Primary and excess insurance carriers and their counsel need to pay close attention to a new Texas Supreme Court case Exxon Mobil vs. National Union Fire Insurance Company of Pittsburgh Pennsylvania and Starr Indemnity & Liability Insurance Company, Supreme Court of Texas, Case No. 21-0936. In that case, the Texas Supreme Court found an “additional insured,” named as such by virtue of a Master Service Agreement, was entitled to, not only the original insured’s primary policy limits, but also to the original insured’s excess limits despite a provision in the umbrella policy disclaiming “broader coverage.”
The facts are as follows: Savage Refinery Services entered into a Master Service Agreement (MSA) with Exxon Mobil. Pursuant to the terms and conditions of that contract and agreement, Savage Refinery Services obtained multiple insurance policies, including a $5 million primary policy with National Union Fire Insurance Company of Pittsburgh Pennsylvania and an additional “umbrella” policy with National Union Fire Insurance Company of Pittsburgh Pennsylvania and a second “umbrella” policy with Starr Indemnity and Liability Insurance Company.
In the Master Service Agreement, Savage Refinery Services agreed to name Exxon Mobil as an additional insured.
Two Savage Refinery Services’ employees were seriously injured while working at an Exxon Mobil facility. The two workers sued Exxon Mobil. Exxon Mobil settled both claims for roughly $12 million each for a total settlement of $24 million.
National Union Fire Insurance Company of Pittsburgh Pennsylvania tendered its primary policy limits of $5 million to pay, in part, the negotiated settlement amounts, acknowledging Exxon Mobil as an additional insured.
Exxon Mobil then made a demand on National Union Fire Insurance Company of Pittsburgh Pennsylvania for additional limits and coverage under its excess umbrella policy to satisfy the remaining funds owed in the settlements. Exxon Mobil demanded access to the limits as an “additional insured” under the umbrella policy.
Importantly, National Union Fire Insurance Company of Pittsburgh Pennsylvania’s umbrella policy contained the following language:
Insured means:…any person or organization, other than
the Named Insured, included as an additional insured
under Scheduled Underlying Insurance, but not for
broader coverage than would be afforded by such
Scheduled Underlying Insurance. (emphasis added)
Further, the primary policy covered “any person or organization” to which Savage is obligated by “any contract or agreement” to provide insurance.
National Union Fire of Pittsburgh Pennsylvania argued the “no broader coverage” language in the umbrella policy meant coverage for Exxon Mobil as an additional insured was limited to the primary policy’s limits.
The trial court sided with Exxon Mobil and found Exxon Mobil was an additional insured under the umbrella policy, thus, entitled to the limits of the umbrella policy”. National Union Fire of Pittsburgh Pennsylvania appealed.
The Court of Appeals reversed the trial court’s opinion, finding Exxon Mobil was limited to the primary policy’s proceeds due to the “no broader coverage” language.
Exxon Mobil appealed to the Texas Supreme Court.
The Texas Supreme Court recognized that the interpretation of the insurance policies at issue must be analyzed in concert with the language of the Master Service Agreement entered into between the parties.
The Texas Supreme Court set out a three (3) step analysis in analyzing insurance policies and Master Service Agreements, emphasizing the steps necessary to include “extrinsic documents” for interpreting insurance policy proceeds. The first step is to review the text of the insurance policy at issue. Secondly, any reference to extrinsic documents (such as the Master Service Agreement) will be made only if the policy requires it. Finally, any reference or interpretation of the insurance policy relative to the language contained in extrinsic documents will be done so only to the extent the extrinsic document is incorporated into the policy.
National Union Fire argued that the umbrella policy’s language limiting the umbrella policy to “no broader coverage” than the primary policy means Exxon cannot broaden its entitlement to insurance policy proceeds to anything beyond the primary policy. The Texas Supreme Court disagreed, noting that Exxon Mobil does not seek “broader” coverage. Exxon Mobil seeks only the same coverage Savage Refinery Services would have under the same policies.