Omega Protein, Inc. v. Evanston Insurance Company

• Court: Mississippi Supreme Court
• Decided: March 31, 2022
• Docket: 2020-CA-01097-SCT
• Status: Published

Opinion

IN THE SUPREME COURT OF MISSISSIPPI

NO. 2020-CA-01097-SCT

OMEGA PROTEIN, INC.

v.

EVANSTON INSURANCE COMPANY

ON MOTION FOR REHEARING

DATE OF JUDGMENT: 08/26/2020 TRIAL JUDGE: HON. KATHY KING JACKSON TRIAL COURT ATTORNEYS: MARK D. MORRISON FREDRICK B. FEENEY, II SUSAN F. E. BRUHNKE NATHAN L. BURROW COURT FROM WHICH APPEALED: JACKSON COUNTY CIRCUIT COURT ATTORNEYS FOR APPELLANT: FREDRICK B. FEENEY, II SUSAN F. E. BRUHNKE ATTORNEYS FOR APPELLEE: ROBERT DOUGLAS MORGAN BENJAMIN COLLIER LEWIS NATURE OF THE CASE: CIVIL - INSURANCE DISPOSITION: REVERSED AND REMANDED - 03/31/2022 MOTION FOR REHEARING FILED: 02/03/2022 MANDATE ISSUED:

BEFORE RANDOLPH, C.J., COLEMAN AND CHAMBERLIN, JJ.

COLEMAN, JUSTICE, FOR THE COURT:

¶1. The motion for rehearing is denied. The original opinion is withdrawn, and this

opinion is substituted.

¶2. On the morning of Monday, July 28, 2014, an explosion occurred at the facility of

Omega Protein, Inc., in Moss Point, Mississippi. The explosion killed one man and seriously

injured several others. Multiple lawsuits were filed against Omega in the United States District Court for the Southern District of Mississippi in Gulfport. Colony Insurance

Company filed a declaratory judgment action in Jackson County Circuit Court seeking a

declaration that it did not cover bodily injuries arising out of the Moss Point facility

explosion. Evanston Insurance Company intervened also seeking a declaration of no

coverage for the same injuries. Evanston provided a $5 million excess liability policy, which

provided coverage after Colony’s $1 million policy was exhausted. Because Colony settled

one of the underlying personal injury cases for $1 million (the limits under its policy), Omega

sought excess coverage from Evanston for the injuries that occurred at its plant. A special

master was appointed, and the trial court granted Evanston’s motion for summary judgment,

finding that the pollution exclusion in the insurance contract barred coverage. Omega and

Evanston appealed the grant of summary judgment.

FACTS AND PROCEDURAL HISTORY

¶3. Omega Protein, Inc., entered into a master service contract with Accu-fab and

Construction, Inc., to perform welding and other fabrication work at their facility in Moss

Point, Mississippi. According to the Master Service Contract, Accu-fab was required to

have commercial general liability insurance that named Omega as additional insured. Accu-

fab purchased a $1 million primary policy issued by Colony Insurance Company and a $5

million excess policy issued by Evanston Insurance Company.

¶4. Per the agreement between Omega and Accu-fab, Accu-fab was to perform welding

and other fabrication work on a large metal storage tank used for the temporary storage of

stickwater. Stickwater is a liquid composed of water, fish oil, and fish solids. On July 28,

2 2014, an explosion occurred at the Omega plant while certain Accu-fab workers were

welding and grinding on a large metal tank that was used for the temporary storage of

stickwater. As a result of the explosion, one of Accu-fab’s workers, Jerry Lee Taylor, II, was

killed, another was seriously injured, and others suffered less serious injuries.

¶5. Taylor’s estate sued Omega alleging that the explosion was caused by the ignition of

explosive gases inside the stickwater storage tank. Omega tendered defense and indemnity

of Taylor’s estate’s lawsuit to Colony, as primary insurer, and Evanston, as following-form

excess insurer. Colony filed the instant declaratory judgment action, seeking a declaration

of no coverage for bodily injury based on the pollution exclusion in its policy. Evanston

intervened and denied coverage based on, among other things, the substantially similar

pollution exclusion in its own policy. Omega and Taylor’s estate settled, and Colony

contributed $1 million, an amount equal to the applicable policy limits.

¶6. In the declaratory judgment action, Omega filed motions for partial summary

judgment, alleging that the pollution exclusion did not apply and that the primary non-

contributory clause was ambiguous and thus inapplicable to Omega in connection with the

explosion. Evanston also filed a motion for summary judgment, arguing that Omega was not

an additional insured under the Colony policy and, therefore, likewise was not an additional

insured under the excess policy issued by Evanston. Evanston further argued that Omega

was not entitled to indemnity because there were no factual allegations of negligence against

Accu-fab in the underlying cases and also because its own pollution exclusion barred

Omega’s claims.

