Court Opinion

ID: 4857984
Source: CourtListenerOpinion
Date Created: 2021-08-26 00:01:16.214484+00
Date Added: 2024-06-11T08:11:56.405047
License: Public Domain

Case: 19-20489      Document: 00515994295         Page: 1     Date Filed: 08/25/2021

            United States Court of Appeals
                 for the Fifth Circuit                               United States Court of Appeals
                                                                              Fifth Circuit

                                                                            FILED
                                                                      August 25, 2021
                                   No. 19-20489
                                                                       Lyle W. Cayce
                                                                            Clerk
   Maxim Crane Works, L.P.,

                                                             Plaintiff—Appellant,

                                       versus

   Zurich American Insurance Company,

                                                            Defendant—Appellee.

                   Appeal from the United States District Court
                       for the Southern District of Texas
                                No. 4:18-CV-3667

   Before Smith, Ho, and Oldham, Circuit Judges.
   Per Curiam:
          We withdraw the court’s prior opinion of Aug. 20, 2021 and substitute
   the following opinion.
          This is an insurance coverage dispute involving an intricate web of
   insurance contracts arising out of a construction project involving multiple
   different businesses. But the legal issue presented in this case is simply this:
   Who counts as an “employee” under the Texas Anti-Indemnity Act
   (“TAIA”)? See Tex. Ins. Code §§ 151.102, 151.103. Specifically, if a
   person is employed by a general contractor, is that person also considered an
Case: 19-20489      Document: 00515994295          Page: 2    Date Filed: 08/25/2021

                                    No. 19-20489

   “employee” of the subcontractor? One might think, under a traditional
   understanding of the term “employee,” the natural answer to this question
   must be “no.” But the TAIA does not define the term “employee” for these
   purposes; there are no Texas cases interpreting the TAIA; and at least one
   Texas court has answered the question “yes,” at least as the term
   “employee” has been used in the Texas Workers’ Compensation Act.
          We are advised that the answer to this question of statutory
   interpretation may affect countless Texas construction contracts. But we
   lack sufficient guidance from Texas courts to determine with any confidence
   how the Supreme Court of Texas would answer this question. “To best serve
   the people of Texas, th[i]s[] question[] should be answered by the only court
   that can issue a precedential ruling that will benefit all future litigants,
   whether in state or federal court.” JCB, Inc. v. Horsburgh & Scott Co., 912
   F.3d 238, 239 (5th Cir. 2018). Accordingly, we certify this question to the
   Supreme Court of Texas.
          Before we do so, we address, and reject, the contention that the
   district court should have dismissed this case for lack of standing, rather than
   enter judgment on the merits for the insurer. In doing so, we explain why
   there was no need for the insurer to file a cross-appeal in order to raise the
   issue of standing on appeal.
                                          I.
          In 2013, Skanska USA, Inc. (“Skanska”), a general contractor, hired
   Berkel & Co. Contractors (“Berkel”) as a subcontractor on a large
   construction project in Houston. Skanska required all of its subcontractors,
   including Berkel, to participate in a contractor-controlled insurance program
   (“CCIP”) as a condition of working on the job. The CCIP provided for
   general commercial liability insurance as well as workers’ compensation
   coverage.

