Anthony Ricky" Devillier v. Alpine Exploration Companies, Inc. "

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

06-0770

ANTHONY “RICKY” DEVILLIER, ET AL.

VERSUS

ALPINE EXPLORATION COMPANIES, INC., ET AL.

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APPEAL FROM THE
TWENTY-SEVENTH JUDICIAL DISTRICT COURT,
PARISH OF ST. LANDRY, NO. 05-C-0896-A
HONORABLE JAMES P. DOHERTY, JR., DISTRICT JUDGE

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JIMMIE C. PETERS
JUDGE

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Court composed of Oswald A. Decuir, Jimmie C. Peters, and Michael G. Sullivan,
Judges.

REVERSED AND REMANDED.

Dennis J. Vidrine
Attorney at Law
711 W. Pinhook
Lafayette, LA 70503
(337) 233-5195
COUNSEL FOR DEFENDANTS/APPELLANTS:
Petroleum Engineers, Inc. and Ray Hodge

Robert M. Kallam
Jennifer A. Wells
Preis & Roy
Post Office Drawer 94-C
Lafayette, LA 70509
(337) 237-6062
COUNSEL FOR THIRD-PARTY DEFENDANT/APPELLEE:
Evanston Insurance Company

PETERS, J.

This appeal is from a judgment interpreting insurance coverage. The issue is

whether a Self-Insured Retention (SIR) of $100,000.00 provided in an endorsement

to a liability policy issued by Evanston Insurance Company (Evanston) applies once

to each individual claim of every claimant arising from an occurrence or only once

to the occurrence regardless of the number of individual claims or claimants.

Interpreting the policy language, the trial court rendered a partial summary judgment

ruling that the SIR was applicable to each individual claim and every claimant. The

third-party petitioners affected by the ruling, Petroleum Engineers, Inc., Petroleum

Engineers International, Inc., and Ray Hodge (collectively “Petroleum”), appealed.1

Of crucial importance in the determination of the issue is the policy’s definition of the

word “claim.” We find that, as applied to the SIR in this case, the definition raises

an ambiguity which by settled rules of interpretation must be resolved against the

insurer. Accordingly, we reverse and remand for further proceedings.

DISCUSSION OF THE RECORD

An oil well experienced a hydrocarbon blowout in Jefferson Parish on February

28, 2004. As a result, a number of lawsuits for personal injuries and property

damages were filed.2 The plaintiffs in the present action, Anthony Devillier and his

wife, filed one of those suits naming Petroleum and other parties as defendants. In

that suit, Mr. Devillier sued for his personal injuries and his wife filed a claim for loss

of consortium.

Petroleum filed a third-party demand in the Devillier suit against its insurer,

Evanston, which issued Commercial General Liability Policy #03PKG00694 insuring

1
The trial court certified that the partial summary judgment was final for purposes of appeal,
as authorized by La.Code Civ.P. art. 1915 .
2
Several hundred plaintiffs were involved in the various suits.

Petroleum from 6/25/2003 to 6/30/2004. The policy contains five coverage parts,

only three of which are involved in any way in this case. Part A covers Commercial

General Liability, Part D covers Contractors Pollution Liability, and a “claims-made”

part covers Professional Liability. The parties agree that Part D, the Contractors

Pollution Liability Coverage, is specifically applicable to this case. The policy also

contains an SIR Endorsement affecting all three of the above parts, and that

endorsement is the focus of the present controversy.

Petroleum sought a partial summary judgment and declaratory order regarding

the SIR coverage. Petroleum contended that only one SIR of $100,000.00 was

applicable to the blowout, or pollution condition,3 and that the SIR was not applicable

to each separate claim asserted by the multiple plaintiffs. Its contention was that,

once it met its obligation of investigation, defense, and payment of any claim in the

amount of $100,000.00, the insurer was obligated for the balance of the loss no matter

the number of claims or claimants. Evanston filed a cross-motion putting at issue the

same coverage dispute. Evanston contended that the SIR of $100,000.00 applied “per

claim,” meaning to each claimant as a separate claim, and that until the SIR was

exhausted as to each it had no obligation to defend.

