Opinion
MO:19-CV-00068-DC
2020-09-25
Aaron Glenn Koury, Cozen O'Connor, Dallas, TX, Marcus R. Tucker, Phelps Dunbar LLP, Houston, TX, for Plaintiffs. Ellen Lewis Van Meir, Nicholas Keith Low, Thompson, Coe, Cousins & Irons, L.L.P., Dallas, TX, for Defendant.
Aaron Glenn Koury, Cozen O'Connor, Dallas, TX, Marcus R. Tucker, Phelps Dunbar LLP, Houston, TX, for Plaintiffs.
Ellen Lewis Van Meir, Nicholas Keith Low, Thompson, Coe, Cousins & Irons, L.L.P., Dallas, TX, for Defendant.
ORDER GRANTING CP WELL'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT
DAVID COUNTS, UNITED STATES DISTRICT JUDGE
BEFORE THE COURT are the Motion for Summary Judgment filed by Plaintiffs St. Paul Fire and Insurance Company (St. Paul), American Guarantee and Liability Insurance Company (American Guarantee), as subrogees of Cimarex Energy Company, and Cimarex Energy Company (Cimarex) (together, Plaintiffs) on January 14, 2020, and the Motion for Summary Judgment filed by Defendant CP Well Testing, LLC (CP Well) on June 11, 2020. (Docs. 22, 47). The parties have fully briefed the issues raised in the motions. (See Docs. 22, 26, 29, 47, 48, 49). After due consideration, the Court GRANTS CP Well's Motion for Summary Judgment (Doc. 47) and DENIES Plaintiffs' Motion for Summary Judgment (Doc. 22).
I. BACKGROUND
The facts surrounding this litigation are not disputed. (See Docs. 22, 26, 29, 47, 48, 49). The summary judgment record indicates that on or about March 15, 2010, Cimarex and CP Well executed a Master Service Agreement (MSA) whereby CP Well was hired to perform flow back services at a well in Beckham County, Oklahoma that was owned and operated by Cimarex. (Docs. 22, 47). The MSA contained a mutual indemnity provision requiring Cimarex and CP Well to indemnify the other against claims for personal injury or illness or death of any member of their "group" as defined in the MSA. See Pls.' Ex. A-1. The MSA also provided:
11.10 Insurance in Support of Indemnities —In support of the mutual indemnity obligations, duties and liabilities each Party assumes in this Agreement, each Party, as indemnitor, agrees, at its own cost, to obtain and maintain, for the benefit of the other Party (and its respective Group) as indemnitees, liability insurance with minimum limits and coverages not less than those required under Article 12 of this Agreement; and, in particular, in the event this Agreement is subject to the indemnity limitations in Chapter 127 of the Texas Civil Practices and Remedies Code (or any successor statute) or similar statute of another jurisdiction, and so long as such limitations are in force, each Party covenants and agrees to support the mutual indemnity and release obligations contained in this Article 11 by carrying insurance (or qualified self-insurance) of the types and in the amounts not less than those specified in Article 12 and Exhibit "C". Notwithstanding any other provision of this Agreement, the Parties agree that its obligations, duties, and liabilities under this Article 11 are independent of all other provisions of this Agreement, including, but not limited to, Article 12
and accordingly shall not be limited, restricted, or in any way affected by any other provision of this Agreement except to the extent mandated by applicable law, and that the insurance requirements and the indemnity provisions shall be separate and distinct obligations and shall be separately and independently enforceable.
Id. Article 12 embodies the parties' agreement that CP Well maintain "the insurance coverage set forth in Exhibit ‘C-1’ " and that Cimarex maintain "the insurance coverage set forth in Exhibit ‘C-2’ ...." Id. Specifically, Article 12 requires:
12.1 Insurance to be Carried —Contractor shall maintain at its sole cost the insurance coverage set forth in Exhibit "C-1" with companies having an A.M. Best's rating of "A-" and VII or better (or other reputable insurance rating organization of "secure" or better) with full policy limits applying, but not less than as stated in Exhibit "C-1". Cimarex shall maintain at its sole cost the insurance coverage set forth in Exhibit "C-2" with companies having an A.M. Best's rating of "A-" and VII or better (or other reputable insurance rating organization of "secure" or better) with full policy limits applying, but not less than as stated in Exhibit "C-2".
