     Case: 14-20222      Document: 00513020452         Page: 1    Date Filed: 04/27/2015




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT


                                      No. 14-20222                       United States Court of Appeals
                                                                                  Fifth Circuit

                                                                                FILED
AMERICAN HOME ASSURANCE COMPANY,                                            April 27, 2015
                                                                           Lyle W. Cayce
              Plaintiff - Appellee Cross-Appellant                              Clerk

v.

OCEANEERING INTERNATIONAL, INCORPORATED,

              Defendant - Appellant Cross-Appellee




                  Appeals from the United States District Court
                       for the Southern District of Texas
                             USDC No. 4:12-CV-2540


Before KING, DAVIS, and OWEN, Circuit Judges.
PER CURIAM:*
       Defendant-Appellant Oceaneering International, Inc., appeals the
district court’s grant of summary judgment in favor of Plaintiff-Appellee
American Home Assurance Company. The district court’s grant of summary
judgment had the effect of denying insurance coverage for claims made by
Oceaneering. American Home cross-appeals the district court’s determination




       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                       No. 14-20222
that Oceaneering’s claim was for “property damage” within the meaning of the
insurance policy. 1 For the reasons that follow, we AFFIRM.
                                              I.
       The facts of the incident underlying this claim for insurance coverage
were set out in our opinion in Chevron USA, Inc. v. Aker Maritime, Inc.
(Chevron I), 604 F.3d 888 (5th Cir. 2010):
              The Genesis Spar, an oil production facility, sits 150 miles
       south of New Orleans in the Gulf of Mexico. A riser system
       attaches the floating spar to the ocean floor, 2,600 feet below.
                                        ...
              Chevron hired Aker Maritime, Inc. (“Aker”) in 1998 to
       provide design and engineering services for the initial construction
       of the riser system. Stability problems plagued the riser system
       after its completion, leading to a crack in the spar’s hull in 2000.
       Oceaneering International, Inc. (“Oceaneering”) repaired the hull
       at Chevron’s request, and Chevron put Aker in charge of designing
       a permanent fix. Large bolts called carriage bolts hold the riser
       system together, and Aker ordered the bolts from Lone Star,
       according to testimony a “well-known” bolt manufacturer that also
       distributed others’ bolts. Aker initially requested eight-inch Grade
       5 carriage bolts, which Chevron had approved. When Lone Star
       responded that it had no Grade 5 bolts, Aker placed an order for
       2,092 Grade 2 carriage bolts, costing a total of $878.64. Instead of
       shipping Grade 2 bolts, Lone Star shipped Grade A bolts
       manufactured by Oriental Fastener Co. (“Oriental”). At the time,
       Lone Star routinely substituted Grade A bolts for Grade 2 bolts,
       then a widespread practice in the fastener industry.
              Lone Star shipped the bolts to Oceaneering, which was in
       charge of assembling the risers. The bolts were marked “OF,”
       indicating the manufacturer, and arrived in shipping boxes
       bearing the Lone Star mark. They also arrived with a packing slip


