United States District Court, W.D. Texas, Austin Division
STARNET INSURANCE COMPANY, LLOYD'S SYNDICATE CVS 1919, LLOYD'S SYNDICATE NO. 780 ADV, and LLOYD'S SYNDICATE NO. 4020 ARK, each for his own and not one for the other, severally subscribing to Contract of Insurance No. BD-CJP-555, Plaintiffs,
FEDERAL INSURANCE COMPANY, Defendant.
SPARKS UNITED STATES DISTRICT JUDGE
REMEMBERED on this day the Court reviewed the file in the
above-styled cause, and specifically Plaintiffs' Motion
for Summary Judgment [#25], Defendant's Motion for
Summary Judgment [#26], the parties' Responses [##27, 29]
in opposition, and the parties' Replies [##28, 30] in
support. Having reviewed the documents, the governing law,
and the file as a whole, the Court now enters the following
opinion and orders.
Starnet Insurance Company, Lloyd's Syndicate CVS 1919,
Lloyd's Syndicate No. 780 ADV, and Lloyd's Syndicate
No. 4020 (Plaintiffs) bring this suit against Defendant
Federal Insurance Company (Federal), claiming Federal
breached its contract with non-party Border to Border
Exploration, LLC (BBX). Compl. [#1] ¶ 17-19. Plaintiffs
allege they are subrogated to BBX's breach of contract
claim against Federal.
parties in this case do not dispute any facts and agree the
only issue before this Court is the interpretation of three
insurance policies to determine the priority of the policies
and consequently if Plaintiffs are entitled to recover from
Federal. Pis.' Mot. [#25] at 10; Def's Mot. [#26] at
1-2. Nevertheless, the Court provides a brief recitation of
the facts for context.
this suit features dueling insurance companies, the
underlying event centers on an oil well blowout. See
Compl. [#1] ¶ 8. On September 1, 2014, an oil well was
being drilled for BBX, the insured, when the well experienced
a blowout, resulting in surface pollution to adjacent creeks
and tributaries and to surrounding property owned by a third
party. Id. Approximately $4, 056 million of the
clean-up expense was allocated to BBX's working interest
in the well. Id. ¶ 12.
time of the blowout, BBX had multiple insurance policies.
Id. ¶¶ 9-11. Relevant here, BBX had Cost
of Well Control and Extra Expense Coverage from Plaintiffs
for up to $25 million (Burke-Daniels Policy). Id.
¶ 11. BBX was also covered by Energy Industries
Liability Insurance from Vigilant Insurance Company
(Vigilant) with an incident limit of $1 million (Vigilant
Policy). Id. ¶ 9. Finally, BBX had Commercial
Excess and Umbrella Insurance from Federal (Federal Policy).
Id. ¶ 10.
the blowout, Plaintiffs paid BBX $2, 028, 274.49, 50% of the
cleanup expenses. Pis.' Mot. [#25] at 7. Vigilant then
paid BBX $1 million, the cap for a single incident under the
Vigilant Policy. Id. Federal, however, refused to
pay BBX the remaining $1, 028, 274.49, asserting its policy
was excess over all other policies, including Plaintiffs'
Federal refused to pay, Plaintiffs paid the remainder of
BBX's claim in exchange for a release and subrogation
agreement. Id. Thus, Plaintiffs paid a total of $3,
056, 548.98. See Id. Plaintiffs now seek
reimbursement from Federal. Compl. [#1] ¶ 8.
Burke-Daniels Policy provided BBX with up to $25 million in
coverage for control of well events, subject to a $200, 000
self-insured retention, and for a variety of operator's
expenses. Pis.' Mot. [#25] at 5. The operator's
expense coverage included pollution expenses, such as
"[t]he cost of removing, nullifying, or cleaning up
seeping, polluting or contaminating substances, which [are]
above the surface of the ground or water bottom, emanating
from well insured under the CONTROL OF WELL INSURANCE . . .
." Pis.' Mot. [#25-3] Ex. 3 (Burke-Daniels Policy)
Burke-Daniels policy also contained the following "other
insurance" clause: "In the event there is other
insurance, which insures to the Assured's benefit
covering any loss, damage, liability or expense covered
hereunder, this insurance shall not pay until such other
insurance is exhausted." Id. at 7.
mentioned above, BBX also had insurance from Vigilant, a
Chubb Insurance Company, which provided pollution liability
insurance. Pis.' Mot. [#25-1] Ex. 1 (Vigilant Policy) at
4. The Vigilant Policy included the following "other
This insurance is primary, except to the extent that the
Excess Insurance provision described below applies. If this
insurance is primary, then our obligations are not affected
unless any of the other insurance is also primary. Then, we
will share with all that other insurance by the method
described in the Method of Sharing provision below.
Id. at 7.
relevant part, the method of sharing provision stated,
"If all of the other insurance permits contribution by
equal shares, then we will follow this method also. Under
this method, each insurer contributes equal amounts until it
has paid its applicable limits of insurance or none of the
loss remains, whichever comes first." Id. at 8.
However, if the other insurance did not permit contribution
by equal shares, the Vigilant Policy mandated each
insurer's share be determined by "the ratio of its
applicable limits of insurance to the total applicable limits
of the insurance of all insurers." Id.
is also a Chubb Insurance Company. Pis.' Mot. [#25-2] Ex.
2 (Federal Policy) at 1. The Federal Policy was composed of
two insuring agreements: Excess Follow-Form Coverage A
(Coverage A) and Umbrella Coverage B (Coverage B). The
Federal Policy specified a limit of $5 million per
occurrence, with separate $5 million limits under each of the
two insuring agreements. Federal Policy at 1.
A included a promise to pay "on behalf of the insured,
that part of loss to which this coverage applies, which
exceeds the applicable underlying limits." Id.
at 4. Coverage A also explained that it "follow[ed] the
terms and conditions of underlying insurance described in the
Schedule of Underlying Insurance" but did "not
apply to any part of loss within the underlying limits, or
any related costs or expenses." Id. The
Schedule of Underlying Insurance listed six insurance
policies meeting the definition of underlying insurance.