     Case: 12-31102      Document: 00512297630   Page: 1   Date Filed: 07/05/2013




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                 Fifth Circuit

                                                                  FILED
                                                                  July 5, 2013
                                  No. 12-31102
                                                                 Lyle W. Cayce
                                                                      Clerk
GLENN DUVAL,

             Plaintiff

v.

NORTHERN ASSURANCE COMPANY OF AMERICA; MARKEL AMERICAN
INSURANCE COMPANY,

             Defendants-Third Party Plaintiffs - Appellants

v.

B H P BILLITON PETROLEUM DEEPWATER, INCORPORATED,

             Third Party Defendant - Appellee


                Appeals from the United States District Court
                    for the Western District of Louisiana


Before STEWART, Chief Judge, HIGGINBOTHAM and JONES, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
      This appeal turns on whether third-party insurers can enforce a master
services agreement’s defense, indemnification, and insurance obligations. We
conclude that those obligations run between the two parties to the master
services agreement and thus are not enforceable by the insurers.
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                                 No. 12-31102

                                       I.
      BHP Billiton Petroleum Deepwater, Inc. (“BHP”) is an energy exploration
company. Prior to its bankruptcy filing, Deep Marine Technology, Inc. (“Deep
Marine”) was an oilfield service company that owned and operated vessels to
support offshore construction. Effective April 18, 2006, BHP and Deep Marine
entered into a Master Services Agreement (“MSA”), pursuant to which Deep
Marine agreed to provide construction support vessels to BHP. The MSA
contained reciprocal indemnity obligations and required the parties to support
their respective indemnity obligations with liability insurance, self-insurance,
or a combination thereof. In addition, the MSA contained a choice of law clause,
stipulating that general maritime law governs interpretation of the MSA and,
to the extent general maritime law is not applicable, Texas law applies.
      Glen Duval (“Duval”), an employee of Wood Group/Deepwater Specialists,
Inc. (another BHP contractor), claims to have suffered injuries during an
offshore personnel basket transfer from a vessel owned by Deep Marine to a
tension-leg platform owned by BHP. On April 8, 2008, he filed suit against Deep
Marine, alleging that the negligence of Deep Marine’s personnel aboard the
vessel caused his injuries. In an amended complaint, he also asserted a claim
against Dolphin Services, L.L.C., the employer of the allegedly negligent crane
operator. Duval did not, and has not, alleged that BHP has any liability for his
injuries. On April 25, 2008, Deep Marine sought defense, additional insured
status, and indemnity from BHP under the MSA, and it tendered the defense of
Duval’s claims to BHP. BHP accepted tender on May 14, 2008.
      On December 4, 2009, Deep Marine filed for Chapter 11 bankruptcy in the
Southern District of Texas, and Duval’s suit was automatically stayed. On
September 10, 2010, the bankruptcy court entered an order permitting Duval to
proceed with his case against Deep Marine’s insurers, but permanently enjoining
him from “enforcing, levying, attaching, collecting, or otherwise recovering in
any matter or by any means” against Deep Marine or its estate. Pursuant to

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that order, the district court reopened the case. On January 4, 2012, Duval
amended his complaint to name Northern Assurance Company of America and
Markel American Insurance Company (“Underwriters”), the protection and
indemnity insurers of Deep Marine, as additional defendants under Louisiana’s
Direct Action Statute.1 On February 7, 2012, Underwriters filed a third-party
complaint against BHP, seeking to be “fully protected, defended, indemnified,
held harmless and provided insurance coverage” by BHP in accordance with the
MSA and purporting to tender BHP to Duval under Federal Rule of Civil
Procedure 14(c).
      Underwriters and BHP filed cross-motions for summary judgment, each
disputing whether Underwriters could enforce BHP’s contractual insurance,
defense, and indemnity obligations to Deep Marine after Deep Marine’s
bankruptcy discharge. Following a hearing with oral argument, the district
court granted BHP’s motion for summary judgment, denied Underwriters’
motion for summary judgment, and dismissed the action with prejudice.2
Underwriters timely appealed.3 We have subject matter jurisdiction pursuant
to 28 U.S.C. § 1292(a)(3), which provides for interlocutory appeal from a district
court’s order “determining the rights and liabilities of the parties to admiralty
cases.”4


                                               II.




