Charles Cook v. Admiral Insurance Company , 438 F. App'x 313 ( 2011 )

Case: 10-10722 Document: 00511577703 Page: 1 Date Filed: 08/19/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 19, 2011
No. 10-10722 Lyle W. Cayce
Clerk
CHARLES D. COOK, D/B/A COOK’S OILFIELD SERVICES,
Plaintiff-Appellant
v.
ADMIRAL INSURANCE COMPANY,
Defendant-Appellee
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 2:09-CV-00109
Before SMITH, WIENER, and OWEN, Circuit Judges.
PER CURIAM:*
MJ Brogdin Consulting Co. (“Brogdin”) retained the services of Plaintiff-
Appellant Charles D. Cook to deliver casing1 and oversee its installation in
Brogdin’s oil well. During the execution of his work on the project, Cook
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
1
Casing is tubing or hollow pipe that comes in lengths or “joints” and is used to line the
hole or “bore” of an oil well and to permit production when the drilling is finished and the well
is “completed,” to permit production of minerals from the well’s productive zone. To avoid
unnecessary delay, a maximum number of joints of casing are delivered to the drill site, and,
after the depth for completion is determined, excess joints are removed from the site and
returned to the supplier.
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delivered casing to the drill site, but thereafter made a counting error that
caused him to take away more of that casing, as excess, than he should have.
This error in turn resulted in the completion of the well at an incorrect depth,
shallower than the zone targeted for completion. Consequently, Brogdin incurred
increased costs to have the well reworked and casing reinstalled to the correct
depth. Cook sued his commercial general liability (“CGL”) insurance carrier,
Defendant-Appellee Admiral Insurance Company (“Admiral”), seeking a
declaratory judgment that Admiral must (1) defend Cook in any lawsuit brought
against him by Brogdin and (2) indemnify Cook for all damages awarded to
Brogdin in such a suit.
Seeking a determination that it did not owe Cook a defense or indemnity,
Admiral filed a motion for summary judgment, which the district court granted.
The court reasoned that, because there was no “loss of use” of the Brogdin well,
Cook’s acts did not result in “property damage” under the terms of Admiral’s
policy, so Admiral had no duty to defend or indemnify Cook. We affirm the sum-
mary judgment, but for different reasons
I. FACTS & PROCEEDINGS
A. Facts
Cook purchased a CGL insurance policy from Admiral. During the term
of that policy, Brogdin retained Cook to deliver casing to the well and to oversee
its installation in the well bore. In preparation for casing and completing the oil
well, Cook was required to haul any excess casing away from the drill site. Cook
made a counting error, however, and hauled away too much casing from the drill
site. This resulted in an insufficient string of casing being installed in the well
bore, causing the well to be completed ineffectively at a depth that was shallower
than that of the zone intended for completion and production. This required
Brogdin to have the well reworked before it could be completed at the correct
2
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depth, costing Brogdin $336,745.63. Brogdin sued Cook in state court, claiming
only that cost of reworking the well.
B. Proceedings
Before he was sued by Brogdin, Cook notified Admiral of Brogdin’s pre-suit
claim. Admiral responded that, although the CGL policy provided $1 million in
coverage, Cook could not recover more than $100,000 in damages because of an
endorsement relating to underground work. This prompted Cook to sue Admiral
in state court, seeking a declaratory judgment that the policy’s full $1 million
coverage was applicable to Brogdin’s anticipated claim because Cook’s work did
not involve an underground equipment hazard. When, thereafter, Brogdin sued
Cook, Admiral accepted Cook’s defense under a reservation of the right to claim
that it had no duty to defend or indemnify Cook against Brogdin’s suit.
Admiral removed Cook’s action to federal court and Brogdin intervened.