The trial court denied Petroleum’s motion and granted Evanston’s. The court

found that the policy was clear and rendered judgment holding that “this $100,000

‘per claim’ self-insured retention must be satisfied per each individual claimant (i.e.,

not per occurrence and not per lawsuit).”

The judgment dismissed Petroleum’s third-party petition “without prejudice to

[the third-party plaintiff’s] rights to reassert the Third-Party Demand once the

3
By definition in the policy, a “pollution condition” is an occurrence.

2

$100,000 per claimant self-insured retention is exhausted for each individual

claimant.”4

On this appeal, Petroleum assigns error to the holding that the policy was free

of ambiguity as well as the holding that the SIR applied to each individual claim and

claimant, and not to the “occurrence” or “pollution condition.”

OPINION

Appellate courts review grants of summary judgment de novo, using the same

criteria that govern the trial court’s consideration of whether summary judgment is

appropriate, that is, whether there is a genuine issue of material fact and whether the

mover is entitled to judgment as a matter of law. Ocean Energy, Inc. v. Plaquemines

Parish Gov’t, 04-66 (La. 7/6/04), 880 So.2d 1. Both sides agree that the coverage

issue is a matter of interpretation of the policy. Both sides agree that, if there is

ambiguity in the policy regarding the issue before us, the insured wins. Whether or

not a policy is ambiguous is a question of law. La. Ins. Guar. Ass’n v. Interstate Fire

& Cas. Co., 93-911 (La. 1/14/94), 630 So.2d 759.

The Commercial General Liability Coverage definitions are specifically made

applicable to the Contractors Pollution Liability Coverage Endorsement. The policy

states that “words and phrases that appear in quotation marks have special meaning.”

The definitions appear in quotation marks.

4
The summary judgment rendered by the trial court was arguably inappropriate because there
was no evidence that Petroleum, the insured, had satisfied an SIR of $100,000.00. Until Petroleum
satisfied its deductible, or retention obligation, coverage under Evanston’s insurance was not
triggered, and the judgment in favor of Evanston could technically be affirmed for that reason.
Evanston makes that point in its brief. However, the ultimate issue both the insured and the insurer
wanted resolved by the cross-motions was how the SIR amount would apply. That issue was reached
and decided by the trial court. Thus, whether the judgment is called a summary judgment or a
declaratory order, by either name it decided the issue the parties wanted resolved and did so by use
of the procedural device they chose as the vehicle for seeking that resolution. That being the case,
and guided by the liberal construction precept of La.Code Civ.P. art. 5051, we recognize the subject
matter as appropriately resolved by summary judgment.

3

The definition of “‘occurrence’” is as follows:

“Occurrence” means an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.

The Contractors Pollution Liability Coverage Endorsement adds the definition of

“‘Claim’ or ‘Claims,’” “‘Pollution Condition,’” and “‘Pollutants’” as follows:

“Claim” or “Claims” means a request or a demand received by you or
the Company for money or services, including the institution of “suit”
or arbitration proceedings against you, seeking damages.

“Pollution Condition” means the discharge, dispersal, seepage,
migration, release or escape of “pollutants”.

“Pollutants” means any solid, liquid, gaseous, thermal, biological or
radioactive substance, material, matter, irritant or contaminant, including
smoke, vapors, soot, fumes, acids, alkalis, chemicals and waste.

The insuring agreement in the Commercial General Liability section provides

that the amount the insurer will pay for damages is limited as described in LIMITS

OF INSURANCE (SECTION III). Under that Section is the following:

1. The Limits of Insurance shown in the Declarations and the
rules below fix the most we will pay, regardless of the
number of:

....

b. Claims made or “suits” brought; or

c. Persons or organizations making claims or bringing
“suits”.

The parties agree that this case presents the situation where there is a

commercial general liability policy with separate coverage parts provided by an

endorsement. There are two endorsements to the policy that are applicable to the

present dispute. The first is the Contractors Pollution Liability Coverage

Endorsement.

