CENTRAL CRUDE, INCORPORATED 

v.

LIBERTY MUTUAL INSURANCE COMPANY; Great American Assurance Company, incorrectly named Great American Insurance Company

Judges: Before DAVIS, DENNIS, and HIGGINSON, Circuit Judges.

Opinion by: W. EUGENE DAVIS

Eugene Davis, Circuit Judge:

Plaintiff-Appellant Central Crude, Inc. ("Central Crude") challenges the district court's interpretation of the "total pollution exclusion endorsement" in its policy with Defendant-Appellee Liberty Mutual Insurance Company ("Liberty Mutual"). We agree with the district court that coverage for Central Crude's environmental pollution claim is excluded under Liberty Mutual's policy. Therefore, we AFFIRM.

I. Background

In January 2007, Central Crude discovered a crude oil leak on its property and a neighboring tract owned by Chevron in Paradis, Louisiana. Of the four to five acres of property covered in oil, Central Crude claimed that "less than a half acre" was on its property. Central Crude subsequently reported the leak to the Louisiana Department of Environmental Quality ("LDEQ"), as it was required to do. Central Crude then retained a contractor, ES&H Consulting & Training Group, to perform remediation work. Central Crude paid approximately one million dollars to the contractor to perform this work. Apparently, the property has not been completely remediated, and according to Central Crude's representative in 2019, it is possible that the spill is ongoing. Although remediation efforts have continued for over fifteen years, the source of the leak remains unclear. Specifically, there has been no determination as to whether the spill occurred from Central Crude's pipelines or from Chevron's wells, or whether (as Central Crude's representative testified was possible) it was simply the result of oil seeping from the ground.

Central Crude had a commercial general liability ("CGL") policy with Liberty Mutual. The insurance policy requires Liberty Mutual to pay sums "to which [the] insurance applies" and to defend Central Crude against suits for covered damages. The policy also contains a "total pollution exclusion endorsement" which limits coverage as follows:

This insurance does not apply to: . . .

f. Pollution

(1) "Bodily injury" or "property damage" which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants" at any time.

(2) Any loss, cost or expense arising out of any:

(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of "pollutants"; or

. . . .

(emphasis added).

Central Crude sought coverage from Liberty Mutual for the costs it incurred in remediating its property in Paradis. Initially, Liberty Mutual agreed to provide limited coverage, but ultimately informed Central Crude on August 23, 2007, that there was "no coverage for the claim."

On January 3, 2008, Columbia Gulf Transmission Company ("Columbia Gulf") sued Central Crude and others in state court (the "CGT Lawsuit"), alleging that the spill threatened to damage Columbia Gulf's natural gas pipeline located on property adjacent to the Paradis spill. The CGT Lawsuit alleged that the spill occurred on "Chevron's tract" and that the source of the spill "could only have been the pipelines owned and/or operated by Central Crude, Inc. or Chevron's [w]ells." Citing to the total pollution exclusion, Liberty Mutual refused to defend Central Crude in the CGT Lawsuit.

In January 2017, Central Crude filed this lawsuit in state court seeking: (1) coverage for past and future expenses it incurred in cleaning up the Paradis spill; (2) coverage for defense costs in connection with the CGT Lawsuit; and (3) damages, penalties, and attorney fees for Liberty Mutual's alleged bad faith denial of coverage.

Liberty Mutual removed the case to federal district court and promptly moved for summary judgment on both coverage, and bad faith. The district court determined that the total pollution exclusion barred coverage for Central Crude's claims and granted summary judgment in favor of Liberty Mutual. Central Crude moved for reconsideration, and the district court denied the motion. Central Crude timely appealed.

II. Discussion

This Court reviews the district court's grant of summary judgment de novo. Under Rule 56(a), a movant is entitled to summary judgment when it demonstrates that there is no genuine dispute as to any material fact and it is entitled to judgment as a matter of law. "A genuine dispute of material fact exists if the evidence is such that a reasonable jury could return a verdict for the nonmoving party."