       1 American Home’s cross-appeal to assert an alternative ground in the record for
affirming the district court’s judgment was unnecessary, as it is axiomatic that this court
reviews judgments, not opinions. Jennings v. Stephens, --- U.S. ---, ---, 135 S. Ct. 793, 799
(2015) (“This Court, like all federal appellate courts, does not review lower courts’ opinions,
but their judgments.”). A cross-appeal is necessary only when the appellee attacks the
judgment “with a view either to enlarging his own rights thereunder or of lessening the rights
of his adversary.” Id. at 798 (internal quotation marks omitted).
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                            No. 14-20222
 noting that they were either “manufactured or distributed” by
 Lone Star. Oceaneering accepted the bolts, failing to notice the
 substitution.
        The first bolt failure occurred on July 9, 2001, when a bolt
 head popped off one of the first bolts used in the risers. Jack
 Couch, the project manager for Oceaneering, contacted Aker’s
 Mike Harville and told Harville that he thought the bolts were a
 “serious weak link.” Couch took a picture of the failed bolt and
 sent it to Harville. Harville told Oceaneering that it had applied
 too much torque to the bolt, as Oceaneering was applying torque
 to Grade 2 bolts that it believed to be Grade 5 bolts. Oceaneering
 continued assembly of the riser system using the torque
 appropriate for Grade 2 bolts, apparently without incident. In
 August 2001, however, Aker took over riser assembly, and
 Oceaneering sent the parts, including the bolts, to Aker. Like
 Oceaneering’s employees, Aker’s employees failed to detect that
 the bolts were Grade A bolts.
        After Aker completed installation of the riser system,
 Oceaneering divers inspected the construction on July 12 and 13,
 2002. During the dives, live audio and video were fed to a room
 aboard the Genesis Spar, where Chevron representatives could see
 and hear everything the divers saw. As documented in
 Oceaneering’s diving logs, the video inspection showed several bolt
 heads were missing. In addition, Harville testified that a Chevron
 employee, Bill Donahue, called him regarding a problem with bolt
 installation, likely on Sunday, July 14.
        In the next month, Aker, Oceaneering, and Chevron
 representatives investigated the bolt failures. During the review,
 the team discovered that the bolts were Grade A, not Grade 2. It
 later determined that not only were the bolts the wrong kind, they
 were also defective due to a defective manufacturing process,
 including failure to stress-relieve the bolts and to heat-treat them.
        Chevron sued on July 15, 2003, a year and a day after the
 Oceaneering dives, but less than a year after it completed its
 investigation. Its complaint included claims for negligence, strict
 liability, redhibition, products liability, and breach of contract.
 Aker brought claims for indemnity against Oceaneering and Lone
 Star. To avoid inconsistent verdicts, the parties agreed to try all
 the claims other than the contract claims to a jury, after which the
 district court would make factual findings based on the trial record
 and render judgment on the contract claims. The jury returned a

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                                         No. 14-20222
       verdict in favor of Chevron on all claims. It found that none of
       Chevron’s claims were prescribed. As to negligence, it found Aker,
       Lone Star, Oriental, and Oceaneering were all negligent and it
       apportioned fault under La. Civ.Code art. 2323: 40 percent to Aker,
       35 percent to Lone Star, 5 percent to Oceaneering, and 20 percent
       to Oriental. It determined that Lone Star and Oriental were
       manufacturers and imposed liability in redhibition and under the
       LPLA. Finally, it determined that Chevron’s total damages were
       $2,968,526.42.

       Id. at 890–92 (footnotes omitted). 2 With respect to the contract claims
relating to indemnification of Aker, the district court determined that it was
bound by the jury verdict. Id. at 892. The district court also ordered that Lone
Star pay $151,167.32, and Oriental pay $86,381.33, in attorney’s fees to
Chevron. Id.
       In Chevron I, the Fifth Circuit affirmed the award of compensatory
damages, reversed the award of attorney’s fees, and remanded for further
consideration of the contract claims. Id. at 902. Discussing the challenge to
the attorney’s fees award, the court determined that attorney’s fees “are
allowable only if Chevron has a redhibition claim under La. Civ. Code art.
2545.” 3 Id. at 899. Although Chevron met that provision’s “basic requirements
for an award of attorney fees,” the “hitch” was the Louisiana Products Liability
Act (“LPLA”), which “‘establishes the exclusive theories of liability for



       2  The difference between Grade A and Grade 2 bolts was also described in our prior
opinion:
        Grade A and Grade 2 bolts are similar, but the standards are different in
        several respects. The most important difference in this case is that Grade 2
        bolts require heating to a specific temperature [to] keep them from breaking,
        whereas Grade A certification allows the manufacturer to determine what level
        of heat treatment is appropriate. At the time, Oriental routinely did not heat-
        treat its bolts at all.
Id. at 891 n.2.
        3 Under Louisiana law, a redhibition claim is established where “[a] seller . . . knows