3 ¶7. Robert L. Gibbs was appointed as special master in the case to address the motions

for summary judgment and recommended that the trial court find that coverage was barred

under the pollution exclusion and that Omega qualified as additional insured under the policy

in addition to Evanston’s coverage’s being triggered by the $1 million payment by Colony.

The trial court granted Evanston’s summary judgment motion. Omega appealed, and

Evanston cross-appealed. STANDARD OF REVIEW

¶8. The Court reviews de novo a grant or denial of summary judgment. Venture, Inc. v.

Harris, 307 So. 3d 427, 431 (Miss. 2020) (quoting Double Quick, Inc. v. Moore, 73 So. 3d

1162, 1165 (Miss. 2011)). “Summary judgment is appropriate when ‘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] any material fact and that the moving party

is entitled to a judgment as a matter of law.’” Id. (quoting Miss. R. Civ. P. 56(c)).

DISCUSSION

I. Whether the trial court erred by finding that the pollution exclusion contained in the insurance policy issued by Evanston applied.

¶9. Omega contends that the trial court erred by adopting the findings of Special Master

Robert Gibbs. Gibbs found that the pollution exclusion contained in the insurance policy

issued to Accu-fab by Evanston applied to bar coverage of the personal injury claims arising

from the July 2014 explosion. The Evanston pollution exclusion at issue states in relevant

part:

This policy shall not apply:

4 1. To “Ultimate Net Loss”:

a. arising out of or contributed to in any way by the actual, alleged or threatened discharge, dispersal, release, migration, escape, or seepage of pollutants. . . . As used in this exclusion, pollutants means any solid, liquid, gaseous, or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes material, to be recycled, reconditioned, reclaimed or disposed of.

¶10. When reviewing an insurance policy, the Court’s role is “to render a fair reading and

interpretation of the policy.” Corban v. United Servs. Auto. Ass’n, 20 So. 3d 601, 609

(Miss. 2009) (citing Noxubee Cnty. Sch. Dist. v. United Nat’l Ins. Co., 883 So. 2d 1159,

1165 (Miss. 2004)). More importantly, “[l]anguage in exclusionary clauses must be ‘clear

and unmistakable,’ as those clauses are strictly interpreted.” Id. at 615 (quoting U.S. Fid.

& Guar. Co. of Miss. v. Martin, 998 So. 2d 956, 963 (Miss. 2008)). Additionally, limitations

or exclusions on coverage must be construed in favor of the insured and against the insurer.

Lewis v. Allstate Ins. Co., 730 So. 2d 65, 68 (Miss. 1998).

¶11. Further, “[i]f a contract contains ambiguous or unclear language, then ambiguities

must be resolved in favor of the non-drafting party. Ambiguities exist when a policy can be

logically interpreted in two or more ways, where one logical interpretation provides for

coverage.” Architex Ass’n, Inc. v. Scottsdale Ins. Co., 27 So. 3d 1148, 1157 (Miss. 2010)

(quoting Martin, 998 So. 2d at 963). When ambiguities are at play in an insurance contract,

we ask “what a reasonable person . . . in the insured’s position would have understood the

terms to mean.” J & W Foods Corp. v. State Farm Mut. Auto. Ins. Co., 723 So. 2d 550, 552

(Miss. 1998).

5 ¶12. Although the definition of “pollutants” under the policy includes “irritant or

contaminants,” the pollution exclusion does not define “irritant or contaminant.” Stickwater

is a byproduct of the fish meal and fish oil production process. The stickwater in tank

number 10 produced methanethiol, hydrogen sulfide, and methane–all three of which are

extremely flammable and are produced by the decomposition of organic matter. Hydrogen

Sulfide (H2S) is listed on the Center for Disease Control (CDC) website as “a highly toxic

gas that can produce extremely rapid [central nervous system] and respiratory depression. It

is also an irritant affecting skin and mucous membranes.” Agency for Toxic Substances &

Disease Registry, Hydrogen Sulfide (H2S), https://www.atsdr.cdc.gov/mhmi/mmg114.pdf

(last visited Dec. 8, 2021). Likewise, methanethiol, also known as methyl mercaptan is listed

on the CDC website as “highly irritant when it contacts moist tissues such as the eyes, skin,

and upper respiratory tract. It can also induce headache, dizziness, nausea, vomiting, coma,

and death.” Agency for Toxic Substances & Disease Registry, Methyl Mercaptan (CH3SH),

https://www.atsdr.cdc.gov/MHMI/mmg139.pdf (last visited Dec. 8, 2021). Both of the

definitions require contact with mucous membranes or inhalation to become an irritant.

