     Case: 17-20550   Document: 00514920853     Page: 1   Date Filed: 04/17/2019




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

                                                                       FILED
                                                                    April 17, 2019
                                 No. 17-20550
                                                                    Lyle W. Cayce
                                                                         Clerk
LLOYD’S SYNDICATE 457; LLOYD’S SYNDICATE 1036; LLOYD’S
SYNDICATE 1084; LLOYD’S SYNDICATE 1209; LLOYD’S SYNDICATE
1225, et al

             Plaintiffs - Appellants

v.

FLOATEC, L.L.C., doing business as FloaTEC Solutions, L.L.C.

             Defendant - Appellee




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


Before SMITH, DUNCAN, and ENGELHARDT, Circuit Judges.
STUART KYLE DUNCAN, Circuit Judge:
      This case concerns a disputed siting of Big Foot in the Gulf of Mexico.
We refer to a floating oil-drilling platform that rests on four massive columns—
hence the name “Big Foot”—moored by steel tendons to the ocean floor.
Chevron, which operates and co-owns Big Foot, contracted with FloaTEC to
engineer the tendons. During installation in 2015, several tendons failed,
causing Chevron huge losses. Big Foot was insured by various Lloyd’s of
London syndicates (collectively, “Underwriters”) through a policy issued to
Chevron. To cover the tendon mishap, Underwriters paid Chevron over $500
million and then went looking to recoup that money. Among others,
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                                  No. 17-20550
Underwriters sued FloaTEC. Underwriters claimed that, having paid
Chevron’s losses under the policy, they were subrogated to Chevron’s right to
sue FloaTEC for damages caused by the tendon failures.
      Eventually the case landed in federal district court and FloaTEC moved
to dismiss. FloaTEC argued that it qualified as an “Other Assured” under
Underwriters’ policy and that the policy waives subrogation against “Other
Assureds”—hence Underwriters’ subrogation-based claims should fail.
Underwriters responded in two ways. First, they argued that the subrogation
issue should be decided by an arbitrator, not the district court, by virtue of the
broad arbitration clause in Chevron’s contract with FloaTEC. Second,
Underwriters argued that, in any event, FloaTEC was not an “Other Assured”
under a proper reading of the policy.
      The district court sided with FloaTEC on both points. It decided the
arbitration clause did not apply because Underwriters were not a party to the
Chevron/FloaTEC contract. It then decided FloaTEC did qualify as an “Other
Assured” under the policy, thus enabling FloaTEC to raise the subrogation
waiver. The court dismissed Underwriters’ claims with prejudice.
      Underwriters appeal both issues. We affirm.
                                        I.
                                        A.
      Big Foot is a major deepwater oil drilling project in the Gulf of Mexico
off the Louisiana coast. It is located on the Outer Continental Shelf in the
Walker Ridge Area, Block 29, about 225 miles south of New Orleans. The
project is operated by Chevron, which co-owns it with Statoil Gulf of Mexico
LLC and Marubeni Oil & Gas (USA) Inc. As part of the project, in 2015,
Chevron began to build and install an “extended tension-leg platform” that
would be anchored to the seafloor almost a mile below. This is a photo of the
platform in transit to Walker Ridge:
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The platform would be kept stationary by sixteen steel tendons attached to
pilings driven into the seafloor. These tendons were critical to the floating
platform’s stability.
      Chevron contracted with FloaTEC to provide engineering services in
connection with Big Foot, including the design and installation of the tendons.
We will refer to the Chevron/FloaTEC agreement as the “Chevron/FloaTEC
Contract” or simply the “Contract.” The Contract required FloaTEC to
maintain specific kinds of insurance related to the performance of its duties on
the project. The Contract also included a broad arbitration clause, empowering
a chosen arbitrator or arbitrators to “rule on objections concerning jurisdiction,
including the existence or validity of this arbitration clause and existence or
the validity of this Contract[.]”
       Big Foot was insured by Underwriters through an Offshore
Construction    Project   Policy    with       Chevron.   We   will   refer   to   this
Underwriters/Chevron agreement as the “Underwriters/Chevron Policy” or