that the thing he sells has a defect but omits to declare it, or [where] a seller . . . declares that
the thing has a quality that he knows it does not have.” La. Civ. Code art. 2545.
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                                 No. 14-20222
manufacturers for damage caused by their products,’” id. at 899–900 (quoting
La. Rev. Stat. § 9:2800.52), and which explicitly prohibits the recovery of
attorney’s fees, La. Rev. Stat. § 9:2800.53(5). “Damage,” as defined under
LPLA, “usually does not include ‘damage to the product itself [or] economic
loss.’” Chevron I, 604 F.3d at 900 (quoting La. Rev. Stat. § 9:2800.53(5)).
Therefore, the parties agreed that LPLA precluded the redhibition claim, and
consequently barred attorney’s fees, “unless the jury awarded damages to
compensate for damage to the bolts themselves or economic loss, which are
recoverable in redhibition.”    Id. (internal quotation marks and brackets
omitted).   The Fifth Circuit noted that under the economic loss doctrine,
“[w]hen a product damages other property or causes personal injury, the action
is for an unsafe product in tort,” but “[i]f the damage is instead to the product
itself or a loss of profits, the action properly is in warranty or contract.” Id.
Noting that LPLA incorporates that distinction, the court concluded that,
“[w]hen a product damages other property, compensation is under the LPLA,
not the redhibition articles.” Id. at 901. Applying that rule to the facts of the
case, the Fifth Circuit determined that “Chevron’s damages incurred repairing
the spar are not economic loss,” as “[t]he undisputed facts . . . show that the
defective products, the bolts, have damaged other property, the spar.” Id.
“That damage is not economic loss—the claim is not that the bolts were a waste
of money or caused loss profits—but property loss, so Chevron’s damages are
entirely under the LPLA, not in redhibition.”        Id. (internal citation and
quotation marks omitted).
      After the remand order in Chevron I, Aker and Chevron reached a
settlement for all claims against Aker. Chevron USA, Inc. v. Aker Mar. Inc.
(Chevron II), 689 F.3d 497, 500 (5th Cir. 2012). On remand, the district court
ordered that Oceaneering indemnify Aker “for nearly the full settlement
amount and for attorneys’ fees.” Id. In Chevron II, Oceaneering appealed that
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                                        No. 14-20222
indemnification order. At issue was the master service agreement (the “MSA”)
between Oceaneering and Chevron, which applied “to damage arising out of,
connected with, incident to directly or indirectly or resulting from or related to
[Oceaneering’s] performance of this Agreement.” Id. at 501 (internal quotation
marks and footnote omitted). 4              This court determined that Aker was
indemnified by Oceaneering under the MSA, and thus affirmed the district
court’s judgment.          Id. at 502–06.          Following the Chevron II decision,
Oceaneering paid Aker $2,049,539.27.
      Oceaneering then sought indemnification from its insurer, American
Home Assurance, for Oceaneering’s own indemnification of Aker. Oceaneering
is the only named insured under its policy with American Home—Commercial
General Liability (“CGL”) Marine Package Insurance Policy No. C1854 (the
“Policy”). Most relevant here, under coverage provision A(1)(a) of the Policy,
American Home agreed to “pay those sums that the insured becomes legally
obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to
which the insurance applies.”             The Policy defines “property damage” as
“[p]hysical injury to tangible property, including all resulting loss of use of that
property,” as well as “[l]oss of use of tangible property that is not physically




      4   “Directly or indirectly” was struck out by agreement of the parties. Id. at 501 n.2.
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                                    No. 14-20222
injured.” The policy also contains a “sistership” exclusion 5 and an exclusion
for contractual liability. 6
      On August 23, 2012, American Home filed a declaratory judgment action
in the United States District Court for the Southern District of Texas, seeking
a declaration that the Policy does not cover Oceaneering’s payment to Aker.
Oceaneering counterclaimed seeking indemnification from American Home.
On January 4, 2013, Oceaneering filed a motion for partial summary judgment
on its breach of contract claim, arguing that the Policy covered its payment to
Aker and that none of the exclusions applied. On September 9, 2013, American
Home filed a cross-motion for summary judgment.
      The matter was referred to a magistrate judge, who issued a
Memorandum and Recommendation on February 18, 2014, recommending
that Oceaneering’s motion be denied and that American Home’s motion be
granted. The court first addressed whether the damages at issue constituted
“property damage” so as to trigger coverage under the Policy. The magistrate


