United States District Court, S.D. Texas, Houston Division
MEMORANDUM AND ORDER
ROSENTHAL, CHIEF UNITED STATES DISTRICT JUDGE
September 2018, Maxim Crane Works, LP sued Zurich American
Insurance Company in Texas state court, alleging breach of
contract and seeking a declaratory judgment that Zurich must
reimburse Maxim for defense costs, a $3.5 million judgment,
and other losses Maxim sustained in a related lawsuit.
(Docket Entry No. 1-3). Zurich timely removed. (Docket Entry
No. 1). The parties cross-moved for summary judgment,
responded, and replied. (Docket Entry Nos. 20, 22, 25, 26,
on the motions, responses, and replies; the record evidence;
and the applicable law, the court grants Zurich's summary
judgment motion, (Docket Entry No. 22), and denies
Maxim's summary judgment motion. (Docket Entry No. 20).
Final judgment is entered by separate order.
reasons for these rulings are detailed below.
The Construction Project and Accident
2013, Skanska USA Building, Inc., a general contractor, was
constructing an office campus in Houston and hired Berkel
& Company Contractors as a subcontractor. (Docket Entry
No. 19 at ¶¶ 1-3). Skanska had a
contractor-controlled insurance program that included
worker's compensation coverage. (Id. at ¶
4). Skanska required Berkel and other subcontractors to
enroll and obtain coverage for the project. (Id.).
Berkel enrolled and obtained coverage under the program
effective from August to October 2013. (Id.). Berkel
also had a separate commercial general liability policy with
Zurich (the “Berkel Policy”), effective from
August 2013 to August 2014. (Id. at ¶ 8).
leased a crane from Maxim for the project. (Id. at
¶ 5). Berkel's Lease Agreement with Maxim stated:
THE EQUIPMENT IS RENTED TO LESSEE ON A BARE
RENTAL BASIS ONLY, in its “As Is”
condition. Lessee, at its own expense, shall transport,
operate, inspect, maintain and repair the Equipment . . . .
LESSEE IS RESPONSIBLE FOR ENSURING COMPLIANCE BY IT AND ITS
EMPLOYEES/AGENTS, AND OF THE EQUIPMENT ITSELF, WITH ALL
APPLICABLE LAWS, REGULATIONS AND ORDINANCES . . . . Lessor
shall have no responsibility of any kind for compliance with
any such laws, regulations or ordinances during the period
the Equipment is in Lessee's possession or control.
(Docket Entry No. 19-1 at 514). Although Maxim had a separate
Commercial General Liability policy with Zurich (the
“Maxim Policy”), the Lease Agreement for the
crane required Berkel to add Maxim as an additional insured
under the Berkel Policy. (Docket Entry No. 19 at ¶¶
7, 10; Docket Entry No. 19-1 at 514). The parties have
stipulated that Maxim is an “Additional Insured”
under the Berkel Policy. (Docket Entry No. 19 at ¶ 9).
As an Additional Insured, Maxim was a “person or
organization to whom or to which [Berkel is] required to
provide additional insured status in a written contract or
written agreement prior to the loss except where such
contract or agreement is prohibited by law.” (Docket
Entry No. 19-1 at 617; see Docket Entry No. 19 at
¶¶ 6- 8). Maxim did not enroll in Skanska's
contractor-controlled insurance program. (Docket Entry No. 19
at ¶ 4).
in 2013, a Berkel employee overtaxed the crane, causing it to
fall over. Part of the crane fell on Tyler Lee, the project
superintendent and a Skanska employee. (Id. at
¶ 11); Berkel & Co. Contractors, Inc.
v. Lee, 543 S.W.3d 288, 293 (Tex. App.-Houston [14th
Dist.] 2008). Lee's leg was amputated. He received
worker's compensation benefits through the
contractor-controlled insurance program. (Docket Entry No. 19
at ¶¶ 11-12).
The State-Court Litigation
2014, Lee sued Berkel, Maxim, and other defendants in state
court, alleging negligence and other state-law claims.
(Id. at ¶ 13). When the state court litigation
began, Maxim sought coverage from Zurich under the Berkel
Policy as an Additional Insured, but Zurich denied coverage.
