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Maxim Crane Works, L.P. v. Zurich American Insurance Co.

United States District Court, S.D. Texas, Houston Division

June 19, 2019

MAXIM CRANE WORKS, L.P., Plaintiff,
v.
ZURICH AMERICAN INSURANCE COMPANY Defendant.

          MEMORANDUM AND ORDER

          LEE H. ROSENTHAL, CHIEF UNITED STATES DISTRICT JUDGE

         In 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, 29, 31).

         Based 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.

         The reasons for these rulings are detailed below.

         I. Background

         A. The Construction Project and Accident

         In 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).

         Berkel 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).

         Later 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).

         B. The State-Court Litigation

         In 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).

         In 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).

         After 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).

         In 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. Id.

         Maxim 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).

         Maxim 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.

         C. The Federal-Court Litigation

         In 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).

         II. The Legal Standard for Summary Judgment

         “Summary 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).

         “Where 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)).

         “When 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 (2014)).

         III. Issue Preclusion

         Zurich 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 address it.

         IV. Standing

         While 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).

         The 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 states:

[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 damages.

(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 ...

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