Amoco Production Co. v. Hydroblast Corp.

• Decision Date: 10 December 1999
• Docket Number: No. Civ.A. 5:98-CV-264-C.,Civ.A. 5:98-CV-264-C.
• Citation: 90 F.Supp.2d 727
• Parties: AMOCO PRODUCTION COMPANY, Plaintiff, v. HYDROBLAST CORPORATION, Defendant/Third-Party Plaintiff, v. Fireman's Fund Insurance Company; John Arnold; and Daniels Insurance Agency, Inc., Third-Party Defendants.
• Court: U.S. District Court — Northern District of Texas

90 F.Supp.2d 727

AMOCO PRODUCTION COMPANY, Plaintiff, v. HYDROBLAST CORPORATION, Defendant/Third-Party Plaintiff, v. Fireman's Fund Insurance Company; John Arnold; and Daniels Insurance Agency, Inc., Third-Party Defendants.

No. Civ.A. 5:98-CV-264-C.

United States District Court, N.D. Texas, Lubbock Division.

December 10, 1999.

COPYRIGHT MATERIAL OMITTED

William J. Wade, Crenshaw, Dupree & Milam, Lubbock, TX, for Amoco Production Co. and Hydroblast Corp.

Kevin M. Murphy, caron, McCormick, Constants & Wilson, Dallas, TX, for Fireman's Fund. Ins. Co.

James L. Wharton, G. Douglas Welch, Jones, Flygare, Brown & Wharton, Lubbock, TX, for John Arnold and Daniels Ins. Agency, Inc.

MEMORANDUM OPINION AND ORDER

CUMMINGS, District Judge.

On this day, the Court considered Defendant/Third-Party Plaintiff Hydroblast Corporation's ("Hydroblast") Motion for Partial Summary Judgment with Respect to Its Claim Against Third-Party Defendant, Fireman's Fund Insurance Company, filed on March 26, 1999. On April 21, 1999, Third-Party Defendant Fireman's Fund Insurance Company ("FFIC") filed its Response. On May 10, 1999, Hydroblast filed its Reply.¹ Having considered all of the relevant arguments and evidence, the Court is of the opinion that Hydroblast's Motion for Partial Summary Judgment and application for a declaratory judgment should be DENIED.

Also on this day, the Court considered FFIC's Cross-Motion for Summary Judgment Against Hydroblast and Plaintiff Amoco Production Company ("Amoco") as Real Party in Interest, filed on April 21, 1999. On May 10, 1999, Hydroblast filed its Response. FFIC filed its Reply on May 25, 1999. Having considered all of the relevant arguments and evidence, the Court is of the opinion that FFIC's Cross-Motion for Summary Judgment and application for a declaratory judgment should be GRANTED.

The Court also considered Third-Party Defendants Daniels Insurance Agency, Inc. ("Daniels Insurance") and John Arnold's Motion for Summary Judgment, filed on July 15,1999. On August 3, 1999, Third-Party Plaintiff Hydroblast filed its Response. Daniels Insurance and Arnold did not file a Reply. Having considered all of the relevant arguments and evidence, the Court is of the opinion that Daniels Insurance and Arnold's Motion for Summary Judgment should be GRANTED.

I. BACKGROUND

This is a declaratory judgment action which is being prosecuted by Amoco through an assignment of claims by Hydroblast.² This action arises from a June 1994 incident in which Gilbert Ybarra and Michael Bounds, employees of Hydroblast, were injured while working at Amoco's CO2 recovery plant located near the town of Sundown in Hockley County, Texas.

The operation of the CO2 plant required the use of Selexol,³ a cleaning solvent manufactured by Union Carbide Corporation, which maximizes CO2 extraction. In June 1994, Amoco contracted with Hydroblast to conduct pressure tests on Amoco's Selexol-filled heat exchangers to determine the presence of any leaks. Hydroblast sent some of its employees, including Ybarra and Bounds, to Amoco's Sundown plant to conduct the pressure tests on the heat exchangers. While Hydroblast employees were pressure-checking the heat exchangers, Selexol was blown from tubes connected to the heat exchangers, drenching Ybarra and Bounds.

In July 1996, Ybarra and Bounds filed suit in the United States District Court, District of New Mexico, against Amoco and Union Carbide for alleged personal injuries caused by their exposure to Selexol.⁴ Following receipt of Ybarra and Bound's Complaint, Amoco requested that Hydroblast take over the defense and indemnify Amoco for the claimed injuries. Amoco made its request for indemnity pursuant to a Well and Lease Service Master Contract ("Master Contract") which Amoco and Hydroblast entered into in 1993.

