FIFTH CIRCUIT FINDS INSURANCE CARRIER HAS NO DUTY TO RETROACTIVELY DEFEND AN ADDITIONAL INSURED
Last Friday, the Fifth Circuit affirmed a district court’s decision that an insurer had no duty under the policy to defend an additional insured. In Ace American Insurance Co. v. Freeport Welding & Fabricating, No. 12-20002, 2012 WL 5077688, (5th Cir. October 19, 2012), Freeport Welding & Fabricating (“Freeport”) sued Ace American Insurance Company (“Ace”) for defense and indemnity arising from an underlying personal injury law suit filed in Texas state court.
In 2008, Freeport issued a purchase order to Brand Industrial, L.L.C. (“Brand Industrial”) for the installation of lining inside of a quench chamber. Brand Industrial’s work was subsequently taken over by its parent company, Brand Energy Solutions, LLC (“Brand Energy”) in January 2009. Afterward, Freeport and Brand Energy entered into a purchase agreement. The purchase agreement started on January 1, 2009 and was indefinitely valid until cancelled in writing by the parties. Importantly, the 2009 purchase agreement served as a contract wherein Brand Energy agreed to provide insurance coverage to Freeport for all purchase orders entered into by Brand Energy and Freeport.
In May 2009, the workers started the installation of the lining and completely fulfilled the 2008 purchase order by August 2009. Several workers were injured during the installation and sued Freeport. Afterward, pursuant to the 2009 purchase agreement, counsel for Freeport tendered defense to Brand Energy’s insurance carrier, Ace. Ace denied the tender of defense and filed for declaratory judgment in the District Court for the Southern District of Texas. The parties filed cross motions seeking summary judgment, and the district court rendered judgment in favor of the insurance carrier holding that it had no duty to defend Freeport as an additional insured under the policy.
On Appeal, the Fifth Circuit determined the May 2009 purchase agreement served as a contract granting Freeport additional insured status under the policy; however, the May 2009 purchase agreement did not apply retroactively to work negotiated under the 2008 purchase order. The Fifth Circuit affirmed the district court’s holding that Ace had no duty to defend Freeport and remanded the case for determination of whether or not Ace had a duty to indemnify.