In Re: Edc Contractor Insurance Litigation

• Court: Louisiana Court of Appeal
• Decided: May 24, 2006
• Docket: CW-0005-1064
• Status: Unknown

Opinion

STATE OF LOUISIANA COURT OF APPEAL, THIRD CIRCUIT

CW 05-1064

IN RE: EDC CONTRACTOR INSURANCE LITIGATION

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APPEAL FROM THE FOURTEENTH JUDICIAL DISTRICT COURT, PARISH OF CALCASIEU, NO. 98-1984, HONORABLE WILFORD D. CARTER, DISTRICT JUDGE

MICHAEL G. SULLIVAN JUDGE

Court composed of Oswald A. Decuir, Michael G. Sullivan, and Elizabeth A. Pickett, Judges.

WRIT DENIED.

George B. Hall, Jr. Stephen Porter Hall Marian T. Harrison Phelps Dunbar, LLP 365 Canal Street, Suite 2000 New Orleans, Louisiana 70130-6534 (504) 566-1311 Counsel for Applicant: Liberty Mutual Insurance Company

Allen J. Mitchell, II Mitchell & Blanco One Lakeshore Drive, Suite 1135 Lake Charles, Louisiana 70629 (337) 436-8686 Counsel for Applicant: Liberty Mutual Insurance Company John Ellison Richard P. Lewis Anderson, Kill & Olick 1600 Market Street, Suite 2500 Philadelphia, Pennsylvania 19103 (215) 568-4710 Counsel for Respondent: ConocoPhillips Company

George Andrew Veazey Huval, Veazey, Felder & Aertker Post Office Box 80948 Lafayette, Louisiana 70598-0948 (337) 234-5350 Counsel for Respondent: ConocoPhillips Company

Joseph L. McReynolds Deutsch, Kerrigan & Stiles 755 Magazine Street New Orleans, Louisiana 70130-3672 (504) 581-5141 Counsel for Respondents: New York Marine Somerset Insurance Company Boston Old Colony Insurance Company Reliance Insurance Company General Insurance Company

Arthur W. Landry Plauche`, Maselli, Parkerson, LLP 201 St. Charles Avenue, Suite 4240 New Orleans, Louisiana 70170 (504) 582-1142 Counsel for Defendant: American Motorists Insurance Company

William T. McCall Guillory & McCall 901 Lake Shore Drive, Suite 836 Lake Charles, Louisiana 70602 (337) 433-9996 Counsel for Respondent: Westchester Surplus Lines Insurance Co.

James R. Nieset Plauche, Smith, & Nieset Post Office Drawer 1705 Lake Charles, Louisiana 70602 (337) 436-0522 Counsel for Respondent: General Star Indemnity Co. Charles R. Talley Lemle & Kelleher 601 Poydras Street, 21st Floor New Orleans, Louisiana 70130-6097 (504) 586-1241 Counsel for Respondent: Sphere Drake Insurance Co.

Michael J. Vondenstein Attorney at Law One Galleria Blvd., Suite 1400 Metairie, Louisiana 70002 (504) 836-6500 Counsel for Respondent: North American Specialty Insurance Company

John Hatch Hughes Allen & Gooch Post Office Box 3768 Lafayette, Louisiana 70502-3768 (337) 291-1290 Counsel for Respondent: Texas Property & Casualty Insurance Guaranty Association

Anna R. Gray The Gray Law Firm Post Office Box 1467 Lake Charles, Louisiana 70602 (337) 494-0694 Counsel for Respondent: Professional Industrial Maintenance

John William Hite, III Salley, Hite, Rivera & Mercer 365 Canal Street, Suite 1710 New Orleans, Louisiana 70130 (504) 566-8802 Counsel for Respondent: United National Insurance Co.

James J. Hautot, Jr. Judice & Adley Post Office Drawer 51769 Lafayette, Louisiana 70503 (337) 235-2405 Counsel for Respondent: American Indemnity Company

Gregory Edgar Bodin Taylor, Porter, Brooks Post Office Box 2471 Baton Rouge, Louisiana 70821 (225) 387-3221 Counsel for Respondent: Hawley Insurance Company Melvin Alan Eiden Rabalais, Hanna & Hebert 701 Robley Drive, Suite 210 Lafayette, Louisiana 70503 (337) 981-0309 Counsel for Respondent: Scottsdale Insurance Company

David Perry Salley Salley, Hite, Rivera & Mercer 3753 Perkins Road, Suite 5 Baton Rouge, Louisiana 70808 (225) 379-3133 Counsel for Respondent: Zurich American Insurance Company

