LOLLEY, J.
This appeal arises out of an insurance coverage dispute whereby four different defendants, Admiral Insurance Company (hereinafter referred to as "Admiral"), Steadfast Insurance Company (hereinafter referred to as "Steadfast"), ACE American Insurance (hereinafter referred to as "ACE"), and Oracle Oil, L.L.C. (hereinafter referred to as "Oracle"), appeal a single judgment granting Oracle's motion for partial summary judgment against Admiral and ACE, denying Oracle's motion for partial summary judgment against Steadfast, and granting Steadfast's motion for summary judgment against Oracle. All of the motions addressed the same issue-the duty to defend. For the reasons set forth below, we reverse the judgment of the trial court and grant summary judgment in favor of Admiral, Steadfast, and ACE.
This case involves a "legacy lawsuit" by a group of land owners against a group of oil and gas operators who have worked in and around the Bellevue Field in Bossier Parish since the 1930s. Plaintiffs,
In particular, plaintiffs allege that from 1978 to 1990, Oracle's predecessors conducted oil and gas activities, including the operation of numerous oil wells, an open pit, and tank batteries on the property immediately east of and adjacent to Section 15. Oracle allegedly acquired these same wells in 2000 and continues to operate them to present. It was these facilities along with the wells that plaintiffs allege are sources of pollution which have migrated and caused damage to the soils and groundwaters underlying plaintiffs' property.
Four different insurers provided insurance to Oracle between 2000 and 2011, as more fully described below:
INSURER TYPE OF POLICY PERIOD OF COVERAGE Admiral Commercial General Liability ("ACGL") 03/12/00-03/12/01 Admiral CGL 03/12/01-03/12/02
Admiral CGL 03/12/02-03/12/03 Steadfast CGL 03/12/03-03/12/04 Steadfast CGL 03/12/04-03/12/05 Steadfast CGL 03/12/05-03/12/06 Bituminous CGL 03/12/06-03/12/07 Bituminous CGL 03/12/07-03/12/08 Bituminous Pollution 03/12/07-03/12/08 Bituminous CGL 03/12/08-03/12/09 Bituminous Pollution 03/12/08-03/12/09 Bituminous CGL 03/12/09-03/12/10 Bituminous Pollution 03/12/09-03/12/10 Ace CGL 03/12/10-03/12/11
Upon receiving notice of the lawsuit, Oracle wrote its insurers seeking defense and indemnification. In time, Admiral, Steadfast, and ACE each responded, denying coverage based on certain exclusions, conditions, or endorsements in their policies. However, Bituminous Casualty Corporation (hereinafter referred to as "Bituminous") initially agreed to defend Oracle. As a result of the denial of coverage, Oracle filed third party demands for indemnification and defense against Admiral, Steadfast and ACE. Oracle sought reimbursement, defense, and indemnity from the three insurance companies, along with all losses, costs, and expenses, including attorney fees incurred or to be incurred by Oracle in defending against the claims asserted by the plaintiffs in the original suit.
Admiral responded by filing a motion for summary judgment and declaratory judgment seeking a dismissal of Oracle's claim for coverage and a declaration that Admiral did not have a duty to defend Oracle. The trial court denied Admiral's motion for summary judgement on the duty to defend, and Admiral sought writs with this court. This court denied the writ on April 27, 2012, on the showing made, and stated the applicant would have an adequate remedy on appeal. Likewise, the Louisiana Supreme Court denied writs on September 14, 2012.
Simultaneously in the trial court, Oracle filed a motion for partial summary judgment on the duty to defend against Admiral, Steadfast, and ACE. Steadfast responded by filing a cross-motion for summary judgment asserting various conditions and exclusions contained in their policies issued to Oracle. ACE also filed a motion based on its policy language.
In July 2012, Bituminous filed a petition for intervention and intervened in the third party demand, alleging that it was providing Oracle with a defense, and it was entitled to contribution from Admiral, Steadfast, and ACE.
A hearing was held on September 12, 2012, and the trial court granted Oracle's motion as to Admiral and ACE, finding a duty to defend existed. However, the trial court denied Oracle's motion for partial summary judgment as to Steadfast and granted Steadfast's cross-motion for summary judgment based solely on the "Other Insurance" provision in the Steadfast policy. Explaining its reasoning, the trial court stated:
The judgment of the trial court was not certified as suitable for immediate appeal, and this court received writ applications from Oracle, Admiral, Steadfast, and ACE. Ultimately, the trial court certified its judgments for immediate appeal, and this appeal by the various parties ensued.
