You're viewing Docket Item 28 from the case Pride International Inc et al v. Tesco Corporation (US) et al. View the full docket and case details.

Download this document:




Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 1 of 14

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

V.

CIVIL ACTION NO. H-12-2889

Plaintiffs,

PRIDE INTERNATIONAL, INC. and §
MEXICO DRILLING LIMITED, LLC, 5
§
§
§
§
§
5
TESCO CORPORATION (US),
TESCO CORPORATION, INSURANCE
§
COMPANY OF THE STATE OF
§
PENNSYLVANIA, ILLINOIS NATIONAL §
INSURANCE COMPANY, STEADFAST
§
INSURANCE COMPANY, and
§
ZURICH INSURANCE COMPANY,
§
§
§

Defendants.

MEMORANDUM AND ORDER

Pending is Insurance Company of the State of Pennsylvania's

and Illinois National Insurance Company's Motion for Summary

Judgment (Document No. 12). After carefully considering the

motion, response, reply, sur-reply, and applicable law, the Court

concludes as follows.

I. Backsround

This case arises out of injuries sustained by Keith Taylor

when working in proximity to a top-drive on a fixed oil platform in
the Bay of Campeche off the coast of Mexico on January 1, 2009 .'

In this action, which has been severed from the underlying suit

~

-

I See Civil Action No. H-11-517.

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 2 of 14

brought by Keith Taylor and his wife, Plaintiffs Pride

International, Inc. ("Pride") and Mexico Drilling Limited, LLC

("Mexico Drilling, " collectively "Plaintiffs" )

sued Tesco

Corporation (US) ("Tesco (US) " ) , Tesco Corporation ( 'Tesco" ) ,

Insurance Company of the State of Pennsylvania ("ISOP"), Illinois

National Insurance Company ("INIC"), Steadfast Insurance Company,

and Zurich Insurance Company, alleging duty to defend and indemnify

and contribution claims.2 This motion involves only the claims

against ISOP and INIC.

Pride and Mexico Drilling contend that ISOP and INIC owe them

a duty to defend and indemnify based on a 2008 Purchase Order

("Purchase Order"), and its incorporated Purchase Order General

Terms and Conditions ("Terms and Conditions"), which are documents

Pride apparently sent to Tesco in connection with Tesco's and/or

its subsidiary's work in rebuilding the engine of the top drive

unit that injured Keith Taylor.

ISOP and INIC argue that

"[nleither Tesco Corporation, Tesco Corporation (US), Mexico

Drilling, nor Pride are parties to this Purchase Order as 'buyer1

or 'sellerJ--terms defined in the Purchase Order and made the basis

of the document s insurance requirements. " 3

Therefore, ISOP and

INIC contend that they are entitled to judgment as a matter of law.

Document No. 17 (1st Am. Cmplt. ) .

Document No. 12 at 2.

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 3 of 14

11. Discussion

A. Leqal Standard

Rule 56(a) provides that "[t] he court shall grant summary

judgment if the movant shows that there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a

matter of law. " FED. R. CIV. P. 56 (a) . Once the movant carries

this burden, the burden shifts to the nonmovant to show that

summary judgment should not be granted. Morris v. Covan World Wide

Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998). A party opposing

a properly supported motion for summary judgment may not rest upon

mere allegations or denials in a pleading, and unsubstantiated

assertions that a fact issue exists will not suffice. Id. '[Tlhe

nonmoving party must set forth specific facts showing the existence

of a 'genuine1 issue concerning every essential component of its

case." Id. "A party asserting that a fact cannot be or is

genuinely disputed must support the assertion by: (A) citing to
particular parts of materials in the record . . .; or ( B ) showing

that the materials cited do not establish the absence or presence

of a genuine dispute, or that an adverse party cannot produce

admissible evidence to support the fact." FED. R. CIV. P. 56(c) (1).

'The court need consider only the cited materials, but it may
consider other materials in the record. " Id. 56 (c) (3) .

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 4 of 14

In considering a motion for summary judgment, the district

court must view the evidence "through the prism of the substantive

evidentiary burden." Anderson v. Liberty Lobby, Inc., 106 S. Ct.

2505, 2513 (1986) . All justifiable inferences to be drawn from the

underlying facts must be viewed in the light most favorable to the

nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 106 S. Ct. 1348, 1356 (1986) . 'If the record, viewed in

this light, could not lead a rational trier of fact to find" for

the nonmovant, then summary judgment is proper. Kellev v. Price-

Macemon, Inc., 992 F.2d 1408, 1413 (5th Cir. 1993) . On the other

hand, if "the factf inder could reasonably find in [the nonmovant' sl

favor, then summary judgment is improper." Id. Even if the

standards of Rule 56 are met, a court has discretion to deny a

motion for summary judgment if it believes that "the better course

would be to proceed to a full trial." Anderson, 106 S. Ct. at

2513.