(Id. at ¶ 14). Maxim also cross-claimed against
Berkel for breach of contract, arguing that Berkel was
required to defend Maxim and indemnify or contribute to any
loss to Maxim. (Id. at ¶ 15).
2015, a jury awarded Lee more than $35 million in damages,
allocating 90% of the fault to Berkel and 10% to Maxim.
(Id. at ¶ 16). Maxim settled with Lee for $3,
444, 300.60, and Zurich paid Lee that amount under the Maxim
Policy. (Id. at ¶ 17). Maxim reimbursed Zurich
for $3, 000, 000 of the settlement costs, as required under
the Maxim Policy's Deductible Endorsement.
(Id.). Zurich also paid Maxim's defense costs
under Maxim's individual policy, and Maxim reimbursed
Zurich for the $824, 839.38 Zurich paid in defense costs.
(Id. at ¶ 19).
the jury verdict, Maxim moved for entry of judgment on its
cross-action against Berkel. (Id. at ¶ 18). The
state trial court entered an amended final judgment in July
2015, stating that “Maxim is not entitled to
reimbursement of Maxim's Defense Fees, Costs, and
Expenses of and from Berkel, ” and rendered judgment in
favor of Berkel in Maxim's cross action. (Docket Entry
No. 19-2 at 169). The court later vacated that final judgment
based on Berkel's objections and entered a new final
judgment stating that “Maxim's motion for entry of
judgment is denied, and Maxim takes nothing on its claims
against Berkel.” (Id. at 189).
September 2015, Berkel appealed. (Docket Entry No. 19 at
¶ 20). In 2018, the Texas court of appeals reversed the
judgment against Berkel, concluding that because Berkel and
Skanska were covered under the contractor-controlled
insurance program, “Skanska is Berkel's statutory
employer” under the Texas Workers' Compensation Act
and “Lee, as Skanksa's actual employee, is
Berkel's co-employee.” Berkel & Co.
Contractors, 543 S.W.3d at 296. Because Skanska was
immune under the Act's exclusive-remedy provision,
Berkel, as a “co-employee, ” was also immune.
also appealed the state-court judgment. (Docket Entry No. 19
at ¶ 22; Docket Entry No. 19-4 at 125-72). The Texas
appellate court concluded that Maxim had “not
preserv[ed] error as to its issues regarding the
applicability of [the Texas Anti-Indemnity Act], ” and
the Texas Supreme Court denied review. Maxim Crane Works,
L.P. v. Berkel & Co. Contractors, Inc., No.
14-15-00614-CV, 2016 WL 4198138, at *2 (Tex. App.-Houston
[14th Dist.] Aug. 9, 2016).
again demanded that Zurich cover its defense and settlement
costs under the Berkel Policy. Zurich denied coverage because
the Texas Anti-Indemnity Act prohibited Maxim's
additional-insured coverage under the Berkel Policy. (Docket
Entry No. 19 at ¶ 24; Docket Entry No. 19-4 at 261-62).
This lawsuit followed.
The Federal-Court Litigation
September 2018, Maxim sued Zurich in state court, seeking
coverage under the Berkel Policy. (Docket Entry No. 1-3).
Zurich timely removed, and the parties agreed to file
cross-motions for summary judgment with a joint stipulation
of facts because the disputed issue is one of law.
(See Docket Entry Nos. 1, 13).
The Legal Standard for Summary Judgment
judgment is appropriate only when ‘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.'” Shepherd on Behalf of Estate of Shepherd
v. City of Shreveport, 920 F.3d 278, 282-83 (5th Cir.
