Aggreko, L.L.C. v. Chartis Specialty Ins. Co.

     Case: 18-40325      Document: 00515194097   Page: 1   Date Filed: 11/11/2019




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT


                                  No. 18-40325                  United States Court of Appeals
                                                                         Fifth Circuit

                                                                       FILED
AGGREKO, L.L.C.,                                                November 11, 2019
                                                                  Lyle W. Cayce
             Plaintiff                                                 Clerk

v.

CHARTIS SPECIALTY INSURANCE COMPANY, formerly known as
AIG Specialty Insurance Company,

             Defendant

************************************************************************

INDIAN HARBOR INSURANCE COMPANY,

             Plaintiff - Appellant Cross-Appellee

v.

THE GRAY INSURANCE COMPANY,

             Defendant - Appellee Cross-Appellant




                Appeals from the United States District Court
                      for the Eastern District of Texas


Before JOLLY, COSTA, and ENGELHARDT, Circuit Judges.
KURT D. ENGELHARDT, Circuit Judge.
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      Indian Harbor Insurance Company (“Indian Harbor”), the plaintiff in one
of two consolidated lawsuits pending below, appeals the district court’s grant
of summary judgment in favor of defendant The Gray Insurance Company
(“Gray”). Gray, in turn, “conditionally” appeals the district court’s decision to
apply Texas law, instead of Louisiana law, to the issues before it, asking us to
only consider its appeal if we conclude that we are unable to affirm the
summary judgment under Texas law. For the reasons set forth below, we
AFFIRM.
                                       I.
      The consolidated lawsuits in this matter arise out of fatal injuries
suffered by James Andrew Brenek, II (“Brenek”) when he was electrocuted by
an electrically-energized generator housing cabinet on a rig in Jefferson
County, Texas. At the time of his accident, Brenek was employed by and
performing work for Guichard Operating Company, L.L.C. (“Guichard”), a
drilling subcontractor located in Crowley, Louisiana. Guichard had leased the
generator involved in the incident from Aggreko, L.L.C. (“Aggreko”), a
Delaware company doing business in both Louisiana and Texas. The rental
agreement between Guichard and Aggreko required Guichard to maintain a
commercial liability insurance policy during the lease period that would cover
damages arising out of use of the leased equipment and recognize Aggreko as
an additional insured.
      On the date of Brenek’s accident—July 27, 2014—Guichard had in place
a primary commercial liability policy issued by Gray (“the Gray Policy”) and
an excess commercial liability policy issued by Chartis Specialty Insurance
Company, also known as “ASIC” (“ASIC”). Aggreko had in place a primary
insurance policy issued by Indian Harbor. Relevant to the issues before us,
Gray is a Louisiana corporation that has its principal place of business in
Metairie, Louisiana and regularly conducts business in Texas. Indian Harbor
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is a Delaware corporation with its principal place of business in Stamford,
Connecticut.
      Following their son’s death, Brenek’s parents (“the Breneks”) filed a tort
suit in Texas state court against Aggreko and Rutherford Oil Corporation
(“Rutherford”), the owner of the rig on which Brenek’s accident occurred. 1
Thereafter, Gray agreed, in response to demands by Aggreko and Rutherford,
to indemnify and defend them as additional insureds under the Gray policy. 2
ASIC, on the other hand, advised Aggreko, upon learning of the Breneks’
lawsuit, that Aggreko did not qualify as an additional insured under the policy
it issued to Guichard. In response, Aggreko filed suit against ASIC in Texas
state court, seeking declaratory relief with respect to ASIC’s alleged
obligations to Aggreko under its policy. ASIC then removed the suit to the
United States District Court for the Eastern District of Texas.
      Despite Aggreko’s lawsuit against ASIC, Gray maintained its defense of
Aggreko with respect to the lawsuit filed by the Breneks. The Gray policy had
a liability limit of $1,000,000, subject to a $50,000 self-insured retention. On
February 8, 2017, Gray and the Breneks reached two separate agreements
regarding the Breneks’ claims against Rutherford and Aggreko. With respect
to Rutherford, Gray agreed to pay the Breneks $50,000 in exchange for a full
and complete release of any and all claims that the Breneks had against
Rutherford arising out of their son’s accident and death. With respect to
Aggreko, Gray agreed to pay the Breneks $950,000 on behalf of Aggreko in
exchange for the Breneks’ agreement to execute any subsequent judgment
obtained by the Breneks as to Aggreko only against available insurance. On
the same date, Gray issued to the Breneks and their attorneys two checks—

      1  See James Andrew Brenek, et al. v. Aggreko, L.L.C. and Rutherford Oil Co., No. E-
196603, 172nd District Court of Jefferson County, Texas.
       2 Rutherford had also contracted with Guichard and was considered an additional

