Although it found that insurance carriers did not have a duty to defend their insureds, a federal district court in Texas has ruled that they may have a duty to indemnify them, where an amended autopsy report raised a genuine issue of material fact as to whether a sewer worker’s death fell outside the policies’ pollution exclusion.

1. The Insurance Coverage Law Information Center
The following article is from National Underwriter’s latest online resource,
FC&S Legal: The Insurance Coverage Law Information Center.
DID POLLUTANT, OR LACK OF OXYGEN, KILL SEWER WORKER?
ISSUE LEADS COURT TO RULE THAT INSURERS MAY HAVE DUTY
TO INDEMNIFY INSUREDS
June 5, 2014 Steven A. Meyerowitz, Esq., Director, FC&S Legal
Although it found that insurance carriers did not have a duty to defend their insureds, a federal district court in Texas has
ruled that they may have a duty to indemnify them, where an amended autopsy report raised a genuine issue of material
fact as to whether a sewer worker’s death fell outside the policies’ pollution exclusion.
The Case
The city of Gordon, Texas, contracted with Jacob and Martin, Ltd., for it to design and install a new sewer system. The city
also contracted with Granbury Contracting & Utilities, Inc., to install sewer lines.
While working on the project, a project engineer allegedly directed Eliseo Alberto Ramirez Rodriguez, an employee of
Granbury, to open a manhole, climb inside it, and remove a plug from the sewer line. After Mr. Ramirez removed the plug,
toxic fumes allegedly were released and he died from methane inhalation.
Mr. Ramirez’s parents sued Jacob and Martin, the project engineer, the lead engineer, and the general partner of Jacob
and Martin under the Texas Wrongful Death and Survival statutes.
Thereafter, Acadia Insurance Company and Continental Western Insurance Company, which had issued general liability
and umbrella policies to Jacob and Martin, Ltd., sought a declaration that they owed no duty to defend or indemnify the
defendants in the lawsuit filed by Mr. Ramirez’s parents.
The insurers moved for summary judgment. The insureds asked the court to consider extrinsic evidence that they
contended demonstrated that Mr. Ramirez may have died from a lack of oxygen.
The Policies
The general liability policy issued by Acadia excluded:
“[b]odily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage,
migration, release or escape of “pollutants” ... [a]t or from any premises, site or location which is or was at any time used
by or for any insured or others for the handling, storage, disposal, processing or treatment of waste.
The umbrella policy issued by Continental Western excluded:
“[b]odily 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....
The Continental Western policy also stated:
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2. This exclusion does not apply if valid “underlying insurance” for the pollution liability risks described above exists or
would have existed but for the exhaustion of underlying limits for “bodily injury” and “property damage.” Coverage
provided will follow the provisions, exclusion, and limitations of the “underlying insurance.”
Both policies defined:
pollutants
as:
any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals
and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
The Court’s Decision
In its decision, the court first rejected the insureds’ argument that it should consider extrinsic evidence that they
contended demonstrated that Mr. Ramirez might have died from a lack of oxygen, ruling that it would not consider “any
evidence beyond the policies and underlying pleading.” The court noted that the insureds did not dispute that methane
was a pollutant or that the exclusions otherwise applied to the facts alleged in the underlying suit.
The court, therefore, concluded that the insurers were entitled to summary judgment on their duty to defend.
The court reached a different result on the duty of the insurers to indemnify.
It explained that an insurer’s duty to indemnify turned on the facts actually established, rather than alleged, in the
underlying dispute. The court noted that the autopsy report was amended to change the cause of death from “asphyxia
due to methane gas inhalation” to “asphyxia due to oxygen displacement in a confined space.” In the court’s view, the
amended autopsy report raised a genuine issue of material fact as to whether Mr. Ramirez’s death fell outside the policies’
pollution exclusion.
According to the court, the insurers had failed to demonstrate that the substance that displaced the oxygen “was in fact
a pollutant as defined by the policies.” According to the court, it was “not sufficient” for the insurers to note that the
oxygen must have been displaced by another substance; rather, it ruled, the insurers had to show, by competent summary
judgment evidence, that the substance that displaced the oxygen was a pollutant under the policies and that the means
by which the oxygen was displaced fell within the exclusions.
Accordingly, the court concluded that the insurers had failed to meet their burden to demonstrate that they were entitled
to judgment as a matter of law on the duty to indemnify.
The case is Acadia Ins. Co. v. Jacob and Martin, Ltd., No. 4:13–cv–798–O (N.D. Tex. May 28, 2014). Attorneys involved
include: Beth D. Bradley, Summer L. Frederick, Tollefson Bradley Ball & Mitchell LLP, Dallas, TX, for Plaintiffs; Robert B.
Wagstaff, McMahon Surovik Suttle PC, Abilene, TX, for Defendants.
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