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CAUSE NO. 2017-48075
KINDER MORGAN PETCOKE, LP
AND KINDER MORGAN
PETCOKE GP LLC
TOTAL PETROCHEMICALS & § IN THE DISTRICT COURT OF
REFINING USA, INC., and §
ACE PROPERTY & CASUALTY §
INSURANCE COMPANY, §
§ HARRIS COUNTY
v. §
§
§
§
164th DISTRICT COURT
RESPONSE TO DEFENDANTS’
MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO DAMAGES
TOTAL Petrochemicals and Refining U.S.A., Inc. (f/k/a TOTAL Petrochemicals U.S.A.,
Inc.) (“TOTAL”) responds to defendants Kinder Morgan Petcoke LP (“Kinder Morgan”) and
Kinder Morgan Petcoke GP LLC’s (collectively the “Kinder Morgan defendants”) Motion for
Partial Summary Judgment as to Damages and in support shows as follows:
I. INTRODUCTION
The Kinder Morgan defendants’ motion makes two arguments: The first is that the
consequential damages disclaimer in the Crane Contract precludes TOTAL and its subrogated
insurer, Chubb, from recovering the damages sought in this case. The second is that if TOTAL
and Chubb are entitled to recover, the amount is limited to $6 million. Both arguments have
been addressed in summary judgment briefing previously filed by TOTAL and Chubb with this
Court. Specifically, the consequential damages defense has been addressed in:
e TOTAL and Chubb’s Reply to Response to Motion for Final Summary Judgment
filed August 19, 2019 at pages 5-7, and
¢ TOTAL’s Response to Sur-Reply Regarding Motion for Final Summary
Judgment filed September 9, 2019 at page 4.
The argument that recovery is limited to $6 million has been addressed in:e TOTAL and Chubb’s Motion for Final Summary Judgment filed July 30, 2019 at
pages 7-10,
e TOTAL and Chubb’s Reply to Response to Motion for Final Summary Judgment
filed August 19, 2019 at pages 7-10, and
e TOTAL’s Response to Sur-Reply Regarding Motion for Final Summary
Judgment filed September 9, 2019 at page 4.
Accordingly, TOTAL incorporates herein its prior Motions for Summary Judgment,
replies, responses and exhibits, including but not limited to those specifically referenced above.
IL. BACKGROUND FACTS
TOTAL and Chubb seek to recover amounts they were required to pay to defend and
settle claims arising out of a fatal injury (the Counts incident). Under the Coke Cutting and
Crane Contract (the “Crane Contract”) between TOTAL and Kinder Morgan, the claims asserted
against TOTAL and its employees should have been covered by Kinder Morgan’s insurance, but
they were not.
Under the Crane Contract, Kinder Morgan agreed to carry certain minimum insurance
coverage including a $1 million Commercial General Liability (“CGL”) Policy and a $5 million
following form excess (umbrella) policy covering, among other things, bodily injury and death.
Ex. A at ex. X § 1.1 (b), (d). Kinder Morgan also agreed, however, to make TOTAL and its
employees, among others, additional insureds, not only on the minimum required coverage but
n “all insurance carried by [Kinder Morgan], except Worker’s Compensation and Employer’
Liability, whether required [by the Crane Contract or not].” Ex. A, Art. 9 (emphasis added).
The Crane Contract further required Kinder Morgan’s insurance to be primary and
noncontributory with TOTAL’s insurance such that Kinder Morgan’s insurance would pay first,
before TOTAL’s insurance:
(b) PRIMARY INSURANCEAny coverage provided to the Additional Insureds by [Kinder Morgan’s]
insurance under this Contract is primary insurance and shall not be considered
contributory insurance with any insurance policies of the Additional Insureds. Ex.
Aex. X § 1.3(b).
Finally, the Crane Contract made Kinder Morgan responsible for any and all deductibles:
1.6 DEDUCTIBLES. Any and all deductibles in the above-described insurance
policies shall be assumed by, for the account of and at [Kinder Morgan's] sole
tisk. Ex. A ex. X § 1.6.
Rather than carrying the minimum required insurance, Kinder Morgan maintained a $10
million self-insured retention (“SIR”), above which it had a $25 million excess policy. Ex. D.
That excess policy covered bodily injury and death claims. Unfortunately, the additional insured
clause in the policy extended “additional insured” status “only to the extent required by any
indemnity given by [Kinder Morgan] under said CONTRACT to the ADDITIONAL
INSURED.” Ex. D § II(A). Kinder Morgan’s indemnity did not cover TOTAL’s employees at
all, and did not cover TOTAL for the claims arising from the Counts incident. See Ex. A, Art. 8.
As a result, Kinder Morgan’s insurance also did not cover TOTAL or its employees for the
claims arising from the Counts incident.