      5  The sistership exclusion, found in coverage provision (A)(2)(n), excludes from
coverage:
              Damages claimed for any loss, cost or expense incurred by you or others
       for the loss of use, withdrawal, recall, inspection, repair, replacement,
       adjustment, removal or disposal of:
              (1) “Your product”;
              (2) “Your work”; or
              (3) “Impaired property”;
              if such product, work or property is withdrawn or recalled from the
       market or from use by any person or organization because of a known or
       suspected defect, deficiency, inadequacy or dangerous condition in it.
       6 The contractual liability exclusion is found in coverage provision (A)(2)(b) and

excludes from coverage:
              “Bodily injury” or “property damage” for which the insured is obligated
       to pay damages by reason of the assumption of liability in a contract or
       agreement. This exclusion does not apply to liability for damages:
              (1) Assured in a contract or agreement that is an “insured contract”,
                  provided the “bodily injury” or “property damage” occurs subsequent
                  to the execution of the contract or agreement; or
              (2) That the insured would have in the absence of the contract or
                  agreement.
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                                  No. 14-20222
judge recognized that in Chevron I, the Fifth Circuit stated that the “‘defective
bolts have damaged other property, the spar,’” and mused that “[p]erhaps the
[Fifth Circuit] was convinced that the structural integrity of the entire facility
was compromised by the sub-standard bolts.”         The magistrate judge then
recommended that American Home’s motion for summary judgment should be
denied as to American Home’s argument that there was no “property damage”
under the Policy, citing a disinclination “to controvert or disregard the Fifth
Circuit’s considered characterization of the damage done to the Genesis Spar
in this case.”   The magistrate judge instead recommended that American
Home’s motion for summary judgment be granted on the grounds that the
sistership exclusion applied to bar coverage. The magistrate judge did not
reach the contractual liability exclusion.     The district court adopted the
Memorandum and Recommendation and issued a final judgment.
                                       II.
      We review a district court’s grant of summary judgment de novo. Etienne
v. Spanish Lake Truck & Casino Plaza, L.L.C., 778 F.3d 473, 475 (5th Cir.
2015). Summary judgment should be granted “if the movant 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). In reviewing a district
court’s grant of summary judgment, we view “all facts and evidence in the light
most favorable to the non-moving party.” E.E.O.C. v. LHC Grp., Inc., 773 F.3d
688, 694 (5th Cir. 2014) (internal quotation marks omitted).
      The interpretation of an insurance contract is also reviewed de novo.
Potomac Ins. Co. of Ill. v. Jayhawk Med. Acceptance Corp., 198 F.3d 548, 550
(5th Cir. 2000). Terms of an insurance policy that “are subject to more than
one reasonable construction are interpreted in favor of coverage.” Gilbert
Texas Const., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 133
(Tex. 2010). “But an ambiguity does not exist simply because the parties
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                                   No. 14-20222
interpret a policy differently.”    Id.        “[W]here the language is plain and
unambiguous, courts must enforce the contract as made by the parties, and
cannot make a new contract for them, nor change that which they have made
under the guise of construction.” Fiess v. State Farm Lloyds, 202 S.W.3d 744,
753 (Tex. 2006) (internal quotation marks omitted).
                                          III.
      Though the district court granted summary judgment based on the
sistership exclusion, we do not reach that issue, as we conclude that
Oceaneering failed to carry its burden of establishing “property damage” as
required by the Policy. We may affirm a district court’s judgment on any basis
supported in the record. Teague v. Quarterman, 482 F.3d 769, 773 (5th Cir.
2007). Oceaneering bears the burden of establishing American Home’s duty to
indemnify. Nat’l Union Fire Ins. Co. v. Puget Plastics Corp., 532 F.3d 398, 401
(5th Cir. 2008) (“In Texas, the insured carries the burden to establish the
insurer’s duty to indemnify by presenting facts sufficient to demonstrate
coverage.”). Here, American Home’s liability to indemnify Oceaneering only
comes into play if Oceaneering is liable for “property damage,” defined under
the Policy as “[p]hysical injury to tangible property.” Oceaneering asserts that
there was “property damage” within the meaning of the Policy, as the defective
bolts damaged the Genesis Spar.
      Oceaneering argues that we are bound by the law of the case doctrine to
follow this court’s decisions in Chevron I and Chevron II, both of which,
Oceaneering contends, found that the defective bolts caused property damage
to the spar. This court’s decision in Chevron I stated:
      Chevron’s damages incurred repairing the spar are not economic
      loss. The undisputed facts here show that the defective products,
      the bolts, have damaged other property, the spar. That damage is
      not economic loss—the claim is not that the bolts were “a waste of


