STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT
06-0770
ANTHONY “RICKY” DEVILLIER, ET AL.
VERSUS
ALPINE EXPLORATION COMPANIES, INC., ET AL.
************
APPEAL FROM THE TWENTY-SEVENTH JUDICIAL DISTRICT COURT, PARISH OF ST. LANDRY, NO. 05-C-0896-A HONORABLE JAMES P. DOHERTY, JR., DISTRICT JUDGE
JIMMIE C. PETERS JUDGE
Court composed of Oswald A. Decuir, Jimmie C. Peters, and Michael G. Sullivan, Judges.
REVERSED AND REMANDED.
Dennis J. Vidrine Attorney at Law 711 W. Pinhook Lafayette, LA 70503 (337) 233-5195 COUNSEL FOR DEFENDANTS/APPELLANTS: Petroleum Engineers, Inc. and Ray Hodge
Robert M. Kallam Jennifer A. Wells Preis & Roy Post Office Drawer 94-C Lafayette, LA 70509 (337) 237-6062 COUNSEL FOR THIRD-PARTY DEFENDANT/APPELLEE: Evanston Insurance Company PETERS, J.
This appeal is from a judgment interpreting insurance coverage. The issue is
whether a Self-Insured Retention (SIR) of $100,000.00 provided in an endorsement
to a liability policy issued by Evanston Insurance Company (Evanston) applies once
to each individual claim of every claimant arising from an occurrence or only once
to the occurrence regardless of the number of individual claims or claimants.
Interpreting the policy language, the trial court rendered a partial summary judgment
ruling that the SIR was applicable to each individual claim and every claimant. The
third-party petitioners affected by the ruling, Petroleum Engineers, Inc., Petroleum
Engineers International, Inc., and Ray Hodge (collectively “Petroleum”), appealed.1
Of crucial importance in the determination of the issue is the policy’s definition of the
word “claim.” We find that, as applied to the SIR in this case, the definition raises
an ambiguity which by settled rules of interpretation must be resolved against the
insurer. Accordingly, we reverse and remand for further proceedings.
DISCUSSION OF THE RECORD
An oil well experienced a hydrocarbon blowout in Jefferson Parish on February
28, 2004. As a result, a number of lawsuits for personal injuries and property
damages were filed.2 The plaintiffs in the present action, Anthony Devillier and his
wife, filed one of those suits naming Petroleum and other parties as defendants. In
that suit, Mr. Devillier sued for his personal injuries and his wife filed a claim for loss
of consortium.
Petroleum filed a third-party demand in the Devillier suit against its insurer,
Evanston, which issued Commercial General Liability Policy #03PKG00694 insuring
1 The trial court certified that the partial summary judgment was final for purposes of appeal, as authorized by La.Code Civ.P. art. 1915 . 2 Several hundred plaintiffs were involved in the various suits. Petroleum from 6/25/2003 to 6/30/2004. The policy contains five coverage parts,
only three of which are involved in any way in this case. Part A covers Commercial
General Liability, Part D covers Contractors Pollution Liability, and a “claims-made”
part covers Professional Liability. The parties agree that Part D, the Contractors
Pollution Liability Coverage, is specifically applicable to this case. The policy also
contains an SIR Endorsement affecting all three of the above parts, and that
endorsement is the focus of the present controversy.
Petroleum sought a partial summary judgment and declaratory order regarding
the SIR coverage. Petroleum contended that only one SIR of $100,000.00 was
applicable to the blowout, or pollution condition,3 and that the SIR was not applicable
to each separate claim asserted by the multiple plaintiffs. Its contention was that,
once it met its obligation of investigation, defense, and payment of any claim in the
amount of $100,000.00, the insurer was obligated for the balance of the loss no matter
the number of claims or claimants. Evanston filed a cross-motion putting at issue the
same coverage dispute. Evanston contended that the SIR of $100,000.00 applied “per
claim,” meaning to each claimant as a separate claim, and that until the SIR was
exhausted as to each it had no obligation to defend.
