Ingalls Shipbuilding v. Federal Insurance Co, et a

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT May 18, 2005

Charles R. Fulbruge III
Clerk
No. 03-60358

INGALLS SHIPBUILDING

Plaintiff-Appellant - Cross-Appellee

versus

FEDERAL INSURANCE CO

Defendant-Appellee

versus

TRANSOCEAN OFFSHORE INC

Cross-Appellant

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NIGEL S BROUSSARD

Plaintiff

versus

TRANSOCEAN OFFSHORE INC; ET AL

Defendants

TRANSOCEAN OFFSHORE INC

Defendant - Cross Defendant -
Counter Claimant - Cross-Appellant

versus

CERTIFIED EMPLOYEE SERVICES INC

Defendant-Appellee
versus

MH PYRAMID INC
 Defendant - Cross Claimant -
Cross Defendant - Cross-Appellee

and

CRAFT WELDING & CONTRACTING CO

Defendant - Cross Claimant -
Counter Defendant - Cross-Appellee

versus

INGALLS SHIPBUILDING

Appellant - Cross-Appellee

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TRANSOCEAN OFFSHORE

Plaintiff - Appellee -
Cross-Appellant

versus

TUDOR INSURANCE CO; ET AL

Defendants

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH,
PENNSYLVANIA; NATIONAL FIRE & MARINE INSURANCE COMPANY

Defendants - Appellants -
Cross-Appellees

No. 03-60557

INGALLS SHIPBUILDING

Plaintiff

versus

FEDERAL INSURANCE COMPANY

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 Defendant

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TRANSOCEAN OFFSHORE

Plaintiff - Appellee

versus

TUDOR INSURANCE COMPANY; ET AL

Defendants

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH,
PENNSYLVANIA; NATIONAL FIRE & MARINE INSURANCE COMPANY

Defendants - Appellants

Appeals from the United States District Court
for the Southern District of Mississippi

Before WIENER, PRADO, Circuit Judges, and LITTLE,* District
Judge.

WIENER, Circuit Judge:

FACTS AND PROCEEDINGS

The underlying facts of the case are undisputed. Ingalls

Shipbuilding, Inc. (“Ingalls”) operates a shipyard in Pascagoula,

Mississippi. In June 1998, Transocean Offshore, Inc.

(“Transocean”) contracted with Ingalls to install various drilling

modules aboard its vessel, the DISCOVERER ENTERPRISE (“Shipyard

Agreement”). In connection with the shipyard work, Transocean

*
District Judge for the Western District of Louisiana,
sitting by designation.

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executed a Purchase Agreement with Pyramid Constructors, Inc.

(“Pyramid”) to design and manufacture a derrick structure and

install its component parts. Transocean also executed a Master

Service Agreement with Craft Welding and Contracting Services

(“Craft”) to provide welding services on the derrick.

In February 1999, Nigel Broussard sustained injuries while

working on the DISCOVERER ENTERPRISE after his head was struck by

a steel wedge allegedly dislodged from the vessel’s drilling dock.

Broussard, an employee of Certified Employment Services, Inc.

(“CESI”), was working on the vessel at the time of the incident

pursuant to a Contract Labor Agreement between CESI and Ingalls.

The sole defendant in the original lawsuit filed by Broussard was

Transocean. Broussard subsequently amended his complaint to

include several contractors involved in the project —— Industrial

Corrosion Control, Inc. (“ICCI”), Pyramid, and Craft. Transocean

brought third party complaints against Ingalls, ICCI, Pyramid, and

Craft seeking insurance defense, indemnity, and coverage. The

contracts that Transocean had entered into with each of these

parties required that Transocean be named as an additional insured

on the contractors’ comprehensive general liability policies.

Ingalls filed a fourth party complaint against CESI alleging that

CESI was obligated to indemnify and defend Ingalls for any

liability it had to Transocean.

The district court determined that Ingalls had failed to

obtain insurance as required by the Shipyard Agreement, and granted

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Transocean’s summary judgment motion for breach of contract.

Ingalls then filed a separate suit against CESI’s insurer, Federal

Insurance (“Federal”), alleging breach of contract and bad faith.

Transocean’s summary judgment motions against ICCI, Pyramid and

Craft were denied because these contractors had obtained insurance

in accordance with the agreements that Transocean had entered into

with them. Transocean then filed a parallel suit against ICCI’s

insurer, Tudor Insurance Co. (“Tudor”); Craft’s insurer, National

Fire and Marine Insurance Co. (“National Fire”); and Pyramid’s

insurer, National Union Fire Insurance Co. (“National Union”),

alleging breach of insurance contract and bad faith for failing to

defend Transocean in the Broussard litigation. In October 2001,

Ingalls’s suit against Federal was consolidated with its fourth

party complaint against CESI, and Transocean’s claims against ICCI,

Craft, and Pyramid were consolidated with its claims against Tudor,

National Fire, and National Union.

In February 2002, Broussard settled his claims against

Transocean, ICCI, Craft, and Pyramid for $829,000. Transocean paid

him $320,000, ICCI paid $279,000, Pyramid paid $120,000, and Craft

paid $110,000. Transocean continued its litigation against the

contractors and their insurers for reimbursement for its share of

the amount of the settlement with Broussard and for attorneys’

fees. In April 2002, Transocean settled its claim against ICCI and

Tudor.

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 In September 2002, the district court granted Transocean’s

motion for summary judgment against National Fire, National Union,

and Ingalls on their duties to defend, but found no bad faith.

National Fire, National Union, and Ingalls, as primary insurers,

were each held responsible to Transocean for an equal share of

Transocean’s settlement amount, with a reduction for the settlement

with Tudor and ICCI, plus reasonable attorneys’ fees, costs and

expenses. The district court directed defense costs to be measured

from the date Transocean served its claims against Ingalls,

Pyramid, and Craft. Costs were calculated to include expenditures

incurred by Transocean in pursuing its present breach of contract

claims.

In June 2003, the district court entered a final judgment for

the amounts owed by the parties to Transocean. National Fire and

National Union appealed this judgment. Transocean filed a limited

appeal in the event that the district court’s decision is reversed,

appealing the denial of its summary judgment motion against Craft

and Pyramid for indemnification and coverage. In addition,

Transocean asks that, in the event that the holding against one of

the insurers is reversed, the damages be reallocated to the

remaining insurers.

In March 2003, the district court granted CESI and Federal

summary judgment on Ingalls’s claims. This decision was appealed

by Ingalls, which appeal was then consolidated with the appeals of

National Fire and National Union.

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 ANALYSIS

Standard of Review

We review the grant of summary judgment de novo, applying the

same standards as the district court.1 Summary judgment is

appropriate when there is no genuine issue as to any material fact,

and the moving party is entitled to judgment as a matter of law.2

I. INGALLS’S APPEAL

A. Background

CESI provided Ingalls with skilled laborers (one of whom was

Broussard) on an as-required basis under the Contract Labor

Agreement. Broussard did not sue Ingalls for his injury; rather,

Ingalls was drawn into the fray by Transocean, which filed a third

party complaint against Ingalls for contractual indemnity and

insurance coverage under the Shipyard Agreement between the two

companies. As noted, Ingalls filed a fourth party complaint

against CESI, claiming that CESI was required by the Contract Labor

Agreement to indemnify Ingalls for, and procure insurance covering

Ingalls for, liability arising out of the Contract Labor Agreement.