insured under the liability policy issued to Guichard by Gray.
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one in the amount of $50,000, and one in the amount of $950,000. On March
3, 2017, the Breneks executed a “Release and Settlement Agreement” and a
“Covenant Not To Execute Agreement” (“Covenant Not To Execute”) setting
forth the formal terms of the respective agreements they entered into with
Gray.
        Consistent with the February 8 agreement between Gray and the
Breneks regarding Aggreko, the Covenant Not To Execute states that, by
executing the agreement, the Breneks “jointly and severally, promise[], agree[]
and covenant[] that they shall not seek to and will not execute on any
Judgment obtained in their favor and against Aggreko in the Lawsuit save and
except to the extent they can recover the Judgment from any insurance
company which provides coverage to Aggreko.” The Covenant Not to Execute
further provides that the Breneks would “enforce any and all such Judgment
against the available insurance only, and not against the assets of Aggreko or
its respective present or former directors, officers, employees, [or] parent
companies.”     Additionally, the agreement indicates that the Breneks
“acknowledge[] and agree[] that Aggreko retains whatever rights it may have
under the law to reduce the amount of any damage award against it by way of
settlement credit, proportionate responsibility, Tex. Civ. Prac. & Rem. Code
Chapter 33, the One-Satisfaction Rule, or otherwise.”
        Taking the position that it had exhausted its policy limit and its
obligation to Aggreko, Gray notified Aggreko by letter dated February 9, 2017
that it intended to withdraw its defense in the Breneks’ pending state lawsuit
30 days from the date of the letter. In support of its position, Gray pointed to
the following language from its policy:




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      SECTION I—COVERAGES
      COVERAGE A.    BODILY INJURY AND PROPERTY
      DAMAGE LIABILITY
      1. Insuring Agreement.
      a. We will pay those sums that the insured becomes legally
      obligated to pay as damages because of “bodily injury” or “property
      damage” to which this insurance applies . . . . But . . .
      2. Our right and duty to defend end when we have used up the
      applicable limit of insurance in payment of judgments or
      settlements under Coverage[] A . . . .
The Gray policy does not define the terms “judgments” and “settlements.”
Noting that it had paid the $1,000,000 policy limit “in settlement regarding the
Brenek occurrence,” Gray advised that it had no further obligations under the
policy.
      Gray subsequently denied requests of Aggreko and Indian Harbor to
maintain its defense of Aggreko. As a result, Indian Harbor instituted a
declaratory action, also in the United States District Court for the Eastern
District of Texas, seeking, among other things, recognition that Gray
maintained a duty to defend Aggreko. Shortly thereafter, the district court
issued an order consolidating Aggreko’s lawsuit against ASIC with Indian
Harbor’s lawsuit against Gray.
      After consolidation, Gray filed a motion for summary judgment in which
it sought a declaration that it had exhausted its policy limits and no longer had
a duty to defend or indemnify Aggreko.         ASIC and Indian Harbor filed
memoranda in opposition to Gray’s motion, while Aggreko filed a response
stating that its substantive arguments would be included in Indian Harbor’s
memorandum. Indian Harbor also, in turn, filed a cross-motion for summary
judgment in which it asked the district court to determine that Texas law
applies to the issues raised in the consolidated lawsuits; that the Covenant Not

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to Execute did not constitute a “settlement” of any of the Breneks’ claims
against Aggreko under Texas law and, therefore, that Gray had not exhausted
its policy limit with respect to such claims; that Gray had an ongoing duty to
defend Aggreko in the Breneks’ lawsuit; and that Gray was required to
reimburse Indian Harbor for any costs spent in Aggreko’s defense. Gray filed
a memorandum in opposition to Indian Harbor’s motion.
      The district court granted Gray’s motion and denied Indian Harbor’s
motion, except that it determined, in accordance with Indian Harbor’s request,
that Texas law—as opposed to Louisiana law—was applicable to the issues
before it. Specifically, the court held that:
      [A]s a matter of law, . . . (1) Texas law is controlling for both the
      Gray Policy and the Covenant Not to Execute; and (2) Gray’s
      payment of the policy limits and the Breneks’ execution of the
      Covenant Not to Execute against Aggreko and the release of
      Rutherford terminates Gray’s duty to defend and indemnify its
      insureds.
Indian Harbor now appeals the district court’s order. As noted above, Gray
asks this court to affirm the district court’s ruling but submits a “conditional”
cross-appeal, urging us to reverse the district court’s conclusion that Texas law
applies to the issues at hand and affirm the district court’s grant of summary
judgment in favor of Gray by applying Louisiana law in the event that we
conclude the judgment cannot be maintained under Texas law.
                                        II.
      This court reviews choice-of-law determinations de novo but reviews the
district court’s underlying factual determinations for clear error. Mumblow v.
Monroe Broadcasting, Inc., 

 (5th Cir. 2005); see also Nat’l
Union Fire Ins. Co. of Pittsburgh, Pa. v. Am. Eurocopter Corp., 

 (5th Cir. 2012) (“A district court’s choice-of-law determination is a legal
conclusion.”). We also review a district court’s interpretation of state law de

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novo. Ironshore Eur. DAC v. Schiff Hardin, L.L.P., 

 (5th Cir.
2019).
      Likewise, we review grants of summary judgment de novo, “applying the
same standard that the district court applied.” Smith v. Reg’l Transit Auth.,

 (5th Cir. 2016). Summary judgment is appropriate where
there is “no genuine dispute as to any material fact” and “the movant is entitled
to judgment as a matter of law.” FED. R. CIV. P. 56(a). Material facts are those
that “might affect the outcome of the suit under the governing law.” Leasehold
Expense Recovery, Inc. v. Mothers Work, Inc., 

 (5th Cir. 2003)
(internal quotation marks and citation omitted). The court must “view the
evidence introduced and all factual inferences [therefrom] in the light most
favorable to the party opposing summary judgment.” Smith, 

(internal quotation marks and citation omitted). “We may affirm the district
court’s grant of summary judgment on any ground supported by the record and
presented to the district court.” Amerisure Mut. Ins. Co. v. Arch Specialty Ins.
Co., 