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simply as the “Policy.” The Policy was written on a “WELCAR 2001” form, a
standard construction risk policy developed for the offshore energy market at
Lloyd’s in the late 1990s. See, e.g., Tim Taylor, Offshore Energy Construction
Insurance: Allocation of Risk Issues, 87 TUL. L. REV. 1165, 1170 (2013)
(“Taylor”). Risks covered by the Policy included physical loss or damage to Big
Foot incurred during the project’s design and engineering. The Policy included
a clause stating that Underwriters agreed to “waive rights of subrogation”
against any “Principal Assureds” or “Other Assureds.” “Other Assureds” were
defined in a separate section of the Policy to include “[a]ny” other companies
with whom Chevron had “entered into written contract(s) in connection with
the [Big Foot] Project.”
      In mid-2015, before the platform’s stabilizing tendons had been
installed, nine of the sixteen tendons detached from their supporting buoys and
plummeted to the seafloor. An investigation revealed that the bolts holding the
tendons to the buoys had come loose. Chevron rejected the remaining seven
tendons and had them sent back to shore. The failure of the tendons and the
resulting delay to Big Foot caused Chevron huge losses. As a result,
Underwriters paid Chevron over $500 million under the Policy.
                                      B.
      Seeking to recoup those payments, Underwriters filed a lawsuit in a
Texas state court in May 2016, naming as defendants various contractors
connected to Big Foot, including FloaTEC. Underwriters alleged FloaTEC had
negligently designed and manufactured the tendons and attachment bolts and
had therefore caused the damages to Big Foot. Prior to service of process,
claims against all defendants except FloaTEC were dropped. FloaTEC
removed the case to federal court.
      Underwriters then filed an amended complaint, adding the claim that
FloaTEC breached its contract with Chevron. Underwriters’ claims against
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FloaTEC were all based on subrogation—meaning Underwriters sought to
stand in Chevron’s shoes by virtue of having paid Chevron’s losses under the
Policy. See LA. CIV. CODE art. 1825 (subrogation is “the substitution of one
person to the rights of another” and “may be conventional or legal”); id. art.
1827 (“conventional” subrogation occurs when “[a]n obligee who receives
performance from a third person . . . subrogate[s] that person to the rights of
the obligee, even without the obligor’s consent”); see also, e.g., Old Repub. Life
Ins. Co. v. Transwood, Inc., 2016-0552 (La. App. 1 Cir. 6/2/17); 222 So.3d 995,
1005 (explaining that, “[u]nder Louisiana law, although an insurer which pays
claims on behalf of an insured is not entitled to legal subrogation, it may still
be entitled to conventional subrogation if appropriately provided in the
contract of insurance”) (citing Watters v. State Dep’t of Transp. & Devel., 33,870
(La. App. 2 Cir. 9/27/00); 768 So.2d 733, 737).
      FloaTEC moved to dismiss for failure to state a claim and, alternatively,
to compel arbitration if the court found Underwriters had stated a claim.
FloaTEC’s argument for dismissal hinged on three clauses in the
Underwriters/Chevron Policy. The first clause, entitled “Subrogation,” states:
      Underwriters shall be subrogated to all rights which the Assured
      may have against any person or other entity, other than Principal
      Assureds and Other Assureds, in respect of any claim or payment
      made under the Policy (emphasis added).

The second clause, entitled “Waiver of Subrogation,” states:
      Underwriters agree to waive rights of subrogation against any
      Principal Assured(s) and/or Other Assured(s) including drilling
      contractors and/or their sub-contractors (emphasis added).

Finally, the third clause defines “Other Assureds” to include:
      [a]ny other company, firm, person, or party . . . with whom [various
      entities including Chevron] have entered into written contract(s)
      in connection with the [Big Foot] Project.”


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                                      No. 17-20550
FloaTEC argued that it qualified as an “Other Assured” and that
Underwriters’ claims were therefore barred by the Policy’s subrogation waiver.
Underwriters opposed FloaTEC’s motion, arguing (1) FloaTEC was not an
“Other Assured” under the Policy, and (2) FloaTEC had waived any right to
arbitration by moving to dismiss.
       The district court agreed with FloaTEC that it was an “Other Assured”
under the Policy and that Underwriters’ claims were thus barred by the
subrogation waiver. The court therefore dismissed Underwriters’ claims with
prejudice for failure to state a claim. 1 Underwriters appeal.
                                            II.
       We review de novo a dismissal for failure to state a claim, asking whether
the plaintiff “fail[ed] to allege any set of facts in support of his claim which
would entitle him to relief.” Taylor v. Books A Million, Inc., 296 F.3d 376, 378
(5th Cir. 2002). We also review de novo a district court’s interpretation of a
contract. Greenwood 950, LLC v. Chesapeake Louisiana, LP, 683 F.3d 666, 668
(5th Cir. 2012); Steel Warehouse Co. v. Abalone Shipping Ltd. of Nicosai, 141
F.3d 234, 236–37 (5th Cir. 1998).
                                            III.
       Underwriters’ appeal requires us to consider two related issues. First,
we must decide whether the district court improperly disregarded the
arbitration clause in the Chevron/FloaTEC Contract when it ruled, as an
initial matter, on FloaTEC’s motion to dismiss. If we decide that the district
court properly considered FloaTEC’s motion to dismiss before any arbitrability


