95-1574 La.App. 3 Cir. 2/19/97, Citgo Petroleum Corp. v. Yeargin, Inc.

• Decision Date: 19 February 1997
• Citation: 690 So.2d 154
• Parties: 95-1574 La.App. 3 Cir
• Court: Court of Appeal of Louisiana — District of US

Page 154

690 So.2d 154

95-1574 La.App. 3 Cir. 2/19/97

CITGO PETROLEUM CORPORATION, Plaintiff--Appellee, v. YEARGIN, INC. (formerly known as Project Construction Corporation) and Continental Casualty Company Defendants--Appellants.

No. 95-1574.

Court of Appeal of Louisiana Third Circuit.

Feb. 19, 1997.

Order Clarifying Decision on

Limited Grant of Rehearing

April 9, 1997.

William M. Nolen, William Brock Swift, Robert Joseph Tete, Lake Charles, for Cito Petroleum Corporation.

Edmund M. Kneisel, Atlanta, GA, Keith Michael Borne, Lafayette, John A. Stewart, Jr., New Orleans, for Yeargin, Inc, etc.

Christopher M. Trahan, Lake Charles, for St. Paul Fire and Marine Insurance Company.

Before WOODARD, PETERS and SULLIVAN, JJ.

[95-1574 La.App. 3 Cir. 1] SULLIVAN, Judge.

Defendants-appellants, Yeargin, Incorporated and Continental Casualty Insurance Company (CNA), Yeargin's insurer, suspensively appeal a $4,280,987.73 judgment rendered in favor of Citgo Petroleum Corporation (Citgo). After trial on the merits, the trial court determined that a CNA policy issued to Project Construction Company (PCC), now known as Yeargin, provided coverage to Citgo, as an "additional insured," for damages which Citgo and its insurers paid in settlement of thirty-one personal injury claims and one wrongful death claim.

FACTS

The personal injury claims arose from a May 20, 1987 fire at Citgo's Lake Charles, Louisiana refinery near its Coker I unit. At the time of the fire, PCC was [95-1574 La.App. 3 Cir. 2] conducting turnaround or maintenance work in the Coker I unit pursuant to a January 1987 contract entered into between Citgo and PCC. The turnaround contract required PCC to name Citgo as an "additional insured" on a policy of comprehensive general liability insurance. PCC did so on the policy it obtained from CNA and issued a certificate of insurance to Citgo evidencing this coverage. The CNA policy provided PCC with five million dollars of comprehensive general liability coverage. PCC's retained liability or deductible under the policy was likewise five million dollars.

The fire was caused by gasoline and hydrocarbons which leaked from a missing valve in a "slop line." Citgo operations personnel sent excess gasoline, which had built up in a debutanizer tower, to the slop collection line. Because the turnaround operations were taking place, part of the slop collection system was blinded off, which caused the gasoline to back-up in the system and eventually leak through the missing valve and onto the ground in the vicinity of the PCC turnaround work. The gasoline ignited.

Most of the injured individuals and the one dead man were PCC employees. Two of the injured workers were employed by the Lake Charles Electric Company. Many of the injured workers and the dead worker's family filed claims against Citgo and its three insurers, the Insurance Company of North America (INA), U.S. Fire Insurance Company (U.S.Fire), and CIGNA.

Citgo and its insurers developed a strategy aimed at settling all of the claims before any went to trial. In settlement of the thirty-two claims, Citgo and its insurers paid a total of $6,925,665.31. Citgo paid the first three million dollars, the amount of its retained liability under its primary three million dollar policy with INA. The next two million dollars in settlement was paid by U.S. Fire pursuant to its excess policy issued to Citgo. The final $1,925,665.31 was paid by CIGNA under its five million dollar excess umbrella policy issued to Citgo.

[95-1574 La.App. 3 Cir. 3] PROCEDURAL HISTORY

On August 25, 1988, Citgo filed the present action against Yeargin and CNA seeking indemnity from Yeargin under the provisions of the turnaround contract and coverage as an "additional insured" under the CNA policy. In its petition, Citgo asserted that the contract between PCC and Citgo obligated PCC to indemnify Citgo and provide it with a defense of the personal injury claims. Citgo also asserted that the CNA policy covered Citgo and that CNA also agreed to defend and hold harmless Citgo from the claims of the personal injury plaintiffs. Additionally, Citgo maintained that CNA acted arbitrarily and capriciously in denying coverage to Citgo and refusing to defend Citgo.

