      Case: 13-20512          Document: 00512673150              Page: 1      Date Filed: 06/23/2014




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

                                                                                                  FILED
                                                                                              June 23, 2014
                                            No. 13-20512
                                                                                             Lyle W. Cayce
                                                                                                  Clerk
INDEMNITY INSURANCE COMPANY OF NORTH AMERICA; NEW YORK
MARINE & GENERAL INSURANCE COMPANY; NAVIGATORS
INSURANCE COMPANY; NATIONAL LIABILITY & FIRE INSURANCE
COMPANY, ("Starr Marine"),

                                                          Plaintiffs – Appellees,
v.

W & T OFFSHORE, INCORPORATED,

                                                          Defendant – Appellant.
-----------------------------------------------------------------------------------------------
XL SPECIALTY INSURANCE COMPANY,

                                                          Plaintiff - Appellee,
v.

W & T OFFSHORE, INCORPORATED,

                                                          Defendant – Appellant.
-----------------------------------------------------------------------------------------------
LIBERTY MUTUAL INSURANCE COMPANY,

                                                          Plaintiff – Appellee,
v.

W & T OFFSHORE, INCORPORATED,

                                                          Defendant – Appellant.
-----------------------------------------------------------------------------------------------
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                                  No. 13-20512


NAVIGATORS INSURANCE COMPANY; NEW YORK MARINE &
GENERAL INSURANCE COMPANY,

                                              Plaintiffs – Appellees,
v.

W & T OFFSHORE, INCORPORATED,

                                              Defendant – Appellant.


                Appeal from the United States District Court
                     for the Southern District of Texas


Before HIGGINBOTHAM, CLEMENT, and HIGGINSON, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
      W&T Offshore (“W&T”)—an energy exploration and development
company—sustained significant damage to its operations as a result of
Hurricane Ike. Anticipating that W&T would seek recovery for its Removal of
Debris (“ROD”) expenses under its Umbrella / Excess Insurance Policies
(“Umbrella    Policies”),   the   four       Umbrella    Insurers       Underwriters
(“Underwriters”) sought a declaratory judgment that they were not liable for
W&T’s ROD damages. In their motion for summary judgment, Underwriters
argued that the Umbrella policies only take effect if W&T’s underlying /
primary insurance is exhausted by claims that would be covered by the
Umbrella Policies.    Because W&T’s underlying insurance was admittedly
exhausted by claims not covered by the Umbrella Policies, the insurers argued
that they have no liability. In its cross-motion for summary judgment, W&T
argued that the Umbrella Policies takes effect once all underlying insurance is
exhausted, regardless of how that exhaustion occurred. The district court
granted summary judgment in favor of Underwriters, holding that the plain

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                                 No. 13-20512
terms of the Umbrella Policies state that it only takes effect if the underlying
policies are exhausted by claims that would be covered under the Umbrella
Policies themselves. We reverse and render summary judgment in favor of
W&T.
                          FACTS AND PROCEEDINGS
       W&T purchased three types of insurance policies to indemnify itself
against hurricanes: (1) a commercial general liability policy (MS-S-2773) (the
“Primary Liability” policy); (2) five Energy Package Policies (“Energy
Package”); and (3) four Umbrella / Excess Liability Policies.          Plaintiff-
Appellant Underwriters provided the Umbrella Policies, which are identical in
all relevant aspects. The Umbrella Policies are the only policies at issue.
       The key difference between the Umbrella Policies and the Energy /
Primary Liability policies is that the Umbrella Policies do not cover (1)
property damage or (2) operators’ extra expenses (“OOE”) that are incurred by
W&T itself; they cover only claims against W&T by a third-party. All relevant
policies have been endorsed to cover ROD claims.
       On September 12, 2008, Hurricane Ike struck the Gulf of Mexico,
allegedly causing damage to over 150 offshore platforms in which W&T had an
interest. Braemer Steege—the loss adjuster for W&T’s claims—submitted
over $150 million in claims for OOE and property damage under the Energy
Package. The Energy Package contains a $10 million self-insured retention
(“SIR”), which W&T has to exhaust prior to submitting any claims. Once that
threshold is met, coverage proceeds in order through five policies, which
provide a total of $150 million in coverage over-and-above the $10 million SIR.
Because submitted expenses for OOE and property damage exceeded $150
million, Braemer Steege forecasted that W&T would submit all of its ROD
claims—estimated to exceed $50 million—to the Umbrella Policies.


