Bott v. JF Shea Company Inc

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

__________________________

No. 01-40848
__________________________

John Bott,
Plaintiff

Mid-Continent Casualty Company,
Intervenor Plaintiff - Counter Defendant - Appellee

versus

J.F. Shea Company, Incorporated; Shea/Keefe,
Defendants - Third Party Plaintiffs - Counter Claimants -
Appellants

versus

Gulf Coast Grouting, Incorporated,
Third Party Defendant - Appellee.

___________________________________________________

Appeal from the United States District Court
for the Southern District of Texas
___________________________________________________
August 2, 2002

Before KING, Chief Judge, PARKER, and CLEMENT, Circuit Judges.

CLEMENT, Circuit Judge:

I. Facts and Proceedings

This case arises out of a personal injury suit brought by John

Bott (“Bott”) against a joint venture known as Shea/Keefe and J.F.

Shea Co., Inc. In an attempt to bid and win a construction

project, J.F. Shea entered into a joint venture with L.J. Keefe
Co.1 Shea/Keefe was awarded construction projects to build five

portions of a sewer line for the City of Houston. Shea/Keefe hired

Gulf Coast Grouting, Inc. (“Gulf Coast”) to do the grouting work on

the project. The contract provided that Shea/Keefe must receive

certificates of insurance before work could commence and further

provided that Gulf Coast was to secure insurance coverage naming

Shea/Keefe as an additional insured.

Gulf Coast obtained insurance from Mid-Continent Casualty

Company (“Mid-Continent”) listing J.F. Shea as an additional

insured. By letter, Shea/Keefe instructed Gulf Coast to name J.F.

Shea as the additional insured although the subcontract provided

that Shea/Keefe was to be named as an additional insured. After

the insurance was obtained from Mid-Continent, Gulf Coast sent

certificates of insurance to Shea/Keefe indicating that J.F. Shea

was an additional insured on the policy on two separate occasions.

Shea/Keefe did not object to the certificates naming J.F. Shea as

an additional insured and allowed work to commence on the project.

On February 9, 1998, Bott, an employee of Gulf Coast, was

injured while working in a sewer line tunnel shaft. Bott filed a

negligence suit against Shea/Keefe and J.F. Shea. Gulf Coast and

Mid-Continent were joined as third party defendants. Shea/Keefe

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The joint venture agreement provided that J.F. Shea would
oversee the daily operations of the project. Interests of the
joint venture in profits and losses were proportionally divided
such that J.F. Shea was responsible for 80% of the job and Keefe
for only 20%.

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filed a third party complaint against Gulf Coast for indemnity

under the Construction Subcontract Agreement (“subcontract”) or,

alternatively, for breach of contract. Bott’s claims against

Shea/Keefe were settled by Shea/Keefe and cross motions for summary

judgment were filed by all parties on the issues of indemnity and

additional insured coverage.

Shea/Keefe requested indemnity from Mid-Continent for Bott’s

suit and subsequent settlement which was denied. It then filed a

motion for summary judgment against Gulf Coast on the indemnity

issue and sought coverage as an additional insured from Mid-

Continent. The district court denied the summary judgment motions

of Shea/Keefe and Gulf Coast as to the indemnity claim. After a

jury trial to allocate negligence between Shea/Keefe and Gulf

Coast, the jury found that Bott’s injuries were caused solely by

Shea/Keefe.

Shea/Keefe then filed a summary judgment motion alleging that

Gulf Coast breached the subcontract by failing to have insurance

coverage naming Shea/Keefe as an additional insured. Gulf Coast

filed a summary judgment motion arguing, among other defenses, that

Shea/Keefe was estopped from asserting the breach of contract

claim. The district court held that the doctrine of quasi-estoppel

precluded Shea/Keefe’s summary judgment on the breach of contract

issue. It further concluded that Shea/Keefe was not an additional

insured because it was not named as such in the policy. It also

held that J.F. Shea, while named as an additional insured, was not

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entitled to coverage because its liability was the result of

activities stemming from the joint venture with Keefe. Shea/Keefe

and J.F. Shea filed a motion for new trial which was denied.

Notice of appeal was then timely filed.

II. Analysis

A. Whether Shea/Keefe is an Additional Insured under the Policy
and Therefore Entitled to Coverage.

The district court’s determination that Shea/Keefe was not an

additional insured is reviewed de novo. See Mid-Continent Casualty

Co. v. Swift Energy Co., 206 F.3dd 487, 491 (5th Cir. 2000), citing,

National Union Fire Ins. Co. of Pittsburgh, Penn. V. Kasler, 906

F.2d 196, 197 (5th Cir. 1990)(“The interpretation of an insurance

contract, including the question of whether the contract is

ambiguous, is a legal determination meriting de novo review.”)