Id. Relevantly, Exhibit C-1 contains the following specific insurance requirements as to CP Well:
c. Commercial General Liability Insurance with limits of $1,000,000 combined single limit per occurrence and aggregate, if applicable, including but not limited to coverage for public liability including bodily injury and property damage liability, personal/advertising injury, contractual liability for those liabilities assumed by Contractor herein, cross liability and severability of interest, liability for pollution and cleanup on a sudden and accidental basis, products and completed operations, protective liability/independent contractors/work sublet, and with the "care, custody, and control exclusion" deleted or alternative coverage under a first party property policy for property leased, rented, used and/or in care, custody and control of Contractor.
...
e. Umbrella or Excess Liability Insurance over items (b), (c), (d), and (g) and (h), if applicable, with following form coverage over (or coverages at least as broad as) the coverages afforded by the primary policies with minimum limits of $2,000,000 per occurrence and aggregate, if applicable, in excess of specified limits.
Id. Exhibit C-2 contains similar language, requiring Cimarex to maintain commercial general liability (CGL) insurance with limits of $1 million and umbrella or excess liability (U/EL) insurance with minimum limits of $25 million. Id. Finally, the MSA includes language excluding punitive damages from CP Well and Cimarex's mutual indemnity obligations. Id.
CP Well maintained CGL insurance with National Union Fire Insurance Company of Pittsburgh, Pennsylvania (National Union) for the policy period of November 24, 2014 to November 24, 2015 with limits of $1 million per occurrence, and a U/EL insurance policy with National Union for the same policy period with limits of $10 million per occurrence and $10 million in the aggregate. See Def.'s Ex. 2, 3. CP Well's U/EL policy included the following relevant provision:
Subject to Paragraphs B. and C. above, the most we will pay for damages under this policy on behalf of any person or organization to whom you are obligated by written Insured Contract to provide insurance such as is afforded by this
policy is the lesser of the Limits of Insurance shown in Item 3. of the Declarations or the minimum Limits of Insurance you agreed to procure in such written Insured Contract.
See Def.'s Ex. 3.
Cimarex too maintained insurance in accordance with the MSA. Specifically, Cimarex maintained an Energy Pro Policy with St. Paul that provided Oil and Gas General Liability Protection for the policy period of September 30, 2014 to September 30, 2015, with a limit of $1 million per occurrence. See Pls.' Ex. A-8. Cimarex's U/EL policy was provided by American Guarantee for the same policy period with a $25 million per occurrence limit. See Pls.' Ex. E-2.
On or about April 25, 2015, Johnny Trent (Trent), an individual the parties agree was a member of CP Well's group under the MSA, was allegedly injured while working at the Beckham Well. (Docs. 22 at 3; 47 at 4). Trent filed a lawsuit in the District Court of Beckham County, Oklahoma against Cimarex, CP Well, and a third party to recover damages related to personal injuries sustained in the accident. (Docs. 22 at 3; 47 at 5). Relevantly, Trent raised negligence and negligence per se claims against the three defendants and a gross negligence claim against Cimarex. (Doc. 47 at 5). The case was later transferred to Oklahoma County, Oklahoma. (Doc. 22 at 3).
On or about October 4, 2018, Cimarex settled the underlying lawsuit with Trent for $4.5 million. (Docs. 22 at 7; 47 at 5). CP Well agreed to pay $3 million toward the settlement based on its contractual indemnity obligation under the MSA but refused to indemnify Cimarex for the remaining $1.5 million, causing St. Paul and American Guarantee to pay, on behalf of Cimarex, $1.5 million to settle the Trent lawsuit. (Docs. 22 at 7–8; 47 at 5–6).
On March 13, 2019, Plaintiffs filed the instant lawsuit against CP Well seeking indemnity. (Doc. 1). Plaintiffs' Second Amended Complaint, filed on October 19, 2019, raises claims for breach of contract and declaratory judgment based upon their allegation that CP Well failed to fully comply with its indemnity obligations under the MSA in the underlying lawsuit. (Doc. 21). Plaintiffs seek a declaration that CP Well has a contractual duty to defend and indemnify Cimarex for the claims brought by Trent in the underlying lawsuit for an amount up to $11 million. Id.
