LLOYD'S SYNDICATE 457; LLOYD'S SYNDICATE 1036; LLOYD'S SYNDICATE 1084; LLOYD'S SYNDICATE 1209; LLOYD'S SYNDICATE 1225, et al Plaintiffs - Appellants
FLOATEC, L.L.C., doing business as FloaTEC Solutions, L.L.C. Defendant-Appellee
from the United States District Court for the Southern
District of Texas
SMITH, DUNCAN, and ENGELHARDT, Circuit Judges.
KYLE DUNCAN, CIRCUIT JUDGE
case concerns a disputed siting of Big Foot in the Gulf of
Mexico. We refer to a floating oil-drilling platform that
rests on four massive columns- hence the name "Big
Foot"-moored by steel tendons to the ocean floor.
Chevron, which operates and co-owns Big Foot, contracted with
FloaTEC to engineer the tendons. During installation in 2015,
several tendons failed, causing Chevron huge losses. Big Foot
was insured by various Lloyd's of London syndicates
(collectively, "Underwriters") through a policy
issued to Chevron. To cover the tendon mishap, Underwriters
paid Chevron over $500 million and then went looking to
recoup that money. Among others, Underwriters sued FloaTEC.
Underwriters claimed that, having paid Chevron's losses
under the policy, they were subrogated to Chevron's right
to sue FloaTEC for damages caused by the tendon failures.
the case landed in federal district court and FloaTEC moved
to dismiss. FloaTEC argued that it qualified as an
"Other Assured" under Underwriters' policy and
that the policy waives subrogation against "Other
Assureds"-hence Underwriters' subrogation-based
claims should fail. Underwriters responded in two ways.
First, they argued that the subrogation issue should be
decided by an arbitrator, not the district court, by virtue
of the broad arbitration clause in Chevron's contract
with FloaTEC. Second, Underwriters argued that, in any event,
FloaTEC was not an "Other Assured" under a proper
reading of the policy.
district court sided with FloaTEC on both points. It decided
the arbitration clause did not apply because Underwriters
were not a party to the Chevron/FloaTEC contract. It then
decided FloaTEC did qualify as an "Other Assured"
under the policy, thus enabling FloaTEC to raise the
subrogation waiver. The court dismissed Underwriters'
claims with prejudice.
appeal both issues. We affirm.
Foot is a major deepwater oil drilling project in the Gulf of
Mexico off the Louisiana coast. It is located on the Outer
Continental Shelf in the Walker Ridge Area, Block 29, about
225 miles south of New Orleans. The project is operated by
Chevron, which co-owns it with Statoil Gulf of Mexico LLC and
Marubeni Oil & Gas (USA) Inc. As part of the project, in
2015, Chevron began to build and install an "extended
tension-leg platform" that would be anchored to the
seafloor almost a mile below. This is a photo of the platform
in transit to Walker Ridge:
platform would be kept stationary by sixteen steel tendons
attached to pilings driven into the seafloor. These tendons
were critical to the floating platform's stability.
contracted with FloaTEC to provide engineering services in
connection with Big Foot, including the design and
installation of the tendons. We will refer to the
Chevron/FloaTEC agreement as the "Chevron/FloaTEC
Contract" or simply the "Contract." The
Contract required FloaTEC to maintain specific kinds of
insurance related to the performance of its duties on the
project. The Contract also included a broad arbitration
clause, empowering a chosen arbitrator or arbitrators to
"rule on objections concerning jurisdiction, including
the existence or validity of this arbitration clause and
existence or the validity of this Contract[.]"
Foot was insured by Underwriters through an Offshore
Construction Project Policy with Chevron. We will refer to
this Underwriters/Chevron agreement as the
"Underwriters/Chevron Policy" or simply as the
"Policy." The Policy was written on a "WELCAR
2001" form, a standard construction risk policy
developed for the offshore energy market at Lloyd's in
the late 1990s. See, e.g., Tim Taylor, Offshore
Energy Construction Insurance: Allocation of Risk
Issues, 87 Tul. L. Rev. 1165, 1170 (2013)
("Taylor"). Risks covered by the Policy included
physical loss or damage to Big Foot incurred during the
project's design and engineering. The Policy included a
clause stating that Underwriters agreed to "waive rights
of subrogation" against any "Principal
Assureds" or "Other Assureds." "Other
Assureds" were defined in a separate section of the
Policy to include "[a]ny" other companies with whom
Chevron had "entered into written contract(s) in
connection with the [Big Foot] Project."
mid-2015, before the platform's stabilizing tendons had
been installed, nine of the sixteen tendons detached from
their supporting buoys and plummeted to the seafloor. An
investigation revealed that the bolts holding the tendons to
the buoys had come loose. Chevron rejected the remaining
seven tendons and had them sent back to shore. The failure of
the tendons and the resulting delay to Big Foot caused
Chevron huge losses. As a result, Underwriters paid Chevron
over $500 million under the Policy.
to recoup those payments, Underwriters filed a lawsuit in a
Texas state court in May 2016, naming as defendants various
contractors connected to Big Foot, including FloaTEC.
Underwriters alleged FloaTEC had negligently designed and
manufactured the tendons and attachment bolts and had
therefore caused the damages to Big Foot. Prior to service of
process, claims against all defendants except FloaTEC were
dropped. FloaTEC removed the case to federal court.
then filed an amended complaint, adding the claim that
FloaTEC breached its contract with Chevron. Underwriters'
claims against FloaTEC were all based on subrogation-meaning
Underwriters sought to stand in Chevron's shoes by virtue
of having paid Chevron's losses under the Policy.
See La. Civ. Code art. 1825 (subrogation is
"the substitution of one person to the rights of
another" and "may be conventional or legal");
id. art. 1827 ("conventional" subrogation
occurs when "[a]n obligee who receives performance from
a third person . . . subrogate[s] that person to the rights
of the obligee, even without the obligor's
consent"); see also, e.g., Old Repub. Life
Ins. Co. v. Transwood, Inc., 2016-0552 (La.App. 1
Cir. 6/2/17); 222 So.3d 995, 1005 (explaining that,
"[u]nder Louisiana law, although an insurer which pays
claims on behalf of an insured is not entitled to legal
subrogation, it may still be entitled to conventional
subrogation if appropriately provided in the contract of
insurance") (citing Watters v. State Dep't of
Transp. & Devel., 33, 870 (La.App. 2 Cir. 9/27/00);
768 So.2d 733, 737).
moved to dismiss for failure to state a claim and,
alternatively, to compel arbitration if the court found
Underwriters had stated a claim. FloaTEC's argument for
dismissal hinged on three clauses in the Underwriters/Chevron
Policy. The first clause, entitled "Subrogation,"
Underwriters shall be subrogated to all rights which the
Assured may have against any person or other entity,
other than Principal Assureds and Other Assureds, in
respect of any claim or payment made under the Policy
second clause, entitled "Waiver of Subrogation,"
Underwriters agree to waive rights of subrogation against
any Principal Assured(s) and/or Other
Assured(s) including drilling contractors and/or their