Court Opinion

ID: 2895238
Source: CourtListenerOpinion
Date Created: 2015-09-07 23:50:40.792251+00
Date Added: 2024-06-11T15:15:40.745805
License: Public Domain

NO. 07-05-0386-CV

                             IN THE COURT OF APPEALS

                      FOR THE SEVENTH DISTRICT OF TEXAS

                                     AT AMARILLO

                                        PANEL E

                                 AUGUST 17, 2007
                         ______________________________

                    YORKSHIRE INSURANCE CO., LTD. AND
               OCEAN MARINE INSURANCE CO., LTD., APPELLANTS

                                           V.

                  DIATOM DRILLING COMPANY AND EMPLOYER’S
                    CONTRACTOR SERVICES, INC., APPELLEES
                      _________________________________

          FROM THE 84TH DISTRICT COURT OF HUTCHINSON COUNTY;

                 NO. 33,355; HONORABLE JOHN LAGRONE, JUDGE
                        _______________________________

Before QUINN, C.J., and HANCOCK, J., and BOYD, S.J.1

                                        OPINION

      We grant Diatom Drilling Co. and Employer’s Contract Services, Inc.’s motion for

rehearing. We withdraw our opinion of May 2, 2007, and substitute the following in its

place. As the judgment of May 2, 2007 is not effected by this substituted opinion, we deny

the motion for rehearing as to the judgment.

      1
       John T. Boyd, Chief Justice (Ret.), Seventh Court of Appeals, sitting by
assignment.
       Appellants, Yorkshire Insurance Co., Ltd., and Ocean Marine Insurance Co., Ltd.

(collectively, “Insurers”), appeal a summary judgment granted in favor of appellees, Diatom

Drilling Co. (Diatom) and Employer’s Contractor Services, Inc. (ECS), in Insurers’ action

for declaratory relief or reformation and the award of attorney’s fees to Diatom and ECS.

We reverse and render judgment in favor of Insurers. We reverse and remand the award

of attorney’s fees and costs.

                                        Background

       Randall Jay Seger did drilling work for two related companies, Diatom Drilling Co.,

L.P., and Employer’s Contractor Services, Inc. ECS was a corporation established by

Diatom’s general partner, Cynthia Gillman, to provide oil field services to Diatom and other

drilling contractors. On July 13, 1992, while employed by ECS but providing services to

Diatom, Randall was killed when a Diatom rig he was working on collapsed. Diatom, who

was insured by a Lloyd’s of London-type comprehensive general liability (CGL) insurance

policy at the time of the accident, notified the subscribing insurers (collectively, “the CGL

insurers”) of the accident. Insurers were members of this group.

       The “cover note” for this CGL policy identified Diatom and ECS as the insureds,

provided a maximum of $500,000 of coverage for any one bodily injury accident or

occurrence,    and    contained    a   “condition,”   inter   alia,   “Excluding     Leased-In

Employees/Workers.” Sixteen insurers subscribed to this CGL policy with each assuming

a proportionate share of the liability coverage provided by the policy.            Specifically,

Yorkshire assumed 16.472 percent and Ocean Marine assumed 10 percent of the

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coverage. The standard policy provisions indicate that each of the subscribing insurers’

liability is several.

        In June of 1993, Randall’s parents (the Segers) filed suit against Diatom/ECS and

its partners alleging negligence and gross negligence. The CGL insurers were not

specifically notified of the suit at the time that it was filed. The suit sat virtually dormant

until 1998. In 1998, Diatom/ECS demanded that the CGL insurers provide a defense to

the Segers’ suit. The CGL insurers refused to provide a defense contending that Randall’s

death was not covered and that Diatom/ECS failed to provide timely notice of suit.

        On March 27, 2001, the Segers’ suit against Diatom/ECS was tried. The trial court

entered judgment against Diatom/ECS and awarded the Segers $15,000,000, plus pre-

and post-judgment interest. Following the entry of this judgment, Gillman contacted the

CGL insurers to inquire as to what they intended to do about the judgment. When Gillman

received no response, she assigned Diatom’s and ECS’s rights against the CGL insurers

to the Segers. Following the assignment, the Segers filed suit against the CGL insurers

seeking damages based on the CGL insurers’ wrongful refusal to defend Diatom/ECS and

negligent failure to settle the Segers’ claim when demand was made within policy limits.