TOTAL and Chubb moved for summary judgment on liability contending, among other
things, that Kinder Morgan breached the contract by failing to carry the minimum required
policies and by limiting the scope of coverage on the insurance it did carry to the scope of its
indemnity. This Court granted that motion. Thus, the only remaining issue is damages.
TOTAL and Chubb filed a Motion for Final Summary Judgment addressing damages,
which was set for submission on September 2, 2019. The damages TOTAL and Chubb seek are
the amounts that should have been paid by Kinder Morgan and its insurer had Kinder Morgan
complied with the Crane Contract.Ill. ARGUMENT
A. TOTAL and Chubb’s Damages are Direct Damages.
As Kinder Morgan has previously conceded, “the amount a party would have received as
payment for the performance of the contract minus saved expenses — are direct damages.” That
describes perfectly what TOTAL is seeking in this case: the amount TOTAL would have
received as payment had Kinder Morgan performed the Crane Contract.
Payment of Kinder Morgan’s SIR was a required part of Kinder Morgan’s performance
because its insurance policy, on which TOTAL and its employees were to be additional insureds,
was excess of that SIR. Payment of the SIR was therefore necessary to invoke coverage under
Kinder Morgan’s policy as required by the Crane Contract. Thus, the $10 million SIR is an
amount Kinder Morgan was obligated to pay pursuant to the Crane Contract when there was a
covered loss. In addition, the insurance provisions of the Crane Contract provide that Kinder
Morgan is responsible for “any and all deductibles.” Ex. Aex.X § 1.6. Kinder Morgan itself
has repeatedly equated its SIR with a deductible and admitted that “Kinder Morgan is
responsible for all deductibles.” See Kinder Morgan’s Motion for Summary Judgment filed
March 6, 2019 at | 8. The amount of Kinder Morgan’s SIR that it failed to pay constitutes direct
damages because it is an “amount TOTAL would have received as payment for the performance
of the contract.”
The same is true with respect to the additional amount Kinder Morgan’s insurance would
have paid had Kinder Morgan complied with the contract. In any case like the present one,
where the breach is the failure to provide insurance coverage, the amounts that would have been
paid by the insurance had the contract been performed are direct damages because the amount is
nothing more than the performance due under the contract. Having failed to provide the required
coverage, Kinder Morgan stands in the shoes of the insurer. See, ¢.g., Stockstill v. Petty Ray
4Geophysical, Div. of Geosource, Inc., 888 F.2d 1493 (5th Cir. 1989) (“{T]he charter agreement
states ‘All insurance ... shall name the charterer as an additional insured.’ ... Since B & B
breached its agreement to do so, it must provide such coverage to Geosource.”); Ruehs v.
Alliance Offshore, L.L.C., No. 05-6360, 2007 WL 275915 *1 (E.D. La. 2007) (“if the vessel
owner failed to satisfy its insurance procurement obligations, it must act as the insurer.”)
Not surprisingly a number of cases, including some cited by Kinder Morgan, have
distinguished between amounts owed under an insurance policy, which are direct damages, and
other amounts lost as a result of the insurer’s failure to pay, which may be consequential
damages. See, e.g., Great Am. Ins. Co. v. AFS/IBEX Fin, Servs., 612 F.3d 800, 807 (Sth Cir.
2010) (distinguishing between amounts owed under a Crime Protection policy, which were direct
damages, and amounts the insured incurred in suing the criminals who committed the fraud,
which were potentially consequential damages)!
Kinder Morgan argues that TOTAL’s damages are consequential because “The death of
Mr. Counts and the resulting damages certainly did not ‘necessarily’ flow from the mere fact that
”
Kinder Morgan did not obtain certain insurance.” Obviously, the death of Mr. Counts was not
caused by Kinder Morgan’s failure to obtain insurance. But equally obviously, the insurance
provisions of the Crane Contract were designed to protect TOTAL in the event of such an
incident, and the fact that TOTAL and Chubb had to pay to defend and settle the Counts incident
resulted directly and necessarily from Kinder Morgan’s failure to comply with those provisions.
The very purpose of the additional insured provisions was to ensure that Kinder Morgan and its
insurers, rather than TOTAL and Chubb, would pay exactly those types of losses.
" See also Essex Builders Group, Inc. v. Amerisure Ins. Co., 429 F. Supp. 2d 1274 1276 (M.D. Fla. 2005) and
Ospina v, Balboa Insurance Co., No. 8:13-cv-1608-T-27TBM (M.D. Fla 2013) (Distinguishing between amounts
due “under the policy,” which are direct damages, and consequential damages flowing from the breach.)
5TOTAL is not seeking lost profits related to some other contract or transaction. Nor is
TOTAL seeking anything outside of what it would have received had Kinder Morgan performed
the contract. TOTAL seeks nothing more than the performance owed under the contract, which
are direct damages.
