Natl Un Fire Ins PA v. Liberty Mutual Ins

United States Court of Appeals
Fifth Circuit
F I L E D
May 18, 2007
Charles R. Fulbruge III
Clerk
In the
United States Court of Appeals
for the Fifth Circuit
_______________
m 06-30489
_______________
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA,
Plaintiff-Appellant,
VERSUS
LIBERTY MUTUAL INSURANCE COMPANY,
Defendant-Appellee.
_________________________
Appeal from the United States District Court
for the Middle District of Louisiana
m 3:05-CV-352
______________________________
Before GARWOOD, SMITH, and DEMOSS,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
National Union Fire Insurance Company
(“National Union”) sued Liberty Mutual In-
surance Company (“Liberty Mutual”), seeking
coverage under a policy. The district court
granted summary judgment for Liberty Mu-
tual, and we affirm.
I.
This case arises out of a dispute between
Rubicon, Inc. (“Rubicon”), and S&B Engi-
neers and Constructors, Ltd. (“S&B”), which
Rubicon hired to provide engineering contract
services for an expansion project. As part of
* Pursuant to 5TH CIR. R. 47.5, the court has de-
termined that this opinion should not be published
and is not precedent except under the limited cir-
cumstances set forth in 5TH CIR. R. 47.5.4.

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this project, S&B obtained weld shop fabri-
cated pipes from American Pipe Fabricating,
Inc. (“American Pipe”). In the middle of the
project, Rubicon terminated S&B’s involve-
ment, litigation ensued, and Rubicon sued
S&B for breach of contract, negligence in per-
forming its duties, and negligent misrepresen-
tation, among other causes of action.
S&B and Rubicon settled the suit, and S&B
sought payment from its insurer, National
Union, for the costs of the suit. National
Union and S&B settled that claim, and S&B
assigned its rights against any third parties to
National Union.
In the instant case, National Union sues
Liberty Mutual, American Pipe’s insurer, to
recover the amount of the settlement to Rubi-
con that resulted from American Pipe’s defec-
tive work, based on two theories. First, Na-
tional Union argues that S&B was an addi-
tional insured under Liberty Mutual’s insur-
ance policy for American Pipe. Liberty Mu-
tual admits that S&B was an additional insured
but asserts that S&B cannot recover in this
case because of the “your work” and “your
product” exclusions in the policy.1 National
Union argues that S&B was not excluded
under these provisions, because S&B was not
“you” as defined by the contract,2 so the exclu-
sions applying to “you” did not apply to S&B.
Moreover, National Union contends that the
“your work” exclusion is inapplicable here
because of the subcontractor exception: Amer-
ican Pipe acted as a subcontractor to S&B, so
the “your work” exclusion does not apply.3
Second, National Union urges that Liberty
Mutual was obligated to fulfill American
Pipe’s promise to indemnify S&B for losses
resulting from American Pipe’s services. As
part of the purchase order between S&B and
American Pipe, American Pipe promised to
carry insurance4 and indemnify S&B.5 As
1 The policy excludes (1) “‘Property damage’ to
‘your work’ arising out of it or any part of it and
included in the ‘products-completed operations
hazard.’”; and (2) “‘Property damage’ to ‘your
product’ arising out of it or any part of it.”
2 The policy defines “you”: “Throughout this
policy the words ‘you’ and ‘your’ refer to the
Named Insured shown in the Declarations, and any
other person or organization qualifying as a Named
Insured under this policy.”
3 Only the “your work” exclusion has a subcon-
tractor exception; the “your product” exclusion
does not. After laying out the “your work” exclu-
sion, the policy states that “[t]his exclusion does
not apply if the damaged work or the work out of
which the damage arises was performed on your
behalf by a subcontractor.”
4 The purchase order states:
Seller must maintain at all times with a reliable
insurance carrier or carriers, at Seller’s sole ex-
pense, insurance policies providing sufficient
coverage and limits to cover the liabilities
assumed under this agreement. Insurance
policies provided by Seller shall include but are
not limited to General Liability, including
coverage for Products and Complete Operations
and Contractual Liability, Automobile
5 The purchase order states:
To the maximum extent permitted by applicable
law, Seller shall defend, indemnify and hold
harmless FBD [S&B’s affiliate], and its affili-
ated companies, subsidiaries and clients from
and against any and all loss, damage, claims,
suit, liability, strict liability, product liability,
judgement and expense (including attorney’s
fees and other costs of litigation) and any fines,
(continued...)

