The Beaumont Court of Appeals had reversed a $25 million summary judgment in favor of Exxon Mobil in a case in which Exxon’s OCIP provided workers’ compensation coverage for a contractor’s employees, triggering the exclusive remedy defense.
Lexington Insurance Company v. Exxon Mobil Corporation and ExxonMobil Oil Corporation (No. 09-22-00174; April 3, 2025) arose from a 2013 explosion at an Exxon facility that killed and injured several people, including employees of a scaffolding contractor, Brock Services, Ltd. Under the contract, Brock, an independent contractor, was required to obtain workers’ compensation coverage, employer’s liability coverage, and CGL coverage that named Exxon as an additional insured. But the contract also allowed Exxon to elect to purchase workers’ compensation coverage on Brock’s behalf, which it did under an owner-controlled insurance policy (OCIP). This policy was in effect on the date of the accident. Brock also obtained an umbrella policy from Lexington with a $25 million limit. Following the accident, the injured Brock employees received workers’ compensation benefits and then filed a third-party action against Exxon. Exxon turned to Lexington for defense costs and $25 million towards an eventual $35 million settlement with plaintiffs. Lexington declined, resulting in this lawsuit. The case went to arbitration on the coverage issue (after the trial court had denied Lexington’s motion to compel arbitration and then been reversed by the court of appeals), in which the arbitrator determined that Exxon was an additional insured under the Lexington policy. The trial court affirmed the award and granted Exxon’s motion for summary judgment for the policy limits, plus attorney’s fees and prejudgment and postjudgment interest. Lexington appealed.
In an opinion by Justice Wright, the court of appeals reversed and rendered judgment for Lexington. First, Lexington contended that the trial court erred in affirming the arbitration award because Exxon’s chosen arbitrator had a conflict-of-interest. Nothing in the arbitration provision, however, required Exxon to select a neutral arbitrator, so that argument didn’t hold any water. Next, the insurer asserted that the policy exclusions for workers’ compensation and employer’s liability precluded coverage of Exxon as an additional insured. It argued further that Brock’s employees were the statutory employees of Exxon under the workers’ compensation statute because Exxon obtained workers’ compensation and liability policies covering Brock’s employees through its OCIP. The exclusive remedy provision thus applied, relieving Lexington of anything more than the limits of workers’ compensation benefits. The court rejected the insurer’s argument, holding that the exclusion didn’t apply because “Exxon Mobil is not seeking coverage under the Lexington policy for any obligation Exxon owed to the Brock employees ‘under a workers’ compensation, disability benefits or unemployment compensation law or any similar law.” Strike two
As to the second policy exclusion carving out bodily injury to the insured’s employee acting in course and scope, the court examined the structure of Exxon’s OCIP and concluded that “Exxon’s use of the OCIP program brings this situation squarely within section 406.123(e) of the Texas Labor Code” and SCOTX’s decision in Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 438 (Tex. 2009) and TIC Energy & Chem., Inc. v. Martin, 498 S.W.3d 68, 76-78 (Tex. 2016). Because Exxon provided workers’ compensation coverage to Brock’s employees through its OCIP, those employees became statutory employees of Exxon, entitling Exxon to the exclusive remedy defense under § 408.001(a). Exxon then deducted the cost of providing workers’ compensation coverage from Brock’s compensation under the contract.
Exxon countered by asserting that the contract explicitly designated Brock as an independent contractor and, consequently, Brock’s employees could not be considered statutory employees of Exxon. The court disagreed, pointing out that the umbrella policy at issue stated that it “provide[d] no broader coverage than the underlying CGL policy.” Consequently, the policy did not “provide Exxon liability coverage for bodily injuries sustained by its statutory employees to include the personal injury of plaintiffs in the underlying case.” Finally, the court of appeals determined that Lexington had no duty to defend because the plaintiff’s pleadings “set for facts that bring the claim within a clearly stated policy exclusion,” that is, the policy’s exclusion of claims for bodily injury to the insured’s employees arising in the course and scope of the employee’s employment. Here there was no dispute that the “Brock plaintiffs were suing for injuries received in the course and scope of employment at the Exxon facility which was covered by the OCIP program and prohibited the employees from bringing claims for personal injury against Exxon and other OCIP participants after workers’ compensation benefits had been paid.” Lexington thus owed no duty to defend. Likewise, it had no duty to indemnify. The court reversed and rendered judgment for Lexington.