None of the cases Kinder Morgan cites involve the failure to provide contractually
required insurance coverage. Indeed, none of the cases Kinder Morgan cites are remotely similar
to the present case and none of them hold that the amounts that would have been received from
the other party had the contract been performed, which is what TOTAL seeks here, constitute
consequential damages.
El Paso Mktg., L.P. v. Wolf Hollow I, L.P., 383 S.W.3d 138, 139 (Tex. 2012), involved a
gas supply contract. The Court initially held that the cost of replacement power might constitute
consequential damages because those costs “derive entirely from the agreements Wolf Hollow
has with its customers ....” In other words, those damages were not the performance owed by
the other contracting party. Despite this, the Court went on to conclude that the cost of
replacement power did not constitute consequential damages in that case because “[t]he UCC
definition of consequential damages excludes cover,” i.e. the cost of substitute goods.
BCC Merch. Sols., Inc. v. Jet Pay, LLC, 129 F. Supp. 3d 440, 475-76 (N.D. Tex. 2015),
supports TOTAL. That case recognized that “profits lost on the contract itself--such as the
amount a party would have received on the contract minus its saved expenses--are direct
damages,” while “profits lost on other contracts or relationships resulting from the breach (such
as resale of property to a third party) are generally classified as indirect or consequential
damages.” Here, TOTAL is not seeking any losses related to “other contracts or relationships;”
TOTAL is seeking the performance Kinder Morgan was to provide under the Crane Contract.Tenn. Gas Pipeline Co, v. Technip United States Corp., No. 01-06-00535-CV, 2008 Tex.
App. LEXIS 6419, at *21-32, 2008 WL 3876141 at *7-8 (Tex. App.—Houston [Ist Dist.] Aug.
21, 2008, pet. denied), likewise supports TOTAL. There, TGP sought damages for delay
resulting from Technip’s breach of contract. Technip contended that delay damages were barred
by the contract’s consequential damage disclaimer. The court, however, noted that Technip had
guaranteed substantial completion by a certain date, and the contract contained a limitation of
liability that expressly did not apply to Technip’s guarantee of timely completion. The court
recognized that if the consequential damages disclaimer excluded all delay damages it would
render the guarantee of timely completion, and its exclusion from the limitation of liability
provision, meaningless. The court therefore concluded that TGP could recover for loss of use,
opportunity or profits directly resulting from delay.
Applying Tennessee Gas here, the Crane Contract clearly contemplated the possibility of
bodily injury or wrongful death claims and required Kinder Morgan to provide insurance
covering TOTAL and its employees for such claims. Precluding recovery for the breach of those
provisions would render them meaningless like the guarantee of timely completion at issue in
Tennessee Gas. Moreover, the loss resulting from a breach of the insurance provisions
necessarily follows whenever claims arise that should have been covered.
Bechtel Corp. v. CITGO Prods. Pipeline Co., 271 S.W.3d 898 (Tex. App.—Austin 2008,
no pet.), is not even a breach of contract case. Bechtel involved a work crew that ruptured an
underground gasoline pipeline owned by Citgo while excavating for a telecommunications line.
Citgo sued on a promissory estoppel theory claiming that had the contractor “kept his promise to
give CITGO prior notice before it excavated,” Citgo would have sent a representative who wouldhave ensured that the pipeline was not ruptured. The Court held that damages resulting from the
rupture were not recoverable on a promissory estoppel theory.
Kiewit Offshore Servs. v. Dresser-Rand Glob. Servs., No. H-15-1299, 2016 U.S. Dist.
LEXIS 117835, at *34, 2016 WL 4564472 (S.D. Tex. 2016), involved liquidated damages
assessed under a contract with a third party. The court held that such damages were not even
foreseeable to Keiwit and were therefore not recoverable “regardless of whether the liquidated
damages are considered direct or consequential.” No one contends that bodily injury claims
related to the Crane Contract were not foreseeable; to the contrary they were expressly
contemplated and provided for by the insurance provisions of the contract.
Finally, in Balfour Beatty Rail, Inc. v. Kan. City S. Ry., Civil Action No. 3:10-CV-1629-
L, 2012 U.S. Dist. LEXIS 106574, at *60; 2012 WL 3100833 (N.D. Tex. 2012), the court found
“no evidence that BBRI was aware that KCSR was using Union Pacific’s tracks and would have
to incur or would continue to incur costs for using Union Pacific’s tracks.” Therefore, there was
no evidence from which it could conclude the loss of use damages constituted direct damages
contemplated by the parties. The opposite is true here; the Crane Contract establishes that the
parties contemplated bodily injury claims and explicitly provided for them in the contract.
In sum, none of the cases Kinder Morgan cites are remotely applicable and none of them
suggest that the damages TOTAL and Chubb suffered are anything other than direct damages.