 (5th Cir. 2015).
      As further discussed below, neither party identifies any material fact
that is in dispute. Thus, our resolution of this appeal revolves on proper
interpretation and application of the applicable law.
                                      III.
                                          1.
      Since the issue of whether the district court applied the correct state’s
law to resolve the matters before it is of primary importance in determining
whether the district court ultimately reached the correct result in granting
Gray’s request for summary judgment, we reject Gray’s categorization of its
appeal as “conditional.” Either the district court applied the correct law, or it
did not. Whether the district court applied the correct law cannot and does not
revolve on whether it reached a result that benefits Gray. Thus, we will
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address the propriety of the district court’s decision to apply Texas law
regardless of whether we agree with the court’s conclusion under Texas law.
      Federal courts exercising diversity jurisdiction generally must apply the
choice-of-law rules of the forum state to determine the applicable substantive
law. Pioneer Expl., L.L.C. v. Steadfast Ins. Co., 

 (5th Cir.
2014). A choice-of-law analysis is unnecessary, however, if the laws of the
states with an interest in the dispute do not conflict. Mumblow, 

. Under such circumstances, the substantive law of the forum applies. 

      Before the district court, Gray argued that there is no conflict between
the laws of Texas and Louisiana—the two states that have an interest in this
matter—with respect to whether it exhausted its obligations under its policy.
Gray asserted, however, that if the court found a conflict to exist, Louisiana
law should be applied to the dispute. Indian Harbor, on the other hand,
contended that Texas law governs. After finding that a potential conflict exists
between Texas and Louisiana law with respect to the issues before it due to
Louisiana’s allowance of direct actions by third parties against liability
insurers and Texas’s rejection of such actions, the district court engaged in a
conflict-of-laws analysis and concluded that the Gray policy should be
interpreted under Texas law.
      Initially, we note that the parties do not point to, and we are unaware
of, any pertinent difference between Texas law and Louisiana law with respect
to interpreting insurance policies. Under the laws of both states, an insurance
policy is a binding agreement that defines the relationship between the insurer
and insured and dictates the obligations each has to the other, subject to
applicable state regulations. See USAA Tex. Lloyds Co. v. Menchaca, 

 (Tex. 2018) (“[A]n insurance policy is a contract that
establishes the respective rights and obligations to which an insurer and its
insured have mutually agreed.” (internal quotation marks and citations
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omitted)); Supreme Servs. and Spec. Co. v. Sonny Greer, Inc., 

 (La. 2007) (“An insurance policy is a conventional obligation that
constitutes the law between the insured and the insurer, and the agreement
governs the nature of their relationship.”) Accordingly, under both Texas and
Louisiana law, insurance policies are to be interpreted in accordance with
general rules governing interpretation of contracts, and words and phrases
contained therein should be given their plain and ordinary meaning. See Don’s
Bldg. Supply, Inc. v. OneBeacon Ins. Co., 

 (Tex. 2008)
(discussing legal precepts for interpreting insurance policies); Bonin v.
Westport Ins. Corp., 

, 910–11 (La. 2006) (same). Further, both
states require true ambiguities in policy language to be construed in favor of
coverage. See 

      Nevertheless, we look further to whether Texas law and Louisiana law
potentially dictate different outcomes with respect to the particular dispute at
hand. As noted above, the policy issued by Gray to Guichard required Gray to
defend Aggreko with respect to the lawsuit filed by the Breneks until such time
as Gray “used up the applicable limit of insurance in payment of judgments or
settlements under Coverage[] A.” There is no dispute that Gray paid its limit
of insurance to the Breneks relative to their claims against Gray’s additional
insureds, Rutherford and Aggreko. There is also no dispute that there has
been no judgment against Aggreko in the lawsuit filed by the Breneks. Thus,
the narrow question that is presented is whether Gray’s payment of $950,000
to the Breneks on behalf of Aggreko in exchange for their covenant not to
execute any judgment against Aggreko, except as to available insurance,
constituted a “settlement” under the Gray Policy sufficient to relieve Gray of
its duty to defend Aggreko. In other words, is a release of tort liability required
in exchange for the payment of policy proceeds for a “settlement,” as
anticipated by the Gray Policy, to occur? To determine whether a conflict exists
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between Texas law and Louisiana law as to this issue, we must engage with
the merits of the issue under the laws of both states.
      “When evaluating issues of state law, we look to the decisions of the
state’s highest court.” Meador v. Apple, Inc., 

 (5th Cir. 2018).
The parties have not identified any cases from the Texas Supreme Court or the
Louisiana Supreme Court that are precisely on point as to the issue before us.
Further, our review of Texas and Louisiana jurisprudence does not reveal any
such cases. Under these circumstances, “we must make an Erie guess and
determine as best we can” how the highest courts of each state would resolve
such issue.   Martinez v. Walgreen Co., 

 (5th Cir. 2019)
(quoting Hays v. HCA Holdings, Inc., 

 (5th Cir. 2016)). To do
so, we must consult “the sources of law that the state[s’] highest court[s] would
look to, including intermediate state appellate court decisions, the general rule
on the issue, decisions from other jurisdictions, and general policy concerns.”

