Dallas National Insurance Company v. Sabic Americas, Inc.

Opinion issued March

10, 2011

In The

Court of Appeals

For The

First District of

Texas

————————————

NO.

01‑08‑00758‑CV

———————————

Dallas National Insurance Company ,

Appellant

V.

Sabic Americas, Inc. ,

Appellee

On Appeal from the 270th

District Court

Harris County, Texas

Trial Court Case No. 2007-48247-A

O

P I N I O N

Seeking a determination of its rights

and obligations under four commercial general‑liability insurance

policies it had issued to appellee Sabic Americas, Inc., appellant Dallas

National Insurance Company filed a declaratory‑judgment action. Sabic filed a

counterclaim seeking, inter alia , a declaratory judgment that

the four policies obligated Dallas National to defend and indemnify it in eight

underlying lawsuits. With both parties’

cross‑motions f or summary judgment before it, the trial court granted

Sabic’s motion and ordered Dallas National to reimburse Sabic for any defense costs it incurred as a result of

the underlying lawsuits. On appeal,

Dallas National contends that the trial court erred in declaring that it was obligated to defend and reimburse

Sabic. We affirm.

Background

Eight lawsuits were filed

against Sabic—four in the Southern District of New York and four in the Middle

District of Florida (underlying lawsuits). [1] The plaintiffs in each of the underlying

lawsuits allege that they are municipal corporations supplying water to

thousands of customers residing within their respective boundaries [2]

and allege that their water supply systems and groundwater were contaminated by

the m ethyl tertiary butyl ether (MTBE)

that over fifty defendants, including Sabic, added to the petroleum products

that they manufactured, refined, formulated, distributed, supplied, sold and/or

marketed. The pleadings in the underlying

lawsuits raise numerous causes of action, including negligence, product

liability, deceptive business practices, and trespass. The plaintiffs in each of those lawsuits are

seeking (1) removal of contaminants from the groundwater and soil, (2) testing

and monitoring of their groundwater, and (3) recovery of damages for testing

costs, remediation, or treatment costs, including damages to water wells,

pumping stations, filters, and other property.

Although

the pleadings in each of the underlying lawsuits raise specific allegations

with regard to some of the individual defendants, none of them raises any

specific allegations with respect to Sabic.

Rather, the plaintiffs in the underlying lawsuits allege that the

“defendants,” including Sabic, began adding MTBE to the petroleum products that

they manufactured, refined, formulated, distributed, supplied, sold and/or

marketed beginning in the 1970s. The

plaintiffs further allege that the defendants knew or should have known the

unique dangers that the addition of MTBE to gasoline and other petroleum

products posed to groundwater supplies as early as the 1970s. According to the plaintiffs, MTBE

contamination was an inevitable result of the defendants’ intentional and

negligent conduct. The plaintiffs

further allege that the defendants misled Congress and the public of the

dangers posed by MTBE and increased the amount of MTBE in their products,

despite knowledge of the hazards it posed.

Plaintiffs also allege that MTBE begins to contaminate the groundwater

soon after it is released, and that the contamination is continuous, persistent,

and ongoing. Although the plaintiffs

allege that the MTBE contamination began well before 2003, they also allege that

new spills and leaks of the petroleum products containing MTBE occurred

annually at all times relevant to the litigation.

Sabic forwarded copies of the

complaints in all eight of the underlying lawsuits to Dallas National with the expectation that it

would receive a legal defense and indemnification pursuant to four commercial

general‑liability insurance policies covering July 2003 to July 2007. Those policies provide in pertinent

part:

SECTION

I – COVERAGES

COVERAGE

A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a.

We will pay those sums that the insured

becomes legally obligated to pay as damages because of “bodily injury” or

“property damage” to which this insurance applies. We will have the right and duty to defend the

insured against any “suit” seeking those damages. However, we will have no duty to defend the

insured against any “suit” seeking damages for “bodily injury” or “property

damage” to which this insurance does not apply.

.

. . .

b.

This insurance applies to “bodily

injury” or “property damage” only if:

(1)

The “bodily injury” or “property damage”

is caused by an “occurrence” that takes place in the “coverage territory”;

(2)

The “bodily injury” or “property damage”

occurs during the policy period . . . .

The policies also include the following

relevant definitions:

13. “Occurrence” means an accident, including

continuous or repeated exposure to substantially the same general harmful

conditions.

.

. . .

15. “Pollutants” means 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.

.

. . .

17. “Property Damage” means:

a. Physical injury to tangible property,

including all resulting loss of use of that property. All such loss of use shall be deemed to occur

at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not

physically injured. All such loss of use

shall be deemed to occur at the time of the “occurrence” that caused it.