       1 In the order dismissing FloaTEC, the district court also denied a motion to dismiss
or to compel arbitration filed by another defendant, American Global Maritime, Inc., which
had been added by Underwriters’ amended complaint. The court subsequently granted
Underwriters’ motion for partial final judgment under Federal Rule of Civil Procedure 54(b),
allowing Underwriters to appeal the dismissal of its claims against FloaTEC. See, e.g.,
Johnson v. Ocwen Loan Servicing, LLC, 916 F.3d 505, 507 (5th Cir. 2019).
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issue, then, second, we must decide whether the court’s ruling on the motion
to dismiss was correct. We consider each issue in turn.
                                                A.
       Underwriters argue that the Contract’s delegation clause required the
district court to send their claims to arbitration instead of ruling on FloaTEC’s
motion     to   dismiss.     That     clause,       Underwriters     assert,    “clearly    and
unmistakably” delegates to the arbitrator all “gateway arbitrability issues,”
including whether the Policy’s subrogation waiver bars their claims. See, e.g.,
Petrofac, Inc. v. DynMcDermott Petroleum Oper. Co., 687 F.3d 671, 675 (5th
Cir. 2012) (parties must “‘clearly and unmistakably provide’” that they have
agreed to “arbitrate arbitrability”) (quoting AT&T Techs., Inc. v. Commc’ns
Workers of Am., 475 U.S. 643, 649 (1986)). 2 According to Underwriters, the
clause prohibited the court from ruling on FloaTEC’s motion to dismiss because
“a valid delegation clause requires the court to refer a claim to arbitration to
allow the arbitrator to decide gateway arbitrability issues.” Kubala v. Supreme
Prod. Servs., Inc., 830 F.3d 199 (5th Cir. 2016) (citing Rent-A-Ctr., W., Inc. v.
Jackson, 561 U.S. 63, 68–69 (2010)). By ruling on that motion, say
Underwriters, the court let FloaTEC “game the system”—that is, “seek[ ] a
decision on the merits while keeping the arbitration option as a backup plan
in case the effort fails.” In re Mirant, 613 F.3d 584, 590 (5th Cir. 2010).
       Underwriters misread our precedent. To assess whether a claim must be
arbitrated, we follow a two-step analysis. At step one, “the court must



       2 As already explained, the delegation clause provides that “[t]he . . . arbitrators have
the power to rule on objections concerning jurisdiction, including the existence or validity of
this Contract.” Given our resolution of this issue, we need not determine whether
Underwriters are correct that the clause “clearly and unmistakably” delegates arbitrability
to the arbitrator. Cf., e.g., Petrofac, 687 F.3d at 675 (explaining that “the express adoption of
[American Arbitration Association] rules presents clear and unmistakable evidence that the
parties agreed to arbitrate arbitrability”).
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determine ‘whether the parties entered into any arbitration agreement at all.’”
IQ Prod. Co. v. WD-40 Co., 871 F.3d 344, 348 (5th Cir. 2017) (quoting Kubala,
830 F.3d at 201). “This first step is a question of contract formation only—did
the parties form a valid agreement to arbitrate some set of claims.” Id. (citing
Kubala, 830 F.3d at 201–02). This inquiry is for the court: “Where the very
existence of any [arbitration] agreement is disputed, it is for the courts to
decide at the outset whether an agreement was reached[.]” Will-Drill Res., Inc.
v. Samson Res. Co., 352 F.3d 211, 218 (5th Cir. 2003) (emphasis added); see
also, e.g., DK Joint Venture 1 v. Weyand, 649 F.3d 310, 317 (5th Cir. 2011) (“[It]
is for the courts and not the arbitrator to decide in the first instance . . .
whether the parties entered into an arbitration agreement in the first place.”).
Only if we answer “yes” at the first step do we proceed to the second. At step
two, we engage in a “limited” inquiry: “[W]hether the [parties’] agreement
contains a valid delegation clause.” IQ Prod., 871 F.3d at 348 (citing Kubala,
830 F.3d at 202). We ask only whether there is “‘clear and unmistakable’
evidence” that the parties intended to arbitrate. Id. 3 If so, a “motion to compel
arbitration should be granted in almost all cases.” Id. (quoting Kubala, 830
F.3d at 202).
       Underwriters skip the first step of the analysis. They would compel
arbitration of their claims against FloaTEC based on the Contract’s delegation
clause. But that is step two. Underwriters must first contend with the step one



       3  Along with other circuits, we previously recognized a narrow exception to this rule
when “a claim of arbitrability is ‘wholly groundless.’” IQ Prod., 871 F.3d at 349 (quoting
InterDigital Commc’ns, LLC v. Int’l Trade Comm’n, 718 F.3d 1336, 1346–47 (Fed. Cir. 2013),
vacated as moot by LG Electronics, Inc. v. InterDigital Commc’ns, LLC, 572 U.S. 1056 (2014)).
This “wholly groundless” exception was recently abrogated by the Supreme Court in Henry
Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019). That development leaves
intact the remainder of our two-part framework for assessing a claim’s arbitrability. More to
the point, Schein’s abrogation of the wholly groundless exception has no impact on this case
since it altered step two of our framework, and here we apply only step one.
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question, which is whether they “form[ed] a valid [arbitration] agreement”
with FloaTEC to begin with. IQ Prod., 871 F.3d at 348. FloaTEC denies this
strenuously: It points out that Underwriters are not parties to the Contract
and, moreover, that the only agreement Underwriters are parties to (the
Underwriters/Chevron Policy) bars subrogation against “Other Assureds” like
FloaTEC. See infra III.B. Hence FloaTEC moved to dismiss Underwriters’
claims, which are based entirely on subrogation.
      The district court correctly treated this subrogation issue as a step one
inquiry because it goes to whether any arbitration agreement exists between
Underwriters and FloaTEC. If the Policy bars Underwriters from stepping into
Chevron’s shoes and benefitting from the Contract’s delegation clause, then
Underwriters and FloaTEC never “entered into any arbitration agreement at
all.” IQ Prod., 871 F.3d 344, 348. We have consistently treated attacks on an
arbitration agreement’s existence as step one matters for courts, not
arbitrators. See, e.g., Will-Drill, 352 F.3d at 216 & nn. 26–28 (treating as a step
one inquiry cases where “the parties resisting arbitration attack the existence
of the entire agreement, not the arbitration clause specifically”). For example,
we have followed sister circuit cases that “refus[ed] to order arbitration of
disputes where one party claims that it is not bound by the arbitration
agreement . . . because it was not an original party to the agreement.” Id. at
216 (discussing Chastain v. Robinson-Humphrey Co., 957 F.2d 851 (11th Cir.
1992); Joseph Co. v. Mich. Sugar Co., 803 F.2d 396 (8th Cir. 1986)). The
subrogation issue here falls into the same category: FloaTEC argues that the
Policy’s subrogation bar means Underwriters cannot step into the
Chevron/FloaTEC Contract containing the arbitration agreement. By deciding
FloaTEC’s motion to dismiss at the outset, the district court properly resolved