B. TOTAL and Chubb’s Damages are Not Limited to $6 million.
Kinder Morgan argues that TOTAL and Chubb’s damages should be capped at $6
million, the minimum amount of insurance required by the Crane Contract. But Kinder
Morgan’s obligation to make TOTAL and its employees additional insureds was not limited to
the minimum required insurance. The Crane Contract explicitly required Kinder Morgan to
make TOTAL and its employees additional insureds not only on the minimum required
8coverage, but on “all insurance carried by [Kinder Morgan], except Worker’s Compensation and
Employer’ Liability, whether required [by the Crane Contract or not].” Ex. A, Art. 9 (emphasis
added). There is no maximum coverage limitation for additional insureds in the Crane Contract
if Kinder Morgan chooses to carry more than the required minimums or structures its insurance
program differently than the contractually required minimums.
Under the plain language of the Crane Contract, Kinder Morgan’s obligation to make
TOTAL and its employees additional insureds extended to any applicable insurance Kinder
Morgan actually carried in addition to, or in lieu of, the minimum required insurance. Thus, its
obligation was not limited to $6 million where Kinder Morgan in fact carried additional or
different insurance. Because Kinder Morgan actually carried a $25 million excess policy instead
of the minimum required insurance, TOTAL was entitled to coverage under that policy up to its
full limits. For example, in Forest Oil Corp. v. Strata Energy, Inc., 929 F.2d 1039, 1044 os" Cir.
1991), Forest was obligated to procure general public liability insurance for the benefit of both
parties “with limits of not less than” $100,000. Forest, however, actually procured a $1 million
primary policy. The court held that Strata was an additional insured to the full extent of Forest’s
$1 million primary coverage and was not limited to the $100,000 contractual minimum.
Another analogous case is Maxus Exploration Co. v. Moran Bros., Inc., 773 S.W.2d 358
(Tex. App. — Dallas 1989), aff'd, 817 S.W.2d 50 (Tex. 1991), which involved insurance
supporting an indemnity under the Texas Oilfield Anti-Indemnity Act. At the time Maxus was
decided, that statute permitted unilateral indemnities if they were supported by insurance, but
provided that “in no event shall said insurance be required in an amount in excess of” $300,000.
The court held that while the amount of insurance that could be contractually required was
limited to $300,000, the statute did not prohibit the other contracting party from voluntarilycarrying in excess of $300,000 in insurance, and held that if the party did so the beneficiary was
entitled to the full amount of the coverage actually obtained. Maxus, 773 S.W.2d at 361. Accord
Campbell v. Sonat Offshore Drilling, Inc., 979 F.2d 1115, 1127 (Sth Cir.1992) (when an
indemnitor voluntarily bought more insurance than was required by statute to support its
indemnity obligation, the indemnitee was entitled to the full amount of coverage purchased);
Lirette v. Union Texas Petrol. Corp., 467 So.2d 29 (La. Ct. App. 1985) (applying Texas law)
(court construed a provision requiring the procurement of insurance “with limits not less than” a
specified amount, and held that the indemnitee was entitled to coverage up to the amount of the
insurance actually obtained, which was greater than the minimum required).
This case is even clearer as it does not involve a statutory limitation on required
insurance coverage. On the contrary, it involves a contract under which Kinder Morgan
affirmatively agreed to make TOTAL and its employees additional insureds on whatever
insurance it carried other than workers’ compensation or employers’ liability. Because Kinder
Morgan voluntarily chose to carry more than the required minimum insurance limits, TOTAL
was entitled to the benefit of those higher limits.
The fact that TOTAL and its employees were entitled to coverage under Kinder
Morgan’s $25 million excess policy also establishes that Kinder Morgan is responsible for its full
$10 million SIR. First, the SIR is in the gap left by Kinder Morgan’s failure to obtain the
minimum required policies. Second, payment of the full SIR is necessary to comply with Kinder
Morgan’s obligation to provide coverage under its excess policy because payment of that SIR is
a prerequisite for Kinder Morgan’s policy to apply at all. Finally, Kinder Morgan itself has
repeatedly equated its SIR with a deductible and has admitted that it is responsible for all
10deductibles applicable to its policies. See, e.g., Kinder Morgan’s Motion for Summary Judgment
filed March 6, 2019 at § 8.
IV. CONCLUSION
TOTAL is entitled to Kinder Morgan’s full SIR and the additional amount TOTAL
should have received under Kinder Morgan’s excess policy had Kinder Morgan not improperly
limited the scope of coverage provided by that policy. Kinder Morgan’s Motion for Summary
Judgment on Damages should be denied, and TOTAL and Chubb’s Motion for Final Summary
Judgment should be granted.
Respectfully submitted,
CLARK HILL STRASBURGER
/s/ Jack Carnegie
JACK CARNEGIE
State Bar No. 03826100
909 Fannin Street, Suite 2300
Houston, Texas 77010-3033
(713) 951-5600 — Telephone
(713) 951-5660 — Facsimile
jack.carnegie@clarkhillstrasburger.com
COUNSEL FOR TOTAL PETROCHEMICALS
& REFINING USA, INC.
