Ace American Insurance v. Freeport Welding & Fabricating, Inc.

Case: 12-20002 Document: 00512027043 Page: 1 Date Filed: 10/19/2012

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

October 19, 2012

No. 12-20002 Lyle W. Cayce

Clerk

ACE AMERICAN INSURANCE CO.,

Plaintiff-Appellee,

v.

FREEPORT WELDING & FABRICATING, INC.,

Defendant-Appellant.

Appeal from the United States District Court for the

Southern District of Texas

Before STEWART, Chief Judge, and DeMOSS and GRAVES, Circuit Judges.

CARL E. STEWART, Chief Judge:

Freeport Welding & Fabricating, Inc. (“Freeport”) and Brand Energy

Solutions, L.L.C. (“Brand Energy”) were named defendants in a personal injury

suit in Texas state court. ACE American Insurance Company (“ACE”) insures

Brand Energy. Freeport sought defense and indemnity from ACE in the state

court proceedings as an additional insured under Brand Energy’s insurance

policy with ACE. ACE denied Freeport’s request, contending that it had no duty

under the policy to defend or indemnify Freeport in the state court proceedings.

ACE and Freeport then filed motions in federal district court seeking

summary judgment on the issue of whether ACE had a duty to defend or

indemnify Freeport in the state court proceedings. The district court rendered

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No. 12-20002

judgment in favor of ACE, holding that it did not have a duty to defend Freeport

in the state court proceedings. The district court declined to rule on the issue of

whether ACE had a duty to indemnify Freeport in the state court proceedings.

Thereafter, the parties in the state court proceedings settled their claims.

For the reasons stated herein, we AFFIRM the district court’s summary

judgment in favor of ACE holding that it had no duty to defend Freeport in the

state court proceedings. We REMAND for a determination of whether ACE has

a duty to indemnify Freeport for the cost of its settlement in the state court

proceedings.

I.

Freeport, a Texas corporation, builds vessels for use in the energy

industry. In 2008, Freeport began making plans to build a vessel called a

quench chamber. On October 22, 2008, Freeport issued a purchase order

(referred to herein as “the 2008 purchase order” or “the purchase order”) to

Brand Industrial, L.L.C. (“Brand Industrial”), a subsidiary of Brand Energy, for

the installation of a lining called refractory for the inside of the quench chamber.

The total amount of the purchase order was $456,018.

Above the signature lines on the purchase order was the following

language:

THIS ORDER INCORPORATES ALL TERMS AND

CONDITIONS LISTED ON THIS ORDER; AND

ACCEPTANCE OF THIS PURCHASE ORDER BY

SELLER TO FURNISH MATERIALS, PRODUCTS

AND/OR SERVICES CALLED FOR HEREIN

CONSTITUTES ACCEPTANCE OF ALL TERMS AND

CONDITIONS.

The purchase order also contained a “Comments” section which stated in

pertinent part:

INCLUDES LABOR, MATERIAL, PERSONNEL

QUALIFICATION, PRODUCTION TEST & THERMAL

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DRY-OUT. DETAILED SCOPE OF WORK AND

REQUIREMENTS TO FOLLOW. WORK TO BE

PERFORMED APPROX. 2ND QUARTER OF 2009.

In January 2009, prior to beginning the installation work pursuant to the

2008 purchase order, Brand Energy sent Freeport a letter stating that Brand

Industrial “has turned your work over to our parent company, Brand Energy

Solutions, LLC.” The letter further provided an address to which Freeport was

to direct future payments for “all contracts, purchase orders and bid documents.”

The letter was signed by Brand Energy’s Director and General Manager,

Lindsey M. Hebert.

Also in January 2009, Freeport and Brand Energy entered into a purchase

agreement (referred to herein as the “2009 purchase agreement” or “the

purchase agreement”), effective January 1, 2009 to evergreen,1 which was to be

applicable to purchase orders issued from Freeport to Brand Energy. The

purchase agreement stated that “in the event” that Freeport “provides notice in

writing” to Brand Energy that it is to provide goods and/or services to Freeport,

then the terms of the purchase agreement, effective January 1, 2009, “shall

apply.”2 The “Terms and Conditions” section located above the signature lines

on the first page of the purchase agreement stated that its terms and conditions

“are hereby incorporated by reference to all purchase orders issued by [Freeport]

to [Brand Energy] and shall govern all such transactions.”