The policies,

which contain pollution exclusions, also state that they do not

apply to bodily injury or property loss “expected or intended from the

standpoint of the insured.”

Dallas National denied

coverage and filed a declaratory‑judgment action against Sabic, seeking a

determination of Dallas National’s rights and obligations under the four

policies. [3] Sabic filed its first amended answer and first

amended counterclaim, seeking a declaratory judgment against Dallas National to

defend and indemnify it as required under the policies. Sabic and Dallas National subsequently filed

cross‑motions for traditional summary judgment. [4] After hearings on both motions, the trial

court signed an order denying Dallas National’s motion and granting Sabic’s

motion on both its duty‑to‑defend and duty‑to‑indemnify

issues. The trial court subsequently set

aside the order and signed a second order granting Sabic’s motion with respect

to the duty­‑to‑defend issue only, denying Dallas National’s motion

on both its duty‑to‑defend and duty‑to‑indemnify

issues, and declaring that Dallas National was obligated to defend Sabic in the

underlying lawsuits and reimburse Sabic for any defense costs it incurred as a

result. The court also severed Sabic’s

breach‑of‑contract and attorney’s‑fee claims. This appeal followed.

Discussion

Dallas National raises one

issue: whether the trial court erred in declaring that Dallas National was

obligated to defend Sabic in the underlying lawsuits and indemnify Sabic for

any associated costs with its defense. Dallas

National raises the following arguments in support of its position:

1. whether Sabic’s summary judgment motion and evidence were insufficient as

a matter of law to show “property damage” that occurred during any policy

period;

2. whether the underlying lawsuits alleged an “occurrence” under the

policies;

3. whether the fortuity doctrine barred coverage for the underlying lawsuits;

4. whether coverage was excluded under the expected or intended exclusion

contained within the policies;

5. whether coverage was excluded under the pollution exclusion; and

6.

whether the underlying

lawsuits in Florida alleged “property damage.”

Standard of Review

We review a

trial court’s decision to grant or to deny a motion for summary judgment

de novo. See Tex. Mun. Power Agency

v. Pub. Util. Comm’n , 253 S.W.3d 184, 192 (Tex. 2007). Although a denial of summary judgment

is not normally reviewable, we may review such a denial when both parties move

for summary judgment and the trial court grants one motion and

denies the other. Id . In our review of such cross‑motions, we

review the summary judgment evidence presented by each party,

determine all questions presented, and render the judgment that the trial court

should

have rendered. Id .

(citing Comm’r Court v. Agan , 940 S.W.2d 77, 81 (Tex. 1997)).

Under the

traditional summary judgment standard, the movant has the burden to show that

no genuine issues of material fact exist and that it is entitled to judgment as

a matter of law. Tex. R. Civ. P 166a(c); Nixon v. Mr. Prop. Mgmt. Co., Inc .,

690 S.W.2d 546, 548 (Tex. 1985). In deciding

whether there is a disputed material fact issue precluding summary judgment,

evidence favorable to the nonmovant will be taken as true, and every reasonable

inference must be indulged in favor of the nonmovant and any doubts resolved in

its favor. Nixon , 690 S.W.2d at

548–49. A defendant moving for summary

judgment must conclusively negate at least one essential element of each of the

plaintiff’s causes of action or conclusively establish each element of its

cross-claim or affirmative defense. Sci.

Spectrum, Inc. v. Martinez , 941 S.W.2d 910, 911 (Tex. 1997).

Duty

to Defend

An insurer’s

duty to defend is determined by the allegations in the pleadings and the language

of the insurance policy. See Zurich

Am. Ins. Co. v. Nokia, Inc ., 268 S.W.3d 487, 495 (Tex. 2008) (applying

“eight‑corners” rule to determinations regarding duty to defend). We resolve all doubts regarding the duty to defend in favor of the duty, and we construe the pleadings liberally. Zurich Am. Ins. Co. v. Nokia,

Inc ., 268 S.W.3d 487, 491 (Tex. 2008); King v. Dallas Fire Ins. Co.,

85 S.W.3d 185, 187 (Tex. 2002); see also

AccuFleet, Inc. v. Hartford Fire Ins. Co. ,

322 S.W.3d 264, 270 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (“We resolve

all doubts regarding the duty to defend in favor of the duty.”). In reviewing the underlying pleadings, we

focus on the factual allegations that show the origin of the damages rather

than on the legal theories alleged. See Nokia , 268 S.W.3d at 495 ; Lamar

Homes, Inc. v. Mid‑Continent Cas. Co ., 242 S.W.3d 1, 13 (Tex.