CERTIFICATE OF SERVICE
This is to certify that the foregoing document has been forwarded to all counsel pursuant
to the Texas Rules of Civil Procedure on September 9, 2019.
/s/ Jack Carnegie
JACK CARNEGIE
4844-7911-6452.1/A7284/A26161/090919
11
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CAUSE NO. 2017-48075 KINDER MORGAN PETCOKE, LP AND KINDER MORGAN PETCOKE GP LLC TOTAL PETROCHEMICALS & § IN THE DISTRICT COURT OF REFINING USA, INC., and § ACE PROPERTY & CASUALTY § INSURANCE COMPANY, § § HARRIS COUNTY v. § § § § 164th DISTRICT COURT RESPONSE TO DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO DAMAGES TOTAL Petrochemicals and Refining U.S.A., Inc. (f/k/a TOTAL Petrochemicals U.S.A., Inc.) (“TOTAL”) responds to defendants Kinder Morgan Petcoke LP (“Kinder Morgan”) and Kinder Morgan Petcoke GP LLC’s (collectively the “Kinder Morgan defendants”) Motion for Partial Summary Judgment as to Damages and in support shows as follows: I. INTRODUCTION The Kinder Morgan defendants’ motion makes two arguments: The first is that the consequential damages disclaimer in the Crane Contract precludes TOTAL and its subrogated insurer, Chubb, from recovering the damages sought in this case. The second is that if TOTAL and Chubb are entitled to recover, the amount is limited to $6 million. Both arguments have been addressed in summary judgment briefing previously filed by TOTAL and Chubb with this Court. Specifically, the consequential damages defense has been addressed in: e TOTAL and Chubb’s Reply to Response to Motion for Final Summary Judgment filed August 19, 2019 at pages 5-7, and ¢ TOTAL’s Response to Sur-Reply Regarding Motion for Final Summary Judgment filed September 9, 2019 at page 4. The argument that recovery is limited to $6 million has been addressed in:e TOTAL and Chubb’s Motion for Final Summary Judgment filed July 30, 2019 at pages 7-10, e TOTAL and Chubb’s Reply to Response to Motion for Final Summary Judgment filed August 19, 2019 at pages 7-10, and e TOTAL’s Response to Sur-Reply Regarding Motion for Final Summary Judgment filed September 9, 2019 at page 4. Accordingly, TOTAL incorporates herein its prior Motions for Summary Judgment, replies, responses and exhibits, including but not limited to those specifically referenced above. IL. BACKGROUND FACTS TOTAL and Chubb seek to recover amounts they were required to pay to defend and settle claims arising out of a fatal injury (the Counts incident). Under the Coke Cutting and Crane Contract (the “Crane Contract”) between TOTAL and Kinder Morgan, the claims asserted against TOTAL and its employees should have been covered by Kinder Morgan’s insurance, but they were not. Under the Crane Contract, Kinder Morgan agreed to carry certain minimum insurance coverage including a $1 million Commercial General Liability (“CGL”) Policy and a $5 million following form excess (umbrella) policy covering, among other things, bodily injury and death. Ex. A at ex. X § 1.1 (b), (d). Kinder Morgan also agreed, however, to make TOTAL and its employees, among others, additional insureds, not only on the minimum required coverage but n “all insurance carried by [Kinder Morgan], except Worker’s Compensation and Employer’ Liability, whether required [by the Crane Contract or not].” Ex. A, Art. 9 (emphasis added). The Crane Contract further required Kinder Morgan’s insurance to be primary and noncontributory with TOTAL’s insurance such that Kinder Morgan’s insurance would pay first, before TOTAL’s insurance: (b) PRIMARY INSURANCEAny coverage provided to the Additional Insureds by [Kinder Morgan’s] insurance under this Contract is primary insurance and shall not be considered contributory insurance with any insurance policies of the Additional Insureds. Ex. Aex. X § 1.3(b). Finally, the Crane Contract made Kinder Morgan responsible for any and all deductibles: 1.6 DEDUCTIBLES. Any and all deductibles in the above-described insurance policies shall be assumed by, for the account of and at [Kinder Morgan's] sole tisk. Ex. A ex. X § 1.6. Rather than carrying the minimum required insurance, Kinder Morgan maintained a $10 million self-insured retention (“SIR”), above which it had a $25 million excess policy. Ex. D. That excess policy covered bodily injury and death claims. Unfortunately, the additional insured clause in the policy extended “additional insured” status “only to the extent required by any indemnity given by [Kinder Morgan] under said CONTRACT to the ADDITIONAL INSURED.” Ex. D § II(A). Kinder Morgan’s indemnity did not cover TOTAL’s employees at all, and did not cover TOTAL for the claims arising from the Counts incident. See Ex. A, Art. 8. As a result, Kinder Morgan’s insurance also did not cover TOTAL or its employees for the claims arising from the Counts incident. TOTAL and Chubb moved for summary judgment on liability contending, among other things, that Kinder Morgan breached the contract by failing to carry the minimum required policies and by limiting the scope of coverage on the insurance it did carry to the scope of its indemnity. This Court granted that motion. Thus, the only remaining issue is damages. TOTAL and Chubb filed