AUSTIN - On Friday, the Texas Supreme Court held that ExxonMobil is an “insured” under an umbrella policy, reversing an appellate court ruling that found insurers were not obligated to reimburse the oil giant for a $24 million settlement.
According to the high court’s opinion, the litigation stems from a workplace accident at Exxon’s Baytown refinery in which two employees for an independent contractor were severely burned. The employees sought compensation for their injuries and later settled with Exxon for a collective amount of more than $24 million.
Court records show Exxon sued National Union Fire Insurance and Starr Indemnity for breach of contract, asserting that both had wrongfully denied coverage. A trial court found in favor of Exxon, ruling that National Union, but not Starr, was obligated under its umbrella policy to reimburse Exxon for the roughly $20 million it had paid in settling with the two injured workers.
An appellate court reversed the ruling, leading Exxon to petition the Texas Supreme Court, which held that Exxon is an “insured” under National Union’s umbrella policy.
“The question presented in this case is whether an insurance policy incorporates the payout limits in an underlying service agreement,” the opinion states. “Based on ordinary rules of contract interpretation and our precedents applying the incorporation-by-reference doctrine, we hold that it does not.
“We accordingly reverse the judgment of the court of appeals and remand the case to that court for further proceedings.”
Justices also reversed a judgment in favor of Starr, finding that the court of appeals’ holding with respect to Starr’s bumbershoot policy was predicated on a similar error.
Case No. 21-0936