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                                 No. 14-20222
      money” or caused lost profits—but property loss, so Chevron’s
      damages are entirely under the LPLA, not in redhibition.

Chevron I, 604 F.3d at 901 (citation omitted). According to Oceaneering, the
Chevron I opinion’s statement that the bolts “damaged other property, the
spar,” binds us to determine that there was “property damage” to the spar
within the meaning of the Policy. Oceaneering is mistaken for two reasons,
one technical, the other fundamental. The technical flaw in Oceaneering’s
argument is that the law of the case doctrine only applies to “subsequent stages
of the same case.” United States v. Mendez, 102 F.3d 126, 131 (5th Cir. 1996)
(internal citation and quotation marks omitted); see also United States v.
Lawrence, 179 F.3d 343, 351 (5th Cir. 1999) (“Although Lawrence was tried
jointly with Tolliver, the doctrine of the law of the case does not govern his
claim. Tolliver’s § 2255 motion is not the same ‘case’ as Lawrence’s § 2255
motion.”). Even “an identical issue decided in a separate action does not
qualify as law of the case.” Farina v. Nokia Inc., 625 F.3d 97, 117 n.21 (3d Cir.
2010). This is a separate action from the suit in Chevron I, not a subsequent
stage of the same action. As such, Chevron I is simply not the law of the case.
See 18B Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure
§ 4478 (2d ed. 2014) (“Law-of-the-case rules have developed to maintain
consistency and avoid reconsideration of matters once decided during the
course of a single continuing lawsuit. They do not apply between separate
actions.” (footnote omitted)).     The fundamental flaw in Oceaneering’s
argument is that it assigns talismanic significance to the use of the words
“property damage” in the Chevron I opinion. Yet the words an opinion uses
cannot be abstracted from the questions and arguments presented to the court
for decision. Before the Chevron I court, the question was whether Chevron
could recover attorney’s fees in its underlying lawsuit.        Answering that
question required characterizing Chevron’s claim as a claim in redhibition, for
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                                 No. 14-20222
which attorney’s fees are recoverable, or as a claim under LPLA, for which they
are not.   A claim in redhibition seeks only economic losses; any products
liability claim for damages other than economic losses falls under LPLA. See
Chevron I, 604 F.3d at 900. The appellant in Chevron I argued in its brief that
Chevron sought only the costs of removing and replacing the bolts in the
Genesis Spar, not the costs of the bolts themselves or any lost opportunities or
profits resulting from the bolts being defective. Brief for Appellant T-3 Custom
Coating at 43–46, Chevron I, 604 F.3d 888 (No. 07-31117), 2008 WL 7662650,
at *43–*46. According to the appellant in Chevron I, economic loss under
Louisiana law is only the cost of the defective product and any lost profits or
opportunities—in contrast, it argued that the cost of removing and replacing
the defective product is non-economic loss recoverable only under LPLA. Id.;
see also Reply Brief for Appellant T-3 Custom Coating at 22–24, Chevron I, 604
F.3d 888 (No. 07-31117), 2008 WL 7662655, at *22–*24. Chevron responded
by arguing that economic loss under Louisiana law encompasses the costs of
removing and replacing the defective product and therefore that its claim was
in redhibition, not under LPLA. Brief for Appellee Chevron USA, Inc. in
Opposition to Brief of Appellant T-3 Custom Coating at 40–43, Chevron I, 604
F.3d 888 (No. 07-31117), 2008 WL 8017258, at *40–*43. That was the only
argument made by the parties that the Genesis Spar suffered “property
damage” as the result of the defective bolts. “Property damage” was, therefore,
used in the Chevron I opinion as a term of art, separating “damage”
compensable under LPLA—the costs of removing and replacing the defective
bolts—from damages that would sound in redhibition—the costs of the original
bolts plus any lost opportunities or profits. See La. Rev. Stat. § 9:2800.54(A)
(“The manufacturer of a product shall be liable to a claimant for damage
proximately caused by a characteristic of the product that renders the product
unreasonably dangerous when such damage arose from a reasonably
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                                 No. 14-20222
anticipated use of the product by the claimant or another person or entity.”);
La. Rev. Stat. § 9:2800.53(5) (defining “Damage” as “all damage caused by a
product, including survival and wrongful death damages, for which Civil Code
Articles 2315, 2315.1 and 2315.2 allow recovery. ‘Damage’ includes damage to
the product itself and economic loss arising from a deficiency in or loss of use
of the product only to the extent that Chapter 9 of Title VII of Book III of the
Civil Code, entitled ‘Redhibition,’ does not allow recovery for such damage or
economic loss.   Attorneys’ fees are not recoverable under this Chapter.”).
Neither party argued that the incorporation of the defective bolts into the
Genesis Spar—and, consequently, the need to remove and replace them—was
not “damage” under LPLA. This court’s statement in Chevron I that the bolts
“damaged other property, the spar” was therefore meant only to classify the
claim for the costs of removing and replacing the defective bolts as being a
claim not for purely economic losses, i.e. a claim in redhibition, but rather for
other property damage, i.e. a claim under LPLA. As such, the Chevron I
opinion says nothing about whether the claims satisfy the definition of
property damage—“physical injury to tangible property”—in the CGL Policy at
issue here.
      Chevron II is even further afield. Chevron II concerned Aker’s attempt
to have Oceaneering indemnify it for the judgment Chevron obtained against
Aker. Chevron II, 689 F.3d at 500. Oceaneering’s indemnity obligation arose
from a provision in the MSA between Chevron and Oceaneering:
      CONTRACTOR [Oceaneering] shall be liable to and hold
      INDEMNITEES harmless for any loss of or damage to the property
      of COMPANY [Chevron] (its joint venturers and partners and
      affiliates) arising out of, connected with, incident to directly or
      indirectly or resulting from or related to CONTRACTOR’S
      performance of this Agreement, including but not limited to,
      CONTRACTOR’S use of equipment provided by COMPANY (its
      joint venturers and partners and affiliates) or others, regardless of

