The Supreme Court of Texas, in the case of Evanston Ins. Co. v. Atofina Petrochemicals, Inc., _____ S.W.3d _____, 2008 WL 2405005 (Tex. 2008), held that a commercial umbrella insurance policy that was purchased to secure the insured’s insurance obligation in a service contract with a third party also provides direct liability coverage for the third party.

      Atofina Petrochemicals, Inc., (Atofina) contracted with Triple S Industrial Corp. (Triple S) to perform maintenance and construction work at Atofina’s Port Arthur refinery. The service contract contained an indemnity provision in which Triple S agreed to indemnify Atofina from all personal injuries and property losses sustained during the performance of the contract, except to the extent that any such loss was attributable to the concurrent or sole negligence, misconduct, or strict liability of Atofina. The service contract also required Triple S to carry certain minimum levels of liability commercial general liability (CGL) insurance and an umbrella (or excess) liability policy. Atofina was named as an additional insured on both policies. An employee of Triple S drowned in a storage tank filled with fuel oil after falling through the corroded roof of the tank while working at the Atofina facility pursuant to Triple S’s contract. The survivors of the employee sued Triple S and Atofina for wrongful death. The primary CGL insurer tendered its policy limits. Atofina then demanded coverage from Evanston as an additional insured under the umbrella policy. Evanston denied the claim and Atofina sued Evanston.

      Atofina claimed it was entitled to reimbursement for the amounts it paid to settle the dispute from Evanston by virtue of its status as an additional insured under the umbrella policy. Under the policy, an insured was defined as follows:

A person or organization for whom you have agreed to provide insurance as is afforded by this policy; but that person or organization is an insured only with respect to operations performed by you or on your behalf, or facilities owned or used by you.

      On review, the Texas Supreme Court examined the terms of the umbrella policy and held that Atofina fit within the definition of an insured. The court stated that the agreement to extend direct insured status to Atofina as an additional insured was separate and independent from Atofina’s agreement to forego contractual indemnity for its own negligence.