Shea/Keefe submits that the district court erred in deny

Shea/Keefe additional insured coverage under the Mid-Continent

policy. Mid-Continent refused to provide coverage to Shea because

the subcontract was between Gulf Coast and Shea/Keefe such that

liability did not arise out of operations performed for Shea.

Mid-Continent’s primary basis for denying coverage to Shea is

because the joint venture clause of the policy precludes such

coverage.2 Even if Shea was an additional insured, it would still

2
Mid-Continent also argued that Shea is not an additional
insured, but admits that, pursuant to this Court’s decisions in
Mid-Continent Casualty Co. v. Swift Energy Co., 206 F.2d 487 (5th
Cir. 2000), and Mid-Continent Casualty Co. v. Chevron Pipe Line

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be subject to the exclusions in the policy. Section II of the

policy, defining who is an insured, contains a final clause stating

that “no person or organization is an insured with respect to the

conduct of any current or past partnership or joint venture that is

not shown as a Named Insured in the Declarations.” Because

liability arose out of the joint venture which is not an insured,

Shea is not entitled to coverage.

Shea first argues that it is seeking coverage for its own

liability and not that of the joint venture. It attempts to

persuade the Court that it is entitled to coverage because, while

the project may have been conducted under the auspices of

Shea/Keefe, it was Shea that managed the daily operations of the

project. Shea has failed to demonstrate how its liability is

separate from that of the joint venture. Shea’s involvement in the

project was as the managing partner of a joint venture. Its

activities related to the project were not individual. It was the

joint venture which contracted with the City of Houston, and it was

the joint venture which contracted with Gulf Coast. Additionally,

the jury found both Shea and Shea/Keefe liable for Bott’s injury.

Second, Shea asserts that the additional insured endorsement

renders the joint venture exclusion inapplicable, and the policy

language is ambiguous because it does not refer to additional

insureds. The policy is not ambiguous nor does the additional

Co., 205 F.3d 222 (5th Cir. 2000), Shea is so qualified because
its liability has a sufficient connection to Gulf Coast’s work.

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insured endorsement render the joint venture clause inapplicable.

The endorsement clearly states that Shea is to be an insured. It

specifically states that Section II, defining who is an insured,

“is amended to include as an insured the person or organization

shown in the Schedule.” The joint venture exclusion states that

“any organization you newly acquire or form, other than a

partnership or joint venture, and over which you maintain ownership

or majority interest, will qualify as a Named Insured if there is

no other similar insurance available to that organization.” The

policy makes Shea an insured, but liability arose out of a joint

venture which is expressly excluded from coverage. Shea/Keefe is

not covered. We therefore affirm the district court’s

determination that Shea/Keefe was not entitled to coverage.

B. Whether the District Court Erred in Holding That the Doctrine
of Quasi-Estoppel Barred Shea/Keefe’s Breach of Contract Claim
Against Gulf Coast.

The district court granted summary judgment on the issue of

whether Shea was estopped from asserting its breach of contract

claim. This Court reviews the granting of summary judgment de

novo. Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380

(5th Cir. 1998).

In determining that Shea was estopped from asserting the

breach of contract claim, the district court held that “it would be

unconscionable” to find a breach for failure to name Shea/Keefe as

an additional insured after Shea/Keefe acquiesced in Gulf Coast’s

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noncompliance by accepting the certificates naming Shea and by

allowing Gulf Coast to complete its work. The court concluded that

Shea/Keefe took an inconsistent position and acquiesced in Gulf

Coast’s breach and was therefore estopped from asserting it. We

disagree.

The doctrine of quasi-estoppel

precludes a party from asserting, to another’s
disadvantage, a right inconsistent with a position [it
has] previously taken. The doctrine applies when it
would be unconscionable to allow a person to maintain a
position inconsistent with one to which he acquiesced, or
from which he accepted a benefit.

Stinnett v. Colorado Interstate Gas Co., 227 F.3d 247, 258 (5th Cir.

