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Insurance Company of North America v. Aberdeen Insurance Services, Inc.

Where a contract is incorporated by reference into a subcontract, the subcontractor is conclusively presumed to undertake the work subject to the conditions and limitations of the prime contract.

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Appeals from the United States District Court for the Southern District of Texas, Houston

In January 1997, Appellants Insurance Company of North America (“INA”) and Maitland Brothers Company (“Maitland”) brought suit against Aberdeen Insurance Services, Inc. (“Aberdeen”) and various London Underwriters (the “Underwriters”) in federal district court, seeking coverage under an insurance policy issued by Aberdeen to Offshore Diving and Salvage, Inc. (“Offshore”), a Maitland subcontractor. The Underwriters filed a counterclaim, alleging Appellants brought their suit in bad faith. After an eight-day trial, a jury entered a special verdict, deciding in favor of INA and Maitland. However, the district court concluded that there was insufficient evidence to support the jury’s findings as to some of the questions that formed the special verdict. Therefore, the court entered judgment as a matter of law under which INA and Maitland received no damages, but denied the Underwriters’ motion for judgment as a matter of law on their counterclaim. Maitland and INA appeal the district court’s partial reversal of the jury’s findings and judgment in favor of the Underwriters. The Underwriters cross-appeal the district court’s denial of their motion for judgment as a matter of law on their counterclaim. Because we conclude that the district court erred insofar as it overruled the jury’s verdict, we reverse the district court’s partial grant of judgment as a matter of law for the Underwriters and affirm the district court’s denial of the Underwriters’ motion for judgment as a matter of law on their counterclaim.

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