In Liberty Mutual Insurance Company v. Linn Energy, L.L.C., __ Fed.Appx. __, 2014 WL 2925161 (5th Cir. June 30, 2014), the United States Court of Appeals for the Fifth Circuit, applying Texas law, affirmed the district court’s summary judgment order holding that the insurer had no duty to defend or indemnify its policyholder in a lawsuit seeking damages associated with a pipe leak that polluted property.
The policyholder in Liberty Mutual had been sued in Louisiana state court for damages related to the alleged leaking of contaminants from a pipeline owned by the policyholder onto property owned by the underlying plaintiffs. See Liberty Mut. Ins. Co. v. Linn Energy LLC, Case No. 4:12-cv-01886, (Sept. 5, 2013), ECF No. 27 at 2. The policyholder sought defense of the underlying lawsuit from its insurer, but the insurer denied coverage on the grounds that the allegations in the underlying litigation were excluded from coverage under the policy. Id. at 3. Specifically, an endorsement to the policy excluded the type of property damage alleged here – 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.” Id. at 4-5; see also 2014 WL 2925161 at *1. On appeal, the policyholder argued that the insurer had a duty to defend because a coverage-adding endorsement provided for coverage of property damage from “‘underground resources and equipment hazard’ arising out of operations performed by” the policyholder. Liberty Mutual, Case No. 4:12-cv-01886, ECF No. 27 at 5. The policyholder argued that the district court erred “because its holding allows the [exclusionary endorsement] to nullify a portion of the supplemental coverage.” 2014 WL 2925161, at *1.
The Fifth Circuit affirmed and essentially adopted the district court’s reasoning, holding that “two provisions of an insurance policy are irreconcilable only when they contradict to the point that one would completely ‘negate or render superfluous the additional coverage.” Id. Here, the court reasoned that the exclusionary endorsement could be read in tandem with the coverage-adding endorsement; as “the [coverage adding endorsement] still provides coverage for all non-pollution property damage, such as the depletion of a reservoir.” Id. Thus, the Fifth Circuit concluded that the insurer properly disclaimed coverage.
Liberty Mutual reinforces the principle that courts should not strain to find an ambiguity where none exists. That the parties agreed to an endorsement that would extend the general coverage grant to a specified peril does not negate exclusions, such as a pollution exclusion, that exclude coverage for some types of claims within a general grant of coverage. This is particularly true where, as here, the endorsement relating to pollution-related claims did not render the coverage-adding endorsement a nullity. Accordingly, this case is a good example of a court reading an insurance policy – and all of its later endorsements – as a whole, rather than allowing one portion to supersede the other when a construction is possible that gives meaning to both endorsements.