Additionally, on the following page titled “Purchase Agreement Terms and

Conditions” were the following paragraphs:

1

“To evergreen” is a phrase used to describe the automatic renewal of a contract after

each maturity period until one of the parties cancels.

2

The purchase agreement also states that it is applicable to Brand Energy’s

subsidiaries and assigns.

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5. INSURANCE. Seller3 agrees to carry the following

minimum insurance which shall be primary to any

insurance maintained by Buyer:4

Worker’s Compensation, Commercial General Liability,

including Completed Operations and Product Liability

Insurance; Blanket Contractual, with an endorsement

naming Buyer as an additional insured with minimum

limits of liability of $2,000,000 each occurrence

combined single limit.

Not later than (10) days from the date of this Order but

in any case prior to Seller’s entering Buyer’s property to

perform Services, a certificate evidencing the above

coverage shall be provided to Buyer and said certificate

shall provide that Buyer shall be given thirty (30) days

advance notice in the event of cancellation or material

modification of the coverage.

...

8. INDEMNIFICATION. Seller shall assume the sole

responsibility for any and all damage or injury

(including death) to any and all persons (including, but

not limited to employees of Seller or Buyer) and to all

property associated with the performance of the

obligations under this Order or any act or omission of

Seller, and shall defend, indemnify and save harmless

Buyer from and against any and all claims, liabilities,

expenses (including attorneys’ fees), fines, penalties,

and damages except for such claims, liabilities, etc.,

caused by the sole negligence of Buyer. Seller hereby

releases and waives all rights of subrogation against

Buyer possessed by Seller’s insurers. Seller hereby

represents that it is authorized by its insurers to grant

such release and waiver.

The purchase agreement was signed by Roy E. Yates, the President of Freeport,

and James “Bubba” Bethea, Jr., the Branch Manager for Brand Energy.

3

Brand Energy

4

Freeport

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Brand Energy began installation of the refractory in May 2009, and the

project was completed in August 2009. On August 21, 2009, Freeport issued a

partial payment to Brand Energy in the amount of $163,824.88. Then on

October 14, 2009, Brand Energy sent a letter to Freeport requesting full

payment of the unpaid balance, the amount of which was $368,461.09.

On May 20, 2009, several workers5 who were installing the refractory

inside the quench chamber were injured when the chamber dislodged and rolled

off of its mount. The workers brought a negligence suit against Freeport, Brand

Energy, and others in Texas state court to recover for bodily injuries resulting

from the accident.6 The state court plaintiffs claimed inter alia that Freeport

was responsible for handling the quench chamber, including its stability; that

Freeport originally hired Brand Industrial to install the refractory; and that

Freeport failed to supervise and warn the workers of the various dangers

involved in applying the refractory inside the quench chamber.

The state court plaintiffs further claimed that, although the job in question

was originally taken on by Brand Industrial, Brand Energy took over the job at

some point after the job began. Thus, Brand Energy was contractually and

legally responsible for some of the planning and most of the execution of the job

but failed to adhere to those responsibilities, and provided no oversight,

supervision, or planning. The state court pleadings do not specifically mention

the 2009 purchase agreement between Freeport and Brand Energy and,

consequently, do not allege that the purchase agreement requires Brand Energy

to provide insurance coverage to Freeport with regard to the May 20, 2009

incident.

5

Antonio Hernandez, Jesus Chavez, and Jorge Garza (Plaintiffs); and Efren Rosales

(Intervenor).

6

Cause No. 52394, Antonio Hernandez, et al. v. Freeport Welding & Fabricating, Inc.,

et al.

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The insurance policy between ACE and Brand Energy covers Brand

Energy and its subsidiaries, including Brand Industrial, and has a policy period

of September 30, 2008 through September 30, 2009. Under “Section I -

Coverages” the policy states:

We will pay those sums that the insured becomes

legally obligated to pay as damages because of “bodily

injury” or “property damage” to which this insurance

applies. We will have the right and duty to defend the

insured against any “suit” seeking those damages.

However, we will have no duty to defend the insured

against any “suit” seeking damages for “bodily injury”

or “property damage” to which this insurance does not

apply.

This coverage provision applies to the “named insured[s]” in the policy, i.e.,

Brand Energy and its subsidiaries, as well as to the “additional insured[s]” in the

policy.

