Hiland Partners GP Holdings, LLC v. National Union Fire Insurance Co. of Pittsgurgh, 013117 FED8, 15-3936

Docket Nº:15-3936
Opinion Judge:MURPHY, Circuit Judge
Party Name:Hiland Partners GP Holdings, LLC, a foreign company; Hiland Partners, LP, a foreign partnership; Hiland Operating, LLC, a foreign company Plaintiffs - Appellants v. National Union Fire Insurance Company of Pittsburgh, PA Defendant-Appellee
Judge Panel:Before KELLY and MURPHY, Circuit Judges, and MONTGOMERY, District Judge. .
Case Date:January 31, 2017
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Hiland Partners GP Holdings, LLC, a foreign company; Hiland Partners, LP, a foreign partnership; Hiland Operating, LLC, a foreign company Plaintiffs - Appellants

v.

National Union Fire Insurance Company of Pittsburgh, PA Defendant-Appellee

No. 15-3936

United States Court of Appeals, Eighth Circuit

January 31, 2017

Submitted: December 15, 2016

Appeal from United States District Court for the District of North Dakota - Bismarck

Before KELLY and MURPHY, Circuit Judges, and MONTGOMERY, [1] District Judge.

MURPHY, Circuit Judge.

Hiland Partners GP Holdings, LLC, Hiland Partners, LP, and Hiland Operating, LLC (collectively, Hiland) brought this insurance coverage action against National Union Fire Insurance Company of Pittsburgh, PA (National Union). Hiland alleged that National Union had a duty to defend and indemnify it in connection with a lawsuit arising from an explosion at its natural gas processing facility. The district court[2] granted National Union summary judgment after concluding that an exclusion to the insurance policy barred coverage. Hiland appeals, and we affirm.

I.

Hiland owns and operates a natural gas processing facility in Watford City, North Dakota. The processing facility receives gas and hydrocarbon products and processes them into byproducts for sale. Hiland entered into a master service contract with Missouri Basin Well Service (Missouri Basin). That contract provided that Missouri Basin would "from time to time, be requested by Hiland . . . to perform certain work or furnish certain services to Hiland." The contract also required Missouri Basin to obtain insurance policies which named it as the primary insured and Hiland as an additional insured.

Missouri Basin also procured a commercial general liability insurance policy through National Union in April 2011, which was effective through April 2012. An endorsement to the policy provided that any organization to which Missouri Basin is obligated as a result of any contract or agreement would be included as an additional insured under the policy. The policy required National Union to pay all "sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage'" which the policy covered. The policy also required National Union "to defend the insured against any 'suit' seeking those damages."

The policy included an endorsement which excluded coverage for: (1) "Bodily Injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:

(a)At or from any premises, site or location which is or was at any time owned or occupied by . . . any insured. . . .

(b)At or from any premises, site or location which is or was at any time used by or for any insured . . . for the handling, storage, disposal, processing or treatment of waste;

(c)Which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for:

(i) Any insured . . . .

(d)At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations . . . .

The endorsement defined "pollutants" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." The endorsement provided that subparagraphs (1)(a) and (1)(d) do not apply if the pollution "commences during the term of the policy, " the insured discovers the pollution within seven days "after it commences, " and the insured reports the pollution to the insurer within twenty one business days following its discovery.

In October 2011, Hiland requested that Missouri Basin remove water from its hydrocarbon condensate tanks at its Watford City processing facility. Condensate is one of the marketable byproducts derived from the facility's processing of gas and hydrocarbon products. It is a flammable, volatile, and explosive product. Missouri Basin asked B&B Heavy Haul, LLC (B&B), a subcontractor, to haul the water. After B&B employee Lenny Chapman arrived at the facility he positioned his truck in front of one of the condensate tanks. Before Chapman began removing the water, one of the tanks overflowed. The condensate then caused an explosion which seriously injured Chapman.

Chapman and his wife filed a lawsuit against Hiland, alleging negligence and loss of consortium. The Chapmans later settled their claims against Hiland. National Union refused to defend and indemnify Hiland as an additional insured under its insurance policy with Missouri Basin...

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