Before the expiration of the discovery period, Plaintiffs filed their Motion for Summary Judgment. (Doc. 22). Plaintiffs argue CP Well is obligated to reimburse St. Paul and American Guarantee for the $1.5 million they paid as Cimarex's insurers to settle the Trent lawsuit because CP Well owes contractual indemnity to Cimarex under the mutual indemnity provision in the MSA. Id. at 1. Further, Plaintiffs argue CP Well is obligated to indemnify Cimarex for up to $11 million under the Texas Oilfield Anti-Indemnity Act (TOAIA) together with the MSA's insurance requirements because $11 million is the amount of liability insurance CP Well obtained to support its contractual indemnity obligations, not $3 million (the minimum amount of liability insurance the MSA required CP Well to procure). Id. at 2.
CP Well filed a response opposing the Motion for Summary Judgment, arguing genuine issues of material fact exist regarding whether Cimarex's settlement payment covered punitive damages, which are not subject to indemnification. (Doc. 26). Further, CP Well claims it was only obligated to indemnify Cimarex for up to $3 million under the MSA and the TOAIA. Id. Plaintiffs filed a reply in support of their Motion for Summary Judgment on February 4, 2020. (Doc. 29).
CP Well also moved for summary judgment on Plaintiffs' claims before the expiration of the discovery deadline. (Doc. 47). CP Well argues that its indemnity obligations extended to $3 million as specified in the MSA and its U/EL policy. Id. Thus, CP Well maintains Plaintiffs' claims for indemnity and declaratory judgment are meritless. Id.
Plaintiffs filed a response reasserting the arguments included in their Motion for Summary Judgment. (Doc. 48). CP Well filed a reply in support of its Motion for Summary Judgment on July 1, 2020. (Doc. 49).
II. LEGAL STANDARD
Summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). A genuine issue exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must examine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251–52, 106 S.Ct. 2505. In making this determination, the Court must consider the record as a whole by reviewing all pleadings, depositions, affidavits, and admissions on file, and drawing all justifiable inferences in favor of the party opposing the motion. See Caboni v. Gen. Motors Corp. , 278 F.3d 448, 451 (5th Cir. 2002). The Court may not weigh the evidence or evaluate the credibility of witnesses. Id.
The moving party bears the initial burden of showing the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party demonstrates an absence of evidence supporting the nonmoving party's case, then the burden shifts to the nonmoving party to come forward with specific facts showing that a genuine issue for trial exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The nonmoving party cannot rest on the mere allegations of the pleadings to sustain this burden. Fed. R. Civ. P. 56(e) ; see also Anderson , 477 U.S. at 248, 106 S.Ct. 2505. "After the nonmovant has been given an opportunity to raise a genuine factual issue, if no reasonable juror could find for the nonmovant, summary judgment will be granted." Caboni , 278 F.3d at 451. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson , 477 U.S. at 248, 106 S.Ct. 2505. The admissibility of summary judgment evidence is subject to the same rules of admissibility applicable to a trial. See Resolution Tr. Corp. v. Starkey , 41 F.3d 1018, 1024 (5th Cir. 1995) (citing Munoz v. Int'l All. of Theatrical Stage Emps. & Moving Picture Mach. Operators of the US & Can. , 563 F.2d 205, 297 n.1 (5th Cir. 1977) ). Federal courts sitting in diversity apply state substantive law and federal procedural law. See Gasperini v. Ctr. for Humanities, Inc. , 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996).
III. DISCUSSION
As previously noted, the facts pertinent to the parties' dispute are not contested. Rather, the parties disagree as to the interpretation of a number of provisions in the MSA and CP Well's U/EL policy, as well as the application of statutory language in the TOAIA. Plaintiffs' breach of contract claim against CP Well is premised on the allegation that CP Well breached the MSA when it refused to indemnify Cimarex or reimburse St. Paul and American Guarantee, as subrogees of Cimarex, the $1.5 million St. Paul and American Guarantee paid to settle the Trent lawsuit. (Doc. 21 at 14–15). Moreover, Plaintiffs seek a declaratory judgment that CP Well owes an obligation to contractually defend and indemnify Cimarex for up to $11 million. Id. at 13–14. Based on the parties' allegations, the issue before the Court is whether CP Well breached the MSA's indemnity provision when it refused to indemnify Cimarex for up to $11 million in the Trent lawsuit.
