Case: 09-50984 Document: 00511193916 Page: 1 Date Filed: 08/04/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 4, 2010
No. 09-50984
Lyle W. Cayce
Clerk
MID-CONTINENT CASUALTY COMPANY,
Plaintiff - Appellant
v.
BAY ROCK OPERATING COMPANY; FELICIANA CORPORATION;
DUNCAN UNDERWOOD; EVERETT DESHA; SEELIGSON OIL
COMPANY, LTD.; ST. PAUL SURPLUS LINES INSURANCE COMPANY,
as insurer of Hollimon Oil Company and J. Charles Hollimon, Inc. and as
alleged subrogee/real party in interest of Hollimon Oil Corporation
Defendants - Appellees
Appeal from the United States District Court
for the Western District of Texas
Before DAVIS, SMITH, and HAYNES, Circuit Judges.
HAYNES, Circuit Judge:
Appellant Mid-Continent Casualty Company (“Mid-Continent”) appeals
the district court’s grant of summary judgment in favor of Appellees Bay Rock
Operating Company (“Bay Rock”), the Feliciana Corporation, Duncan
Underwood, Everett DeSha, the Seeligson Oil Company, and St. Paul Surplus
Lines Insurance Company (“St. Paul”), as subrogee of Hollimon Oil Corporation
(“HOC”). We AFFIRM.
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I. FACTUAL AND PROCEDURAL HISTORY
Feliciana Corporation, Duncan Underwood, Everett DeSha, and the
Seeligson Oil Company (collectively, the “working interest owners”) owned a
Texas oil well named Striebeck No. 1. The working interest owners designated
HOC as the operator of the well, and HOC hired Bay Rock to supervise and
manage the drilling of the well. Under Bay Rock’s supervision, Striebeck No. 1
suffered a blowout, causing property damage and the loss of gas from the well.
In the wake of the blowout, Bay Rock contacted Cudd Pressure Control to obtain
well-control services. HOC incurred the costs to control, repair, evaluate, and
complete the well after the blowout. HOC had a well-control policy with St.
Paul, and St. Paul paid the costs incurred by HOC pursuant to a settlement
agreement after HOC demanded coverage for the costs.
Thereafter, St. Paul and the working interest owners brought suit in Texas
state court, accusing Bay Rock of negligently causing the blowout. A state court
jury found that Bay Rock was negligent and awarded St. Paul and the working
interest owners: (1) the costs incurred to control the well; (2) the costs incurred
to repair, evaluate, and complete the well; and (3) the value of the gas lost in the
blowout. The San Antonio Court of Appeals affirmed, and the Texas Supreme
Court denied Bay Rock’s petition for review and its petition for rehearing.1
Bay Rock had a commercial general liability policy (the “CGL Policy”) and
an umbrella policy (the “Umbrella Policy”) (collectively, the “Policies”) with
Mid-Continent. Mid-Continent defended Bay Rock in the state court action
under a reservation of rights letter. After judgment was entered against Bay
Rock, Mid-Continent brought this diversity action in federal district court,
1
Bay Rock Operating Co. v. St. Paul Surplus Lines Ins. Co., 298 S.W.3d 216 (Tex.
App.-San Antonio), pet. denied, 2010 Tex. LEXIS 336 (Tex. 2010) (denying motion for
rehearing).
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seeking a declaration that Bay Rock’s damages were not covered by the Policies.
Mid-Continent and Appellees both moved for summary judgment. The district
court granted Appellees’ motion for summary judgment and denied
Mid-Continent’s motion. This appeal followed.
II. STANDARD OF REVIEW
We review the district court’s grant of summary judgment de novo, and we
may affirm on any grounds supported by the record. Berquist v. Washington
Mut. Bank, 500 F.3d 344, 348-49 (5th Cir. 2007). When reviewing a grant of
summary judgment, the court views all facts and evidence in the light most
favorable to the non-moving party. United Fire & Cas. Co. v. Hixson Bros., 453
F.3d 283, 285 (5th Cir. 2006). However, to avoid summary judgment, the
non-movant must go beyond the pleadings and come forward with specific facts
indicating a genuine issue for trial. Piazza’s Seafood World, LLC v. Odom, 448
F.3d 744, 752 (5th Cir. 2006). Because both Mid-Continent and Appellees moved
for summary judgment, this court reviews “each . . . motion independently,
viewing the evidence and inferences in the light most favorable to the nonmoving
party.” Ford Motor Co. v. Tex. Dep’t of Transp., 264 F.3d 493, 498 (5th Cir.