4

The insuring agreement for the Contractors Pollution Liability Coverage

Endorsement contains the following language:

b. This insurance applies to “bodily injury” and “property
damage” only if:

(1) The “bodily injury” or “property damage” is caused
by an “occurrence” that takes place in the “coverage
territory” resulting in a “pollution condition” . . . .

It also provides: “We may, at our discretion, investigate any ‘occurrence’ and settle

any ‘claim’ or ‘suit’ that may result.” It includes the same limits of insurance

provision as quoted above regarding the number of claims made or suits brought or

persons or organizations making claims or bringing suits.

Paragraph 10 of the Limits of Insurance section of the Contractors Pollution

Liability Coverage Endorsement provides:

10. The Deductible5 amount stated on the Declarations is
applicable to each “claim” and each “pollution condition”,
applies once to each “claim” and each “pollution
condition” and can be applied either for defense expenses,
settlement, compromise or indemnification.

This paragraph comprised of a single sentence is a key provision in the policy. The

parallel structures in Paragraph 10 emphasize the equal importance of “claim” and

“pollution condition” in the sentence. The deductible (SIR) is made applicable once

to each. Literally, the sentence, standing alone and without reference to other

provisions in the policy, is applicable to this insurance only in the limited

circumstance when there is one pollution condition and but one claim arising from

that pollution condition. If in Paragraph 10 “claim” is singular, i.e., if it refers only

to a single cause of action asserted by a single claimant, an irreconcilable ambiguity

5
The trial court found and the parties agreed that in this case “deductible” and “retention” are
synonymous terms.

5

exists when there are multiple claims arising from one pollution condition. However,

all parts of the contract must be considered. “Each provision in a contract must be

interpreted in light of the other provisions so that each is given the meaning suggested

by the contract as a whole.” La.Civ.Code art. 2050. We will later relate Paragraph

10 to other parts of the policy, bearing in mind that the policy directs us to give

“special meaning” to definitions of words and phrases in quotation marks.

The second endorsement applicable to the present dispute is the Self-Insured

Retention Endorsement. The SIR Endorsement begins with this language:

This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE PART
PRODUCTS/COMPLETED OPERATIONS LIABILITY COVERAGE PART
OWNERS AND CONTRACTORS PROTECTIVE LIABILITY COVERAGE PART
PROFESSIONAL LIABILITY COVERAGE PART

Following this list identifying the four coverage parts being modified, the

endorsement then states that “[t]he total limit of liability of the Company as stated in

the policy declarations shall apply excess of the retained limit (herein called the Self-

Insured Retention) as stated in the endorsement, and the Named Insured agrees to

assume this retained limit . . . .” The printed form of the endorsement has spaces

provided for insertion of specific information, and in those spaces are inserted

abbreviated references to three coverages and the self-insured retention the named

insured agreed to assume. For Commercial General Liability, it is “$25,000 per

claim”; for Contractors Pollution Liability, the amount is “$100,000 per claim”; and,

for Professional Liability, it is “$100,000 per claim.” Thus, the Contractors Pollution

6

Liability coverage 6 is subject to a $100,000.00 “per claim” SIR Endorsement having

no annual aggregate retention.

The issue in this case is the meaning of “per claim.” Evanston’s brief asserts

that “per claim” is a term defined in the policy. It is not. Its brief also argues that

“per claim” equates to “per person.” Nothing in the policy manifests that equation.

The pleadings show that the well blowout resulted in a “pollution condition.”

Applying Paragraph 10 of the Limits of Insurance section of the Contractors Pollution

Liability Coverage Endorsement, it is quite clear that there can be but one SIR

deductible or retention to one pollution condition. It is equally certain that the same

interpretation applies to “claim” in Paragraph 10. We emphasize, however, that the

element of uncertainty in this case is the precise definition of “claim.”7

The word “claim” and the word “claims” are not separately defined in the

policy. However, the phrase “‘claim’ or ‘claims’” is defined. The defined words are

nouns. One is singular, and the other is plural. Evanston argues that each individual

claimant’s demand constitutes a separate claim triggering separate retention amounts.