The trial court denied Petroleum’s motion and granted Evanston’s. The court
found that the policy was clear and rendered judgment holding that “this $100,000
‘per claim’ self-insured retention must be satisfied per each individual claimant (i.e.,
not per occurrence and not per lawsuit).”
The judgment dismissed Petroleum’s third-party petition “without prejudice to
[the third-party plaintiff’s] rights to reassert the Third-Party Demand once the
3 By definition in the policy, a “pollution condition” is an occurrence.
2 $100,000 per claimant self-insured retention is exhausted for each individual
claimant.”4
On this appeal, Petroleum assigns error to the holding that the policy was free
of ambiguity as well as the holding that the SIR applied to each individual claim and
claimant, and not to the “occurrence” or “pollution condition.”
OPINION
Appellate courts review grants of summary judgment de novo, using the same
criteria that govern the trial court’s consideration of whether summary judgment is
appropriate, that is, whether there is a genuine issue of material fact and whether the
mover is entitled to judgment as a matter of law. Ocean Energy, Inc. v. Plaquemines
Parish Gov’t, 04-66 (La. 7/6/04), 880 So.2d 1. Both sides agree that the coverage
issue is a matter of interpretation of the policy. Both sides agree that, if there is
ambiguity in the policy regarding the issue before us, the insured wins. Whether or
not a policy is ambiguous is a question of law. La. Ins. Guar. Ass’n v. Interstate Fire
& Cas. Co., 93-911 (La. 1/14/94), 630 So.2d 759.
The Commercial General Liability Coverage definitions are specifically made
applicable to the Contractors Pollution Liability Coverage Endorsement. The policy
states that “words and phrases that appear in quotation marks have special meaning.”
The definitions appear in quotation marks.
4 The summary judgment rendered by the trial court was arguably inappropriate because there was no evidence that Petroleum, the insured, had satisfied an SIR of $100,000.00. Until Petroleum satisfied its deductible, or retention obligation, coverage under Evanston’s insurance was not triggered, and the judgment in favor of Evanston could technically be affirmed for that reason. Evanston makes that point in its brief. However, the ultimate issue both the insured and the insurer wanted resolved by the cross-motions was how the SIR amount would apply. That issue was reached and decided by the trial court. Thus, whether the judgment is called a summary judgment or a declaratory order, by either name it decided the issue the parties wanted resolved and did so by use of the procedural device they chose as the vehicle for seeking that resolution. That being the case, and guided by the liberal construction precept of La.Code Civ.P. art. 5051, we recognize the subject matter as appropriately resolved by summary judgment.
3 The definition of “‘occurrence’” is as follows:
“Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
The Contractors Pollution Liability Coverage Endorsement adds the definition of
“‘Claim’ or ‘Claims,’” “‘Pollution Condition,’” and “‘Pollutants’” as follows:
“Claim” or “Claims” means a request or a demand received by you or the Company for money or services, including the institution of “suit” or arbitration proceedings against you, seeking damages.
“Pollution Condition” means the discharge, dispersal, seepage, migration, release or escape of “pollutants”.
“Pollutants” means any solid, liquid, gaseous, thermal, biological or radioactive substance, material, matter, irritant or contaminant, including smoke, vapors, soot, fumes, acids, alkalis, chemicals and waste.
The insuring agreement in the Commercial General Liability section provides
that the amount the insurer will pay for damages is limited as described in LIMITS
OF INSURANCE (SECTION III). Under that Section is the following:
1. The Limits of Insurance shown in the Declarations and the rules below fix the most we will pay, regardless of the number of:
....
b. Claims made or “suits” brought; or
c. Persons or organizations making claims or bringing “suits”.
The parties agree that this case presents the situation where there is a
commercial general liability policy with separate coverage parts provided by an
endorsement. There are two endorsements to the policy that are applicable to the
present dispute. The first is the Contractors Pollution Liability Coverage
Endorsement.
4 The insuring agreement for the Contractors Pollution Liability Coverage
Endorsement contains the following language:
b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory” resulting in a “pollution condition” . . . .