2001).
III. DISCUSSION
Mid-Continent raises a number of arguments for reversing the district
court’s grant of summary judgment. First, Mid-Continent argues that St. Paul
had no right to bring the underlying state court action. Second, Mid-Continent
asserts that the damages awarded against Bay Rock do not fall within the
Policies’ general grants of coverage. Finally, Mid-Continent argues that certain
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exclusions or limitations remove from coverage the damages at issue. We will
address each of Mid-Continent’s arguments in turn.2
A. St. Paul’s Subrogation Rights
Mid-Continent argues that St. Paul lacked the legal capacity to bring the
underlying liability suit as HOC’s subrogee and, therefore, there is no coverage
for the damages awarded against Bay Rock. The district court found that the
issue of St. Paul’s right of subrogation was litigated in the state court action and
that Mid-Continent was barred from re-litigating it. Under Texas law, a party’s
“legal authority to sue or be sued, is an issue” that cannot be attacked in “a
separate proceeding.” See Presley v. Republic Energy Drilling, L.L.C., No.
2-07-225-CV, 2008 WL 4053002, at *3-*4 (Tex. App.-Fort Worth Aug. 29, 2008,
no pet.).3 Nevertheless, Mid-Continent argues that it is not collaterally estopped
from re-litigating St. Paul’s subrogation right because it was not in privity with
Bay Rock. We disagree.
An insurer in a coverage case will be barred from re-litigating a particular
issue from the underlying liability case if: (1) the issue raised in the coverage
suit was raised and determined in the liability suit; (2) the issue determined in
the liability suit was essential to the judgment in the liability suit; and (3) the
necessary requirement of privity exists between the insurer and the insured. See
Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 802 (Tex. 1992); Columbia
Mut. Ins. Co. v. Fiesta Mart, Inc., 987 F.2d 1124, 1127 (5th Cir. 1993). The
2
The district court applied Texas law, and the parties do not appeal the district court’s
application of Texas law. Accordingly, we will apply Texas law here. See Tifford v. Tandem
Energy Corp., 562 F.3d 699, 705 n.2 (5th Cir. 2009).
3
According to the comments to Texas Rule of Appellate Procedure 47.7, “[a]ll opinions
and memorandum opinions in civil cases issued after the 2003 amendment have precedential
value.” Therefore, even though this decision is unpublished, it has precedential value under
Texas law.
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requisite degree of privity between an insurer and its insured can exist if: (1) the
insurer controlled the insured’s defense in the liability suit; and (2) the insurer
and the insured do not hold conflicting positions with respect to the issue
determined in the liability suit. See State Farm Lloyds v. Borum, 53 S.W.3d
877, 886-88 (Tex. App.-Dallas 2001, pet. denied) (showing that privity can be
established if the insurer controls an insured’s litigation and is not in conflict
with the insured as to the particular issue to be re-litigated); see also Benson &
Ford, Inc. v. Wanda Petroleum Co., 833 F.2d 1172, 1174 (5th Cir. 1987) (citing
“a liability insurer assum[ing] control of a defense” as an example of the control
necessary to find privity). Mid-Continent controlled Bay Rock’s defense, and its
position with respect to St. Paul’s subrogation right is the same as Bay Rock’s
position. Accordingly, we conclude that Mid-Continent was in privity with Bay
Rock, and, as a result, Mid-Continent is collaterally estopped from re-litigating
St. Paul’s right of subrogation.4
B. The Policies’ General Grants of Coverage
Mid-Continent asserts that the district court erred in finding that the
damages awarded against Bay Rock fell under the Policies’ general grants of
coverage. Mid-Continent’s brief raises two arguments to support its assertion:
(1) the damages awarded against Bay Rock are not covered because HOC did not
have an ownership interest in Striebeck No. 1; and (2) the damages at issue are
not covered because they were not because of property damage as required by
the Policies. This section will address each of Mid-Continent’s arguments in
turn.
4
The San Antonio Court of Appeals’s opinion in the underlying state court action
shows that the issue of St. Paul’s subrogation right was fully litigated in that action and that
the determination of that issue was essential to the state court judgment. Bay Rock Operating
Co., 298 S.W.3d at 222-26.
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1. Ownership Argument
Mid-Continent argues that the damages awarded against Bay Rock are not
covered because HOC did not have an ownership interest in Striebeck No. 1.