Appellate courts review summary judgments de novo under the same criteria that govern the district court's consideration of whether summary judgment is appropriate. Elliott v. Continental Cas. Co., 2006-1505 (La.02/22/07), 949 So.2d 1247, 1254; Reynolds v. Select Properties, Ltd., 93-1480 (La.04/11/94), 634 So.2d 1180, 1183; Gonzales v. Geisler, 46,501 (La. App.2d Cir.09/21/11), 72 So.3d 992, 995. A motion for summary judgment will be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact, and that the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966(B).
Relevant to the case sub judice, in an action under an insurance contract, the insured bears the burden of proving the existence of a policy and coverage. The insurer, however, bears the burden of showing policy limits or exclusions. Tunstall v. Stierwald, 2001-1765 (La.02/26/02), 809 So.2d 916, 921; Whitham v. Louisiana Farm Bureau Cas. Ins. Co., 45,199 (La. App.2d Cir.04/14/10), 34 So.3d 1104, 1107; Gonzales, supra. Summary judgment declaring a lack of coverage under an insurance policy may not be rendered unless there is no reasonable interpretation of the policy, when applied to the undisputed material facts shown by the evidence supporting the motion, under which coverage could be afforded. Elliott, supra; Reynolds, supra; Gonzales, supra.
An insurance policy is a contract between the parties, and should be construed using the general rules of interpretation of contracts. Blackburn v. National Union Fire Ins. Co. of Pittsburgh, 2000-2668 (La.04/03/01), 784 So.2d 637, 641; Mossy Motors, Inc. v. Cameras America, 2004-0726 (La.App.4th Cir.03/02/05), 898 So.2d 602, 605, writ denied, 2005-1181 (La.12/09/05), 916 So.2d 1057; Gonzales, supra. The parties' intent, as reflected by the words of the policy, determines the extent of the coverage. Id. If the policy wording at issue is clear and expresses the intent of the parties, the agreement must be enforced as written. Bossier Plaza Assocs. v. National Union Fire Ins. Co. of Pittsburgh, 35,741 (La.App.2d Cir.04/03/02), 813 So.2d 1114, 1119. An insurance policy should not be interpreted in an unreasonable or strained manner so as to enlarge or to restrict its provision beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion. Magnon v. Collins, 1998-2822 (La.07/07/99), 739 So.2d 191, 197; Mossy Motors, supra. Likewise, a court should not strain to find ambiguity in a policy where none exists. Fleming Novelty, Inc. v. Alexander, 34,346 (La.App.2d Cir.12/20/00), 775 So.2d 643, writ denied,
The purpose of liability insurance is to afford the insured protection from damage claims. Policies, therefore should be construed to effect, and not to deny coverage. Thus, if a provision which seeks to narrow the language of the exclusion is subject to two or more reasonable interpretations, that which favors coverage must be applied. However, it is equally well settled that insurance companies have the right to limit coverage in any manner they desire, so long as the limitations do not conflict with statutory provisions or public policy. Elliott, supra.
Here, there is one issue on appeal—whether Admiral, Steadfast, and ACE owe Oracle a duty to defend. An insurer's duty to defend suits against its insured is broader than its liability for damage claims. The duty to defend is determined by the allegations of the injured plaintiff's petition, with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage. Elliott, supra; Steptore v. Masco Const. Co., 93-2064 (La.08/18/94), 643 So.2d 1213; American Home Assurance Co. v. Czarniecki, 255 La. 251 (La.1969), 230 So.2d 253; Sibley v. Deer Valley Homebuilders, Inc., 45,063 (La.App.2d Cir.03/03/10), 32 So.3d 1034, 1039. This is known as the "eight corners rule," whereby an insurer must look to the "four corners" of the plaintiff's petition and the "four corners" of its policy to determine whether it has a duty to defend. Vaughn v. Franklin, 2000-291, pg. 5 (La.App.1st Cir.03/28/01), 785 So.2d 79, 84, writ denied, 2001-1551 (La.10/05/01), 798 So.2d 969. American Home Assurance Co., supra. In this analysis, the allegations of the petition are liberally interpreted in determining whether they set forth grounds that bring the claims within the scope of the insurer's duty to defend. Id. An insurer's duty to defend arises whenever the pleadings against the insured disclose even a possibility of liability under the policy. Sibley, supra; Vaughn, supra. If assuming all the allegations of the petition to be true, there would be both coverage under the policy and liability of the insured to the plaintiff, the insurer must defend the insured regardless of the outcome of the suit. Elliott, supra.