2000), citing, Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d

857, 864 (Tex. 2000). We recently analyzed the basis of the

estoppel doctrine under Texas law in Long v. Turner, 134 F.3d 312,

318 (5th Cir. 1998). In Long, we noted that a precise description

of the core basis of estoppel is that “one who retains benefits

under a transaction cannot avoid its obligations and is estopped to

take an inconsistent position.” Id., citing, Vessels v. Anschutz

Corp., 823 S.W.2d 762, 766 (Tex.App.-Texarkana 1992, writ

denied)(citations omitted). We noted that quasi-estoppel is

“inapplicable where the conduct allegedly giving rise to the

estoppel is not shown to have benefitted a party sought to be

estopped.” Long, 314 F.3d at 318. Several Texas courts and this

Court have subsequently interpreted the doctrine to “appl[y] when

it would be unconscionable to allow a person to maintain a position

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inconsistent with one to which he acquiesced, or from which he

accepted a benefit.” Stinnett v. Colorado Interstate Gas Co., 227

F.3d 247 (5th Cir. 2000); Lopez v. Munoz, Hockema & Reed, L.L.P.,

22 S.W.3d 857, 864 (Tex. 2000); Atkinson Gas Co. v. Albrecht, 878

S.W.2d 236, 240 (Tex.App.--Corpus Christi 1994, writ denied);

Vessels v. Anschutz Corp., 823 S.W.2d 762, 765-66

(Tex.App.--Texarkana 1992, writ denied).

Gulf Coast also argued to the district court that Shea/Keefe

waived any claim that Gulf Coast breached the subcontract based on

Shea/Keefe’s intentional and inconsistent conduct.3 Waiver is

defined in Texas as the intentional relinquishment of a known

right, or intentional conduct inconsistent with claiming that

right. Sun Exploration & Prod. Co. v. Benton, 728 S.W.2d 35, 37

(Tex. 1987). Shea/Keefe submits that the fact that Gulf Coast was

allowed to commence work and was paid for completing that work does

not constitute a release of Shea/Keefe’s contractual rights.

Section 11 of the subcontract states that

Contractor’s failure to enforce any of the provisions of
this Section 11 shall not act as a waiver of
Subcontractor’s obligation to procure the required
insurance or as a waiver to enforcement of any of these
previous provisions at a later date.

Gulf Coasts contends that the non-waiver position does not preclude

a finding that Shea/Keefe waived its claim. While non-waiver

3
The district court did not rely on the waiver issue in
granting summary judgment.

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clauses are evidence that a party did not waive a contractual

right, the parties actions may nonetheless constitute waiver. See

Enserch Corp. v. Rebich, 925 S.W.2d 75, 82 (Tex.App.-Tyler

1996)(citations omitted).

This case simply does not give rise to a claim of quasi-

estoppel. The factual scenario is based on mutual negligence and

incompetence. Gulf Coast and Shea/Keefe entered into a contract

which, in pertinent part, required Gulf Coast to obtain insurance

coverage for the joint venture. The contract was unambiguous on

this point. Subsequent to the signing of the contract, a letter

was sent from Shea/Keefe to Gulf Coast instructing it to obtain

insurance naming J.F. Shea. Gulf Coast asserts that it merely

followed the instructions of Shea/Keefe to name J.F. Shea as an

insured under the Mid-Continent policy. Gulf Coast’s reliance on

a letter, when it was aware of the unambiguous terms of the

contract, was careless at the very least. In the same vein,

Shea/Keefe was negligent in sending a letter requiring Gulf Coast

to obtain insurance for J.F. Shea and not Shea/Keefe.

Additionally, the contract provided that Gulf Coast could not

commence work until it provided Shea/Keefe with the appropriate

certificates of insurance. Gulf Coast, on two occasions, presented

certificates to Shea/Keefe naming J.F. Shea as an insured. At no

time did Shea/Keefe question or correct the improper party listed

on the certificates. Furthermore, Shea/Keefe not only allowed Gulf

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Coast to commence work but to complete it. These facts set up a

claim for waiver and not estoppel. It was inappropriate for the

district court to grant summary judgment based on an equitable

defense when there was a contract in place with provisions that

would adequately address the issues arising from these facts.

Whether or not Shea/Keefe’s actions constituted a waiver of the

waiver clause provision of the subcontract, however, is a fact

bound inquiry which we cannot address.

III. Conclusion

We affirm the district court’s grant of summary judgment as to

Mid-Continent’s position that Shea/Keefe was not afforded coverage

under the policy. The policy clearly named J.F. Shea as an

additional insured, and the joint venture exclusion of the policy

prevented Shea/Keefe from being covered thereunder. We reverse the

district court’s grant of summary judgment to Gulf Coast on the

theory of quasi-estoppel and remand for further proceedings

consistent with this opinion.

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