Opinion
CIVIL ACTION No. 97-2777 SECTION: E/3.
November 27, 2000.
ORDER AND REASONS
Third party defendants, Commercial Union Assurance Company PLC, Yorkshire Insurance Company, Ltd., Phoenix Assurance Public Limited Company, Skandia Marine Insurance Company, (U.K.) Ltd., Terra Nova Insurance Company, Limited, Threadneedle Insurance Company, Limited, and Assurances Generales de France Incendie Accidents Reassurances Transport, the Comprehensive Commercial General Liability insurers for Bill Laurence, Inc. (hereinafter "BLI's CGL underwriters), have filed a motion for entry of summary judgment in their favor on the claim of North Central Oil Corporation for indemnity and defense on the ground that the Comprehensive Commercial General Liability policy ("CGL") of BLI, under which North Central Oil Corporation ("North Central") is an additional named insured, excludes coverage for that claim. North Central opposes the motion.
Facts
North Central hired Bill Laurence, Inc. ("BLI") to operate its South Pass 24 field located in Plaquemines Parish, Louisiana. There was a Master Service Agreement in effect between North Central and BLI, which required BLI to name North Central as an additional insured on its CGL policy. Ryan Jenkins, an operator employed by BLI at the South Pass 24 W-1 production facility, claims that he was injured in October, 1996 when he was exposed to benzene. Jenkins alleges that his first exposure occurred when he was directed to wade through oil in the marsh in an attempt to locate the source of an oil leak. The second exposure occurred the following week when he alleges he was required by his employer to repair leaks by repairing hatch cover gaskets and equipment doors at the W-1 production facility without proper breathing equipment.
Tim Benton, a North Central supervisor, was present at the oil production facility in October, 1996, at the time the oil spill occurred and benzene was released at the production facility. Benton was there when Jenkins initially waded into the water where the spill had occurred. Testing by Oil Mop, a North Central contractor, revealed the presence of benzene in the oil. Testing by Oil Mop one week later revealed benzene levels in excess of sixty parts per million on the bottom deck of the production platform. BLI employees were sent to physicians for medical testing, which revealed the presence of benzene in some of the workers, including Ryan Jenkins. North Central's Benton and everyone in the field at the time were aware that workers were exposed to excessive levels of benzene.
Jenkins sued North Central and Bill Laurence, Inc. and various insurers, among others, alleging that he suffered exposure to benzene and other hazardous and toxic chemicals, when he was directed to wade into the water to find the source of a chemical leak. Tests revealed excessive levels of benzene in the area. He alleged that he was instructed to repair the North Central W-1 production facility without proper breathing equipment. He alleged that he suffered serious injury as a result of this exposure to benzene. His claim was settled, but North Central has asserted the instant third-party complaint against BLI's CGL insurers, seeking indemnity for its share of the settlement and all costs of defense.
It is undisputed that the policy in question contains an endorsement labeled "Seepage, Pollution, and Contamination", which excludes the following:
Liability for bodily injury and/or personal injury to or illness or death of any person . . . directly or indirectly caused by or arising out of seepage into or onto and/or pollution and/or contamination of air, land, water and/or any other property and/or person irrespective of the cause of the seepage and/or pollution and/or contamination, and whenever occurring.
Exhibit 1, Endorsement 6, paragraph 7 to BLI's CGL underwriters' motion for summary judgment.
The policy also contains a "buy-back" endorsement, which reinstates pollution coverage when the insured establishes that all four of the following conditions have been met:
A. The occurrence was accidental and was neither expected nor intended by the insured. An accident shall not be considered unintended or unexpected unless caused by some intervening event neither expected nor intended by the insured.
B. The occurrence can be identified as commencing at a specific time and date during the term of this policy.
C. The occurrence became known to the insured within 72 hours after its commencement and was reported to underwriters within 30 days thereafter.
D. The occurrence did not result from the insured's intentional and willful violation of any government statute, rule or regulation.
Exhibit 1, Endorsement 9, paragraphs A-D to BLI's CGL underwriters' motion for summary judgment.
"Occurrence" is defined in the policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Exhibit 1, Section IV, paragraph 9 to BLI's CGL underwriters' motion for summary judgment.
North Central had a supervisor on the scene at the time the benzene was originally released and at the time Jenkins was sent in to repair the hatch cover to prevent further leaks, which occurred in October, 1996. It was served with Jenkins' Petition for Damages and Jury Demand which was filed in the 25th Judicial District Court for the Parish of Plaquemines on October 10, 1997. North Central sent notice to BLI's CGL Underwriters on November 6, 1997.
Analysis
BLI's CGL insurers contend that the policy unambiguously excludes coverage to North Central, an additional named insured, for the plaintiff's claims, and thus they have no duty to defend and indemnify. The Underwriters also contend that North Central failed to notify it within 30 days of the occurrence, and thus failed to satisfy one of the conditions of the pollution buy-back endorsement.