Admiral then countersued Cook and Brogdin, seeking a declaratory judgment
that its duty to indemnify Cook was limited to $100,000. Cook filed a motion for
partial summary judgment on Admiral’s counterclaim. Admiral then filed a
motion for summary judgment, asserting that it had no duty to defend Cook in
Brogdin’s state court suit because Brogdin’s claims against Cook were not within
the scope of coverage of the CGL policy.
The district court granted summary judgment in favor of Admiral. It held
that Admiral did not have a duty to defend Cook against Brogdin’s lawsuit
because Cook’s actions did not result in a “loss of use of tangible property that
is not physically injured,” and that there thus was no “property damage” under
the CGL policy.2 The district court also ruled that, for the same reasons, Admiral
did not have a duty to indemnify Cook, who then timely filed a notice of appeal.
2
Cook v. Admiral Ins. Co., No. 2:09-CV-0109-J, 2010 WL 2605256, at *2-4 (N.D. Tex.
June 29, 2010).
3
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II. ANALYSIS
A. Standard of Review
We review a district court’s summary judgment de novo, applying the
same legal standards as the district court.3 Summary judgment is proper only
“if the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.”4 In our review, we may
only consider the summary judgment record that was before the district court,
viewing that evidence in the light most favorable to the non-moving party.5
B. Admiral Does Not Have a Duty to Defend Cook
Under Texas law, an insurer’s duty to defend “is governed by the
‘eight-corners’ rule, whereby a court considers only the allegations in the
underlying complaint and the terms of the insurance policy. If the petition filed
against the insured, liberally construed, alleges facts within the scope of
coverage, the insurer must defend.”6 In addition, the duty to defend “is
determined by the underlying plaintiff’s pleadings . . . without regard to the
truth or falsity of those allegations,” making “only two documents [ ] ordinarily
relevant to the determination of the duty to defend: the policy and the pleadings
of the underlying claimant. Facts outside the pleadings, even those easily
ascertained, are ordinarily not material to the determination and allegations
against the insured are liberally construed in favor of coverage.”7
3
United States v. Caremark, Inc., 634 F.3d 808, 814 (5th Cir. 2011) (citation omitted).
4
FED. R. CIV. P. 56(a).
5
Caremark, 634 F.3d at 814 (citations omitted).
6
Lincoln Gen. Ins. Co. v. Aisha’s Learning Center, 468 F.3d 857, 858 (5th Cir. 2006)
(citing Nat’l Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex.
1997)).
7
Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 599-600 (5th Cir. 2006) (citing
GuideOne Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006)).
4
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Here, Brogdin asserts in its complaint that it had contracted with Cook to
“deliver and oversee the running of casing on a well” but that Cook had “removed
more casing from the well site than it [sic] should, thereby resulting in a failure
to complete the well to the desired depth, necessitating an expensive rework of
the well, proximately causing damage to plaintiff.” Based on these alleged facts,
Brogdin makes two distinct legal claims—one based on a theory of breach of
contract and the other based on a theory of negligence—contending that under
each theory Cook “must reimburse [Brogdin] for the funds paid by [Brogdin] to
mitigate damages caused by [Cook], to the damage of [Brogdin].” We now must
determine in our de novo review whether Brogdin has made allegations against
Cook that fall within the scope of coverage of Admiral’s CGL policy.
1. “Loss of Use of Tangible Property That Is Not Physically
Injured”
The CGL policy requires Admiral to defend Cook against any suit seeking
“damages because of ‘bodily injury’ or ‘property damage’ to which this insurance
applies.”8 The policy further provides that “[t]he insurance applies to [ ] ‘property
damage’ only if: The [ ] ‘property damage’ is caused by an ‘occurrence’ that takes
place in the ‘coverage territory’ . . . .” And an “occurrence” is defined as “an
accident, including continuous or repeated exposure to substantially the same
harmful conditions.” The Texas Supreme Court has agreed with our earlier
assessment that “‘claims for damage caused by an insured’s defective
performance or faulty workmanship’ may constitute an ‘occurrence’ when
‘property damage’ results from the ‘unexpected, unforeseen or undesigned
happening or consequence’ of the insured’s negligent behavior”9—regardless of
8
The parties do not dispute that Brogdin does not allege “bodily injury” in this case.
