Court Opinion

ID: 50390
Source: CourtListenerOpinion
Date Created: 2010-04-26 00:50:51+00
Date Added: 2024-06-11T08:18:41.320084
License: Public Domain

United States Court of Appeals
                                                                                         Fifth Circuit
                                                                                       F I L E D
                                                  In the                                May 18, 2007
                       United States Court of Appeals                              Charles R. Fulbruge III
                                      for the Fifth Circuit                                Clerk
                                            _______________

                                              m 06-30489
                                            _______________

   NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA,

                                                              Plaintiff-Appellant,

                                                 VERSUS

                            LIBERTY MUTUAL INSURANCE COMPANY,

                                                              Defendant-Appellee.

                                     _________________________

                             Appeal from the United States District Court
                                for the Middle District of Louisiana
                                          m 3:05-CV-352
                               ______________________________

Before GARWOOD, SMITH, and DEMOSS,                     (“National Union”) sued Liberty Mutual In-
  Circuit Judges.                                      surance Company (“Liberty Mutual”), seeking
                                                       coverage under a policy. The district court
JERRY E. SMITH, Circuit Judge:*                        granted summary judgment for Liberty Mu-
                                                       tual, and we affirm.
   National Union Fire Insurance Company
                                                                             I.
                                                          This case arises out of a dispute between
   *
    Pursuant to 5TH CIR. R. 47.5, the court has de-    Rubicon, Inc. (“Rubicon”), and S&B Engi-
termined that this opinion should not be published     neers and Constructors, Ltd. (“S&B”), which
and is not precedent except under the limited cir-     Rubicon hired to provide engineering contract
cumstances set forth in 5TH CIR. R. 47.5.4.            services for an expansion project. As part of
this project, S&B obtained weld shop fabri-               Moreover, National Union contends that the
cated pipes from American Pipe Fabricating,               “your work” exclusion is inapplicable here
Inc. (“American Pipe”). In the middle of the              because of the subcontractor exception: Amer-
project, Rubicon terminated S&B’s involve-                ican Pipe acted as a subcontractor to S&B, so
ment, litigation ensued, and Rubicon sued                 the “your work” exclusion does not apply.3
S&B for breach of contract, negligence in per-
forming its duties, and negligent misrepresen-               Second, National Union urges that Liberty
tation, among other causes of action.                     Mutual was obligated to fulfill American
                                                          Pipe’s promise to indemnify S&B for losses
   S&B and Rubicon settled the suit, and S&B              resulting from American Pipe’s services. As
sought payment from its insurer, National                 part of the purchase order between S&B and
Union, for the costs of the suit. National                American Pipe, American Pipe promised to
Union and S&B settled that claim, and S&B                 carry insurance4 and indemnify S&B.5 As
assigned its rights against any third parties to
National Union.
                                                             3
                                                               Only the “your work” exclusion has a subcon-
   In the instant case, National Union sues               tractor exception; the “your product” exclusion
Liberty Mutual, American Pipe’s insurer, to               does not. After laying out the “your work” exclu-
recover the amount of the settlement to Rubi-             sion, the policy states that “[t]his exclusion does
con that resulted from American Pipe’s defec-             not apply if the damaged work or the work out of
tive work, based on two theories. First, Na-              which the damage arises was performed on your
tional Union argues that S&B was an addi-                 behalf by a subcontractor.”
tional insured under Liberty Mutual’s insur-                 4
                                                                 The purchase order states:
ance policy for American Pipe. Liberty Mu-
tual admits that S&B was an additional insured
                                                             Seller must maintain at all times with a reliable
but asserts that S&B cannot recover in this                  insurance carrier or carriers, at Seller’s sole ex-
case because of the “your work” and “your                    pense, insurance policies providing sufficient
product” exclusions in the policy.1 National                 coverage and limits to cover the liabilities
Union argues that S&B was not excluded                       assumed under this agreement. Insurance
under these provisions, because S&B was not                  policies provided by Seller shall include but are
“you” as defined by the contract,2 so the exclu-             not limited to General Liability, including
sions applying to “you” did not apply to S&B.                coverage for Products and Complete Operations
                                                             and Contractual Liability, Automobile
   1                                                         5
     The policy excludes (1) “‘Property damage’ to               The purchase order states:
‘your work’ arising out of it or any part of it and
included in the ‘products-completed operations               To the maximum extent permitted by applicable
hazard.’”; and (2) “‘Property damage’ to ‘your               law, Seller shall defend, indemnify and hold
product’ arising out of it or any part of it.”               harmless FBD [S&B’s affiliate], and its affili-
                                                             ated companies, subsidiaries and clients from
   2
      The policy defines “you”: “Throughout this             and against any and all loss, damage, claims,
policy the words ‘you’ and ‘your’ refer to the               suit, liability, strict liability, product liability,
Named Insured shown in the Declarations, and any             judgement and expense (including attorney’s
other person or organization qualifying as a Named           fees and other costs of litigation) and any fines,
Insured under this policy.”                                                                        (continued...)