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                                       No. 17-20550
that contract-formation issue, which is “for the courts and not the arbitrator to
decide in the first instance.” DK Joint Venture 1, 649 F.3d at 317. 4
       Underwriters cannot avoid this outcome by calling the subrogation issue
a “merits-based affirmative defense” to its claims against FloaTEC. That again
ignores that we have two contracts here, not one. If we were dealing with a
disagreement       between      Chevron      and    FloaTEC       concerning      FloaTEC’s
engineering of Big Foot’s tendons, we might have a “merits-based” issue that
would presumably have to be arbitrated under the Contract. We have nothing
like that here, however. FloaTEC argues Underwriters were not parties to the
Contract at all and so could not invoke the Contract’s delegation provision in
the first place. This is not a dispute about the “merits” of Underwriters’ claims;
it is “a simpler type of dispute which, we have held, is for the courts and not
the arbitrator to decide in the first instance: a dispute over whether the parties
entered into any arbitration agreement in the first place.” Id. 5



       4 The parties submitted post-argument briefs addressing the impact, if any, of the
Supreme Court’s recent decisions in Schein, 139 S. Ct. 524, and New Prime, Inc. v. Oliveira,
139 S. Ct. 532 (2019). Neither decision bears on the issues before us. Schein simply rejected
the “wholly groundless” exception to arbitrability delegations. 139 S. Ct. at 529. It did not
change—to the contrary, it reaffirmed—the rule that courts must first decide whether an
arbitration agreement exists at all. See id. at 530 (“To be sure, before referring a dispute to
an arbitrator, the court determines whether a valid arbitration agreement exists.”).
Similarly, Oliveira decided only that “a court should decide for itself whether [the Federal
Arbitration Act’s] ‘contracts of employment’ exclusion applies before ordering arbitration,”
139 S. Ct. at 537, but said nothing about how a court should determine whether any
arbitration agreement exists to begin with.
       5 Underwriters urge that arbitration is “strongly favored” and should be granted
unless the pertinent arbitration clause is “not susceptible of an interpretation” that would
cover the dispute. See, e.g., Sedco, Inc. v. Petroleos Mexicanos Mexican Nat. Oil Co. (Pemex),
767 F.2d 1140, 1145 (5th Cir. 1985), as modified by Freudensprung v. Offshore Tech. Servs.,
Inc., 379 F.3d 327 (5th Cir. 2004). We do not question those principles, but they have no
bearing here. We are not interpreting an arbitration clause; we are deciding whether an
arbitration clause exists between the relevant parties. The “strong federal policy favoring
arbitration,” we have held, “‘does not apply to the determination of whether there is a valid
agreement to arbitrate between the parties.’” Will-Drill, 352 F.3d at 214 (quoting Fleetwood
Enters. Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002)).
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      For the same reason, Underwriters are wrong that FloaTEC “gamed the
system by asking the district court to first determine the merits” and, if that
failed, asking “to send the case to mandatory arbitration” for a second bite at
the apple. As explained, FloaTEC’s motion to dismiss did not ask the court to
“determine the merits” of Underwriters’ claims; it asked the court to rule that
Underwriters could not be subrogated to Chevron’s rights. And FloaTEC asked
for arbitration only if the court ruled that Underwriters were subrogated to
Chevron’s rights. By making these alternative requests, FloaTEC was not
“gaming the system”—it was covering its bases. Cf. Mirant, 613 F.3d at 590–
91 (a party “game[d] the system” when it “did not initially present its motion
to compel arbitration . . . as an alternative to its motion to dismiss,” but instead
litigated the merits extensively before moving to compel arbitration).
      In sum, we conclude the district court correctly ruled on FloaTEC’s
motion to dismiss before addressing any issue concerning the arbitrability of
Underwriters’ claims. 6
                                           B.
      We turn to Underwriters’ argument that the district court erred by
dismissing its claims against FloaTEC. The district court reasoned that
FloaTEC qualified as an “Other Assured,” as defined in the Policy, because
FloaTEC “entered into a written contract” with Chevron “in connection with
the [Big Foot project].” The court therefore concluded that Underwriters’
subrogated claims were barred, because in the Policy Underwriters “agree[d]
to waive rights of subrogation against any . . . Other Assured(s).”




