The Burlington Northern v. Nat'l Union Fire Ins. Co. of Pittsburgh

• Decision Date: 25 February 2011
• Docket Number: No. 10–0064.,10–0064.
• Parties: The BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY f/k/a The Atchison, Topeka and Santa Fe Railway Company, Petitioner,v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Respondent.
• Court: Texas Supreme Court

334 S.W.3d 217

54 Tex. Sup. Ct. J. 599

The BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY f/k/a The Atchison, Topeka and Santa Fe Railway Company, Petitioner,

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Respondent.

No. 10–0064.

Supreme Court of Texas.

Feb. 25, 2011.

Donald E. Herrmann, David E. Keltner, Preston Randolph Mundt, Kelly Hart & Hallman LLP, Fort Worth, Mainess Gibson, Connelly Baker Wotring LLP, Houston, for Petitioner.Jeffrey Parsons, Darin Lee Brooks, Kristen W. Kelly, Beime Maynard & Parsons, L.L.P., Houston, for Respondent.PER CURIAM.

In this insurance coverage dispute The Burlington Northern and Santa Fe Railway Company (BNSF) sought a declaratory judgment that National Union Fire Insurance Company owed duties to defend and indemnify BNSF in a personal injury suit resulting from a collision between one of its trains and an automobile. The trial court granted National Union's motion for summary judgment. The court of appeals affirmed. 334 S.W.3d 235. Because the court of appeals did not consider evidence extrinsic to the pleadings and insurance policy in determining whether National Union owed a duty to indemnify, we reverse the judgment of the court of appeals and remand the case to that court for further proceedings.

In 1994, BNSF contracted with SSI Mobley (Mobley) to control vegetation along certain areas of BNSF's right-of-way. The contract term was “1994 through 1996.” Pursuant to the contract, which required Mobley to purchase a comprehensive general liability (CGL) policy naming BNSF as an additional insured, Mobley purchased a CGL policy from National Union.¹

On August 25, 1995, a collision took place at a railroad crossing between a BNSF train and an automobile. The driver of the car and one of the passengers were killed; the second passenger was injured. Separate suits filed by survivors of the driver and deceased passenger were eventually consolidated. Pleadings in the consolidated suit alleged that excessive vegetation near the crossing obstructed the driver's view of the oncoming train. The pleadings, in part, stated that

The Railroad had a contract with SS Mobley Company to carry out chemical weed control. SS Mobley failed to use reasonable care to carry out its chemical weed control, and because of its improper timing and application of chemical weed control, there was excessive vegetation at the crossing at the time of the collision, which proximately caused the collision.

BNSF tendered defense of the case to National Union. After National Union denied that it had either a duty to defend or indemnify, BNSF filed suit seeking a declaratory judgment that National Union had both duties. While the declaratory judgment suit was pending, BNSF settled the claims arising from the death of the driver. It also reached a high-low settlement agreement with the other claimants: BNSF and the claimants agreed that the claimants would receive $1 million if the jury returned a verdict less than that amount, $8 million if the verdict exceeded that amount, or the claimants would receive the exact amount of the verdict if the jury awarded between $1 million and $8 million. The case was then tried to a jury which returned a plaintiff's verdict of over $27 million. BNSF paid $8 million according to the high-low settlement agreement.

In the declaratory judgment suit, BNSF and National Union filed competing traditional motions for summary judgment and the trial court initially granted partial summary judgment in favor of BNSF. Then BNSF filed a final motion for summary judgment. National Union responded by filing a motion to reconsider and an additional traditional and no evidence motion for summary judgment. The trial court withdrew the partial summary judgment it had granted in BNSF's favor, granted National Union's motion, and entered a take-nothing judgment against BNSF.

The court of appeals affirmed. 334 S.W.3d 235. Citing this Court's decision in King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex.2002), the court applied the eight-corners rule in determining National Union's duty to defend. 334 S.W.3d at 239. The court of appeals first determined that National Union did not have a duty to defend. Id. at 244. It then concluded that National Union did not have a duty to indemnify because BNSF's arguments as to National Union's duty to indemnify were “based entirely on its duty to defend arguments.” Id. at 244. The court of appeals did not consider evidence extrinsic to the policy and the pleadings when reaching its decision that there was no duty to indemnify.

BNSF challenges the court of appeals' conclusions as to both National Union's duty to defend and its duty to indemnify. It maintains that the court of appeals (1) incorrectly applied the eight-corners rule when determining whether National Union owed a duty to defend, and (2) erred in failing to consider extrinsic evidence when determining whether National Union had a duty to indemnify.

National Union responds that (1) the court of appeals correctly applied the eight-corners rule, and (2) even if the court of appeals had analyzed National Union's duty to indemnify in light of extrinsic evidence, its conclusion would have been the same: National Union does not have a duty to indemnify BNSF.

As relevant to our consideration of this matter, National Union's policy coverage contains a “completed operations” exclusion which excludes coverage for “all ‘bodily injury’ and ‘property damage’ occurring away from premises [Mobley] own[s] or rent[s] and arising out of ‘[Mobley's] product’ or ‘[Mobley's] work.’ ” However, the policy also excepts from the completed operations exclusion “[w]ork that has not yet been completed or abandoned.” The policy provides that Mobley's work would be “deemed completed” at the earliest of the following times:

(1) When all of the work called for in [the] contract has been completed.

(2) When all of the work to be done at the site has been completed if [the] contract calls for work at more than one site.

(3) When that part of the work done at a job site has been put to its intended...