B. The Purchase Order and Terms and Conditions

It is undisputed that ISOP issued a foreign commercial general

liability insurance policy, number 80-0268562, to Tesco, and INIC

issued a commercial umbrella liability policy, number BE 53-721-28,

to T e ~ c o . ~ Both policies were effective from April 30, 2008 to

Document No. 12, exs. 1 & 2.

4

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 5 of 14

October 30, 200gt5 during the time period of Keith Taylor's

a ~ c i d e n t . ~ Both policies extend coverage also to "Additional

Insureds," defined as persons to whom the named insured is

obligated by a written contract to provide insurance such as that

afforded by the p ~ l i c i e s . ~

The multi-pages 2008 Purchase Order issued for the rebuilding

of the engine of top drive unit 154, bears at the top of each page

the name and logo of "PRIDE," evidencing that Pride prepared and

issued the Purchase Order, and was in fact the purchaser to whom

the product was to be delivered. Pride designated that Mexico

Drilling, Pride's subsidiary and the operator of the offshore well

where the product was to be used, should be billed for the work.

This was set forth in the top "box" on the Purchase Order form, as

follows :

Bill To Mexico Drilling, Ltd

Calle: 1 SUR, LOTE 2-A
PTD IND. PESQ LAGUNA AZUL
CP 24140
CIUDAD DEL CARMEN, CAMPECHE

Document No. 13, ex. 5 at A-036.

Document No. 12, ex. 1 at 29; Id., ex. 2 at 54.

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 6 of 14

The supplier who was to perform the work for which Pride issued the

Purchase Order was named in the "box" immediately underneath the

identification of Mexico Drilling, Ltd., as follows:

Supplier DRILLING INNOVATION DE MEXIC0,S.A. DE CV

DBA TESCO
CALLE 33/A NO 24 COL FATIMA

The Purchase Order next names the party and address to which the

product was to be delivered, namely, the issuer of the Purchaser

Order, as follows:

Ship To PRIDE 1002E

AV. 4 ORIENTE NO 18-B ALTOS
ENTRE-AV, 1 Y 2 SUR
PTO. IND PESQ LAGUNA AZUL
CIUDAD DEL CARMEN CM 24140

A subsidiary box on the Pride Purchase Order includes a number

of details, even including the name of Pride's purchasing agent who

was identified as "Buyer," as follows:

Buyer
Promised Delivery 12/18/08
Reference
Frt Fwd Mode of Transport Land Freight Order Summary TESCO Rebuild Engine
Supplier Mode Of Transport

Delivery Terms FOB Destinat, Frt PPD(UCC TX)
Supplier SO
Requisition No 00539389 OR

CAMARENA AGUILAR, RAUL

Delivery Instructions

No address is given for Mr. Camarena Aguilar, he is not the person

to be billed, and he is not the person to whom the product is to be

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 7 of 14

shipped. The uncontroverted summary judgment evidence is that

Mr. Camarena Aguilar was the purchaser's purchasing agent, or

"buyer," employed by a subsidiary of Pride in Ciudad del Carmen.

All pages of the Purchase Order state that "Terms and

Conditions Apply," and the parties are agreed that this refers to

the Purchase Order's general terms and conditions issued by Pride

and, once again, bearing the Pride name and logo at the top of each

page. The Terms and Conditions employ the terms "Buyer" and

'Seller," stating that those terms 'as used herein shall mean the

entities defined as such in the associated Purchase Order."' The

Terms and Conditions generally impose constraints and obligations

on the "Seller" for the benefit of the "Buyer," including

requirements for Seller to provide certain liability insurance

coverage for Buyer at Seller's cost, including waivers of

subrogation in favor of Buyer, as follows:

Seller agrees to carry, at its sole expense, Commercial
General Liability Insurance, including Contractual
Liability Insurance, Products Liability/Completed
Operations Insurance, covering all operations and work
hereunder in the amount of not less than $1,000,000 each
occurrence/$2,000,000 aggregate combined single limit for
bodily injury and property damage liability for all
liability arising out of the injury to or death of one or
more persons in any one occurrence, or destruction of
property in any one occurrence. Such Insurance shall
include Buyer Group as an additional insured with respect
to all operations and work hereunder and such insurance
shall provide that it applies separately to each insured
against whom claim is made or suit is brought. Such
Insurance shall contain a Waiver of Subrogation in favor

Id., ex. 1B at A-019.

7

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 8 of 14

of Buyer Group and shall provide for 30 days prior
written notice to Buyer or any cancellation or material
change. Seller also agrees to carry, at its sole
expense, Automobile Liability Insurance including hired
and non-ownership liability insurance in the amount of
not less than $1,000,000 combined single limit for bodily
injury and property damage liability. Such insurance
shall include Buyer Group as an additional insured,
contain a Waiver of Subrogation in favor of Buyer Group
and shall provide for 30 days prior written notice to
Buyer of any cancellation or material change.