The Louisiana Supreme Court has considered the application of a pollution exclusion endorsement in circumstances where the pollution occurred accidentally as contrasted with releases by active industrial polluters. In Ducote v. Koch Pipeline Co., 730 So.2d 432 (La. 1999), the court held that because the pollution exclusion clause nowhere states that it excludes coverage only for active industrial polluters or businesses which knowingly emit pollutants over extended periods of time, the exclusion applies to omit coverage "regardless whether the release was intentional or accidental, a one-time event or part of an on-going pattern of pollution." 730 So.2d at 437.
The Ducote court reiterated the general principles governing interpretations of insurance policies, observing:
An insurance policy is an agreement between the parties and should be interpreted by using the general rules of contract interpretation as set forth in the Louisiana Civil Code. The judicial responsibility in interpreting insurance contracts is to determine the parties' common intent. The parties' intent, as reflected by the words of the policy, determines the extent of coverage. However, when the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent. Such intent is to be determined in accordance with the general, ordinary, plain and popular meaning of the words used in the policy, unless the words have acquired a technical meaning. If the policy wording is clear and expresses the intent of the parties, the agreement must be enforced as written. Courts lack the authority to change or alter the terms of an insurance policy under the guise of interpretation.
An insurance policy should not be interpreted in an unreasonable or a strained manner so as to enlarge or to restrict its provisions beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion. Absent a conflict with statutory provisions or public policy, insurers, like other individuals, are entitled to limit their liability and to impose reasonable conditions upon the policy obligations they contractually assume. As this court has stated in Muse v. Metropolitan Life Ins. Co., 139 La. 605, 192 So. 72 (1939), Commercial Union Ins. Co. v. Advance Coating Co., 351 So.2d 1183, 1185 (La. 1977), and Reynolds v. Select Properties, Ltd., 634 So.2d at 1180, 1183 (La. 1994):
The rule of strict construction does not authorize a perversion of language, or the exercise of inventive powers for the purpose of creating an ambiguity where none exists, nor does it authorize the court to make a new contract for the parties or disregard the evidence as expressed, or to refine away terms of a contract expressed with sufficient clearness to convey the plain meaning of the parties.730 So.2d at 435-36 (citations omitted).
North Central suggests that there is a genuine dispute as to whether there was "widespread benzene contamination" of the air so as to trigger the pollution exclusion. The policy provision does not require "widespread" contamination, but only "seepage into or onto and/or pollution and/or contamination of air, land, water, . . . and/or any person irrespective of the cause of the seepage and/or pollution and/or contamination, and whenever occurring." There is no dispute that the leak was accidental, that testing for benzene, a contaminant harmful to humans, was done, and that benzene was detected in the plaintiff. The fact that the benzene leak was seepage or pollution or contamination is further evidenced by the fact that plaintiff Jenkins was sent to repair the leak.
Similarly, North Central contends that the Ducote decision is inapplicable because Jenkins' alleged exposures were not caused by any type of traditional environmental pollution. What Ducote makes plain is that the exclusion is not limited to traditional environmental pollution, but is to be given its ordinary meaning, and operates to exclude coverage "regardless whether the release was intentional or accidental, a one-time event or part of an ongoing pattern of pollution." 730 So.2d at 437. Considering the undisputed material facts in the record, the Court finds that the Seepage, Pollution, and Contamination provision is applicable to the plaintiff's claim, and thus, would operate to omit coverage to North Central.
The policy in question did contain a pollution buy-back endorsement. The Underwriters argue that North Central failed to provide proper notice within 30 days of the "occurrence" as required by the buy-back endorsement. Initially, North Central argued that the event which triggered the "notice" provision was the service of the complaint, not the seepage incident. The endorsement unambiguously requires notice within 30 days of an "occurrence", which is defined by the policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Policy, Exhibit 1 to motion, Section IV, paragraph 9 (emphasis added).
North Central contends that the policy contains instructions about an insured's duties in the event of an "occurrence", providing that the insured "must see to it that we are notified as soon as practicable of an `occurrence' or an offense which may result in a claim." Policy, Exhibit 1 to motion, Section IV, paragraph 2(a). It argues that the record does not support the Underwriters' position that the events which occurred in October, 1996 constituted an "occurrence" under the policy because it could not have known that plaintiff Jenkins would claim to be injured. The facts in the record do not support this position.
North Central had a supervisor on site at the time of the initial benzene release and one week later when Jenkins was instructed to repair the leak. The workers in the vicinity were tested for benzene exposure, and two workers, including Jenkins, tested positive. A meeting was held during which the workers were told that benzene was detected in two of them. North Central was aware of the benzene leak, was aware that testing for benzene was performed, and was aware that Jenkins and one other worker tested positive for benzene exposure. The rules of interpretation of insurance policies require a finding that these events were an "occurrence" which constituted "an event which may result in a claim." The policy did not require a claim to be asserted, but only an event which may result in a claim. The actions undertaken at the time, including the testing for benzene and the resulting finding that plaintiff Jenkins tested positive for benzene, without any other cause for the result, such as the anemia in the other worker who tested positive, were certainly sufficient to meet the requirement that the event may result in a claim.