¶13. Omega asserts that the gasses emitted from the stickwater tank are not irritants or

contaminants because they are found naturally, albeit in small quantities, in the ambient air.

Thus, Omega contends, they cannot be pollutants. It further argues that the gasses in the

stickwater tank were not irritants or contaminants as defined under the pollution exclusion

since they were properly contained within the tank and were not contacting, contaminating,

6 or irritating anything. Evanston argues that gasses emitted from the tank fit squarely within

the pollution exclusion language.

¶14. The Oxford English Dictionary defines “irritant” as an “irritant substance, body or

agency; a poison, etc. which produces irritation; and anything that stimulates an organ to its

characteristic vital action.” Irritant, The Oxford English Dictionary (2d ed. 1989). It defines

“contaminant” as “that which contaminates.” Contaminant, The Oxford English Dictionary

(2d ed. 1989). More helpful is the definition of “contaminate” provided by the dictionary

as “to render impure by contact or mixture; to corrupt, defile, pollute, sully, taint, [or] infect.

Contaminate, The Oxford English Dictionary (2d ed. 1989).

¶15. The words “irritant” and “contaminant” are subject to more that one meaning under

the pollution exclusion. On one hand a substance can be an irritant or contaminant at its core

and by its very nature. That substance is an irritant or a contaminant no matter where it is,

how it is contained, or whether it is in contact with something actively irritating or

contaminating it. On the other hand, pursuant to the above-cited definitions, a substance is

not necessarily an irritant or contaminant until it comes into contact with something and is

actively irritating or contaminating it. For example, crude oil inside a large tanker is a

contaminant by its very nature. Though it is contained inside the tanker, were it to come into

contact with the water or wildlife, it would contaminate them immediately. The potential a

substance has to contaminate makes the substance a contaminant by its nature, no matter

where it is located. It can also be said that the same crude oil under the same set of facts is

not a contaminant because it is located inside an inert container within the ship and is not in

7 contact with anything. In that context, that crude oil it is not a contaminant because it is not

actively contaminating something.

¶16. The pollution exclusion at issue is susceptible to more than one reasonable

interpretation and, therefore, is ambiguous. Accordingly, it must be construed in favor of

coverage in accordance with Architex and Martin. The trial judge, therefore, erred by

adopting the special master’s finding that the pollution exclusion applied.

II. Whether the trial judge erred by adopting the special master’s finding that coverage was triggered under Evanston’s policy of excess liability insurance.

¶17. On cross-appeal, Evanston argues that coverage of Omega should not have been

triggered under the insurance contract at all. Evanston relies solely on the Mississippi

Supreme Court’s recent opinion in Colony Insurance Co. v. First Specialty Insurance Corp.

However, Evanston’s reliance is misplaced. In Colony, the Court simply answered a certified

question from the United States Court of Appeals for the Fifth Circuit; the question was

whether the payment Colony Insurance made was voluntary or whether it was compelled to

do so. Colony Ins. Co. v. First Specialty Ins. Corp., 262 So. 3d 1128, 1135 (Miss. 2019).

¶18. In Colony, Colony Insurance Company, a primary insurer of Accu-fab, negotiated and

paid a settlement for the wrongful death claim that had arisen from the July 2014 explosion

at Omega’s Moss Point facility. Id. at 1131. Colony filed a declaratory judgment action in

the Circuit Court of Jackson County, Mississippi, seeking an order declaring that Colony’s

policy did not provide coverage for any of the damages or injuries sustained as a result of the

July 2014 explosion. Id. at 1130. Colony demanded that First Specialty Insurance

8 Corporation, the excess liability policy issuer, reimburse the full amount Colony contributed

to the wrongful death settlement. Id. at 1131. When First Specialty refused, Colony filed

an action against it seeking reimbursement of the amount it had contributed to the settlement

of Taylor’s estate’s wrongful death lawsuit against Omega. Colony asserted claims of

equitable subrogation and implied indemnity. Id. Of import here, Colony involved two

insurance companies litigating equitable subrogation and implied indemnity causes of action.

Id.

¶19. The case at bar, while arising out of the same series of unfortunate events, is

distinguishable from the Court’s Colony opinion in that it is a question of whether there is

coverage under the excess insurance contract. It is not an action between two insurance

companies sounding in equitable subrogation and implied indemnity. Evanston relies on the

holding in Colony to support the claim that Colony, the primary insurer, voluntarily paid the

policy limit on behalf of Omega in defense of the claims from Taylor’s estate. Evanston

argues that a voluntary payment, as opposed to a compulsory one, indicates there is no

liability on behalf of Accu-fab, so the excess coverage policy was not triggered. However,

the court’s decision in Colony is not applicable. No determination of liability was made in

Colony, and the voluntary payment has no bearing on the analysis here.

