Texas Supreme Court Holds Subrogation Waiver Prevents Insurer From Recovery

The Texas Supreme Court’s interpretation of an endorsement waiving subrogation rights precluded an insurer’s reimbursement of payments to injured workers even though reference to extrinsic evidence might have suggested a contrary result. Exxon Mobil Corp. v. Ins. Co. of the State of Pennsylvania, 568 S.W.3d 650 (Tex. 2019).

A refinery hired a contractor to perform services at its plant. Two workers employed by the contractor were injured from a release of hot water and received workers compensation’ benefits. One worker then sued the refinery for damages, and the workers’ compensation carrier sought to recoup its payments first as allowed under Texas workers’ compensation law. The refinery contended that contractor had waived subrogation before the date of the injury, and therefore, the carrier was not entitled to first dollars. The carrier countered that the waiver of subrogation endorsement in its policy provided that the contractor waived subrogation only to the extent of liabilities it assumed and the contractor never contractually assumed the tort liability of the refinery. Therefore, it argued, the waiver of subrogation did not apply as to the refinery operator.

The Supreme Court disagreed, holding that while the Texas standard subrogation waiver form requires one to look at past the policy and to the service agreement to determine if there was a waiver, the policy does not necessarily incorporate the terms of that contract. The Court distinguished prior Supreme Court opinions in In re Deepwater Horizon and Ken Petroleum Corp. v. Questor Drilling Corporation because in those cases the policies had different wording even if the contractual provisions were very similar. The Court explained that if the policy directs the court elsewhere to determine coverage, then the court will refer to the unincorporated document but only to the extent required by the policy. Here, the Court had to look to the contract to determine whether the contractor was required to provide the waiver to the refinery, but held that “[i]t does not necessarily follow, however, that circumstances limiting the waiver may also be considered.”