Even if the 30 day period for notifying the insurer was triggered in October, 1996, at the time of the seepage and/or pollution and the plaintiff's positive test for benzene, North Central argues that the Underwriters suffered no prejudice and that the 30-day provision should not constrain it, since it was only an additional named insured and not a direct party to an insurance contract who had direct knowledge of a claim. North Central's logic is unavailing. North Central, a sophisticated business entity, required that it be named an additional named insured and it had direct knowledge of the incident. There is no provision in the policy, nor any policy reason, which would dictate that it be treated differently that BLI, the direct insured.
The Fifth Circuit decisions of Matador Petroleum Corporation v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653 (5th Cir. 1999) andCertain Underwriters at Lloyd's London v. C.A. Turner Construction Co. Inc., 112 F.3d 184 (5th Cir. 1997) invalidate North Central's argument that the 30 day notice provision is inapplicable if the insurer cannot show prejudice. In Matador, the court held that notice 38 days after the occurrence, when notice was required 30 days after the occurrence, was insufficient to trigger coverage of a pollution event, noting that whether the insurer suffered prejudice as a result of the insured's late notice was irrelevant. 174 F.3d at 660. Likewise, the court in C.A. Turner Construction Co. had no trouble holding the pollution buy-back provision was unambiguous and required compliance with its special notice provision in order to reinstate pollution coverage. 112 F.3d at 188-89. Since the policies and endorsements make no differentiation between named insureds and additional named insureds in this context, rules of policy interpretation require that they be treated equally. North Central's suggestion that it be treated other than as an insured in the policy is not persuasive, as it is certainly seeking coverage as an insured.
Finally, North Central argues that the duty to defend is broader then the duty to indemnify and that the insurers should have provided a defense at the time the suit was filed. As recognized by the court in Matheny v. Ludwig, 742 So.2d 1029, 1034 (La.App. 2d Cir. 1999):
Generally, an insurer's duty to defend suits is broader than its liability for damage claims. The duty to defend is determined by the allegations of the plaintiff's petition, with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage. [Citations omitted].
Thus, if assuming all the allegations of the plaintiff's petition to be true, there would be both (1) coverage under the policy and (2) liability to the plaintiff, the insurer must defend the suit regardless of its outcome. Additionally, the allegations of the petition are liberally interpreted in determining whether they set forth grounds which bring the claim within the scope of the insurer's duty to defend the suit brought against its insured. [Citations omitted]. The duty to defend arises whenever the pleadings against the insured disclose even a possibility of liability under the policy. [citations omitted].742 So.2d at 1034-35.
A plain reading of the plaintiff's petition, along with the policy and its endorsements, as well as the undisputed facts, demonstrates that North Central is not entitled to indemnity or defense under the policy because it failed to provide timely notice. While Ducote had not yet been decided at the time the original suit was filed, the jurisprudence preceding it would not have supported a contrary conclusion. The injuries which plaintiff Jenkins alleges he sustained were as the result of the release of benzene and oil, known consequences of oil field operations. Had North Central complied with the 30 day notice provision, it would have been entitled to indemnity and defense. It did not and there is no convincing support for a contrary position, even prior to Ducote. As observed by the court in Crabtree v. Hayes-Dockside. Inc., 612 So.2d 249, 251 (La.App. 4th Cir. 1992), "[a]lthough the duty of an insurer to defend is broader than the question of liability, when an exclusion is applicable as a matter of law (i.e., no coverage), there is no duty to defend." Prior to the time Jenkins filed suit, the Fifth Circuit had decided C.A. Turner Construction Co., Inc., 112 F.3d at 184, (decided May 8, 1997), exhibiting no shyness in strictly enforcing the terms of pollution exclusion and pollution buyback endorsements as written.
Plaintiff filed his original petition on September 7, 1997.Ducote was decided on Jan. 20, 1999.
The court in Crabtree held that the escape of PVC dust during bagging operations is a factual situation which falls within the pollution exclusion, which was applicable and thus, the insurer had no duty to defend because there was no coverage. 612 So.2d at 252-53.
For the above and foregoing reasons, the Court finds that the seepage, pollution and contamination endorsement applies to Jenkins' claim, that the pollution buyback endorsement would have reinstated coverage had North Central provided notice within 30 days of October, 1996, the date of the "occurrence" which may have resulted in a claim, but that North Central failed to do so. The policy thereafter affords no coverage and the Underwriters have no duty to indemnify or defend North Central.
Accordingly,
IT IS ORDERED that the motion of third party defendants, Commercial Union Assurance Company PLC, Yorkshire Insurance Company, Ltd., Phoenix Assurance Public Limited Company, Skandia Marine Insurance Company, (U.K.) Ltd., Terra Nova Insurance Company, Limited, Threadneedle Insurance Company, Limited, and Assurances Generales de France Incendie Accidents Reassurances Transport, the Comprehensive Commercial General Liability insurers for Bill Laurence, Inc., for summary judgment on the claims of North Central Oil, Inc., be and is hereby GRANTED.