ADDITIONAL INSURED NOT COVERED BY BLANKET, LEFT OUT IN THE COLD FOR ITS OWN NEGLIGENCE

Also in the last week of February, the United States Fifth Circuit Court of Appeals issued an opinion interpreting the language involved in an insurance policy’s “additional insured” provision. In Schlumberger Technology Corporation v. Carolina Casual Insurance Company, 2023 WL 2240461, Spotted Lakes, LLC was transporting sand for Schlumberger when it was involved in a four-vehicle accident, including two tractor trailers, with one tractor-trailer operated by Schlumberger and the other by Spotted Lakes.  One of the drivers of a non-tractor-trailer sued Schlumberger, and they settled prior to trial. Schlumberger then filed a separate action against Spotted Lakes, seeking the recovery of its defense costs, the settlement amount, and attorneys’ fees and costs. Schlumberger and Spotted Lakes had a Master Transportation Agreement that required Spotted Lakes to list Schlumberger as an additional insured on its own policy. Spotted Lakes’ policy had a Blanket Additional Insured Endorsement providing that “insured” includes any person or organization that you are required to provide insurance, but only to the extent of Spotted Lakes’ negligence.

Although the Southern District of Texas agreed with Schlumberger that this meant Schlumberger was covered under the policy, the Fifth Circuit held otherwise. Specifically, the Fifth Circuit noted that the policy excluded all acts outside of those arising out of Spotted Lake’s negligence. Here, the original plaintiffs only sued Schlumberger and only alleged its negligence. Thus, the “only your negligence” language limited the “any person or organization that requires you under an insured contract” language, and the Fifth Circuit sided with Spotted Lakes and its insurance company.