Timothy Patrick Farrelly Hailey, McNamara Post Office Box 8288 Metairie, Louisiana 70011-8288 (504) 836-6500 Counsel for Respondent: North American Specialty Insurance Company

Marshall Joseph Simien, Jr. Simien Law Firm One Lakeshore Drive, Suite 1110 Lake Charles, Louisiana 70629 (337) 497-0022 Counsel for Respondent: National Union Fire Insurance Company of Pittsburgh Commerce & Industry Insurance Company American International Specialty Lines Insurance Company Lexington Insurance Company

Todd Michael Ammons Stockwell, Sievert Post Office Box 2900 Lake Charles, Louisiana 70602 (337) 436-9491 Counsel for Respondent: Homestead Insurance Company

William James Kelly, III Adams & Reese 4500 One Shell Square New Orleans, Louisiana 70139 (504) 581-3234 Counsel for Respondent: Valley Forge Insurance Company CNA-A Stock Insurance Company Transcontinental Insurance Company CNA-Transportation Insurance Company Continental Casualty Company Joshua Simon Force Sher, Garner, Cahill 5353 Essen Lane, Suite 650 Baton Rouge, Louisiana 70809 (225) 757-2185 Counsel for Respondent: Colonial Insurance Company

Samuel Bryan Gabb Lundy & Davis Post Office Box 3010 Lake Charles, Louisiana 70602 (337) 439-0707 Counsel for Respondent: Transco Syndicate #1 Ltd. Reliance Insurance Company Louisiana Insurance Guaranty Assoc.

Erin Fury Parkinson McGlinchey, Stafford, & Lang 643 Magazine Street New Orleans, Louisiana 70130 (504) 586-1200 Counsel for Respondent: American International Specialty Lines Insurance Company Lexington Insurance Company Commerce & Industry Insurance Company National Union Fire Insurance Company of Pittsburgh

Kelly Cambre Bogart Attorney at Law 3838 N. Causeway Blvd., Suite 2900 Metairie, Louisiana 70002 (504) 589-4307 Counsel for Respondent: Pacific Insurance Company

Pamela J. Lormand Preston & Cowan 909 Poydras Street, Suite 2400 New Orleans, Louisiana 70112 (504) 527-0680 Counsel for Respondent: Highlands Insurance Company

Erin McGonagle Jackson & Campbell 1120 20th NW, Suite 300 South Washington, DC 20036 (202) 457-1600 Counsel for Respondent: Commerce & Industry Insurance Company Lexington Insurance Company National Union Fire Ins. Company of Pittsburgh American International Specialty Lines Insurance Company Richard W. Bryan Jackson & Campbell 1120 20th Street, NW, South Tower Washington, DC 20036 (202) 457-1600 Counsel for Respondent: National Union Fire Insurance Company of Pittsburgh Commerce & Industry Insurance Company American International Specialty Lines Insurance Company Lexington Insurance Company

Sheila R. Caudle Ross, Dixon & Bell 2001 K Street, N.W. Washington, DC 20006-1040 (202) 662-2000 Counsel for Respondent: Transcontinental Insurance Company Continental Casualty Company Valley Forge Insurance Company CNA-A Stock Insurance Company CNA-Transportation Insurance Company SULLIVAN, Judge.

At issue in this writ application is whether the trial court properly denied

summary judgment sought by Liberty Mutual Insurance Company (Liberty Mutual)

regarding a commercial general liability (CGL) policy it issued to S & B Engineers

& Constructors, Ltd. (S & B). For the following reasons, we deny the writ.

Facts

In the mid-1990’s, Conoco discovered that ethylene dichloride (EDC) had been

discharged on its premises. As a result of the EDC discharge, Conoco contracted

with S & B and numerous other contractors to recover the discharged EDC and to

remediate EDC-damaged property at their Westlake, Louisiana site. Conoco’s

contract with S & B is dated October 7, 1994. Pursuant to their contracts with

Conoco, S & B and the other contractors were obligated to maintain CGL policies

which provided $1 million in liability coverage and named Conoco as an “additional

assured.” Liberty Mutual sold S & B two CGL policies dated January 1, 1994 and

January 1, 1995, which contained blanket additional insured endorsements that

provide additional insured coverage to Conoco.

After working at Conoco’s site, employees of many of Conoco’s EDC

contractors filed suit against Conoco, seeking damages for injuries they allegedly

suffered as a result of being exposed to EDC. Conoco settled the employees’ claims,

then filed this suit, contending that Liberty Mutual’s policies provide coverage for the

employees’ claims.