9
Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 16 (Tex. 2007) (quoting
Federated Mut. Ins. Co. v. Grapevine Excavation Inc., 197 F.3d 720, 725 (5th Cir. 1999)).
5
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whether the occurrence injures a third party’s property or the insured’s work.10
The Texas Supreme Court has also explained that “[a]n accident is generally
understood to be a fortuitous, unexpected, and unintended event” and has cited,
as an example, “[t]he wrong number of boxes was shipped because someone
made a mistake in counting.”11
Here, Cook’s “remov[al] [of] more casing from the well site than [he]
should” (because someone made a mistake in counting) was an “occurrence”
under the terms of the CGL policy, as construed by the Texas Supreme Court.12
The question then is whether the resulting damage alleged by Brogdin—the
“failure to complete the well to the desired depth”—constituted “property
damage” under Admiral’s policy.
That CGL policy defines “property damage” disjunctively as:
(a) Physical injury to tangible property, including all resulting
loss of use of that property. All such loss of use shall be deemed to
occur at the time of the physical injury that caused it; or
(b) Loss of use of tangible property that is not physically injured.
All such loss of use shall be deemed to occur at the time of the
“occurrence” that caused it.
In the district court, Cook assumed that Brogdin’s alleged facts fit into the
CGL policy under subsection (b) alone, i.e., the “loss of use” definition of
“property damage.” The district court determined, however, that for there to be
“loss of use of tangible property,” the tangible property—here, the well—must
have been in use prior to the damage.13 The court observed: “The well completed
10
Id. at 9 (“The CGL policy, however, does not define an ‘occurrence’ in terms of the
ownership or character of the property damaged by the act or event. Rather, the policy asks
whether the injury was intended or fortuitous, that is, whether the injury was an accident.”).
11
Id. at 8 (quotation marks and citations omitted).
12
See id.
13
Cook, 2010 WL 2605256, at *3.
6
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at the specified depth had not only not been used but could not have been used.
It was not poised ready to put in action or service. It simply did not exist at the
time of the breach or when the reworking was done.”14 Based on that analysis,
the district court concluded that Cook’s actions did not result in “loss of use” of
an existing well.15 The court went on to note that “even if the policy did cover
damages for the loss of use of something that had not yet been created, the
Brogdin lawsuit does not allege damages for loss of use.”16 We need not pursue
this further, however, because we affirm on different grounds.
2. “Property Damage” Exclusions
Although the CGL policy does generally require Admiral to defend against
any suit seeking damages from Cook for “property damage,” section j of the
policy expressly excludes coverage of:
“Property damage” to:
...
(5) That particular part of real property on which you . . . are
performing operations if the “property damage” arises out of those
operations; or
(6) That particular part of any property that must be restored,
repaired or replaced because ‘your work’ was incorrectly performed
on it.
Here, the “property damage,” i.e., the completion of the well at an incorrect
depth, undeniably arose out of Cook’s operations; and it was precisely that well
which had to be reworked because Cook’s negligence in retrieving too much
casing from the site left an insufficient quantity of casing to reach the proper
depth for completion. Moreover, Cook then oversaw the running of that
insufficient casing. Relying on Mid-Continent Casualty Co. v. JHP Development,
14
Id.
15
Id.
16
Id. (emphasis added).