The district court granted Transocean’s summary judgment motion on

its claim against Ingalls. The court held that by failing to

procure insurance as required by the Shipyard Agreement, Ingalls

1
Tango Transp. v. Healthcare Fin. Servs. LLC, 322 F.3d 888,
890 (5th Cir. 2003).
2
Fed. R. Civ. P. 56(c).

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breached the contract and thus is deemed to have assumed the

position of Transocean’s underwriter. Ingalls did not appeal the

decision.

Ingalls filed suit against Federal, CESI’s underwriter, for

coverage under CESI’s insurance policy. Ingalls’s fourth party

complaint against CESI was consolidated with the suit against

Federal.

CESI and Federal filed motions for summary judgment and

Ingalls likewise filed a motion for summary judgment. The district

court granted CESI’s and Federal’s motions, finding that the

indemnity language in the Contract Labor Agreement did not cover

damages from Ingalls’s breach of contract with Transocean, and that

the insurance CESI was required to procure did not cover Ingalls’s

breach.

B. Ingalls v. CESI

The Contract Labor Agreement between Ingalls and CESI contains

the following provision:

XVII. Insurance

A. INSURANCE

(a) [CESI] hereby assumes entire responsibility and
liability for any and all injury to any and all
persons . . . and for any and all damage to property
. . . caused by or resulting from or arising out of
any act or omission on the part of [CESI], its
subcontractors, agents and employees under or in
connection with this Purchase Order or the
prosecution of the work hereunder and shall indemnify
and save harmless [Ingalls], its officers, agents,
and employees against and from risk of claims,

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 demands or damages by third persons arising or
alleged to have risen out of the performance of this
Purchase Order. [CESI’s] liability under this
paragraph shall be limited to the risks covered and
monetary limits of [CESI’s] insurance carried
pursuant to paragraph (b) of this article.

(b) [CESI] agrees to maintain during the period
of this agreement and at its expense policies of
insurance as follows:

. . . .

-Comprehensive, Public, Environmental/Pollution
Legal Liability, General and Automobile
Liability coverage including completed
operations/products liability coverage covering
bodily injury, death and property damage
including broad form contractual liability
coverage, with combined single limits of
$2,000,000 with endorsement covering [CESI’s]
indemnity obligations hereunder; with a
severability of interest clause and with
[Ingalls] added as an additional assured for any
liability arising out of the performance of the
work hereunder.

1. CESI’s Duty to Indemnify Ingalls

Ingalls argues that the Contract Labor Agreement required CESI

to indemnify Ingalls from claims of third parties arising out of

the performance of the Contract Labor Agreement, including

Transocean’s breach of contract claim against Ingalls. Agreements

to indemnify are construed to give effect to the intent of the

parties.3 To determine intent, we look first to the contract

language; we only look beyond the language if it is unclear or

3
Heritage Cablevision v. New Albany Elec. Power Sys., 646
So.2d 1305, 1312-13 (Miss. 1994).

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ambiguous.4 The first part of the indemnity provision is an

assumption of liability for damage to persons or property “caused

by or resulting from or arising out of any act or omission on the

part of [CESI], its subcontractors, agents and employees under or

in connection with this Purchase Order or the prosecution of the

work hereunder.”

Ingalls contends that this language should be interpreted as

requiring CESI to assume responsibility for injury to all persons

whose injuries are caused by or result from (1) any act or omission

on CESI’s part, (2) in connection with the contract, or (3) the

prosecution of the work under the contract. The language of the

contract fails to support Ingalls’s construction. The plain

language limits CESI’s responsibility to injuries or damage caused

by CESI, “its subcontractors, agents and employees.” In the

present case, the harm was caused to an employee, Broussard. The

claim in question lies outside the ambit of this language.

The second part of the indemnity provision indemnifies Ingalls

“against and from risk of claims, demands or damages by third

persons arising or alleged to have risen out of the performance of

this Purchase Order.” The claim that Ingalls seeks reimbursement

for, however, rose out of Ingalls’s breach of the Shipyard

4
Id. at 1313. Ingalls argues that the court should apply
Mississippi law, as opposed to maritime law. Because the
standard is the same under either, it is not necessary to address
Ingalls’s argument. See id. (applying Mississippi law); Robin v.
Sun Oil Co., 548 F.2d 554, 557 (5th Cir. 1977) (applying maritime
law).

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Agreement with Transocean, not from the performance of the Contract

Labor Agreement.5 Ingalls was held to be in breach of contract

under the Shipyard Agreement for failing to obtain insurance that

covered Transocean. Ingalls tries to recharacterize its liability,

arguing that the damages claimed by Transocean for breach of

contract arose from the fact that Broussard was working at Ingalls,

thereby rising out of the performance of the Contract Labor

Agreement.

We have rejected analogous claims that indemnity agreements

encompass claims made by third parties against the indemnitee for

the indemnitee’s own contractual indemnity obligations absent clear

expression in the contract that such coverage is intended to be

included. In Corbitt v. Diamond M. Drilling Co., we addressed

claims similar to these.6 The facts of Corbitt that are pertinent

to this case are as follows: Shell Oil contracted with two

companies, Diamond M. and Sladco, to work on a drilling operation.

When an injured employee of Sladco sued Diamond M. in tort, Diamond

M. sought indemnification from Shell pursuant to their contract.

Shell then filed a third-party action seeking indemnification from

Sladco as the employer of the injured plaintiff, pursuant to their

5
This scenario can be contrasted with one where Broussard
sued Ingalls directly for his injuries. The claim would then be
one in tort for an injury incurred while performing under the
Contract Labor Agreement. In that scenario, the second part of
the indemnity provision might apply.
6
654 F.2d 329 (5th Cir. 1981).

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contract. Thus, in Corbitt, Shell was situated similarly to

Ingalls, and Diamond M. and Sladco, which had no contract between

themselves, were situated similarly to Transocean and CESI,

respectively. We held that Shell was not entitled to

indemnification from its contractor, Sladco, because the

indemnification provision in the contract between Shell and Sladco,

as Corbitt’s employer, restricted the scope of Sladco’s

indemnification duty to obligations sounding in tort. Although the

underlying claim sounded in tort, we concluded that the obligation

for which Shell sought indemnification was contractual in nature,

as it arose from the agreement between Shell and Diamond M.

Applying maritime law, we declined to interpret the phrase “all

claims” to include such contractual obligations.7 We explained

that

[a] contract of indemnity should be construed to cover
all losses, damages, or liabilities which reasonably
appear to have been within the contemplation of the
parties, but it should not be read to impose liability
for those losses or liabilities which are neither
expressly within its terms nor of such character that it
can reasonably be inferred that the parties intended to
include them within the indemnity coverage. Thus, for
example, it is widely held that a contract of indemnity
will not afford protection to an indemnitee against the
consequences of his own negligent act unless the contract
clearly expresses such an obligation in unequivocal
terms. A contract to indemnify another for his own

7
The indemnification agreement in Corbitt read in relevant
part: “[Sladco] shall indemnify and defend Shell Oil Company ...
against all claims, suits, liabilities and expenses on account of
injury or death of persons (including employees of Shell or
[Sladco] . . .) . . . arising out of or in connection with
performance of this [contract] . . . .” Id. at 331.