 (quoting Hays, 

).          Because of Louisiana’s “civilian
methodology,” in determining how the Louisiana Supreme Court would resolve
the present issue, we must give primary importance to Louisiana’s
constitution, codes and statutes. Jorge-Chavelas v. La. Farm Bureau Cas. Ins.
Co., 

 (5th Cir. 2019) (internal quotation marks and citations
omitted). We must refrain, however, from “adopt[ing] innovative theories of
recovery under state law without strong reason to believe that those theories
would be adopted if [the state’s highest court] had the opportunity.” Martinez,
935 F.3d at 398–99 (internal quotation marks and citation omitted).
      We note that if a prior panel of this court made an Erie ruling under
Texas or Louisiana law as to the issue before us, and that ruling has not been
superseded by either state statute or caselaw, then we are bound by that
panel’s prior decision. See Welborn v. State Farm Mut. Auto. Ins. Co., 

 (5th Cir. 2007).
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                                        2.
                                        a.
      We first analyze the issue before us under Texas law. Indian Harbor
argues that, under Texas law, the payment of Gray’s policy proceeds on behalf
of Aggreko in exchange for the Covenant Not to Execute is not a “settlement”
sufficient to have relieved Gray from its duty to defend Aggreko under the Gray
Policy, since it did not release Aggreko from any tort liability or end any part
of the Breneks’ lawsuit against Aggreko. Indian Harbor further contends that
Gray’s actions are part of a “strategy” to shift its duty to defend to Indian
Harbor, an excess insurer. Indian Harbor primarily points to this court’s
decision in Continental Casualty Co. v. North American Capacity Insurance
Co., 

 (5th Cir. 2012), in support of its position.
      Gray, on the other hand, argues that Indian Harbor “elevates form over
substance” and that we should focus on whether the Covenant Not to Execute
“provided similar protection as any document entitled ‘release’ or ‘settlement’.”
Gray further suggests that in light of available excess insurance under Indian
Harbor’s policy, which would be inaccessible after full release of the Breneks’
liability claims against Aggreko, the Covenant Not to Execute was as complete
of a release as it could obtain. Additionally, Gray asserts that the policy
provision at issue is clear and unambiguous and does not explicitly require a
release.   In support of its position, Gray relies on another of this court’s
decisions—Judwin Properties, Inc. v. United States Fire Insurance Co., 

 (5th Cir. 1992).
      Our decisions in Continental Casualty Co. and Judwin Properties, Inc.
were both decided under Texas law. For the reasons discussed below, we
conclude that neither case compels a specific resolution of this matter under
Texas law. We address each in turn, starting with the older decision—Judwin
Properties, Inc. The appellants in Judwin Properties, Inc., to which we will
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                                     No. 18-40325
collectively refer as “Judwin,” were sued in multiple personal injury lawsuits
by dozens of plaintiffs after treating certain rental properties with the chemical
chlordane. 

. Prior to trial, Judwin’s primary insurer, United
States Fire Insurance Company (“USF”), entered into an agreement with two
groups of plaintiffs to pay them $6,000,000 in exchange for covenants not to
execute judgments directly against Judwin, USF’s other insureds, or USF. 

at 433–35.     USF also agreed to pay “a peppercorn” to the two groups of
plaintiffs in exchange for a release of bad faith claims against USF. 3 

. Following payment of the $6,000,000, USF declined further coverage
under its policy. 

 In turn, Judwin sued USF, alleging that the insurer had
breached its insurance policy by failing to properly defend Judwin or settle the
claims of the two groups of plaintiffs, and asserting claims for bad faith
regarding the manner in which USF had defended Judwin. 

      On Judwin’s appeal from the district court’s grant of summary judgment
in favor of USF, we noted that the USF policy provided that USF would “not
be obligated to pay any claim or judgment or to defend any suit after the
applicable limit of the company’s liability ha[d] been exhausted by payment of
judgments or settlements.” 

 (internal quotation marks and citation
omitted). We found this language to be “plain, clear and unambiguous” and,
regarding Judwin’s claim that USF had breached its duty to defend, concluded
that “USF exhausted its obligation to provide a defense to Judwin when USF
paid $6,000,000 to [two groups of] plaintiffs on behalf of the insureds under the
policy.” 

 In response to Judwin’s argument that USF’s failure to obtain a
release of liability from the two groups of plaintiffs prevented termination of
USF’s obligations under the policy, we pointed out that Judwin had not raised

      3 Judwin had separately reached its own agreement with the two groups of plaintiffs
whereby such plaintiffs agreed to not execute any judgment against Judwin in exchange for
an assignment of any bad faith claims Judwin had against its insurers. Judwin Props., Inc.,

.
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such argument before the trial court. 

 at 436 n.4. We further referenced
our policy of not considering arguments raised for the first time on appeal
absent a showing of manifest injustice that would result from our failure to
consider a purely legal question and noted that Judwin had not demonstrated
how our failure to consider its argument would result in manifest injustice. 