      1
          LA. REV. STAT. ANN. § 22:1269.
      2
          The district court did not issue a written opinion.
      3
          Duval did not appeal the district court’s judgment.
      4
          28 U.S.C. § 1292(a)(3).

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       We review a district court’s order granting summary judgment de novo,
applying the same standards as the district court.5 “Summary judgment is
warranted if the pleadings, the discovery and disclosure materials on file, and
any affidavits show that there is no genuine [dispute] as to any material fact and
that the movant is entitled to judgment as a matter of law.”6 When parties file
cross-motions for summary judgment, “we review each party’s motion
independently, viewing the evidence and inferences in the light most favorable
to the nonmoving party.”7
       “Interpretation of the terms of a contract, including an indemnity clause,
is a matter of law, reviewable de novo on appeal.”8 “[T]he obligation to indemnify
is to be strictly construed,”9 and “a court should not construe an indemnity
clause to impose liability for a loss neither expressly within its terms nor of such
a character that the parties probably intended to exclude the loss.”10


                                                III.
       The parties dispute whether the MSA requires BHP to protect, defend,
indemnify, and hold harmless Underwriters against Duval’s claim. We conclude
that it does not and therefore affirm the district court’s grant of summary
judgment in favor of BHP. To be clear, the parties agree that the MSA required


       5
        Greater Hous. Small Taxicab Co. Owners Ass’n v. City of Hous., 660 F.3d 235, 238 (5th
Cir. 2011).
       6
            Id. (quoting DePree, 588 F.3d at 286) (alteration in original).
       7
           Ford Motor Co. v. Tex. Dept. of Transp., 264 F.3d 493, 498 (5th Cir. 2001).
       8
           Kemp v. Gulf Oil Corp., 745 F.2d 921, 924 (5th Cir. 1984).
       9
        Foreman v. Exxon Corp., 770 F.2d 490, 497 n.12 (5th Cir. 1985) (internal quotations
and citations omitted)
       10
          Kemp, 745 F.2d at 924 (quoting Corbitt v. Diamond M. Drilling Co., 654 F.2d 329, 333
(5th Cir. 1981)); see Hardy v. Gulf Oil Corp., 949 F.2d 826, 834 (5th Cir. 1992); Foreman, 770
F.2d at 497 n.12.

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BHP to protect, defend, indemnify, release and hold harmless Deep Marine
against Duval’s claim. Specifically, the MSA provided:
       Company [BHP] shall protect, defend, indemnify, release, and hold
       harmless Contractor Group from and against any and all claims
       arising out of, resulting from or in connection with the provision of
       the Goods and/or Services pursuant to this Contract for:

       (I) any injury, death, or illness suffered by any person in Company
       Group; and

       (II) any damage to or loss of any equipment, materials, vessels, or
       other property of any member of Company Group . . . .

The parties defined “Contractor Group” to include the Contractor (Deep Marine);
its subsidiaries, affiliates, contractors, and subcontractors; and the “agents,
representatives, servants, directors, officers, assigns, managers, members,
shareholders, owners, employees and invitees of all of the foregoing.” It defined
“Company Group” to include BHP, as well as its subsidiaries, affiliates,
contractors, and subcontractors, and employees “of all of the foregoing.” Finally,
the MSA defined “claims” to include “all claims losses, demands, causes of action,
suits, proceedings, fines, penalties, judgments, obligations and liabilities of every
kind and character.” Thus, Duval’s claim against Deep Marine fell within the
scope of BHP’s indemnification obligation because it was a personal injury claim
asserted by a person in Company Group (an employee of a BHP contractor)
against a member of Contractor Group (Deep Marine). But the same is not true
of Duval’s claim against Underwriters. Under the plain language of the MSA,
BHP’s indemnification and defense obligations only ran to members of the
“Contractor Group.” The parties could have included the Contractor’s insurers
within the definition of “Contractor Group,” as parties in other cases have done,11


