Gas v. Aspen Ins. Uk Ltd.

• Decision Date: 29 August 2011
• Docket Number: No. 10–30190.,10–30190.
• Citation: 652 F.3d 584
• Parties: JEFFERSON BLOCK 24 OIL & GAS, L.L.C., Plaintiff–Appellant,v.ASPEN INSURANCE UK LIMITED; Ace European Group Limited; Certain Underwriters at Lloyd's, London, subscribing to Policy 07835N6717, Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

652 F.3d 584

JEFFERSON BLOCK 24 OIL & GAS, L.L.C., Plaintiff–Appellant,

v.ASPEN INSURANCE UK LIMITED; Ace European Group Limited; Certain Underwriters at Lloyd's, London, subscribing to Policy 07835N6717, Defendants–Appellees.

No. 10–30190.

United States Court of Appeals, Fifth Circuit.

Aug. 29, 2011.

Robert E. Holden (argued), Donald R. Abaunza, Stephen W. Wiegand, Liskow & Lewis, P.L.C., New Orleans, LA, for Plaintiff–Appellant.Harry Alston Johnson, III (argued), Phelps Dunbar, L.L.P., Baton Rouge, LA, Rebecca Yvonne Cooper, Richard N. Dicharry, Phelps Dunbar, L.L.P., New Orleans, LA, for Defendants–Appellees.Appeal from the United States District Court for the Eastern District of Louisiana.Before GARZA and BENAVIDES, Circuit Judges, and LYNN ^*, District Judge.LYNN, District Judge:

In this insurance coverage dispute, Plaintiff–Appellant Jefferson Block 24 Oil & Gas, L.L.C. (Jefferson Block) appeals from the district court's grant of summary judgment in favor of Defendants–Appellees, Aspen Insurance UK Limited, Ace European Group Limited, and Certain Underwriters at Lloyd's, London (collectively Underwriters). For the following reasons, we REVERSE and REMAND.

I

At all times relevant to this appeal, Jefferson Block was the part-owner, and sole operator, of seven offshore oil and gas leases, an associated platform, wells, and pipelines located in the Gulf of Mexico. The leases were divided between two different lease blocks located in the High Island area. Two of the leases, M–103384 and M–103385, were located in the High Island 7 lease block, and the five others, M–103386, M–103387, M–103388, M–103389, and M–103390, were located in the High Island 24 lease block. Jefferson Block also operated a 16–inch right-of-way oil pipeline that connected an offshore production facility located on one of the leases in the High Island 24 lease block, M–103387, with a facility on shore. In reaching its destination, the pipeline crossed other lease blocks, including High Island 7, where Jefferson Block operated certain leases, and several others where it held no interests.

On November 5, 2007, there was a sudden decrease in pressure in the 16–inch pipeline while Jefferson Block was filling the pipeline with oil. An investigation revealed that a leak had developed in the line, resulting in the spill of oil into the Gulf of Mexico. Jefferson Block, acting under the direction of a “Unified Command” consisting of the United States Coast Guard and other governmental agencies, conducted a cleanup of the spill, during which it incurred approximately $3 million in oil pollution “removal” costs.

At the time of the pipeline leak and the resulting cleanup, Jefferson Block owned a “London OPA Insurance Policy for Offshore Facilities” (the OPA Policy) underwritten by Underwriters. Underwriters' potential exposure under the OPA Policy is limited, however, to only certain liabilities that Jefferson Block incurred “as the responsible party Designated Applicant of the offshore area(s) and facility(ies) set out in Item 10 of the Declarations.” An additional proviso in the OPA Policy provides that the policy only covers certain liabilities arising from a “discharge or substantial threat of discharge as to which a facility (or facilities) set out in Item 10 of the Declarations has been designated as the source.”

Item 10 of the Declarations consists of only a single sentence: “Item 10: Schedule of Offshore Area(s) and Facilities Thereon: (See attached form MMS–1021).” The MMS–1021 form itself, discussed in further detail below, is titled “Covered Offshore Facilities,” and lists “2 Locations of Covered Offshore Facilities.” Specifically, the form lists Lease Numbers M–103384 to M–103385 in the High Island 7 lease block on one line and Lease Numbers M–103386 through M–103390 in the High Island 24 lease block on a second line. The MMS–1021 form does not specifically reference the 16–inch pipeline.

Jefferson Block submitted a claim under the OPA Policy for indemnification of the removal costs it incurred in responding to the pipeline leak. Underwriters denied the claim, and Jefferson Block filed suit against Underwriters in the Eastern District of Louisiana. Specifically, Jefferson Block alleged that Underwriters wrongfully refused to indemnify it for oil pollution removal costs. The parties thereafter filed cross-motions for summary judgment, and the district court, after concluding that the OPA Policy did not cover the costs Jefferson Block sustained as a result of the leak in the 16–inch pipeline, granted Underwriters' motion, denied Jefferson Block's motion, and entered judgment in favor of Underwriters. This appeal followed.