It also provides: “We may, at our discretion, investigate any ‘occurrence’ and settle
any ‘claim’ or ‘suit’ that may result.” It includes the same limits of insurance
provision as quoted above regarding the number of claims made or suits brought or
persons or organizations making claims or bringing suits.
Paragraph 10 of the Limits of Insurance section of the Contractors Pollution
Liability Coverage Endorsement provides:
10. The Deductible5 amount stated on the Declarations is applicable to each “claim” and each “pollution condition”, applies once to each “claim” and each “pollution condition” and can be applied either for defense expenses, settlement, compromise or indemnification.
This paragraph comprised of a single sentence is a key provision in the policy. The
parallel structures in Paragraph 10 emphasize the equal importance of “claim” and
“pollution condition” in the sentence. The deductible (SIR) is made applicable once
to each. Literally, the sentence, standing alone and without reference to other
provisions in the policy, is applicable to this insurance only in the limited
circumstance when there is one pollution condition and but one claim arising from
that pollution condition. If in Paragraph 10 “claim” is singular, i.e., if it refers only
to a single cause of action asserted by a single claimant, an irreconcilable ambiguity
5 The trial court found and the parties agreed that in this case “deductible” and “retention” are synonymous terms.
5 exists when there are multiple claims arising from one pollution condition. However,
all parts of the contract must be considered. “Each provision in a contract must be
interpreted in light of the other provisions so that each is given the meaning suggested
by the contract as a whole.” La.Civ.Code art. 2050. We will later relate Paragraph
10 to other parts of the policy, bearing in mind that the policy directs us to give
“special meaning” to definitions of words and phrases in quotation marks.
The second endorsement applicable to the present dispute is the Self-Insured
Retention Endorsement. The SIR Endorsement begins with this language:
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART PRODUCTS/COMPLETED OPERATIONS LIABILITY COVERAGE PART OWNERS AND CONTRACTORS PROTECTIVE LIABILITY COVERAGE PART PROFESSIONAL LIABILITY COVERAGE PART
Following this list identifying the four coverage parts being modified, the
endorsement then states that “[t]he total limit of liability of the Company as stated in
the policy declarations shall apply excess of the retained limit (herein called the Self-
Insured Retention) as stated in the endorsement, and the Named Insured agrees to
assume this retained limit . . . .” The printed form of the endorsement has spaces
provided for insertion of specific information, and in those spaces are inserted
abbreviated references to three coverages and the self-insured retention the named
insured agreed to assume. For Commercial General Liability, it is “$25,000 per
claim”; for Contractors Pollution Liability, the amount is “$100,000 per claim”; and,
for Professional Liability, it is “$100,000 per claim.” Thus, the Contractors Pollution
6 Liability coverage 6 is subject to a $100,000.00 “per claim” SIR Endorsement having
no annual aggregate retention.
The issue in this case is the meaning of “per claim.” Evanston’s brief asserts
that “per claim” is a term defined in the policy. It is not. Its brief also argues that
“per claim” equates to “per person.” Nothing in the policy manifests that equation.
The pleadings show that the well blowout resulted in a “pollution condition.”
Applying Paragraph 10 of the Limits of Insurance section of the Contractors Pollution
Liability Coverage Endorsement, it is quite clear that there can be but one SIR
deductible or retention to one pollution condition. It is equally certain that the same
interpretation applies to “claim” in Paragraph 10. We emphasize, however, that the
element of uncertainty in this case is the precise definition of “claim.”7
The word “claim” and the word “claims” are not separately defined in the
policy. However, the phrase “‘claim’ or ‘claims’” is defined. The defined words are
nouns. One is singular, and the other is plural. Evanston argues that each individual
claimant’s demand constitutes a separate claim triggering separate retention amounts.