The parties agree that Texas law applies to interpret the MSA. (Doc. 22 at 7; 47 at 2). The parties also agree that the MSA is subject to the TOAIA, Chapter 127 of the Texas Civil Practice and Remedies Code. (Docs. 22, 47).
A. The TOAIA
Under the TOAIA, an indemnity provision in an "agreement pertaining to a well for oil, gas, or water ... is void if it purports to indemnify a person against loss or liability for damage that is caused by or results from the sole or concurrent negligence of the indemnitee, his agent or employee, or an individual contractor directly responsible to the indemnitee." Tex. Civ. Prac. & Rem. Code Ann. § 127.003(a)(1). Further, it voids an indemnity agreement for damage that "arises from personal injury or death, property injury, or any other loss, damage, or expense that arises from personal injury, death, or property injury." Tex. Civ. Prac. & Rem. Code Ann. § 127.003(a)(2). The MSA subject to this litigation falls under these categories. See Pls.' Ex. A-1. However, the indemnity provision is not void
if the parties agree in writing that the indemnity obligation will be supported by liability insurance coverage to be furnished by the indemnitor subject to the limitations specified in Subsection (b) or (c).
Tex. Civ. Prac. & Rem. Code Ann. § 127.005(a). Here, the parties agreed that their indemnity obligations would be supported by liability insurance coverage. See Pls.' Ex. A-1. Thus, the MSA falls under the Safe Harbor Provision of the TOAIA. See Tex. Civ. Prac. & Rem. Code Ann. § 127.005(a).
The limitations referred to in § 127.005(a) differ depending on whether the parties' agreement contains a mutual or unilateral indemnity obligation. See Tex. Civ. Prac. & Rem. Code Ann. § 127.005(b), (c). Subsection (b) applies to agreements containing mutual indemnity obligations, as the parties agree is the case here. See Pls.' Ex. A-1. Subsection (b) provides:
With respect to a mutual indemnity obligation, the indemnity obligation is limited to the extent of the coverage and dollar limits of insurance or qualified self-insurance each party as indemnitor has agreed to obtain for the benefit of the other party as indemnitee.
Tex. Civ. Prac. & Rem. Code Ann. § 127.005(b). Accordingly, the parties may agree to provide a specific amount of coverage to support their indemnity obligations. Id. However, in interpreting this provision, the Texas Supreme Court concluded that subsection (b) "does not require parties to a mutual indemnity agreement to agree to have insurance in the same dollar amount." See Ken Petroleum Corp. v. Questor Drilling Corp. , 24 S.W.3d 344, 350 (2000). Neither does the TOAIA require that the "amount of coverage each party agrees to provide ... be specific in the agreement that contains the indemnity agreement." Id. at 351 (citing Tex. Civ. Prac. & Rem. Code Ann. § 127.005(a) ). Rather, "it contemplates that the mutual indemnity obligations will be enforceable only up to ‘the extent of the coverage and dollar limits of insurance or qualified self-insurance each party as indemnitor has agreed to provide in equal amounts to the other party as indemnitee.’ " Id. (quoting Tex. Civ. Prac. & Rem. Code Ann. § 127.005(b) ). Thus, "[w]hen the parties agree to provide differing [or unspecified] amounts of coverage, the mutual indemnity obligations are limited to the lower amount of insurance." Id. at 351.
In the instant case, the parties disagree as to whether the MSA included a specific dollar amount of insurance each party was required to obtain. CP Well argues the MSA specifies the minimum amount of coverage each party agreed to provide—$3 million in CGL and U/EL insurance. (Doc. 47 at 9–10). Plaintiffs allege Cimarex and CP Well did not specify the actual coverage limits each was agreeing to maintain. (Doc. 22 at 16). Plaintiffs claim the indemnity obligation is limited to the amount of insurance that is equally provided, applying Ken Petroleum . Id. Thus, because Cimarex maintained $26 million in liability insurance and CP Well maintained $11 million in liability insurance, CP Well's indemnity obligation is limited to $11 million, not $3 million. Id. To decide the issue, the Court must turn to the language of the MSA.