On August 9, 1991, Citgo filed a motion for partial summary judgment in which it asserted the CNA policy covered Citgo for its own negligence and CNA was therefore obligated to defend Citgo. It also sought judgment decreeing that the CNA coverage was primary for the first three million dollars and provided coverage thereafter on a fifty/fifty percent basis with the U.S. Fire excess coverage. Yeargin and CNA responded with a motion for summary judgment seeking to have the CNA coverage of Citgo decreed as excess to the ten million dollars in coverage available to Citgo through INA, U.S. Fire and CIGNA.

On September 1, 1992, the trial court granted Citgo's motion as prayed for and denied the motion filed by Yeargin and CNA. Yeargin and CNA appealed to this court from the granting of summary judgment and sought a supervisory writ of review from the denial of their own motion for summary judgment.

On August 27, 1993, this court reversed the partial summary judgment rendered in favor of Citgo, finding that "genuine issues remain to be resolved as to material facts in this case." For the same reason, this court determined that the trial court correctly [95-1574 La.App. 3 Cir. 4] denied the motion for summary judgment filed by Yeargin and CNA. Citgo then sought review of this court's ruling with the Supreme Court of Louisiana.

On October 1, 1993, Yeargin and CNA filed a third party demand against St. Paul Fire and Marine Insurance Company (St.Paul), which provided primary and excess insurance coverage to the Lake Charles Electric Company. Yeargin and CNA asserted that, because Citgo was named as an "additional insured" on the St. Paul insurance policies, Yeargin and CNA were entitled to indemnity and/or contribution from St. Paul in the event they were found liable to Citgo.

On December 20, 1993, the supreme court denied Citgo's application for review of this court's reversal of the partial summary judgment. The supreme court remanded the case to the trial court.

The trial of this matter took place from January 23 to January 28, 1995. On the first day of trial, prior to jury selection, the trial judge ruled that he would decide the issue of whether the CNA insurance policy issued to PCC provided coverage to Citgo as an "additional insured." He also ordered that the jury would not be presented with evidence or testimony concerning (1) the intent of PCC and Citgo in formulating the insurance requirements, and (2) the regular practice of the business community in formulating such contractual provisions. Additionally, the trial judge decreed that the jury would decide (1) whether the settlements entered into between Citgo, its insurers and the personal injury claimants were reasonable, and (2) whether CNA acted arbitrarily and capriciously in refusing to pay Citgo's claims within sixty days of satisfactory proof of loss.

Before trial, Citgo and Yeargin settled Citgo's contractual indemnity claim against Yeargin. Therefore, at trial, the most contested issue was whether the CNA policy issued to PCC provided coverage to Citgo as an "additional insured" for its own [95-1574 La.App. 3 Cir. 5] negligence in causing the fire. The trial judge heard evidence on this issue outside the presence of the jury.

At the close of evidence, St. Paul orally moved for directed verdict, asserting that its policy only covered Citgo as an additional insured "for bodily injury arising out of Citgo's general supervision of Lake Charles Electric Company's work." St. Paul argued that no evidence was presented by third party plaintiffs, Yeargin and CNA, to show Citgo's general supervision of the Lake Charles Electric Company's employees in any way contributed to the cause of the accident. The trial court determined that the St. Paul policy did not provide coverage to Citgo under the circumstances and, therefore, granted St. Paul's motion for directed verdict. St. Paul was dismissed from the suit.

The trial judge then ruled that the CNA policy provided Citgo with insurance for its own negligence. He reasoned that, because PCC used clear language in the indemnity provision of the turnaround contract which obviously did not extend PCC's obligation to indemnify Citgo for "the sole negligence of Citgo" and did not use as clear language in the insurance clause of the contract or the certificate of insurance, PCC knew that Citgo wanted to be covered for Citgo's own negligence. In construing the "other insurance" clause of the CNA policy, he concluded that the CNA policy provided Citgo with primary insurance for the first three million dollars of loss because the CNA policy's "other insurance" provision, that it does not apply if "any other valid and collectible insurance is available to the Insured," did not contemplate Citgo's three million dollar retained liability under the INA policy. He concluded that the fact that Citgo's retained liability equaled the INA policy's liability limit made the coverage self insurance. In other words, the trial judge determined that the word "insurance" in the CNA policy's "other insurance" clause did not include self insurance within its scope. The trial judge then found that, above the three million dollar point, the CNA policy [95-1574 La.App. 3 Cir. 6] issued to PCC and the U.S. Fire policy issued to Citgo would share coverage of the loss on a fifty/fifty percent basis. The trial judge also concluded that CNA had a duty to defend Citgo against the personal injury and wrongful death claims.

Thereafter, the jury then rendered its verdict in which it concluded that Citgo and its insurers acted reasonably in entering into all of the settlements. The jury also determined that the failure of CNA and/or Yeargin (PCC) to pay the claims of...