                                                      2
American Pipe’s insurer, Liberty Mutual                      sons that American Pipe and S&B’s contract
would be obligated to fulfill this promise. Lib-             is not an insured contract because S&B was an
ertyMutual, however, contends that American                  engineer, and Liberty Mutual’s insurance poli-
Pipe’s obligation to indemnify S&B was ex-                   cy with American Pipe excludes engineering
cluded from Liberty Mutual’s policy with                     services from the definition of insured con-
American Pipe by the contractual liability ex-               tracts.8
clusion.6 National Union retorts that the pur-
chase order qualifies as an insured contract,                                        II.
obviating that exclusion.7 Liberty Mutual rea                   “This Court reviews grants of summary
                                                             judgment de novo, applying the same standard
                                                             as the district court, viewing the evidence in a
   5                                                         light most favorable to the non-movant.”
    (...continued)
   penalties and assessments arising out of injury           Fruge ex rel. Fruge v. Parker Drilling Co.,
   to, disease or death of, or damage to or loss of          337 F.3d 558, 560 (5th Cir. 2003). “If the
   property of, persons (except for Seller’s prop-           court finds no ambiguity [in an insurance poli-
   erty, employees, agents or subcontractors)                cy], the court’s duty is to enforce the policy
   resulting from or in connection with the execu-           according to its plain meaning.” Valmont En-
   tion of this order by Seller, its agents or sub-          ergy Steel, Inc. v. Commercial Union Ins. Co.,
   contracts to the extent and proportion caused by          359 F.3d 770, 773 (5th Cir. 2004).
   the sole, concurrent, or contributory negligence
   or other fault of Seller, its agents or subcontrac-                             A.
   tors. Liability and Workers’ Compensation                    National Union seeks coverage as an addi-
   including employers Liability coverage. All               tional insured, arguing the “your work” and
   Policies, excepting Workers’ Compensation                 “your product” exceptions do not apply to
   shall include FBD and its affiliated companies,
                                                             S&B because “you” was defined in the con-
   subsidiaries and clients as additional insureds.”
                                                             tract as American Pipe, not additional insureds
   6
    Liberty Mutual’s contract with American Pipe
excludes coverage for
                                                                7
                                                                  (...continued)
   ‘Bodily injury’ or ‘property damage’ for which            tract as “[t]hat part of any other contract or agree-
   the insured is obligated to pay damages by rea-           ment pertaining to your business . . . under which
   son of the assumption of liability in a contract          you assume the tort liability of another party to pay
   or agreement. This exclusion does not apply to            for ‘bodily injury’ or ‘property damage’ to a third
   liability for damages:                                    person or organization.”
                                                                8
   (1) Assumed in a contract or agreement that is                   The definition of an insured contract “does
   an ‘insured contract’, provided the ‘bodily in-           not include any contract or agreement: . . . (2) That
   jury’ or ‘property damage’ occurs subsequent              indemnifies an architect, engineer or surveyor for
   to the execution of the contract or agreement; or         injury or damages arising out of: (a) Preparing,
                                                             approving or failing to prepare or approve maps,
   (2) That the insured would have in the absence            drawings, opinions, reports, surveys, change
   of the contract or agreement.                             orders, designs or specifications; or (b) Giving
                                                             directions or instructions, or failing to give them, if
   7
       The insurance policy defined an insured con-          that is the primary cause of the injury or damage .
                                      (continued...)         . . .”