      6  Given our resolution of this threshold issue, we need not consider FloaTEC’s
alternative argument that Underwriters waived their right to argue for arbitration now by
opposing arbitration below.
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      On appeal, Underwriters contend the district court misread the Policy.
They focus, not on the definition of “Other Assured,” but on a distinct clause
entitled “Special Conditions for Other Assureds,” which provides as follows (we
present the three sentences of the clause separately for easier reading):
      [1] The interest of the Other Assured(s) shall be covered
      throughout the entire Policy Period for their direct participation in
      the venture, unless specific contract(s) contain provisions to the
      contrary.
      [2] The rights of any Assured under this insurance shall only be
      exercised through the Principal Assureds.
      [3] Where the benefits of this insurance have been passed to an
      Assured by contract, the benefits passed to that Assured shall be
      no greater than such contract allows and in no case greater than
      the benefits provided under the insuring agreements, terms[,]
      conditions[,] and exclusions in the Policy (brackets added).

The definition of “Other Assured,” argue Underwriters, must be read in light
of these Special Conditions. Specifically, they say the clause’s first and third
sentences require consulting the Chevron/FloaTEC Contract to see whether
Chevron is obligated to provide insurance coverage to FloaTEC under the
Policy. If not, Underwriters argue that FloaTEC cannot qualify as an “Other
Assured” and so cannot invoke the Policy’s subrogation waiver. Moreover,
Underwriters contend that by defining “Other Assured” in isolation, the
district court rendered the Special Conditions clause meaningless. They argue
that, “[i]f possession of a written contract [with Chevron] alone was sufficient
to qualify for full coverage under the [Policy], there would be no need for the
Special Conditions provision.”
      To resolve this issue, we apply Louisiana law 7 governing contract
interpretation. See generally LA. CIV. CODE, bk. III, tit. IV, ch. 13; id. arts.


      7 As the district court correctly found, Louisiana law applies under the Outer
Continental Shelf Lands Act. See 43 U.S.C. § 1333(a). Congress has “adopt[ed] as surrogate
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2045–2057; see also, e.g., In re Katrina Canal Breaches Litig., 495 F.3d 191,
206–08 (5th Cir. 2007) (discussing Louisiana law principles for interpreting
insurance contracts). Under Louisiana law, “[t]he role of the judiciary in
interpreting insurance contracts is to ascertain the common intent of the
insured and insurer as reflected by the words in the policy.” Peterson v.
Schimek, 98-1712 (La. 3/2/99); 729 So. 2d 1024, 1028; see also LA. CIV. CODE
art. 2045 (contractual interpretation is “the determination of the common
intent of the parties”). “Words and phrases used in an insurance policy are to
be construed using their plain, ordinary and generally prevailing meaning,
unless the words have acquired a technical meaning.” Cadwallader v. Allstate
Ins. Co., 2002-1637 (La. 6/27/03); 848 So. 2d 577, 580 (citing LA. CIV. CODE art.
2047). Insurance policies should be construed holistically, meaning that “one
policy provision is not to be construed separately at the expense of disregarding
other policy provisions.” Louisiana Ins. Guar. Ass’n v. Interstate Fire & Cas.
Co., 93-0911 (La. 1/14/94); 630 So. 2d 759, 763; see also LA. CIV. CODE art. 2050
(contractual provisions must be interpreted “in light of the other provisions” to
give each “the meaning suggested by the contract as a whole”). “The rules of
construction do not authorize . . . the exercise of inventive powers to create an
ambiguity where none exists or the making of a new contract when the terms
express with sufficient clearness the parties’ intent.” Cadwallader, 848 So. 2d
at 580; see also LA. CIV. CODE art. 2046 (when words are “clear and explicit and
lead to no absurd consequences, no further interpretation may be made in
search of the parties’ intent”). On the other hand, “[i]f after applying the other
general rules of construction an ambiguity remains, the ambiguous contractual