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Inc.,17 Cook insists that exclusion j(5) is inapplicable because, temporally
speaking, “there was a gap between the occurrence and loss of use.” In that
opinion, we addressed this same CGL policy exclusion, recognizing that
“exclusion j(5) makes clear that the exclusion only applies to property damage
that occurred during the performance of construction operations” and concluding
that the exclusion did not apply in that case because the property damage
“occur[red] during a prolonged, open-ended, and complete suspension of
construction activities.”18 Cook attempts to liken Mid-Continent to the instant
case by identifying the “occurrence” as the removal of the casing and then
arguing that the property damage “occurred after the occurrence was performed,
when the casing was run.” This analysis, however, misses the point of our
holding in Mid-Continent and misses the factual distinction between that case
and this one. The plain language of exclusion j(5) makes it applicable to property
damage that “arises out of” operations that take place while the insured is
“performing operations.” That is why exclusion j(5) did not apply in Mid-
Continent to damage caused during a suspension of construction activities. Here,
in contrast, there was no suspension of construction activities: The well was
completed to the incorrect depth, i.e., damaged, while Cook was “deliver[ing] and
oversee[ing] the running of casing on [the] well,” as his “work” was characterized
in Brogdin’s complaint.
Cook likewise asserts that exclusion j(6) is inapplicable because “the
defective work was the removal of casing, [and] the loss of use was to the well,
a separate property.” But, this analysis too strays from the plain text of the
exclusion. In Mid-Continent, we explained that “[t]he plain meaning of the
exclusion . . . is that property damage only to parts of the property that were
17
557 F.3d 207 (5th Cir. 2009).
18
Id. at 213.
8
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themselves the subjects of the defective work is excluded.”19 In the instant case,
Cook was hired to (1) provide casing for the well as an integral part of the
drilling and completion of the well as a whole and (2) oversee the running of the
casing that he provided. As Admiral notes, casing “is not a component of a well
that functions independently, and without which the rest of the well would
continue to function.”20 Therefore, because Cook negligently recovered and
hauled off too much of the casing from the well site where he had delivered
it—thus furnishing a net amount of casing insufficient to reach the target depth
for the completion of the well—he caused defects in the “construction” of the well
as a whole when he oversaw the installation of that deficient quantity of casing.
These circumstances are distinguishable from those of defective repair work
(performed after a well is constructed) that causes damage only to the casing, as
a pre-installed component of the finished well.21 By contrast, there was here no
domino effect of damage to the entire well triggered by Cook’s defective work on
one independent working part of the well; rather, Cook’s work was performed
during the overall drilling and completion operation of the well and thus caused
damage to the entire well when his work was incorrectly performed.
Although the district court did not grant summary judgment in favor of
Admiral on the basis of exclusions j(5) and j(6), we have recognized that we may
19
Id. at 215.
20
This is simply not a situation in which the insured’s work was to be performed on a
discrete independent component of a whole piece of property, and its defective work on that
one component caused damage to other components of the whole property. See Gore Design
Completions, Ltd. v. Hartford Fire Ins. Co., 538 F.3d 365, 371-72 (5th Cir. 2008) (holding that
when the insured was hired for “engineering of an in-flight entertainment/cabin management
system,” exclusion j(6) only “exclude[d] coverage for the damage to the IFE/CMS itself (or,
perhaps, the electrical system) but not the rest of the Aircraft and the ensuing loss of use
damages”).
21
See, e.g., Underwriters at Lloyd’s London v. OSCA, Inc., Nos. 03-20398, 03-20817,
03-21021, 2006 WL 941794, at *18-19 (5th Cir. 2006) (per curiam) (unpublished).
9
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affirm a district court’s judgment for reasons—supported by the record—other
than those relied on by the district court.22 We may, therefore, properly consider
whether any of the Admiral policy’s exclusions apply to coverage in this case
because the entire CGL policy, including exclusions j(5) and j(6), is part of the
record. Cook contends that Admiral has waived any argument based on these
policy exclusions because, under Texas law, a policy exclusion is an affirmative
defense,23 and failure to raise an affirmative defense generally constitutes
waiver.24 But, we have also made clear that “there is some play in the joints” of
that general rule, and “‘a defendant does not waive an affirmative defense if it
is raised at a pragmatically sufficient time, and [the plaintiff] was not prejudiced
in its ability to respond.’”25 We have, for example, upheld a summary judgment
in favor of an insurer based on an affirmative defense that the insurer did not
plead.26
Here, the parties’ dispute turned primarily on whether Cook’s negligence,
as alleged by Brogdin, caused “property damage” under the policy’s “loss of use”
definition. The district court determined that it did not, thereby denying that
Admiral had a duty to defend, and the court stopped its analysis at that point.