       11
         See, e.g., Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487, 494 (5th Cir.
2000); Magee v. Ensco Offshore Co., No. 11-1351, 2012 WL 1825274, at *3 (E.D. La. May 18,
2012); BJ Serv’s Co., USA v. Thompson, No. 6:08-510, 2010 WL 2024725, at *6 (W.D. La. May
14, 2010).

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but they did not do so. In turn, BHP owes no duty to Underwriters, and we find
Underwriters’ arguments to the contrary unpersuasive.
       Underwriters argue that BHP waived any potential defenses to its
contractual obligations by accepting Deep Marine’s tender of Duval’s claim and
defending Deep Marine in the matter. But waiver is simply inapplicable here.
Even though BHP accepted Deep Marine’s tender of Duval’s claim, it never
indicated it had any obligation to Underwriters. Instead, its defense arises out
of an unknowable change in factual circumstances—specifically Deep Marine’s
discharge in bankruptcy, the bankruptcy court’s order permanently enjoining
Duval from proceeding against Deep Marine, and Underwriters’ subsequent
claim against BHP.
       Underwriters also make four substantive arguments in favor of their
interpretation of the MSA. First, Underwriters attack BHP’s characterization
of the MSA as an indemnity agreement requiring that Deep Marine make
payment to Duval before BHP’s indemnification obligation becomes
enforceable.12 They argue that the MSA requires BHP to indemnify Deep
Marine against liability, so BHP’s indemnification obligation becomes
enforceable once Deep Marine’s liability is established, not when Deep Marine
eventually makes payment on that liability.13 Underwriters point out that,
under Louisiana’s Direct Action Statute, Deep Marine must be found liable in



       12
         Underwriters also attack BHP’s general characterization of the MSA as an indemnity
agreement. They contend that an indemnity agreement must contain a pre-payment
provision, requiring payment of claims by the indemnitee, and argue that because the MSA
contains no language requiring pre-payment of claims by Deep Marine, it is not an indemnity
agreement. We disagree. The cases Underwriters rely on to argue that an indemnity
agreement requires pre-payment are insurance cases in which the policies at issue were
characterized as indemnity policies because they required pre-payment as a prerequisite to
the insurer’s liability. The MSA does not purport to be a liability insurance policy, and
Underwriters cite no authority indicating that the MSA’s indemnification language should be
interpreted to require anything other than indemnification as it is typically understood.
       13
            See 42 C.J.S. § 27, § 28.

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order for Underwriters to be held liable.14 Therefore, they contend, even though
Deep Marine will never pay damages to Duval, BHP’s indemnification obligation
will become enforceable once liability is established.              But even assuming
arguendo that the MSA requires indemnification against liability and that Deep
Marine will eventually be held liable, Underwriters still cannot prevail because
BHP’s indemnification obligation—whatever its scope—runs only to Deep
Marine.
      Second, Underwriters contend that summary judgment in favor of BHP
was improper because, upon their payment of any judgment or settlement to
Duval, they will become subrogated to all of Deep Marine’s rights, including its
rights against BHP under the MSA. This argument also fails to persuade.
Assuming arguendo that payment by Underwriters would give rise to
subrogation, Underwriters would nevertheless have no claim against BHP
because “a subrogee can obtain no greater rights than its subrogor had.”15 Deep
Marine would not, and could not, incur any loss in the Duval action, so
Underwriters could not seek indemnification from BHP. And, because BHP has
agreed to continue providing Deep Marine with a nominal defense, Underwriters
would not have a breach of contract claim against BHP.
      Third, Underwriters argue that BHP agreed to become Deep Marine’s
primary insurer against liability to members of Company Group. They point to
the MSA’s requirements (1) that BHP support its indemnification obligations
with self-insurance, a liability insurance policy, or a combination thereof and (2)
that the insurance coverage BHP obtains name Deep Marine as an additional
insured and serve as primary insurance, without the right of contribution from
any insurance policies maintained by Deep Marine. We find the argument
inapplicable here because BHP chose to self-insure for claims under $1 million