federal law the ‘civil and criminal laws of each adjacent State’” to govern disputes on the
Outer Continental Shelf. Petrobras Am., Inc. v. Vicinay Cadenas, S.A., 815 F.3d 211, 215 (5th
Cir.), order clarified on reh’g, 829 F.3d 770 (5th Cir. 2016) (quoting 43 U.S.C. § 1333(a)(2)(A)).
Parties cannot alter this rule by choosing another state’s law in their contract. Id.
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provision is to be construed against the drafter, or, as originating in the
insurance context, in favor of the insured.” Louisiana Ins. Guar. Ass’n, 630 So.
2d at 764; see also Katrina Canal Breaches Litig., 495 F.3d at 207 (same).
Under this “rule of strict construction,” ambiguous clauses are “construed
against the insurer and in favor of coverage” and “equivocal provisions seeking
to narrow an insurer’s obligation are strictly construed against the insurer.”
Bonin v. Westport Ins. Corp., 2005-0886 (La. 5/17/06); 930 So.2d 906, 911
(citations omitted).
      Applying these principles to the insurance contract at issue, we reject
Underwriters’ arguments that the district court misread its terms. To the
contrary, the court correctly found FloaTEC to be an “Other Assured” under
the Policy and thus correctly concluded that Underwriters’ claims against
FloaTEC are barred by the Policy’s subrogation waiver.
      First, the “plain . . . meaning” of the Policy qualifies FloaTEC as an
“Other Assured.” Cadwallader, 848 So. 2d at 580. It is uncontested that
FloaTEC contracted with Chevron to provide engineering services for Big Foot.
This makes FloaTEC an “Other Assured” under the Policy’s text because it
“entered into [a] written contract[ ]” with Chevron “in connection with the [Big
Foot] project.” The Policy places no additional conditions on the status of an
“Other Assured.” See, e.g., AGIP Petroleum Co., Inc. v. Gulf Island Fabrication,
Inc., 920 F. Supp. 1318, 1325–26 (S.D. Tex. 1996) (construing materially
identical definition of “other assured” and concluding this “clear and
unambiguous language . . . [was] intended to include contractors . . . who
entered into agreements with [the principal Assured] concerning the
[project]”). FloaTEC therefore qualifies under the Policy as an “Other Assured”
against whom Underwriters “agree[d] to waive rights of subrogation,” as the
district court correctly found. No further analysis was required in the face of
that plain language. See LA. CIV. CODE art. 2046 (“no further interpretation
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                                   No. 17-20550
may be made in search of the parties’ intent” when a contract’s words are “clear
and explicit and lead to no absurd consequences”).
      Tellingly, Underwriters’ arguments are not directed to the text of the
“Other Assured” definition or the subrogation waiver. Instead, they rely on
cases allegedly standing for the proposition that an “Other Assured” must be
entitled to insurance coverage from a Principal Assured. See, e.g., WH
Holdings, LLC v. Ace Am. Ins. Co., 481 F. App’x 894 (5th Cir. 2012); Edwards
v. Brambles Equip. Servs., Inc., 75 F. App’x 929 (5th Cir. 2003). But “[n]one of
th[ose] cases,” the district court cogently observed, “supports a general
proposition that, always and everywhere, Other Assured status is determined
by reference to the contract between a Principal Assured and a putative Other
Assured.” To the contrary, in those cases the issue turned—as it does here—on
the specific policy definition in play.
      The policies in Underwriters’ cases limit an “insured” to entities a
principal is obligated to insure. See WH Holdings, 481 F. App’x at 895 (defining
“insured” to include “any party in interest which the insured is responsible to
insure”); Edwards, 75 F. App’x at 932 (involving a policy that “extend[ed]
coverage to ‘any person or organization you [the main policyholder] are
required by written contract to include as an insured’”) (emphases added). Here,
the pertinent definition is materially different: “Other Assured” means an
entity with whom a principal Assured has “entered into written contract(s) in
connection with the [Big Foot] Project.” That definition does not require that
the principal Assured also be obligated to provide coverage to the entity, and
we cannot blue-pencil that extra clause into the Contract. “[I]t is too obvious
for argument that courts will not add words to a contract for the purpose of
ascertaining the true intent of the parties.” Ross v. Zuntz, 36 La. Ann. 888, 894
(La. 1884); see also Sims v. Mulhearn Funeral Home, Inc., 2007-0054 (La.
5/22/07); 956 So. 2d 583, 589 (explaining “[c]ourts lack the authority to alter
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                                 No. 17-20550
the terms of insurance contracts under the guise of contractual interpretation
when the policy’s provisions are couched in unambiguous terms”).
      Second, we disagree with Underwriters that the Special Conditions
clause somehow alters or qualifies the Policy’s otherwise unambiguous
definition of “Other Assured.” Nothing in the Special Conditions clause
purports to modify that definition. To the contrary, the clause assumes that its
conditions apply only to entities that already are “Other Assureds.” Nor does
the clause purport to modify the Policy’s subrogation waiver, which
unambiguously “waive[s] rights of subrogation against . . . Other Assured[s].”
Reading the Special Conditions clause to strip an otherwise-qualified entity of
“Other Assured” status, as Underwriters urge us to do, would be an
impermissible “exercise of inventive powers to create an ambiguity where none
exists.” Cadwallader, 848 So. 2d at 580. We lack authority to do that. See LA.
CIV. CODE art. 2046; Sims, 956 So. 2d at 589.
      Even if we possessed that revisionary authority—and could pretend the
Special Conditions clause somehow modifies the definition of “Other
Assured”—that would not help Underwriters. We would then be left with an
insurance contract ambiguous on what constitutes an “Other Assured,” and
ambiguous on how the subrogation waiver applies. But it is bedrock law that
ambiguous insurance provisions are read against the insurer and in favor of
coverage. LeBlanc v. Aysenne, 2005-0297 (La. 1/19/06); 921 So.2d 85, 89
(explaining “[i]f there is an ambiguity in a[n] [insurance] policy, then that
ambiguity should be construed in favor of the insured and against the insurer”)
(citing Pareti v. Sentry Indemnity Co., 536 So.2d 417, 420 (La. 1988); accord
Bonin, 930 So.2d at 911; Carrier v. Reliance Ins. Co., 1999-2573 (La. 4/11/00);
759 So. 2d 37, 43; Louisiana Ins. Guar. Ass’n, 630 So. 2d at 764. Moreover,
when “subrogation is disputed,” then the intent to subrogate “must be shown
by clear proof . . . that unquestionably implies it.” A. Copeland Enter., Inc. v.
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                                         No. 17-20550
Slidell Mem’l Hosp., 94-2011 (La. 6/30/95); 657 So.2d 1292, 1298 (citing 5 LA.
CIV. L. TREATISE, LAW OF OBLIGATIONS § 11.22 (1992)). Far from “clear proof”
of an intent to subrogate, here the Policy’s plain text shows intent to bar
subrogation against a putative “Other Assured” like FloaTEC and does not
even hint that the Special Conditions clause tempers that bar.
       If there were any doubt on this point, the record shows that
Underwriters and Chevron knew exactly how to limit “Other Assured” status
in the Policy. The parties struck through a provision in the Special Conditions
section that made conformity with certain “Quality Assurance/Quality Control
system(s)” a “condition precedent . . . to benefit from the Other Assureds status”
(emphasis added). 8 If Underwriters and Chevron wanted to impose a similar
condition precedent for required Policy coverage (or anything else), a template
was thus readily available: The parties could have inserted a provision making
Chevron’s obligation to extend Policy coverage a “condition precedent” to an
entity’s ability to benefit from “Other Assured” status or from the subrogation
waiver. They did not, and we cannot do it for them.
       We also reject Underwriters’ argument that allowing FloaTEC to benefit
from the subrogation waiver as an “Other Assured” renders the Special
Conditions clause “meaningless.” To be sure, we must read an insurance



