Pilgrim Enterprises v MAryland Cas. Co.

• Decision Date: 22 June 2000
• Citation: 24 S.W.3d 488
• Parties: <!--24 S.W.3d 488 (Tex.App.-Houston 2000) PILGRIM ENTERPRISES, INC.; PILGRIM CONVENIENCE, INC.; R&G NO. 1, INC.; R&G NO. 2, INC.; R&G NO. 3, INC.; PILGRIM LAUNDRY COMPANY, INC.; PILGRIM EQUIPMENT CO., INC.; R.F.S., INC. NO. 8; R.F.S., INC. NO. 11; R.F.S., INC. NO. 17; S&R NO. 2, LTD.; and PLC NO. 11 JOINT VENTURE, Appellants V. MARYLAND CASUALTY COMPANY, Appellee MARYLAND CASUALTY COMPANY, Appellant V. PILGRIM ENTERPRISES, INC.; PILGRIM CONVENIENCE, INC.; R&G NO. 1, INC.; R&G NO. 2, INC.; R&G NO. 3, INC.; PILGRIM LAUNDRY COMPANY, INC.; PILGRIM EQUIPMENT CO., INC.; R.F.S., INC. NO. 8; R.F.S., INC. NO. 11; R.F.S., INC. NO. 17; S&R NO. 2, LTD.; and PLC NO. 11 JOINT VENTURE, Appellees NO. 01-97-01421-CV In The Court of Appeals For The First District of Houston, Texas Opinion issued
• Court: Texas Court of Appeals

Page 488

24 S.W.3d 488 (Tex.App.-Houston [1st Dist.] 2000)

PILGRIM ENTERPRISES, INC.; PILGRIM CONVENIENCE, INC.; R&G NO. 1, INC.; R&G NO. 2, INC.; R&G NO. 3, INC.; PILGRIM LAUNDRY COMPANY, INC.; PILGRIM EQUIPMENT CO., INC.; R.F.S., INC. NO. 8; R.F.S., INC. NO. 11; R.F.S., INC. NO. 17; S&R NO. 2, LTD.; and PLC NO. 11 JOINT VENTURE, Appellants

V.

MARYLAND CASUALTY COMPANY, Appellee

MARYLAND CASUALTY COMPANY, Appellant

V.

PILGRIM ENTERPRISES, INC.; PILGRIM CONVENIENCE, INC.; R&G NO. 1, INC.; R&G NO. 2, INC.; R&G NO. 3, INC.; PILGRIM LAUNDRY COMPANY, INC.; PILGRIM EQUIPMENT CO., INC.; R.F.S., INC. NO. 8; R.F.S., INC. NO. 11; R.F.S., INC. NO. 17; S&R NO. 2, LTD.; and PLC NO. 11 JOINT VENTURE, Appellees

NO. 01-97-01421-CV

In The Court of Appeals For The First District of Houston, Texas

Opinion issued June 22, 2000

On Appeal from the 113th District Court Harris County, Texas Trial Court Cause No. 95-51488A

[Copyrighted Material Omitted] Panel consists of Justices Cohen, Nuchia, and Duggan.^*

O P I N I O N

LEE DUGGAN, Jr., Justice (Retired).

The principal question in this appeal from a summary judgment is as follows: for purposes of coverage under an occurrence-based comprehensive general liability ("CGL") insurance policy, do personal injury and property damage from underground contamination "occur" under Texas law only when the harm is "discovered"? We answer in the negative.

Eleven plaintiffs filed seven suits¹ in 1996 against Pilgrim Enterprises, Inc. and related entities² (collectively, "Pilgrim") for personal injuries and property damage allegedly caused by long term exposure to a chemical known as perchloroethylene ("PCE") and other hazardous substances released from Pilgrim's facilities. Each suit was filed by a former Pilgrim landlord or adjacent property owner. Pilgrim filed three coverage lawsuits, later consolidated by agreement into one case, against Maryland Casualty Co. ("Maryland") and other insurers, seeking a defense and indemnification. Maryland filed a motion for partial summary judgment, asserting that it had no duty to defend Pilgrim in five of the seven pending suits. The trial court granted the partial summary judgment in favor of Maryland and, over Maryland's objection, severed the judgment to allow Pilgrim to commence an immediate appeal.

Maryland appeals the trial court's action in granting the severance; Pilgrim appeals the summary judgment holding that Maryland has no duty to defend the five suits.

We affirm that portion of the trial court's judgment severing the cause; we reverse the remaining portion of the judgment, which rendered summary judgment on the ground that Maryland had no duty to defend, and remand the cause.

I. Factual Background

Pilgrim has operated dry cleaning facilities in Harris and Bexar counties since the 1960s. In the course of its operations, Pilgrim purchased CGL insurance policies from various insurers, including four consecutive policies from Maryland between December 1981 and December 1985.

Over the years, Pilgrim used PCE as the primary solvent in its dry cleaning operations. In 1994, Pilgrim conducted soil sampling at 17 of its dry cleaning sites and discovered PCE contamination in the soil and, in some cases, the groundwater. The contamination allegedly arose from repeated spills, overfills, and leakage when Pilgrim's suppliers delivered PCE and during Pilgrim's maintenance and operation of its PCE storage units and dry cleaning equipment. Pilgrim notified the Texas Natural Resources Conservation Commission ("TNRCC") of the contamination and agreed with the TNRCC to clean up the contaminated sites in 1995.