The resolution of this insurance coverage dispute turns on the interpretation of the total pollution exclusion in Central Crude's CGL policy with Liberty Mutual. Under Louisiana law, an insurance policy is a contract between the parties and is construed under the same general rules for interpreting contracts. The parties' intent, as reflected by the words of the policy, determines the extent of coverage. If a policy is clear and expresses the intent of the parties, the agreement must be enforced as written. However, an insurance policy should not be interpreted to achieve an absurd result. Further, because the purpose of liability insurance is to afford the insured protection from damage claims, policies should be construed to effect, and not to deny coverage. Nonetheless, an insurer has the right to limit coverage in any manner it desires, unless those limitations conflict with law or public policy.

Central Crude, as the party seeking coverage, has the burden of proving that the Paradis spill falls within the CGL policy's terms. Liberty Mutual has the burden of proving the applicability of an exclusionary clause. If Liberty Mutual unambiguously shows that an exclusion applies, it will not owe Central Crude indemnification for past or future remediation costs, or a duty to defend and indemnify in the CGT Lawsuit. Additionally, Liberty Mutual would not be liable for any penalties and fees under Louisiana's bad faith statutes.

Central Crude seeks both defense and indemnity from Liberty Mutual. "An insurer's duty to defend suits on behalf of an insured presents a separate and distinct inquiry from that of the insurer's duty to indemnify a covered claim . . . ." Whether an insurer has a duty to defend "is determined by the allegations of the plaintiff's petition [against the insured], with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage." Conversely, whether an insurer has a duty to indemnify is determined by the court's application of "the Policy to the actual evidence adduced at the underlying liability trial together with any evidence introduced in the coverage case."

The parties agree that Doerr v. Mobil Oil Corp. is the leading Louisiana case interpreting the total pollution exclusion endorsement contained in the insurance policy between Central Crude and Liberty Mutual. In Doerr, the plaintiffs alleged that Mobil Oil discharged petrochemicals into the Mississippi River, and that St. Bernard Parish drew those chemicals into its drinking water system and redistributed it to users throughout the Parish. The plaintiffs, who consumed the water, filed a class action claiming personal injuries from the contaminated water. They sued St. Bernard Parish and its liability insurer, Genesis Insurance Company.

Genesis moved for summary judgment, arguing that the total pollution exclusion endorsement in its insurance policy excluded coverage for plaintiffs' alleged damages. The trial court denied Genesis's motion, citing the policy's total pollution exclusion endorsement. The Fourth Circuit Court of Appeal reversed and dismissed the claim against Genesis. The Louisiana Supreme Court, however, reversed the appellate court, reinstating the trial court's denial of summary judgment and remanding the matter to the trial court.

The Doerr court began by overruling one of its recent decisions, Ducote v. Koch Pipeline Co. In Ducote, a contractor was cutting the grass near an ammonia pipeline when his tractor overturned, and the tractor's bushhog blade struck the pipeline, causing the release of anhydrous ammonia into the atmosphere. The plaintiffs, who inhaled the gas, sued the pipeline owner, claiming personal injury damages. The Louisiana Supreme Court held that the total pollution clause excluded coverage.

In overruling Ducote, the court in Doerr engaged in a lengthy discussion about the text, history, and purpose of the total pollution exclusion. The court made clear that courts should "construe [a] pollution exclusion clause in light of its general purpose, which is to exclude coverage for environmental pollution, and under such interpretation, [the] clause will not be applied to all contact with substances that may be classified as pollutants." Accordingly, the court held that its opinion in Ducote, which did not involve environmental pollution, conflicted "with the intent of the policy exclusion and disrupt[ed] the expectations of both insurers and insured."

To assist courts in determining whether a case involves environmental pollution, Doerr provides three factors to be considered:

(1) Whether the insured is a "polluter" within the meaning of the exclusion;

(2) Whether the injury-causing substance is a "pollutant" within the meaning of the exclusion; and

(3) Whether there was a "discharge, dispersal, seepage, migration, release or escape" of a pollutant by the insured within the meaning of the policy.