Thus, as Indian Harbor correctly points out, we expressly declined in Judwin
Properties, Inc. to consider the specific issue that is currently directly before
us. Accordingly, we do not glean any holding from Judwin Properties, Inc. that
is binding on us in the instant case.
      We turn, then, to Continental Casualty Co. to consider what bearing it
may have on our decision here. In Continental Casualty Co., we determined
that a primary insurer that paid its policy limit to a company that had invoked
contractual arbitration against its insured did not exhaust its policy
obligations, including its duty to defend, since it failed to obtain a release of
any claim against its insured. 683 F.3d at 89–90. Like the insurance policies
at issue in Judwin Properties, Inc. and here, the policy at issue in Continental
Casualty Co. provided that the insurer’s “right and duty to defend end[ed]
when [it] . . . used up the applicable limit of insurance in the payment of
judgments or settlements.” Id. at 89 (internal quotation marks omitted). We
agreed with the district court’s conclusion that the primary insurer’s
agreement with the claimant “did not satisfy the plain meaning of this
provision because there was no judgment ending even part of the arbitration
against [the insured].” Id. We added that “there was no settlement as intended
by the policy because no lawsuit or dispute was ended.” Id. Further, we
characterized the payment by the primary insurer as an “initial installment
payment from one insurer” that was intended to “be applied . . . to some future
judgment or global settlement, which did not finally occur until 15 months


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[later].” Id. Thus, we held that the insurer’s “payment was . . . not pursuant
to a settlement or judgment as required by its policy.” Id. at 90.
        Indian Harbor reads Continental Casualty Co. as requiring that an
agreement must end a legal claim or lawsuit and, therefore, contain a release
of liability, to be considered a settlement. We do not believe that our holding
in Continental Casualty Co. is as broad as Indian Harbor suggests.
Importantly, in that case, we did not take note of any benefit obtained by the
primary insurer for its insured in exchange for paying its policy limit. 4 Id. at
89–90. Absent any perceivable benefit obtained on behalf of the insured, it was
clear that the insurer’s payment of its limits was not “in the payment of [a]
settlement[].” Id. at 89. In so holding, we did not exclude the possibility that
a payment by a liability insurer in exchange for an agreement by a claimant
not to execute any judgment against its insured or some other benefit to the
insured could, in some circumstances, constitute a “settlement” under Texas
law. This is supported by the language in the opinion stating that “there was
no settlement as intended by the policy because no lawsuit or dispute ended.”
Id.
                                               b.
        Because neither of our decisions relied upon by the parties binds us here,
we proceed to conduct an Erie analysis of whether, under Texas law, the


        4A review of the district court’s opinion and filings in the district court reveals that,
as here, the primary insurer in Continental Casualty Co. did obtain, as part of its agreement
with the tort plaintiff, a confirmation by the tort plaintiff that it would not execute any
judgment against the assets of the insured. Unlike here, however, the insured in Continental
Casualty Co. had previously obtained its own covenant not to execute from the tort plaintiff.
See 

. Perhaps because of that, the panel of this court that decided Continental
Casualty Co. made no reference to any covenant not to execute obtained by the primary
insurer in exchange for the payment of its policy limits. In light of its omission of any
reference to the affirmation by the tort plaintiff that it would honor its prior commitment not
to execute any judgment directly against the insured in its agreement with the primary
insurer, we will not assume that such affirmation played any role in the panel’s analysis or
decision.
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Covenant Not to Execute and payment of the remainder of the Gray policy
proceeds constitutes a “settlement” sufficient to have relieved Gray of its duty
to defend Aggreko under the Gray Policy. See Martinez, 

. Our
review of pertinent Texas jurisprudence leaves us convinced that, if presented
with the issue before us, the Texas Supreme Court would conclude that a
settlement occurred, as required by the Gray Policy.
      First, to determine whether a settlement took place here, we look to the
definition of a settlement. Relying on Texas jurisprudence, we have previously
defined a “settlement” as follows: “the conclusion of a disputed or unliquidated
claim, and attendant differences between the parties, through a contract in
which they agree to mutual concessions in order to avoid resolving their
controversy through a course of litigation.” McCleary v. Armstrong World
Indus., Inc., 

 (5th Cir. 1990) (quoting Priem v. Shires, 

, 863 n.3 (Tex. App.—Austin 1985, no writ)). There is no dispute
that the Covenant Not to Execute is a binding contract. Further, it is apparent
that in that contract, mutual concessions were made: Gray paid $950,000 on
behalf of Aggreko in exchange for the Breneks’ agreement not to execute any
tort judgment directly against Aggreko. Though the contract did not end
Aggreko’s tort liability, it did conclude, as the district court recognized, any
claim that the Breneks had to Aggreko’s personal assets and eliminated any
personal exposure that Aggreko faced with respect to a potential tort judgment
against it. In addition, the Covenant Not to Execute effectively reduced the
amount of damages that the Breneks could recover as a result of any finding
of tort liability on the part of Aggreko by $950,000, since, in it, the Breneks
“acknowledge[d] and agree[d] that Aggreko retain[ed] whatever rights it may
have under the law to reduce the amount of any damage award against it by
way of settlement credit, proportionate responsibility, Tex. Civ. Prac. & Rem.
Code Chapter 33, the One-Satisfaction Rule, or otherwise.”
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       Considering the foregoing, the fact that the Breneks’ damages plainly
exceed the Gray Policy limit, and the inability of Gray to obtain a full release
of Aggreko without hampering the Breneks’ excess coverage claims, we believe
that the Texas Supreme Court would conclude that a settlement occurred as to
the Breneks’ claims against Aggreko.
       Our conclusion is bolstered by various Texas cases addressing
exhaustion of liability policy limits and/or an insurer’s duty to defend,
including a case relied upon by Gray in its briefing—Kings Park Apartments,
Ltd. v. Nat’l Union Fire Ins. Co., 

 (Tex. App.—Houston [1st
Dist.] 2003, pet. denied). 5 Kings Park Apartments, Ltd. arises from the same
factual circumstances as Judwin Properties, Inc. Kings Park Apartments, Ltd.
(“Kings Park”) owned some of the rental properties that were treated with
chlordane by Judwin. 