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 negligence imposes an extraordinary obligation. Thus an
indemnitor is entitled to express notice that under his
agreement, and through no fault of his own, he may be
called upon to pay damages caused solely by the
negligence of his indemnitee. For the same reasons
express notice is required where a party seeks to shift
his contractual liability to indemnify a third party.8

We further ruled that, even though a “contract need not

contain any special words to evince an intention to create a right

of indemnity for independent contractual liabilities”, it “must

clearly express such a purpose.”9 Cases that Ingalls points to

either support a determination that the language in the Contract

Labor Agreement is insufficiently expressed, or are inapposite.10

For example, in Sumrall v. Ensco Offshore Co., the indemnity

provision at issue covered “all . . . causes of action of

whatsoever nature or character . . . and whether arising out of

contract, tort . . . whether or not caused by . . . Santa Fe [party

in Ingalls’s shoes] . . . .”11 Unlike the provision in Sumrall, the

indemnity provision at issue here does not include expansive

8
Id. at 333 (internal citations omitted).
9
Id. at 334 (emphasis added). This broad statement refutes
any contention that the present case is distinguishable from
Corbitt on the grounds that the indemnity language in Corbitt was
limited to personal injury claims.
10
Ingalls string cites a series of cases which appear to be
lifted directly out of the Sumrall opinion, without providing any
parentheticals or pin cites, to support its position. In each of
the cited cases, the indemnity provision in question required the
indemnifying party to indemnify third party contractors of the
indemnitee, as well as the indemnitee.
11
291 F.3d at 318 n. 4 (emphasis added).

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phrases such as “whatsoever nature or character” or any specific

reference to “contract.” CESI had no duty to indemnify Ingalls for

Ingalls’s breach of contract.

2. CESI’s Obligation to Obtain Insurance for Ingalls

Subsection (b) of the “Insurance” provision in the Contract

Labor Agreement requires CESI to obtain particular types of

liability coverage for Ingalls and to have Ingalls named as an

additional insured on the specified types of coverage “for any

liability arising out of the performance of the work hereunder.”

One type of liability coverage CESI was obligated to obtain for

Ingalls was “broad form contractual liability coverage.” Ingalls

argues that CESI’s obligation to obtain contract liability coverage

included coverage of Ingalls’s breach of contract with Transocean.

Assuming that Ingalls is correct in asserting that CESI was

obligated to obtain broad form contractual liability coverage for

Ingalls, this obligation still would not extend so far as to cover

Ingalls for its own breach of contract:

[C]ourts have consistently interpreted the phrase
“liability assumed by the insured under any contract” to
apply only to indemnification and hold-harmless
agreements, whereby the insured agrees to “assume” the
tort liability of another. This phrase does not refer to
the insured’s breaches of its own contracts.12

12
1 Barry R. Ostrager & Thomas R. Newman, Handbook on
Insurance Coverage Disputes § 7.05, at 460 (12th ed. 2004)
(citing cases); see also Musgrove v. Southland Corp., 898 F.2d
1041, 1044 (5th Cir. 1990) (“The assumption by contract of the
liability of another is distinct conceptually from the breach of
one’s contract with another.”).

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Ingalls’s liability to Transocean resulted directly from Ingalls’s

breach of contract, not from any contractually assumed liability.

It therefore falls outside of any contractual obligation CESI had

to procure insurance coverage for Ingalls.

C. Ingalls v. Federal

Ingalls contends that, irrespective of CESI’s obligation to

obtain insurance coverage for Ingalls, Federal is obligated to

reimburse Ingalls as an Additional Insured under Federal’s policy

with CESI. Under the Contract Labor Agreement, CESI was required

to have Ingalls named as an additional insured under CESI’s

policies with Federal. Ingalls relies on Endorsement 5 and 6 of

CESI’s Federal policy as support for its position that Federal had

an obligation to cover Ingalls’s breach of contract.13 Ingalls’s

13

Endorsement No. 5

Additional Insureds And Waivers Of Subrogation Endorsement
Privilege is hereby granted the Assured to agree to name as
Additional Assureds on all policies others for whom the Assured
is performing work or who are performing work for or with the
Assured, provided the Assured shall have so agreed prior to loss.
Such others who the Assured has agreed to name as Additional
Assureds shall become Additional Assureds hereunder upon the
Assured entering into such agreement, and no further notice,
declaration, amendment, or endorsement shall be necessary to
constitute any such others as Additional Assured.
. . . .
Notwithstanding the preceding provisions . . . no party shall be
deemed an Additional Assured and no waiver or release of
subrogation shall extend to any extent greater than required by
the agreement entered into between such party and the Assured.

Endorsement No. 6

Action Over/Indemnity Buyback Endorsement

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contention fails for several reasons. First, as the district court

pointed out, Federal’s coverage obligations are limited by the

coverage agreed to in the Contract Labor Agreement. Ingalls’s

quotation of Endorsement No. 5 in its brief cherry-picks the

language, conveniently omitting the dispositive language:

“Notwithstanding the preceding provisions . . . no party shall be

deemed an Additional Assured and no waiver or release of

subrogation shall extend to any extent greater than required by the

agreement entered into between such party and the Assured.” As

CESI’s indemnity and insurance obligations do not extend to

Ingalls’s breach of contract, Federal’s coverage does not extend

that far either.

Second, Endorsement No. 6 covers only those amounts “paid on

account of investigation, defense and indemnity as respect its

responsibilities, if any, to third parties by virtue of defense and

indemnity obligations assumed under written contract or

agreement.”14 Ingalls did not assume by contract any indemnity

In consideration of the premium charged hereunder, it is hereby
understood and agreed that this policy, subject to all of its
terms and conditions, warranties, and limit of liability, is
endorsed to indemnify the Assured for amounts for which it shall
have become liable to pay and shall have paid on account of
investigation, defense and indemnity as respect its
responsibilities, if any, to third parties by virtue of defense
and indemnity obligations assumed under written contract or
agreement . . . .
14
As Ingalls’s claim fails for other reasons, we need not
consider whether Endorsement No. 6 covers Ingalls at all, given
that it is limited to the “Assured” and does not mention
“Additional Assureds.”

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obligation to Transocean; there was only a promise to provide

insurance coverage. The damages owed by Ingalls to Transocean were

incurred as a result of its breach, not as a result of any assumed

liability. Once again, Ingalls’s reliance on the obligation of

CESI to obtain “broad form contractual liability coverage” does

nothing to support Ingalls’s claim. “Contractual liability

coverage” extends only to contractual assumption of the liability

of another party, not to liability incurred through the breach of

one’s own contract with another.15 Federal’s summary judgment

motion was properly granted.

II. NATIONAL FIRE’S APPEAL

A. Background

The Master Service Agreement entered into by Craft and

Transocean provided that Craft would maintain comprehensive general

liability insurance and cause Transocean to be named as an

additional insured. National Fire issued a general liability

policy to Craft with an additional insured endorsement naming

Transocean as an additional insured pursuant to the terms,

conditions and exclusions of the endorsement. As a result of the

Broussard litigation, Transocean made a written demand for

insurance, defense and indemnity from Craft and its underwriters.

This demand was expressed in a letter to Craft’s counsel dated

April 17, 2001. In September 2001, Transocean filed a claim

15
See note 12 and supporting text.

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against National Fire for denying coverage and defense to

Transocean. Denying that it owed Transocean defense or indemnity,

National Fire filed a motion for summary judgment. In the

alternative, National Fire insisted that there was no duty to

defend because of the late notice from Transocean. On the same

date, Transocean filed a cross motion for summary judgment.

