In United Nat. Ins. Co. v. Hydro Tank, Inc., 2008 WL 1799963, C.A.5 ( Tex. ), United National, the umbrella liability insurer for Hydro Tank, the employer of workers injured in a tank cleaning incident, brought suit seeking declaratory judgment that the pollution exclusion clause barred coverage for tank owner Motiva's indemnification claim against Hydro Tank. The district court granted summary judgment in favor of United National, and Motiva appealed.
The plaintiffs alleged they “were caused to sustain serious injuries and damages while working in a tank when they were exposed to toxic levels of hydrogen sulfide and/or other chemicals and vapors,” and, as a result, they “became overcome by chemicals and toxins owned by [Motiva] … causing brain injury and damage.”
Motiva argued that use of the phrase “and/or” creates two injury scenarios: one in which the workers were injured by hydrogen sulfide gas, a pollutant, and one in which they were injured by “other chemicals and vapors” that were not necessarily pollutants. Under the second scenario, Motiva asserted, the workers have not alleged injury by a pollutant.
The court of appeals first explained that although for purposes of construing the duty to defend it had to interpret the pleadings liberally, that did not require it to adopt unreasonable interpretations of plain language, ignore ordinary usage, or to set aside the basic tools of construction.
According to the court, if the phrase “and/or” was conjunctive, Motiva's interpretation contradicted the policy's language. Because the relevant clause stated that coverage would be denied so long as “ 'bodily injury' … which would not have occurred in whole or in part but for the … alleged … release … of 'pollutants.' ”, if a claim alleged that injury arose at least in part from a pollutant, coverage would be denied.
The court went on to add that even if “and/or” did reference a disjunctive phrase and thereby stated two possible causes of the workers' fainting, either through their exposure to hydrogen sulfide gas or “other chemicals & vapors”, Motiva's argument still failed to allege a covered incident. Although Motiva argued that the correct interpretation of the pleading read the phrase “toxic levels of” as applying only to “hydrogen sulfide,” and not to the latter phrase “other chemicals and vapors,” the court disagreed. The court stated that the logical interpretation of the pleadings was that the phrase “toxic levels of” modified both “hydrogen sulfide” and “other chemicals and vapors” (particularly in light of the fact that the plaintiffs only a few sentences later alleged brain injury from “chemicals and toxins”).
Moreover, the court explained, when general terms like “chemicals” and “vapors” followed specific terms like “hydrogen sulfide,” there was a presumption that the general terms were to be construed as belonging to the same class or category as the more specific term. Accordingly, the phrase “toxic levels of hydrogen sulfide and/or other chemicals and vapors” suggested that injury resulted from (1) toxic levels of hydrogen sulfide; (2) toxic levels of other chemicals or vapors; or (3) a combination of both. And, in any of these situations, the workers were exposed to pollutants according to the policy exclusion.
Next, Motiva argued that a plausible reading of the complaint suggested that the plaintiffs were injured not by hydrogen sulfide gas, but by the sludge itself, which Motiva contended was not a pollutant because it was properly stored in the mix tank. The court stated that it need not, however, determine whether toxic sludge stored in this fashion was a pollutant, because the argument could not be squared with the plaintiffs' pleadings. Because Motiva claimed that since the workers did not allege the particular mechanism of their exposure to hydrogen sulfide, it was possible, the court stated, that they were injured by skin-to-sludge contact rather than by inhalation of a gas.
Contrary to this theory, the plaintiffs allege they were “overcome” by “chemicals and toxins” and were “caused to fall” into the sludge. The toxic exposure caused them to collapse, and they may then have suffered further toxic exposure. Under no liberal construction of the pleadings can this sequence of events be read to say that the toxic exposure occurred only after they were “overcome” by heat or a benign chemical.
Therefore, the court of appeals affirmed the decision of the district court, holding that the claim was barred under the pollutants exclusion in the umbrella policy.