by: Nadia I. Gire

The Texas Supreme Court ruled in favor of ExxonMobil Corporation in its dispute with National Union Fire Insurance Company of Pittsburgh, PA. The case revolved around ExxonMobil’s pursuit of additional insured coverage from National Union for settlements related to a refinery accident involving two contractor employees. This article explores the court’s ruling and the underlying principles that shaped its decision.

ExxonMobil, having exhausted the limits of its primary insurance policy underwritten by National Union, sought coverage as an additional insured from National Union’s umbrella liability insurer. A portion of the settlement, amounting to approximately $5 million, was covered by various primary insurance policies recognizing ExxonMobil as an additional insured. However, National Union and Starr, another insurer, both denied ExxonMobil coverage under their umbrella policies. In response, ExxonMobil filed a lawsuit alleging breach of contract by both insurers, asserting that their denial of coverage was wrongful. National Union argued that ExxonMobil’s agreement with contractor Savage contained terms that excluded additional insured coverage under the umbrella policy. The insurer refused to indemnify ExxonMobil for the settlements based on this assertion.

The Texas Supreme Court, after careful consideration, sided with ExxonMobil and affirmed its status as an additional insured. Moreover, the court established three guiding principles to govern Texas’s “clear manifestation” doctrine, ensuring that courts enforce rather than expand the parties’ agreement.

• No Broader Coverage: The court noted that the umbrella policy explicitly disclaimed providing “broader coverage” than the primary policy. Consequently, ExxonMobil was not seeking coverage that extended beyond what the primary policy offered. Instead, it aimed to access the higher limits provided by the umbrella policy, given that the primary policies had already been exhausted.

• Same Coverage, Different Limits: ExxonMobil’s request for coverage aligned with the primary policy’s scope, but at the higher limits provided by the umbrella policy. The court recognized that ExxonMobil was not demanding an expansion of coverage but rather seeking the same coverage as the primary policy, adjusted to reflect the limits of the umbrella policy.

• Enforcing the Parties’ Agreement: The court emphasized the importance of enforcing the terms of the parties’ agreement without exceeding its bounds. It held that courts should uphold the agreement while avoiding interpretations that would unduly expand or restrict the parties’ intended coverage.

ExxonMobil’s triumph in this case highlights the significance of additional insured coverage disputes and the principles that guide such cases. The Texas Supreme Court’s ruling ensures that parties receive the coverage they are entitled to under their agreements, without exceeding the intended scope; therefore, it is imperative that agreement must be evaluated on a case-by-case basis. For assistance relating to any insurance coverage matters or additional information regarding this case, please contact Wilkins | Gire.