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American Pipe’s insurer, Liberty Mutual
would be obligated to fulfill this promise. Lib-
ertyMutual, however, contends that American
Pipe’s obligation to indemnify S&B was ex-
cluded from Liberty Mutual’s policy with
American Pipe by the contractual liability ex-
clusion.6 National Union retorts that the pur-
chase order qualifies as an insured contract,
obviating that exclusion.7 Liberty Mutual rea
sons that American Pipe and S&B’s contract
is not an insured contract because S&B was an
engineer, and Liberty Mutual’s insurance poli-
cy with American Pipe excludes engineering
services from the definition of insured con-
tracts.8
II.
“This Court reviews grants of summary
judgment de novo, applying the same standard
as the district court, viewing the evidence in a
light most favorable to the non-movant.”
Fruge ex rel. Fruge v. Parker Drilling Co.,
337 F.3d 558, 560 (5th Cir. 2003). “If the
court finds no ambiguity [in an insurance poli-
cy], the court’s duty is to enforce the policy
according to its plain meaning.” Valmont En-
ergy Steel, Inc. v. Commercial Union Ins. Co.,
359 F.3d 770, 773 (5th Cir. 2004).
A.
National Union seeks coverage as an addi-
tional insured, arguing the “your work” and
“your product” exceptions do not apply to
S&B because “you” was defined in the con-
tract as American Pipe, not additional insureds
5(...continued)
penalties and assessments arising out of injury
to, disease or death of, or damage to or loss of
property of, persons (except for Seller’s prop-
erty, employees, agents or subcontractors)
resulting from or in connection with the execu-
tion of this order by Seller, its agents or sub-
contracts to the extent and proportion caused by
the sole, concurrent, or contributory negligence
or other fault of Seller, its agents or subcontrac-
tors. Liability and Workers’ Compensation
including employers Liability coverage. All
Policies, excepting Workers’ Compensation
shall include FBD and its affiliated companies,
subsidiaries and clients as additional insureds.”
6 Liberty Mutual’s contract with American Pipe
excludes coverage for
‘Bodily injury’ or ‘property damage’ for which
the insured is obligated to pay damages by rea-
son of the assumption of liability in a contract
or agreement. This exclusion does not apply to
liability for damages:
(1) Assumed in a contract or agreement that is
an ‘insured contract’, provided the ‘bodily in-
jury’ or ‘property damage’ occurs subsequent
to the execution of the contract or agreement; or
(2) That the insured would have in the absence
of the contract or agreement.
7 The insurance policy defined an insured con-
(continued...)
7(...continued)
tract as “[t]hat part of any other contract or agree-
ment pertaining to your business . . . under which
you assume the tort liability of another party to pay
for ‘bodily injury’ or ‘property damage’ to a third
person or organization.”
8 The definition of an insured contract “does
not include any contract or agreement: . . . (2) That
indemnifies an architect, engineer or surveyor for
injury or damages arising out of: (a) Preparing,
approving or failing to prepare or approve maps,
drawings, opinions, reports, surveys, change
orders, designs or specifications; or (b) Giving
directions or instructions, or failing to give them, if
that is the primary cause of the injury or damage .
. . .”