2007). The insurer’s duty to defend

arises when pleadings raise allegations that, if taken as true, potentially

state a cause of action within the terms of the policy. Gehan

Homes, Ltd. v. Employers Mut. Cas. Co. , 146 S.W.3d 833, 838 (Tex.

App.—Dallas 2004, pet. denied); Nokia , 268 S.W.3d at

495 . If potential coverage exists “for

any portion of the suit, an insurer must defend the entire suit.” Stumph

v. Dallas Fire Ins. Co. , 34 S.W.3d 722, 728 (Tex. App.—Austin 2000, no pet.).

We interpret

insurance policies according to the rules of contract construction. See Am.

Mfrs. Mut. Ins. Co. v. Schaefer , 124 S.W.3d 154, 157 (Tex. 2003); SMI

Realty Mgmt. Corp. v. Underwriters at Lloyd’s , 179 S.W.3d 619, 624 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) .

Our primary goal in doing so is to give

effect to the written expression of the parties’ intent. SMI Realty Mgmt. Corp. , 179 S.W.3d at 624 . To this end, we construe the terms of

the contract as a whole and consider all of its terms, not in isolation, but

within the context of the contract. Id. ; Forbau

v. Aetna Life Ins. Co. , 876 S.W.2d 132 , 133–34 (Tex. 1994).

If a contract

can be given only one reasonable meaning, it is not ambiguous and will be

enforced as written. See Kelley‑Coppedge,

Inc. v. Highlands Ins. Co ., 980 S.W.2d 462, 464 (Tex. 1998). On the other hand, if a contract is

susceptible to two or more reasonable interpretations, it is ambiguous. Id. Whether a particular provision or the

interaction among multiple provisions creates an ambiguity is a question of

law. See Nat’l Union Fire Ins. Co. v.

CBI Indus ., 907 S.W.2d 517, 520 (Tex. 1995). The fact that the parties may disagree about

the policy’s meaning does not create an ambiguity. See Kelley‑Coppedge, Inc. , 980

S.W.2d at 465 . When an alleged contract

ambiguity involves an exclusionary provision of an insurance policy, then we must

adopt the construction urged by the insured as long as that construction is not

unreasonable, even if the construction urged by the insurer appears to be more

reasonable or a more accurate reflection of the parties’ intent. See Balandran

v. Safeco Ins. Co. of Am ., 972 S.W.2d 738, 741 (Tex. 1998). The insurer has the burden of proving that a

policy limitation or exclusion constitutes an avoidance or an affirmative

defense. Utica Nat’l Ins. Co. v. Am. Indem. Co ., 141 S.W.3d 198, 204 (Tex.

2004).

Insufficient

Summary Judgment Evidence—“Property Loss” and “Occurrence”

Dallas

National contends that Sabic’s summary judgment motion and evidence were

insufficient as a matter of law to show “property damage” that was caused by an

“occurrence” that took place during the policy period. Specifically, Dallas National contends that

even though the plaintiffs in the underlying lawsuits artfully plead

negligence, the pleaded facts (even liberally construed in Sabic’s favor)

unambiguously allege intentional and knowing conduct rather than

negligence. See Nokia , 268 S.W.3d at 495 (factual allegations contained

in plaintiffs’ pleadings control, not alleged cause of action). According to Dallas National, such conduct

cannot be considered “accidental,” and thus, cannot constitute an “occurrence”

as defined by the policies. Dallas

National also contends that the pleadings in the underlying lawsuits are

insufficient to demonstrate that “property damage” occurred during the policy

periods because the pleadings do not allege specific dates when the actual

injuries occurred. Finally, Dallas

National contends that the Florida lawsuits do not allege “property damage”

(actual, physical damage), but rather, damages for loss of consumer confidence,

economic losses, and anticipatory or speculative losses.

Having

reviewed the pleadings filed in the underlying lawsuits, we conclude the

factual allegations raised here support a duty.

The pleadings allege both intentional conduct (i.e., the defendants knew

of MTBE’s harmful effects and nevertheless added MBTE to the petroleum products

they manufactured, refined, formulated, distributed, supplied, sold and/or

marketed) and negligence (i.e., the defendants should have known of MTBE’s

harmful effects). The allegations of

intentional conduct (which are not covered) are not sufficient to preclude a

duty to defend when they are coupled with allegations of negligence (which may

be covered), because if coverage exists “for any portion of a suit, an insurer

must defend the entire suit.” Stumph , 34 S.W.3d at 728 .