Prior to trial on the assigned Stowers action, the Segers settled their claims against all of

the remaining solvent CGL insurers, except Yorkshire and Ocean Marine, and the settling

insurers were dismissed from the suit. Insurers filed a third-party claim for declaratory

relief or for reformation of the CGL policy against Diatom and ECS. The present appeal

relates to this third-party action.

                                              3
       Both Diatom/ECS and Insurers filed motions for summary judgment relating to

Insurers’ declaration and reformation actions. The trial court granted Diatom/ECS’s motion

and denied Insurers’ motion, severed the third-party claims from the Segers’ Stowers

action, and ordered that the issue of attorney’s fees be set for a future hearing. On April

21, 2006, the trial court entered final judgment in the severed third-party action consistent

with the order discussed above and awarded Diatom/ECS $68,385 for attorney’s fees

through trial.

       Insurers present seven issues on appeal. Their first issue contends that the trial

court erred in denying Insurers’ summary judgment on the declaratory judgment action.

By their second and third issues, Insurers contend that, if coverage for Randall Seger’s

death is found, the trial court erred in not reforming the policy to exclude the claim. By their

fourth issue, Insurers contend that the trial court erred in sustaining Diatom/ECS’s

assertion of privilege relating to certain documents. By their fifth issue, Insurers contend

that the trial court erred in awarding Diatom/ECS attorney’s fees because there was no

basis for judgment and no evidence to support the amount awarded. Insurers’ sixth issue

is a general assignment of error in the trial court’s granting of summary judgment. See

Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970). Finally, by their seventh

issue, Insurers contend that the trial court erred in granting Diatom/ECS’s evidentiary

objections and in denying objections made by Insurers. Because we conclude that the

declaratory judgment on coverage issue is dispositive, we will address the other issues

raised by Insurers in a cursory manner.

                                               4
                                         Coverage

       The trial court granted summary judgment in favor of Diatom and ECS on Insurers’

declaratory judgment action seeking a declaration that injury and death claims made by

employees that were leased by ECS to Diatom were specifically excluded by the CGL

policy. By their sixth issue, Insurers generally challenge the trial court’s grant of summary

judgment and, by their first issue, expressly challenge the denial of their summary

judgment motion. Insurers contend that the CGL policy unambiguously excludes coverage

for injury and death claims made by ECS employees leased in to Diatom, such as the

claims asserted by the Segers. Further, Insurers contend that their construction of the

exclusion is bolstered when the circumstances surrounding the policy’s formation are

considered. Diatom/ECS contend that the trial court did not err because declaratory relief

was unavailable to Insurers because Insurers sought to establish their construction of the

exclusion as a defense to the Segers’ claim. Diatom/ECS contend, in the alternative, that

Insurers produced no evidence that the Segers’ claim was excluded by the CGL policy.

       When both parties to a suit move for summary judgment, each party bears the

burden of establishing that it is entitled to judgment as a matter of law. City of Garland v.

Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000). When the trial court grants one

party summary judgment and denies the other, we review both parties’ summary judgment

evidence, determine all questions presented, and render the judgment the trial judge

should have rendered. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872

(Tex. 2000). We review a summary judgment de novo to determine whether the prevailing

party has established its right to summary judgment as a matter of law. See Dallas Cent.

                                             5
Appraisal Dist. v. Cunningham, 161 S.W.3d 293, 295 (Tex.App.–Dallas 2005, no pet.). In

reviewing a summary judgment, we must examine the entire record in the light most

favorable to the nonmovant, indulging every reasonable inference and resolving any

doubts against the motion. See City of Keller v. Wilson, 168 S.W.3d 802, 824-25 (Tex.

2005).