The policy contains the following three “additional insured” endorsements:

(1) “Any person or organization whom you have agreed to include as an

additional insured under a written contract, provided such contract was

executed prior to the date of loss”; (2) “Any person or organization the insured

is required by contract to provide said coverage”; and, (3) “Any Owner, Lessee or

Contractor whom you have agreed to include as an additional insured under a

written contract, provided such contract was executed prior to the date of loss.”

On July 17, 2009, relying on the 2009 purchase agreement, counsel for

Freeport tendered Freeport’s defense in the state court suit to Brand Energy and

requested that the tender be forwarded to Brand Energy’s insurance carrier,

ACE. ACE denied the tender of defense via written letters dated August 27,

2009 and April 1, 2010. ACE then filed for declaratory judgment in the federal

district court seeking a ruling that it had no duty to defend or indemnify

Freeport as an additional insured under Brand Energy’s insurance policy.

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Freeport filed a counter-claim against ACE seeking a declaratory judgment that

it was covered as an additional insured under Brand Energy’s insurance policy

and therefore entitled to defense and indemnity by ACE in the state court

proceedings.

The district judge rendered summary judgment in favor of ACE and

against Freeport, holding that ACE did not have a duty to defend Freeport in the

state court proceedings as an additional insured under Brand Energy’s

insurance policy. Additionally, reasoning that “the insurer’s duty to indemnify

cannot be determined until after the underlying suit has been resolved,”

Columbia Cas. Co. v. Ga. & Fla. RailNet, Inc., 542 F.3d 106, 111 (5th Cir. 2008),

the district judge declined to rule on whether ACE had a duty to indemnify

Freeport in the state court case.

Freeport appeals the district court’s summary judgment in favor of ACE

holding that it did not have a duty to defend Freeport in the state court

proceedings.7 Additionally, in consideration of the settlement recently reached

among the parties in the state court proceedings, Freeport now moves this court

to rule on the issue of whether ACE has a duty to indemnify Freeport as an

additional insured under Brand Energy’s insurance policy.

II.

A.

7

In the declaratory judgment proceedings, both ACE and Freeport filed motions to

strike. The district court denied ACE’s motion to strike the following: (1) the affidavit of Roy

E. Yates; (2) the August 21, 2009 check from Freeport to Brand Energy; (3) the October 14,

2009 letter from Brand Energy to Freeport; (4) the depositions of Chris Roland, James “Bubba”

Bethea, Jr., and Lindsay Hebert; and (5) the registration records concerning Brand Industrial.

The district court denied as moot ACE’s motion to strike the following: (1) the January 2009

letter from Brand Energy to Freeport; and (2) the unsigned purchase order drafted by

Freeport. Additionally, the district court denied as moot Freeport’s motion to strike the

following: (1) ACE’s argument concerning the unsigned purchase order; and (2) portions of the

affidavits of Rob Englebert and Lindsey Hebert. ACE does not appeal the district court’s

rulings on its motion to strike. Freeport does appeal the district court’s ruling on its motion

to strike.

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This court reviews a district court’s grant of summary judgment de novo.

Nat’l Cas. Co. v. W. World Ins. Co., 669 F.3d 608, 612 (5th Cir. 2012). Summary

judgment is appropriate when the evidence before the court shows that “there

is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” FED. R. CIV. P. 56(a). The moving party bears the

initial burden of demonstrating the absence of a genuine issue of material fact.

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this

burden, the non-moving party must then come forward and establish the specific

material facts in dispute. Matshushita Elec. Indus. Co., Ltd. v. Zenith Radio

Corp., 475 U.S. 574, 587 (1986). If the non-moving party is unable to identify

anything in the record to support its claim, summary judgment is appropriate.

Stahl v. Novartis Pharm. Corp., 283 F.3d 254, 263 (5th Cir. 2002).

The interpretation of an insurance contract is also reviewed de novo. Nat’l

Cas. Co., 669 F.3d at 612.

B.

Where federal jurisdiction is based on diversity of citizenship, a federal

court looks to the substantive law of the forum state. See Erie R.R. Co. v.

Tompkins, 304 U.S. 64, 78 (1938); Colony Ins. Co. v. Peachtree Constr., Ltd.,

647 F.3d 248, 252 (5th Cir. 2011). The parties do not dispute that Texas law

applies in these proceedings.