To the extent Seller or any of Seller's employees,
affiliates or subcontractors are contemplated to enter
Buyer's facilities or operations, Seller shall self-
insure or carry statutory Worker's Compensation and
Employer's Liability Insurance covering all operations
and work hereunder in an amount not less than $1,000,000
per person. Such insurance shall contain a Waiver of
Subrogation in favor of Buyer Group and shall provide for
30 days prior written notice to Buyer of any cancellation
or material change. Seller agrees to maintain Umbrella
Excess Liability Insurance in the amount of $10,000,000
each occurrence in excess of the Commercial General
Liability, Automobile Liability & Employer's Liability.
Such insurance shall include Buyer Group as an additional
insured and contain a Waiver of Subrogation in favor of
Buyer Group and shall provide for 30 days prior written
notice of any cancellation or material change.

Seller shall promptly provide to Buyer Certificates of
Insurance. The above insurance requirements are minimum
requirements and shall not limit Seller's liability to
Buyer or Buyer Group in any manner. All such insurance
must be with insurance carriers with a minimum A.B. Best
Rating of A VIII or better.g

The Terms and Conditions also contain a choice of law

provision, stating that "ANY AND ALL DISPUTES ARISING HEREUNDER

SHALL BE CONSTRUED ACCORDING TO THE LAWS OF ENGLAND THEN IN FORCE

9 Id., ex. 1B at A-022-23. The Terms and Conditions define
"Buyer Group" as "Buyer and its subsidiaries and their respective
shareholders, employees, officers, directors, agents and
representatives." Id., ex. 1B at A-022.

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 9 of 14

NOTWITHSTANDING ANY PRINCIPLES OF LAW THAT MAY REFER TO THE LAWS OF

ANOTHER JURISDICTION."^^ Pursuant to the choice-of-law provision,

Pride and Mexico Drilling contend that this Court must look to the

laws of England to construe the Purchase Order and its Terms and

Conditions in determining whether Tesco was contractually bound to

provide insurance coverage to Pride and Mexico Drilling, such as to

make them "Additional Insureds" under Tesco's INIC and ISOP

policies. INIC and ISOP do not contest this reading of the choice-

of-law provision. INIC and ISOP also do not argue in their motion

that the Purchase Order and incorporated Terms and Conditions did

not form a binding contract. Instead, they argue that the "Buyer"

and "Buyer Group" covered as an additional insured is Pride's

purchasing agent Mr. Camarena Aguilar, and not Pride, which issued

the Purchase Order and to which Tesco delivered the rebuilt engine,

or Mexico Drilling, which was billed for it. Pursuant to the

Purchase Order's choice of law clause, the contract is interpreted

in accordance with the laws of England. See also, FED. R. CIV. P.

44.1 ('In determining foreign law, the court may consider any

relevant material or source, including testimony, whether or not

submitted by a party or admissible under the Federal Rules of
Evidence. " ) .

Id., ex. 1B at A-023.

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 10 of 14

C. Analysis

ISOP and INIC argue that the contract should be interpreted

without reference to extrinsic evidence because the contract is

unambiguous. They contend that because Pride's purchasing agent

wrote in his own name in the subsidiary "box" on the Purchase Order

as "Buyer," he is the only individual or entity entitled to

insurance coverage under the Terms and Conditions." They also

assert that the 'Seller" is Drilling Innovation de Mexico, S.A. de

Cv,12 and therefore appear to accept that "Supplier" is equivalent

to "Seller. " I 3

A contract is construed under English law from the perspective

of "what a reasonable person having all the background knowledge

which would have been available to the parties would have

understood them to be using the language in the contract to mean."

Charbrook Ltd. v. Persimmon Homes Ltd, [2009] UKHL 38, [2009]

1 A.C. 1101 (H.L.) 1112. Accordingly, extrinsic evidence is

'' Document No. 12 at 8.

l 3 They assert that Tesco is not the "Seller" notwithstanding
that the "Supplier" is listed as Drilling Innovation de Mexico,
S.A. de CV d/b/a Tesco. The "Order Summary" in the subsidiary
'box" on the Purchase Order also reads, "TESCO Rebuild Engine."
The ISOP policy states that "Named Insured" also includes "any
subsidiary, associated, affiliated, allied or acquired company or
corporation (including subsidiaries thereof) of which any insured
named as the Named Insured on the Declarations Page [Tesco] has
more than 50% ownership interest in or exercises management or
financial control over." Document No. 12, ex. 1 at 28.