Although

the plaintiffs do not allege specific dates when the MTBE contamination

occurred, they nonetheless allege that MTBE begins to contaminate the

groundwater soon after it is released, and that the contamination is

continuous, persistent, and ongoing.

Although the plaintiffs allege that the MTBE contamination began well

before 2003, they also allege that new spills and leaks of the petroleum

products containing MTBE occurred “annually” “[a]t all times relevant to the

litigation”—which includes the years immediately preceding the filing of the underlying

lawsuits in March 2007. Under a liberal

construction of the factual allegations raised in the pleadings, it is apparent

that the plaintiffs allege that new instances of MTBE contamination occurred

between July 2003 and July 2007, as a result of annual spills, leaks, and other

discharges of the petroleum products containing MTBE into the environment.

Dallas

National further contends that the Florida lawsuits do not allege “property

damage” (actual, physical damage), but rather, damages for loss of consumer

confidence, economic losses, and anticipatory or speculative losses. A review of the pleadings filed in the

Florida lawsuits reveals that, although the plaintiffs are seeking damages for

such economic losses, they are also seeking compensation for “damages to

Plaintiff’s property, including wells, pumping stations, filters, and

usufructuary rights to the water drawn from the aquifers” caused by the MTBE

contamination. Specifically, the

plaintiffs allege that the MTBE spreading through the groundwater and water

supply system, including plaintiff’s production wells, gives the water a “foul

taste and odor that renders the water unusable.” Having done so, the plaintiffs in the Florida

lawsuits have, at a minimum, alleged that the defendants’ conduct resulted in

the “loss of use of tangible property” ( i.e. ,

groundwater rendered unusable for sale due to MTBE contamination).

Construed

liberally, the pleadings in the underlying lawsuits allege facts sufficient to

show “property damage” was caused by an “occurrence” that took place between

July 2003 and July 2007.

Known‑Loss

Doctrine

Dallas National

also argues that it does not have a duty to defend Sabic under the known‑loss

doctrine or the policy’s “expected or intended” coverage exclusion. The known‑loss doctrine, also known as

the “fortuity doctrine,” bars coverage for a loss the insured already knows to

have occurred, or which is in progress at the inception of the carrier’s

initial policy. See, e.g. , Scottsdale Ins.

Co. v. Travis , 68 S.W.3d 72, 75 (Tex. App.—Dallas 2001, pet. denied). Specifically, Dallas National contends that, since

the plaintiffs in the underlying lawsuits allege that Sabic’s wrongful conduct

occurred before and after the purchase of the insurance policies, “the known

loss doctrine bars coverage and no duty to defend arises.”

Dallas

National cites to two cases in supports of its claim that the known‑loss

doctrine bars coverage in the present case: Scottsdale

Ins. Co. v. Travis , 68 S.W.3d 72 (Tex. App.—Dallas 2001, pet. denied) and Two Pesos v. Gulf Ins. Co. , 901 S.W.2d

495, 501 (Tex. App.—Houston [14th Dist.] 1995, no writ). Both Scottsdale

Insurance Co. and Two Pesos ,

however, are factually distinguishable from the present case. The underlying lawsuits in both Scottsdale Insurance Co. and Two Pesos only alleged intentional

torts; neither petition alleged negligence on the part of the insured. See

Scottsdale Ins. Co. , 68 S.W.3d at 74 (petition alleged claims for tortuous interference

with contract, misappropriation of trade secrets, breach of fiduciary duty, and

conversion); Two Pesos , 901 S.W.2d at

498 (petition alleged claim for trade‑dress infringement). As such, the petitions in both of those cases

alleged only facts that the insured

was engaged in conduct that was not covered or was excluded by the policy. See

Scottsdale Ins. Co. , 68 S.W.3d at 75

(stating that, if petition alleges only

facts not covered or excluded by insurance policy, insurer has no duty to

defend).

As

previously discussed, the pleadings in the underlying lawsuits allege both

intentional conduct (which is not covered) and negligence (which may be

covered). Sabic has demonstrated that

the underlying lawsuits allege some facts which may support a duty to defend,

and Dallas National has failed to refute all possible bases for Sabic’s

liability in negligence necessary to defeat the contractual duty to defend. See

Stumph , 34 S.W.3d at 728 .

“Expected

or Intended” Coverage Exclusion

Dallas

National argues that it does not have a duty to defend Sabic because the

pleadings in the underlying lawsuits allege that Sabic engaged in “intentional

conduct resulting in foreseeable damages” and such allegations fall squarely

within section I(A)(2)(a) which unambiguously precludes coverage for “‘[b]odily

injury’ or ‘property damage’ expected or intended from the standpoint of the

insured.”