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                                No. 13-20512
     In anticipation of these claims, Underwriters filed separate suits seeking
declaratory judgments that W&T’s claims are not covered under the Umbrella
Policies because the Retained Limit of those policies had not been exhausted.
The “Retained Limit” is the triggering mechanism for the “Coverage” provision
of the Insuring Agreement, which provides:
                       INSURING AGREEMENTS
     I.    COVERAGE
            We will pay on behalf of the Insured those sums in excess
     of the Retained limit that the Insured becomes legally obligated to
     pay by reason of liability imposed by law or assumed by the
     Insured under an Insured Contract because of Bodily Injury,
     Property Damage, Personal Injury or Advertising Injury
     that takes place during the Policy Period and is caused by an
     Occurrence happening anywhere in the world. The amount we
     will pay for damages is limited as described in INSURING
     AGREEMENT III, LIMITS OF INSURANCE.
The “Retained Limit” is defined in Insuring Agreement § III.E:
           E.    Retained Limit
            We will be liable only for that portion of damages in excess
     of the Insured’s Retained Limit which is defined as the greater of
     either:
           1.    The total of the applicable limits of the
                 underlying policies listed in the SCHEDULE
                 OF UNDERLYING INSURANCE and the
                 applicable limits of any other underlying
                 insurance providing coverage to the Insured; or
           2.    The amount stated in the SPECIAL
                 DECLARATIONS as Self Insured Retention as
                 a result of any one Occurrence not covered by
                 the underlying policies listed in the
                 SCHEDULE             OF        UNDERLYING
                 INSURANCE nor by any other underlying
                 insurance providing coverage to the Insured;
                And then up to an amount not exceeding the Each
           Occurrence Limit as stated in the SPECIAL
           DECLARATIONS.
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Underwriters argue that the Retained Limit of the coverage has not been met
because W&T exhausted its underlying policies, (i.e., the “total of the
applicable limits of the underlying policies”), using claims that are not covered
by the Umbrella Policies, (i.e., the $150 million of OOE and property damage
claims). In support, Underwriters cite § III.D, which provides:
      D.    Subject to B. and C. above, whichever applies, the Each
            Occurrence Limit is the most we will pay for the sum of
            damages covered under INSURING AGREEMENT [§] I
            because of all Bodily Injury, Property Damage,
            Personal Injury and Advertising Injury arising out of
            any one Occurrence.

            If the applicable limits of insurance of the policies listed in
            the SCHEDULE OF UNDERLYING INSURANCE or of
            other insurance providing coverage to the Insured are
            reduced or exhausted by payment of one or more claims that
            would be insured by our Policy we will:
            1.    In the event of reduction, pay in excess of the reduced
                  underlying limits of insurance; or
            2.    In the event of exhaustion of the underlying limits of
                  insurance, continue in force as underlying insurance.
      W&T argues that this section does not govern the circumstances under
which the Retained Limit is depleted, but rather describes the Underwriter’s
duties and obligations if the underlying insurance policies “are reduced or
exhausted by payment of one or more claims that would be insured by our
Policy.” Because the “total of the applicable limits of the underlying policies
listed in the SCHEDULE OF UNDERLYING INSURANCE and the
applicable limits of any other underlying insurance providing coverage to the
Insured” has been exhausted, W&T argues that Underwriters are liable “for
that portion of damages in excess of the Insured’s Retained Limit.”
      The district court granted Underwriters’ motion for summary judgment,
finding that the “underlying insurance can only be exhausted by claims that

