Ducote v. Koch Pipeline Co., LP

• Decision Date: 20 January 1999
• Docket Number: No. 98-C-0942.,98-C-0942.
• Parties: Craig DUCOTE, et al. v. KOCH PIPELINE CO., L.P., et al.
• Court: Louisiana Supreme Court

730 So.2d 432

Craig DUCOTE, et al. v. KOCH PIPELINE CO., L.P., et al.

No. 98-C-0942.

Supreme Court of Louisiana.

January 20, 1999.

Order Granting Rehearing in Part and Modifying Opinion February 26, 1999.

John A. Bivins, Lafayette, for Applicant.

James Eugene Mixon, James L. Pate, LaBorde & Neuner, Lafayette, Darrel Dee Ryland, Marksville, Russel L. Potter, Andrew Parker Texada, Stafford, Stewart & Potter, Alexandria, Joseph Blaise Treuting, Marksville, Daniel James Caruso, Douglas Watson Redfearn, New Orleans, Jerry Ryals Humble, Jonesville, for Respondent.

Ralph Shelton Hubbard, III, New Orleans, Laura A. Foggan, Washington, DC, Daniel E. Troy, Kevin Lyskowski, for Amicus Curiae Insurance Environment Litigation.

Harry Alston Johnson, III, Shreveport, Richard Nelson Dicharry, New Orleans, for Amicus Curiae Certain London Market Ins. and Certain Underwriters of Lloyd.

William Thomas D'Zurillan, James Louis Weiss, New Orleans, Kelly J. Kirkland, Jack O'Neill, Byron C. Keeling, Houston, TX, for Amicus Curiae American Petroleum Institution.

Francis S. Craig, III, Dominguez Hills, CA, Emile C. Rolfs, III, Luis Arturo Leitzelar, Baton Rouge, for Amicus Curiae Vicksburg Chemical Co. and Cedar Chemical Corp.

Colleen Noel Wertz, Baton Rouge, for Amicus Curiae James H. "Jim" Brown and Louisiana Dept. of Ins.

Philip Edward Downer, III, Robert William Kyle, Timothy Wayne Wilhite, Shreveport, for Amicus Curiae TE Products Pipeline Co.

John A. MacDonald, Amy Bach, for Amicus Curiae United Policyholders.

George Bartlett Hall, Jr., New Orleans, for Amicus Curiae Agricultural Ins. Co. and American Nat. Fire Ins.

James R. Sutterfield, New Orleans, for Amicus Curiae Reliance Nat. Ins. Co.

Frederick Theodore Haas, III, New Orleans, for Amicus Curiae RLI Ins. Co.

Edward P. Lobman, New Orleans, Arthur F. Brandt, Chicago, IL, for Amicus Curiae Westchester Fire Ins. Co.

Marcy V. Massengale, New Orleans, for Amicus Curiae American Petroleum Institute.

TRAYLOR, Justice.¹

FACTS

Gulf Central Pipeline Company (Gulf Central), a wholly owned subsidiary of Koch Industries, Inc., owns and operates an ammonia transmission line which runs through part of Avoyelles Parish. On May 25, 1995, Gulf Central contracted with Stan Delancy (Delancy), d/b/a Delancy Enterprises, to cut the grass on the right-of-way along the pipeline. In the written contract, Delancy agreed to defend, protect, indemnify and hold Gulf Central harmless from and against all claims arising out of the work of Delancy or its subcontractors. The contract further required Delancy to obtain liability insurance for Gulf Central and other Koch Pipeline subsidiaries.

Delancy purchased a comprehensive general liability policy from American Central Insurance Company (American Central), a Commercial Union Company, through the assistance of Troy & Nichols Insurance Agency. On June 7, 1995, an employee of Troy & Nichols Insurance Agency sent Delancy a letter with an endorsement specifically stating that Gulf Central had been added as an additional named insured. On July 7, 1995, a certificate of insurance was issued in favor of Koch Pipeline, through its former subsidiaries, stating that the Commercial Union policy was no more restrictive than that provided by standard coverage. After Gulf Central merged into Koch Pipeline, L.P. on July 31, 1995, Koch Pipeline, L.P. assumed all of the assets, liabilities, and contractual obligations of Gulf Central. Delancy later subcontracted the grass mowing work to Alexander & Ainsworth Contractors, which was insured by First Financial Indemnity Company (First Financial).

On September 11, 1995, an employee of Alexander & Ainsworth was cutting the grass with a tree cutter tractor when the tractor overturned and the tractor's bushhog blade struck the pipeline, releasing anhydrous ammonia into the atmosphere. Craig and Ramona Ducote subsequently filed suit alleging that Ramona Ducote sustained personal injuries as a result of the ammonia exposure. The pipeline operator, Koch Pipeline, L.P., filed a cross-claim and third party demand against Delancy, Alexander & Ainsworth, First Financial, American Central, Commercial Union Insurance Company (Commercial Union), and Troy & Nichols Insurance Agency seeking indemnification or contribution for all damages arising out of the incident. First Financial, American Central, and Commercial Union denied coverage based upon their policies' pollution exclusions, which preclude coverage with respect to:

Bodily injury or property damage which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.