                                          2
Case: 19-20489      Document: 00515994295          Page: 3    Date Filed: 08/25/2021

                                    No. 19-20489

          Berkel leased a Link-Belt Crawler Crane from Maxim Crane Works,
   L.P., for use on the project. The lease was a “Bare Rental Agreement,”
   meaning that Berkel agreed to be solely responsible for operating and
   maintaining the crane while it was in Berkel’s possession. The lease also
   required Berkel to name Maxim as an additional insured under Berkel’s
   commercial general liability insurance policy (“Berkel CGL Policy”), which
   was issued by Zurich American Insurance Company (“Zurich”). Because
   Maxim was only a leasing partner, however, it was not subject to Skanska’s
   CCIP requirement or included in the program.
          On September 30, 2013, a Berkel employee operating the crane caused
   the boom to collapse, crushing the leg of Tyler Lee, a project supervisor and
   Skanska employee on site. Lee was awarded workers’ compensation benefits
   under the CCIP. His leg was ultimately amputated.
          In 2014, Lee filed suit against Berkel, Maxim, and others in Texas
   state court for injuries based on negligence. When the state court litigation
   commenced, Maxim sought coverage from Zurich as an additional insured
   under the Berkel CGL Policy. Based in part on its reading of the TAIA,
   Zurich denied coverage. Maxim cross-claimed against Berkel for breach of
   contract on the theory that Berkel was required to defend Maxim and
   indemnify or contribute to any of Maxim’s losses.
          In 2015, a jury awarded Lee $35.4 million in actual damages, allocating
   90% of the fault to Berkel and 10% to Maxim. Maxim settled with Lee for $3.4
   million. Maxim’s independent insurance policy (“Maxim CGL Policy”) also
   happened to be purchased from Zurich. Pursuant to that policy, Zurich
   initially paid the entire amount of both the settlement and the associated legal
   fees. However, pursuant to Maxim’s deductible, Zurich billed back $3
   million of the settlement and $824,839.38 in legal fees, which Maxim
   reimbursed to Zurich.

                                          3
Case: 19-20489      Document: 00515994295          Page: 4   Date Filed: 08/25/2021

                                    No. 19-20489

          Following the jury verdict, Maxim moved for entry of judgment on its
   cross-claim against Berkel. The court denied Maxim’s motion.
          Berkel appealed the jury verdict. In 2018, the state court of appeals
   reversed judgment against Berkel, finding that because Berkel and Skanska
   were both covered under the CCIP, Lee was Berkel’s “statutory co-
   employee” for purposes of the Texas Workers’ Compensation Act
   (“TWCA”). Berkel & Co. Contractors, Inc. v. Lee, 543 S.W.3d 288, 296 (Tex.
   App.—Houston [14th Dist.] 2018, pet. denied), reh’g granted in part (Jan. 23,
   2018), reh’g denied (Mar. 6, 2018). Consequently, it held Berkel could not be
   sued in tort because the exclusive remedy for workplace injuries against
   employers was workers’ compensation.
          Maxim separately appealed the state court’s judgment on its cross-
   claim against Berkel. The court of appeals affirmed, holding Maxim had not
   preserved arguments relating to the applicability of the TAIA. The Texas
   Supreme Court denied further review.
          In April 2018, Maxim made another demand on Zurich to reimburse
   Maxim for the costs of the legal defense and the judgment. Zurich again
   denied coverage.
          In September 2018, Maxim filed suit in state court against Zurich
   seeking declaratory relief and contract damages. Specifically, Maxim argued
   Zurich had improperly denied it coverage as an additional insured under
   Berkel’s CGL Policy.       Zurich removed to federal court on diversity
   jurisdiction grounds. As only legal issues were in dispute, the parties agreed
   to a joint stipulation of facts and to file cross-motions for summary judgment.
   In 2019, the district court granted Zurich’s motion for summary judgment
   and denied Maxim’s motion for summary judgment. The district court
   concluded: (1) Maxim had standing to pursue its claim, and (2) the TAIA
   precluded Maxim from coverage as an additional insured. Maxim appealed