a Motion for Final Summary Judgment addressing damages, which was set for submission on September 2, 2019. The damages TOTAL and Chubb seek are the amounts that should have been paid by Kinder Morgan and its insurer had Kinder Morgan complied with the Crane Contract.Ill. ARGUMENT A. TOTAL and Chubb’s Damages are Direct Damages. As Kinder Morgan has previously conceded, “the amount a party would have received as payment for the performance of the contract minus saved expenses — are direct damages.” That describes perfectly what TOTAL is seeking in this case: the amount TOTAL would have received as payment had Kinder Morgan performed the Crane Contract. Payment of Kinder Morgan’s SIR was a required part of Kinder Morgan’s performance because its insurance policy, on which TOTAL and its employees were to be additional insureds, was excess of that SIR. Payment of the SIR was therefore necessary to invoke coverage under Kinder Morgan’s policy as required by the Crane Contract. Thus, the $10 million SIR is an amount Kinder Morgan was obligated to pay pursuant to the Crane Contract when there was a covered loss. In addition, the insurance provisions of the Crane Contract provide that Kinder Morgan is responsible for “any and all deductibles.” Ex. Aex.X § 1.6. Kinder Morgan itself has repeatedly equated its SIR with a deductible and admitted that “Kinder Morgan is responsible for all deductibles.” See Kinder Morgan’s Motion for Summary Judgment filed March 6, 2019 at | 8. The amount of Kinder Morgan’s SIR that it failed to pay constitutes direct damages because it is an “amount TOTAL would have received as payment for the performance of the contract.” The same is true with respect to the additional amount Kinder Morgan’s insurance would have paid had Kinder Morgan complied with the contract. In any case like the present one, where the breach is the failure to provide insurance coverage, the amounts that would have been paid by the insurance had the contract been performed are direct damages because the amount is nothing more than the performance due under the contract. Having failed to provide the required coverage, Kinder Morgan stands in the shoes of the insurer. See, ¢.g., Stockstill v. Petty Ray 4Geophysical, Div. of Geosource, Inc., 888 F.2d 1493 (5th Cir. 1989) (“{T]he charter agreement states ‘All insurance ... shall name the charterer as an additional insured.’ ... Since B & B breached its agreement to do so, it must provide such coverage to Geosource.”); Ruehs v. Alliance Offshore, L.L.C., No. 05-6360, 2007 WL 275915 *1 (E.D. La. 2007) (“if the vessel owner failed to satisfy its insurance procurement obligations, it must act as the insurer.”) Not surprisingly a number of cases, including some cited by Kinder Morgan, have distinguished between amounts owed under an insurance policy, which are direct damages, and other amounts lost as a result of the insurer’s failure to pay, which may be consequential damages. See, e.g., Great Am. Ins. Co. v. AFS/IBEX Fin, Servs., 612 F.3d 800, 807 (Sth Cir. 2010) (distinguishing between amounts owed under a Crime Protection policy, which were direct damages, and amounts the insured incurred in suing the criminals who committed the fraud, which were potentially consequential damages)! Kinder Morgan argues that TOTAL’s damages are consequential because “The death of Mr. Counts and the resulting damages certainly did not ‘necessarily’ flow from the mere fact that ” Kinder Morgan did not obtain certain insurance.” Obviously, the death of Mr. Counts was not caused by Kinder Morgan’s failure to obtain insurance. But equally obviously, the insurance provisions of the Crane Contract were designed to protect TOTAL in the event of such an incident, and the fact that TOTAL and Chubb had to pay to defend and settle the Counts incident resulted directly and necessarily from Kinder Morgan’s failure to comply with those provisions. The very purpose of the additional insured provisions was to ensure that Kinder Morgan and its insurers, rather than TOTAL and Chubb, would pay exactly those types of losses. " See also Essex Builders Group, Inc. v. Amerisure Ins. Co., 429 F. Supp. 2d 1274 1276 (M.D. Fla. 2005) and Ospina v, Balboa Insurance Co., No. 8:13-cv-1608-T-27TBM (M.D. Fla 2013) (Distinguishing between amounts due “under the policy,” which are direct damages, and consequential damages flowing from the breach.) 