Admiral Ins. Co. v. Trident NGL, Inc.

• Decision Date: 25 March 1999
• Docket Number: No. 01-97-00468-CV,01-97-00468-CV
• Citation: 988 S.W.2d 451
• Parties: ADMIRAL INSURANCE COMPANY, Appellant, v. TRIDENT NGL, INC., Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 451

988 S.W.2d 451

ADMIRAL INSURANCE COMPANY, Appellant, v. TRIDENT NGL, INC., Appellee.

No. 01-97-00468-CV.

Court of Appeals of Texas Houston (1st Dist.).

March 25, 1999.

Rehearing Overruled May 7, 1999.

Deanna Dean Smith, Houston, for Appellant.

Ronald Martin Weber, Houston, for Appellee.

Panel consists of Justices MIRABAL, WILSON, and TAFT.

OPINION

MARGARET GARNER MIRABAL, Justice.

This case involves the interpretation of a commercial general liability insurance policy. The appeal is from the grant of the additional insured's ¹ motion for summary judgment, and the denial of the insurer's ² cross-motion for summary judgment. The trial court entered a final judgment awarding the additional insured $1,000,000 in damages, prejudgment and post-judgment interest, and attorneys' fees. We modify the judgment, and as modified, affirm.

The uncontroverted summary judgment evidence shows the following: K-D Oilfield Services (KD) was in the business of providing crews and equipment to service oil and gas facilities owned by other companies. Trident and KD entered into a Master Service Agreement (MSA) in October 1992 for KD to service facilities owned by Trident. Pursuant to the MSA, KD was required to purchase commercial general liability insurance and to include Trident as an additional insured. KD purchased the necessary insurance from Admiral, who issued a policy carrying KD as the "named insured" and Trident as an "additional insured." The policy limit was $1,000,000.

On March 23, 1993, Domingo Santos, a KD employee, was assigned by KD to assist Trident in performing preventive maintenance on a compressor at the Maggie Harris Compressor Station outside of Breckenridge, Texas. Santos was unloading Trident's tools from Trident's truck when the compressor exploded. Santos was seriously injured. ³ Neither Santos nor anyone employed by KD performed any act or failed to perform any act that caused the compressor to explode. Admiral's policy was in effect on March 23, 1993.

Santos filed suit against Trident for tort damages. Trident then made a claim for coverage, as an additional insured, against Admiral. On November 15, 1993, Admiral denied coverage. Trident paid an amount many times in excess of the limits of the policy to settle Santos's claims. The parties stipulated the amount paid was reasonable. Trident then sued Admiral for breach of contract in failing to cover Trident for liability resulting from Santos's claim. Admiral counterclaimed, seeking a declaratory judgment that Admiral had no contractual obligation to defend or indemnify Trident.

In its first point of error, Admiral asserts the trial court erred in granting Trident's motion for summary judgment and overruling Admiral's motion for summary judgment.

Admiral made three arguments in its motion for summary judgment as to why coverage was properly denied:

1. The liability arose out of Trident's operations, not KD's operations, so the additional insured endorsement does not act to cover the injury;

2. Coverage is precluded for bodily injury to KD's employees; and

3. KD did not provide contractual liability insurance to Trident.

Trident's response and cross-motion for summary judgment addressed each of these issues, specifically arguing that Trident's liability "arose out of KD's operations," and, therefore, the additional insured endorsement did act to cover the injury.

Summary judgment is proper only when the movant establishes there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex.1995); Long v. State Farm Fire & Cas. Co., 828 S.W.2d 125, 126-27 (Tex.App.--Houston [1st Dist.] 1992, writ denied). When both parties move for summary judgment and one is overruled and the other granted, on appeal we determine all questions presented. Jones v. Strauss, 745 S.W.2d 898, 900 (Tex.1988); Knighton v. International Bus. Mach. Corp., 856 S.W.2d 206, 209 (Tex.App.--Houston [1st Dist.] 1993, writ denied).

In the present case, the parties agree there are no questions of fact at issue, only matters of law. The resolution of the two summary judgment motions rests on the proper interpretation of the "additional insured endorsement" to the general liability insurance policy.

