Texas Supreme Court
AUSTIN – Atofina Petrochemicals, which paid $5.75 million to the family of a man who drowned in oil at its refinery in Port Arthur, can recover every penny of it from Evanston Insurance Company, the Texas Supreme Court ruled June 13.
All nine justices agreed that Jefferson County District Judge Gary Sanderson committed an error in 2002, when he granted summary judgment in favor of Evanston.
Two justices argued in partial dissent that while Evanston had to cover the loss, it deserved a chance to prove that Atofina overpaid in order to reach a settlement.
The majority held that if Evanston wanted to influence the settlement, it shouldn't have denied coverage.
Evanston carried a $9 million umbrella policy on Triple S Industrial Corporation, a maintenance and construction contractor at the refinery.
The policy covered additional parties involved in Triple S operations.
Triple S also carried $1 million in comprehensive liability through Admiral Insurance.
One day Triple S employee Matthew Todd Jones stepped on the corroded top of an oil storage tank. The top gave way, dropping him to his death.
His family sued, and Admiral tendered its $1 million limit.
Atofina demanded coverage from Evanston, which denied the claim.
Atofina added Evanston as a third party and severed the insurance dispute from the family's suit.
Atofina moved for summary judgment, arguing that it qualified as an additional insured party under the Evanston policy.
Evanston moved for summary judgment, arguing that the policy excluded coverage for losses that Atofina caused through its own negligence.
With both motions pending, Atofina reached a settlement agreement adding $5.75 million to the $1 million payout from Admiral. Sanderson granted summary judgment to Evanston.
In 2003, the 9th District appeals court in Beaumont reversed Sanderson.
Evanston petitioned for Supreme Court review. The justices granted review and heard arguments in 2005.
Three years later, the justices held that Atofina could recover from Evanston.
"The service contract between Triple S and Atofina does not assign responsibility for maintaining the storage tank that caused Jones's injury," wrote Justice Paul Green.
"Rather, the contract gives Triple S the exclusive 'power and authority to select the means, method and manner of performing' the operation, and provides that Triple S 'shall have control of and be responsible for the work site,'" he wrote.
"Far from shifting any responsibility to Atofina, the specific terms of the service contract make Triple S responsible for all operations," he wrote.
Litigation never determined liability, he wrote.
Next, Green disposed of Evanston's claim that Atofina overpaid.
He quoted a 1988 decision, Employers Casualty v. Block, holding that "if an insurer wrongfully denies coverage and its insured then enters into an agreed judgment, the insurer is barred from challenging the reasonableness of the settlement amount."
He wrote, "Had Evanston not unconditionally denied coverage, it too would have been able to influence the amount of the settlement."
On that point, Justices Nathan Hecht and Phil Johnson disagreed.
"Evanston had no duty to defend Atofina, as Atofina itself admits. The umbrella policy gave Evanston the right to defend a covered claim but no duty," Hecht wrote.
"Even if Evanston had admitted coverage, it still had no duty to participate in settlement negotiations," he wrote.
"It is a different sort of equity that punishes someone, even an insurance company, for acting legally," he wrote.
An affidavit from Evanston estimated a reasonable settlement at $1 to $2 million, he wrote, raising a fact issue that needed resolution.
The court remanded the case to Sanderson for rulings on interest and attorney fees.
Jack Carnegie and Walter Snider represented Atofina. Jeffery Nobles, Brit Brown and Frank Monago represented Evanston.