2019) (quoting Fed.R.Civ.P. 56(a)). “A material fact is
one that might affect the outcome of the suit under governing
law, ” and “a fact issue is genuine if the
evidence is such that a reasonable jury could return a
verdict for the non-moving party.” Renwick v. PNK
Lake Charles, L.L.C., 901 F.3d 605, 610 (5th Cir. 2018)
(quotations omitted). The moving party “always bears
the initial responsibility of informing the district court of
the basis for its motion, ” and identifying the record
evidence “which it believes demonstrate the absence of
a genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986).
the non-movant bears the burden of proof at trial, ‘the
movant may merely point to the absence of evidence and
thereby shift to the non-movant the burden of
demonstrating'” that “there is an issue of
material fact warranting trial.” Kim v. Hospira,
Inc., 709 Fed.Appx. 287, 288 (5th Cir. 2018) (quoting
Nola Spice Designs, LLC v. Haydel Enters., Inc., 783
F.3d 527, 536 (5th Cir. 2015)). The moving party must
demonstrate the absence of a genuine issue of material fact,
but it need not need to negate the elements of the
nonmovant's case. Austin v. Kroger Tex., L.P.,
864 F.3d 326, 335 (5th Cir. 2017). “If the moving party
fails to meet [its] initial burden, [the summary judgment
motion] must be denied, regardless of the nonmovant's
response.” Pioneer Expl., LLC v. Steadfast Ins.
Co., 767 F.3d 503, 511 (5th Cir. 2014) (quoting Kee
v. City of Rowlett, 247 F.3d 206, 210 (5th Cir. 2001)).
the moving party has met its Rule 56(c) burden, the nonmoving
party cannot survive a summary judgment motion by resting on
the mere allegations of its pleadings.” Duffie
v. United States, 600 F.3d 362, 371 (5th Cir. 2010).
The nonmovant must identify specific evidence in the record
and articulate how that evidence supports that party's
claim. Willis v. Cleco Corp., 749 F.3d 314, 317 (5th
Cir. 2014). “A party cannot defeat summary judgment
with conclusory allegations, unsubstantiated assertions, or
only a scintilla of evidence.” Lamb v. Ashford
Place Apartments L.L.C., 914 F.3d 940, 946 (5th Cir.
2019). In deciding a summary judgment motion, “the
evidence of the nonmovant is to be believed, and all
justifiable inferences are to be drawn in his or her
favor.” Waste Mgmt. of La, L.L.C. v. River Birch,
Inc., 920 F.3d 958, 972 (5th Cir. 2019) (alterations
omitted) (quoting Tolan v. Cotton, 572 U.S. 650, 656
moved for summary judgment that issue preclusion, or
collateral estoppel, bars Maxim's claim because Maxim
litigated the same coverage claim in state court. (Docket
Entry No. 22 at 18-20). In its reply, Zurich explains that it
“has reviewed the pleadings from the Underlying Lawsuit
in conjunction with Maxim's collateral estoppel response
argument” and “is withdrawing its collateral
estoppel defense.” (Docket Entry No. 29 at 4). Because
Zurich has abandoned this argument, the court need not
Maxim argues that it is entitled to recover under the Berkel
Policy because it named Maxim as an Additional Insured,
Zurich's standing argument focuses on Maxim's
separate policy with Zurich, the Maxim Policy. Zurich argues
that Maxim does not have standing to assert its claims
because the Maxim Policy “includes a [d]eductible
endorsement that effectively assigns Zurich the very claims
that Maxim is asserting against Zurich.” (Docket Entry
No. 22 at 11).
Maxim Policy requires Maxim to reimburse Zurich for all
defense costs, including the first $3 million of any
settlement or judgment. (Docket Entry No. 19-1 at 669).
According to Zurich, the Maxim Policy's Deductible
Endorsement assigns all rights of recovery to Zurich. (Docket
Entry No. 22 at 11, 20-27). The Deductible Endorsement
[Zurich has] 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. You will do
everything necessary to protect those rights for us and to
help us enforce them.
If we recover any payment made under this policy from anyone
liable for injury or damages, the recovered amount will first
be applied to any payments made by us in excess of the
Deductible Amount. The remainder of the recovery, if any,
will then be applied to reduce the Deductible Amount
reimbursed or reimbursable by you as respects that injury or
(Docket Entry No. 19-1 at 673). The section further explains
that the policy applies:
irrespective of the application of any Deductible Amount(s),
including those with respect to . . . [Zurich's] right
and duty to investigate or defend the insured against any
“suits” seeking those damages; and . . .
[Maxim's] duties in the ...