In a decision with important implications for insurers and corporate policyholders, a Texas appellate court has reversed a $25 million summary judgment awarded to Exxon Mobil Corporation and ExxonMobil Oil Corporation in a long-running dispute with Lexington Insurance Company. The court ruled that although Exxon was an additional insured under Lexington’s umbrella liability policy, a key exclusion precluded coverage for claims involving statutory employees.
The dispute stemmed from an April 2013 explosion at Exxon’s Beaumont, Texas refinery during a maintenance project. Exxon had contracted Brock Services, Ltd. to provide scaffolding services. Under the service agreement, Brock was identified as an independent contractor and was required to obtain insurance coverage, including workers’ compensation, employer’s liability, and commercial general liability (CGL) policies naming Exxon as an additional insured. However, the contract also gave Exxon the option to procure those coverages on Brock’s behalf, which it did through an Owner Controlled Insurance Program (OCIP). Exxon procured workers’ compensation and employer’s liability policies covering Brock and its employees and deducted the insurance cost from payments made to Brock.
Three Brock employees were injured in the explosion. After receiving workers’ compensation benefits under the OCIP, they sued Exxon for personal injuries. Exxon ultimately settled the claims for approximately $35 million and sought reimbursement of $25 million from Lexington under an umbrella policy issued to Brock. Exxon argued that it qualified as an additional insured and that Lexington was obligated to provide coverage.
The Lexington umbrella policy contained a binding arbitration clause for disputes involving policy interpretation. After initial objections, Exxon was ordered by a prior appellate decision to submit to arbitration. The three-member arbitration panel—composed of two party-nominated arbitrators and one neutral umpire—concluded that Exxon was an additional insured under the umbrella policy. However, the panel did not address whether any exclusions applied, leaving that issue for the courts to resolve.
The trial court affirmed the arbitration award and granted summary judgment for Exxon. It awarded Exxon the full $25 million limit under the Lexington umbrella policy, along with prejudgment and post-judgment interest and attorney’s fees. Lexington appealed, arguing that even if Exxon was an additional insured, the policy’s “Employer’s Liability” exclusion barred coverage and that the trial court erred in awarding interest and fees.
On appeal, the Ninth Court of Appeals in Beaumont agreed with Lexington. The appellate court held that Exxon was considered a statutory employer of the injured Brock employees under Texas Labor Code § 406.123, since it had procured workers’ compensation coverage for them through its OCIP. As statutory employees, the workers’ claims were subject to the policy’s Employer’s Liability Exclusion, which barred coverage for bodily injury to an “employee” of the insured arising out of and in the course of employment.
The court reasoned that the exclusion applied regardless of whether the insured was being sued as an employer or in another capacity. Because Exxon was deemed a statutory employer, and the injured workers were performing their duties at Exxon’s job site under the OCIP, the exclusion applied squarely to their claims.
Lexington also invoked the policy’s Workers’ Compensation and Similar Laws Exclusion, which precludes coverage for obligations under workers’ compensation laws. The appellate court rejected this argument, holding that Exxon was not seeking coverage for obligations under workers’ compensation law, but for indemnity related to third-party injury claims. As such, that exclusion did not bar coverage.
Nevertheless, because the Employer’s Liability Exclusion was triggered, the court concluded that Lexington had no duty to defend or indemnify Exxon. It further held that Exxon was not entitled to recover any portion of the policy limits, nor to interest or attorney’s fees. The judgment was reversed, and the court rendered judgment that Exxon take nothing.
The decision reaffirms the principle that even when a party qualifies as an additional insured, coverage can still be denied when a valid exclusion applies. The court found that all parties to the contract were aware that the OCIP would provide blanket coverage for all workers on the site and that workers receiving those benefits would be treated as statutory employees for purposes of liability and insurance exclusions.
For insurers and corporate risk managers, the ruling underscores the importance of carefully assessing OCIP arrangements and how statutory employer status may interact with policy exclusions. The case also serves as a reminder that umbrella policies, while broad, do not override specific exclusions that are clearly articulated and consistent with underlying statutory frameworks.
The appellate court’s reversal ultimately clarifies that umbrella coverage cannot be used to sidestep the liability limitations embedded in Texas’s workers’ compensation system when the employer has procured coverage through an OCIP.
Case: Lexington Insurance Company v. Exxon Mobil Corporation and ExxonMobil Oil Corporation
Citation: No. 09-22-00174-CV (Tex. App.—Beaumont, April 3, 2025)
Decision: Judgment reversed and rendered.