“Under Texas law, an insurer may have two responsibilities relating to

coverage - the duty to defend and the duty to indemnify.” Gilbane Bldg. Co. v.

Admiral Ins. Co., 664 F.3d 589, 594 (5th Cir. 2011) (citing D.R. Horton-Tex., Ltd.

v. Markel Int’l Ins. Co., 300 S.W.3d 740, 743 (Tex. 2009)). The Texas Supreme

Court has explained that the two duties are distinct, and they are to be decided

separately. Gilbane Bldg. Co., 664 F.3d at 594.

In order to decide whether there is a duty to defend under the policy, the

court must first determine whether the party alleging coverage qualifies as an

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additional insured under the policy. Id. If the party alleging coverage does

qualify as an additional insured, the court must then determine whether, under

Texas’s eight-corners rule, the facts alleged in the underlying state court

proceedings are sufficient to trigger the duty to defend under the policy. Id. An

affirmative answer to both is required to hold that there is a duty to defend. Id.

The party alleging coverage bears the burden on each of these issues. Id.

(citation omitted).

Under the eight-corners rule, “[t]wo documents determine an insurer’s

duty to defend - the insurance policy and the third-party plaintiff’s pleadings in

the underlying litigation[.]” Id. If the underlying pleadings allege facts that

may fall within the scope of coverage, the insurer has a duty to defend; if the

pleading only alleges facts excluded by the policy, there is no duty to defend.

Ooida Risk Retention Group, Inc. v. Williams, 579 F.3d 469, 472 (5th Cir. 2009)

(citation omitted).

Moreover, the duty to defend does not rely on the truth or falsity of the

underlying allegations; an insurer is obligated to defend the insured if the facts

alleged in the petition, taken as true, potentially assert a claim for coverage

under the insurance policy. Colony Ins. Co., 647 F.3d at 253 (citing GuideOne

Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006)).

Because the only two documents relevant to the duty-to-defend inquiry are the

insurance policy and the petition, an insurer’s duty to defend can be determined

at the moment the petition is filed. Id. at 253. “Resort to evidence outside the

four corners of these two documents is generally prohibited.” Id. (citing

GuideOne Elite Ins. Co., 197 S.W.3d at 307).

“In performing its eight-corners review, a court may not read facts into the

pleadings, look outside the pleadings, or speculate as to factual scenarios that

might trigger coverage or create an ambiguity.” Gilbane Bldg. Co., 664 F.3d at

596-97 (citing Nat’l Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d

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139, 142 (Tex. 1997)). “Moreover, ‘[t]he Texas Supreme Court has never

recognized any exception to the strict eight corners rule.’” Id. at 597 (citing

Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 529, 531 (5th Cir.

2004)). “Although ambiguities will be resolved in favor of coverage, ‘[t]he fact

that the parties disagree as to coverage does not create an ambiguity.’” Id. at 597

(citing Valmont Energy Steel, Inc. v. Commercial Union Ins. Co., 359 F.3d 770,

773 (5th Cir. 2004)).

Only a few Texas appellate courts have held that the examination of

extrinsic evidence was warranted under an exception to the eight-corners rule.

Ooida Risk Retention Group, Inc., 579 F.3d at 475 (citing Mid-Continent Cas. Co.

v. Safe Tire Disposal Corp., 16 S.W.3d 418, 421 (Tex. App.–Waco, 2000, pet.

denied); State Farm Fire & Cas. Co. v. Wade, 827 S.W.2d 448, 452-53 (Tex.

App.–Corpus Christi, 1992, writ denied); Gonzales v. Am. States Ins. Co., 628

S.W.2d 184, 187 (Tex. App.–Corpus Christi, 1982, no writ)). The exception to

this rule is limited to cases where “it is initially impossible to discern whether

coverage is potentially implicated and when the extrinsic evidence goes solely

to a fundamental issue of coverage which does not overlap with the merits of or

engage the truth or falsity of any facts alleged in the underlying case.” Ooida

Risk Retention Group, Inc., 579 F.3d at 475 (citation omitted).

“The duty to indemnify, on the other hand, is ‘a matter dependent on the

facts and circumstances of the alleged injury-causing event, [and] parties may

introduce evidence during coverage litigation to establish or refute the duty to

indemnify.’” Gilbane Bldg. Co., 664 F.3d at 594 (quoting D.R. Horton-Tex., 300

S.W.3d at 741).