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                                      No. 14-20222
       the passive, concurrent or active negligence of, and regardless of
       whether liability without fault (including, but not limited to,
       claims for unseaworthiness of any vessel) is imposed or sought to
       be imposed on, INDEMNITEES.

Id. at 501 (footnote omitted). Pointing to the “damage to the property of
COMPANY [Chevron]” language in the MSA, Oceaneering argues that a
necessary predicate finding underlying this court’s holding that Oceaneering
was obligated to indemnify Aker is that the defective bolts caused property
damage to the Genesis Spar. Yet, again, Oceaneering’s argument fails, as the
opinion never addresses whether the bolts caused property damage to the spar.
See generally Chevron II, 689 F.3d 497. The Chevron II opinion appears not to
have addressed the issue for good reason—the issue was never raised by
Oceaneering in its brief. See generally Brief for Appellant Oceaneering Int’l,
Inc., Chevron II, 689 F.3d 497 (No. 11-30369), 2011 WL 9525615. As such, the
Chevron II opinion did not pass any judgment on the issue of whether the bolts
had caused property damage to the spar. The question was not before the
court, as it had not been raised. See McKay v. Novartis Pharm. Corp., 751 F.3d
694, n.6 (5th Cir. 2014) (“An appellant abandons all issues not raised and
argued in its initial brief of appeal and we have held repeatedly that we will
not consider issues not briefed by the parties.” (internal quotation marks,
citation, and brackets omitted)).
       Oceaneering rests its argument that there was “property damage” within
the meaning of the CGL Policy on these two prior opinions. 7 Because these