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                                  No. 13-20512
are also covered by the Excess Liability policies themselves.” Because W&T
exhausted the underlying policies with its OOE and property damage claims,
the court held that “coverage under the Excess Liability policies has not been
triggered and there is no coverage for the costs for removal of wreck or debris.”
      W&T appeals, raising the same arguments it did in the court below.
                              STANDARD OF REVIEW
      “We review de novo the district court’s grant of summary judgment.”
Greenwood 950, L.L.C. v. Chesapeake Louisiana, L.P., 683 F.3d 666, 668 (5th
Cir. 2012). “Summary judgment is appropriate when there is no genuine
dispute as to any material fact and the moving party is entitled to judgment as
a matter of law.” Id. “As part of that analysis, we review de novo the district
court's interpretation of the contract, including the question of whether the
contract is ambiguous.” Id.
      “Under Texas law, insurance policies and indemnity agreements are
contracts, and the general rules of contract interpretation apply.” Travelers
Lloyds Ins. Co. v. Pac. Emp’rs Ins. Co., 602 F.3d 677, 681 (5th Cir. 2010). “[A]
court construing a contract must read that contract in a manner that confers
meaning to all of its terms, rendering the contract’s terms consistent with one
another.” Tittle v. Enron Corp., 463 F.3d 410, 419 (5th Cir. 2006). “In doing
so, courts should examine and consider the entire writing in an effort to
harmonize and give effect to all the provisions of the contract so that none will
be rendered meaningless.       No single provision taken alone will be given
controlling effect; rather, all the provisions must be considered with reference
to the whole instrument.”      Id. (internal quotation marks, emphasis, and
ellipses omitted).
      If, after reading the terms of the policy and giving meaning to all
provisions, the terms “are unambiguous, the court must enforce the policy
according to its plain meaning.”     Travelers Lloyds, 602 F.3d at 681.       “An
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                                       No. 13-20512
insurance policy’s terms are unambiguous if they have definite and certain
legal meaning.”       Id.    “The parties’ disagreement regarding the extent of
coverage does not create an ambiguity.” Id. However, if the terms of the
contract are ambiguous, the court should adopt the interpretation that is most
favorable to the insured. Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d
455, 458 (Tex. 1997).
                                       DISCUSSION
       Although Underwriters’ argument—embraced by the district court—has
force at first glance, a careful reading of the contract unambiguously precludes
Underwriters’ interpretation. W&T’s interpretation fits neatly with (1) the
plain text of the Coverage provision, (2) the definition of a Retained Limit, and
(3) other contract provisions relating to coverage and payment.                    Further,
W&T’s interpretation explains § III.D in a way that is not only consistent with
its own language and the contract as a whole, but also sheds light on the
nuances of Underwriters’ coverage obligations. By contrast, Underwriters’
argument relies entirely on the text of § III.D, which is insufficiently specific
to carry the burden of a similar provision in Westchester Fire Ins. Co. v. Stewart
& Stevenson Services, Inc., 31 S.W.3d 654 (Tex. App.—Houston [1st Dist.]
2000, pet. denied). 1 Further, Underwriters’ interpretation of § III.D would
render it nonsensical when applied to other portions of the contract. We
reverse the judgment of the district court and render summary judgment in
favor of W&T.



       1 As will be discussed in Section I.B below, Underwriters’ contention that § III.D
“mean[s] the same” thing as the provision in Westchester because “[o]ne provision is the
converse of the other” is a logical fallacy. See Liberty Mutual Br. 25. Whereas the provision
in Westchester stated that exhaustion “by reason of payment of losses not covered by this
policy” would result in applying the policy as if “such aggregate limit [had] not been reduced
or exhausted,” Underwriters’ Policies dictate what will happen if the underlying policies are
exhausted by claims that would be covered by the Umbrella Policies.
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                                       No. 13-20512
I.     Plain Language of Agreement
       The logical place to begin when determining whether W&T’s ROD claims
are covered by the Umbrella Policies is the “Coverage” provision, which
provides:
                             INSURING AGREEMENTS
       I.     COVERAGE
              We will pay on behalf of the Insured those sums in excess
       of the Retained limit that the Insured becomes legally obligated to
       pay by reason of liability imposed by law or assumed by the
       Insured under an Insured Contract because of Bodily Injury,
       Property Damage, Personal Injury or Advertising Injury
       that takes place during the Policy Period and is caused by an
       Occurrence happening anywhere in the world. The amount we
       will pay for damages is limited as described in INSURING
       AGREEMENT III, LIMITS OF INSURANCE.
       By its terms, this provision (1) obligates Underwriters to pay “those sums
in excess of the Retained limit that the Insured becomes legally obligated to
pay by reason of liability imposed by law,” and (2) provides that the “amount
we will pay for damages is limited” as described in “Insuring Agreements § III
– Limits of Insurance.” We address these provisions in turn.
       A.     Retained Limit
       Under the Coverage provision, Underwriters are only obligated to pay
(1) “sums in excess of the Retained limit” that (2) “the Insured becomes legally
obligated to pay by reason of liability imposed by law” 2 because of (3) an event
covered by the policy. 3 Because Underwriters will only pay “sums in excess of
the Retained limit,” the definition of that term is essential to understanding