         Initially, Diatom/ECS contend that the trial court could have properly granted

summary judgment on Insurers’ declaratory judgment action based on declaratory relief

being unavailable.      Diatom/ECS cite Howell v. Mauzy, 899 S.W.2d 690, 706

(Tex.App.–Austin 1994, writ denied), for the general rule that declaratory judgments are

not available to settle disputes already pending before the court. However, the Howell

court goes on to state that, “A court may allow a declaratory-judgment counterclaim,

however, if it is something more than a mere denial of the plaintiff’s claim and has greater

ramifications than the original suit.” Id. Looking specifically to the relief sought by Insurers

in their counterclaim for declaratory relief, Insurers sought a declaration that “on the date

of Randall Seger’s death, the operative insurance documents excluded liability for injury

or death to ‘leased-in employees/workers’ . . . .” Insurers were entitled to seek a

declaration regarding the CGL policy’s coverage independent of the Segers’ Stowers action

and the declaration sought does not merely deny the Segers’ claim. In fact, the declaration

sought requests a construction of the “leased-in employee/worker” exclusion contained in

the CGL policy, an issue which would not necessarily be reached in the Segers’ Stowers

                                               6
claim.2 Thus, we conclude that declaratory judgment regarding construction of the leased-

in worker exclusion was available to Insurers.

       Insurers sought a declaration of the proper construction of the cover note’s condition

“Excluding Leased-In Employees/Workers.” The CGL policy includes no definitions relating

to this exclusion. According to Insurers, a standard “leased worker” exclusion was not

established until 1993. Insurers contend that the proper construction of the exclusion is

that the CGL insurers would not be liable for claims made by workers that were “leased-in”

to Diatom. At the time of the formation of the CGL policy and through its effective period,

the record reflects that all of Diatom’s drilling workers were leased in from ECS. Insurers

contend that the plain language of the exclusion and the circumstances surrounding the

formation of the CGL policy evidence that it was always Diatom/ECS’s intent to exclude

injury and death claims made by an ECS employee leased to Diatom. Diatom/ECS

contend that any declaration that the “Leased-In Employees/Workers” exclusion limited

liability for injury claims would require the trial court to add to the language of the contract.

       The interpretation of insurance policies is governed by the same rules of

construction applicable to other written contracts. State Farm Life Ins. Co. v. Beaston, 907
S.W.2d 430, 433 (Tex. 1995). In construing a written contract, the court’s primary concern

is to ascertain the true intentions of the parties as expressed in the instrument. Coker v.

Coker, 650 S.W.2d 391, 393 (Tex. 1983). Terms in an insurance contract will be given

       2
         By way of example, if the Segers are able to establish that Insurers failed to meet
the exceptions to the general prohibition against unauthorized insurers being allowed to
rely on their contractual defenses, the determination of whether the CGL policy specifically
excluded claims by leased-in employees/workers would not be reached.

                                               7
their ordinary meaning unless the policy shows that the words were meant in a technical

or different sense. Sec. Mut. Cas. Co. v. Johnson, 584 S.W.2d 703, 704 (Tex. 1979). We

must read all parts of the contract together and must strive to give meaning to every

sentence, clause, and word to avoid rendering any portion inoperative. Balandran v.

Safeco Ins. Co. of Am., 972 S.W.2d 738, 741 (Tex. 1998). If terms in the contract can be

given a definite or certain legal meaning, they are not ambiguous and the court will

construe the contract as a matter of law. Coker, 650 S.W.2d at 393. However, if, after

applying the rules of construction identified above, an insurance policy remains ambiguous,

we are to construe the language in a manner that favors coverage. Beaston, 907 S.W.2d

at 433.

       Diatom/ECS contends that the leased-in worker exclusion is ambiguous because

the condition could reasonably exclude (1) leased-in workers from being “insureds” under

the policy, (2) claims made for damages caused by leased-in workers, (3) claims made by

leased-in workers for injury or death, or (4) claims made by families of leased-in workers

for wrongful death. Reading all of the parts of the policy reveals that every exclusion in the

contract excludes coverage for claims of insureds’ liability related to or arising from the

event or persons identified by the various exclusions. Thus, to harmonize the terms of the

CGL policy, we conclude that the “Excluding Leased-In Employees/Workers” condition

excludes    claims against Diatom/ECS related to or arising from “Leased-In

Employees/Workers.”

