International Offshore Services, L.L.C. v. Linear Controls Operating, Inc.
647 F. App’x 327 (2016)
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Rule of Law:
Under Louisiana law, an 'additional insured' on a commercial general liability policy is not entitled to coverage for its own contractual liability unless that liability falls within the policy's definition of an 'insured contract,' which typically requires the 'Named Insured' to have assumed the liability in question.
Facts:
- International Marine, L.L.C. and Apache Corporation entered into a Master Time Charter Agreement (MTCA), under which Apache agreed to indemnify International Marine for injuries to employees of Apache or its subcontractors.
- Apache entered into a Master Service Contract (MSC) with its subcontractor, Controls Operating, Inc. (Linear).
- The MSC required Linear to indemnify Apache and to secure insurance naming Apache as an additional insured for liabilities Linear assumed under the MSC.
- Linear obtained a commercial general liability policy from Catlin Specialty Insurance Company (Catlin).
- An endorsement to the Catlin policy added Apache as an 'additional insured,' but not as a 'Named Insured.'
- Jake Bergeron, an employee of Linear, was injured on a boat owned by International Marine while traveling to an Apache jobsite.
Procedural Posture:
- International Marine filed a limitation of liability action in federal court, in which Jake Bergeron asserted a personal injury claim.
- International Marine then filed a separate declaratory judgment action against Linear and Apache, seeking a determination that they owed it defense and indemnity.
- In that second action, Third-Party Plaintiff Apache Corporation asserted a claim for insurance coverage against Third-Party Defendant Catlin Specialty Insurance Company.
- The U.S. District Court for the Eastern District of Louisiana granted summary judgment in favor of Catlin, dismissing Apache's claim.
- Apache Corporation, as Appellant, appealed the district court's final judgment to the U.S. Court of Appeals for the Fifth Circuit.
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Issue:
Does an insurance policy's 'insured contract' exception, which provides coverage when the 'Named Insured' assumes the tort liability of another, extend to cover the separate contractual liability assumed by an 'additional insured' in a different contract?
Opinions:
Majority - Per Curiam
No. The insurance policy’s 'insured contract' exception does not extend to cover the separate contractual liability assumed by an additional insured. The court reasoned that coverage is determined by the plain language of the policy, not by obligations in a separate service contract. The Catlin policy excludes contractual liability unless it is assumed in an 'insured contract,' which the policy defines as a contract where 'you' (the Named Insured) assume the tort liability of another. Because the policy explicitly defines 'you' as the Named Insured (Linear), and Apache is only an 'additional insured,' Apache's assumption of liability to International Marine under the MTCA does not qualify as an 'insured contract.' The court found no legal basis to expand the policy's coverage for an additional insured beyond its express terms.
Analysis:
This decision reinforces a strict textualist approach to interpreting insurance policies, emphasizing the critical legal distinction between a 'Named Insured' and an 'additional insured.' It clarifies that an additional insured's coverage is not coextensive with the named insured's and does not automatically import external contractual obligations into the policy. The ruling serves as a caution to companies that rely on additional insured status for protection; they must ensure the specific language of the policy endorsement provides coverage for their own, separate contractual indemnity agreements. This case highlights the potential for significant gaps between the indemnity a company demands in a service contract and the actual insurance coverage procured by its contractor.
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