529 F.3d 642 (5th Cir. 2008), 07-20354, Noble Energy, Inc. v. Bituminous Cas. Co.

Docket Nº:07-20354.
Citation:529 F.3d 642
Party Name:NOBLE ENERGY, INC.; St. Paul Surplus Lines Insurance Company; Associated Electrical & Gas Insurance Services, Ltd., Plaintiffs-Appellants, v. BITUMINOUS CASUALTY COMPANY, Defendant-Appellee.
Case Date:June 02, 2008
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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529 F.3d 642 (5th Cir. 2008)

NOBLE ENERGY, INC.; St. Paul Surplus Lines Insurance Company; Associated Electrical & Gas Insurance Services, Ltd., Plaintiffs-Appellants,

v.

BITUMINOUS CASUALTY COMPANY, Defendant-Appellee.

No. 07-20354.

United States Court of Appeals, Fifth Circuit.

June 2, 2008

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Marcus R. Tucker (argued), Robert H. Etnyre, Jr. , Royston, Rayzor, Vickery & Williams, Houston, TX, for Noble Energy, Inc. and St. Paul Surplus Lines Ins. Co.

Randy G. Donato , Donato, Minx & Brown, Houston, TX, for Associated Elec. & Gas Ins. Services, Ltd.

Thomas Butler Alleman (argued), Winstead PC, Dallas, TX, for Defendant-Appellee.

Appeals from the United States District Court for the Southern District of Texas.

Before KING , WIENER , and ELROD , Circuit Judges.

WIENER , Circuit Judge:

This insurance coverage dispute concerns whether, pursuant to a general liability insurance policy issued by Defendant-Appellee Bituminous Casualty Company (“Bituminous" ) to T&L Lease Services, Inc. (“T&L Lease" ) (the “Bituminous policy" ),

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Bituminous had a duty to defend and owes indemnity to one of the Plaintiffs-Appellants, Noble Energy, Inc. (“Noble" ), in connection with the underlying lawsuit arising from an explosion at an oilfield recycling facility. Noble and its insurers, Plaintiffs-Appellants St. Paul Surplus Lines Insurance Company (“St. Paul" ) and Associated Electrical & Gas Insurance Services (“Aegis" ), appeal the district court's grant of summary judgment in favor of Bituminous. Plaintiffs-Appellants urge that the court erred when it held that (1) Noble was not an “additional insured" under the Bituminous policy, and (2) even if, arguendo, Noble was an additional insured, the policy's pollution exclusion negates coverage of Noble's alleged liabilities. Convinced that the district court properly held that the pollution exclusion applies to the claims asserted against Noble in the underlying lawsuit, we affirm its ruling that Bituminous does not have a duty to defend or indemnify Noble, making resolution of the question whether Noble was an additional insured unnecessary.

I. FACTS AND PROCEEDINGS

Noble is engaged in the exploration for and production of petroleum. St. Paul issued commercial general liability and automobile insurance policies to Noble, and Aegis also issued liability insurance to Noble, covering the time when the incident described below occurred.

In August 2000, Noble and T&L Lease entered into a Master Service Agreement (the “Noble/T&L Agreement" ), pursuant to which T&L Lease was retained by Noble to collect and dispose of Basic Sediment and Water (“BS&W" ) from Noble's storage tanks, which are located near two petroleum wells. The Noble/T&L Agreement required T&L Lease to provide additional insurance coverage to Noble under T&L Lease's general liability and auto policies. Soon after entering into the Noble/T&L Agreement, T&L Lease subcontracted its obligations to an affiliated corporation, T&L Environmental Services, Inc. (“T&L Environmental" ). Together, T&L Lease and T&L Environmental purchased from Bituminous a commercial general liability policy (the aforementioned “Bituminous policy" ), a commercial auto policy, and a commercial umbrella policy. The term of each policy was from April 1, 2002 to April 1, 2003.

On January 13, 2003, T&L Environmental dispatched two trucks to pick up BS&W from Noble's storage tanks and haul the BS&W to a disposal facility off premises. After collecting the BS&W from the tanks and loading it into the two trucks, the T&L Environmental workers drove to a facility owned and operated by BLSR Operating, Ltd. (“BLSR" ) in Rosharon, Texas. When the T&L Environmental drivers arrived at the BLSR facility, each backed his truck onto a mud disposal and washout pad, then got out of the truck to complete paperwork, leaving the diesel engine running. While the BLSR employees were unloading the BS&W, the trucks' engines began to race. One of the engines exploded, causing a fire that engulfed both trucks. A T&L Environmental employee and two BLSR employees were killed, and several other workers were injured. It was later determined that combustible vapors from the BS&W, which contained gas condensate, had caused the diesel engines to race, leading to the explosion and fire.

Some surviving employees and the estates of the deceased employees (the “Plaintiffs" ) filed suits against T&L Environmental, T&L Lease, Noble, and several other companies (the “underlying lawsuit" ). Thereafter, Noble's insurance broker, Marsh USA Inc., sent a demand letter to Bituminous, asserting that Bituminous was obligated to defend and indemnify Noble

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in the underlying lawsuit because Noble was an additional insured under the Bituminous policy. Bituminous rejected this demand.

In April 2004, Noble entered into a settlement agreement with the Plaintiffs in the underlying lawsuit. Pursuant to the agreement, St. Paul and Aegis paid approximately $14,400,000 to the Plaintiffs on Noble's behalf. In a separate transaction, Bituminous paid approximately $5,650,000 to settle the claims asserted directly against its insureds, T&L Lease and T&L Environmental.

In June 2005, Noble, St. Paul, Aegis, and Bituminous arbitrated the issue whether Noble had released its contractual indemnity claim against Bituminous when it settled with the Plaintiffs. The arbitrator concluded that Noble had properly preserved that claim.

Several months later, Noble, St. Paul, and Aegis (collectively, the “Appellants" ) filed this breach-of-contract and declaratory-judgment action against Bituminous in Texas state court. After Bituminous removed the suit to federal court, both sides filed summary judgment motions. The Appellants insisted in their first motion that Bituminous had a duty to defend Noble in the underlying lawsuit; in their second motion, they asserted that Bituminous has a duty to indemnify them for monies paid to the Plaintiffs pursuant to Noble's settlement agreement, up...

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