However, by definition in the policy the phrase “claim or claims” is used to denote

6
It appears that the wrong SIR Endorsement form was used by the insurer in putting this
policy together. The SIR Endorsement form actually used stated it modified four coverages and
listed them. We reproduced those four above in boldface. Coverage Part D of the policy is
Contractors Pollution Liability Coverage, while the boldface coverage that most nearly corresponds
to Part D by name is shown on the form as OWNERS AND CONTRACTORS PROTECTIVE
LIABILITY COVERAGE. As demonstrated by other endorsements attached to the policy, these
are two separate coverages. Thus, the SIR Endorsement does not expressly modify the Contractors
Pollution Liability Coverage; expressly, it modifies Owners and Contractors Protective Liability
Coverage, a coverage part not found in the policy in the record. However, despite the apparent use
of the wrong SIR Endorsement form, the SIR amount “per claim” written into the blocks farther
down in the endorsement does expressly relate to Contractors Pollution Liability. Because it appears
that the third-party plaintiff/insured herein agreed that the SIR Endorsement form actually used did
in fact modify the coverage, we mention the discrepancy but do not otherwise consider it in the
resolution of the coverage issue in this case.
7
Evanston includes in its brief the observation that the SIR Endorsement provides for
$100,000.00 “per claimant.” That, too, is a misstatement. The endorsement does not provide for
an SIR “per claimant.” It provides for an SIR “per claim.”

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either a singular “claim” or plural “claims.” Both words have the same definition,

and no distinction is made between the application of the singular and the plural. The

word “or” is a coordinating conjunction which joins words of equal grammatical rank.

See Winifred Bryan Horner, et al., Harbrace College Handbook, 16 (12th ed.,

Harcourt Brace & Co. 1994). “Claims,” like “claim,” as defined, means a request or

a demand for money or services and includes the institution of suit. A suit making

a request or a demand for money or services may be instituted by many claimants or

by one. If “per claim” in the SIR Endorsement unambiguously refers to a single

claim, as argued by Evanston, then the addition of “or ‘claims’” in the definitional

phrase “‘claim’ or ‘claims’” is meaningless. We cannot ignore its own language

written into the policy by the insurer. Evanston’s brief argues that “each individual

person or entity and their assertion(s) of damages is considered a separate and distinct

“claim” as that phrase is used in the contract.” However, that phrase as used in the

contract equates “claims” with “claim.” By treating “claim” or “claims” as being the

same with no distinction between the singular and the plural, the phrase “per claim”

can just as well be rendered “per claims.”

Additionally, the SIR Endorsement modified the policy with this provision:

3. In the event of a claim or claims arising which appear
likely to exceed the Self-Insured Retention, no costs, other
than adjusting expenses, shall be incurred by the Insured
without the written consent of the Company[.]

Once more—and this time tellingly in the context of the SIR Endorsement itself—the

reference is to “claim or claims,” without distinction as to number. If the SIR applies

once to each claim, the addition of “or claims” is superfluous. On the other hand, if

the SIR applies once to each claim or claims, whether one or many, the application

is consistent with the rest of the language in Paragraph 10 of the Limits of Insurance,

8

which states that the deductible is applicable to each “pollution condition” and

applies once to each “pollution condition.”

Both parties in this case argue the same three cases dealing with SIR

coverages: Trahan v. Savage Industries, Inc., 96-1239 (La.App. 3 Cir. 3/5/97), 692

So.2d 490, writs denied, 97-1636, 97-1652 (La. 10/3/97), 701 So.2d 207, 209;

Musmeci v. Schwegmann Giant Super Markets, Inc., 332 F.3d 339 (5th Cir. 2003),

cert. denied, 540 U.S. 1110, 124 S.Ct. 1078 (2004); and Maxim Manufacturing Corp.

v. Alliance General Insurance Co., 911 F.Supp. 239 (S.D. Miss. 1995).

In Trahan, 692 So.2d 490, the plaintiff sued for his personal injuries, and his

wife and children made loss of consortium claims. The bankrupt defendant had an

SIR policy. The trial court cumulated the loss of consortium claims with the injury

claim under one SIR of $100,000.00. We reversed that ruling, finding that the clear

policy language did not permit grouping the loss of consortium claims of Trahan’s

wife and children under the same SIR applied to his injury. We noted that the SIR

section of the policy provided that “‘[t]he Retained Limit is the amount set forth

under Item 4 of the Policy Declarations and shall apply to each claim.’” Id. at 497.