       8   The stricken clause appears in the record as follows:




See, e.g., Taylor, supra, at 1181 (explaining that this provision, which was “designed to limit
access to the policy for contractors” who failed to comply with agreed quality control
procedures, “has not been a popular clause and is now frequently deleted”). The parties also
struck a similar clause from the Policy’s subrogation waiver. That clause would have made
conformity with the same quality control provisions a “condition precedent to [Other
Assureds] benefiting from the [Policy’s] automatic waiver of subrogation.”
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                                        No. 17-20550
contract to give every provision meaning. LA. CIV. CODE art. 2050; see, e.g.,
Arias-Benn v. State Farm Fire & Cas. Ins. Co., 495 F.3d 228, 231 (5th Cir. 2007)
(under Louisiana law, “[a]n insurance contract is to be construed as a whole”).
But, even on the district court’s straightforward reading of “Other Assured”
(requiring an “Other Assured” only to have a Big Foot contract with Chevron),
the Special Conditions clause would still play a role in the parties’ contractual
relationships. For instance, the first sentence of the Special Conditions clause
permits Chevron to limit a contractor’s Policy coverage through a “provision”
in a “specific contract.” Suppose Chevron did that in its contract with FloaTEC
(as appears to be the case) 9: That limitation might come into play should
FloaTEC seek affirmative recovery under the Policy against Underwriters
(which, of course, is not the scenario we have here). The second Special
Conditions sentence would also play a role in this scenario: FloaTEC would
have to “exercise[ ]” whatever “rights” it has under the Policy “through the
Principal Assureds,” like Chevron. And the third Special Conditions sentence
would insure that any recovery FloaTEC sought under the Policy “shall be no
greater than such contract [with Chevron] allows.”
       This reading harmonizes the “Other Assured” definition and the Special
Conditions clause. The definition concerns a party’s status as an “Other
Assured,” whereas the clause concerns the extent to which an “Other Assured”



       9  As the district court explained, the Chevron/FloaTEC Contract requires FloaTEC to
maintain specific insurance covering certain project risks, such as workers’ compensation and
employer’s liability insurance, commercial general liability insurance, and automobile,
watercraft, and aircraft insurance. The Contract further provides that, to the extent of
FloaTEC’s liabilities, this required insurance “is primary with respect to all insureds . . . and
that no other insurance carried by [Chevron] will be considered as contributory insurance for
any loss.” We need not decide to what extent these provisions limit FloaTEC’s interests under
the Policy because, as explained, FloaTEC is not seeking recovery under the Policy. Rather,
it is seeking only to raise the subrogation waiver against Underwriters’ claims. It is enough
to say, with the district court, that these insurance requirements in the Chevron/FloaTEC
Contract “have nothing to do with [FloaTEC’s] Other Assured status” under the Policy.
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                                        No. 17-20550
may claim Policy coverage. By arguing that a party has “Other Assured” status
only insofar as it has coverage, Underwriters conflate status and extent of
coverage. But the Policy does not. As the district court cogently explained, “the
Policy definition of an Other Assured . . . plainly does not require the contract
between [Chevron] and [FloaTEC] to address the subject of insurance[.]”
Moreover, under the rules of contract interpretation, we should avoid an
interpretation of the Special Conditions clause that overrides the plain
language of the “Other Assured” definition. See, e.g., Clovelly Oil Co., LLC v.
Midstates Petroleum Co., LLC, 2012-2055 (La. 3/19/13); 112 So.3d 187, 195
(courts should “interpret contract provisions ‘so as to avoid neutralizing or
ignoring any of them or treating them as surplusage’”) (quoting John Bailey
Contractor, Inc. v. State Dept. of Transp. & Devel., 439 So.2d 1055, 1058 (La.
1983)) (citing LA. CIV. CODE art. 2050).
       Finally, another reason for rejecting Underwriters’ counter-textual
reading of the Policy (and for accepting the district court’s textual reading) is
that Underwriters’ reading collides with the “anti-subrogation” rule. Under
this “fundamental principle of insurance law[,]” “[a]n insurer cannot by way of
subrogation recover against its insured or an additional assured any part of its
payment for a risk covered by the policy.” Peavey v. M/V ANPA, 971 F.2d 1168,
1177 (5th Cir. 1992) (citing, inter alia, Dow Chemical Co. v. M/V Roberta
Taylor, 815 F.2d 1037, 1043 (5th Cir. 1987)) (emphasis added). 10 Importantly,
the rule applies even when the additional assured is not covered under the