1. Freeport’s Status as an Additional Insured

This court’s holding in Gilbane requires that our analysis begin with a

determination of whether Freeport qualifies as an “additional insured” under

Brand Energy’s insurance policy, which includes a review of the 2009 purchase

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agreement. Gilbane Bldg. Co., 664 F.3d at 594. If we determine that Freeport

qualifies as an additional insured during the relevant time period, our analysis

will then proceed to the eight-corners rule to decide if the facts alleged in the

underlying state court proceedings were sufficient to trigger ACE’s duty to

defend Freeport as an additional insured under Brand Energy’s insurance policy.

Id. at 594.

Freeport argues that it is an additional insured under Brand Energy’s

insurance policy with ACE. We agree with Freeport that it qualified as an

additional insured under Brand Energy’s insurance policy during the 2009

purchase agreement’s term of coverage. For the following reasons, however, we

do not agree with Freeport’s argument that it qualified as an additional insured

under Brand Energy’s insurance policy with respect to the underlying state court

claims.

Brand Energy’s insurance policy provides coverage for Brand Energy and

its subsidiaries, including Brand Industrial, and has a policy period of

September 30, 2008 through September 30, 2009. The policy states under

“Section I - Coverages” that “[ACE] will pay those sums that the insured

becomes legally obligated to pay as damages because of ‘bodily injury’ or

‘property damage’ to which this insurance applies. [ACE] will have the right and

duty to defend the insured against any ‘suit’ seeking those damages.” This

coverage provision applies to the Brand Energy and its subsidiaries, the named

insureds under the policy, as well as to those named as additional insureds

under the policy. Three “additional insured” endorsements are included in the

policy: (1) “Any person or organization whom [Brand Energy has] agreed to

include as an additional insured under a written contract, provided such

contract was executed prior to the date of loss”; (2) “Any person or organization

[Brand Energy] is required by contract to provide said coverage”; and, (3) “Any

Owner, Lessee or Contractor whom [Brand Energy has] agreed to include as an

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additional insured under a written contract, provided such contract was

executed prior to the date of loss.”

Consequently, in order for Freeport to qualify as an additional insured

under Brand Energy’s insurance policy with ACE, there must be in existence a

contract wherein Brand Energy has agreed to provide insurance coverage for

Freeport. The 2009 purchase agreement is such a contract. The purchase

agreement between Brand Energy and Freeport, effective January 1, 2009 to

evergreen, applies to purchase orders issued by Freeport to Brand Energy during

the term of coverage and contains the following paragraphs on the page titled

“Purchase Agreement Terms and Conditions”:

5. INSURANCE. Seller agrees to carry the following

minimum insurance which shall be primary to any

insurance maintained by Buyer:

Worker’s Compensation, Commercial General Liability,

including Completed Operations and Product Liability

Insurance; Blanket Contractual, with an endorsement

naming Buyer as an additional insured with minimum

limits of liability of $2,000,000 each occurrence

combined single limit.

A plain reading of the purchase agreement indicates that it applies to all

purchase orders entered into by Brand Energy and Freeport during its term of

coverage. Accordingly, we conclude that Freeport qualified as an additional

insured under Brand Energy’s insurance policy with ACE for all purchase orders

entered into between Freeport and Brand Energy during the 2009 purchase

agreement’s term of coverage, i.e., from January 1, 2009 through the end of the

term of coverage.

Now, we consider whether Freeport is covered as an additional insured

under Brand Energy’s insurance policy with respect to the underlying state court

claims that stemmed from the 2008 purchase order. Freeport argues that the

2009 purchase agreement is applicable to the 2008 purchase order, and thus,

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Freeport qualifies as an additional insured with respect to the underlying state

court claims. We do not agree.

“Under Texas law, the interpretation of an unambiguous contract is a

question of law for the court to decide by ‘looking at the contract as a whole in

light of the circumstances present when the contract was entered.’” Gonzalez v.

Denning, 394 F.3d 388, 392 (5th Cir. 2004) (quoting Philadelphia Am. Life Ins.

Co. v. Turner, 131 S.W.3d 576, 587 (Tex. App.–Fort Worth, 2004)). “The primary

concern of a court construing a written contract is to ascertain the true intent of

the parties as expressed in the instrument.” Id. at 392 (citing Nat’l Union Fire

Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995)).