B. Whether the MSA Specifies the Amount of Coverage the Parties Agreed to Provide
The MSA is a contract. Accordingly, the rules of contract construction govern its interpretation. See Hovanec v. Miller , No. 5-17-CV-766-XR, 2018 WL 1221486, at *12 (W.D. Tex. Mar. 7, 2018). "Disagreement between the parties concerning the meaning of contract terms does not transform issues of law to issues of fact." Certain Underwriters at Lloyd's, London v. Cameron Int'l Corp. , No. 4:14-CV-2105, 2018 WL 385496, at *2 (S.D. Tex. Jan. 10, 2018), aff'd sub nom. Certain Underwriters at Lloyd's, London v. Axon Pressure Prods. Inc. , 951 F.3d 248 (5th Cir. 2020). When construing a contract district courts "must ascertain the true intentions of the parties as expressed in the writing itself." Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am. , 341 S.W.3d 323, 333 (Tex. 2011). District courts must "give terms their plain, ordinary, and generally accepted meaning unless their instrument shows that the parties used them in a technical or different sense." Heritage Res., Inc. v. NationsBank , 939 S.W.2d 118, 121 (Tex. 1996).
The MSA contains a couple of provisions that reference the amount of liability insurance each party was required to obtain. First, Paragraph 11.10, in relevant part, provides:
In support of the mutual indemnity obligations, duties and liabilities each Party assumes in this Agreement, each Party, as indemnitor, agrees, at its own cost, to obtain and maintain, for the benefit of the other Party (and its respective Group) as indemnitees, liability insurance with minimum limits and coverages not less than those required under Article 12 of this Agreement ...
Pls.' Ex. A-1 (emphasis added). This paragraph unambiguously states that the minimum limits the parties must obtain to support their indemnity obligations cannot be less than those required in Article 12 of the MSA. See id. Paragraph 11.10 continues:
in the event this Agreement is subject to the indemnity limitations in Chapter 127 of the Texas Civil Practices and Remedies Code (or any successor statute) or similar statute of another jurisdiction,
and so long as such limitations are in force, each Party covenants and agrees to support the mutual indemnity and release obligations contained in this Article 11 by carrying insurance (or qualified self-insurance) of the types and in the amounts not less than those specified in Article 12 and Exhibit "C".
Id. Thus, to the extent the indemnity limitations under the TOAIA, Chapter 127 of the Texas Civil Practices and Remedies Code, apply, the parties agree to carry insurance in no specific amount as long as it is not less than what is stated in Article 12 and Exhibit C. Id.
Exhibit C-1, which contains the contractor insurance requirements, states that CP Well must maintain a CGL policy "with limits of $1,000,000 combined single limit per occurrence and aggregate, if applicable[.]" Id. Furthermore, it requires CP Well to maintain U/EL insurance "with the following form coverage over (or coverages at least as broad as) the coverages afforded by the primary policies with minimum limits of $2,000,000 per occurrence and aggregate , if applicable, in excess of specified limits." Id. (emphasis added).
Based on the language used in the MSA, the Court rules the MSA does not specify the amount of coverage each party agreed to provide. Rather, in giving the terms in the MSA, such as "not less than" and "minimum limits," their plain, ordinary, and generally accepted meaning, the Court finds the parties merely agreed to a floor. Either party was free to obtain more coverage than that specified in the MSA. Because the MSA does not limit the amount of coverage the parties agreed to obtain to support their indemnity obligations, the TOAIA applies to limit the parties' indemnity obligations to "the lowest common denominator of insurance coverage between the parties." Liberty Mut. Fire Ins. Co. v. Surplus Ins. Co. , No. 1:16-CA-00870-SS, 2017 WL 6420920, at *4, 2017 U.S. Dist. LEXIS 206187, at *12 (W.D. Tex. Dec. 14, 2017) ; see also Tex. Civ. Prac. & Rem. Code Ann. § 127.005(b). Thus, the next question is how much each party, as indemnitor, agreed to obtain for the benefit of the other party as indemnitee.