       10 See also, e.g., Shelter Mut. Ins. Co. v. State Farm Mut. Auto. Ins. Co., 2007-0163 (La.
App. 1 Cir. 7/18/08); 993 So.2d 236, 240 (observing “[i]t is well settled [under Louisiana law]
that an insurer cannot be subrogated against its own insured”) (citations omitted); 16 COUCH
ON INS. § 224:12 (“Pursuant to the antisubrogation rule, an insurer is not entitled to
subrogation against persons or entities named in the policy as insureds, or who are additional
insureds under the terms of the policy.”) (citing, inter alia, Olinkraft, Inc. v. Anco Insulation,
Inc., 376 So.2d 1301 (La. App. 2 Cir. 1979) (emphasis added).
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                                  No. 17-20550
policy for the specific risk at issue. See, e.g., Dow Chemical Co., 815 F.2d at
1044–45 (discussing Marathon Oil Co. v. Mid-Continent Underwriters, 786
F.2d 1301, 1302 (5th Cir. 1986); Wiley v. Offshore Painting Contractors, Inc.,
711 F.2d 602 (5th Cir.), on reh’g, 716 F.2d 256 (5th Cir. 1983)). Our key decision
is Marathon Oil, in which Judge Rubin explained:
      [W]hen underwriters issue a policy covering an additional assured
      and waiving ‘all subrogation’ rights against it, they cannot recoup
      from the additional assured any portion of the sums they have paid
      to settle a risk covered by the policy, even on the theory that the
      recoupment is based on the additional assured’s exposure for risks not
      covered by the policy.

786 F.2d at 1302 (emphasis added); see also AGIP, 920 F. Supp. at 1329
(Marathon Oil “determined . . . that waiver of subrogation is not co-extensive
with, but is broader than, coverage under the insurance policy”); and see, e.g.,
Lanasse v. Travelers Ins. Co., 450 F.2d 580 (5th Cir. 1971) (op. of Brown, C.J.)
(underwriters could not recover against additional assured “in the face of the
explicit policy provision waiving subrogation” even though the “additional
assured . . . cannot claim the affirmative benefit of the [policy] coverage”).
      Underwriters’ awkward yoking of “Other Assured” status to the Special
Conditions clause would bring their suit perilously close to the anti-
subrogation danger zone. Recall Underwriters’ theory: Despite the Policy
definition, they say FloaTEC is not an “Other Assured” (and thus can be sued
via subrogation) solely because the Contract withholds full Policy coverage
from FloaTEC. This is precisely the forbidden scenario laid out in Judge
Rubin’s Marathon Oil opinion: (1) Underwriters would “recoup from [an]
additional assured [i.e., FloaTEC] sums they have paid to settle a risk covered
by the policy”; (2) the Policy “waiv[es] . . . subrogation” against an “additional
assured”; and (3) Underwriters rely “on the theory that the recoupment is
based on [FloaTEC’s] exposure for risks not covered by the [P]olicy.” Marathon

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                                  No. 17-20550
Oil, 786 F.2d at 1302 (brackets added). Thus FloaTEC, understandably, urges
us to rule that the anti-subrogation principle bars Underwriters’ suit as a
matter of public policy. See, e.g., Peavey, 971 F.2d at 1177 (describing anti-
subrogation rule as based on “public policy”). But we need not go that far. It is
enough to say that avoiding conflict with the anti-subrogation rule provides yet
another reason—over and above the textual and contextual reasons already
discussed—to give the Policy definition of “Other Assured” the straightforward
reading the district court did. See, e.g., In re Katrina Canal Breaches Litig.,
2010-1823 (La. 5/10/11); 63 So.3d 955, 963 (assessing whether certain
insurance provisions “violate public policy”); Peterson, 729 So.2d at 1031
(explaining that insurance contracts should be construed to “give[ ] effect to
the long-standing public policy of this State”).
                                       IV.
      To sum up, we conclude that the district court properly ruled on
FloaTEC’s motion to dismiss Underwriters’ claims before considering
arbitrability. We also conclude that the district court correctly found FloaTEC
was an “Other Assured” under the Policy and could thus invoke the
subrogation waiver. We therefore affirm the district court’s judgment
dismissing Underwriters’ claims with prejudice.
      AFFIRMED.




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