“In construing a contract under Texas law, courts must examine and consider

the entire writing and give effect to all provisions such that none are rendered

meaningless.” Id. (citing Int'l Turbine Servs., Inc. v. VASP Brazilian Airlines,

278 F.3d 494, 497 (5th Cir. 2002)). “The terms used in the [contract] are given

their plain, ordinary meaning unless the [contract] itself shows that the parties

intended the terms to have a different, technical meaning.” Id. (citing Am. Nat’l

Gen. Ins. Co. v. Ryan, 274 F.3d 319, 323 (5th Cir. 2001)). “To be legally binding,

‘[t]he parties must have a meeting of the minds, and each must communicate his

consent to the terms of the agreement.’” Crisalli v. ARX Holding Corp., 177 F.

App’x 417, 419-20 (5th Cir. 2006) (citing Smith v. Renz, 840 S.W.2d 702, 704

(Tex. App.–Corpus Christi, 1992)).

“If a written contract is so worded that it can be given a definite or certain

legal meaning, then it is not ambiguous.” Gonzalez, 394 F.3d at 392 (quoting

Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 907 S.W.2d at 520). “If, however, the

language of the contract is subject to two or more reasonable interpretations or

meanings, it is ambiguous.” Id. at 392 (citation omitted). “A contract is not

ambiguous merely because the parties to an agreement proffer conflicting

interpretations of a term.” Id. (quoting Int’l Turbine Servs., Inc. v. VASP

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Brazilian Airlines, 278 F.3d 494, 497 (5th Cir. 2002)). Under Texas law, a

contract generally is construed against its drafter only as a last resort, after

application of ordinary rules of construction leave reasonable doubt as to its

interpretation. Forest Oil Corp. v. Strata Energy, Inc., 929 F.2d 1039, 1043-44

(5th Cir. 1991) (citation omitted). In order to determine whether a contract has

retroactive application, a court looks to the language of the contract itself.

Gardiner, Kamya & Assocs., P.C. v. Jackson, 467 F.3d 1348, 1353 (Fed. Cir.

2006).

The 2009 purchase agreement is not ambiguous. It clearly defines its term

of coverage as commencing on January 1, 2009 and remaining effective “to

evergreen.” Accordingly, the purchase agreement applies to purchase orders

entered into between the parties from January 1, 2009 forward, until one of the

parties cancels the agreement. A review of the remainder of the 2009 purchase

agreement indicates that there is no provision in the agreement evidencing its

retroactive application to the 2008 purchase order between Freeport and Brand

Energy, nor to any other purchase order entered into between the parties prior

to January 1, 2009. Further, we are not persuaded by Freeport’s argument that

the 2009 purchase agreement’s language that it applies to “all purchase orders”

somehow evidences its application to the 2008 purchase order, or any other

purchase order in existence prior to the purchase agreement’s term of coverage.8

To draw such a conclusion would render the purchase agreement’s term of

coverage entirely meaningless.

Furthermore, the 2008 purchase order, which clearly pre-dates the 2009

purchase agreement, makes no mention of the projected application of the 2009

8

We also find unpersuasive Freeport’s several arguments that general wording in the

purchase agreement that does not specifically mandate its application to future purchase

orders somehow renders the agreement applicable to orders in existence prior to its January

1, 2009 term of coverage. As an example, Freeport points to wording such as “[a]s specified

by buyers order” as opposed to “to be specified” or “as specified by future buyers order.”

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purchase agreement to the 2008 purchase order. Nor does the 2008 purchase

order provide for the projected application of any other type of insurance

coverage to be provided by Brand Energy to Freeport. The only language in the

2008 purchase order that could be construed as anticipating any future dealings

between the parties is found in the “comments” section of the order which states

“Detailed scope of work and requirements to follow. Work to be performed

approx. 2nd quarter of 2009.” This language, however, does not pertain to

insurance coverage between the parties, nor does it pertain to the 2009 purchase

agreement or to any other purchase agreement. As a result, neither the terms

of the 2008 purchase order, nor the terms of the 2009 purchase agreement,

result in the applicability of the 2009 purchase agreement to the 2008 purchase

order.