The application of the eight corners rule calls for this court to compare the "four corners" of plaintiffs' petition against the "four corners" of each CGL and/or pollution insurance policy and determine whether the claims, liberally interpreted and taken as true, fall within the scope of the duty to defend. If there is no reasonable interpretation of the policy, when applied to the undisputed facts shown by the evidence supporting the motion, under which coverage should be afforded, summary judgment will be proper, and there will be no duty to defend.
Similar to most legacy lawsuits, plaintiffs raise a plethora of allegations and theories of recovery against numerous oil and gas operators for pollution damage to their property. The trial court had difficulty discerning whether the allegations contained within plaintiffs' petition were in every respect based on pollution, i.e., the trial court was unable to find that plaintiffs' cause of action was strictly limited to pollution damages. The crux of Oracle's argument is that plaintiffs' petition raises separate causes of action that may be totally unrelated to pollution, such as breach of contract and trespass. It is Oracle's position that if plaintiffs' allegations go beyond pollution damages, then the possibility of coverage, and thus the duty to
Oracle is first distinguished in plaintiffs' second supplemental and amending petition in Paragraph 7, which provides:
However, in Paragraph 7.1, it is alleged that Oracle conducted operations on property immediately adjacent to the east of plaintiffs' property—not on plaintiffs' property. Additionally, in Paragraph 7.2, it is alleged that Oracle never took leases or assignments affecting plaintiffs' property. Thus, Oracle is not alleged to be operating on plaintiffs' property, and Oracle is not alleged to be contractually associated with plaintiffs via lease or assignment. Oracle is next set apart from the other named defendants in Paragraph 7.7, which reads, verbatim:
Plaintiffs allege that the wastes deposited in these pits include naturally occurring radioactive material ("NORM"), produced water, drilling fluids, chlorides, hydrocarbons, and heavy metals. Plaintiffs also allege that the defendants' failure to responsibly and timely remove this toxic pollution in the soil and groundwater of plaintiffs' property has allowed the pollution to migrate and spread. It is based on this conduct that plaintiffs are claiming negligence under La. C.C. art. 2315, violation of La. R.S. 30:29 ("Act 312"), violation of industry practice and custom, continuous tort, breach of contract, nuisance, failure to act as a prudent operator and prudent administrator, failure to restore plaintiffs' property to original condition, unjust enrichment damages, violation of regulatory obligations, and civil trespass.
Further in support, plaintiffs make no demands for damages concerning defendants' operations other than those related to the seepage or migration of pollutants. For example, plaintiffs do not request damages for the recovery for simple surface-related disturbances such as the unauthorized removal of trees or damage to topsoil. Nor do plaintiffs seek an injunction for the removal of Oracle's stray wells that were operated beyond its mineral lease on plaintiffs' property. In fact,
Having concluded that the plaintiffs' petition is solely based on pollution, we next turn to each insurer's policy to determine whether coverage is unambiguously excluded. Admiral, Steadfast, and ACE all argue that each of their respective policies issued to Oracle contain applicable provisions which in some way exclude coverage for long-term, environmental pollution damages. We agree. Specifically, we find that all of the allegations set forth above, fit squarely within the clear language of each insurers' pollution exclusion contained within each policy issued to Oracle.
Admiral provided CGL insurance and an excess policy to Oracle from March 2000 to March 2003, subject to certain terms, conditions, limitations, exclusions, and endorsements. All three of the policies' insuring agreements provide:
Admiral's policies were also subject to a pollution exclusion, which provides:
This insurance does not apply to:
Additionally, Admiral's policy issued to Oracle for the period of March 12, 2000, to March 12, 2001, contains a Total Pollution Exclusion Endorsement. This endorsement
The excess policy also contains a pollution exclusion with similar language.
Under the language of the Admiral policy, coverage is excluded for damages:
Likewise, the Total Pollution Endorsement excludes coverage for "bodily injury or property damage which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time." The excess policy's pollution exclusion also excludes coverage for any "bodily injury, property damage, or personal injury arising out of any environment by pollutants that are introduced at any time, anywhere, in any way, and to costs or other loss or damage arising out of such contamination." The term "pollutants" is defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste."
