INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
A classical gas
Patterson-UTI Energy, Inc., and its affiliates (collectively, Patterson) provide oil and gas equipment and services, and purchase insurance to cover potential costs that arise from incidents during drilling operations. For the 2017-2018 policy year, Patterson obtained an umbrella policy from Liberty Mutual Insurance Europe, Ltd., and an excess policy from Ohio Casualty Insurance Company.
After a drilling rig incident led to multiple lawsuits, Patterson settled the claims and incurred significant legal defense expenses. Ohio Casualty funded portions of the settlements but refused to cover the defense expenses, leading Patterson to sue Ohio Casualty and its broker, Marsh USA, Inc.
In its petition, Patterson alleged that Ohio Casualty’s refusal breached the contract and violated the state’s insurance code. In the alternative (and assuming that the excess policy did not cover defense expenses), Patterson alleged that Marsh committed negligence, negligent misrepresentation, fraud, and breach of contract by failing to procure an insurance policy that did cover defense expenses.
The parties filed competing motions for summary judgment regarding whether the Ohio Casualty policy covered defense expenses. The trial court granted Patterson’s motion and denied Ohio Casualty’s. The court determined that “the defense costs sought by [Patterson] are covered under the Ohio Casualty policy at issue in this case because the Ohio Casualty policy did not clearly and unambiguously exclude the coverage for defense costs provided by the underlying primary policy.” To expedite resolution of the case the parties jointly moved for entry of an agreed final judgment, which the trial court signed. Ohio Casualty appealed.
The trial court granted summary judgment in favor of Patterson, ruling that the Ohio Casualty policy covered defense expenses because it did not clearly exclude them. The parties then moved for an agreed final judgment, which the trial court signed. Ohio Casualty appealed, and the Court of Appeals for the Fourteenth District of Texas affirmed the trial court’s decision, reasoning that the excess policy, being a follow-form policy, did not unambiguously exclude defense expenses and thus covered them.
The Supreme Court of Texas reviewed the case and reversed the Court of Appeals’ judgment. The Supreme Court held that the excess policy’s coverage is determined by its own terms, not the underlying policy.
The excess policy defined “loss” as sums paid in settlement or satisfaction of a claim as damages, which does not include defense expenses. Therefore, the excess policy did not cover Patterson’s legal defense expenses.
The Supreme Court rendered judgment in favor of Ohio Casualty and remanded the dispute between Patterson and Marsh to the trial court for further proceedings.
The Ohio Casualty Insurance Company v. Patterson-UTI Energy, Inc.—Supreme Court of Texas—No. 23-0006—October 30, 2024.