. Shortly before trial, Kings Park and some
related parties reached an agreement with one group of plaintiffs, pursuant to
which Kings Park assigned its bad faith claims against its insurers to the
plaintiffs in exchange for a covenant not to execute any judgment directly
against Kings Park. 

 Kings Park retained a monetary interest in the
outcome of any bad faith lawsuits by the plaintiffs. 

. Following a
judgment against Kings Park, certain plaintiffs filed suit against Kings Park’s
insurers, including National Union, asserting bad faith claims under the
assignment by Kings Park. 

 National Union later reached an agreement
with these plaintiffs in which it agreed to pay its $5 million policy limit and a
peppercorn in exchange for a covenant not to execute any judgment against
Kings Park and a release of the bad faith claims against National Union. 

       5We note that while Indian Harbor spends much time in its briefing pointing to cases
from other jurisdictions to support its position, it does not point to any case from a Texas
court that is directly on point.
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                                  No. 18-40325
      Kings Park filed a separate suit against National Union, alleging that
National Union had wrongfully paid its policy limit to resolve only the bad faith
claims against it, as opposed to the plaintiffs’ claims against Kings Park, and
that National Union had wrongfully refused to defend or indemnify it. 

. On appeal from a jury verdict in favor of Kings Park, National Union
contended that payment of its policy limit was on behalf of its insureds and,
therefore, that it had exhausted its obligations under its policy. 

 at 530–31.
The court of appeals agreed, finding the evidence sufficient to establish that
National Union exhausted its policy limit by paying $5 million on behalf of
Kings Park to settle bodily injury claims against it and a peppercorn for the
release of bad faith claims against National Union. 

 at 533–34. The court
looked to, inter alia, the language of National Union’s agreement with the
plaintiffs and the reasoning and holding of this court in Judwin in support of
its conclusion. 

. Notably, the court rejected King Park’s argument
that, because National Union did not obtain a release of tort liability for Kings
Park in exchange for its $5 million payment, the payment could not have
exhausted National Union’s policy. 

 at 532–33. The court noted that the
lack of a release of liability was “not dispositive,” since the plaintiffs’ bodily
injury claims against Kings Park were retained for the purpose of preserving
their claims against an excess insurer. 

 at 532–33.
      In response to Kings Park’s argument that it received no benefit from
National Union’s settlement payment, particularly given that it had already
entered into its own covenant not to execute with the plaintiffs, the court noted
that “Kings Park received the benefit of the right to proceed [against] the next
layer of insurance, which would not have been available absent exhaustion of
National Union’s policy.” 

. According to the court, Kings Park also
“received the benefit of an essential step toward a full release after all the


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                                  No. 18-40325
insurers paid,” since “National Union’s $5 million payment was an integral
piece of the ultimate settlement plan to a full release of judgment.” 

      Here, like the tort defendant in Kings Park, Aggreko received the benefit
of resolution of a portion of the monetary claim against it and a step toward a
full release, since in the Covenant Not to Execute, the Breneks
“acknowledge[d] and agree[d] that Aggreko retain[ed] whatever rights it may
have under the law to reduce the amount of any damage award against it”
because of Gray’s payment. Further, here, where Aggreko had not obtained
any concessions from the Breneks on its own, Aggreko clearly received as a
result of the Covenant Not to Execute the benefit of the Breneks’ agreement
not to execute any judgment directly against Aggreko. Accordingly, like in
Kings Park, we conclude that the lack of a release of Aggreko’s liability is not
dispositive of whether Gray’s obligations to Aggreko under the Gray Policy
were exhausted.
      In further support of our conclusion that Gray exhausted its duty to
defend Aggreko under Texas law, we look to Texas Farmers Ins. Co. v. Soriano,

 (Tex. 1994), and its progeny. In Soriano, the Texas Supreme
Court held that “when faced with a settlement demand arising out of multiple
claims and inadequate proceeds, an insurer may enter into a reasonable
settlement with one of the several claimants even though such settlement
exhausts or diminishes the proceeds available to satisfy other claims.” 

.      This approach, the court noted, among other benefits,
“promotes settlement of lawsuits.” 

 Relying on Soriano, an intermediate
Texas court held that an auto liability insurer exhausted its duty to defend its
insured by paying its policy limit to enter into reasonable settlements of a
portion of the claims against him resulting from a three-car accident, where
the insurance policy at issue provided that the insurer’s “duty to settle or
defend end[ed] when [its] limit of liability . . . [had] been exhausted.” See Mid-
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                                  No. 18-40325
Century Ins. Co. of Texas v. Childs, 

 (Tex. App.—Texarkana
2000, no pet.).
      We recognize that in the instant case, unlike in Soriano and Mid-Century
Insurance Co. of Texas, there are not multiple, independent claimants
asserting claims against Aggreko as a result of Brenek’s accident.
Nevertheless, these cases signify the willingness of Texas courts to allow a
liability insurer to reasonably exhaust its duties to its insured under the terms
of its policy, including its duty to defend, even though it has not resolved all
pending liability claims against the insured. Notably, despite Indian Harbor’s
suggestion that Gray’s agreement with the Breneks was a maneuver to dump
Aggreko’s defense on it, there is no assertion or indication that payment of
$950,000 to the Breneks by Gray on behalf of Aggreko to satisfy a portion of
the damages sought for the death of the Breneks’ son was unreasonable. Thus,
in light of these cases, we do not see pending liability claims against Aggreko
after payment of Gray’s policy limit and execution of the Covenant Not to
Execute alone as a reason to conclude that Gray did not exhaust its contractual
obligations to Aggreko.
      Finally, we note that our conclusion that a “settlement” occurred under
the terms of the Gray Policy, is, we believe, in line with the Texas Supreme
Court’s goal of promoting public policies that encourage settlements.         See
Stewart Title Guar. Co. v. Sterling, 