The district court granted Transocean’s cross motion, holding

that National Fire had a duty to defend and is liable for one-

fourth of Transocean’s share of the settlement with Broussard, plus

reasonable attorneys’ fees. Costs were assessed from the date that

Transocean served its claim against Craft, and included

expenditures incurred in connection with the current breach of

contract action.16 National Fire filed a motion to reconsider which

was denied by the district court, and this appeal followed. The

parties agree that Mississippi law applies.

B. National Fire’s Duty to Defend Transocean

On appeal, National Fire makes three arguments: (1) The terms

of the insurance endorsement did not require it to defend

Transocean; (2) it had no duty to defend Transocean because

Transocean failed to provide timely notice of the claim; and (3) it

had no duty to defend or indemnify Transocean because the policy

was merely “excess” to other coverage under the endorsement.

16
Unlike National Union, National Fire does not dispute on
appeal the district court’s award of attorneys’ fees incurred in
the instant litigation.
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 1. Duty to Defend

National Fire maintains that under the terms of the

endorsement, no duty to defend Transocean was triggered by

Broussard’s lawsuit. The endorsement reads:

1. WHO IS AN INSURED . . . is amended to include as
an insured the person or organization (called
“additional insured”) shown in the schedule
[Transocean] but only with respect to liability arising
out of:

A. “Your work” for the additional insured(s) at
the location designated above, or

B. Acts or omissions of the additional
insured(s) in connection with their general
supervision of “your work” at the location shown
in the Schedule.

2. With respect to the insurance afforded these
additional insureds, the following additional
provisions apply:

. . . .

B. Additional Exclusions. This insurance does
not apply to:

. . . .

(3) “Bodily injury” or “property damage”
arising out of any act or omission of the
additional insured(s) or any of their
employees, other than the general
supervision of work performed for the
additional insured(s) by you.

The parties do not dispute that the policy covers any

liability of Transocean that arises out of (1) Craft’s work, or (2)

Transocean’s negligent supervision of Craft. Mississippi has

adopted the “allegations of the complaint” rule (sometimes referred

to as the eight-corners test) to determine whether an insurer has

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a duty to defend.17 We review the allegations in Broussard’s

complaint to see whether it states a claim that is within or

arguably within the scope of the coverage provided by National

Fire’s policy.18 When comparing the words of the complaint with the

words of the policy, “we look not to the particular legal theories”

pursued by Broussard, “but to the allegedly tortious conduct

underlying” the suit.19 Broussard’s second amended complaint named

Craft, Pyramid, and Transocean as defendants, alleging:

VI.
Plaintiff would not have been injured if the defendants
performing work in the derrick, ot [sic] Transocean
Offshore Inc. as vessel owner, individually and/or
severally, had undertaken the precaution of rigging
safety netting and toe boards, and removing loose pieces
of metal from the derrick.

VII.
As a direct and proximate result of the gross negligence
of the Defendants, individually and/or jointly, in
failing to rig safety netting, toe boards, headache
boards, and/or roping off areas of the vessel exposed to

17
Am. Guarantee & Liab. Ins. Co. v. 1906 Co., 273 F.3d 605,
610 (5th Cir. 2001); Farmland Mut. Ins. Co. v. Scruggs, 886 So.2d
714, 719 (Miss. 2004); United States Fid. & Guar. Co. v.
OmniBank, 812 So.2d 196, 200 (Miss. 2002); Delta Pride Catfish,
Inc. v. Home Ins. Co., 697 So.2d 400, 403 (Miss. 1997).
Mississippi law also provides an exception to the “allegations of
the pleadings” rule, which holds that an insurer has a duty to
defend when presented with extrinsic facts, of which the insurer
has knowledge or could obtain knowledge by means of a reasonable
investigation, that trigger coverage under the policy. See
Mulberry Square Prods., Inc. v. State Farm Fire & Cas. Co., 101
F.3d 414, 422 (5th Cir. 1996). Transocean did not argue this
alternate ground for coverage.
18
1906 Co., 273 F.3d at 610 (citing cases).
19
Id. (citing cases).
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 falling objects for the protection of persons working
below the derrick of D/S DISCOVERER ENTERPRISE, and in
failing to remove loose metal objects from the derrick,
and in causing a four pound wedge to fall and strike
Plaintiff, Plaintiff has suffered personal injury, mental
disability, physical pain and suffering, and mental
anguish.

Looking solely at the complaint, we cannot determine whether

Broussard was suing Transocean in a capacity related to its

relationship with Craft, unrelated to its relationship with Craft,

or both. The district court was convinced that the factual

allegations in the complaint “clearly provide grist for a claim of

vicarious liability or negligent supervision.” The district court

might have been overconfident in its statement, but the conclusion

is correct. As one commentator has stated,

When pleadings are of an indefinite, vague and ambiguous
nature, the courts have found that the insurer has a duty
to defend the insured, at least until the pleadings are
clarified. Any doubts as to the insurer’s duty to defend
raised by the complaint will be resolved in the insured’s
favor. The best advice with respect to ambiguous
complaints is: “When in doubt, defend.”20

The allegations in the complaint could support claims against

Transocean for both negligent supervision of Craft and vicarious

20
22 Eric M. Holmes, Holmes’ Appleman on Insurance 2d §
136.2 at 16 (2003) (citing cases). See 1906 Co., 273 F.3d at 610
(emphasis added) (insurer is justified in refusing to defend
“only if it is clear from the face of the state court complaints
that the allegations therein are not covered”); Merchants Co. v.
American Motorists Ins. Co., 794 F.Supp. 611 (S.D. Miss. 1992)
(construing both the allegations of a complaint and the
provisions of an insurance contract liberally in determining
whether there was a duty to defend). This method of
interpretation is different from that which requires provisions
of insurance contracts to be construed liberally in favor of the
insured.
-21-
liability for Craft’s actions. Under Mississippi law, therefore,

National Fire had a duty to defend Transocean.

2. Notice of the Claim

National Fire insists that, even if the policy provided

Transocean with coverage, Transocean failed to notify National Fire

in accordance with the policy and is therefore barred from seeking

coverage under the policy. The policy’s notice provision required

the insured to provide written notice “as soon as practicable”

after a suit was brought against it. Interpreting Mississippi law

previously, we have said that the phrase “as soon as practicable”

“means ‘within a reasonable time under all the circumstances to

effectuate the objects and purposes of the notice clause.’”21

“Notice given so late that it is ‘unreasonable’ or that prejudices

the insurer bars recovery by the insured.”22

National Fire emphasizes that it did not receive notice from

Craft, Transocean, or anyone else until two years after the

accident and more than eighteen months after Broussard filed suit.

Neither of these events is determinative of when notice should have

been given. The policy specifically requires that notice be given

“as soon as practicable” once “a claim is made or ‘suit’ is brought

against any insured.” The time of the accident is irrelevant.

Broussard’s initial complaint neither named Craft as a defendant

21
State of Mississippi v. Richardson, 817 F.2d 1203, 1206-
07 (5th Cir. 1987) (quoting Young v. Travelers Ins. Co., 119 F.2d
877, 880 (5th Cir. 1941)).
22
Id. at 1207.
-22-
nor provided any indication that Transocean’s negligence could be

related to Craft’s work. Rather, the complaint initially named

only Transocean, and the policy, as conceded by National Fire, does

not cover the additional insureds’ own negligence outside of the

additional insureds’ negligent supervision of the insured. The

time for starting the notice clock is the date on which Craft was

added to the complaint: That is when a claim against Transocean

for vicarious liability or negligent supervision of the insured

first became possible. The second amended complaint was filed on

November 30, 2000; the record makes clear that Transocean wrote to

Craft on April 17, 2001, requesting that it notify its insurer of

the insurer’s duty under the policy. At the latest, National Fire

had notice within four and a half months following the date that

the complaint was amended to add Craft as a defendant.