       2 The clause “becomes legally obligated to pay by reason of liability imposed by law” is
why Underwriters are not liable for the damages W&T sustained to its own property; the
Umbrella Policies indemnify against third-party claims, not first-party claims. This is not
disputed.
       3 Although ROD damages are not mentioned in this provision, they were incorporated

by endorsement.
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                                  No. 13-20512
the policy. The “Retained Limit” is defined in Insuring Agreement § III.E,
which states that the Retained Limit is defined as the greater of (1) the amount
of underlying insurance or (2) the amount of SIR that is not covered by the
underlying insurance. The greater amount here is the “total of the applicable
limits of the underlying policies listed,” which amounts to $161 million in
coverage.
      Taking the text of the Coverage provision on its face, Underwriters are
obligated to pay “sums in excess of” the “total of the applicable limits of the
underlying policies listed,” i.e., sums in excess of the $161 million of underlying
coverage. Nothing in the text of the Coverage provision or the definition of the
Retained Limit specifies how the $161 million “limit[] of the underlying
policies” must be reached or states that the Retained Limit refers exclusively
to sums covered by the Umbrella Policy.
      The plain text of the Coverage provision states that Underwriters are
liable for any damages in excess of the Retained Limit that are covered by the
contract. Because the Retained Limit has been exhausted, this suggests that
Underwriters are liable for W&T’s ROD damages.
      B.      Damages Limited by Insuring Agreement § III
      “Section I – Coverage” also provides that the “amount we will pay for
damages is limited” as described in “Insuring Agreement § III – Limits of
Insurance.”     “Section III – Limits of Insurance” outlines “the most
[Underwriters] will pay” under various scenarios; it makes no claims about the
breadth of coverage or requirements for exhausting the Retained Limit.
Section III.B, for example, states that the “General Aggregate Limit is the most
we will pay for all damages covered under Insuring Agreement [§] I.” (italics
added, bold in original). Section III.D—the basis of Underwriters’ argument—
begins with a similar provision, stating that the “Each Occurrence Limit is the
most we will pay for the sum of damages covered under Insuring Agreement
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                                 No. 13-20512
[§] I.” (italics added, bold in original). The “sum of damages covered under
Insuring Agreement [§] I,” as just discussed, are those damages in excess of
the Retained Limit, i.e., the “total of the applicable limits of the underlying
policies.” In context, the “applicable limits of the underlying policies” must
refer to the Each Occurrence Limits of those polices. Thus, Underwriters are
liable to pay sums in excess of the total “Each Occurrence Limits” of the
underlying policies, up to their own Each Occurrence Limit.
      If, however, the applicable limits of insurance—i.e., the Each Occurrence
limits of the underlying policies—are reduced or exhausted by payment of one
or more claims that would be insured by [the] policy,” Underwriters undertake
additional obligations. If the Each Occurrence Limits of the underlying policies
are reduced by payments of one or more claims that would be insured by the
policy, Underwriters must “pay in excess of the reduced underlying limits of
the insurance,” rather than the standard payment in excess of the Retained
Limit.
      If the underlying policies are exhausted by claims that would be insured
by the policy, however, Underwriters undertake an even greater obligation.
Whereas Underwriters are generally only obligated to “pay . . . sums,” complete
exhaustion of the underlying policies by claims that would be insured by the
policy requires Underwriters to “continue in force as underlying insurance,”
which, in addition to making payments as the underlying insurance, requires
Underwriters to defend against any suit claiming damages covered by the
policy.
      The correctness of this interpretation is reflected in “Insuring Agreement
§ II.A.1 – Defense,” which states that when the “Limits of Insurance of the
underlying policies . . . have been exhausted by payment of claims to which this
Policy applies,” Underwriters “shall have the right and duty to defend any
claim or suit seeking damages covered by the terms and conditions of this
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                                  No. 13-20512
Policy.” Note the specificity with which the defense provision refers to the
claims requiring Underwriters to defend: those where the “underlying
policies . . . have been exhausted by payment of claims to which this Policy
applies.” Those claims require that Underwriters mount a defense on behalf
of W&T; given that the usual obligation is simply to “pay . . . sums” on W&T’s
behalf, the clear implication is that there are some claims which Underwriters
must pay where the underlying policies have not been exhausted by claims that
would be covered by the policy. See Insuring Agreements § II.C (“In all other
instances except A. above, we will not be obligated to assume charge of the
investigation, settlement or defense of any claim made, suit brought or
proceeding instituted against the Insured. We will, however, have the right
and shall be given the opportunity to participate in the defense and trial of any
claims, suits or proceedings relative to any Occurrence which, in our opinion,
may create liability on our part under the terms of this policy.”) (italics added).
      Other provisions discussing the payment of sums under the contract
support this interpretation. “Section VI.P – When Loss Is Payable,” states that
“Coverage under this Policy will not apply unless and until the Insured or the
Insured’s Underlying Insurer is obligated to pay the Retained Limit. When
the amount of loss has finally been determined, we will promptly pay on behalf
of the Insured the amount of loss falling within the terms of this Policy.” This
provision is instructive for several reasons.      First, it again refers to the
Retained Limit as the triggering mechanism for the Umbrella Policy. Second,
it states that its obligation begins when the Underlying Insurance “is obligated
to pay the Retained Limit.” It does not qualify how the Retained Limit must
be paid or that it must be met with claims covered under the Umbrella Policy;
it simply states that it must be met. This stands in stark contrast to the next
sentence, which explicitly refers to the Umbrella Policies’ coverage provisions
and states that Underwriters “will promptly pay . . . the amount of loss falling
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                                        No. 13-20512
within the terms of this Policy.” So while the Retained Limit must simply be
met, payments on claims will only be made if they fall under the terms of the
policy. If the terms of the Umbrella Policy also governed how the Retained
Limit must be exhausted, one would expect to find similar language to that
effect.
          In fact, that is precisely what occurred in Westchester, 31 S.W.3d 654,
which was relied upon by both the district court opinion and Underwriters’
briefing. The policy in Westchester provided that if the aggregate limit of the
underlying policies was exhausted “by reason of payment of losses not covered
by this policy,” Westchester would apply the policy as if “such aggregate limit
[had] not been reduced or exhausted.” 4 By its explicit terms, the Westchester
policy notified the beneficiary that its underlying insurance would not be
considered exhausted unless it was exhausted by claims covered under the
policy. This is far more explicit than the provision at issue here, which merely
outlines what will happen if the underlying insurance is entirely exhausted by
claims covered under the policy; it says nothing about what will happen if the
Retained Limit is exhausted by non-covered claims.
          Underwriters’ contend that § III.D “mean[s] the same” thing as the
provision in Westchester because “[o]ne provision is the converse of the other.”
This is a logical fallacy. 5        Whereas the Westchester provision lays out a