 (Tex. 1991).
                                        3.
      Having concluded the Texas Supreme Court would likely decide the
present issue in favor of Gray, we turn to the likely outcome under Louisiana
law. In its initial brief, Gray asserts that if we “reach [its] conditional cross-
appeal, [then we] should reverse the district court’s choice-of-law ruling,
conclude that Louisiana law applies, and conclude that Gray exhausted its
policy limits under Louisiana law and owes no further obligation to Aggreko.”
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                                 No. 18-40325
Gray does not argue, however, with any detail or clarity why it’s duty to defend
Aggreko should be considered exhausted under Louisiana law.             Its only
discussion of the merits of the issue under Louisiana law contains a brief
discussion of the case Gasquet v. Commercial Union Ins. Co., 

(La. App. 4 Cir. 1980) and its progeny and the suggestion that the law of
Louisiana and several other states “aligns with Judwin.” Indian Harbor, for
its part, does not address in its briefing how the issue before us would be
decided under Louisiana law and conceded at oral argument that under
Louisiana law Gray likely exhausted its duty to defend Aggreko.
      The district court, with little explanation, concluded that “[u]nder
Louisiana law, a direct action state, the Covenant Not to Execute acted as a
release, as described in Gasquet v. Commercial Union Insurance Company, and
ended Gray’s obligations under the Gray Policy despite not being a full release
of liability for Aggreko.”
      While, as discussed below, we agree that Gasquet and its progeny
support the conclusion that Gray exhausted its duty to defend Aggreko under
Louisiana law, Gasquet did not address the specific issue before us. Further,
other sources of Louisiana law are entitled to consideration here. As discussed
above, in making an Erie determination under Louisiana law, due to
Louisiana’s “civilian methodology,” we must give primary importance to any
pertinent Louisiana constitutional or statutory provisions. Jorge-Chavelas,

.     Louisiana Civil Code article 3071 provides Louisiana’s
definition of a “settlement,” or, using Louisiana’s terminology, a “compromise.”
Because our task is to determine whether a settlement occurred sufficient to
relieve Gray of its duty to defend Aggreko under the Gray policy, that article
is pertinent and warrants our primary consideration. Notably, the district
court and the parties failed to give this provision any consideration, much less
the primary consideration it deserves.
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                                  No. 18-40325
      Louisiana Civil Code article 3071 defines a “compromise” as “a contract
whereby the parties, through concessions made by one or more of them, settle
a dispute or an uncertainty concerning an obligation or other legal
relationship.” LA. CIV. CODE ANN. Art. 3071 (2007). For the same reasons that
the agreement between Gray and the Breneks appears to meet the Texas
definition of a “settlement,” it also appears to meet the Louisiana definition of
a “compromise.”      Again, the Covenant Not to Execute is undoubtedly a
contract; both Gray, on behalf of Aggreko, and the Breneks made concessions
in such contract; and, through the Covenant Not to Execute, the uncertainty
as to Aggreko’s personal financial obligation to the Brenek’s and its liability
for at least $950,000 in damages was resolved.         Thus, it appears that a
settlement or compromise occurred between Gray, on behalf of Aggreko, and
the Breneks under the terms of Louisiana Civil Code article 3071.
      Having addressed the code provision relevant to this dispute, we turn,
now, to Gasquet and its progeny. In Gasquet, the plaintiff suffered severe
injuries in an airboat accident that occurred while he was on a hunting trip.

. Prior to trial, the plaintiff entered into an agreement with
the tort defendants’ primary insurer whereby the primary insurer paid
$200,000 of its $300,000 liability policy limit in exchange for a complete release
of the primary insurer and a release of the alleged tortfeasors “from all claims
which might be recovered from [them] directly, but specifically reserving his
claims only to the extent that collectible coverage is afforded to [the alleged
tortfeasors] by [a] policy of excess insurance.” 

. As part of his
agreement with the primary insurer, the plaintiff also agreed to “allow a credit
to [the excess insurer] for the full $300,000 of the primary insurance policy.”

.
      The excess insurer sought summary judgment, claiming that there was
no coverage under its policy since the plaintiff settled with the primary insurer
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                                  No. 18-40325
for less than its policy limits. 

 The excess insurer relied on the following
language from its policy in support of its argument: “Liability under this policy
with respect to any occurrence shall not attach unless and until the insured,
or the insured’s underlying insurer, shall have paid the amount of the
underlying limits on account of such occurrence.” 

 The excess insurer
argued that since the limit of the underlying policy had not been paid and no
longer could be paid, due to the language of the plaintiff’s agreement with the
primary insurer, it could not have any liability under its excess policy. 

After studying relevant Louisiana jurisprudence and cases from other
jurisdictions, the Louisiana Fourth Circuit Court of Appeal held that the
plaintiff’s “release of the primary insurer . . . and partial release of [the
tortfeasors] for less than the full primary limits, but granting a credit for the
full primary limits and reserving the right to proceed against the excess
carrier, did not release [the excess carrier] from its liability as the excess
insurer.” 