The next question is whether, under all relevant

circumstances, the timing of the notice was unreasonable or somehow

prejudiced the insurer. The purpose of notice provisions in

insurance policies is to give the insurance company “the chance to

settle or litigate claims for which it ultimately might be

liable.”23 In Bolivar County Board of Supervisors v. Forum

Insurance Co.,24 we concluded that notice was not furnished as “soon

as practicable” when (1) there was a five-month delay in providing

notice, (2) the case was defended by counsel not obtained by the

23
Id.
24
779 F.2d 1081, 1084 (5th Cir. 1986).
-23-
insurance company, and (3) the case had already been submitted to

the court for decision by the time notice was given. The

circumstances of the instant case stand in obvious contrast to

those in Bolivar. National Fire had notice of the suit no more

than four and one-half months following the filing of the second

amended complaint, and was not only aware of the suit, but

participated actively in the settlement proceedings as counsel for

Craft. We are satisfied that the timing of the notice provided by

Transocean was neither unreasonable nor prejudicial to National

Fire’s ability to defend Transocean had it chosen to do so.

We conclude, however, that the district court erred in

identifying the time when National Fire became obligated to defend

Transocean, and hence the forward-looking time from which National

Fire is obligated to reimburse Transocean for defense costs in the

Broussard litigation. National Fire became obligated to defend

Transocean under the policy some time in April 2001, specifically

on the day that National Fire became aware of Transocean’s April 17

letter demanding a defense. Transocean is a sophisticated party

and, as such, could have been expected to request a defense under

the policy if it had desired one. And, it would be absurd to

require an insurance company to force itself on such a

sophisticated party if its services have not been requested.25 We

25
See Douglas R. Richmond, The Additional Problems of
Additional Insureds, 33 Tort and Ins. L.J. 945, 968 (1998)
(quoting Hartford Accident & Indem. Co. v. Gulf Ins. Co., 776
F.2d 1380, 1383 (7th Cir. 1985)) (“An insurance company ‘is not
required to intermeddle officiously where its services have not
-24-
therefore remand to the district court for a recalculation of the

defense costs that National Fire is obligated to reimburse

Transocean, starting from the date on which National Fire became

aware of Transocean’s April 17 demand letter.

3. National Fire’s Excess Insurance Argument

National Fire’s final argument is that it had no duty to

defend or indemnify Transocean because the terms of the policy

established that it provided excess coverage only. National Fire

failed to advance this argument in its motion for summary judgment,

raising it for the first time in its response to Transocean’s

motion for summary judgment.26 In that response, National Fire

based its excess insurance argument on an “other insurance”

provision contained in the insurance policy, but failed to cite to

the location of that provision or to quote its language. As a

result, the district court relied on the wrong excess insurance

provision in making its decision.27

been requested.’”).
26
Although this court is not obligated to comb through the
record to determine whether an argument has been properly
preserved —— the obligation falling on the proponent —— after a
thorough review of the record we were unable to locate any
response by National Fire to Transocean’s motion for summary
judgment. It is the responsibility of the parties to make sure
that the record on appeal is complete. The court finally
obtained a copy of National Fire’s response, along with several
other missing motions, after contacting the district court and
National Fire’s counsel.
27
The district court looked to the “other insurance”
provision in the body of the policy. That provision, however,
had subsequently been amended by endorsement.
-25-
 Following the issuance of the district court’s order granting

Transocean’s motion for summary judgment and denying National

Fire’s motion, National Fire filed a timely motion for

reconsideration. Despite National Fire’s failure properly to raise

its excess-insurance argument in its original motions, the district

court considered the applicable “other insurance” provision of the

policy and denied National Fire’s motion for reconsideration.

National Fire failed to appeal the denial of the motion for

reconsideration; hence, its appeal covers only the summary judgment

motion.

It is the obligation of the party to direct the court’s

attention to the facts and law supporting its argument. As a

result of National Fire’s failure to raise the argument properly

before the district court, we have no obligation to address it.

Although we have no obligation to do so, a brief review of the

provision shows that, even if it were applicable, National Fire

would still have a duty to defend Transocean. The “Other

Insurance” endorsement to the National Fire policy provides:

This insurance is excess over any other insurance . . .
. When this insurance is excess, we will have no duty
under Coverage A or B to defend the insured against any
“suit” if any other insurer has a duty to defend the
insured against that “suit.” If no other insured
defends, we will undertake to do so, but the insured’s
rights against all those other insurers who have a duty
to defend the insured are transferred to us.

The record reflects —— and it was never disputed until the motion

for reconsideration —— that no other insured stepped in to defend

-26-
Transocean. In its motion for reconsideration, National Fire first

argued that Transocean had access to a self-insurance policy.

Motions to alter or amend a judgment “cannot be used to raise

arguments, which could, and should, have been made before the

judgment issued.”28 The sole evidence National Fire provided to

support its new contention was a copy of Transocean’s response to

a document production request made by Ingalls. On appeal, National

Fire has added a copy of the proffered self-insurance policy and

also a brief excerpt from a deposition by Ingalls of a Transocean

officer. Given National Fire’s failure to provide anything more

than a bare bones assertion, and at such a late stage, the district

court did not abuse its discretion in refusing to consider the

additional evidence. Further, it appears that National Fire had

access to this evidence at the time it filed its motion for summary

judgment, yet has offered no reason for its belated inclusion. We

have upheld the refusal by district courts to consider such

evidence.29 Under the language of the policy, therefore, National

Fire had a duty to defend Transocean.30

28
Pluet v. Frasier, 355 F.3d 381, 385 n.2 (5th Cir. 2004).
29
See Hopper v. Frank, 16 F.3d 92, 98 n.6 (5th Cir. 1994);
Waltman v. International Paper Co., 875 F.2d 468, 473-74 (5th
Cir. 1989).
30
On the question of indemnification, it does appear that
National Fire’s policy was excess and that Ingalls and National
Union were primary insurers. Under Mississippi law, however, an
insurer who unjustifiably refuses to defend a suit may be liable
in damages for the amount of the settlement entered into by the
insured. See Mavar Shrimp & Oyster Co. v. United States Fidelity
& Guaranty Co., 187 So.2d 871, 875 (Miss. 1966). Therefore,
-27-
 We affirm the district court’s grant of Transocean’s motion

for summary judgment on National Fire’s breach of its duty to

defend Transocean, but remand for a redetermination of defense

costs.

III. NATIONAL UNION’S APPEAL

A. Background

Pyramid and Transocean entered into a Purchase Agreement which

provided that Pyramid would maintain comprehensive general

liability insurance, in which Transocean would be named as an

additional insured. At the time the Purchase Agreement was signed,

Pyramid was a named insured under a policy with National Union.

Transocean contends it is an additional insured pursuant to a

blanket additional insured endorsement attached to Pyramid’s

National Union policy. As a result of the Broussard litigation,

Transocean brought a claim against National Union for denying

Transocean coverage and for failure to defend it. National Union

filed a motion for summary judgment denying that it owed Transocean

defense or indemnity. In response, Transocean filed a motion for

summary judgment against National Union.

