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 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.
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
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.
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:
The "Retained Limit" is defined in Insuring Agreement § III.E:
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
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
The district court granted Underwriters' motion for summary judgment, finding that the "underlying insurance can only be exhausted by claims that 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.
"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
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 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).
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).
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:
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
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"
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.
"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
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
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
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."
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.
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.
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.