Court vacates Exxon’s $25 million recovery from contractor’s policy

A Texas appellate court vacated an order directing a contractor’s insurer to contribute $25 million toward a settlement Exxon entered with three workers injured in a refinery explosion who had also accepted workers compensation benefits.

ExxonMobil Oil Corp. and its affiliates contracted with Brock Services to provide scaffolding during a maintenance construction project at a refinery in Beaumont.

In addition to obtaining coverage required by the contract, Brock secured an umbrella policy with a $25 million limit from Lexington Insurance Co., according to last week’s decision in Lexington Insurance Co. v. Exxon Mobil Corp.

Exxon exercised a contractual option to provide workers compensation coverage through its owner-controlled insurance program.

In April 2013, an explosion at the refinery killed several workers and injured others, including three Brock Services employees. The Brock workers received workers comp benefits, then sued Exxon for their injuries.

Exxon settled with the workers for $35 million in April 2015. The company said it was an additional insured under the Lexington policy, so the insurer had to provide a defense and contribute $25 million toward the settlement.

After arbitration determined that Exxon was an additional insured, a trial court affirmed the finding and granted summary judgment.

Lexington appealed, arguing that the trial court should have vacated the award because the arbitrator was biased; policy exclusions preclude Exxon from recovering under the umbrella policy; and prior settlements eroded the policy limit and, at most, it owed Exxon $15 million.

The 9th District Court of Appeals agreed that the exclusions applied to Exxon and that the company is not entitled to any recovery from its contractor’s umbrella policy.

The court said the work comp exclusion wasn’t applicable because it was clear that Exxon wasn’t seeking coverage under the policy for an obligation it owed the Brock employees under Texas’ workers’ compensation laws. However, the exclusion stating that the employer liability coverage doesn’t apply to bodily injuries that arise out of and in the course of employment did apply.