The district court granted Transocean’s motion, ruling that

National Union had a duty to defend and holding National Union

liable for one-fourth of Transocean’s share of the settlement with

National Fire might still have been obligated to indemnify
Transocean for its prorated portion of the settlement despite
being only an excess insurance provider.
-28-
Broussard, plus defense costs and reasonable attorneys’ fees.

Costs were assessed from the date that Transocean served its claim

against Pyramid, and included costs incurred in connection with the

current breach of contract action. The district court did not find

any bad faith on the part of National Union.

On appeal, National Union does not deny that it had a duty to

defend Transocean. It argues, however, that under Texas law this

duty was never triggered because Transocean failed to make a formal

tender of its defense to National Union. Unlike with National

Fire, Transocean did not write or otherwise communicate with

National Union requesting a defense in the Broussard action.

National Union also contends that the district court erred in

holding it liable for a portion of Transocean’s settlement with

Broussard, relying on two distinct arguments for this proposition:

first, Transocean’s voluntary settlement with Broussard was a

breach of National Union’s insurance policy, and Texas law bars

insureds from recovering such payments; second, there is no

evidence in the record to support the district court’s conclusion

that Broussard’s claims against Transocean were within the coverage

provided under the additional insured endorsement of the National

Union policy. Finally, National Union argues that the district

court erred in awarding attorneys’ fees incurred by Transocean in

the instant litigation and that the district court failed to take

account of the fact that National Union’s insurance was excess and

not primary. We address each of these contentions in turn.

-29-
 B. Choice of Law

The district court declined to conduct a choice-of-law

analysis in its consideration of Transocean’s claims against

National Union, reasoning that the outcome would be the same under

either Mississippi or Texas law on both the question of National

Union’s duty to defend and its duty to indemnify Transocean. On

appeal, National Union argues that Texas law should be applied;

Transocean asserts that the correct law to apply is Mississippi’s.

We conclude, however, that a choice-of-law determination must be

made before any of National Union’s claims are addressed. As noted

above, the district court awarded attorneys’ fees for the instant

litigation to Transocean. “The award of attorneys’ fees is

governed by the law of the state whose substantive law is applied

to the underlying claims.”31 Texas law provides the prevailing

party in a breach of contract action with a mandatory award of

reasonable attorneys’ fees.32 Mississippi, on the other hand,

follows the American Rule regarding attorneys’ fees.33 Mississippi

law is well settled that attorneys’ fees are not awarded unless

expressly authorized by a statute or other provision of law.34 In

31
Kona Tech. Corp. v. Southern Pac. Transp. Co., 225 F.3d
595, 614 (5th Cir. 2000) (quoting Exxon Corp. v. Burglin, 4 F.3d
1294, 1301 (5th Cir. 1993)).
32
Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8); Kona Tech.
Corp., 225 F.3d at 614.
33
Huggins v. Wright, 774 So.2d 408, 412 (Miss. 2000).
34
Sentinel Indus. Contracting Corp. v. Kimmins Indus. Serv.
Corp., 743 So.2d 954, 971 (Miss. 1999).
-30-
breach of contract cases, attorneys’ fees generally are not awarded

as damages absent some provision for them in the contract or a

finding of conduct that justifies the imposition of punitive

damages.35 Because (1) the underlying claims in National Union’s

appeal are for breach of contract, (2) the award of attorneys’ fees

is governed by the law of the underlying claims, and (3) the laws

of Texas and Mississipi are in conflict as to whether attorneys’

fees are awardable in a breach of contract action, we must conduct

a choice-of-law analysis.

When federal jurisdiction is based on diversity of

citizenship, we apply the conflict of law rules of the forum state

—— here, Mississippi.36 Mississippi has adopted the “center of

35
See id.; Garner v. Hickman, 733 So.2d 191, 198 (Miss.
1999); Greenlee v. Mitchell, 607 So.2d 97, 108 (Miss. 1992);
Guar. Serv. Corp. v. Am. Employers’ Ins. Co., 898 F.2d 453, 455
(5th Cir. 1990).
36
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496
(1941); Mumblow v. Monroe Broadcasting, Inc., No. 03-31013, 401
F.3d 616, 620 (5th Cir. 2005); Herring Gas Co. v. Magee, 22 F.3d
603, 605 (5th Cir. 1994).
In the original complaint filed against the insurers,
Transocean alleged the existence of both diversity and admiralty
jurisdiction. We assume that the district court was satisfied it
had diversity jurisdiction, as it made no analysis of, and there
was no further discussion of, whether admiralty jurisdiction did
in fact exist. Nor did the parties ever discuss the existence of
admiralty jurisdiction or ask for the application of maritime law
at the district court. Transocean argues for the first time on
appeal that we should apply federal choice of law rules as a
court sitting in admiralty. In its motion for summary judgment,
Transocean made no choice of law argument. In its motion in
opposition to National Union’s motion for summary judgment,
Transocean argued for the application of Mississippi choice of
law rules. Because we are satisfied that we have diversity
jurisdiction over the case, we refuse to address for the first
time on appeal whether we should apply federal choice of law
-31-
gravity” approach to resolving choice-of-law issues in contract

cases and has embraced the Restatement (Second) of Conflict of

Laws.37 A court that applies the “center of gravity approach” must

determine “which state has the most substantial contacts with the

parties and the subject matter of the action.”38 Restatement § 188

identifies a number of factors pertinent to the determination of

which State’s substantive law must be applied in contract cases:

(a) the place of contracting, (b) the place of negotiation of the

contract, (c) the place of performance, (d) the location of the

subject matter of the contract, and (e) the domicile, residence,

nationality, place of incorporation, and place of business of the

parties.39

Transocean urges the application of § 193 of the Restatement,

which it maintains requires the application of Mississippi law.

Section 193 provides the general rule that the governing law in

actions involving insurance contracts, other than life insurance,

should be the law of the state that the parties understood was to

be the principal location of the risk during the life of the

rules. “It is well established that ‘parties generally are bound
by the theory of law they argue in the district court, absent
some manifest injustice.’” Am. Int’l Trading Corp. v. Petroleos
Mexicanos, 835 F.2d 536, 540 (5th Cir. 1987) (citations omitted).
37
See Boardman v. United Serv. Auto. Ass’n, 470 So.2d 1024
(Miss. 1985).
38
Id. at 1031.
39
Restatement (Second) of Conflict of Laws § 188(2).
-32-
policy.40 Although the Mississippi Supreme Court has recognized §

193 as among the choice of law rules applicable in Mississippi,41

we conclude that this case presents a situation in which the goals

of the Restatement are better satisfied through application of

Texas law. The comment to § 193 provides two rationales for

looking to the principal location of the insured risk. Neither are

evident in the present case.