For purposes of determining coverage, we accept as true plaintiffs' allegations that Oracle and their predecessors participated in the operation and construction of an open pit and tank battery in Section 15 not far from plaintiffs' property, and it was these facilities that are the sources of pollution which have migrated and caused damage to the soils and groundwaters underlying plaintiffs' properties. It is alleged that Oracle used or is using these sites for the handling, storage, disposal, processing or treatment of waste, and further, it is alleged that the property was contaminated with NORM, produced water, drilling fluids, chlorides, hydrocarbons, and heavy metals, amongst other contaminants. As discussed above, no other damages are alleged besides those resulting from the seepage or migration of pollutants.
If the policy wording at issue is clear and expresses the intent of the parties, the agreement must be enforced as written. Additionally, we must not strain to find ambiguity in a policy where none exists. When compared against plaintiffs' petition for damages, we find that coverage is unambiguously excluded under the clear terms of the Admiral policy. There is no question that this legacy lawsuit would not have arisen but for the "actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants." There is also no question that NORM, produced water, drilling fluids, chlorides, hydrocarbons, and heavy metals fall within the definition of pollutants as defined in the policy. These materials are at the very least contaminants, chemicals, or wastes. Therefore, we find that coverage is unambiguously excluded based on the clear terms of the pollution exclusion, and accordingly, Admiral owes no duty to defend Oracle in the instant matter.
Steadfast issued three CGL policies to Oracle from March 12, 2003, to March 12, 2006, which were in all material aspects identical. Relevant provisions of the Steadfast policies provide:
However, the policies contain a Time Element Limited Pollution Liability Endorsement for Energy and/or Energy Related Operations,
Notably, the Time Element Limited Pollution Liability Endorsement in the Steadfast policies excludes coverage for any "injury or damage which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time." It also excludes coverage for any "loss, cost or expense arising out of any request, demand, or order that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the affects of pollutants." "Pollutants" is defined in the
However, if certain conditions are met, the language of the endorsement makes it clear that coverage will be provided for certain limited pollution incidents. These conditions include: (1) the pollution incident must be neither expected nor intended from the standpoint of an insured; (2) the pollution incident must have first commenced during the policy period; (3) the pollution incident must be discovered by the insured within 7 days of commencement; and, (4) the pollution incident must be reported to Steadfast, in writing, within 30 days from the date of commencement. The endorsement also contains a catch-all condition, which states that any "claim" arising out of "bodily injury" or "property damage" on account of a "pollution incident" must be made upon the insured and reported to us in writing as soon as practicable, and in no event no later than 3 years after the policy has ended.
Parallel to the analysis above, Oracle is alleged to have participated in the operation of an open pit and tank battery on land immediately east of and adjacent to plaintiffs' properties on Section 15. These activities are alleged to have resulted in the spillage, seepage, and migration of contaminants such as NORM, produced water, drilling fluids, chlorides, hydrocarbons, and heavy metals into the groundwaters and soil underlying plaintiffs' land. When taken as true, these allegations clearly fall within the explicit exclusions of the Steadfast policy. Nevertheless, the record is also clear that Oracle did not comply with any of the conditions precedent to coverage. Plaintiffs allege the incident was not discovered by Oracle within 7 days, the pollution was not reported to Steadfast, in writing, within 30 days, and, the pollution was not reported within 3 years of the termination of the Steadfast policy. The policy expressly provides that if the listed conditions are not met, then Steadfast will have no duty to defend the insured. Therefore, we find that the Time Element Limited Pollution Liability Endorsement unambiguously excludes coverage for the allegations raised against Oracle in plaintiffs' petition for damages, and consequently, Steadfast is relieved of the duty to defend.
Steadfast's cross-motion for summary judgment was granted based solely on the "Other Insurance" provision, as amended by the Total Pollution Exclusion contained within their policy. The trial court agreed with Steadfast's argument that the insurance became "excess" once Bituminous began undertaking a defense for Oracle. Steadfast also asserted several other defenses and exclusions on appeal, including the known loss and loss in progress endorsement as well as other policy exclusions. However, because we find that the pollution exclusion within the Steadfast policy excludes coverage and results in Steadfast being dismissed from the suit on other grounds, these arguments are now moot and will not be discussed.
ACE issued a CGL insurance policy to Delphi Oil, Inc., covering from the period March 12, 2010, to March 12, 2011, in which Oracle was named as an additional insured. Pertinent provisions of the ACE policy provide:
However, ACE's policy also contains an Endorsement, which
(Emphasis in original.)