                                         4
Case: 19-20489      Document: 00515994295           Page: 5    Date Filed: 08/25/2021

                                     No. 19-20489

   and Zurich cross-appealed, with Maxim arguing the TAIA did not bar
   coverage and Zurich arguing Maxim did not have standing. After oral
   argument, Zurich filed an unopposed motion to dismiss its cross appeal,
   which we granted.      Maxim has also filed an opposed motion to stay
   proceedings in this Court and to certify the TAIA question to the Texas
   Supreme Court.
                                         II.
          We review a district court’s grant of summary judgment de novo,
   applying the same standard as the district court. Nola Spice Designs, L.L.C.
   v. Haydel Enters., Inc., 783 F.3d 527, 536 (5th Cir. 2015). Summary judgment
   is appropriate “if the movant shows that there is no genuine dispute as to any
   material fact and the movant is entitled to judgment as a matter of law.”
   Fed. R. Civ. P. 56(a). Where, as here, “the only issue[s] before the court
   [are] [] pure question[s] of law,” “summary judgment is appropriate.”
   Sheline v. Dun & Bradstreet Corp., 948 F.2d 174, 176 (5th Cir. 1991).
          The parties agreed to a joint stipulation of facts, and the two issues for
   resolution on appeal are pure questions of law: (1) does Maxim have
   standing, and (2) does the employee exception under the TAIA preclude
   Maxim from seeking coverage as an additional insured? Texas law governs
   the latter question.
                                         III.
          Before turning to our standing analysis, we first address a few
   procedural issues. During oral argument, we inquired as to whether Zurich’s
   cross-appeal was proper or necessary. After oral argument, Zurich moved to
   dismiss its cross-appeal. We previously granted that motion and now explain
   why.

                                          5
Case: 19-20489      Document: 00515994295           Page: 6    Date Filed: 08/25/2021

                                     No. 19-20489

          In its motion to dismiss its cross-appeal, Zurich requested that “the
   grounds therein be considered alternate grounds for affirmance of the
   District Court’s judgment or preserved grounds to address in the event the
   Court reverses the district court’s judgment.”
          Zurich’s motion to dismiss is well taken. “[A]rguments that support
   the judgment as entered can be made without a cross-appeal.” 15A C.
   Wright & A. Miller Federal Practice and Procedure §
   3904 (2d ed. 2021). And unnecessary cross-appeals should generally be
   avoided. “Appeal procedure is streamlined in desirable ways if arguments to
   support the judgment are made in brief without filing an unnecessary cross-
   appeal. Cross-appeal procedure complicates briefing schedules and the
   number and length of the briefs in ways that may generate more confusion
   than enlightenment.” Id.
          As discussed below, Zurich’s “standing” argument is based not on
   the lack of an Article III injury, but on the absence of contractual standing.
   That is, Zurich argues that Maxim does not have a contractual right to bring
   this suit. And such questions do not go to the court’s subject matter
   jurisdiction, but are instead part of the inquiry into the merits of a particular
   claim. Cf. Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118,
   128 n.4 (2014). “[U]nlike a dismissal for lack of constitutional standing,
   which should be granted under Rule 12(b)(1), a dismissal for lack of
   prudential or statutory standing is properly granted under Rule 12(b)(6).”
   Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 795 n.2 (5th Cir.
   2011). Likewise, “[c]ontractual standing is distinct from Article III standing
   and does not implicate subject-matter jurisdiction.” SM Kids, LLC v. Google
   LLC, 963 F.3d 206, 211 (2d Cir. 2020). “Article III standing speaks to the
   power of a court to adjudicate a controversy; contractual standing speaks to
   a party’s right to relief for breach of contract.” Id. So where, as here, a case
   turns on the validity of an assignment of contractual rights, that is not “a

                                          6
Case: 19-20489         Document: 00515994295               Page: 7      Date Filed: 08/25/2021

                                          No. 19-20489

   question of Article III standing” but “one of contractual standing.” Id. The
   latter would require affirmance of the judgment, just like all of Zurich’s other
   arguments in defense of the judgment below. 1
           Accordingly, Zurich was not required to file a cross-appeal here. We
   therefore dismissed the cross-appeal and now turn to Zurich’s standing
   argument.
                                               IV.
           Zurich argues that Maxim lacks “standing” to bring its claim. We
   disagree.
           Zurich does not deny that Maxim alleges an Article III injury. But
   Zurich claims that Maxim has no cause of action pursuant to “the general
   prohibition on a litigant’s raising another person’s legal rights.” Lexmark,
   572 U.S. at 126. As Lexmark makes clear, this argument implicates the merits
   of Maxim’s right to sue—not its Article III standing to invoke the federal
   judicial power. See id. at 125–27.
           In this case, Maxim seeks recovery under Berkel’s CGL Policy.
   Zurich contends that, because Maxim’s own CGL Policy with Zurich assigns

