Victory on Appeal for ExxonMobil

  • February 22, 2019

On February 15, 2019, Beck Redden won a significant appeal in the Texas Supreme Court. The case involves insurance law and general principles of contract construction. The particular issue is incorporation by reference, which is a doctrine that often comes up when an insurance policy refers to a contract between the insured and someone else. By a unanimous vote, the Supreme Court agreed with the Firm's argument that a workers' compensation insurer, by providing a widely used subrogation waiver drafted by the Department of Insurance, had validly waived its right to recoup the payments it made after a refinery accident injured a pair of contractor employees. This issue has broad-ranging importance for industrial businesses like ExxonMobil that require specialty contractors to perform critical work on their facilities and want to secure broad insurance coverage to protect contractor employees while doing that work.

ExxonMobil had engaged a contractor, Savage Refinery Services, to do some work at the company's Baytown refinery, under a standard service agreement that requires contractors to obtain insurance and a subrogation waiver. Savage bought workers' compensation insurance and paid an extra premium to get a subrogation waiver.

While working at the refinery, two Savage employees suffered on-the-job injuries. They received workers' compensation benefits from their employer's insurer and settled with ExxonMobil for the company's potential tort liability. Savage's insurer then pursued ExxonMobil to recoup the workers compensation benefits paid to the men, urging that ExxonMobil was really at fault, even though the insurer had issued a subrogation waiver. A trial judge agreed with ExxonMobil that the insurer had waived subrogation rights against ExxonMobil, but the Houston First Court of Appeals disagreed. The court of appeals refused to hear oral argument.

The Supreme Court granted review. It heard oral argument in September 2018 from Beck Redden appellate lawyers Joshua Smith, who gave the opening argument, and David Gunn, who gave the rebuttal.

In a unanimous opinion written by Justice Guzman, the Supreme Court agreed with the Firm's arguments. The Court parsed the relevant contractual language and concluded: "The standard-form blanket subrogation waiver in Savage's workers' compensation policy defines its applicability by reference to some other contract, but only to determine who may claim the waiver and whether Savage agreed to provide the waiver for operations causally connected to a bodily injury claim."

The Beck Redden team consisted of David Gunn, Joshua Smith, John Adcock, and B.D. Daniel. They worked in collaboration with Mike Morris and Dan Van Winkle of Taylor Book Allen & Morris, L.L.P.