Because the court thus determined that there was no policy coverage in the first
22
Palmer ex rel. Palmer v. Waxahachie Indep. Sch. Dist., 579 F.3d 502, 506 (5th Cir.
2009) (citing United States v. Dunigan, 555 F.3d 501, 508 n.12 (5th Cir. 2009)), cert. denied,
130 S. Ct. 1055 (2010); LLEH, Inc. v. Wichita County, Tex., 289 F.3d 358, 364 (5th Cir.), cert.
denied, 537 U.S. 1045 (2002).
23
TEX. INS. CODE § 554.002 (“Language of exclusion in the contract or an exception to
coverage claimed by the insurer or health maintenance organization constitutes an avoidance
or an affirmative defense.”).
24
Rogers v. McDorman, 521 F.3d 381, 385 (5th Cir. 2008).
25
Id. at 385-86 (quoting Arismendez v. Nightingale Home Health Care, Inc., 493 F.3d
602, 610 (5th Cir. 2007)) (alteration in original).
26
Standard Waste Sys. Ltd. v. Mid-Continent Cas. Co., 612 F.3d 394, 398 (5th Cir.
2010).
10
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place, it had no reason to question whether any of the policy’s exclusions might
apply. As we found that ruling to raise a difficult question, however, and
believed the policy-exclusion question to be rather straightforward, we requested
that both parties submit supplemental letter briefs addressing the applicability
of the policy’s two exclusions, which to us seemed relevant to the facts of this
case. Cook thus had an adequate opportunity to respond and to refute the
applicability of the exclusions; and, indeed, he took only two days, of the seven
we allowed, to do so. Now that we have reviewed both Cook’s and Admiral’s
responding analyses on this issue, we are satisfied that Cook was not prejudiced
by our sua sponte raising of this issue,27 and we are now convinced that these
exclusions provide the correct legal basis on which to affirm the district court’s
summary judgment.
In sum, the property damage alleged by Brogdin in its complaint falls
squarely within these two “property damage” exclusions—j(5) and j(6)—of the
CGL policy. This, in turn, relieves Admiral of any duty to defend Cook in the
action brought against him by Brogdin.
C. Admiral Does Not Have a Duty to Indemnify Cook
Under Texas law, an insurer’s duty to indemnify “is justiciable before the
insured’s liability is determined in the liability lawsuit when the insurer has no
duty to defend and the same reasons that negate the duty to defend likewise
negate any possibility the insurer will ever have a duty to indemnify.”28 Admiral’s
CGL policy provides that it “will pay those sums that [Cook] becomes legally
obligated to pay as damages because of [ ] ‘property damage’ to which this
insurance applies.” As we have determined that the CGL policy does not apply
27
Federal Rule of Civil Procedure 56 does not limit district courts or courts of appeals
to granting summary judgment based on grounds asserted by the parties.
28
Farmers Tex. Cnty. Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997) (emphasis
in original).
11
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to the type of “property damage” alleged by Brogdin, Admiral does not have a
duty to indemnify Cook for the same reasons that it does not have a duty to
defend him.
III. CONCLUSION
For the foregoing reasons, the district court’s summary judgment relieving
Admiral of any duty to defend or indemnify Cook is, in all respects, AFFIRMED.
12
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OWEN, Circuit Judge, concurring.