           1
              Moreover, even if Zurich were to challenge Article III standing—which it does
   not—there would still be no need to cross-appeal. To be sure, if Zurich were to successfully
   challenge Article III standing on appeal, we would not affirm the judgment below—rather,
   we would vacate the judgment and remand with instructions to dismiss the case for lack of
   jurisdiction. That’s because a judgment based on lack of Article III standing is different
   from a judgment on the merits for the defendant. “[W]hen this court dismisses a case due
   to failure of one particular jurisdictional element, and the party later cures that
   jurisdictional defect and brings a new suit, res judicata does not bar the second suit.” Lopez
   v. Pompeo, 923 F.3d 444, 447 (5th Cir. 2019). See also California v. Texas, 141 S. Ct. 2104,
   2135 n.9 (2021) (Alito, J., dissenting) (same). That being said, a cross-appeal “is not
   necessary to challenge the subject-matter jurisdiction of the district court, under the well-
   established rule that both district court and appellate courts are obliged to raise such
   questions on their own initiative.” 15A Wright & Miller § 3904.

                                                 7
Case: 19-20489        Document: 00515994295             Page: 8      Date Filed: 08/25/2021

                                         No. 19-20489

   all of its rights to Zurich, Maxim has no remaining cognizable legal interest
   to invoke. The provision of the Maxim CGL Policy that Zurich invokes reads
   as follows:
           We [Zurich] have your rights and the rights of persons entitled
           to the benefits of this insurance to recover sums that are
           reimbursable under this endorsement and any Deductible
           Amount from anyone liable for the injury or damages. . . .
           Maxim seeks funds that have already been “reimbursed.” Zurich
   nevertheless argues that any “reimbursed” funds must have, by definition,
   once been “reimbursable.” Because Zurich has the right to recover “sums
   that are reimbursable” and “any Deductible Amount” from any liable party,
   it argues that Maxim has assigned away the very recovery it seeks to Zurich.
           But the policy language expressly distinguishes between sums that are
   “reimbursable” (future tense) versus those that are already “reimbursed”
   (past tense). The assignment of rights provision grants to Zurich rights only
   as to future “reimbursable” amounts—not reimbursed ones. See Bowersox
   Truck Sales & Serv., Inc. v. Harco Nat’l Ins. Co., 209 F.3d 273, 279–80 (3d
   Cir. 2000) (refusing to rewrite a release agreement to include the future tense
   when only the present tense was used). Maxim has already reimbursed
   Zurich, so no amount remains “reimbursable” under the provision.
   Moreover, the policy elsewhere expressly refers to “reimbursable and
   reimbursed” amounts, suggesting that the parties recognized the difference
   between the two terms, yet only assigned to Zurich the right to the former.
   See Clarke v. MMG Ins. Co., 100 A.3d 271, 276 (Pa. Super. Ct. 2014)
   (disfavoring surplusage). 2

           2
             Zurich relies heavily on Zurich American Insurance Company v. Wausau Business
   Insurance Company, 2018 WL 4684112 (S.D.N.Y. Sept. 28, 2018), as persuasive authority.
   But Wausau is distinguishable. That case did not confront the factual situation here where

                                               8
Case: 19-20489        Document: 00515994295             Page: 9      Date Filed: 08/25/2021

                                         No. 19-20489

           Finally, even if the language is ambiguous as to already reimbursed
   sums, ordinary contract principles suggest that we would construe the policy
   against the drafter (Zurich) and in favor of the insured (Maxim). See Mut.
   Benefit Ins. Co. v. Politsopoulos, 115 A.3d 844, 852 n.6 (Pa. 2015) (“Consistent
   with ordinary principles of contract interpretation, where a policy provision
   is ambiguous, it is generally construed against the insurance company as the
   drafter of the agreement.”); Eichelberger v. Warner, 434 A.2d 747, 749 (Pa.
   Super. Ct. 1981) (“Exceptions to an insurer’s general liability are accordingly
   to be interpreted narrowly against the insurer.”). (The parties agree that
   Pennsylvania law governs the Maxim Policy.)
           In sum, the Maxim Policy does not assign Maxim’s rights to Zurich,
   so we conclude that Maxim can pursue this claim against Zurich under the
   Berkel Policy.
                                              V.
           Turning at last to the merits, the parties agree that this appeal turns
   on a single question of statutory interpretation—whether the employee
   exception under the TAIA precludes Maxim from coverage as an additional
   insured. The district court concluded that the TAIA prevents Maxim from
   recovering under Berkel’s CGL Policy.
           The TAIA generally voids indemnity coverage in construction
   contracts, with certain exceptions:
           Except as provided by Section 151.103, a provision in a
           construction contract, or in an agreement collateral to or
           affecting a construction contract, is void and unenforceable as
           against public policy to the extent that it requires an indemnitor

