566 F.3d 452 (5th Cir. 2009), 08-50652, Nautilus Ins. Co. v. Country Oaks Apartments Ltd.
|Citation:||566 F.3d 452|
|Opinion Judge:||HAYNES, Circuit Judge:|
|Party Name:||NAUTILUS INSURANCE COMPANY, Plaintiff-Appellee, v. COUNTRY OAKS APARTMENTS LTD., Defendant-Appellant.|
|Attorney:||John C. Tollefson (argued), Stephen A. Melendi, Tollefson, Bradley, Ball & Mitchell, Dallas, TX, for Nautilus Ins. Co. Jeffrey E. Dahl (argued), Harkins, Latimer & Dahl, San Antonio, TX, for Country oaks Apartments, Ltd. Alex M. Miller (argued), Watts Law Firm, San Antonio, TX, for Kaia Alvarado....|
|Judge Panel:||Before GARWOOD, OWEN and HAYNES, Circuit Judges.|
|Case Date:||April 22, 2009|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
Appeal from the United States District Court for the Western District of Texas.
Once again we address the scope of the absolute pollution exclusion in an insurance policy under Texas law. Concluding that the exclusion unambiguously applies to exclude liability coverage for injuries caused to Kaia Alvarado by the pollutant carbon monoxide seeping, discharging, releasing and dispersing into an apartment owned by Appellant and leased by Kaia's mother, we AFFIRM the district court's grant of summary judgment.
Appellant Country Oaks Apartments Ltd. (Country Oaks) purchased a Commercial General Liability (CGL) policy from Appellee Nautilus Insurance Company (Nautilus). Some time during the policy period, some workers accidentally blocked the vent to the furnace in several Country Oaks apartments, including the one in which Kelly Schenks, who was pregnant with Kaia, lived. As a result, carbon monoxide that otherwise would have been dispersed into the outside atmosphere was dispersed into the apartment. Tragically, young Kaia was born with a number of difficulties that continue to this day, including almost daily seizures; her family attributes these conditions to her in utero exposure to the carbon monoxide.1
Schenks sued Country Oaks in a Texas state court on behalf of Kaia, and Country Oaks tendered the defense of that case to Nautilus. Nautilus, in turn, refused to defend, contending that it owed no duty to defend or indemnify due to its policy's absolute pollution exclusion. That exclusion says that coverage does not apply to:
(1) " Bodily injury" or " property damage" which would not have occurred in whole or in part but for the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of " pollutants" at any time.
The policy defines the term " pollutant" as " any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes material to be recycled, reconditioned or reclaimed."
The exclusion quoted above was added to the policy by way of an amendatory endorsement. The original text of the policy contained a pollution exclusion clause that was amended by the above-quoted endorsement. The pollution exclusion clause in the original text of the policy included the following language: " However, this subparagraph [the original exclusion] does not apply to: (i) bodily injury if sustained within a building and caused by smoke, fumes, vapor or soot from equipment used to heat that building; ...."
Nautilus then filed the instant declaratory judgment action to determine its duties. Nautilus moved for summary judgment on the duty to defend and indemnify. Country Oaks cross-moved on its counterclaim seeking a defense and associated fees and costs. The district court granted summary judgment in full to Nautilus, and denied summary judgment to Country Oaks which timely appealed. Though not a party to the declaratory judgment action, Kaia's family filed an amicus brief before the district court, as well as this court, and participated in oral argument in this court.
II. Standard of Review
This court reviews the district court's grant of summary judgment de novo, applying the same standards as the district court. Adams v. Travelers Indem. Co., 465 F.3d 156, 163 (5th Cir.2006). Summary judgment is appropriate " if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c).
A. Rules of Insurance Contract Construction
Under Texas law, which applies to this diversity case,
[t]he eight-corners rule provides that when an insured is sued by a third party, the liability insurer is to determine its duty to defend solely from terms of the policy and the pleadings of the third-party claimant. Resort to evidence outside the four corners of these two documents is generally prohibited.
GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 307 (Tex.2006). The duty to defend does not depend upon the truth or falsity of the allegations: " A plaintiff's factual allegations that potentially support a covered claim is all that is needed to invoke the insurer's duty to defend[.]" Id. at 310 (citing Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.1965)).
In this case, Nautilus is not...
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