Under Paragraph 10 of the Master Contract, Hydroblast agreed to defend, indemnify, and hold Amoco harmless from any suit against it by Hydroblast employees working at the Amoco plant. Prior to approval of the Master Contract, Amoco required Hydroblast to procure certain insurance. Under Paragraph 11, Hydroblast agreed to secure and maintain during the term of the agreement comprehensive general liability insurance. Hydroblast subsequently purchased two policies from Third-Party Defendant Daniels Insurance through Daniels Insurance employee, Third-Party Defendant John Arnold. Both policies were underwritten by Third-Party Defendant FFIC.⁵ Shortly after Daniels Insurance provided Amoco with a certificate of insurance on Hydroblast, Amoco approved the Master Contract.

Following the Sundown plant incident, Hydroblast did not agree to indemnify or take over the defense of Amoco in the Ybarra and Bounds litigation as required by the provisions of the Master Contract. In 1997, Amoco sued Hydroblast in Hockley County, Texas, seeking a declaratory judgment that Hydroblast was obligated to defend and indemnify Amoco in the Ybarra and Bounds lawsuit. Amoco also sought a declaratory judgment that Hydroblast had breached Paragraph 11 of the Master Contract requiring Hydroblast to secure and maintain comprehensive general liability insurance.

In the state court action, Hydroblast, as Third-Party Plaintiff, filed third-party claims against FFIC, Daniels Insurance, and John Arnold. Specifically, Hydroblast sought a declaratory judgment that FFIC had breached the contract of insurance obligating it to furnish a defense to Amoco under the comprehensive liability provisions of the policies. Hydroblast also sought a declaration that FFIC was obligated to pay any judgment entered or settlement agreed to in the Ybarra-Bounds litigation.

FFIC contends that it is not obligated to defend Amoco or pay any judgment or settlement because the indemnity agreement in the Master Contract between Amoco and Hydroblast is not covered due to the operation of a pollution-exclusion endorsement contained in the general liability policy. The specific language of the pollution exclusion provides:

This insurance does not apply to:

* * * * * *

f. (1) Bodily injury, property damage, or personal injury which would not have occurred in whole or in part but for the actual, alleged or threatened existence, discharge, dispersal, seepage, migration, release or escape of pollutants.

The pollution exclusion further provides:

Pollutants means one or more manmade or naturally occurring solid, liquid, gaseous or thermal irritant or contaminant including but not limited to smoke vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes material to be recycled, reconditioned or reclaimed.

FFIC contends that it also denied coverage because Amoco was neither a named insured nor an additional insured under the FFIC policies.⁶

In its Motion for Partial Summary Judgment, Hydroblast asks the Court to declare that: (1) FFIC is obligated to defend Amoco as an additional insured in the Ybarra and Bounds litigation; and (2) FFIC is obligated under its policy to pay any judgment entered or settlement agreed upon, up to policy limits, in the Ybarra and Bounds litigation. Conversely, FFIC seeks a declaration that (1) it has no obligation to defend or indemnify Amoco in the Ybarra and Bounds action; (2) it has no obligation to indemnify or reimburse Hydroblast for any costs or expenses, including any defense or indemnity costs which Hydroblast might owe to Amoco as a result of any indemnity agreement entered into between Hydroblast and Amoco; and (3) Hydroblast is not entitled to attorney's fees in the prosecution of this action.

In its third-party claims against Daniels Insurance and Arnold, Hydroblast alleged that Daniels Insurance and Arnold breached an express or implied agreement by failing to procure the listing and naming of Amoco as an additional insured under the policies underwritten by FFIC. Hydroblast also asserted that Daniels Insurance and Arnold were liable under the Texas Deceptive Trade Practices Act ("DTPA") and the Texas Insurance Code. Daniels Insurance and Arnold removed the present action to this Court on the basis of diversity jurisdiction.

In their Motion for Summary Judgment, Daniels Insurance and Arnold contend that there is no evidence of an express or implied agreement between Hydroblast, Daniels Insurance, and Arnold in which pollution coverage was to be included in the FFIC policies. Daniels Insurance and Arnold also assert that Hydroblast cannot maintain claims under the DTPA and the Texas Insurance Code because none of the operative facts regarding the insurance transactions between them took place in Texas; therefore, according to Daniels Insurance and Arnold, under the choice-of-law rules, New Mexico law should govern.

II. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," when viewed in the light most favorable to the non-movant, "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute about a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id. at 248, 106 S.Ct. 2505. In making its determination, the court must draw all justifiable inferences in favor of the non-moving party. Id. at 255, 106 S.Ct. 2505. Once the moving party has initially shown "that there is an absence of evidence to support the non-moving party's cause," Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), the non-movant must come forward, after adequate time for discovery, with "specific facts" showing a genuine factual issue for trial. FED.R.CIV.P. 56(e); Matsushita Elec. Indus. Corp. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Conclusory allegations and...