The parties agree that—at minimum—Cimarex agreed to obtain $1 million in CGL insurance and $25 million in U/EL insurance. See Pls.' Ex. A-1. Further, Cimarex did maintain liability insurance with limits matching the minimum amounts of coverage required under the MSA. (See Reed Decl. Pls.' Ex. A; Pls.' Ex. A-8). The parties disagree, however, as to the amount of coverage CP Well maintained for Cimarex's benefit as indemnitee. CP Well argues that the MSA makes clear that it only agreed to maintain $1 million in CGL insurance and $2 million in U/EL insurance. (Doc. 47 at 10–11). Plaintiffs argue that because CP Well obtained a $1 million CGL policy and $10 million in U/EL insurance, CP Well agreed to maintain $11 million in liability insurance to support its indemnity obligations to Cimarex. (Doc. 22 at 17). CP Well's indemnity obligations are only enforceable "to the coverage and dollar limits that apply equally to both parties." See Ken Petroleum , 24 S.W.3d at 345. Thus, the Court must next determine the amount of coverage CP Well agreed to obtain for Cimarex's benefit. See Tex. Civ. Prac. & Rem. Code Ann. § 127.005(b).
C. Amount of Coverage CP Well Agreed to Maintain for Cimarex's Benefit
Plaintiffs argue that nothing in the TOAIA prevents an indemnitor from voluntarily providing more insurance than required under the agreement. (Doc. 22 at 18). While that may be the case, the Court is not persuaded that merely obtaining more insurance than is required by an agreement subjects an indemnitor to liability up to its full insurance limit. Rather, the relevant inquiry is how much coverage CP Well agreed to obtain to "satisfy its indemnity obligations under the [ ] MSA." See Surplus Ins. Co. , 2017 WL 6420920, at *4, 2017 U.S. Dist. LEXIS 206187, at *13–14 ; see also Tex. Civ. Prac. & Rem. Code Ann. § 127.005(b).
In Ken Petroleum , the Texas Supreme Court reviewed the amount of self-insurance and insurance the party had available "to support its contractual indemnity obligation to Ken Petroleum." 24 S.W.3d at 347. To ascertain the amount of insurance or self-insurance the indemnitor procured or had available to support its indemnity obligation, the Texas Supreme Court turned to the parties' negotiation of their contract. See id. at 354. Likewise, contrary to Plaintiffs' allegation that the terms of CP Well's U/EL policy do not control, the Court concludes that it must look to the MSA, CP Well's U/EL policy, and other available evidence in the summary judgment record to determine the amount of insurance the two parties have in common. See id. By looking outside the MSA, the Court is not incorporating CP Well's U/EL policy into the MSA. Rather, under the TOAIA, the Court is ascertaining the lowest common amount of coverage the parties obtained for the benefit of the other.
Curiously, Plaintiffs note that, in Ken Petroleum , the "Texas Supreme Court looked beyond the contract" to determine "the common limit of insurance that [the parties] maintained." (Doc. 22 at 11). Further, Plaintiffs also argue that they "can look outside the contract to determine the extent of liability insurance." (Doc. 29 at 4). Nevertheless, Plaintiffs argue the Court cannot turn to CP Well's U/EL policy to determine the lowest amount of insurance in common. The Court finds Plaintiffs' arguments contradictory and unsupported.
As a starting point, the Court finds that CP Well and Cimarex, at a minimum, have in common $3 million in liability insurance. The Court arrives at this conclusion by looking at the minimum amount both parties agreed to obtain in the MSA. See Pls.' Ex. A-1. As noted above, Cimarex agreed to maintain a minimum of $26 million in liability insurance and CP Well agreed to maintain a minimum of $3 million in liability insurance. Id.
The only evidence Plaintiffs provide to support their allegation that CP Well agreed to obtain $11 million in liability insurance to support its indemnity obligations is CP Well's CGL and U/EL policies, which together provide $11 million in liability insurance. See Def.'s Ex. 2, 3.
CP Well points out, however, that its U/EL policy provides
the most we will pay for damages under this policy on behalf of any person or organization to whom you are obligated by written Insured Contract to provide insurance such as is afforded by this policy is the lesser of the Limits of Insurance shown in Item 3. of the Declarations or the minimum Limits of Insurance you agreed to procure in such written Insured Contract.
Def.'s Ex. 3. Thus, CP Well argues its U/EL policy only provides U/EL coverage for the "minimum Limits of Insurance" CP Well agreed to procure under the MSA, which is $2 million in U/EL insurance. See Pls.' Ex. A-1.