The terms of the Policies do not require HOC to have an ownership interest in
Striebeck No. 1 for there to be coverage, and Mid-Continent does not cite any
authority that supports such a proposition. Accordingly, we conclude that Mid-
Continent’s first argument is without merit.
The Policies contain similar grants of coverage. The CGL Policy states
that Mid-Continent “will pay those sums that [Bay Rock] becomes legally
obligated to pay as damages because of . . . ‘property damage’ . . . .” Similarly,
the Umbrella Policy states that Mid-Continent “will indemnify [Bay Rock] for
ultimate net loss in excess of the retained limit because of . . . property damage
. . . .” The CGL Policy and the Umbrella Policy both define “property damage,”
in relevant part, as: (1) “Physical injury to tangible property, including all
resulting loss of use of that property. . . .;” or (2) “Loss of use of tangible property
that is not physically injured.” Accordingly, to prove coverage, Bay Rock only
had to show: (1) that it was legally obligated to pay the damages awarded
against it; and (2) that the damages awarded were because of physical injury to
tangible property. Nothing in the Policies require the claimant—HOC—to have
an ownership interest in the property that was damaged for coverage to exist.
To support its ownership argument, Mid-Continent also asserts that the
underlying state lawsuit “established that [HOC] suffered no injury in the
blowout.” This argument, however, does not show that HOC needed to have an
ownership interest in Striebeck No. 1 for there to be coverage. Moreover, the
underlying state lawsuit actually established the opposite of Mid-Continent’s
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assertion because the state court jury found that HOC incurred losses and
awarded it damages as a result.5
Accordingly, HOC’s lack of an ownership interest in Striebeck No. 1 did
not defeat Bay Rock’s claim for coverage.
2. “Because of Property Damage”
Mid-Continent also argues that the damages awarded against Bay Rock
were not related to any physical injury to tangible property and, therefore, are
not covered by the Policies. Specifically, Mid-Continent argues that the
following costs are not covered: (1) the costs to control Striebeck No. 1; and (2)
the costs to repair, complete, and evaluate the well.6 The district court found
that all of these damages were the result of physical injury to tangible property
and, therefore, they were covered by the Policies. Mid-Continent argues that the
district court’s finding was erroneous. To support its argument, Mid-Continent:
(1) argues that Appellees failed to demonstrate that the costs at issue were
related to property damage; (2) argues that there was no injury to the wellbore;
and (3) argues that the completion and evaluation costs were not incurred
because of the blowout. We will address each of Mid-Continent’s arguments in
turn.
Mid-Continent’s first argument asserts that Appellees failed to
demonstrate that the costs at issue were related to any property damage. Mid-
5
If Mid-Continent is making this “no loss” argument in an attempt to re-litigate
whether HOC incurred any losses at all, the doctrine of collateral estoppel would bar it from
re-litigating the issue of HOC’s losses, because the facts of this case show: (1) the issue of
HOC’s losses was litigated in the underlying liability suit; (2) the issue of HOC’s losses was
essential to the state court judgment because HOC had to suffer losses to be awarded
damages; and (3) Mid-Continent was in privity with Bay Rock because Mid-Continent
controlled Bay Rock’s defense, and its position with respect to HOC’s losses is the same as Bay
Rock’s position. See Getty Oil, 845 S.W.2d at 802; Borum, 53 S.W.3d at 886-88.
6
In its reply brief, Mid-Continent concedes coverage for the lost gas award.
7
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Continent’s first argument is based on the fact that HOC and the working
interest owners were not awarded other costs beyond the costs to control, repair,
complete, and evaluate the well. The bare fact that certain other costs were not
awarded does not show that Appellees failed to demonstrate that the costs that
were awarded were related to property damage. In the district court, Appellees
demonstrated that the costs at issue were related to property damage by
showing that they were incurred because of the blowout and the resulting
property damage from it. Accordingly, we conclude that Appellees did show that
the costs at issue were related to property damage and that Mid-Continent’s first
argument fails to indicate any genuine issue for trial.
Mid-Continent’s second argument asserts that there was no injury to the
wellbore and, therefore, a reasonable jury could find that none of the costs
awarded were related to property damage. The only evidence that
Mid-Continent cites to support its argument directly contradicts its assertion.7
As a result, we hold that Mid-Continent’s second argument fails to create a fact
issue as to any of the damages awarded against Bay Rock.