II

We review the district court's grant of summary judgment de novo, applying the same standards as the district court. DePree v. Saunders, 588 F.3d 282, 286 (5th Cir.2009). “The district court's interpretation of an insurance contract is a question of law that we also review de novo.” Admiral Ins. Co. v. Ford, 607 F.3d 420, 422 (5th Cir.2010) (internal quotation marks and citation omitted). Summary judgment is appropriate when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c)(2). “A genuine issue of material fact exists if the evidence is such that a reasonable jury could return a verdict for the non-moving party.” Paz v. Brush Engineered Materials, Inc., 555 F.3d 383, 391 (5th Cir.2009) (internal quotation marks and citations omitted). “When assessing whether a dispute to any material fact exists, we consider all of the evidence in the record but refrain from making credibility determinations or weighing the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398–99 (5th Cir.2008). “In reviewing the entire record, we consider all evidence in a light most favorable to the non-moving party and draw all reasonable inferences in favor of the non-moving party.” Frakes v. Crete Carrier Corp., 579 F.3d 426, 429–30 (5th Cir.2009) (internal quotation marks and citation omitted).

III

This case presents an insurance coverage dispute governed by New York law.¹ “It is well established under New York law that a policyholder bears the burden of showing that the insurance contract covers the loss.” Morgan Stanley Grp., Inc. v. New England Ins. Co., 225 F.3d 270, 276 (2d Cir.2000). A court interprets an insurance policy using the same general rules that govern the construction of any written contract. See Throgs Neck Bagels, Inc. v. GA Ins. Co. of N.Y., 241 A.D.2d 66, 671 N.Y.S.2d 66, 68 (1998). In a case like this one, the analysis proceeds in three steps.

First, the court considers the express language of the policy, construing that language “to effectuate the intent of the parties as derived from the plain meaning of the policy's terms.” Andy Warhol Found. for the Visual Arts, Inc. v. Fed. Ins. Co., 189 F.3d 208, 215 (2d Cir.1999). When the contract language is unambiguous, the court will discern the parties' intent from the document itself as a matter of law, and summary judgment is thus appropriate. See id. (“If the language of the insurance contract is unambiguous, we apply its terms.”); Sarinsky's Garage, Inc. v. Erie Ins. Co., 691 F.Supp.2d 483, 485 (S.D.N.Y.2010) (“Where the contract language is wholly unambiguous, summary judgment is appropriate.”); Dryden Cent. Sch. Dist. v. Dryden Aquatic Racing Team, 195 A.D.2d 790, 600 N.Y.S.2d 388, 391 (1993) (“It is well settled that courts will first look to the express contract language used to give effect to the intention of the parties, and where the language of a contract is clear and unambiguous, the court will construe and discern that intent from the document itself as a matter of law.” (citations omitted)). If the court concludes that the policy is ambiguous, however, it should proceed to the second step.

Once the court has concluded that the policy is ambiguous, the burden shifts to the insurer to prove that its proposed interpretation of the policy is the correct one. Morgan Stanley Grp., Inc., 225 F.3d at 276. At this stage, “the court may accept any available extrinsic evidence to ascertain the meaning intended by the parties during the formation of the contract.” Id. at 275–76 (internal quotation marks and citations omitted). If the extrinsic evidence is “so one-sided that no reasonable person could decide the contrary,” the court may resolve the ambiguity as a matter of law. Sarinsky's Garage, Inc., 691 F.Supp.2d at 486 (internal quotation marks and citation omitted). “If it is not, the extrinsic evidence must be interpreted by the factfinder.” Id.

Finally, if the insurer fails to submit extrinsic evidence that resolves the ambiguity, the proper interpretation is an issue of law for the court. Kenavan v. Empire Blue Cross & Blue Shield, 248 A.D.2d 42, 677 N.Y.S.2d 560, 563 (1998). Under such circumstances, a court should ordinarily resolve the ambiguity against the insurer. Id.; see also Morgan Stanley Grp., Inc., 225 F.3d at 276 (“ ‘If the extrinsic evidence does not yield a conclusive answer as to the parties' intent,’ a court may apply other rules of contract construction, including the rule of contra proferentem, which generally provides that where an insurer drafts a policy ‘any ambiguity in [the] ... policy should be resolved in favor of the insured.’ ” (quoting McCostis v. Home Ins. Co., 31 F.3d 110, 113 (2d Cir.1994))). With these principles in mind, we now turn to the instant dispute.

A

We begin our analysis, of course, with the express language of the OPA Policy. Andy Warhol Found., 189 F.3d at 215. Before considering that language in detail, though, we note that “[a]lthough clear and unambiguous terms of an insurance policy must be given their plain and ordinary meaning, the language of an insurance policy must be construed with...