       7 Oceaneering states, in a footnote in its brief, that “[o]ther States and Circuits
recognize that when a defective product is incorporated into a larger product, the resulting
harm is considered to be covered property damage.” We are reluctant to pass on such a
potentially far-reaching argument where it was only joined on the merits by Oceaneering in
such a limited manner. As such, we note only that the cases cited by Oceaneering in support
of that assertion are inapposite. Three of the cases interpreted prior versions of the CGL
policy, which has since been amended to define “property damage” as “physical injury to
tangible property,” and have been distinguished by subsequent opinions on that basis.
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                                        No. 14-20222
two opinions fail to establish that the bolts caused “property damage” within
the meaning of the Policy, Oceaneering has failed to carry its burden of
showing that its claim falls within the scope of the Policy. As such, we do not
reach the applicability of the sister-ship exclusion or the insured contract
exclusion. See Teague, 482 F.3d at 773.
                                              IV.
       The judgment of the district court is AFFIRMED.


Compare Goodyear Rubber & Supply Co. v. Great Am. Ins. Co., 471 F.2d 1343, 1344 (9th Cir.
1973) (“Under well-settled principles, when one product is integrated into a larger entity and
the product proves defective, the damage is considered as damage to the entity to the extent
that the market value of the entity is reduced by an amount in excess of the value of the
defective product.”), with N.H. Ins. Co. v. Vieira, 930 F.2d 696, 701 (9th Cir. 1991) (“In light
of the new, narrowed definitions of property damage, we are persuaded that diminution in
value is not ‘physical damage’ to ‘tangible property,’ and hence is not covered by New
Hampshire’s policy.”); compare Hauenstein v. St. Paul-Mercury Indemnity Co., 65 N.W.2d
122, 125–26 (Minn. 1954), with Federated Mut. Ins. Co. v. Concrete Units, Inc., 363 N.W.2d
751, 755–56 (Minn. 1985); compare Geddes & Smith, Inc. v. St. Paul-Mercury Indemnity Co.,
334 P.2d 881, 885 (Cal. 1959), with Vieira, 930 F.2d at 697–701, and F&H Constr. v. ITT
Hartford Ins. Co., 12 Cal. Rptr. 3d 896, 903 (Cal. Ct. App. 2004) (“Prior to 1973, the standard
CGLI policies defined ‘property damage’ as ‘injury to or destruction of tangible property.’ . . .
Beginning in 1973, the definition of ‘property damage’ in the standard CGLI policy was
changed to ‘physical injury to or destruction of tangible property.’ Giving this new definition
its plain and ordinary meaning, the majority of courts hold that it does not cover economic
damages.”). Another of the cases cited by Oceaneering, Sturges Manufacturing Co. v. Utica
Mutual Insurance Co., 332 N.E.2d 319 (N.Y. 1975), also construed the earlier version of the
CGL policy, which defined property damage merely as “injury to or destruction of tangible
property.” See id. at 321. The final case cited by Oceaneering is wholly uninstructive on the
issue in question here. See Pittsburgh Bridge & Iron Works v. Liberty Mut. Fire Ins. Co., 444
F.2d 1286, 1288 (3d Cir. 1971) (noting that the CGL policy provides coverage “[w]here X
supplies a part to Y who constructs an entity from X’s part and from other parts and X’s part
proves defective causing damage to the entity” but failing to define “damage to the entity”).
Further, the Texas Supreme Court has expressed skepticism that the mere incorporation of
a defective product into a larger product—without something more—constitutes property
damage, stating in dicta that “faulty workmanship that merely diminishes the value of the
home without causing physical injury or loss of use does not involve ‘property damage.’”
Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 10 (Tex. 2007); see also Bldg.
Specialties, Inc. v. Liberty Mut. Ins. Co., 712 F. Supp. 2d 628, 645 (S.D. Tex. 2010) (“There
were no allegations of any resulting physical damage to the duct work itself or to other parts
of the house or to the loss of use. The petition sought damages only for the cost of repairing
the defective duct work. The petition alleged defective work by the insured but did not allege
that the defective work ‘caused physical injury or loss of use.’ The petition did not allege
covered ‘property damage.’”).
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