The Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd. (Tex.
2011) (Opinion by Justice Hecht)
FULL TEXT OF OPINION [ coming soon ]
Opinions are available in pdf from the Court's website. Follow docket-number hotlink or the case-style hyperlink
The Assureds contend that indemnification for weather stand-by charges is required by
policy provisions other than paragraph 13, and that if the deletion of that paragraph is construed as
an exclusion, then its effect must be “strictly construed against the insurer and in favor of the
We agree that strict construction is required, but the effect of the exclusion is the same.
The Assureds argue that payment of weather stand-by charges is required by the policy’s
general provision that “insures against all risks of physical loss of and/or physical damage to
[covered] property”. But that provision is expressly “[s]ubject to the terms” that follow in the
policy, one of which would have been paragraph 13. Treating its deletion as an exclusion makes
it an express exception to the general “all risks” insurance provision.
The Assureds argue that weather stand-by charges are “costs necessarily incurred and duly
justified in repair or replacement” of lost or damaged property, which must be paid under paragraph
1a. But weather stand-by charges are not necessarily incurred in repairing property damage; they
are optional. The Assureds could have released vessels and labor until the storms that delayed
repairs passed. Their retention may have been prudent and cost-effective, as the Assureds argue,
but the charges incurred were no more necessary than those for repositioning a structure, repeating
tests, losses from terrorism, and transportation interruptions, all covered by other paragraphs in the
same “Terms and Conditions” section that were also deleted.
The Assureds argue that weather stand-by charges are part of the costs of equipment and
labor “used” or “utilise[d]” in repairing covered property under paragraph 1d, but the opposite is
true: the charges are for equipment and labor that are standing by, awaiting use when the weather
clears. If paragraph 1d covered weather stand-by charges, paragraph 13 would be surplusage in a
policy in which it was not struck through, as in this policy.
Finally, the Assureds argue that because the policy provided a deductible for weather standby charges, the
charges must have been payable under the policy. But the deductible provision was
another part of the printed form. Having struck paragraph 13, the parties might well have struck the
deductible provision, but failing to do so simply left it inoperative.
* * *
For these reasons, we conclude that the judgment of the court of appeals should be Affirmed.
OPINION OF THE COURT OF APPEALS BELOW: Court of Appeals
Also see: Texas Causes of Action | 2011 Texas Supreme Court Opinions | 2011 Tex Sup Ct Per Curiams
The Houston Exploration Co v. Wellington Underwriting Agencies, Ltd.,
No. 08-0890 (Tex. Aug. 26, 2011)(Opinion by Justice Nathan Hecht)(coverage, insurance contract construction,
effect of strike-through)
THE HOUSTON EXPLORATION CO. AND OFFSHORE SPECIALTY FABRICATORS, INC. v. WELLINGTON UNDERWRITING
AGENCIES, LTD., ET AL.; from Harris County; 14th district (14-07-00970-CV, 267 SW3d 277, 07-17-08) 2 petitions
The Court affirms the court of appeals' judgment.
Justice Hecht delivered the opinion of the Court, in which Justice Wainwright, Justice Medina, Justice Green,
and Justice Guzman joined, and in Parts I and III of which Justice Johnson joined. [pdf]
The parties dispute whether an “all risk” property damage insurance policy provides
indemnity for certain expenses incurred in connection with a covered loss. Coverage was negotiated
in the London market, and as is customary there, the parties reached agreement by lining through
provisions in a form policy. One such provision would have required reimbursement of the disputed
expenses, and the question is whether the strike-through reflects the parties’ intention that those
expenses would not be reimbursed. We agree with the court of appeals that the answer is yes.
Deletions from a draft agreement do not always indicate the parties’ intent, but they do when, as
here, they are part of the customary negotiation process.
Justice Johnson delivered a concurring opinion. [pdf]
Chief Justice Jefferson delivered a dissenting opinion, in which Justice Willett and Justice Lehrmann joined. [pdf]
Link to e-briefs including amicus briefs:
OFFSHORE SPECIALTY FABRICATORS, INC. v. WELLINGTON UNDERWRITING AGENCIES, LTD.