In 1996, the seven suits against Pilgrim were filed. Pilgrim notified Maryland and requested a defense and indemnity under the 1981-85 policies. Maryland initially agreed to defend each suit, subject to a reservation of its right to withdraw from the defense and assert its coverage defenses. When Pilgrim made similar demands on its other insurers, and none agreed to defend or participate in funding Pilgrim's defense, Maryland withdrew its offer of complete defense. Pilgrim rejected Maryland's offer to pay only a "pro-rata" share of the defense costs.

After Pilgrim's coverage lawsuits against Maryland and its other insurers were consolidated, Maryland filed a motion for partial summary judgment on the ground that it had no duty to defend Pilgrim in five of the seven pending PCE lawsuits--Sunblossom, Briargrove, Murad, Turk III, and Agim. Maryland conceded its duty to defend in two suits, Turk I and Turk II, but asserted in its motion that the plaintiffs' claimed injuries in the five suits were not alleged to have occurred within the coverage period of Pilgrim's Maryland policies.

Maryland argued that the language of each policy triggered its duty to defend Pilgrim only if the alleged property damage or bodily injury became "manifest" during a policy period and that the tort plaintiffs' claims did not allege that. The trial court agreed, granted Maryland's motion for summary judgment on the five claims, and severed them from Pilgrim's remaining actions, specifically reciting that "[t]he Court's Partial Judgment is hereby made final so that Plaintiffs may commerce an immediate appeal."

II.

Maryland's appeal of the severance

Maryland argues in its point of error that the trial court abused its discretion in severing the five claims because they are inextricably interwoven (1) with the remaining claims Maryland must defend and (2) with the defenses of the twelve remaining defendant insurers. Further, Maryland argues, because the severance was improper, the partial summary judgment is not an appealable final judgment. Because Maryland's point of error would be dispositive of the entire appeal, if sustained, we address it first.

A. Whether the severance order separated claims that are inextricably interwoven with remaining claims

A partial summary judgment becomes final and appealable when the trial court signs an order severing into a separate case the parties and claims addressed. Mafrige v. Ross, 866 S.W.2d 590, 592 (Tex. 1993). Texas Rule of Civil Procedure 41 provides that "[a]ny claim against a party may be severed and proceeded with separately." TEX. R. CIV. P. 41. A trial court has broad discretion in the matter of severance and consolidation of causes. Guaranty Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex. 1990). The standard of review for determining whether a trial court erred in ordering a severance is abuse of discretion. Id.

The reasons undergirding a proper grant of severance "are to do justice, avoid prejudice and further convenience." Id. Severance is proper if

1. the controversy involves more than one cause of action;

2. the severed claim is one that would be the proper subject of a lawsuit if independently asserted; and

3. the severed claim is not so interwoven with the remaining action that they involve the same facts and issues.

Id.

Here, Here Maryland claims the third element of this test is not met because (1) Pilgrim's claim against Maryland for a defense in the two remaining lawsuits involves the same facts and issues as in the severed actions; (2) Maryland's other defenses to coverage (such as a pollution exclusion clause) apply equally to its duty to defend here; and (3) other defendant insurers in the consolidated case have the same policy language defining when an injury occurs.

Maryland's duty to defend each severed and each remaining claim is a contractual undertaking defined by each policy. See Whatley v. City of Dallas, 758 S.W.2d 301, 304 (Tex. App.--Dallas 1988, writ denied). The specific language of each policy and the factual allegations of each underlying plaintiffs' pleadings against Pilgrim will determine Maryland's duty to defend each claim. Nationwide Property & Cas. Ins. Co. v. McFarland, 887 S.W.2d 487, 492 (Tex. App.--Dallas 1994, writ denied).

Similarly, Maryland's indemnity obligations on the severed claims are not inextricably interwoven with the remaining claims because the duties to defend and to indemnify in both the severed and remaining claims are separate duties. Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821-22 (Tex. 1997). Unlike the duty to defend, the duty to indemnify is based on facts proven, not on pleadings. American Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 154 (Tex. App.--Dallas 1990, writ dism'd).

We hold that the five severed claims are not inextricably interwoven with Pilgrim's remaining claims.

B. Whether a severance order is proper if it severs some, but not all, claims against a particular defendant

Maryland argues that a severance of some but not all claims against a party cannot form a final judgment for purposes of appeal, citing Martinez v. Humble Sand & Gravel, Inc., 875 S.W.2d 311, 312 (Tex. 1994), Guidry v. National Freight, Inc., 944 S.W.2d 807, 812 (Tex. App.--Austin 1997, no writ), and Rutherford v. Whataburger, Inc., 601 S.W.2d 441, 443 (Tex. App.--Dallas 1980, writ ref'd, n.r.e.). None of these cases, however, holds that severance is never proper unless all claims against a particular defendant are released.

Maryland argues that the controlling reasons for a severance, "to do justice, avoid prejudice and further convenience,"³ apply only when all of the claims against a party are severed. However, it cites no case expressly so holding. In fact, the Texas Supreme Court has noted that severance is proper to set out a final judgment for appeal precisely when all issues against a defendant have not been disposed of. In City of Beaumont v. Guillory, the Court noted as follows:

A summary judgment . . . is presumed to dispose of only those issues expressly presented, not all issues in the case. A summary judgment that fails to dispose expressly of all parties and issues in the pending suit is interlocutory and not appealable unless a severance of that phase of the case is ordered by the trial court . . . .

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