                                                         3
such as S&B. We take as a given that “you”               discharge, dispersal, release or escape of
in this policy only means American Pipe, ac-             pollutants from premises owned by Factory
cording to the policy’s definition of that word.         (the only insured included in the policy’s de-
Read with that definition, the policy excludes           finition of ‘you’).” Id.
claims based on American Pipe’s work or
product, because American Pipe is substituted                The instant case has different facts, but our
for you in those exclusions. With that substi-           reading of the insurance policy comports en-
tution, the policy excludes (1) “‘Property dam-          tirely with Chevron Chemical’s reading of the
age’ to ‘[American Pipe’s] work’ arising out             policy in that case. In both cases, the named
of it or any part of it and included in the ‘prod-       insured is substituted for “you” in the policy.
ucts-completed operations hazard.’”; and                 Though the substitution in that case meant that
(2) “‘Property damage’ to ‘[American Pipe’s]             the exclusion did not apply because the pre-
product’ arising out of it or any part of it.”           mises were not owned by “you,” in this case
                                                         the exclusion does apply, because the work or
   S&B’s claim as an additional insured is               product serving as the basis of the claim was
based on American Pipe’s work or product.                “yours”SSAmerican Pipe’s.
S&B is correct that if S&B’s work or product
had been the basis of the suit, these exclusions            Substituting “American Pipe” for “you” in
would not apply, but they do apply in this case          the subcontractor exception similarly reveals
because American Pipe’s work or product is               that S&B is not entitled to relief under that
the cause of the claim.                                  exception. The policy says that the “your
                                                         work” exclusion does not apply “if the dam-
    National Union points us to Chevron                  aged work or the work out of which the dam-
Chemical Co. v. Factory Compressor Parts,                ages arises was performed on your behalf by a
Inc., 1993 WL 329999 (E.D. La. Aug. 23,                  subcontractor.” Because the contract defines
1993), to support its position. Instead of bol-          “you” as American Pipe, the exception applies
stering National Union’s argument, however,              when someone else does work as American
Chevron Chemical confirms the effect we have             Pipe’s subcontractor, not when American Pipe
given to the terms of the policy here. In that           is a subcontractor. “[O]n your behalf” be-
case, an insurance policy excluded “bodily               comes “on American Pipe’s behalf,” so S&B
injury or property damage arising out of the             cannot obtain the benefit of this exception, be-
alleged or threatened discharge, dispersal, re-          cause no one worked on American Pipe’s
lease or escape of pollutants . . . at or from           behalf. S&B was excluded from coverage be-
premises you own, rent or occupy.” Id. at *2             cause American Pipe’s work or product was
(internal quotations omitted). The “you” was             the basis of the claim, and American Pipe did
defined in the policy as the named insured in            not hire a subcontractor to work on its behalf,
the declaration, and the named insured was               so the district court correctly determined that
Factory Compressor Parts. Id. at *3. Because             S&B’s claim was excluded.
the damage from pollutants occurred on Chev-
ron’s and not Factory Compressor Parts’s                                      B.
premises, the exclusion did not apply on those              National Union seeks coverage pursuant to
facts: “[T]he pollution exclusion only applies           the purchase order between S&B and Amer-
to claims for bodily injury which arise from the         ican Pipe in which American Pipe agreed to

                                                     4
defend and indemnify S&B. National Union
asserts that Liberty Mutual, as American
Pipe’s insurer, is liable to S&B for this obliga-
tion.

   Because the basis of S&B’s claim is Amer-
ican Pipe’s work or product, the indemnity
provision in the purchase order does not pro-
vide a way for S&B to be covered by Liberty
Mutual’s policy. The indemnity provision was
never triggered.

   American Pipe promised to indemnify S&B
for claims “arising out of injury to, disease or
death of, or damage to or loss of property of,
persons (except for Seller’s property, employ-
ees, agents or subcontractors) . . . .” This
provision excludes damage to property of
American Pipe, as the “Seller.” Without dam-
ages beyond damages to American Pipe’s own
work or product, the indemnity provision was
never triggered, and Liberty Mutual is not ob-
ligated to pay National Union on this basis.

   AFFIRMED.

                                                    5