Bituminous Cas. Corp. v. Vacuum Tanks, Inc., 94-20789

Decision Date28 February 1996
Docket NumberNo. 94-20789,94-20789
Citation75 F.3d 1048
PartiesBITUMINOUS CASUALTY CORPORATION, Plaintiff-Appellant, Cross-Appellee, v. VACUUM TANKS, INC., Defendant-Appellee, Cross-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Beverly B. Godbey, Joanne Early, Gardere & Wynne, Dallas, TX, for Appellant.

Norman Riedmueller, Houston, TX, Ellen A. Yarrell, Houston, TX, for Appellee.

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

Before REAVLEY, HIGGINBOTHAM and BARKSDALE, Circuit Judges.

REAVLEY, Circuit Judge:

In this lost policy case, Bituminous Casualty Corporation ("Bituminous") appeals a judgment entered in favor of its insured, Vacuum Tanks, Inc. ("VTI"). We modify the judgment so as to deny the award of attorney's fees to VTI, and otherwise affirm.

BACKGROUND

VTI is in the business of transporting liquid waste materials from industrial sites to disposal sites. It became the subject of several pollution damage and cleanup claims relating to dumping activities from 1959 through 1965. These claims (the "underlying claims"), were asserted in three separate lawsuits. VTI incurred expenses in defending and settling these claims.

Bituminous, VTI's insurer, initiated this Texas law diversity suit, seeking a declaratory judgment that it had no duty to defend or insure against the underlying claims. VTI counterclaimed, seeking a declaratory judgment that Bituminous had a duty to defend, recovery of its costs in defending the underlying claims, and punitive damages for bad faith denial of coverage. Neither party could find a copy of the annual policies, although Bituminous found a copy of a "specimen policy" for this period.

In 1991 the case was tried to the court and it ruled in favor of VTI on the coverage issue, although it found no breach of the duty of good faith and fair dealing. We reversed and remanded for further proceedings in a prior appeal. Bituminous Casualty Corp. v. Vacuum Tanks, Inc., 975 F.2d 1130 (5th Cir.1992). We found that "VTI produced sufficient evidence to prove that insurance policies had existed during the relevant time period," id. at 1131, but that there was insufficient proof of the actual terms of the policy, or whether the waste disposal claims were covered by the policies, id. at 1132-33. We also addressed attorney's fees, as discussed further below.

After remand the district court conducted further trial proceedings. The court again found that Bituminous had issued comprehensive general liability (CGL) policies to VTI which covered the underlying claims. The court awarded VTI certain costs incurred in defending the underlying claims, prejudgment interest and attorney's fees.

In the second appeal, Bituminous does not dispute the conclusion of our prior panel that it had issued policies during the period in question, but again argues that VTI failed to carry its burden of proving "the terms of the insurance contract between the parties in order to establish coverage under the policy." Id. at 1132.

DISCUSSION
A. Proof of Terms of Coverage

As in the first trial, the district court concluded that the claims asserted in the underlying actions were covered by the Bituminous policies. The court found that the policies actually issued to VTI had the same terms as those in the specimen policy found in Bituminous' VTI file. This finding by the district court is a finding of fact, which we will not disturb unless clearly erroneous. Fiberlok, Inc. v. LMS Enters., Inc., 976 F.2d 958, 962 (5th Cir.1992).

The district court did not clearly err in finding that the terms of the policies matched those of the specimen policy. VTI's evidence in support of this finding included the following. VTI again offered the specimen policy, which was written for use in Texas. Unlike at the first trial, VTI offered the policy for all purposes, rather than limiting its offer to the issue of good faith. See Bituminous, 975 F.2d at 1132-33.

An assistant director from the Texas Department of Insurance, Charles DuPertuis, testified that the Texas Board of Insurance mandated particular forms for insurance policies for the period in question, and that as a licensed insurer Bituminous was required to conform to the mandatory forms. The Board issued bulletins setting out the required forms. DuPertuis further testified that there were two types of comprehensive policies allowed: a comprehensive general auto liability policy and a comprehensive general liability policy. The only difference between the two concerns automobile coverage not relevant here. DuPertuis testified that the specimen policy produced from Bituminous's files conformed exactly to the mandatory requirements of the bulletins, which were also introduced at the second trial. He testified that a licensed insurer could deviate from the mandatory terms of the approved forms and endorsements only by obtaining Board approval of its own endorsement for a particular named insured.