Mid-Continent’s final argument asserts that the evaluation and
completion costs awarded against Bay Rock were not related to the blowout and,
therefore, a reasonable jury could find that the costs were not covered by the
Policies. As an initial matter, we note that the state jury award directly
contradicts Mid-Continent’s assertion; the jury award states that the completion
and evaluation costs awarded were damages that were suffered as a result of the
blowout. To the extent that Mid-Continent has created a fact issue as to
whether the completion and evaluation costs resulted from the blowout, we hold
7
The evidence cited by Mid-Continent states as follows: “It just turned out that there
was wellborn [sic] damage . . . .”
8
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that Mid-Continent is collaterally estopped from re-litigating this issue because:
(1) the jury award shows that this issue was litigated in the underlying liability
suit; (2) this issue was essential to the underlying judgment because the jury
could not have awarded the completion and evaluation costs if they were not
because of the blowout; and (3) Mid-Continent and Bay Rock were in privity with
respect to this issue because Mid-Continent controlled Bay Rock’s defense and
both Mid-Continent and Bay Rock have the same position on the issue. See
Getty Oil, 845 S.W.2d at 802; Borum, 53 S.W.3d at 886-88.
In summary, because Mid-Continent has failed to create a triable jury
issue as to whether any of the damages awarded against Bay Rock were because
of physical injury to tangible property, we hold that the district court did not err
in concluding that the damages at issue were related to physical injury to
tangible property and, therefore, covered by the Policies.
C. Exclusions and Limitations
Mid-Continent raises a number of limitations and exclusions to coverage
and argues that the district court erred in finding that none of them were
applicable. We address each of the exclusions and limitations raised by Mid-
Continent in turn.
1. The Underground Equipment Limitation
Mid-Continent argues that the CGL Policy’s “Underground Equipment
Limitation” removes from coverage the repair costs at issue, which were incurred
to remove a stuck drill pipe. Appellees assert that Mid-Continent waived this
argument. Mid-Continent rebuts Appellees’ assertion by stating that it raised
this argument in its complaint and in its summary judgment motions. The fact
that Mid-Continent raised this argument in its complaint will not save it from
waiver if it failed to present this argument in its summary judgment motions.
Grenier v. Cyanamid Plastics, Inc., 70 F.3d 667, 678 (1st Cir. 1995) (“Even an
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issue raised in the complaint but ignored at summary judgment may be deemed
waived.”). In its motions, Mid-Continent did cite the Underground Equipment
Limitation, but it only argued that the limitation removed from coverage
“property damage to ‘any casing, pipe, bit or tool . . . or other drilling . . .
equipment.’” Mid-Continent did not argue that the limitation applied to
removal of a drill pipe. Because Mid-Continent failed to raise its removal
argument in the district court, the argument is waived. See id.; see also See
Martco Ltd. P’ship v. Wellons, Inc., 588 F.3d 864, 877 (5th Cir. 2009)
(“[A]rguments not raised before the district court are waived and cannot be
raised for the first time on appeal.”).
2. The Well Control Provision
Mid-Continent argues that the control costs awarded against Bay Rock are
removed from coverage by an exclusion in the CGL Policy and a limitation in the
Umbrella Policy (collectively, the “Well Control Provision”). Mid-Continent
bears the burden of proving that an exclusion or limitation applies.
Underwriters at Lloyd’s of London v. Gilbert Tex. Constr., L.P., 245 S.W.3d 29,
33 (Tex. App.-Dallas 2007), aff’d, 2010 WL 2219645 (Tex. 2010). The district
court found that the Well Control Provision only removed from coverage those
control costs incurred at a well in which Bay Rock had a working interest, and,
because Bay Rock did not have working interest in Striebeck No. 1, the court
found that the costs to control Striebeck No. 1 were covered. We review the
district court’s policy interpretation de novo. Finger Furniture Co. Inc. v.
Commonwealth Ins. Co., 404 F.3d 312, 314 (5th Cir. 2005). We hold that the
district court did not err in its interpretation of the Well Control Provision.
The CGL Policy and the Umbrella Policy both remove from coverage “[a]ny
cost or expense incurred by [Bay Rock] or at [Bay Rock’s] request or by or at the
request of any ‘Co-owner of the Working Interest’ in connection with controlling
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or bringing under control any oil, gas, or water well.” The CGL Policy defines
“Co-owner of the Working Interest” as “any person or organization who is, with
[Bay-Rock], a co-owner, joint venturer or mining partner in mineral properties
. . . .” Mid-Continent argues that the control costs at issue were incurred at Bay
Rock’s “request” because it participated in obtaining well control services from
Cudd and, therefore, the control costs are removed from coverage by this
provision.
