76 F.3d 89 (5th Cir. 1996), 94-20758, Mustang Tractor & Equipment Co. v. Liberty Mut. Ins. Co.

Docket Nº:94-20758.
Citation:76 F.3d 89
Party Name:MUSTANG TRACTOR & EQUIPMENT COMPANY and Eureka Investment Company, Plaintiffs-Appellants, v. LIBERTY MUTUAL INSURANCE COMPANY, et al., Defendants, First State Insurance Company, Defendant-Appellee.
Case Date:February 22, 1996
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 89

76 F.3d 89 (5th Cir. 1996)


Company, Plaintiffs-Appellants,



First State Insurance Company, Defendant-Appellee.

No. 94-20758.

United States Court of Appeals, Fifth Circuit

February 22, 1996

Page 90

Randall A. Pulman, Clayton C. Cannon, Stumpf & Falgout, San Antonio, TX, for appellants.

John D. Skruge, Chicago, IL, Ralph H. Duggins, Ft. Worth, TX, for amicus Union Pacific Railroad Co., et al.

Robert L. Carter, Washington, DC, for amicus Texas Chemical Council.

J. Preston Wrotenbury, Hirsch, Robinson, Sheiness & Glover, PC, Houston, TX, David Pollack, Stephanie Ebers, Siff, Rosen, New York City, for appellee.

Tanja E. Hens, Washington, DC, for amicus Ins. Environm. Litigat. Ass'n.

Thomas Brocato, Gold, Weems, Bruser, Sues & Rundeil, Alexandria, LA, for amicus Aetna Casualty & Surety Co.

Thomas W. Brunner, Wiley, Rein & Fielding, Washington, DC, for amicus curiae.

Edward Zampino, Peter E. Mueller, Harwood Lloyd, Hackensack, NJ, for amicus curiae Aetna Casualty & Surety Co.

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

Before DAVIS and PARKER, Circuit Judges, and BUNTON, 1 District Judge.

W. EUGENE DAVIS, Circuit Judge:

Mustang Tractor & Equipment Company and its wholly-owned subsidiary Eureka Investment Company (hereinafter collectively referred to as Mustang) appeal from the district court's order denying their motion and granting their insurer's motion for summary judgment. Appellants contend the district court erred in sustaining their insurer's coverage defense. We affirm.


In 1973 Mustang purchased an eighteen and a half acre tract of land from Olin Corporation (Olin) for $300,000. Olin had operated a pesticide blending facility on the property and, in the process, had contaminated the land with hazardous chemicals. Since its discovery in 1981, this contamination has spawned a number of lawsuits, only two of which are relevant here.

After being required by the Texas Water Commission to clean up contamination in ditches surrounding the property, Olin sued Mustang in state court for contribution. Olin alleged that, by demolishing buildings and grading the property, Mustang had released additional pollutants into the ditches. Although the district court granted Mustang's motion for summary judgment, the appellate court reversed and remanded the case for trial. It found material fact issues with respect to whether Mustang's activities had contributed to the pollution. Mustang then settled with Olin by agreeing to pay Olin $600,000 toward the remediation costs.

The second action followed in October of 1990 when Mustang sued its primary insurer, Liberty Mutual Insurance Company, and its excess carriers, among them First State Insurance Company (First State). Mustang sought to recover under its Comprehensive General Liability (CGL) Policies the sum it had expended in the Olin settlement and the costs of defending several other suits. Mustang and the various insurers filed cross-motions for summary judgment, and in October, 1993, the district court issued a Memorandum Ruling in which it relied on a number of theories to grant the various insurers' motions for summary judgment. On appeal Mustang contends the district court erred in holding that appellee First State's CGL policy does not cover the portion of the clean-up costs Mustang agreed to bear in the Olin settlement. 2 Evaluating this assertion requires that we examine the alleged discharges Olin asserted against Eureka in the state court litigation.

Olin alleged that when Mustang took over the property, "all the former Olin manufacturing buildings, a labelled Toxaphene tank, labelled Xylene tanks, some equipment used to process the sulphur and pesticide products

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and various other items that had been associated with Olin's former processing plant" were intact. In 1977 Mustang hired Olshan Demolishing Company to raze the structures, extract concrete foundations to at least three feet below the ground, and remove all trash from the site. Olshan agreed to perform the work for $48,000 and to complete the job within five months of receiving its demolition permits from the City of Houston. Olin's complaint alleges that outside contractors also "remove[d] all ... tanks; strip[ped] vegetation; [dug] pits and trenches; install[ed] underground tanks and pipes; bulldoze[d] mounds of dirt; pave[d] some areas; cap[ped] others with limestone and construct[ed] a new building" and that "Mustang directed its own employees to perform portions of this demolition, bulldozing, removal of tanks, burying materials on Site, and general construction work." Finally, the summary judgment record reflects that Mustang employees used a D-6 bulldozer and a road maintainer to grade the land. Olin contended that these activities caused contamination to enter the ditches.

With this factual predicate from the summary judgment record, we turn to the coverage issue this case presents.


The CGL policy at issue precludes coverage for:

[A]ny liability of any insured arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes acids, alkalis, toxic chemicals, solids, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water unless such discharge, dispersal, release or escape is sudden and accidental. (emphasis added).

Mustang argues that this provision is ambiguous because the word "sudden" can mean either "unexpected" or "something that occurs quickly, rapidly or abruptly." According to Mustang, extrinsic evidence such as the circumstances surrounding the clause's adoption is admissible to resolve the ambiguity. First State, on the other hand, contends that appellant attempts to create an ambiguity where none exists; it argues that the term "sudden" is commonly understood to mean quickly or rapidly.

The parties agree that Texas law governs this case. The Texas Supreme Court, however, has not addressed the meaning of the clause at issue here, even though Texas appellate courts have discussed the question without reaching any conclusions. 3 Texas does, of course, have rules of contractual interpretation, and we apply those in resolving this issue. See Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex.1994). Texas law requires that courts strive to effectuate the intentions of parties as they are expressed in a contract. National Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995). Courts must read all provisions of an agreement together, interpreting the agreement so as to give each provision its intended effect. Forbau, 876 S.W.2d at 133. We must be...

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