       However, as the CGL policy does not define the phrase “Leased-In

Employee/Worker,” we must look to the ordinary meaning of those words to determine the

                                              8
scope of the exclusion. See Sec. Mut. Cas. Co., 584 S.W.2d at 704. The ordinary

meaning of “lease” is an agreement for possession or use of property for a specified period

or at will in exchange for a specified rent or compensation. See MERRIAM -W EBSTER ’S

COLLEGIATE DICTIONARY 798 (Frederick C. Mish, ed., 11th ed. 2003). The ordinary meaning

of “worker” is a person that “exerts strength or faculties to do or perform something.”

MERRIAM -W EBSTER ’S COLLEGIATE DICTIONARY 1442-43 (Frederick C. Mish, ed., 11th ed.

2003). The ordinary meaning of the word “in,” when used as a modifier, is directed toward

some destination or place. MERRIAM -W EBSTER ’S COLLEGIATE DICTIONARY 627 (Frederick

C. Mish, ed., 11th ed. 2003). Therefore, we conclude that, applying the ordinary meaning

of the words used in the CGL policy and striving to give meaning to every part thereof, the

condition “Excluding Leased-In Employees/Workers,” as a matter of law, unambiguously

excludes from coverage all claims for a named insured’s liability for bodily injury or property

damage brought by or on behalf of persons that perform work for the insured under an

agreement with another allowing temporary use of the worker, even though the leased

worker would not be an employee of insured.3

       We reverse the trial court’s summary judgment in favor of Diatom and ECS and

render summary judgment declaring that, on the date of Randall Seger’s death, the CGL

policy at issue in this appeal excluded liability for injury or death to leased-in

employees/workers as that phrase is defined above.

       3
        We focus on the term “worker” in an effort to harmonize the provisions of the
policy. Claims for bodily injury by a leased-in worker that concurrently holds the status of
an employee would be covered under the standard employee exclusion contained in the
CGL policy. Thus, an exclusion for a leased-in employee would be redundant.

                                              9
                                        Other Issues

       Insurers’ second through fourth issues in this appeal are made contingent on our

affirming the trial court’s grant of summary judgment on the declaratory judgment action.

As we have reversed the trial court’s grant of summary judgment and rendered judgment

in favor of Insurers, we need not address these issues.

       By their fifth issue, Insurers contend that Diatom and ECS are not entitled to

attorney’s fees. As we have rendered declaratory judgment in favor of Insurers, we reverse

that portion of the judgment awarding Diatom and ECS attorney’s fees and remand this

issue to the trial court for a determination of whether attorney’s fees should be awarded

and, if so, the appropriate amount of the award. See TEX . CIV. PRAC . & REM . CODE ANN .

§ 37.009 (Vernon 1997).

       Finally, neither party addressed Insurers’ seventh issue relating to the admission or

exclusion of evidence. As a result, we conclude that this issue has not been adequately

briefed and is, therefore, waived. See TEX . R. APP. P. 38.1(h); Gen. Serv. Comm. v. Little-

Tex. Insul. Co., 39 S.W.3d 591, 604 n.1 (Tex. 2001); Fredonia State Bank v. Am. Life Ins.

Co., 881 S.W.2d 279, 284-85 (Tex. 1994). It appears that Insurers’ issue relates to the trial

court’s sustaining Diatom/ECS’s objection to Insurers’ evidence submitted in opposition to

Diatom/ECS’s motion for summary judgment. However, we have concluded that the trial

court erred in granting summary judgment to Diatom/ECS without considering this excluded

evidence. Thus, we conclude that this waiver is of no effect in our resolution of this appeal.

                                             10
                                         Conclusion

       We reverse the trial court’s summary judgment and render judgment declaring that,

on the date of Randall Seger’s death, the CGL policy at issue in this appeal excluded

liability for injury or death to leased-in employees/workers. We also reverse the trial court’s

award of attorney’s fees in this cause and remand for further proceedings consistent with

this opinion.

                                                   Mackey K. Hancock
                                                       Justice

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