BEAUMONT - Exxon lost $25 million in one court ruling this month after a Texas appeals court found a contractor's insurance policy didn't extend to the oil and gas giant's settlement of lawsuits over a deadly 2013 explosion in Beaumont.
The Ninth District Court of Appeals on April 3 reversed earlier rulings from an arbitration proceeding and the Jefferson County District Court, finding instead that Lexington Insurance Company had no duty to pay a large part of a $35 million settlement reached with injured workers.
The explosion caused two deaths and 10 injuries and was caused by workers who used a torch to remove bolts from the top of a heat exchanger. Hydrocarbons released from the exchanger ignited in the torch's flame, causing an explosion and fire.
Litigation followed, and the company settled Clean Air Act claims with the federal government in 2019. It paid the feds $616,000, bought the Beaumont Fire Department a $730,000 command vehicle and implemented changes at Exxon's facility.
Exxon tried to grab what it could from Lexington Insurance to pay for lawsuits by injured workers. The insurer disputed that the policy it issued to Brock Services, which was hired by Exxon for scaffolding services during a maintenance construction project, extended to Exxon.
Three Brock employees were injured in the explosion. Exxon had obtained Workers' Compensation coverage for them, and Brock took out an excess policy with a limit of $25 million.
Exxon wanted that policy to pay $25 million of the $35 million it agreed to pay the injured Brock employees, suing Lexington in 2014. Exclusions in the policy for Workers' Compensation and employer liability prevent Exxon from being considered an additional insured, Lexington argued.
It also said sections of labor law classified the Brock workers as actually being Exxon employees, triggering the employer liability exclusion.
"Exxon Mobil Corporation paid the premiums pursuant to the (owner-controlled insurance program) for Brock's Workers' Compensation and employer's liability insurance policy, as well as for Brock's commercial general liability policy," Justice Jay Wright wrote.
"Exxon deducted the costs from Brock's contract payments. Therefore, Exxon... (was) considered to be a statutory 'employer' for purposes of the Workers' Compensation provisions..."
That meant for the excess $25 million policy obtained by Brock, those workers were not covered, Wright wrote. Exxon should have invoked a Workers' Compensation defense when fighting those lawsuits, he added.
"We conclude that the Employer Liability Exclusion in the umbrella policy at issue applies and expressly excludes coverage for the Brock employees' work-related injuries because the Brock employees who were injured were statutory 'employees' of Exxon Mobil," Wright wrote.