* * * * * *

Pollutants means any solid, liquid, gaseous, or thermal irritant or contaminant including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste includes material to be recycled, reconditioned or reclaimed.

After all parties were joined, multiple motions for summary judgment were filed concerning insurance coverage.

On July 15, 1997, the trial court granted partial summary judgment in favor of Delancy and Koch Pipeline, L.P. holding that the total pollution exclusion endorsement contained in both the American Central and First Financial policies did not exclude coverage for the claims alleged. The Third Circuit Court of Appeal affirmed, reasoning that pollution exclusions do not apply to accidental releases of pollutants by businesses which are not active industrial polluters. We reverse.

LAW

An insurance policy is an agreement between the parties and should be interpreted by using the general rules of contact interpretation as set forth in the Louisiana Civil Code. Ledbetter v. Concord Gen. Corp., 95-0809 (La.1/6/96); 665 So.2d 1166, 1169; Smith v. Matthews, 611 So.2d 1377, 1379 (La.1993); Crabtree v. State Farm Ins. Co., 93-0509 (La.2/28/94); 632 So.2d 736. The judicial responsibility in interpreting insurance contracts is to determine the parties' common intent. Louisiana Ins. Guar. v. Interstate Fire, 93-0911 (La.1/14/94); 630 So.2d 759, 763. The parties' intent, as reflected by the words of the policy, determines the extent of coverage. La. Civ.Code art.2045; Ledbetter v. Concord Gen. Corp., 665 So.2d at 1169; Reynolds v. Select Properties, Ltd., 93-1480 (La.4/11/94); 634 So.2d 1180. However, when the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent. La. Civ.Code art.2046. Such intent is to be determined in accordance with the general, ordinary, plain and popular meaning of the words used in the policy, unless the words have acquired a technical meaning. La. Civ.Code art.2047; Ledbetter v. Concord Gen. Corp., 665 So.2d at 1169citing Louisiana Ins. Guar. v. Interstate Fire, 630 So.2d at 763

; Reynolds v. Select Properties, Ltd., 634 So.2d at 1183. If the policy wording at issue is clear and expresses the intent of the parties, the agreement must be enforced as written. Ledbetter v. Concord Gen. Corp., 665 So.2d at 1169

citing Pareti v. Sentry Indem. Co., 536 So.2d 417, 420 (La.1988); Reynolds v. Select Properties, Ltd., 634 So.2d at 1183. Courts lack the authority to change or alter the terms of an insurance policy under the guise of interpretation. Louisiana Ins. Guar. v. Interstate Fire, 630 So.2d at 764.

An insurance policy should not be interpreted in an unreasonable or a strained manner so as to enlarge or to restrict its provisions beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion. Reynolds v. Select Properties, Ltd., 634 So.2d at 1183; Louisiana Ins. Guar. v. Interstate Fire, 630 So.2d at 763. Absent a conflict with statutory provisions or public policy, insurers, like other individuals, are entitled to limit their liability and to impose and to enforce reasonable conditions upon the policy obligations they contractually assume. As this court has stated in Muse v. Metropolitan Life Ins. Co., 193 La. 605, 192 So. 72 (1939), Commercial Union Ins. Co. v. Advance Coating Co., 351 So.2d 1183, 1185 (La.1977), and Reynolds v. Select Properties, Ltd., 634 So.2d at 1183:

The rule of strict construction does not authorize a perversion of language, or the exercise of inventive powers for the purpose of creating an ambiguity where none exists, nor does it authorize the court to make a new contract for the parties or disregard the evidence as expressed, or to refine away terms of a contract expressed with sufficient clearness to convey the plain meaning of the parties....

DISCUSSION

Guided by the language of the pollution exclusion clause and the basic principles as set forth in the Louisiana Civil Code, we conclude that coverage for damage resulting from the release of anhydrous ammonia is excluded under the commercial general liability policy.² Our decision regarding the reasonable scope of a pollution exclusion, in the absence of ambiguity, must be tied to the language of the policy. The clear terms of the pollution exclusion at issue explicitly preclude coverage of liability arising from "the discharge, dispersal, seepage, migration, release and escape" of "pollutants," defined as "any ... gaseous ... irritant or contaminant, including ... vapor, ... fumes, ... [and] chemicals." As a court, we cannot place limitations upon the plain language of a policy exclusion simply because we may think it should have been written that way. Neither can we construe insurance policies based upon a determination as to whether the insured's subjective expectations are reasonable, as such guesswork can only lead to uncertainty and unnecessary litigation. Applying the policies' language to the context of the claim does not produce an uncertain or ambiguous result, but leads to one reasonable conclusion: the alleged damage was caused by the release of anhydrous ammonia, a substance which is clearly a "pollutant" for which coverage...