.
      As recognized in RSUI Indemity Co. v. American States Insurance Co.,
“Gasquet” has become a term of art among Louisiana jurists and lawyers to
describe a type of release. 

 (E.D. La. 2015). The court
in RSUI Indemnity Co. described a Gasquet release and its function as follows:
      [B]y executing a Gasquet release in a settlement agreement, a
      plaintiff (1) releases the primary insurer entirely, and (2) releases
      the insured from all claims which might be recovered from the
      insured directly, reserving claims against the insured only to the
      extent that collectible coverage is afforded by an excess insurance
      policy. Procedurally, after a Gasquet release is executed the
      insured remains in the lawsuit as a “nominal” defendant while the
      plaintiff pursues recovery from the excess insurer.

 (alterations omitted) (internal quotation marks and citation
omitted). See also Thistlethwaite v. Gonzalez, 

, 244 n.1 (La. App.
5 Cir. 2012) (discussing Gasquet and its implications); Jones v. Capital Enters.,

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                                  No. 18-40325
Inc., 

, 480–81 (La. App. 4 Cir. 2012) (same); Thompson v. Shay,

 (La. App. 1 Cir. 2002) (same).
      As noted above, we believe that Gasquet and its progeny do support the
conclusion that the Louisiana Supreme Court would conclude that a settlement
occurred sufficient to relieve Gray of its duty to defend Aggreko, since these
cases make clear that Louisiana courts are willing to recognize that a liability
insurer can exhaust its duties to its insured without obtaining a release of tort
liability on behalf of the insured. Gasquet does not, however, resolve the
central issue here: whether a “settlement” can occur under Louisiana law
without a release of any claim or tort liability. To the extent the district court’s
decision suggests that Gasquet does resolve that question, it is in error.
      The Louisiana Supreme Court case of Pareti v. Sentry Indemnity
Company, 

 (La. 1988), also instructs our resolution of the issue
before us under Louisiana law. The issue before the court in that case was
“whether [a] liability insurer had a continuing duty, after the exhaustion of its
policy limits through settlement, to defend its insured in another claim arising
from the same [automobile] accident.” Pareti, 

. The policy
provided that “the insurer’s duty to settle or defend end[ed] when [its] limit of
liability . . . ha[d] been exhausted.” 

 The court concluded that because this
language is not ambiguous and because “there [was] no indication from the
record that the insurer did not act in good faith when it settled the personal
injury claim for the limits of its liability policy,” the insurer was not obligated
to defend its insured as to the unresolved claim after payment of its policy
limit. 

 at 418–19.
      In deciding the case, the court cautioned that its ruling was “premised
upon both the language of the policy before [it] and the facts of [the] particular
case.” 

. Further, it recognized that “[w]hen an insurer merely
tenders its limits without obtaining a settlement of any claim for its insured, a
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                                   No. 18-40325
strong argument can be made that it has neither exhausted its policy limits
nor fulfilled its fiduciary duty to discharge its policy obligations to the insured
in good faith.” 

 at 422–423 (internal quotation marks and citation omitted).
Recognizing and addressing the “[r]isk that insurance companies [would] enter
inappropriate settlements in some cases” to avoid their contractual duties to
their insureds, including the duty to defend, the court stated that “in every
case, the insurance company is held to a high fiduciary duty to discharge its
policy obligations to its insured in good faith.” 

. `The court added
that “[a]n insurer which hastily enters into a questionable settlement simply
to avoid further defense obligations under the policy clearly is not acting in
good faith and may be held liable for damages caused to its insured.” 

      The Louisiana Supreme Court’s willingness to recognize that a liability
insurer can exhaust its duty to defend under its policy by, in good faith,
resolving some, but not all, claims against its insured for its policy limits
suggests that it would also recognize the exhaustion of a liability insurer’s duty
to defend by, in good faith, fully resolving the question of its insured’s personal
liability for damages.
      Considering the foregoing authorities, and for the reasons discussed
above, we believe that the Louisiana Supreme Court would determine that
Gray, on behalf of Aggreko, and the Breneks entered into a settlement
sufficient to exhaust Gray’s duty to defend Aggreko under the Gray Policy.
                                        4.
      Because we conclude that the outcome of the present dispute would be
the same under both Texas and Louisiana law, we need not engage in a conflict-
of-laws analysis and apply Texas law. See Mumblow, 

. Under
Texas law, as set forth above, we conclude that Gray exhausted its policy limit
and its duty to defend Aggreko when it paid $950,000—the remainder of its
liability coverage limit—to the Breneks in exchange for the Breneks agreement
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                                 No. 18-40325
not to execute any judgment against Aggreko and to recognize Aggreko’s
entitlement to claim a $950,000 damages credit.
      We emphasize that our resolution of the matter before us does not reach
and should not be interpreted as in any way construing Indian Harbor’s
obligations under its own policy, which concerns matters that are not before
us. Further, we recognize that, in some instances, insurers may be compelled
to improperly and hastily hand over their policy limits to rid themselves of the
duty to defend their insured. We reiterate that such a situation is not before
us, as there is no suggestion or indication in the record that the Breneks’
damages do not exceed the Gray policy limit or that Gray did not properly
investigate the Breneks’ claim on behalf of Aggreko. Thus, our decision should
not be construed as in any way limiting remedies to insureds under Texas or
Louisiana law against insurers who have improperly or in bad faith handled
their claims.
                                      IV.
      For the reasons set forth herein, the judgment of the district court is
AFFIRMED.




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