5TOTAL is not seeking lost profits related to some other contract or transaction. Nor is TOTAL seeking anything outside of what it would have received had Kinder Morgan performed the contract. TOTAL seeks nothing more than the performance owed under the contract, which are direct damages. None of the cases Kinder Morgan cites involve the failure to provide contractually required insurance coverage. Indeed, none of the cases Kinder Morgan cites are remotely similar to the present case and none of them hold that the amounts that would have been received from the other party had the contract been performed, which is what TOTAL seeks here, constitute consequential damages. El Paso Mktg., L.P. v. Wolf Hollow I, L.P., 383 S.W.3d 138, 139 (Tex. 2012), involved a gas supply contract. The Court initially held that the cost of replacement power might constitute consequential damages because those costs “derive entirely from the agreements Wolf Hollow has with its customers ....” In other words, those damages were not the performance owed by the other contracting party. Despite this, the Court went on to conclude that the cost of replacement power did not constitute consequential damages in that case because “[t]he UCC definition of consequential damages excludes cover,” i.e. the cost of substitute goods. BCC Merch. Sols., Inc. v. Jet Pay, LLC, 129 F. Supp. 3d 440, 475-76 (N.D. Tex. 2015), supports TOTAL. That case recognized that “profits lost on the contract itself--such as the amount a party would have received on the contract minus its saved expenses--are direct damages,” while “profits lost on other contracts or relationships resulting from the breach (such as resale of property to a third party) are generally classified as indirect or consequential damages.” Here, TOTAL is not seeking any losses related to “other contracts or relationships;” TOTAL is seeking the performance Kinder Morgan was to provide under the Crane Contract.Tenn. Gas Pipeline Co, v. Technip United States Corp., No. 01-06-00535-CV, 2008 Tex. App. LEXIS 6419, at *21-32, 2008 WL 3876141 at *7-8 (Tex. App.—Houston [Ist Dist.] Aug. 21, 2008, pet. denied), likewise supports TOTAL. There, TGP sought damages for delay resulting from Technip’s breach of contract. Technip contended that delay damages were barred by the contract’s consequential damage disclaimer. The court, however, noted that Technip had guaranteed substantial completion by a certain date, and the contract contained a limitation of liability that expressly did not apply to Technip’s guarantee of timely completion. The court recognized that if the consequential damages disclaimer excluded all delay damages it would render the guarantee of timely completion, and its exclusion from the limitation of liability provision, meaningless. The court therefore concluded that TGP could recover for loss of use, opportunity or profits directly resulting from delay. Applying Tennessee Gas here, the Crane Contract clearly contemplated the possibility of bodily injury or wrongful death claims and required Kinder Morgan to provide insurance covering TOTAL and its employees for such claims. Precluding recovery for the breach of those provisions would render them meaningless like the guarantee of timely completion at issue in Tennessee Gas. Moreover, the loss resulting from a breach of the insurance provisions necessarily follows whenever claims arise that should have been covered. Bechtel Corp. v. CITGO Prods. Pipeline Co., 271 S.W.3d 898 (Tex. App.—Austin 2008, no pet.), is not even a breach of contract case. Bechtel involved a work crew that ruptured an underground gasoline pipeline owned by Citgo while excavating for a telecommunications line. Citgo sued on a promissory estoppel theory claiming that had the contractor “kept his promise to give CITGO prior notice before it excavated,” Citgo would have sent a representative who wouldhave ensured that the pipeline was not ruptured. The Court held that damages resulting from the rupture were not recoverable on a promissory estoppel theory. Kiewit Offshore Servs. v. Dresser-Rand Glob. Servs., No. H-15-1299, 2016 U.S. Dist. LEXIS 117835, at *34, 2016 WL 4564472 (S.D. Tex. 2016), involved liquidated damages assessed under a contract with a third party. The court held that such damages were not even foreseeable to Keiwit and were therefore not recoverable “regardless of whether the liquidated damages are considered direct or consequential.” No one contends that bodily injury claims related to the Crane Contract were not foreseeable; to the contrary they were expressly contemplated and provided for by the insurance provisions of the contract. Finally, in Balfour Beatty Rail, Inc. v. Kan. City S. Ry., Civil Action No. 3:10-CV-1629- L, 2012 U.S. Dist. LEXIS 106574, at *60; 2012 WL 3100833 (N.D. Tex. 2012), the court found “no evidence that BBRI was aware that KCSR was using Union Pacific’s tracks and would have to incur or would continue to incur costs for using Union Pacific’s tracks.” Therefore, there was no evidence from which it could conclude the loss of use damages constituted direct damages contemplated by the parties. The opposite is true here; the Crane Contract establishes that the parties contemplated bodily injury claims and explicitly provided for them in the contract. In sum, none of the cases Kinder Morgan cites are remotely applicable and none of them suggest that the damages TOTAL and Chubb suffered are anything other than direct damages. B. TOTAL and Chubb’s Damages are Not Limited to $6 million. Kinder Morgan argues that TOTAL and Chubb’s damages should be capped at $6 million, the minimum amount of insurance required by the Crane Contract. But Kinder Morgan’s obligation to make TOTAL and its employees additional insureds was not limited to the minimum required insurance. The Crane Contract explicitly required Kinder Morgan to make TOTAL and its employees