I respectfully concur in the judgment only. The panel majority’s decision
is based on arguments that neither Admiral Insurance Company nor Cook
advanced in the district court, nor were these arguments raised in this court
until supplemental briefing was requested by our court. Respectfully, our
jurisprudence does not allow us to affirm a summary judgment on any grounds,
but rather only on the basis of any arguments advanced below. Admiral is
entitled to summary judgment, however, since the events giving rise to the
underlying suit against Cook fall outside the scope of Cook’s insurance policy.
Admiral did advance this basis for summary judgment, both in the district court
and in our court.
I
Cook acquired a general commercial liability insurance policy from
Admiral. Cook contracted with M. J. Brogdin to deliver and oversee the running
of casing for an oil well. In the course of that job, Cook made an error, and
Brogdin sued. Brogdin’s two-page petition filed in state court alleged that Cook
“removed more casing from the well site than [he] should, thereby resulting in
a failure to complete the well to the desired depth.” Brogdin’s suit sought
damages as a result. Cook filed the instant suit against Admiral, seeking a
declaratory judgment that Admiral was required to defend and indemnify him
from Brogdin’s claims.
The district court granted summary judgment in favor of Admiral. Among
Admiral’s arguments for summary judgment, though not the basis of the district
court’s decision, was the limited scope of the coverage set forth in the
“classifications” section of the insurance policy. Admiral did not advance an
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argument on the basis of the “property damage” exclusions relied upon by the
panel majority.1
II
The panel majority resolves this case on the basis of two “property
damage” exclusions in the policy.2 The panel majority concludes that the district
court’s grant of summary judgment may be affirmed on the basis of these
exclusions—which were not addressed by the parties until our request for
supplemental briefing on appeal—because “we have recognized that we may
affirm a district court’s judgment for reasons—supported by the record—other
than those relied on by the district court.”3
Our court, however, has recognized limits on the reach of that general
proposition. For instance, in Johnson v. Sawyer, we stated, “Although we can
affirm a summary judgment on grounds not relied on by the district court, those
grounds must at least have been proposed or asserted in that court by the
movant.”4 Yet here, the panel majority relies upon exclusions that were never
asserted in the district court.
In LeMaire v. Louisiana Department of Transportation & Development, we
recognized that the limits placed upon our summary judgment affirmance rule
are intertwined with the general limits we place upon the scope of our
consideration on appeal: “we may only affirm an order granting summary
judgment on a basis that was presented to the district court. This is in keeping
1
Ante, at 11.
2
Id.
3
Id. at 9-10 (citing Palmer ex rel. Palmer v. Waxahachie Indep. Sch. Dist., 579 F.3d 502,
506 (5th Cir. 2009); LLEH, Inc. v. Wichita Cnty., Tex., 289 F.3d 358, 364 (5th Cir. 2002)).
4
120 F.3d 1307, 1316 (5th Cir. 1997) (citing Mo. Pac. R.R. v. Harbison-Fischer Mfg. Co.,
26 F.3d 531, 538 (5th Cir. 1994), F.D.I.C. v. Laguarta, 939 F.2d 1231, 1240 (5th Cir. 1991), and
Frank C. Bailey Enter., Inc. v. Cargill, Inc., 582 F.2d 333, 334 (5th Cir. 1978)).
14
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with our precedent that arguments not raised before the district court are
waived and cannot be raised for the first time on appeal.”5 Accordingly, the
general proposition relied upon by the panel majority comes into tension with
another of our court’s general propositions, stated—perhaps most succinctly—in
another context by our en banc court: “It goes without saying that we are a court
of review, not of original error. Restated, we review only those issues presented
to us; we do not craft new issues or otherwise search for them in the record.”6
We have recognized that “[i]t is for the parties, those who have a stake in the
litigation, to decide which issues they want to pursue, at trial and on appeal.”7
As our en banc court recognized, “it is not for us to decide which issues should
be presented, or to otherwise try the case for the parties.”8 Here, because the
parties chose—on the basis of their own assessments—to address other
provisions contained in the policy, we should not relitigate the case for them.
