INSURANCE-RELATED COURT CASES
Digested from case reports published online
ExxonMobil Corporation hired Savage Refinery Services to work as an independent contractor at Exxon’s refinery in Baytown, Texas. Their working relationship was memorialized in a service agreement under which Savage promised to obtain at least a minimum stated amount of liability insurance for its employees and to name Exxon as an additional insured. Savage ultimately procured five different policies. National Union Fire Insurance Company underwrote two of them—a primary policy for general commercial liability and an umbrella policy. A third policy was underwritten by Starr Indemnity & Liability Insurance Company.
In a workplace accident at Exxon’s Baytown refinery, two Savage employees were severely burned. The employees sought compensation for their injuries and later settled with Exxon for a collective amount exceeding $24 million. About $5 million of that settlement money came from some of Savage’s primary policies under which Exxon was recognized as an additional insured, including the primary policy underwritten by National Union, whose limits were exhausted. Exxon paid the rest of the settlement money out of pocket because National Union and Starr both denied Exxon coverage under their umbrella policies.
Exxon then sued both National Union and Starr for breach of contract, asserting that both had wrongfully denied coverage. The trial court sided with Exxon, ruling that National Union (but not Starr) was obligated under its umbrella policy to reimburse Exxon for the roughly $20 million it had paid in settling with the two injured employees. National Union appealed and maintained that Exxon was not insured under its umbrella policy.
The court of appeals agreed with National Union and reversed the trial court’s decision. The court concluded that the umbrella policy incorporated the primary policy’s limits and that the primary policy in turn incorporated the limits of the underlying service agreement, which required only commercial general liability insurance of a specified minimum amount.
Thus, the court of appeals held, “[b]ecause coverage available to Exxon as an additional insured under the [primary policy], through its incorporation of the Exxon–Savage contract, makes clear that Exxon’s status as an additional insured is limited to primary coverage, Exxon is not entitled to coverage under the [umbrella policy] as an ‘additional insured.’” For similar reasons, the court affirmed the summary judgment ruling in favor of Starr.
The supreme court granted Exxon’s petition for review and reversed the appellate court’s decision as to National Union and Starr. The court remanded the case to the court of appeals for further proceedings.
ExxonMobil Corporation v. National Union Fire Insurance Company of Pittsburgh, PA, and Starr Indemnity & Liability Insurance Company—Supreme Court of Texas—February 23, 2023—No. 21-0936.