Liberty Mutual filed a motion for partial summary judgment, seeking a

declaratory judgment that Texas law governs the interpretation of its policies and that,

pursuant to Texas law, the total pollution exclusions contained in the two policies

exclude coverage for Conoco in the underlying lawsuits. In opposition, Conoco argued that Louisiana law, which may result in coverage for the underlying lawsuits,

should be applied to interpret the policy. After a hearing, the trial court denied the

motion. Liberty Mutual urges in this writ application that the trial court erred in

denying its motion.

Summary Judgment

A motion for summary judgment will be granted “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any,

show that there is no genuine issue as to material fact, and that mover is entitled to

judgment as a matter of law.” La.Code Civ.P. art. 966(B). Summary judgment is

favored and shall be construed “to secure the just, speedy, and inexpensive

determination of every action.” La.Code Civ.P. art. 966(A)(2).

The mover bears the initial burden of proof to show that no genuine issue of

material fact exists. However, if the mover will not bear the burden of proof at trial,

he need not negate all essential elements of the adverse party’s claim, but he must

point out that there is an absence of factual support for one or more elements essential

to the claim. La.Code Civ.P. art. 966(C)(2). Once the mover has met his initial

burden of proof, the burden shifts to the nonmoving party to produce factual support

sufficient to establish that he will be able to satisfy his evidentiary burden at trial. Id.

Appellate courts review motions for summary judgments de novo, asking the

same questions the trial court asks to determine whether summary judgment is

appropriate. Champagne v. Ward, 03-3211 (La. 1/19/05), 893 So.2d 773. This

inquiry seeks to determine whether any genuine issue of material fact exists and

whether the mover is entitled to judgment as a matter of law. La.Code Civ.P. art.

966(B). “A fact is material if it potentially insures or precludes recovery, affects a

2 litigant’s ultimate success, or determines the outcome of a legal dispute.” Hines v.

Garrett, 04-806, p. 1 (La. 6/25/04), 876 So.2d 764, 765.

Discussion

Liberty Mutual maintains that the choice of law analysis provided in the

Louisiana Civil Code mandates that Texas law be applied to the interpretation of its

policies and that, pursuant to Texas law, the total pollution exclusion contained in

those policies excludes coverage for Conoco’s demands against it. Articles 3515 and

3537 of the Louisiana Civil Code are at issue here. Article 3515 provides:

Except as otherwise provided in this Book, an issue in a case having contacts with other states is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.

That state is determined by evaluating the strength and pertinence of the relevant policies of all involved states in the light of: (1) the relationship of each state to the parties and the dispute; and (2) the policies and needs of the interstate and international systems, including the policies of upholding the justified expectations of parties and of minimizing the adverse consequences that might follow from subjecting a party to the law of more than one state.

Article 3537 states:

Except as otherwise provided in this Title, an issue of conventional obligations is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue.

That state is determined by evaluating the strength and pertinence of the relevant policies of the involved states in the light of: (1) the pertinent contacts of each state to the parties and the transaction, including the place of negotiation, formation, and performance of the contract, the location of the object of the contract, and the place of domicile, habitual residence, or business of the parties; (2) the nature, type, and purpose of the contract; and (3) the policies referred to in Article 3515, as well as the policies of facilitating the orderly planning of transactions, of promoting multistate commercial intercourse, and of protecting one party from undue imposition by the other.

3 Liberty Mutual argues that these conflict of law articles and the jurisprudence

interpreting them mandate a conclusion that Texas law governs the interpretation of

its policies. It outlines the factors which it contends require application of Texas law:

1) S & B is located in Houston, Texas;

2) the Liberty Mutual office which sold the two policies at issue is located in Houston, Texas; and

3) the Liberty Mutual polices at issue were negotiated, executed, issued, and delivered in Texas.

Liberty Mutual cites a number of cases in which various Louisiana courts have

considered similar choice of law conflicts and determined that the law of the state

where the insurer and the insured were located and the policies were sold and

delivered governed interpretation of the contracts. See Murden v. Acands, Inc., 04-

2122, 05-319 (La. 12/14/05), 921 So.2d 165; Harrison v. R.R. Morrison & Son, Inc.,

37,992 (La.App. 2 Cir. 12/10/03), 862 So.2d 1065, writ denied 04-101 (La. 3/19/04),

869 So.2d 857; Norfolk S. Corp. v. Ca. Union Ins. Co., 02-369, 02-371, 02-372

(La.App. 1 Cir. 9/12/03), 859 So.2d 167, writ denied, 03-2742 (La. 12/19/03), 861

So.2d 579; Shell Oil Co. v. Hollywood Marine, Inc., 97-106, 97-611 (La.App. 5 Cir.

