A Texas federal court recently held that an additional insured lacked standing to file an independent claim against an insurer.  In Antares Underwriting, Ltd. v. Magellan E&P Holdings, Magellan entered into an Emergency Agreement with Great White Well Control (“GWWC”) to provide well control services.  The Agreement had an effective date of September 1, 2020. Antares Underwriting Limited (“Antares”) issued an energy policy to Magellan with a policy term of June 30, 2020 to June 30, 2021.  When GWWC made a claim for additional insured coverage under the energy policy, Antares denied coverage. GWWC then filed suit against Magellan, Antares and Redmon-Keys, the producer of the policy.  Antares filed a motion to dismiss which the US Southern District Court granted.

This issue before the Court was whether GWWC had standing to bring an independent or “stand alone” lawsuit against Antares for denial of additional insured coverage. Based on prior decisions from state and federal courts, the Court noted that GWWC could not have been added as an additional insured during the progress of the blowout. The blowout occurred on August 31, 2020.  Both the Emergency Agreement and an Amendment to it became effective on September 1, 2020, a day after the blowout.  As GWWC was not an “additional insured” under the Antares policy at or before the time of the blowout, GWWC lacked standing to sue Antares for additional insured coverage.

The Court acknowledged that it denied dismissal of an additional insured coverage claim in a strikingly similar blowout case, Lloyds of London v. Bison.  However, the Court stressed that in Bison, the agreement between the parties required Bison be named as additional insured and the named insured, PDS Drilling, procure proper coverage for “all other obligations assumed in the contract”.  Further, the insurance policy in Bison provided that it “automatically included any additional insureds as required by written contract”. Neither the opinion in Antares nor the opinion in Bison indicate whether the contract in Bison was executed before or after the blowout, though presumably it was before. However, the Antares Court noted that the Antares policy did not contain language automatically naming additional insureds required in the Magellan-GWWC contract, distinguishing the two cases.

In the end, both the timing of the Agreement and the language in (or really, excluded from) the insurance policy dictated the outcome. The case highlights the need for parties to carefully read their insurance policies to make certain they are robust enough to cover the contractual allocation of liability. It also underscores the importance of the date of contract relative to the date of the claim or occurrence for purposes of securing coverage.

The attorneys in our Austin and Dallas office are available to answer your questions regarding this opinion and other construction or employment related matters.  Please contact us at info@gstexlaw.com.

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