¶20. The trial court erred by finding that coverage was triggered because there has been no

showing of negligence on behalf of Accu-fab. In Mississippi, insurance policies “are

contracts, and as such, they are to be enforced according to their provisions.” Corban, 20 So.

3d at 609. Thus, the coverage issue pled will be determined by the language of the policy.

9 The Evanston excess policy states that Evanston “agrees to pay on behalf of the Insured that

portion of Ultimate Net Loss in excess of the limits of the Underlying Insurance” and will

provide coverage to additional insureds “to the extent of their liability due to the negligence

of the Named Insured.” The trial court relied on the special master’s finding that the

voluntary payment from Colony and the language and the nature of the policy showed that

coverage should be triggered. However, this Court finds that the excess policy cannot be

triggered without the exhaustion of the underlying insurance policy and a showing of

negligence from Accu-fab. As the parties have agreed there has been no adjudication of fault

or negligence attributed to Accu-fab, there can be no finding that the policy was triggered.

The trial court erred by determining that the excess policy was triggered without first

determining if there was liability on behalf of Accu-fab.

III. Whether the trial judge erred by adopting the special master’s finding that Omega qualified as an additional insured under Evanston’s policy of excess liability insurance.

¶21. Also on cross-appeal, Evanston contends that Omega should not have qualified as an

additional insured under the insurance contract. Evanston provided an excess insurance

policy to Accu-fab that provided $5 million of coverage if and when the $1 million policy

issued by Colony was exhausted. Accu-fab was the named insured on both policies, not

Omega. However, per the master service contract between Accu-fab and Omega, Omega

was required to be listed as an additional insured on the insurance policies that Accu-fab was

contractually required to take out. Item 4 of the insurance contract is titled “Schedule of

Underlying Insurance” and clearly lists the Colony policy held by Accu-fab. The Colony

10 policy contained a schedule entitled “ADDITIONAL INSURED - OWNERS, LESSEES OR

CONTRACTORS - SCHEDULED PERSON OR ORGANIZATION.” The schedule listed

additional insured as “All persons or organizations as required by written contract with the

Named Insured.” Thus, subject to a determination of negligence on Accu-fab’s part, under

the contract, Omega could qualify as an additional insured.

¶22. The excess policy issued by Evanston also contains a provision that states the policy

will “follow form over Additional Insureds covered in the Controlling Underlying Insurance

to the extent of their liability due to the negligence of the Named Insured.” Thus, for the

excess policy to afford coverage to Omega, there must be a determination that Omega has

incurred liability on behalf of negligence attributed to Accu-fab. There was never any

adjudication made regarding negligence of Accu-fab. Indeed, the parties acknowledge that

lack of a negligence determination in their briefs.

¶23. However, since the underlying lawsuit in the appeal before the Court is a declaratory

judgment action filed by Colony in which Evanston intervened, and Evanston is the party

seeking a declaratory judgment on the issue, it has assumed the burden of proof. “The

movant has the burden of showing no genuine issue of material fact exists, giving the non-

movant the benefit of the doubt as to the existence of any genuine issues of material facts.”

Richardson v. Norfolk S. Ry. Co., 923 So. 2d 1002, 1007 (Miss. 2006) (citing McCullough

v. Cook, 679 So. 2d 627, 630 (Miss. 1996)). Because there has been no adjudication of fault

or negligence attributed to Accu-fab, Evanston has failed to prove that Omega was not

covered under the excess liability policy issued by Evanston. Likewise, due to this same lack

11 of a fault adjudication, the trial court erred by summarily finding that Omega qualified as

additional insured under the excess liability policy issued by Evanston.

CONCLUSION

¶24. Because the pollution exclusion in the insurance contract was ambiguous, it must be

construed against the insurer and in favor of the insured, allowing coverage. Further, we find

the question of whether coverage was triggered is governed by the language of the contract

and that Evanston has failed to prove there could be no coverage under the excess liability

policy. Also, as there has been no determination of liability on behalf of Accu-Fab, the trial

court erred by summarily finding that Omega is an additional insured. Therefore, we reverse

the trial court’s grant of summary judgment as to all issues and remand the case for further

proceedings.

¶25. REVERSED AND REMANDED.

RANDOLPH, C.J., KITCHENS AND KING, P.JJ., MAXWELL, BEAM, CHAMBERLIN, ISHEE AND GRIFFIS, JJ., CONCUR.