   an insured had already reimbursed the insurer for all amounts due and was seeking recovery
   after the fact, as all recovery there was prospective.

                                               9
Case: 19-20489     Document: 00515994295            Page: 10    Date Filed: 08/25/2021

                                     No. 19-20489

          to indemnify, hold harmless, or defend a party, including a
          third party, against a claim caused by the negligence or fault . . .
          of the indemnitee . . . .
   Tex. Ins. Code § 151.102. The anti-indemnity provision applies equally
   to additional insured coverage, which is at issue in this case. Id. § 151.104.
          But Maxim claims that it is covered by an exception under the TAIA
   concerning employees. Under the statute, “Section 151.102 does not apply
   to a provision in a construction contract that requires a person to indemnify
   . . . against a claim for the bodily injury or death of an employee of the
   indemnitor, its agent, or its subcontractor of any tier.” Id. § 151.103 (emphasis
   added). Simply put, additional insured coverage is enforceable, and not void,
   if the claim runs against the policyholder’s employee.
          Neither party suggests that Maxim was liable for Berkel’s negligence,
   so both parties agree that the TAIA voids Berkel’s CGL Policy from covering
   Maxim’s costs unless the § 151.103 “employee exception” applies here.
          Maxim argues that Berkel was effectively Lee’s “co-employer,” so
   the employee exception applies. The logic goes like this: Maxim was covered
   by the Berkel CGL Policy, which insured injuries to Berkel’s employees
   caused by Maxim’s negligence. In the Berkel v. Lee suit, Berkel was deemed
   to be Lee’s “co-employee” under the TWCA. Next, “co-employee” and
   “co-employer” are interchangeable terms, meaning that Lee is
   “functionally” Berkel’s employee. And if Lee is Berkel’s employee, then the
   exception permitting additional insured coverage for employees applies and
   Maxim can claim coverage under Berkel’s CGL Policy. Thus, this case turns
   on the meaning of “employee” under the TAIA.
          Unlike the TWCA, the TAIA contains no statutory definition of the
   term “employee.” Under the ordinary meaning of the term, we would not
   treat Lee as Berkel’s employee. “[U]ndefined terms in a statute are typically

                                          10
Case: 19-20489     Document: 00515994295          Page: 11   Date Filed: 08/25/2021

                                   No. 19-20489

   given their ordinary meaning, [unless] a different or more precise definition
   is apparent from the term’s use in the context of the statute.” TGS-NOPEC
   Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex. 2011). Accordingly,
   Zurich argues that Lee was an employee of Skanska, not Berkel. Zurich also
   emphasizes that the primary means for determining the legislature’s intent is
   by reading the statutory text, not by considering broad policy purposes. Id.
          The parties have found no Texas case law construing the TAIA or its
   employee exception, nor have we found any.
          For its part, Maxim asks us to view the case law interpreting the
   TWCA as relevant and persuasive in resolving the question before us—in
   particular, the determination by the state appellate court that Berkel was a
   “co-employee” of Lee under the TWCA. Berkel, 543 S.W.3d at 296. Maxim
   argues that, if Lee and Berkel are indeed “co-employees,” then Berkel was
   “functionally equivalent to being the injured worker’s [i.e. Lee’s]
   employer.” And if that is so, then the employee exception under the TAIA
   applies, and Maxim can properly be designated an additional insured under
   Berkel’s CGL Policy.
          To make the jump from “co-employee” to “co-employer,” Maxim
   invokes Austin Bridge & Road, LP v. Suarez, 556 S.W.3d 363 (Tex. App.—
   Houston [1st Dist.] 2018, pet. denied). But Zurich responds that the facts of
   Austin Bridge are wholly distinguishable from the current case. Additionally,
   the statutory definition of “employee” used in the TWCA that Maxim relies
   on is relevant “only for purposes of the workers’ compensation laws of this
   state,” as the statute makes clear. Tex. Lab. Code § 406.123(e). Maxim
   argues that courts should “consider the circumstances of this case and the
   legislative intent of the TAIA, which plainly anticipated broad
   indemnification and additional insured coverage for injuries to an
   indemnitor’s employees.”      See Tex. Gov’t Code § 312.005 (“In

