On June 14, 2016, Judge Harmon of the United States District Court for the Southern District of Texas denied Ace American Insurance Company’s Motion for Reconsideration of its First-Amended Cross-Motion for Summary Judgment in Lexington Ins. Co. v. ACE Am. Ins. Co., 4:12-CV-531, 2016 WL 3251748, at *1 (S.D. Tex. June 14, 2016).  On March 4, 2015, Ace filed a Motion for Reconsideration of the Court's interlocutory order based on the Texas Supreme Court’s opinion in In re Deepwater Horizon, 470 S.W.3d 452, 2015 WL 674744 (Tex. Feb. 13, 2015) (“Deepwater Horizon”). The Court postponed consideration of Ace’s Motion for Reconsideration as premature until the Texas Supreme Court’s decision was released for publication and was no longer subject to revision, and the Court later denied Ace’s Motion without prejudice because of the continued pendency of the In re Deepwater Horizon decision. After In Re Deepwater Horizon became final, Ace filed a Renewed Motion for Reconsideration.

The insurance coverage lawsuit was brought by Lexington Insurance Company wherein it contended that Ace had a duty to defend Lexington’s additional insureds Midcontinent Express Pipeline, LLC and its affiliates (“MEP PARTIES”) in several Underlying Lawsuits arising out of a natural gas explosion that took place in Smith County, Mississippi on July 15, 2009.  Ace denied that it owed a duty and has, therefore, filed a First Amended Cross-Motion for Summary Judgment against Lexington.

Ace’s Motion for Reconsideration asked the Court to revisit the relationship between the additional insured provision in the Ace Policy and the applicable provisions of a Professional Services Agreement (“PSA”), and conclude that Ace is entitled to summary judgment rather than Lexington.  Ace argued that the Court’s previous order was “inconsistent with the Supreme Court’s holding in Deepwater Horizon” in its finding that the scope of the indemnity obligation set forth in the PSA did not operate to limit the additional insured coverage owed to the MEP Parties under the Ace Policy.

The Court determined that Deepwater Horizon did not present an intervening change in the controlling law and it did not expressly overrule any previous case law.  Rather, the Court determined Deepwater Horizon specifically stated that “[o]ur application of these foundational principles in Urrutia and ATOFINA guides our analysis of the policies and Drilling Contract at issue here.”  470 S.W.3d at 460.  For that reason alone, the limited application of the Supreme Court’s ruling, the Court concluded Ace’s Motion should be denied.

The Court also evaluated Ace’s indemnity provision regarding third party claims, and determined that third party claims do trigger the indemnity obligation under the PSA.  The Court explained that the underlying plaintiffs in all eight suits are employees of contractors other than the MEP Parties, and therefore are third parties, and they have claimed that the MEP Parties are responsible for the bodily injuries or the deaths of the plaintiffs.”

Because the underlying plaintiffs’ claims fall under the indemnity obligation, the MEP Parties were entitled receive coverage as additional insureds under the Ace policy.

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