Here, there is little dispute about the first two Doerr factors. As to the first consideration, Central Crude, a pipeline company that transports large volumes of oil, is a type of business that presents a risk of pollution, and thus is a "polluter" within the meaning of the exclusion. As to the second consideration, the parties agree that crude oil is a "pollutant." With respect to the third consideration, it is undisputed that a "dispersal" or "release" of crude oil occurred; that the spill impacted four or five acres of property; that initial response activities resulted in the removal of more than 25,000 gallons of liquid; and that Central Crude has spent over one million dollars in remediation efforts.

Central Crude contends that the total pollution exclusion is applicable only if the insured is found to be responsible for the release or discharge of the pollutant. It latches onto the language in Doerr "by the insured" to argue that Liberty Mutual is required to show that the escape of oil was the fault of Central Crude. We disagree.

Neither the CGL policy nor Doerr requires identification of the party at fault for the oil spill in determining whether the total pollution exclusion applies here. The CGL policy's total pollution exclusion broadly precludes coverage for bodily injury or property damage that "would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of 'pollutants' at any time." The provision requires a dispersal of pollutants but makes no requirement that the party responsible for the dispersal be determined. Doerr's third factor similarly asks whether there was a "discharge, dispersal, seepage, migration, release or escape" of a pollutant.

Doerr instructs courts to look at the actions of the " alleged polluter." The allegations in the CGT Lawsuit, as well as the evidence introduced in this matter on summary judgment, show that Central Crude was alleged to be one of two potential parties that caused a large discharge and dispersal of crude oil. Moreover, imposing a fault requirement for application of a total pollution exclusion in cases involving environmental pollution would run counter to the Louisiana Supreme Court's instruction in Doerr that pollution exclusions must be read in accordance with their general purpose "to exclude coverage for environmental pollution."

The key to our discussion today is that we are persuaded that Doerr teaches that the total pollution clause has full application to a case, such as this, where several acres of land are covered with oil from a leak alleged, at least in part, to have been caused by the insured. The fundamental point the Doerr court made was that there is a material distinction between environmental pollution cases on one hand, and certain types of personal injury cases on the other. The leading Louisiana Insurance Treatise also reads Doerr in this fashion. The author of the Treatise states, "[t]he ultimate conclusion [in Doerr] is that the pollution 'exclusion was designed to exclude coverage for environmental pollution only and not for all interactions with irritants or contaminants of any kind.'"

The Louisiana Second Circuit Court of Appeal in Lodwick v. Chevron similarly understood Doerr to be limited in this way. In that case, the defendant and its predecessors operated oil and gas production facilities on land adjacent to plaintiffs' land. Plaintiffs alleged that the defendants failed to clean toxic pollutants from the production facilities which migrated and spread to plaintiffs' property. Because plaintiffs' claims were based on "contamination and pollution damages" that plaintiffs represented resulted from defendant's open pit and tank battery, the court found that all three Doerr factors were met, and held that the exclusion precluded coverage. The court noted that such a "legacy lawsuit is the exact type of case that the Doerr court found pollution exclusions to be applicable." The court stated:

Doerr did not involve the type of claims for which the exclusion was designed; it was a personal injury case, not an environmental pollution case as alleged here. Thus, guided by the principles set forth in Doerr, we find that when long term pollution damages are alleged . . . pollution exclusions are applicable to exclude coverage. As stated in Doerr, this is the very purpose of a pollution exclusion.

This case, unlike Doerr and Ducote, does not involve claims for personal injury. Instead, the claims for which Central Crude seeks coverage involve only long-term pollution damages related to an oil spill. As in Lodwick, excluding coverage in a case like this one is the very purpose of total pollution exclusion clauses.

In sum, the absolute pollution exclusion in Liberty Mutual's policy unambiguously excludes coverage for Central Crude's costs related to "clean up" or "remov[al]" of the crude oil, as well as for any '"property damage' which would not have occurred in whole or part but for the . . . release or escape" of the crude oil. We therefore determine that Liberty Mutual has established the applicability of the total pollution exclusion endorsement, and thus does not owe Central Crude a duty to defend in the CGT Lawsuit, or indemnification of past or future remediation costs. III. CONCLUSION

For the foregoing reasons, the judgment of the district court is AFFIRMED.