VTI's independent insurance agent told Bituminous that the policies issued to VTI "were the standard comprehensive general policies with the normal standard endorsements." Kemp Martin, an agent who worked for the successor to the agency employing VTI's original agent, testified to the same effect. Martin also testified that none of the standard approved endorsements at the time, such as endorsements for dog liability and professional services, would have been applicable to this case. VTI offered as exhibits what it claimed were all the approved endorsements for this period. They deal with coverage issues not relevant here such as endorsements for engineers, architects, etc. None of the endorsements would preclude coverage here. A Bituminous internal memorandum concedes that during the period in question policies "had no pollution exclusion wordage."

Evidence was offered that Bituminous knew the nature of VTI's business and that all operations of the insured were covered by the policies. VTI produced Railroad Commission records and other records showing that VTI had comprehensive general liability insurance during the period in question. Jacque DeCoux, the president of VTI and a lawyer, testified that in his opinion, based on his knowledge of the company and the documents he had reviewed, VTI had comprehensive liability coverage with only one endorsement--a $250 deductible per claim against property damage.

We noted in the prior panel opinion that in lost policy cases the terms of the policy can be established by secondary evidence. Bituminous, 975 F.2d at 1132. Based on the evidence presented, the district court did not clearly err in concluding that during the time period in issue Texas was a "standard policy" state, and that all CGL policies were required to contain the terms and provisions in the state bulletins introduced by VTI, as mirrored by the specimen policy.

Bituminous complains that the district court erred in allowing the testimony of Mr. DeCoux because he was not an insurance expert and for other reasons. DeCoux had served as the president of VTI for many years. To the extent that he testified that VTI maintained continuous liability coverage with a certain deductible, his testimony was based on his knowledge of the company and his review of relevant records. To the extent that he testified that the terms of the missing policies matched those of the specimen policy, his testimony was cumulative of other evidence supporting the same conclusion. "Under [FED.R.EVID.] 103(a), appellate courts should reverse on the basis of erroneous evidentiary rulings only if a party's substantial rights are affected. Moreover, the party asserting error based on erroneous rulings bears the burden of proving that the error was harmful." Carroll v. Morgan, 17 F.3d 787, 790 (5th Cir.1994) (citation omitted). Bituminous fails to carry its burden of showing that the testimony affected its substantial rights, even if it was erroneously admitted.

B. Coverage Under the Specimen Policy

Bituminous argues in the alternative that even if the terms of the policies issued to VTI matched those found in the specimen policy, Bituminous had no duty to defend.

The specimen policy covers "all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease ... sustained by any person and caused by accident." It also covers "all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident."

1. Injury to Property

Bituminous first argues that the underlying claims do not constitute "injury to or destruction of property." In particular, it argues that the "CERCLA claims" do not fall within the policy coverage for property damage.

Under Texas law, the duty to defend is determined by the terms of the policy and the allegations of the underlying suit without regard to their truth of falsity. Gulf Chem. & Metallurgical Corp. v. Associated Metals & Minerals Corp., 1 F.3d 365, 369 (5th Cir.1993). The duty to defend "is owed by each and every insurer whose policy is potentially implicated" and "remains absolute until the insurer proves that its policy covers no remaining claims." Id. at 372. In construing the allegations of the underlying suit, "courts liberally interpret the meaning of those allegations in the insured's favor." Pro-Tech Coatings, Inc. v. Union Standard Ins. Co., 897 S.W.2d 885, 887 (Tex.App.--Dallas 1995, no writ). "Any doubt as to whether the complaint states a covered cause of action is resolved in the insured's favor." Cullen/Frost Bank of Dallas v. Commonwealth Lloyd's Ins. Co., 852 S.W.2d 252, 255 (Tex.App.--Dallas 1993), writ denied, 889 S.W.2d 266 (Tex.1994). Likewise, in construing the language of the policy, "when the language chosen is susceptible of more than one construction, such policies should be construed strictly...

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