         31 S.W.3d at 658 (“In the event of the reduction or exhaustion of the Aggregate
          4

Limits of Liability of the “Underlying Insurance” by reason of payment of losses not covered
by this policy; this policy shall apply in the same manner it would have applied had such
aggregate limit not been reduced or exhausted.”).
       5 If A = “underlying policies exhausted by covered claims” and B = “coverage,” the

provisions work as follows:
       Westchester Policy:
       Not A  Not B (alternatively, B  A).

          Underwriters’ Policy:
          A  B (alternatively, Not B  Not A).

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                                    No. 13-20512
limitation on coverage—if not reduced or exhausted by covered claims, then no
coverage—the Umbrella Policies explain two potential scenarios—if reduced or
exhausted by covered claims, then either (1) pay in excess of reduced limit limit
or (2) act as primary insurer.         The two policies are not identical, and
Westchester, rather than helping Underwriters’ argument, provides an
excellent example of the type of provision that would be included if the policy
meant what Underwriters claim it means.
      Thus, the Umbrella Policies provide coverage in four ways. First, if the
Retained Limit is met, Underwriters pay sums for covered damages in excess
to that limit. Second, if the underlying policies are reduced by claims covered
under the policy, Underwriters pay sums—not in excess of the Retained
Limit—but in excess of the reduced limit of the underlying policies. Third, if
the underlying policies are exhausted by covered claims, Underwriters act as
the underlying insurers and are obligated to defend against covered claims.
And finally, if Underwriters provide the only coverage, they again must act as
the underlying insurers and defend against covered claims. Because these
scenarios are clear from the face of the policy, we reverse the district court and
render judgment in favor of W&T.
                                  CONCLUSION
      For the reasons stated, we REVERSE the district court and RENDER
SUMMARY JUDGMENT in favor of W&T Offshore.




       Underwriters are arguing that B  A is the same as A  B. This is the “affirming
the consequent” fallacy, and is simply incorrect.
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