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 11 of 14

permitted regardless of whether the contract is ambiguous or

unambiguous. See Rainv Skv SA v. Kookmin Bank, [2011] UKSC 50,

[2011] 1 W.L.R. 2900 (S.C.) 2908 ("I would accept the submission

made on behalf of the appellants that the exercise of construction

is essentially one unitary exercise in which the court must

consider the language used and ascertain what a reasonable person,

that is a person who has all the background knowledge which would

have been available to the parties in the situation in which they

were at the time of the contract, would have understood the parties

to have meant. In doing so, the court must have regard to all the

relevant circumstances."); Charbrook Ltd. v. Persimmon Homes Ltd,

[2009] UKHL 38, [2009] 1 A.C. 1114 (H.L.) 1114 ("[Iln deciding

whether there is a clear mistake, the court is not confined to

reading the document without regard to its background or context.

As the exercise is part of the single task of interpretation, the

background and context must always be taken into consideration.");

Prenn v. Simmonds, [I9711 1 W.L.R. 1381 (H.L.) 1383-84. ("The time

has long passed when agreements, even those under seal, were

isolated from the matrix of facts in which they were set and

interpreted purely on internal linguistic considerations. " ) ; see

also Pannell Kerr-Forster Intfl Assrn Ltd. v. Quek, 5 F. App'x 574,

2001 WL 180646, at *2-3 (9th Cir. Feb. 2, 2001) (unpublished op.)

(finding that district court erred in confining its analysis to the

four corners of the contract because under English law, 'evidence

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 12 of 14

of the surrounding circumstances is admissible in all cases to

place the contract into its correct setting, even where there is no

ambiguity apparent on the face of the document") (quoting KIM

LEWISON, THE INTERPRETATION OF CONTRACTS § 2 .lo, at 44 ( 198 9) ) .

Plaintiffs present the following evidence in response to the

summary judgment motion: the declaration and deposition of Robert

Estilette, Pride's rig manager who oversaw the exchange and

overhaul of the top drive unit's engine; a Securities and Exchange

Commission form identifying Innovation de Mexico, S .A. de CV as one

of Tesco' s subsidiaries; and a price quotation from Tesco regarding

the engine rebuild.14 ISOP and INIC move to strike these exhibits,

arguing that extrinsic evidence is not admissible in interpreting

an unambiguous contract.15 The motion to strike is denied because

Plaintiff's evidence constitutes the very kind of evidence that a

court is required to consider when interpreting a contract in

accordance with English law. See Prenn v. Simmonds, [I9711 1

W.L.R. 1381 (H.L.) 1385 ('[Elvidence should be restricted to

evidence of the factual background known to the parties at or

before the date of the contract, including evidence of the

l4 Document No. 13, exs. 1-4. Mr. Estilette' s declaration and
deposition both provide evidence that he understood that the
refurbishment would be conducted by Tesco through its subsidiary
Innovation de Mexico, S.A. de CV; that it was clear in his
communications with Tesco that Pride was paying for the
refurbishment through its subsidiary Mexico Drilling; and that Raul
Camarena was acting as Pride's purchasing agent when he drafted the
Purchase Order. Document No. 13, exs. 1 & 3.

l5 Document No. 14 at 1-2.

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 13 of 14

'genesis' and objectively the 'aim' of the transaction. " ) . One

cannot impartially examine the Purchase Order in the context of the

relevant circumstances without recognizing that the parties to that

agreement well knew that Pride issued the Purchase Order and was

the purchaser of the product, that Tesco was the supplier/seller

who would perform the work through its subsidiary, that Pride's

subsidiary Mexico Drilling--the operator of the offshore well where

the product was to be used--would be billed for the product, and

that Mr. Camarena Aguilar was a purchasing agent--a "buyer" only in

that sense--acting for Pride in issuing Pride's Purchase Order.

After having considered the substantial summary judgment

evidence of the background for and the parties' obvious 'aim" in

forming their agreement pursuant to which Tesco would rebuild the

engine for Pride and Mexico Drilling--however ineptly they may have

used identifying terms for themselves in the Purchase Order and its

Terms and Conditions--the Court finds that ISOP and INIC have not

shown as a matter of law that Tesco was not obligated under the

Purchase Order contract to procure additional insurance on

Plaintiffs ' behalf, and movants have not established as a matter of

law that they have no duty to defend or to indemnify Plaintiffs

against the Taylor claims.

Case 4:12-cv-02889 Document 28 Filed in TXSD on 06/04/13 Page 14 of 14

111. Order

For the foregoing reasons, it is

ORDERED that Insurance Company of the State of Pennsylvania's

and Illinois National Insurance Company's Motion for Summary

Judgment (Document No. 12) is DENIED.

The Clerk will enter this Order and provide a correct copy

to all parties.

SIGNED at Houston, Texas, on this

of June, 2013.

WERLEIN,
'ES DISTR

8

JUDGE