additional insureds not only on the minimum required 8coverage, but on “all insurance carried by [Kinder Morgan], except Worker’s Compensation and Employer’ Liability, whether required [by the Crane Contract or not].” Ex. A, Art. 9 (emphasis added). There is no maximum coverage limitation for additional insureds in the Crane Contract if Kinder Morgan chooses to carry more than the required minimums or structures its insurance program differently than the contractually required minimums. Under the plain language of the Crane Contract, Kinder Morgan’s obligation to make TOTAL and its employees additional insureds extended to any applicable insurance Kinder Morgan actually carried in addition to, or in lieu of, the minimum required insurance. Thus, its obligation was not limited to $6 million where Kinder Morgan in fact carried additional or different insurance. Because Kinder Morgan actually carried a $25 million excess policy instead of the minimum required insurance, TOTAL was entitled to coverage under that policy up to its full limits. For example, in Forest Oil Corp. v. Strata Energy, Inc., 929 F.2d 1039, 1044 os" Cir. 1991), Forest was obligated to procure general public liability insurance for the benefit of both parties “with limits of not less than” $100,000. Forest, however, actually procured a $1 million primary policy. The court held that Strata was an additional insured to the full extent of Forest’s $1 million primary coverage and was not limited to the $100,000 contractual minimum. Another analogous case is Maxus Exploration Co. v. Moran Bros., Inc., 773 S.W.2d 358 (Tex. App. — Dallas 1989), aff'd, 817 S.W.2d 50 (Tex. 1991), which involved insurance supporting an indemnity under the Texas Oilfield Anti-Indemnity Act. At the time Maxus was decided, that statute permitted unilateral indemnities if they were supported by insurance, but provided that “in no event shall said insurance be required in an amount in excess of” $300,000. The court held that while the amount of insurance that could be contractually required was limited to $300,000, the statute did not prohibit the other contracting party from voluntarilycarrying in excess of $300,000 in insurance, and held that if the party did so the beneficiary was entitled to the full amount of the coverage actually obtained. Maxus, 773 S.W.2d at 361. Accord Campbell v. Sonat Offshore Drilling, Inc., 979 F.2d 1115, 1127 (Sth Cir.1992) (when an indemnitor voluntarily bought more insurance than was required by statute to support its indemnity obligation, the indemnitee was entitled to the full amount of coverage purchased); Lirette v. Union Texas Petrol. Corp., 467 So.2d 29 (La. Ct. App. 1985) (applying Texas law) (court construed a provision requiring the procurement of insurance “with limits not less than” a specified amount, and held that the indemnitee was entitled to coverage up to the amount of the insurance actually obtained, which was greater than the minimum required). This case is even clearer as it does not involve a statutory limitation on required insurance coverage. On the contrary, it involves a contract under which Kinder Morgan affirmatively agreed to make TOTAL and its employees additional insureds on whatever insurance it carried other than workers’ compensation or employers’ liability. Because Kinder Morgan voluntarily chose to carry more than the required minimum insurance limits, TOTAL was entitled to the benefit of those higher limits. The fact that TOTAL and its employees were entitled to coverage under Kinder Morgan’s $25 million excess policy also establishes that Kinder Morgan is responsible for its full $10 million SIR. First, the SIR is in the gap left by Kinder Morgan’s failure to obtain the minimum required policies. Second, payment of the full SIR is necessary to comply with Kinder Morgan’s obligation to provide coverage under its excess policy because payment of that SIR is a prerequisite for Kinder Morgan’s policy to apply at all. Finally, Kinder Morgan itself has repeatedly equated its SIR with a deductible and has admitted that it is responsible for all 10deductibles applicable to its policies. See, e.g., Kinder Morgan’s Motion for Summary Judgment filed March 6, 2019 at § 8. IV. CONCLUSION TOTAL is entitled to Kinder Morgan’s full SIR and the additional amount TOTAL should have received under Kinder Morgan’s excess policy had Kinder Morgan not improperly limited the scope of coverage provided by that policy. Kinder Morgan’s Motion for Summary Judgment on Damages should be denied, and TOTAL and Chubb’s Motion for Final Summary Judgment should be granted. Respectfully submitted, CLARK HILL STRASBURGER /s/ Jack Carnegie JACK CARNEGIE State Bar No. 03826100 909 Fannin Street, Suite 2300 Houston, Texas 77010-3033 (713) 951-5600 — Telephone (713) 951-5660 — Facsimile jack.carnegie@clarkhillstrasburger.com COUNSEL FOR TOTAL PETROCHEMICALS & REFINING USA, INC. CERTIFICATE OF SERVICE This is to certify that the foregoing document has been forwarded to all counsel pursuant to the Texas Rules of Civil Procedure on September 9, 2019. /s/ Jack Carnegie JACK CARNEGIE 4844-7911-6452.1/A7284/A26161/090919 11