order to properly

interpret the meaning of the contract”.            Ogea, 622 F.2d at 190;

                                      4
Tullier, 81 F.3d at 553-54.    The only credible meaning of the

Contract — which contains a requirement that CMC indemnify Diamond

but that Diamond procure P&I coverage naming CMC an additional

assured — is that CMC is required to indemnify Diamond only beyond

the limits of Diamond’s P&I policy.

          In a line of cases commencing with Ogea ...
          this court has held that a party ... who has
          entered into a contractual indemnity provision
          but who also names the indemnitor ... as an
          additional   assured   under   its   liability
          policies, must first exhaust the insurance it
          agreed to obtain before seeking contractual
          indemnity.

Tullier, 81 F.3d at 553 (internal citation omitted).

                                                       AFFIRMED

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