The construction of an insurance policy and the limiting language in an endorsement are questions of law for the court to determine. See Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex.1983); R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex.1980). An insurance policy is a contract. Therefore, we construe it by applying rules of interpretation and construction generally applicable to contracts. National Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995). When construing a written contract, our primary focus is to ascertain the true intent of the parties as expressed in the written document. Id. A written contract that can be given a definite or certain legal meaning is not ambiguous. Id. If the policy contains no ambiguity, the words used in the policy are to be given their ordinary meaning. Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex.1984).

If, however, the language of the policy is subject to two or more reasonable interpretations, the policy is ambiguous and the construction that would afford coverage to the insured must be adopted. National Union, 907 S.W.2d at 520; Gonzalez v. Mission Am. Ins. Co., 795 S.W.2d 734, 737 (Tex.1990). Whether a contract is ambiguous is a question of law for the court to determine. National Union, 907 S.W.2d at 520. A court should consider an insurance policy as a whole, giving effect to each part of the contract. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex.1994). No single phrase, sentence, or section of a policy should be isolated and considered apart from the other provisions of the policy. Id. at 134.

The commercial general liability insurance policy provides the following coverage for KD as "named insured:"

The company will pay on behalf of the insured those sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or B. property damage to which this insurance applies.

The "additional insured endorsement" provides as follows:

In consideration of the premium charged, the persons or entities insured provision is amended to include as an insured the organizations designated below, but only with respect to liability arising out of the named insured's [KD's] operations.

Additional insured:

Trident NGL, Inc.

P.O. Box 9359

The Woodlands, Texas 77387

(Emphasis added.) "Operations" is defined as "oil or gas well servicing ... to include materials, parts or equipment furnished in connection therewith."

Admiral maintains that the term "arising out of the named insured's [KD] operations" was intended only to provide coverage if KD's performance was a cause of the explosion. In other words, absent an affirmative act by KD that caused or contributed to the explosion, the additional insured endorsement in the policy in this case did not provide coverage.

Trident argues that the term "arising out of the named insured's [KD's] operations" was meant to provide Trident coverage for any claim that had a logical cause-in-fact connection with KD's operations. Thus, because the accident occurred while KD was performing its operations, i.e., KD's employee was present for the purpose of maintaining and repairing Trident's facilities, the claim was within the meaning of the policy.

Trident relies on several cases from around the country construing almost identical "additional insured endorsement" language. ⁴ The majority view of these cases is that for liability to "arise out of operations" of a named insured it is not necessary for the named insured's acts to have "caused" the accident; rather, it is sufficient that the named insured's employee was injured while present at the scene in connection with performing the named insured's business, even if the cause of the injury was the negligence of the additional insured.

In Merchants Ins. Co., Inc. v. U.S. Fidelity & Guar. Co., 143 F.3d 5 (1st Cir.1998), a subcontractor added the general contractor as an additional insured to the sub's liability insurance. Id. at 6. While on the job, the sub's employee was injured as a result of the general contractor's negligence. Id. Because the injured employee suffered his injuries "in the course of, and contemporaneously with" the sub's work for the general contractor, the injury "arose out of" the work of the sub for the general contractor, and, therefore, the general contractor was covered under the "additional insured endorsement" for the negligence claims against it. Id. at 10.

In McIntosh v. Scottsdale Ins. Co., 992 F.2d 251 (10th Cir.1993), a patron at a city festival was injured when he jumped over a retainage wall in his haste to find a portable toilet. The patron sued the city for failure to warn of a dangerous condition. The city tendered its defense to the festival company's insurer because the city was named as an additional insured under the festival company's general liability insurance policy. The additional insured endorsement included the city as an insured "only with respect to liability arising out of operations performed for (the city) by or on behalf of (the Festival Company)." Id. at 254. The appellate court held the endorsement did not limit coverage to situations where the Festival Company was negligent; rather, the endorsement provided coverage for the city even though the city stipulated that it, alone, was 100% negligent, because the injury "arose out of" the operation of the festival. Id. The McIntosh court went on to apply the axiom that ambiguities in insurance policies are construed liberally in favor of the insured, stating:

At best, the phrase "but only with respect to liability arising out of (the Festival...