In conclusion, it is clear that the 2009 purchase agreement does not apply

to the 2008 purchase order giving rise to the claims in the state court

proceedings. Accordingly, we hold that Freeport is not covered as an additional

insured under Brand Energy’s insurance policy with respect to the underlying

state court claims arising out of the 2008 purchase order.

In light of our holding that Freeport does not qualify as an additional

insured under Brand Energy’s insurance policy with respect the underlying state

court claims, we need not reach the second part of the analysis under Gilbane

with respect to the eight-corners rule. Gilbane Bldg. Co., 664 F.3d at 594. For

the same reason, we also pretermit the following additional arguments

submitted by Freeport: (1) that the 2008 purchase order and the 2009 purchase

agreement should be read together as forming a single contract which is

reasonably susceptible to the interpretation that the purchase agreement

applied to both existing and future purchase orders once it was issued; (2) that

the 2009 purchase agreement is not unenforceably vague when read in

conjunction with the 2008 purchase order; (3) that the purchase agreement

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applies to Brand Energy and its subsidiaries, including Brand Industrial; (4)

that ACE’s parol evidence (portions of the affidavits of Rob Englebert and

Lindsey Hebert) of its intent that the 2009 purchase agreement would not apply

to refractory work should not have been admitted by the district court, i.e., the

district court erroneously denied Freeport’s motion to strike this evidence;9 (5)

that given the district court’s finding that the 2009 purchase agreement was

ambiguous, summary judgment was inappropriate; (6) that ACE should be

precluded from arguing that the 2009 purchase agreement was not supported by

consideration since it did not plead so as an affirmative defense; and further,

that ACE failed to provide evidence or proof of lack of consideration;10 and (7)

Freeport’s supplemental brief arguments that the law implies a mutual

obligation on the part of the buyer and seller as consideration for the 2009

purchase agreement; and, alternatively, that the purchase agreement was

supported by adequate consideration due to the “applicable law” provision in the

agreement. Finally, because the underlying state court proceedings have been

settled, we also pretermit Freeport’s argument that the suit in federal court

should be dismissed without prejudice pending the resolution of the state court

suit.

2. Duty to Indemnify

Since the underlying state court proceedings remained pending when the

summary judgment proceedings were held in the district court, the district judge

declined to rule on the issue of whether ACE had a duty to indemnify Freeport

as an additional insured under Brand Energy’s insurance policy. As stated,

9

Because the district court did not consider this evidence in the proceedings below, it

“denied as moot” Freeport’s motion to strike.

10

This argument refers to the district court’s ruling denying Freeport’s motion to strike

ACE’s argument pertaining to this issue. Because the district court did not consider this

evidence in the proceedings below, it “denied as moot” Freeport’s motion to strike.

16

Case: 12-20002 Document: 00512027043 Page: 17 Date Filed: 10/19/2012

No. 12-20002

however, the parties in the state court proceedings have now reached a

settlement. In light of this development, Freeport now moves this court to rule

on the issue of whether ACE has a duty to indemnify Freeport.

“The duty to indemnify is separate and distinct from the duty to defend.”

Gilbane Bldg. Co., 664 F.3d at 601 (citing Zurich Am. Ins. v. Nokia, Inc., 268

S.W.3d 487, 490-91 (Tex. 2008)). “The duty to defend is circumscribed by the

eight-corners doctrine; the duty to indemnify, on the other hand, is controlled by

the facts that establish liability in the underlying suit.” Id. at 601 (citing Pine

Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d 650, 656 (Tex.

2009)). Consequently, the insurer’s duty to indemnify generally cannot be

determined until the underlying suit has been resolved. Columbia Cas. Co., 542

F.3d at 111 (citing Collier v. Allstate Cnty. Mut. Ins. Co., 64 S.W.3d 54, 62 (Tex.

App.–Fort Worth, 2001)). Since, however, the parties have now settled their

claims in the underlying state court litigation, the issue of whether ACE has a

duty to indemnify Freeport as an additional insured under Brand Energy’s

insurance policy is now ripe for consideration by the district court. Accordingly,

we remand for a determination of whether ACE has a duty to indemnify

Freeport for the cost of its settlement in the state court proceedings.

III.

For the foregoing reasons, we AFFIRM the district court’s summary

judgment in favor of ACE holding that it had no duty to defend Freeport. We

REMAND for a determination of whether or not ACE has a duty to indemnify

Freeport for the cost of its settlement in the state court proceedings.

17