First, the location often “has an intimate bearing upon the

risk’s nature and extent and is a factor upon which the terms and

conditions of the policy will frequently depend.”42 Here, the

parties to the contract did not contemplate any particular insured

location in negotiating the contract, so that a particular risk

location could not have influenced the terms of the policy. To the

contrary, the policy is written to cover multiple risks in whatever

states Pyramid does covered work. Our conclusion on the

40
The Restatement states:
The validity of a contract of fire, surety or casualty insurance
and the rights created thereby are determined by the local law of
the state which the parties understood was to be the principal
location of the insured risk during the term of the policy,
unless with respect to the particular issue, some other state has
a more significant relationship under the principles stated in §
6 to the transaction and the parties, in which event the local
law of the other state will be applied.
Restatement (Second) of Conflict of Laws § 193. The commentary
to the section states: “The location of the insured risk will be
given greater weight than any other single contact in determining
the state of the applicable law provided that the risk can be
located, at least principally, in a single state.” § 193 cmt. b.
41
See Boardman, 470 So.2d at 1033.
42
§ 193 cmt. c.
-33-
inapplicability of § 193 is further supported by comment (b), which

states that “[s]ituations . . . where the location of the risk has

less significance, include . . . (2) where the policy covers a

group of risks that are scattered throughout two or more states.”43

Second, “the state where the insured will be principally

located during the term of the policy has a natural interest in the

determination of issues arising under the insurance contract.”44

Even though this is normally true, in the present case Mississippi

has almost no interest in the outcome of the dispute. Broussard,

a Mississippi resident, has been paid and is no longer a party to

the dispute. What remains is a dispute between a corporation with

its principal place of business in Texas and a foreign insurer over

an insurance contract negotiated in Texas and entered into by a

Texas corporation.45 We faced a similar choice-of-law question in

43
§ 193 cmt. b; see also Maryland Cas. Co. v. Cont’l Cas.
Co., 332 F.3d 145, 151-56 (2d Cir. 2003) (in deciding which law
to apply in determining whether insurer had a duty to defend and
indemnify, court concluded the case was an exception to § 193 of
Restatement and looked to § 188 because the insured risks under
insurance policy were located in numerous states).
Comment (f) on multiple risk policies does not contradict
either our conclusion or that stated in comment (b). Comment (f)
states that, when a policy insures specific risks located in
several states, and the type of insurance coverage has special
statutory forms that differ across the several states, such as
with fire insurance, the courts should be inclined to treat a
case as involving several policies, each governing an individual
risk. The comment is inapposite in the present case.
44
§ 193 cmt. c.
45
Texas’s interest in having its law govern the outcome of
this case is evident through its own choice of law statutes.
Article 21.42 of the Texas Insurance Code provides that “[a]ny
contract of insurance payable to any citizen or inhabitant of
-34-
W.R. Grace & Co. v. Continental Cas. Co.,46 in which we applied

Texas’s choice-of-law rules. Like Mississippi, Texas has adopted

the most-significant-relationship approach of the Restatement

(Second) of Conflict of Laws.47 As here, the issues in W.R. Grace

& Co. revolved around the construction and application of insurance

policies. Grace, a manufacturer of asbestos fireproofing material,

had settled a lawsuit with a number of Texas school districts, and

the question was whether Grace could seek indemnity from its

insurers. We decided to apply the law of New York instead of that

of the forum state (Texas) because, even though Texas was the

location of the insured risk and the injury, (1) Grace and three of

the insurers maintained their principal places of business in New

York, (2) Grace’s insurance broker was located in New York, and (3)

most of the policies were solicited, negotiated and delivered in

New York.48 Important to our conclusion that we should apply New

York law was the fact that neither the tort victims nor Texas had

any interest in whether the settlement was paid by Grace or the

this State by any insurance company or corporation doing business
within this State shall be held to be a contract made and entered
into under and by virtue of the laws of this State relating to
insurance, and governed thereby.”
46
896 F.2d 865 (5th Cir. 1990).
47
Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 420-21
(Tex. 1984).
48
W.R. Grace & Co., 896 F.2d at 873.
-35-
insurers —— Texas’s only interest was in its resident tort victims’

compensation and that had been satisfied through the settlement.49

We conclude that the choice-of-law question in the present

case should be resolved through the application of § 188’s factors.

The original insurance contract between National Union and Pyramid

was negotiated and entered into in Texas,50 as was the Purchase

Agreement, which automatically made Transocean an additional

insured under the terms of the policy. National Union is a

Pennsylvania corporation with its principal place of business in

Pennsylvania; Pyramid, the primary insured under the insurance

contract, is a Texas corporation with its principal place of

business in Texas; and Transocean, the additional insured, is a

Delaware corporation with its principal place of business in Texas.

The insurance policy covers Pyramid’s work in several states,

including Mississippi, as well as entities that become additional

insureds under the policy’s Blanket Additional Insured

Endorsement.51 Although choice of law is not an exact science,

consideration of § 188’s factors lead us to conclude that Texas law

is the proper law to apply. Mississippi’s interest is minimal at

49
Id. at 874.
50
The original primary insured was named Maritime
Hydraulics, U.S., Inc., and the contract was later amended to
state that the primary insured was Pyramid.
51
The Blanket Additional Insured Endorsement provides: “It
is agreed that Additional Insureds are covered under this policy
as required by written contract, but only with respect to
liabilities arising out of the operations performed by or for the
Named Insured.” (emphasis and bolding in original).
-36-
best. Its resident, Broussard, has been paid and is not involved

in the instant litigation. Even though questions of liability

affect the resolution of the issue whether National Union must

indemnify Transocean, they are secondary to the questions of

insurance policy interpretation in which Texas has a greater

interest.

C. National Union’s Duty to Defend Transocean

National Union claims that under Texas law an insurer’s duty

to defend an insured is triggered only by actual service of process

on the insured followed by the transmission of that service to the

insurer. The Texas Supreme Court, however, has expressly left open

the question whether the duty to defend is triggered when the

insurer has actual knowledge of a suit against the insured.52 In

analogous cases, both this circuit and courts of Texas have held

that substantial, as opposed to formal, compliance with an

insurance policy’s notice requirement is sufficient under Texas

law,53 and that the insurer may waive the notice requirement through

its action or inaction.54 It is beyond dispute that National Union

was aware of the suit against Transocean. National Union had

participated in the Broussard litigation on behalf of its primary

52
Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d
170, 174 (Tex. 1995).
53
See Bituminous Cas. Corp. v. Vacuum Tanks, Inc., 75 F.3d
1048, 1056 & n.7 (5th Cir. 1996) (citing Fifth Circuit and Texas
cases).
54
See id. at 1056 & nn.8–9.
-37-
insured, Pyramid, from the time Pyramid was added as a defendant.

This participation continued all the way through to the settlement

with Broussard in February 2002. In the course of its

participation, National Union could not have failed to notice that

Transocean was a party to the same lawsuit. As for substantial

compliance, the breach of contract suit Transocean filed against

National Union and the other insurers for failure to provide a

defense in the Broussard litigation made clear that Transocean

expected a defense from National Union under the policy. National

Union waived any requirement of further compliance with the notice

provisions of the policy “by failing to request that the suit

papers themselves be forwarded or otherwise objecting to the

adequacy of the notice provided by” Transocean.55

The district court, however, erred in identifying the time

when National Union became obligated to defend Transocean, and

hence the point from which National Union is obligated to reimburse

Transocean for defense costs in the Broussard litigation. National

Union became obligated to defend Transocean under the policy on

September 10, 2001, the date when Transocean filed its complaint

against National Union. It was on that date that National Union

was first made aware of Transocean’s desire for a defense under the

55
Id. at 1056. National Union does not argue on appeal
that it was prejudiced by late notice, relying solely on its
failure-to-tender argument. We note that National Union
participated in the settlement talks with Broussard from their
inception through its primary insured, Pyramid, and was aware of
Transocean’s desire for a defense a full five months before the
actual settlement.
-38-
insurance policy. The record does not reveal, and Transocean does

not argue, that it made any request to National Union for a defense

prior to the filing of the complaint. An insurer has no obligation

to force itself onto an insured that has given no indication of its

desire for a defense and that has obtained other defense counsel.56

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

Transocean on the question whether National Union breached its duty

to defend. We remand, however, for that court to determine the

portion of the Broussard defense costs that Transocean incurred

after September 10, 2001, the only period for which National Union

is responsible.