III
There is, however, an alternative ground on which summary judgment
may be affirmed that the parties did raise, both below and in their briefing to
this court. Admiral contends that the claims asserted by Brogdin’s suit against
Cook fall outside the scope of Cook’s policy. To determine the scope of Admiral’s
duty to defend under Texas’s “eight corners” rule, we compare the facts alleged
in Brogdin’s petition to the language of the policy.9
5
480 F.3d 383, 387 (5th Cir. 2007) (internal citation omitted).
6
United States v. Brace, 145 F.3d 247, 255 (5th Cir. 1998) (en banc).
7
Id. at 256.
8
Id.
9
Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Merchs. Fast Motor Lines, Inc., 939
S.W.2d 139, 141 (Tex. 1997) (per curiam).
15
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The underlying state-court petition states that Cook “removed more casing
from the well site than [he] should, necessitating an expensive rework of the
well.” On appeal, Cook explains that this was an “oversight” and cites to a
description of this oversight as arising “when Cook’s employees miss counted
[sic] casing joints.” However, the insurance policy contains an endorsement that
“[t]his insurance applies to . . . ‘property damage’ . . . arising only out of those
operations which are described by the classification shown on the Commercial
General Liability Coverage Declarations, its endorsements[,] and supplements.”
The “Commercial General Liability Coverage Part” includes the following
“Classification[s]”:
OIL OR GAS LEASE WORK BY CONTRACTORS—OILFIELD
LEASE ROAD AND DITCH MAINTENANCE, EXCAVATION AND
BEAUTIFICATION OF OILFIELD LEASE SITE—NOT LEASE
OPERATIONS—OILFIELD WATER STEAM CLEANING OF
TANKS AND SMALL TANKS WITH PRESSURE WASHER WITH
PSI OF 2500 OR LESS—NOT LEASE OPERATIONS
OCCASIONAL SHOP WELDING—EXCLUDING ANY WORK ON
EXISTING LINES[.]
OIL OR GAS CONTRACTOR’S EQUIPMENT RENTED TO
OTHER[S] (EXCLUDING ANY SELF-PROPELLED VEHICLES OR
AUTOS) WITHOUT OPERATORS—NO IN-HOLE EQUIPMENT
(PRODUCTS/COMPLETED OPERATIONS ARE INCLUDED IN
THE GENERAL AGGREGATE LIMIT)[.]
SUB-CONTRACTED WORK ONLY TO OTHER INSURED
INDEPENDENT CONTRACTORS, OIL OR GAS WORK IN THE
FIELD[.]10
The events for which Cook seeks coverage fall outside of the scope of the
text. We must be mindful of the directive under Texas law that “courts must
strive to give effect to the written expression of the parties’ intent” in
10
The original appears to use en-dashes instead of em-dashes or hyphens. This has
been corrected without brackets for clarity.
16
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No. 10-10722
interpreting an insurance policy.11 Moreover, to determine the scope of coverage
“the court must focus on the factual allegations that show the origin of the
damages rather than on the legal theories alleged.”12 Reading the classifications
as a whole, nothing listed in the policy’s coverage extends to the facts pled: the
erroneous removal of casing from the site that hindered the completion of the
well at the desired depth.
Nevertheless, Cook argues that the erroneous removal of the casing falls
under the phrase “oil or gas lease work by contractors” in the classification. But
that phrase is followed by a dash and references to lease road and ditch
maintenance and the excavation and beautification of the oilfield lease site.
