Kelley-Coppedge, Inc. v. Highlands Ins. Co.

• Decision Date: 31 December 1998
• Docket Number: INC,KELLEY-COPPEDG,No. 97-0926,97-0926
• Citation: 980 S.W.2d 462
• Parties: 42 Tex. Sup. Ct. J. 130 , Petitioner, v. HIGHLANDS INSURANCE COMPANY, Respondent.
• Court: Texas Supreme Court

Page 462

980 S.W.2d 462

42 Tex. Sup. Ct. J. 130

KELLEY-COPPEDGE, INC., Petitioner, v. HIGHLANDS INSURANCE COMPANY, Respondent.

No. 97-0926.

Supreme Court of Texas.

Argued April 28, 1998.

Decided Nov. 12, 1998.

Rehearing Overruled Dec. 31, 1998.

Patrick J. Wielinski, Dallas, for Petitioner.

Michael S. Quinn, Austin, Robert A. Shults, Collyn A. Peddie, Houston, for Respondent.

SPECTOR, Justice, delivered the opinion of the Court, in which PHILLIPS, Chief Justice, and ENOCH, ABBOTT and HANKINSON, Justices, join.

In this case, we consider whether Kelley-Coppedge, Inc. (KCI), an independent contractor, "occupied" the easement on which it was performing operations, thereby invoking the pollution exclusion clause of a commercial general liability policy. The court of appeals held that KCI did occupy the easement and therefore rendered summary judgment that KCI take nothing. 950 S.W.2d 415. We reverse and render judgment for KCI.

I

While laying pipe along an easement, KCI, an oil and gas pipeline contractor, inadvertently struck a Mobil Oil pipeline causing the release of 1600 barrels of crude oil. The spill damaged a third party's land upon which the easement was located.

At the time, Highlands Insurance Co. covered KCI under a commercial general liability policy. After the spill, KCI notified Highlands, took steps to mitigate potential damage, and entered into agreements with Mobil and the adjoining landowner to clean up the soil in accordance with Texas Railroad Commission standards. Highlands eventually paid to repair the Mobil pipeline and for the lost oil. When KCI presented Highlands with the cleanup costs, however, Highlands denied the claim.

KCI then sued Highlands for a declaratory judgment on Highlands's coverage obligations, breach of insurance contract, and attorneys' fees. Both parties moved for summary judgment. Finding that the insurance contract's pollution exclusion clause did not exclude KCI's cleanup costs, the trial court granted summary judgment for KCI and overruled Highlands's motion. The trial court later granted KCI summary judgment on damages for $435,000.

The court of appeals reversed and rendered summary judgment for Highlands. 950 S.W.2d at 419. Relying on Tri County Service Co. v. Nationwide Mutual Insurance Co., 873 S.W.2d 719, 720 (Tex.App.--San Antonio 1993, writ denied), the court held that because KCI had the right to be on the easement to perform operations, it occupied the easement for the purposes of the insurance policy. 950 S.W.2d at 419. Because section f. (1)(a) of KCI's policy excluded coverage for the release of pollutants from premises it "owned or occupied," the court held that KCI could not recoup its cleanup costs from Highlands. Id. We granted KCI's petition for review and now reverse and render judgment for KCI.

II

The issue we must resolve is whether the pollution exclusion clause contained in KCI's insurance policy with Highlands excluded coverage for KCI's cleanup costs. The relevant portions of the pollution exclusion clause are subsections f. (1)(a), f. (1)(d), and f. (2)(a). Exclusion f. (1) of the policy excludes coverage for:

"Bodily injury" and "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, or rented or loaned to, 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:

(i) if the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor;

Exclusion f. (2) excludes coverage for:

Any loss, cost or expense arising out of any

(a) Request, demand or order that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants .... (emphasis added).

This dispute turns on whether or not the term "occupied by" in the policy encompasses KCI's activities on the easement. Highlands contends that "to occupy" is simply "to take up significant parts of an occupied space" or "to be there." KCI contends that something more than mere presence is needed, and that Highlands's interpretation of section f. (1)(a) renders section f. (1)(d) meaningless and the insurance contract ambiguous as a whole.