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such as S&B. We take as a given that “you”
in this policy only means American Pipe, ac-
cording to the policy’s definition of that word.
Read with that definition, the policy excludes
claims based on American Pipe’s work or
product, because American Pipe is substituted
for you in those exclusions. With that substi-
tution, the policy excludes (1) “‘Property dam-
age’ to ‘[American Pipe’s] work’ arising out
of it or any part of it and included in the ‘prod-
ucts-completed operations hazard.’”; and
(2) “‘Property damage’ to ‘[American Pipe’s]
product’ arising out of it or any part of it.”
S&B’s claim as an additional insured is
based on American Pipe’s work or product.
S&B is correct that if S&B’s work or product
had been the basis of the suit, these exclusions
would not apply, but they do apply in this case
because American Pipe’s work or product is
the cause of the claim.
National Union points us to Chevron
Chemical Co. v. Factory Compressor Parts,
Inc., 1993 WL 329999 (E.D. La. Aug. 23,
1993), to support its position. Instead of bol-
stering National Union’s argument, however,
Chevron Chemical confirms the effect we have
given to the terms of the policy here. In that
case, an insurance policy excluded “bodily
injury or property damage arising out of the
alleged or threatened discharge, dispersal, re-
lease or escape of pollutants . . . at or from
premises you own, rent or occupy.” Id. at *2
(internal quotations omitted). The “you” was
defined in the policy as the named insured in
the declaration, and the named insured was
Factory Compressor Parts. Id. at *3. Because
the damage from pollutants occurred on Chev-
ron’s and not Factory Compressor Parts’s
premises, the exclusion did not apply on those
facts: “[T]he pollution exclusion only applies
to claims for bodily injury which arise from the
discharge, dispersal, release or escape of
pollutants from premises owned by Factory
(the only insured included in the policy’s de-
finition of ‘you’).” Id.
The instant case has different facts, but our
reading of the insurance policy comports en-
tirely with Chevron Chemical’s reading of the
policy in that case. In both cases, the named
insured is substituted for “you” in the policy.
Though the substitution in that case meant that
the exclusion did not apply because the pre-
mises were not owned by “you,” in this case
the exclusion does apply, because the work or
product serving as the basis of the claim was
“yours”SSAmerican Pipe’s.
Substituting “American Pipe” for “you” in
the subcontractor exception similarly reveals
that S&B is not entitled to relief under that
exception. The policy says that the “your
work” exclusion does not apply “if the dam-
aged work or the work out of which the dam-
ages arises was performed on your behalf by a
subcontractor.” Because the contract defines
“you” as American Pipe, the exception applies
when someone else does work as American
Pipe’s subcontractor, not when American Pipe
is a subcontractor. “[O]n your behalf” be-
comes “on American Pipe’s behalf,” so S&B
cannot obtain the benefit of this exception, be-
cause no one worked on American Pipe’s
behalf. S&B was excluded from coverage be-
cause American Pipe’s work or product was
the basis of the claim, and American Pipe did
not hire a subcontractor to work on its behalf,
so the district court correctly determined that
S&B’s claim was excluded.
B.
National Union seeks coverage pursuant to
the purchase order between S&B and Amer-
ican Pipe in which American Pipe agreed to

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defend and indemnify S&B. National Union
asserts that Liberty Mutual, as American
Pipe’s insurer, is liable to S&B for this obliga-
tion.
Because the basis of S&B’s claim is Amer-
ican Pipe’s work or product, the indemnity
provision in the purchase order does not pro-
vide a way for S&B to be covered by Liberty
Mutual’s policy. The indemnity provision was
never triggered.
American Pipe promised to indemnify S&B
for claims “arising out of injury to, disease or
death of, or damage to or loss of property of,
persons (except for Seller’s property, employ-
ees, agents or subcontractors) . . . .” This
provision excludes damage to property of
American Pipe, as the “Seller.” Without dam-
ages beyond damages to American Pipe’s own
work or product, the indemnity provision was
never triggered, and Liberty Mutual is not ob-
ligated to pay National Union on this basis.
AFFIRMED.

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