Another Indemnity/Insurance Decision from Deepwater Horizon and another certification to Texas Supreme Court

Another Indemnity/Insurance Decision from Deepwater Horizon and another certification to Texas Supreme Court

By: Bryan O’Neill

Cameron Int'l Corp. v. Liberty Ins. Underwriters, Inc. (In re Deepwater Horizon), No. 14-3132015 U.S. App. LEXIS 20115 (5th Cir. Nov. 19, 2015)Indemnity and insurance clauses in the offshore environment generate a great deal of litigation and yet another such dispute arising out of the Transocean Deepwater Horizon incident has reached the Fifth Circuit.The first issue on appeal was whether Cameron Iron Works was required to exhaust all insurance and indemnification remedies prior to being indemnified by Liberty Insurance which issued a policy of insurance covering Cameron between the first $100 million and $150 million in losses. Liberty maintained first that the “other insurance” clause in the policy required Cameron to obtain a final judicial determination that Transocean does not have to indemnify Cameron, only then when Liberty’s obligation to pay arose.Cameron counters that the district court properly interpreted the Other Insurance Clause to mean that Liberty's policy is excess of other insurance if, but only if, that "other insurance" actually and presently applies. Thus, because Transocean refused to indemnify Cameron, Liberty was obligated to pay the policy benefits.The Court stated that: “Cameron's interpretation is reasonable and Liberty's is not. The plain language of the clause supports Cameron's reading. Liberty's policy is excess only if other insurance "applies," present tense.”  The “other insurance clause” does not “require that Cameron exhaustively litigate other potential sources of coverage before Liberty's payment obligation is triggered.” Hence, Liberty breached its contract.Liberty also maintained that Cameron breached a provision in the policy which jeopardized Liberty’s rights of subrogation by settling.  Because the court held that Liberty breached its contract, it did not reach the question whether the settlement by Cameron breached the subrogation clause of the contract. “Because Liberty breached the policy by wrongfully denying coverage under the Other Insurance Clause, it waived its subrogation rights.”The trial court denied Cameron its claim for damages under the Texas Insurance Code. The trial court felt bound by a Fifth Circuit decision while Cameron maintained that a decision of the Texas Supreme Court, Vail v. Texas Farm Bureau Mutual Insurance Co., 754 S.W.2d 129 (Tex. 1988) was controlling. Liberty maintained that in order to recover attorney’s fees, Cameron had “to assert some injury other than the policy benefits and attorney's fees.” Cameron suggested that it “need not assert any injury independent from the policy benefits as actual damages.” Because developments cast doubt on the validity of the decision in Vail, the Fifth Circuit certified the following question to the Texas Supreme Court:Whether, to maintain a cause of action under Chapter 541 of the Texas Insurance Code against an insurer that wrongfully withheld policy benefits, an insured must allege and prove an injury independent from the denied policy benefits?Finally, the court reversed the trial judge on Cameron’s claim for attorney’s fees holding that the Cameron in its prior motions for summary judgment did not present a claim for attorney’s fees.