A

Initially, we note that we interpret insurance policies in Texas according to the rules of contract interpretation. Balandran v. Safeco Ins. Co. of America, 972 S.W.2d 738, (Tex.1998); National Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995); Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex.1994). In CBI, we set forth guidelines courts are to follow when interpreting insurance contracts:

The primary concern of a court in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument. If a written contract is so worded that it can be given a definite or certain legal meaning, then it is not ambiguous. Parol evidence is not admissible for the purpose of creating an ambiguity.

If, however, the language of a policy or contract is subject to two or more reasonable interpretations, it is ambiguous. Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered. Only where a contract is first determined to be ambiguous may the courts consider the parties' interpretation, and admit extraneous evidence to determine the true meaning of the instrument.

907 S.W.2d at 520 (citations omitted). See also Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex.1996) (observing that when construing unambiguous instruments "[w]e give terms their plain, ordinary, and generally accepted meaning ..."). We must also attempt to give effect to all contract provisions so that none will be rendered meaningless. Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 158 (Tex.1951); see also Michael Sean Quinn, Liability Insurance Contracts: A Primer, 34 TEX. J. BUS. L. . 2, 19-20 (1997). We proceed with these principles as our guide.

Each party argues an alternate meaning for the term "occupy" as used in the policy. An ambiguity does not arise, however, merely because the parties advance conflicting contract interpretations. Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex.1997). Only when, after applying the applicable rules of construction, a contract term is susceptible of two or more reasonable interpretations will the term be ambiguous. Glover v. National Ins. Underwriters, 545 S.W.2d 755, 761 (Tex.1977). We find no ambiguity in this contract.

Highlands contends that the plain meaning of "to occupy" is "to take up space." Thus, KCI's mere presence on the easement constitutes "occupation" as contemplated by the pollution exclusion clause. Because section f. (1)(a) excludes coverage for any pollutant discharge from any premises the insured "occupied," KCI cannot recover its cleanup costs. In support of its definition of "occupy," Highlands cites Tri County, 873 S.W.2d at 720, the only Texas case to consider this issue.

Tri County was a paving subcontractor working under contract to pave an H.E.B. parking lot. Tri County began its operations in September 1990 and finished them in December 1990. After Tri County sprayed oil on the parking lot, heavy rains washed the oil into a nearby creek. H.E.B. then removed the oil from the creek and docked Tri County for the cost of cleanup. Tri County claimed this loss under its commercial general liability (CGL) policy with Nationwide. Nationwide later denied coverage, invoking a pollution exclusion clause identical to that at issue here. Tri County then sued Nationwide.

Tri County argued that it never "occupied" the parking lot because it held no property interest in the site. After holding that the clause was unambiguous, the court of appeals held that the plain, ordinary meaning of "occupied" did not necessarily mean ownership, and was broad enough to encompass Tri County's operations. Id. at 721. Highlands argues that we should reach the same conclusion as the Tri County court and hold that KCI "occupied" the easement.

KCI, however, contends that accepting Highlands's definition of occupy would render exclusion f. (1)(d) meaningless. KCI argues that if any presence, no matter how transitory, is occupancy under section f. (1)(a), then this section excludes all operations of the insured, including those performed by contractors or subcontractors, regardless of whether the insured owns the property or not. Thus, section f. (1)(d)'s provision excluding coverage for the insured's operations on another's land would be surplusage. In support of this argument, KCI cites United States Fidelity & Guaranty Co. v. B & B Oil Well Service, Inc., 910 F.Supp. 1172 (S.D.Miss.1995).

In that case, B & B, an oil well contractor, had contracted to rework some oil wells. A number of landowners on whose land the oil wells were located sued B & B alleging that the landowners' property had been contaminated by pollutants from B & B's operations. USF & G, which insured B & B under a CGL policy nearly identical to that between KCI and Highlands, sought a declaratory judgment that under the contracts of insurance issued to B & B, B & B had no coverage for the contamination. Id. at 1175.

While the court ultimately held that another provision excluded coverage, the court also held that because B & B was not an "occupier" of the premises, section f. (1)(a) of the insurance contract did not bar coverage. Id. at 1178-81. As here, the insurer relied on Tri County in arguing that the insured occupied the premises. However, the court...