Under Texas law, we are required to interpret “[c]ontract provisions . . .
so as to avoid meanings that produce unreasonable, oppressive, or absurd results
. . . .” Cont’l Sav. Ass’n v. U.S. Fid. & Guar. Co., 762 F.2d 1239, 1245 (5th Cir.
1985). Under Mid-Continent’s interpretation, the control costs awarded against
Bay Rock would have been covered if Bay Rock had refused to participate in
obtaining well control services from Cudd. In other words, because Bay Rock
made an affirmative attempt to mitigate the damages from the blowout, it lost
coverage. Mid-Continent’s interpretation creates a perverse incentive on the
part of insureds like Bay Rock to do nothing when a well goes out of control in
order to preserve their right to coverage. As a result, we cannot accept
Mid-Continent’s interpretation of the Well Control Provision because it leads to
unreasonable and absurd results.
Because we cannot accept Mid-Continent’s interpretation, we must now
determine whether the district court’s interpretation of the provision was a
reasonable one. The district court found that the Well Control Provision only
applied to costs to control a well in which an insured has a working interest (i.e.,
is a “co-owner”). The Well Control Provision plainly refers to Bay Rock’s co-
owners of a working interest, and it is uncertain whether this working interest
requirement was meant to apply to control costs incurred by Bay Rock or at Bay
Rock’s request. Under Texas law, courts “must resolve . . . uncertainty [in an
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insurance policy] by adopting the construction that most favors the insured.” See
Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d
552, 555 (Tex. 1991). Therefore, we must construe the Well Control Provision
as the district court did in favor of Bay Rock, and, as a result, we hold that the
control costs awarded against Bay Rock are covered by the Policies.
3. Exclusions 2.j.(5) and 2.j.(6) in the CGL Policy
Mid-Continent argues that exclusions 2.j.(5) and 2.j.(6) in the CGL Policy
exclude from coverage all the damages at issue. The district court found that
these exclusions were inapplicable because they were superseded by the CGL
Policy’s Oil & Gas Endorsement. We review the district court’s interpretation
of the policy de novo. Finger Furniture Co. Inc., 404 F.3d at 314. After
reviewing the terms of the policy, we conclude that these exclusions do not
negate coverage here.8
“Endorsements to a policy generally supersede and control over conflicting
printed terms within the main policy;” however, the provisions found in the main
“policy and endorsement should be construed together unless” doing so would
negate or render superfluous the additional coverage afforded in the
endorsement. See Mesa Operating Co. v. Cal. Union Ins. Co., 986 S.W.2d 749,
754-55 (Tex. App.-Dallas 1999, pet. denied).
Exclusion 2.j.(5) excludes all property damage to real property that is the
subject of Bay Rock’s drilling operations. The Oil & Gas Endorsement provided
Bay Rock with additional coverage for property damage to “[a]ny formation
8
Mid-Continent only argues that the district court erred in finding that exclusions
2.j.(5) and 2.j.(6) were superseded. The district court also found that identical provisions in
the Umbrella Policy, exclusions 2.k.(3) and 2.k.(4), were superseded. Because Mid-Continent
fails to challenge the district court’s determination as to 2.k.(3) and 2.k.(4), any such argument
is waived. Askanase v. Fatjo, 130 F.3d 657, 668 (5th Cir. 1997) (“All issues not briefed are
waived.”).
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strata or area in or through which exploration for or production of any substance
is carried on.” The application of exclusion 2.j.(5) would eliminate the additional
coverage that Bay Rock purchased with the Oil & Gas Endorsement.
Accordingly, we conclude that the district court did not err in finding that
exclusion 2.j.(5) was superseded.
Exclusion 2.j.(6) removes from coverage property damage to “that
particular part of any property that must be restored, repaired or replaced
because [Bay Rock’s] work was incorrectly performed on it.” Exclusion 2.j.(6)
has been interpreted to apply only to “property damage to parts of a property
that were themselves the subject of defective work by [an] insured.”
Mid-Continent Cas. Co. v. JHP Dev., Inc., 557 F.3d 207, 215 (5th Cir. 2009). As
a result, the exclusion “does not bar coverage for damage to parts of a property
that were the subject of only nondefective work by the insured and were
damaged as a result of the defective work by the insured on other parts of the
property.” Id. Given this interpretation of the exclusion, we will first address
whether exclusion 2.j.(6) even applies to the damages at issue.
