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In a stunning legal reversal, a Texas state appeals court has overturned Exxon Mobil’s $25 million judgment, ruling that the energy giant’s excess insurer, Lexington Insurance Co., is not obligated to cover a $35 million settlement tied to a 2013 plant explosion. The decision underscores the far-reaching impact of employer liability exclusions in insurance law.

Court Rules Exxon’s Coverage Blocked by Policy Exclusion

A three-judge panel ruled that the trial court erred in its previous decision, finding that Exxon was ineligible for coverage under Lexington’s policy. The key factor? Exxon’s participation in an owner-controlled insurance program (OCIP), which provided workers' compensation coverage for subcontractors from Brock Services Ltd.

Because Texas labor law considers Exxon the statutory employer of the injured Brock workers, the “employer’s liability exclusion” applied, negating coverage.

Exclusion Language Seals Exxon’s Fate

The court pointed to a crucial provision in Lexington’s policy: Coverage is barred when an insured employee suffers a work-related injury, regardless of whether the insured is liable “as an employer or in any other capacity.”

With this provision in place, Exxon’s status as a statutory employer effectively shut the door on its claim for insurance benefits.

Legal Battle Stemming From a Deadly Plant Disaster

The dispute dates back to a catastrophic 2013 explosion at an Exxon facility, which led to multiple injuries among Brock subcontractors. The injured workers filed suit after receiving workers’ compensation benefits, prompting Exxon to sue Lexington in 2014 for coverage.

Despite securing a $25 million judgment in 2022, Exxon’s victory was short-lived. The appellate court found that because the OCIP explicitly classified subcontractors as Exxon employees, the company was legally barred from seeking further compensation.

Exxon Walks Away With “Nothing”

In a decisive opinion, the panel determined that Exxon was never entitled to coverage under the excess policy.

“This case concerns the depth and breadth of the ‘exclusive remedy’ defense provided by the Texas Workers' Compensation statute,” the court stated. “Historically, general liability policies were never meant to cover an employer’s liability to its own employees.”

The ruling leaves Exxon empty-handed, as the judges firmly sided with Lexington’s interpretation of the policy.

Legal Teams and Next Steps

The Panel

The case was decided by Chief Justice W. Scott Golemon and Justices Leanne Johnson and Jay Wright.

Representation

• Lexington Insurance Co. was represented by Howard L. Close, Michael Adams-Hurta, Thomas C. Wright, and Kenneth Jason Fair of Wright Close & Barger LLP, as well as Darin Lee Brooks, Brian Waters, Kristen Kelly of Gray Reed, and Christopher W. Martin of Martin Disiere Jefferson & Wisdom.
• Exxon Mobil was represented by Russell S. Post, Joshua S. Smith, and Nicholas M. Bruno of Beck Redden LLP.

Neither Exxon nor Lexington provided immediate comments on Thursday regarding the ruling.

With this dramatic reversal, the case highlights the limitations of corporate insurance policies and the legal complexities of employer liability exclusions. As Exxon assesses its next move, the ruling sets a precedent for future disputes over coverage for workplace accidents.