However, by definition in the policy the phrase “claim or claims” is used to denote
6 It appears that the wrong SIR Endorsement form was used by the insurer in putting this policy together. The SIR Endorsement form actually used stated it modified four coverages and listed them. We reproduced those four above in boldface. Coverage Part D of the policy is Contractors Pollution Liability Coverage, while the boldface coverage that most nearly corresponds to Part D by name is shown on the form as OWNERS AND CONTRACTORS PROTECTIVE LIABILITY COVERAGE. As demonstrated by other endorsements attached to the policy, these are two separate coverages. Thus, the SIR Endorsement does not expressly modify the Contractors Pollution Liability Coverage; expressly, it modifies Owners and Contractors Protective Liability Coverage, a coverage part not found in the policy in the record. However, despite the apparent use of the wrong SIR Endorsement form, the SIR amount “per claim” written into the blocks farther down in the endorsement does expressly relate to Contractors Pollution Liability. Because it appears that the third-party plaintiff/insured herein agreed that the SIR Endorsement form actually used did in fact modify the coverage, we mention the discrepancy but do not otherwise consider it in the resolution of the coverage issue in this case. 7 Evanston includes in its brief the observation that the SIR Endorsement provides for $100,000.00 “per claimant.” That, too, is a misstatement. The endorsement does not provide for an SIR “per claimant.” It provides for an SIR “per claim.”
7 either a singular “claim” or plural “claims.” Both words have the same definition,
and no distinction is made between the application of the singular and the plural. The
word “or” is a coordinating conjunction which joins words of equal grammatical rank.
See Winifred Bryan Horner, et al., Harbrace College Handbook, 16 (12th ed.,
Harcourt Brace & Co. 1994). “Claims,” like “claim,” as defined, means a request or
a demand for money or services and includes the institution of suit. A suit making
a request or a demand for money or services may be instituted by many claimants or
by one. If “per claim” in the SIR Endorsement unambiguously refers to a single
claim, as argued by Evanston, then the addition of “or ‘claims’” in the definitional
phrase “‘claim’ or ‘claims’” is meaningless. We cannot ignore its own language
written into the policy by the insurer. Evanston’s brief argues that “each individual
person or entity and their assertion(s) of damages is considered a separate and distinct
“claim” as that phrase is used in the contract.” However, that phrase as used in the
contract equates “claims” with “claim.” By treating “claim” or “claims” as being the
same with no distinction between the singular and the plural, the phrase “per claim”
can just as well be rendered “per claims.”
Additionally, the SIR Endorsement modified the policy with this provision:
3. In the event of a claim or claims arising which appear likely to exceed the Self-Insured Retention, no costs, other than adjusting expenses, shall be incurred by the Insured without the written consent of the Company[.]
Once more—and this time tellingly in the context of the SIR Endorsement itself—the
reference is to “claim or claims,” without distinction as to number. If the SIR applies
once to each claim, the addition of “or claims” is superfluous. On the other hand, if
the SIR applies once to each claim or claims, whether one or many, the application
is consistent with the rest of the language in Paragraph 10 of the Limits of Insurance,
8 which states that the deductible is applicable to each “pollution condition” and
applies once to each “pollution condition.”
Both parties in this case argue the same three cases dealing with SIR
coverages: Trahan v. Savage Industries, Inc., 96-1239 (La.App. 3 Cir. 3/5/97), 692
So.2d 490, writs denied, 97-1636, 97-1652 (La. 10/3/97), 701 So.2d 207, 209;
Musmeci v. Schwegmann Giant Super Markets, Inc., 332 F.3d 339 (5th Cir. 2003),
cert. denied, 540 U.S. 1110, 124 S.Ct. 1078 (2004); and Maxim Manufacturing Corp.
v. Alliance General Insurance Co., 911 F.Supp. 239 (S.D. Miss. 1995).
In Trahan, 692 So.2d 490, the plaintiff sued for his personal injuries, and his
wife and children made loss of consortium claims. The bankrupt defendant had an
SIR policy. The trial court cumulated the loss of consortium claims with the injury
claim under one SIR of $100,000.00. We reversed that ruling, finding that the clear
policy language did not permit grouping the loss of consortium claims of Trahan’s
wife and children under the same SIR applied to his injury. We noted that the SIR
section of the policy provided that “‘[t]he Retained Limit is the amount set forth
under Item 4 of the Policy Declarations and shall apply to each claim.’” Id. at 497.
