Lexington Insurance Co. v. W.M. Kellogg Co

In Lexington Insurance Co. v. W.M. Kellogg Co., 976 S.W.2d 807 (Tex. App.--Houston 1st Dist. 1998, no writ) the First Court of Appeals addressed a nearly identical situation. There, Kellogg agreed to "design, engineer, and construct an ethylene manufacturing facility in Louisiana for Westlake Petrochemical Corporation." Id. at 808. A dispute arose about the work that Kellogg performed; therefore, after Kellogg completed the project, the parties executed the following release: For and in consideration of the cash, invoice cancellations, credit, benefits, mutual promises, and terms and conditions provided for in this Agreement, the receipt and adequacy of which are hereby expressly acknowledged by Westlake Polymers and Westlake . . . each individually and on behalf of its respective successors and assigns, do hereby and forever RELEASE, ACQUIT and DISCHARGE Kellogg . . . their officers, employees, shareholders, affiliates, subsidiaries, directors, attorneys, agents, legal representatives, successors and assigns of and from any and all claims, actions or causes of action, known or unknown, accrued or which may accrue in the future, for damages, injury, losses, costs, charges, expenses or liability of whatsoever kind or character, known or unknown, accrued or which may accrue in the future, arising out of or relating, directly or indirectly, to any of the Released Transactions. . . . . The term "Released Transactions": means and includes any and all acts, omissions, promises, events, occurrences, warranties, representations, transactions, dealings, inducements or agreements of every kind or character relating directly or indirectly (i) to the negotiation, execution, performance, warranties, terms, conditions, rights and obligations, or any other aspect of the subject matter of the Project Agreement, (ii) to the Plant; or (iii) to any engineering services, design work or other services of any kind or character performed directly or indirectly by Kellogg for Westlake Polymers and/or Westlake in connection with the Project Agreement for the Plant. Id. Two years later, there was an explosion at the plant, and Westlake sought insurance payments from its insurer, Lexington. Id. Lexington, as Westlake's subrogee, threatened to sue Kellogg and to claim that the release did not apply to claims of negligence or gross negligence, so Kellogg filed a declaratory judgment action. Id. at 808-09. The trial court declared that the release was effective as to any claims arising from Kellogg's services at the Westlake facility. Id. at 809. On appeal, the First Court of Appeals held that the express negligence doctrine did not apply to the release because it was executed after the negligent acts--Kellogg's provision of services at the Westlake facility--even though the explosion and resulting damages did not occur until after the release was signed: "In the present case, the Agreement releasing Kellogg from liability, supported by consideration worth more than one million dollars, was drafted and signed after the acts which could give rise to liability were completed. The Agreement was signed after the construction of the plant had been completed, and it is uncontested a disagreement had arisen regarding Kellogg's performance. This case involves only claims for alleged negligence committed before the release was signed. Accordingly, the "fair notice doctrine" under Dresser does not apply." Id.