10/15/97), 701 So.2d 1038; and Holcomb v. Universal Ins. Co., 93-1424 (La.App. 3

Cir. 6/1/94), 640 So.2d 718, writ denied, 94-1740 (La. 10/7/94), 644 So.2d 643. See

also Resure, Inc. v. Chem. Distrib., Inc., 927 F. Supp. 190 (M.D. La. 1996), aff’d 114

F.3d 1184 (5th Cir. 1997), cert. denied, 523 U.S. 1072, 118 S.Ct. 1511 (1998).

Conoco makes a number of arguments against summary judgment and why

Louisiana law should be applied to the interpretation of Liberty Mutual’s policies.

One of those arguments is that summary judgment is premature at this time because

4 additional discovery is necessary before an adequate conflict-of-laws analysis can be

made.

An analysis under Articles 3515 and 3537 is fact intensive. Liberty Mutual

relies on Article 3537, which identifies numerous factors that must be considered in

an analysis thereunder: (1) the pertinent contacts of each state to the parties and the

transaction, including the place of negotiation, formation, and performance of the

contract, the location of the object of the contract, and the place of domicile, habitual

residence, or business of the parties; (2) the nature, type, and purpose of the contract;

and (3) the policies referred to in Article 3515, as well as the policies of facilitating

the orderly planning of transactions, of promoting multistate commercial intercourse,

and of protecting one party from undue imposition by the other.

Liberty Mutual filed its motion for partial summary judgment on April 25,

2005. Conoco filed its opposition to the motion of June 20, 2005, arguing in part that

Liberty Mutual’s motion was not supported by admissible evidence. On July 1, 2005,

Liberty Mutual filed a supplemental memorandum in support of its motion to which

it attached an affidavit executed by Richard Ruse, the agent who sold S & B its

policy. Mr. Ruse stated that he negotiated and handled the issuance of the policies

Liberty Mutual sold to S & B which are at issue here and that all actions regarding

S & B’s purchase of those policies, i.e., negotiations, issuance, and delivery occurred

in Houston, Texas. In many respects, his statements were non-specific and self-

serving; they essentially tracked the factors enumerated in Article 3537.

One of Conoco’s arguments to the trial court was that it had outstanding

discovery, including a motion to compel discovery and a request for a corporate

deposition of Liberty Mutual, which needed to be completed before Liberty Mutual’s

5 motion should be considered. In its reasons for judgment, the trial court identified

the need for additional discovery as one reason for denying summary judgment.

Shortly thereafter, Conoco continued its attempts to depose Liberty Mutual

representatives; however, Liberty Mutual refused the requested discovery because of

this pending writ application.

Initially, we observe that Richard Ruse’s affidavit was not filed fifteen days

before the hearing as required by La.Code Civ. P. art. 966(A). More importantly, the

affidavit does not detail what the “negotiations” between S & B and Liberty Mutual

involved. Did S & B simply request a CGL policy with an blanket additional insured

provision or did representatives of both companies negotiate back and forth regarding

specific coverage provisions and exclusions to be included in the policies? Was the

additional insured endorsement negotiated between S & B and Liberty Mutual or did

S & B simply request the endorsement with no discussion at all? Did S & B question

the application of the additional insured endorsement regarding contracts it performed

outside the state of Texas? We find this important as S & B is in the business of

remediating hazardous waste sites and the companies with which it contracts for these

services may often require additional insured endorsements. Additionally, as noted

by the trial judge, was the premium charged for the additional insured endorsement

a flat rate premium or was it calculated based on factors which are pertinent to the

issues here?

We have considered the numerous cases cited by Liberty Mutual which

indicate it would be appropriate to apply Texas law to the insurance coverage issues

presented here. However, there is no discussion in those cases of the specific facts

outlined above which we believe are pertinent to a choice of law analysis of the

6 factors here. We cannot tell from the discussions in those cases whether there was

extensive discovery concerning the negotiation and issuance of the policies, whether

the negotiations for the issuance of the policies were detailed, or whether a simple

request for a policy was submitted by the insured to its insurer.

Mr. Ruse’s affidavit and Liberty Mutual’s policies do not allow for a complete

and adequate analysis of the factors and policies enumerated in Articles 3515 and

3537. Consequently, Liberty Mutual has not established that it is “entitled to

judgment as a matter of law.” La.Code Civ.P. art. 966 (A)(2).

Disposition

There was no error in the trial court’s ruling.