Mid-Continent argues that Bay Rock was contracted to supervise the
drilling of Striebeck No. 1 as a whole, and, because the damages at issue
resulted from Bay Rock’s defective supervision, all property damage related to
the well is excluded by 2.j.(6). Mid-Continent’s argument is inconsistent with
the case law and the terms of the exclusion, which restricts the exclusion to
property damage to that particular part of Striebeck No. 1 that was the subject
of Bay Rock’s defective work. The state liability suit established that the
damages at issue were incurred as a result of “Bay Rock’s negligent decision to
drill ahead without running a true formation integrity test (“FIT”), also known
as a ‘shoe test’ or ‘casing seat test,’ to ensure that the intermediate casing seat
and surrounding formation could withstand the anticipated higher pressures as
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they drilled further down-hole.” Bay Rock Operating Co., 298 S.W.3d at 227,
230. The state court suit shows that the intermediate casing seat and the
surrounding formation were the property that was the subject of Bay Rock’s
defective work, and, as a result, exclusion 2.j.(6) only applies to property damage
to that property; the exclusion does not apply to any resulting damage to other
property. Mid-Continent does not point to any evidence that any of the costs
awarded were specifically for property damage to the intermediate casing seat
or the surrounding formation.9 Consequently, we hold that exclusion 2.j.(6) does
not apply to any of the damages at issue.
If we accepted Mid-Continent’s interpretation of 2.j.(6), as applying to any
and all property damage to Striebeck No. 1, we would still find 2.j.(6)
inapplicable because Mid-Continent’s interpretation would cause an
irreconcilable conflict between the exclusion and the additional coverage
purchased by Bay Rock in the Oil & Gas Endorsement. In the Oil & Gas
Endorsement, Bay Rock purchased coverage for any damage to the formation,
strata, or area in which it worked, as well as coverage for all surface and
subsurface property damage from a blowout.10 The application of exclusion
9
Mid-Continent’s brief fails to argue or present any evidence to show that the damages
at issue were for property damage to the intermediate casing seat or the surrounding
formation, and it is not our duty to search the record for such evidence. See Forsyth v. Barr,
19 F.3d 1527, 1537 (5th Cir. 1994) (noting that it is not the duty of this court to “sift through
the record in search of evidence to support a party’s opposition to summary judgment”).
10
Paragraph IV of the Oil & Gas Endorsement contains a provision (“the Blowout
Endorsement”) that states as follows: “Unless so indicated below, the Blow-out and Cratering
of any well is included within the Limit of Insurance.” The language immediately following
the Blowout Endorsement states, “[i]f so indicated, this insurance does not apply to ‘Property
Damage’ on or above the surface of the earth caused by the blow-out or cratering of any well”
(the “Surface Limitation”). The Surface Limitation was not indicated as applicable. Mid-
Continent argues that the language of the Surface Limitation mirrors the scope of coverage
found in the Blowout Provision and, therefore, the provision only covers property damage on
or above the surface of the earth. Appellees argue that the plain language of the Blowout
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2.j.(6), as interpreted by Mid-Continent, would exclude from coverage all the
additional property damage coverage described within the Oil & Gas
Endorsement. Accordingly, even if we accepted Mid-Continent’s interpretation,
we would still find exclusion 2.j.(6) inapplicable because Mid-Continent’s
interpretation would lead us to conclude that the exclusion was superseded.
In summary, we find that the district court did not err in finding that
exclusions 2.j.(5) and 2.j.(6) did not remove from coverage the damages awarded
against Bay Rock.
IV. CONCLUSION
Because Mid-Continent has failed to show that the district court
committed reversible error in granting Appellees summary judgment, we
AFFIRM.
Provision provides coverage for both surface and subsurface property damage; Appellees’
argument is further supported by the fact that the Surface Limitation does not mirror the
terms of the Blowout Endorsement as other limitations in the endorsement do. The
interpretations provided by Appellees and Mid-Continent are both reasonable interpretations
of the Oil & Gas Endorsement’s blowout coverage. When there are two reasonable
interpretations of a policy provision, Texas law requires us to construe the provision in favor
of the insured, “even if the construction urged by the insurer appears to be more reasonable
or a more accurate reflection of the parties’ intent.” Hudson Energy Co., 811 S.W.2d at 555.
Accordingly, we must adopt the reasonable interpretation offered by Bay Rock and the other
appellees.
15