We then quoted the applicable policy provision:

where a series of an/or (sic) several claims are made which are
attributable directly or indirectly to the same event, condition, cause,
defect or hazard or alleged defect or hazard or failure or alleged failure
to warn of such, each and every one of such claims shall be deemed to
be separate and distinct from each and every other one of such
claims and shall be treated as a separate and distinct claims
occurrence from each and every other one of such claims irrespective
of the period or area over which the claims occur or the number of such
claims.

Id.

9

This specific policy language caused this circuit in Trahan to conclude that a separate

SIR applied to the plaintiff’s injury claim and to each of the loss of consortium claims

on behalf of his wife and children respectively. No such clarifying language appears

in the present policy distinguishing one claim from multiple claims arising from the

same pollution condition.

In Musmeci, 332 F.3d 339, 352, the SIR provision contained only one line

providing, “‘$250,000 each claim.’” The word “claim” was not defined in the policy.

However, the court found that the meaning of the word “claim” for purposes of the

SIR provision could be gleaned by reference to the use of the word in numerous other

provisions in the policy. The court then found that its meaning was clear and

unambiguous and that a “claim” was the assertion of a legal right against the insured

by a third party. The distinction between the policy in Musmeci and the present case

is that in Musmeci “claim” was not defined and it was used always in the singular,

while in the present case the singular “claim” and plural “claims” are defined in the

policy and mean the same thing.

In Maxim, 911 F.Supp. 239, two children died as a result of a defective heater.

The SIR Endorsement in the manufacturer/insured’s liability policy stated: “‘The

retention amount will apply on an each claim basis regardless of the number of claims

arising out of one occurrence.’” Id. at 239. The coverage dispute was whether a suit

brought by the father of the two children constituted one claim under the policy or

two. The decision did not indicate whether or not the word “claim” was defined in

the policy, but the court found that the only result it could reach under any reasonable

interpretation of the word “claim” was that the word was unambiguous, and in that

case there were two causes of action, two claims, and two retentions. The distinction

10

between Maxim and our present case is the same as that we just described with

Musmeci.

An insurance policy is a contract between the parties and should be construed

by using the general rules of interpretation of contracts set forth in the Louisiana Civil

Code. “Ambiguous policy provisions generally are to be construed against the insurer

and in favor of coverage.” Carrier v. Reliance Ins. Co., 99-2573, p. 12 (La. 4/11/00),

759 So.2d 37, 43. “[E]quivocal provisions seeking to narrow an insurer’s obligation

are strictly construed against the insurer.” Id. While Evanston recognizes this rule,

it invokes the equally settled rule that, for strict construction to apply, the insurance

policy must not only be susceptible to two or more interpretations, but also each of

the alternative interpretations must be reasonable. That is surely the law, but in the

present case an interpretation favoring only one retention for whatever claims might

be asserted for one pollution condition is a reasonable interpretation based on the

policy language. “Interpretation of a contract is the determination of the common

intent of the parties.” La.Civ.Code art. 2045; see also Cadwallader v. Allstate Ins.

Co., 02-1637 (La. 6/27/03), 848 So.2d 577. This policy is ambiguous and must be

interpreted against the party who furnished its text. See La.Civ.Code art. 2056.

The trial court’s grant of summary judgment in favor of Evanston Insurance

Company was based on its finding that there was no ambiguity in the policy and its

finding that there was no coverage for more than one retention for this pollution

condition. Based on our de novo review of the policy language, we find that the

policy’s SIR coverage language was ambiguous. Consequently, the ruling was error

as a matter of law. We will reverse the judgment and remand the third-party demand

for further proceedings.

11

DISPOSITION

For the reasons assigned, we reverse the judgment of the trial court and remand

the third-party demand of Petroleum for further proceedings. Costs of this appeal will

be borne by Evanston Insurance Company.

REVERSED AND REMANDED.

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