The parties agree that the MSA is an Insured Contract as defined in CP Well's U/EL policy. (See Docs. 29 at 6–7 n.5; 47 at 14). CP Well's U/EL policy only covers the lesser of $10 million, the limits of insurance shown in Item 3 of the Declarations of the U/EL policy, or $2 million, the minimum limits of insurance CP Well agreed to procure in the MSA. Because the minimum $2 million CP Well agreed to procure in the MSA is the lesser, CP Well's U/EL policy indicates CP Well only obtained $2 million in U/EL insurance on top of the $1 million CGL insurance to support its indemnity obligations to Cimarex under the MSA.
It is important to note that the relevant inquiry is not how much liability insurance CP Well obtained. Rather, under the TOAIA, the parties' indemnity obligations are limited to the lowest common amount of coverage the parties obtained to benefit the other. See Tex. Civ. Prac. & Rem. Code Ann. § 127.005(b).
Plaintiffs argue that the limitation in CP Well's U/EL policy does not limit the amount of insurance available to support CP Well's indemnity obligations to Cimarex because the provision applies only if Cimarex is seeking coverage as an additional insured rather than as an indemnitee. (Docs. 29 at 6; 48 at 16–18). The Court disagrees with Plaintiffs' interpretation of the limitation in CP Well's U/EL policy. Under the MSA, CP Well was required to maintain insurance to support its indemnity obligations to Cimarex. See Pls.' Ex. A-1. In other words, CP Well was obligated, by the MSA, to provide U/EL insurance to support its indemnity obligation to Cimarex. See id. That is exactly the type of obligation the limitation in CP Well's U/EL policy contemplates. See Def.'s Ex. 3. A review of the U/EL policy makes clear that CP Well agreed to obtain $2 million in U/EL insurance to support its indemnity obligations under an insured contract—in this case, the MSA. And, under the TOAIA, Cimarex is statutorily limited to $3 million, the amount of insurance that CP Well "agreed to provide" for Cimarex's benefit. See Ken Petroleum , 24 S.W.3d at 353.
Plaintiffs contend that "[i]f the parties wanted to explicitly limit their insurance exposure to no more than $3 [m]illion, Cimarex and CP Well could have included a specific insurance reference without using the not less than or minimum limits language" and that the MSA "was meant to provide coverage as broad as possible." (Doc. 22 at 19). Nevertheless, if the parties wanted to require more coverage than the minimum amount specified in the MSA, they should have instituted a higher floor. Further, the MSA's language regarding coverage being interpreted "as broad as possible " recognizes that coverage can only go as far as the parties agree to obtain to support their indemnity obligations.
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In a final attempt to obtain reimbursement for the $1.5 million St. Paul and American Guarantee paid to settle the Trent lawsuit, Plaintiffs argue that even if the limitation of the U/EL policy applies, "CP Well is still responsible to reimburse Plaintiffs because the absence of coverage does not preclude an indemnitor's indemnity obligation under TOAIA." (Doc. 29 at 7). The Court disagrees. The TOAIA unambiguously limits the parties' indemnity obligations "to the extent of the coverage and dollar limits of insurance ... each party as indemnitor has agreed to obtain for the benefit of the other party as indemnitee[.]" Tex. Civ. Prac. & Rem. Code Ann. § 127.005(b).
***
In sum, having found no genuine issues of material fact, the Court rules CP Well was only required to indemnify Cimarex for up to $3 million and CP Well did not breach its contract with Cimarex when it refused to indemnify Cimarex in the underlying lawsuit for any amount beyond $3 million. Consequently, Plaintiffs' claims for breach of contract and declaratory judgment fail.
D. Punitive Damages Issue
CP Well raised a second argument in its response to Plaintiffs' Motion for Summary Judgment. (Doc. 26). It argues that because the parties' indemnity obligations do not extend to punitive damages and the settlement payment covered such damages, there is a genuine issue of material fact regarding the extent of CP Well's indemnity obligation. Id. Because the Court finds Plaintiffs' claims fail and CP Well does not have to reimburse St. Paul and American Guarantee as subrogees of Cimarex for the $1.5 million they paid in the underlying suit, the Court need not determine whether any portion of the $1.5 million paid in the Trent lawsuit covered punitive damages.
IV. CONCLUSION
For the foregoing reasons, the Court GRANTS CP Well's Motion for Summary Judgment (Doc. 47) and DENIES Plaintiff's Motion for Summary Judgment (Doc. 22). Accordingly, Plaintiffs' claims against CP Well are dismissed.
The Court further ORDERS that all pending motions be DENIED as MOOT .
It is so ORDERED .