D. National Union’s Duty to Indemnify Transocean

The district court held National Union liable for one-fourth

of Transocean’s contribution to the settlement with Broussard as

damages for breaching its duty to defend. Under Texas law,

however, an insurer that has violated its duty to defend is not

barred from contesting its duty to indemnify.57 The factual

allegations in the pleadings, along with the policy language,

determine an insurer’s duty to defend, and its duty to indemnify is

56
See note 25 and accompanying text.
57
See Quorum Health Res., L.L.C. v. Maverick County Hosp.
Dist., 308 F.3d 451, 468-69 (5th Cir. 2002) (even if an insurer
wrongfully refuses to defend, it is still able to assert the
policy defense of noncoverage); Western Alliance Ins. Co. v.
Northern Ins. Co. of New York, 176 F.3d 825, 830 (5th Cir. 1999)
(an insurer that breaches its duty to defend may not contest the
liability of the insured in the underlying settlement or verdict,
but remains free to argue that the assumed liability was not in
actuality covered under its policy).
-39-
triggered by the actual facts establishing liability in the

underlying suit.58 Turning to the relevant policy language, the

Blanket Additional Insured Endorsement covers Transocean for

“liabilities arising out of the operations performed by or for the

Named Insured.” Texas courts have broadly construed the phrase

“arising out of” in interpreting additional-insured provisions of

insurance policies.59 On the record before us, however, we are

unable to determine whether Transocean’s alleged liability to

Broussard was covered under the additional-insured endorsement.60

We therefore remand to the district court for a determination of

this issue in the first instance.61

E. Attorneys’ Fees

58
Quorum Health Res., 308 F.3d at 468; Trinity Universal
Ins. Co. v. Cowan, 945 S.W.2d 819, 821 (Tex. 1997).
59
Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487
(5th Cir. 2000) (interpreting Texas case law); McCarthy Bros. Co.
v. Continental Lloyds Ins. Co., 7 S.W.3d 725 (Tex. App. —— Austin
1999, no pet. h.); Admiral Ins. Co. v. Trident NGL, Inc., 988
S.W.2d 451 (Tex. App. —— Houston 1999, pet. denied).
60
Mid-Continent Cas. Co., McCarthy Bros. Co., and Admiral
Ins. Co. are not directly on point in the present case because in
each of those cases the injured party was an employee of the
named insured. The injured party in the instant case, Broussard,
was not an employee of the named insured.
61
National Union’s second argument, that Transocean’s
settlement with Broussard violated the voluntary payments clause
of the insurance policy and therefore National Union is not
liable for the settlement amount, fails. “[A]n insurer who first
wrongfully refuses to defend an insured is precluded from
insisting on the insured’s compliance with other policy
conditions.” Quorum Health Res., 308 F.3d at 468 (internal
quotations omitted).
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 The district court awarded Transocean attorneys’ fees incurred

in the instant litigation. National Union argues on appeal that

this was improper. As we stated in our choice-of-law analysis,

Texas law provides a mandatory award of reasonable attorneys’ fees

to the prevailing party in a breach of contract action.62 To obtain

an award of attorneys’ fees under the applicable Texas statute, a

party must (1) prevail on a cause of action for which attorneys’

fees are recoverable, and (2) recover damages.63 Transocean

prevailed and was awarded damages on its breach of duty to defend

claim. As we are remanding to the district court the question

whether National Union breached its duty to indemnify Transocean,

however, we also remand for that court to redetermine the quantum

of attorneys’ fees owed by National Union to Transocean following

the court’s reconsideration of the indemnification question.

F. Excess Insurance Claim

National Union contends that the district court failed to take

into account the “other insurance” clause in its policy with

Pyramid. The “other insurance” provision states, in relevant part,

a. Primary Insurance
This insurance is primary except when b. below
applies. If this insurance is primary, our
obligations are not affected unless any of the
other insurance is also primary. Then we will
share with all that other insurance by the method
described in c. below.

62
Tex. Civ. Prac. & Rem. Code Ann. § 38.001(8); Kona Tech.
Corp., 225 F.3d at 614.
63
Kona Tech. Corp., 225 F.3d at 614
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 ...
c. Method of Sharing
If all of the other insurance permits contribution
by equal shares, we will follow this method also.
Under this approach each insurer contributes equal
amounts until it has paid its applicable limit of
insurance or none of the loss remains, whichever
comes first.

Endorsement #0018 of the policy provides:

BLANKET PRIMARY COVERAGE ENDORSEMENT
It is understood and agreed that this policy will apply
as primary coverage where required by written contract
for work performed by the Named Insured.

The terms of the Purchase Agreement between Transocean and Pyramid

required Pyramid to obtain primary coverage. In addition, the

certificate obtained by Pyramid reflecting the coverage provided to

Transocean also expressly states that the insurance is primary.

Thus there is no doubt that National Union’s coverage was primary.

National Union nevertheless contends that the district court

erred in not requiring contribution by other insurers. When we

examine the part of the district court’s final order that addresses

the recapitulation of damages, we discern no reversible error.

First, National Union complains that the district court should have

apportioned some of the liability to Tudor. At the time of

judgment, Tudor and its insured, ICCI, had settled with Transocean

and were no longer involved in the litigation. In its

recapitulation of damages, the district court thoroughly examined

the effect of the settlement on the amounts owed by Ingalls,

National Fire, and National Union, and adjusted the amounts

accordingly. On the question of attorneys’ fees, the district
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court disregarded any monies spent solely on efforts directed at

Tudor or ICCI. As for the liability for Transocean’s settlement

amount, the district court divided the $320,000 sum by four,

leaving Ingalls, National Fire, and National Union each responsible

for $80,000. In its brief, National Union fails to direct us to

any specific error in the district court’s calculation method; and

it is not our obligation to confect an argument for them.

Second, National Union attempts to piggy-back on National

Fire’s argument that the district court failed to take into account

Transocean’s self-insurance plan.64 As we concluded above, this

argument was no more than a bare-bones assertion before the

district court, devoid of citation to legal authority in support of

its position. We are satisfied that the district court did not err

in rejecting the argument.

CONCLUSION

To recap, we affirm the district court’s grant of CESI’s and

Federal Insurance’s motions for summary judgment. We also affirm

the district court’s grant of Transocean’s motion for summary

judgment against National Fire on the question whether National

Fire breached its duty to defend. We remand, however, for the

district court to determine the amount of Transocean’s defense

costs for which National Fire is responsible in the Broussard

64
National Union first raised the argument via reference to
National Fire’s Response to Transocean’s Recapitulation of
damages in a short supplement brief.
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litigation from the date of National Fire’s receipt of Transocean’s

letter demanding a defense.

As for the district court’s grant of Transocean’s motion for

summary judgment on its claims against National Union, we affirm in

part and reverse and remand in part. On remand, the district court

shall (1) calculate Transocean’s defense costs for which National

Union is liable in the Broussard litigation from the date on which

suit was filed by Transocean against National Union; (2) decide

whether National Union has a duty under Texas law to indemnify

Transocean for one-fourth of the amount of Transocean’s settlement

payment to Broussard; and (3) recalculate the amount of

Transocean’s attorneys’ fees for which National Union is

responsible.

AFFIRMED IN PART, REVERSED AND REMANDED IN PART.

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