Like Steadfast, ACE's policy provides coverage for limited pollution incidents but only when certain conditions are met. The conditions precedent to coverage are as follows: (1) the discharge is both unexpected or unintended from the standpoint of the insured; (2) the discharge of pollutants must commence abruptly and instantaneously such that it can be said to have commenced entirely at a specific time and date within the policy period; (3) the discharge must have been known by the insured within 30 days of the commencement of the discharge of pollutants; and, (4) the discharge must have been reported to ACE within 60 days of the commencement of the discharge of pollutants. Importantly, the endorsement further states that if the conditions are not met, ACE has no
The record is also clear that Oracle met none of the conditions precedent for coverage. It is alleged that the discharge did not commence abruptly and instantaneously, that the discharge was not known by Oracle within 30 days of the commencement of discharge, and that Oracle did not report the incident to ACE within 60 days. Regardless, the policy expressly excludes coverage, however caused, for any damage arising out of or in any way related to pollutants at, from, or related to any waste site. As discussed extensively above, plaintiffs' allegations are, at a minimum, related to pollution and pollutants. And, it is alleged that these pollutants seeped and migrated from Oracle's closed pit and tank battery into the soil and groundwaters underlying plaintiffs' lands. These allegations inarguably fall within the exclusions in the ACE policy. As a result, we find coverage to be unambiguously excluded under the ACE policy and further find that ACE does not owe Oracle a duty to defend.
ACE also argues that coverage is unambiguously excluded if the insured had knowledge that the property damage had occurred prior to the policy period. Again, because we find the that the endorsement within the ACE policy unambiguously excludes coverage for pollution based allegations, this argument is now moot and need not be addressed.
As a final matter, we reject Oracle's contention that according to Doerr v. Mobil Oil Corp., 2000-0947 (La.12/19/00), 774 So.2d 119, the pollution exclusions found within the policies are inapplicable to the facts of this case. In Doerr, the seminal case addressing pollution exclusions, the Louisiana Supreme Court detoured from its previous stance that total pollution exclusions were intended to be read strictly to exclude coverage for all interactions with irritants or contaminants. Rather, the court narrowed its application of the exclusions and clarified that the purpose of the pollution exclusion was to exclude coverage for
The Doerr court set forth three factors to resolve the applicability of pollution exclusions: (1) whether the insured is a "polluter"
Throughout plaintiffs' petition for damages, all defendants, including Oracle, are alleged to be oil field operators and producers. Jurisprudence has established that oil field operators and producers are "polluters" under the Doerr test due to the fact that oil drilling and related activities present a clear and obvious risk of pollution. Grefer v. Travelers Ins. Co., 04-1428 (La.App.5 Cir.12/16/05), 919 So.2d 758. Next, the court in Grefer also noted that contaminants such as NORM, oil, sludge, grease, salt water, and other hazardous and/or toxic substances are "pollutants" within the meaning of the total pollution exclusion. Id. at 771. Plaintiffs also allege that their property was contaminated by other contaminants including mercury, lead-based compounds, chromium-based algicides, hydrochloric acid, caustic soda, and various corrosion inhibitors. Certainly, these substances qualify as chemicals, contaminants, irritants, or waste under the various exclusions. Finally, it is alleged that these substances seeped and migrated from Oracle's open pit and tank battery into the soil and groundwaters underlying plaintiffs' lands. This is the foundation of plaintiffs' lawsuit. Oracle never alleged any damages other than those related to the "discharge, dispersal, seepage, migration, release or escape" of pollutants. Plaintiffs' allegations make it clear that all three Doerr factors are met—(1) Oracle is a "polluter" within the policy; (2) the injury-causing substances, such as NORM, are "pollutants" within the policy; and, (3) there was a "discharge, dispersal, seepage, migration, release or escape" of pollutants. In any event, we find that this legacy lawsuit is the exact type of case the Doerr court found pollution exclusions to be applicable.
For the foregoing reasons, we find that the pollution exclusions within the Admiral, Steadfast, and ACE policies unambiguously exclude coverage, and thus the trial court erred in granting Oracle's motions for summary judgment on the issue of the insurers' duty to defend. Accordingly, the judgment of the trial court granting Oracle's motions for summary judgment is reversed, and summary judgment is hereby granted in favor of Admiral, Steadfast and ACE. All costs of this appeal are assessed to Oracle.
APPLICATION FOR REHEARING
Before BROWN, STEWART, CARAWAY, DREW and LOLLEY, JJ.
Rehearing denied.
