Commercial Insurance Policy and Interpretation

How an insurance policy is interpreted by Texas Courts is important. This is true whether you live in Grand Prairie, Arlington, Weatherford, Fort Worth, Mansfield, Dallas, or anywhere else in Texas.
A commercial insurance policy was recently interpreted by the United States District Court, Southern District of Texas, Houston Division. The style of this case is National Casualty Insurance Company v. Orion Transport, Inc. and Silvia Brune, Individually and as Representative of the Estate of James Brune, Deceased and Cody Brune and Cory Brune. The case was decided on February 22, 2010.
The undisputed facts in this case are that on February 4, 2009, Orion Transport, Inc. (Orion) hired welder, James Brune, to perform maintenance on its 1977 Heil Tanker Trailer. While Brune was performing the requested maintenance the trailer exploded injuring Brune, who later died of his injuries. The Brune estate and his survivors sued Orion and ETOCO. L.P., and ETOCO Management, LLC. in State District Court. National Casualty Insurance Company (National) brought this instant case in Federal District Court asking the court to rule that National had no duty or obligation under its policy of insurance with Orion to defend Orion or to pay any claims against Orion.
The court spent considerable time discussing procedural issues in the lawsuit and then addressed the basis for the lawsuit. The court restated well established law in this area that under a typical insurance policy an insurance company assumes two distinct responsibilities: one, the duty to defend and, two, the duty to indemnify. To make this clear, the duty to indemnify protects the insurance company customer from payment of damages they may be found legally obligated to pay, while the duty to defend protects the same customer against the expense of any lawsuit seeking damages. What is important here is that the insurance company owes neither duty when the type of claims made in a lawsuit are specifically excluded from policy coverage.
To determine whether or not National had a duty, the court uses the “eight corners” rule. The first four corners are the allegations in the papers related to the lawsuit and the second four corners are the words found in the insurance policy. The insured, or in this case, Orion, bears the initial burden of showing that coverage exists, and once established, the burden shifts to the insurer to show that policy exclusions apply.
In this case, it was alleged in the lawsuit papers that Orion used its Heil Tanker Trailer to haul salt water from a well owned by the Etoco defendants. It is also alleged that the salt water contained dangerous and explosive hydrocarbons. That Orion hauled the salt water to a disposal well and purportedly emptied the trailer. The Brunes alleged that a potentially explosive residue remained in the trailer. That the trailer was taken to Orions place of business where Brune was asked to do repairs and maintenance. While performing this work the trailer exploded.
National denied coverage and pointed to a Pollution Exclusion in the policy. This exclusion spoke to pollution and pollutants, and whether or not under the policy the pollutants were being stored.
An arguement over whether or not the salt water with hydrocarbons was a pollutant was resolved in Nationals favor. The next arguement was over whether or not the pollutant in the tanker was being “stored” in the tanker as that term is defined in the National insurance policy. For guidance the court looked to Webster’s Ninth New Collegiate Dictionary. Webster’s defined stored as “for preservation or later use or disposal.” The court decided that was not the situation in this case and ruled that the Pollution Exclusion did not apply.
An experienced Insurance Law Attorney is needed for guidance in these situations. A complete reading of this case gives insight into how courts reach their decisions in these cases. An attorney can read the policy at issue in a situation and apply the reading of that policy to the facts and discuss likely outcomes.