Energy Lawyer & Attorney : Liskow & Lewis Law Firm : Gulf Coast, Offshore

By Kevin Connolly

On certified question from the Fifth Circuit Court of Appeals, the Texas Supreme Court, in Fairfield Insurance Company v. Stephens Martin Paving, LP, 2008 WL 400397, *1 (Tex. 2008), addressed the issue of whether Texas public policy prohibits a “liability insurance provider from indemnifying an award for punitive damages imposed on its insured because of gross negligence.” The Court answered this question in the negative and held that Texas public policy does not prohibit coverage under an employer’s liability policy for exemplary damages for an employer’s gross negligence that causes an employee’s death. However, without a clear legislative intent to generally prohibit or allow the insurance of exemplary damages arising from gross negligence, the court declined to make a broad proclamation of public policy but instead offered considerations applicable to the analysis.

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By Andrew Wooley

In an opinion filed today in the matter of Unauthorized Practice of Law Committee vs. American Home Assurance Co., the Supreme Court of Texas has authorized liability insurers to use in-house staff attorneys to defend their Texas insureds, so long as there is no conflict of interest between the insurer's and the insured's interests: "We hold that an insurer may use staff attorneys to defend a claim against an insured if the insurer’s interest and the insured’s interest are congruent, but not otherwise. Their interests are congruent when they are aligned in defeating the claim and there is no conflict of interest between the insurer and the insured. We also hold that a staff attorney must fully disclose to an insured his or her affiliation with the insurer."

The majority opinion may be viewed at http://www.supreme.courts.state.tx.us/historical/2008/mar/040138.htm

The dissenting opinion may be viewed at http://www.supreme.courts.state.tx.us/historical/2008/mar/040138d.htm

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By Andrew Wooley:

Supreme Court of Texas decides Superior Snubbing: In a case of substantial importance to the energy industry, the Supreme Court of Texas held that an oilfield service contractor sued by an injured employee of another contractor is entitled to enforce the indemnity provision in a Master Service Agreement between the operator and the contractor whose employee was injured.

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The Eastern District of Louisiana recently held that insurance claims for damage to a Gulf of Mexico production facility will not support federal court jurisdiction under the Outer Continental Shelf Lands Act.  Accordingly, the district court remanded the case of LLOG Exploration Co. v. Certain Underwriters at Lloyd's, 2007 WL 854307 (E.D. La. 3/16/07), to state court for lack of federal jurisdiction.  LLOG sued its insurers for property damage and business interruption losses to several Gulf of Mexico production facilities resulting from Hurricanes Katrina and Rita.  The insurers removed to federal court, asserting federal jurisdiction under the OCSLA, which provides that “the district courts of the United States shall have jurisdiction of cases and controversies arising out of, or in connection with ... any operation conducted on the outer Continental shelf which involves exploration, development, or production of the minerals, of the subsoil and seabed of the outer Continental Shelf, or which involves rights to such minerals.”  43 U.S.C. § 1349(B)(1).  The insurers argued that the case affected the production of minerals because LLOG sought recovery under its business interruption coverage for loss of production during the period of recovery from the storms.  Judge Livaudais ruled that OCSLA jurisdiction was unavailable because “[t]he insurance coverage dispute does not affect or alter the progress of production activities on the OCS, nor does it threaten to impair the total recovery of federally owned minerals from the OCS.”  Click here to view the opinion.

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Contributed by  Andrew Wooley

In Via Net v. TIG Insurance Co., the Supreme Court of Texas recently concluded it was not reasonable for a party to believe it was an additional insured under another party’s commercial general liability policy, based only on a certificate of insurance provided by the other party’s insurance broker. After noting that certificates of insurance generally do nothing more than acknowledge the existence of a policy and its general terms, and do not specify “the numerous limitations and exclusions that often encumber such policies,” the court stated “those who take such certificates at face value do so at their own risk.”

While the specific legal issue in Via Net was whether a party’s reliance on a certificate of insurance provided by another party’s insurance broker was sufficiently reasonable to toll the statute of limitations until the aggrieved party learned it was not, in fact, an additional insured, the lesson in the case for those who intend and expect to be named as an additional insured under someone else’s insurance policy is to require verification of that beyond a mere certificate of insurance, e.g., copies of the policy and the endorsement adding the party as an additional insured. The opinion in Via Net is available on Westlaw at 2006 WL 3759389 and is also available on the Texas Supreme Court’s web site at http://www.supreme.courts.state.tx.us/historical/2006/dec/050785.htm.

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