      14
           See Descant v. Adm’rs of Tulane Educ. Fund, 639 So. 2d 246, 249 (La. 1994).
      15
           Complaint of Admiral Towing & Barge Co., 767 F.2d 243, 250 (5th Cir. 1985).

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and the parties agree that Duval’s claim is not for more than $1 million. We
conclude that the additional insured and primary insurance requirements do not
apply to BHP’s self-insurance. For one, the MSA focuses on “insurance coverage”
and “policies of insurance” when describing both the additional insured and
primary insurance requirements, leading us to believe that those requirements
only apply when BHP chooses to support its indemnity obligation with a liability
insurance policy. When a company self-insures, by contrast, “there is no contract
with an insurance company.”16 We find further support for our reading in Texas
case law. In Hertz Corp. v. Robineau, the Texas Court of Appeals explained that
“the term ‘self-insurance’ is a misnomer” because “in effect, a self-insurer does
not provide insurance at all.”17 It went on to make clear that a self-insurer does
not “assume[] all the duties and burdens of an insurer,” unless the parties have
expressly contracted for “liability coverage.”18 “To say that a self-insurer will pay
the same judgments and in the same amounts as insurance company would have
had to pay is one thing; while it is obvious that to assume all the obligations that
exist under a [liability policy] is quite another thing.”19 We therefore conclude
that the additional insured and primary insurance requirements do not apply
BHP’s self-insurance.
      Fourth, Underwriters argue that because “discharge of the debtor does not
affect the liability of any other entity on, or the property of any other entity for,
such debt,”20 we should enforce BHP’s contractual obligations. Otherwise, they
contend, BHP will receive a windfall. This argument, too, misses the point. It
is true that Deep Marine’s bankruptcy does not affect the liability of any other

      16
           BLACK’S LAW DICTIONARY 819 (8th ed. 2004).
      17
           6 S.W.3d 332, 336 (Tex. Ct. App. 1999) (emphasis in original).
      18
           Id.
      19
           Id. (internal quotations omitted).
      20
           11 U.S.C. § 524(e).

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entity, such as Underwriters, to Duval. But Duval has not alleged that BHP has
any potential liability for his claims. That makes sense because BHP’s only
obligation is an indemnification obligation to Deep Marine; unlike Underwriters,
it has no secondary liability to injured tort victims, like Duval.
         Before concluding, we pause briefly to address Underwriters’ contention
that they could tender BHP directly to Duval under Federal Rule of Civil
Procedure 14(c). Such tender was improper because Duval has no claim against
BHP. The MSA only obligates BHP to indemnify members of the “Contractor
Group.” As an employee of Wood Group (a BHP contractor), Duval is only a
member of “Company Group,” not “Contractor Group,” so BHP’s contractual
obligations do not run to him. And, even if they did, because no claims have
been asserted against Duval, BHP would have no obligation to indemnify and
defend him.21 Moreover, as we have previously explained, Underwriters did not
agree to act as the primary insurer of Deep Marine against Duval’s claim, so
Duval could not bring suit directly against BHP under Louisiana’s Direct Action
Statute.


                                           IV.
         For the reasons set forth above, we AFFIRM the judgment of the district
court.




         21
        It is worth noting that Duval neither opposed BHP’s motion for summary judgment
(which expressly sought dismissal of the tendered claim) nor appealed the district court’s
dismissal of the tendered claim.

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