Cook’s “remov[al of] more casing from the well site than [he] should” bears no
resemblance to the policy’s statements of coverage. Cook’s allegedly erroneous
acts are wholly unconnected to maintaining lease roads or ditches. Similarly,
one cannot say that Cook’s erroneous removal of the pipe was done to beautify
or excavate the site: as Cook concedes, the casing was improperly removed owing
to an “oversight,” a function of a counting error. Moreover, if “lease work by
contractors” were to extend coverage to all activities undertaken by Cook in the
course of his business—as Cook appears to contend—there would be no need for
the examples following the dash. Indeed, the Supreme Court of Texas has held
that “courts must be particularly wary of isolating from its surroundings or
considering apart from other provisions a single phrase, sentence, or section” of
11
State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430, 433 (Tex. 1995) (citation
omitted).
12
Merchs. Fast Motor Lines, Inc., 939 S.W.2d at 141 (internal quotation marks and
citation omitted).
17
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No. 10-10722
an insurance policy.13 Reading the classifications as a whole, the removal of the
casing falls outside of the policy’s scope and, thus, coverage does not attach.14
Alternatively, Cook argues that this section of the insurance contract is
unclear and should be construed against Admiral. He relies upon National
Union Fire Insurance Co. of Pittsburgh, Pennsylvania v. Hudson Energy Co.15
There, the Supreme Court of Texas held that “if a contract of insurance is
susceptible of more than one reasonable interpretation, we must resolve the
uncertainty by adopting the construction that most favors the insured.”16 Cook’s
reliance is misplaced, however, because that case made clear that “[i]f the
written instrument is worded so that it can be given only one reasonable
construction, it will be enforced as written.”17 That is the situation in the instant
case. The classifications list types of work that will be covered—for instance, the
renting of Cook’s non-self-propelled equipment to others—and types of work that
will explicitly not be covered—for instance, certain lease operations. As
discussed above, the policy may only be reasonably interpreted by reading the
examples following the dashes as cabining the preceding language. This
explains the dual listings of non-coverage for “lease operations.” If the first
listing of “lease operations” was not limited by reference to the cleaning of tanks,
there would be no need to list it again with reference to shop welding.
Because the only reasonable interpretation of the classifications of Cook’s
policy would not extend coverage to the events at issue, “it will be enforced as
13
State Farm Life Ins. Co., 907 S.W.2d at 433 (citation omitted).
14
E.g., Merchs. Fast Motor Lines, Inc., 939 S.W.2d at 141 (holding that the negligent
discharge of a firearm while in a truck did not fall within the scope of an insurance policy
covering injury “‘resulting from the ownership . . . of a covered auto’”).
15
811 S.W.2d 552 (Tex. 1991).
16
Id. at 555 (citations omitted).
17
Id. (citation omitted).
18
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No. 10-10722
written.”18 For the same reasons Admiral has no duty to defend, it has no duty
to indemnify.19
IV
Cook contends that Admiral waived its argument relying upon the
classifications limiting the scope of the policy by waiting to raise this issue until
Admiral’s motion for summary judgment below. Cook theorizes that this delay
constitutes waiver, since he construes this language as constituting an
affirmative defense. Even assuming this were an affirmative defense, there is
no waiver. We have previously held that “a defendant does not waive an
affirmative defense if it is raised at a pragmatically sufficient time, and the
plaintiff was not prejudiced in its ability to respond.”20 Cook does not argue to
this court that he was prejudiced by the delay, nor is prejudice apparent.
Moreover, we have previously held that a purely legal issue raised following
relevant testimony at trial was asserted at a “pragmatically sufficient time.”21
Under Texas law, the interpretation of an insurance contract is also a question
of law.22 On the facts presented here, there is similarly no waiver.
***
I respectfully concur in the judgment only.
18
Id. (citation omitted).
19
Farmers Tex. Cnty. Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997) (per
curiam).
20
Rogers v. McDorman, 521 F.3d 381, 386 (5th Cir. 2008) (internal quotation marks,
brackets, and citation omitted).
21
Lucas v. United States, 807 F.2d 414, 418 (5th Cir. 1986).
22
Am. Int’l Specialty Lines Ins. Co. v. Rentech Steel LLC, 620 F.3d 558, 562 (5th Cir.
2010).
19