We then quoted the applicable policy provision:
where a series of an/or (sic) several claims are made which are attributable directly or indirectly to the same event, condition, cause, defect or hazard or alleged defect or hazard or failure or alleged failure to warn of such, each and every one of such claims shall be deemed to be separate and distinct from each and every other one of such claims and shall be treated as a separate and distinct claims occurrence from each and every other one of such claims irrespective of the period or area over which the claims occur or the number of such claims.
Id.
9 This specific policy language caused this circuit in Trahan to conclude that a separate
SIR applied to the plaintiff’s injury claim and to each of the loss of consortium claims
on behalf of his wife and children respectively. No such clarifying language appears
in the present policy distinguishing one claim from multiple claims arising from the
same pollution condition.
In Musmeci, 332 F.3d 339, 352, the SIR provision contained only one line
providing, “‘$250,000 each claim.’” The word “claim” was not defined in the policy.
However, the court found that the meaning of the word “claim” for purposes of the
SIR provision could be gleaned by reference to the use of the word in numerous other
provisions in the policy. The court then found that its meaning was clear and
unambiguous and that a “claim” was the assertion of a legal right against the insured
by a third party. The distinction between the policy in Musmeci and the present case
is that in Musmeci “claim” was not defined and it was used always in the singular,
while in the present case the singular “claim” and plural “claims” are defined in the
policy and mean the same thing.
In Maxim, 911 F.Supp. 239, two children died as a result of a defective heater.
The SIR Endorsement in the manufacturer/insured’s liability policy stated: “‘The
retention amount will apply on an each claim basis regardless of the number of claims
arising out of one occurrence.’” Id. at 239. The coverage dispute was whether a suit
brought by the father of the two children constituted one claim under the policy or
two. The decision did not indicate whether or not the word “claim” was defined in
the policy, but the court found that the only result it could reach under any reasonable
interpretation of the word “claim” was that the word was unambiguous, and in that
case there were two causes of action, two claims, and two retentions. The distinction
10 between Maxim and our present case is the same as that we just described with
Musmeci.
An insurance policy is a contract between the parties and should be construed
by using the general rules of interpretation of contracts set forth in the Louisiana Civil
Code. “Ambiguous policy provisions generally are to be construed against the insurer
and in favor of coverage.” Carrier v. Reliance Ins. Co., 99-2573, p. 12 (La. 4/11/00),
759 So.2d 37, 43. “[E]quivocal provisions seeking to narrow an insurer’s obligation
are strictly construed against the insurer.” Id. While Evanston recognizes this rule,
it invokes the equally settled rule that, for strict construction to apply, the insurance
policy must not only be susceptible to two or more interpretations, but also each of
the alternative interpretations must be reasonable. That is surely the law, but in the
present case an interpretation favoring only one retention for whatever claims might
be asserted for one pollution condition is a reasonable interpretation based on the
policy language. “Interpretation of a contract is the determination of the common
intent of the parties.” La.Civ.Code art. 2045; see also Cadwallader v. Allstate Ins.
Co., 02-1637 (La. 6/27/03), 848 So.2d 577. This policy is ambiguous and must be
interpreted against the party who furnished its text. See La.Civ.Code art. 2056.
The trial court’s grant of summary judgment in favor of Evanston Insurance
Company was based on its finding that there was no ambiguity in the policy and its
finding that there was no coverage for more than one retention for this pollution
condition. Based on our de novo review of the policy language, we find that the
policy’s SIR coverage language was ambiguous. Consequently, the ruling was error
as a matter of law. We will reverse the judgment and remand the third-party demand
for further proceedings.
11 DISPOSITION
For the reasons assigned, we reverse the judgment of the trial court and remand
the third-party demand of Petroleum for further proceedings. Costs of this appeal will
be borne by Evanston Insurance Company.