                                        11
Case: 19-20489     Document: 00515994295            Page: 12   Date Filed: 08/25/2021

                                     No. 19-20489

   interpreting a statute, a court shall diligently attempt to ascertain legislative
   intent and shall consider at all times the old law, the evil, and the remedy.”).
   Here, Maxim was left holding the bag only because the Fourteenth Court
   read the TWCA to make Lee and Berkel “statutory co-employees,” so
   Maxim contends, it makes sense to carry that meaning over to the TAIA’s
   employee exception. Doing so will ensure that “the TAIA and TWCA . . .
   work hand-in-glove.” In support, Maxim cites language from the TAIA that
   the act “does not affect . . . the benefits and protections under the workers’
   compensation laws of this state,” to show that the two statutes are indeed
   linked. Tex. Ins. Code § 151.105(5).
          The district court sided with Zurich, holding that “the statutory
   language and the Texas cases interpreting [the TWCA] show that the terms
   ‘coemployer’ and ‘coemployee’ are not interchangeable and that the court
   cannot deem Berkel to be Lee’s coemployer.” And even if Maxim were able
   to establish that Berkel was indeed Lee’s functional employer, it is not clear
   whether an employee of a “co-employer” under the TWCA is also an
   employee under the TAIA. Indeed, other Texas statutes set different
   statutory definitions of “employee,” so it is far from clear that the TWCA
   definition necessarily applies in the TAIA context. See, e.g., Tex. Civ.
   Prac. & Rem. Code § 101.001 (defining “employee”); Tex. Health
   & Safety Code § 312.007(a) (same).
                                         ***
          We have the discretion to certify questions of law to state courts of
   last resort. See, e.g., In re Deepwater Horizon, 807 F.3d 689, 698 (5th Cir.
   2015). On occasion, we have considered the following factors when deciding
   whether to certify:
          (1) the closeness of the question and the existence of sufficient
          sources of state law; (2) the degree to which considerations of

                                          12
Case: 19-20489     Document: 00515994295           Page: 13    Date Filed: 08/25/2021

                                    No. 19-20489

          comity are relevant in light of the particular issue and case to
          be decided; and (3) practical limitations of the certification
          process: significant delay and possible inability to frame the
          issue so as to produce a helpful response on the part of the state
          court.
   JCB, 912 F.3d at 241 (quoting cases).
          Certification is advisable here. First, as discussed, this case involves
   open legal questions regarding the interpretation of the TAIA. That act
   contains no statutory definition of employee, and it is unclear whether we
   should seek guidance from the definitions provided by the TWCA or some
   other Texas statute. Nor have we been able to identify any meaningful
   authority from any Texas state court.           Second, Maxim advises that,
   considering the prevalence of CCIPs like the one at issue here, indemnity
   issues under the TAIA and its employee exception “will likely continue to
   arise with regularity” out of construction-related personal injury suits.
                                         VI.
          We hereby certify the following question of law to the Supreme Court
   of Texas:
          Whether the employee exception to the TAIA, Texas
          Insurance Code § 151.103, allows additional insured coverage
          when an injured worker brings a personal injury claim against
          the additional insured (indemnitee), and the worker and the
          indemnitee are deemed “co-employees” of the indemnitor for
          purposes of the TWCA.
          We do not purport to limit the Supreme Court of Texas to the precise
   form or scope of the question certified.

                                          13