Dallas

National contends that the plaintiffs in the underlying lawsuits allege that

before 2003, the defendants, including Sabic, added MTBE to the petroleum

products that they manufactured, refined, formulated, distributed, supplied,

sold, and/or marketed, and defendants, including Sabic, knew that the addition

of MTBE to those products would cause groundwater contamination—the property

damage alleged in the underlying lawsuits.

Dallas National further contends that, because the plaintiffs allege

that Sabic’s conduct was intentional, Sabic’s conduct does not qualify as an

accident or “occurrence” covered under the policies.

Sabic

counters that the plaintiffs in the underlying lawsuits allege both the

intentional conduct Dallas National focuses on and negligent conduct which

would qualify as an accident or “occurrence” covered under the policies. The plaintiffs in the underlying lawsuits

made multiple claims of what Sabic “should have known” about the deleterious

effects of MTBE, exposing Sabic to the potential of accident liability

resulting from negligence—“occurrences” that fall outside the “expected and

intended” exclusion.

Despite

allegations of negligence, Dallas National urges this Court to read the

pleadings in the underlying suits as alleging “intentional conduct resulting in

foreseeable damages” that falls within the “expected or intended”

exclusion. Sabic counters that the

pleadings make factual allegations that would support the insured’s possible

liability for negligent conduct that resulted in unintended and unexpected

harm, which would qualify as accidents or “occurrences” covered under the policies.

In

support, Dallas National cites to Trinity

Universal Insurance Co. v. Cowan for the proposition that an unexpected or

unintended consequence of an intentional tort is not a covered “occurrence” and

coverage is excluded for such expected or intended injuries. 945 S.W.2d 819 , 827–29 (Tex. 1997). Although the Cowan

court found no “accident” in that case, it declined to hold that deliberate

acts may never constitute an accident, citing the example of the hunter who

deliberately fires a gun at what he believes to be a deer but is actually a

person. Id. at 828 . Moreover, the duty to defend is not negated by the inclusion of claims

that are not covered; rather, it is triggered by the inclusion of any claims

that might be covered. Zurich

Am. Ins. Co. v. Nokia, Inc. ,

268 S.W.3d 487 , 495–96 (Tex. 2008). Even if some of the claims alleged in the underlying

suits are excluded from coverage by the “expected or intended”

provision, the inclusion of other claims that might be covered triggers the

duty to defend.

Pollution

Exclusion

Dallas

National also contends that it does not have a duty to defend Sabic in the underlying

suits because the pollution exclusions set forth in each of the policies

exclude coverage for such losses.

Specifically, Dallas National contends that the allegations in the underlying

lawsuits fall squarely within section I(A)(2)(f)(2)’s pollution exclusion which

unambiguously precludes coverage for “[a]ny loss, cost or expense arising out

of any: . . . (b) Claim or suit by or on behalf of a governmental authority for

damages because of testing for, monitoring, cleaning up, removing, containing,

treating, detoxifying or neutralizing, or in any way responding to, or

assessing the effects of pollutants.”

According to Dallas National, the plaintiffs in each of the underlying

lawsuits are “governmental authorities” for purposes of the policy exclusion.

Sabic

counters that the pollution exclusion is ambiguous and therefore, we must adopt

the construction of the clause urged by Sabic, “as long as that construction is

not unreasonable, even if the construction urged by the insurer appears to be

more reasonable or a more accurate reflection of the parties’ intent.” Evanston

Ins. Co. v. ATOFINA Petrochemicals, Inc. , 256 S.W.3d 660, 668 (Tex. 2008)

(quoting Nat’l Union Fire Ins. Co. v.

Hudson Energy Co. , 811 S.W.2d 552, 555 (Tex. 1991)). Sabic argues that section I(A)(2)(f)(2) only

applies to “clean up” costs and not claims for compensatory damages, like the

claims alleged by the plaintiffs in the underlying suits. Sabic further maintains that the plaintiffs

in the underlying lawsuits are quasi‑municipal water sellers, not

“governmental authorities” under the terms of the pollution exclusion, and urges

this Court to interpret the term “governmental authority” as a state or federal

agency that has some authority to issue and/or enforce environmental

cleanup demands or orders. Sabic also contends

that, even if the pollution exclusion applies, it is nonetheless covered under

the polices, in light of the exception to the pollution exclusion set forth in

section I(A)(2)(f)(2).

Section

I(A)(2)(f)(2)(a), (b) of the 2004–2005, 2005–2006, and 2006–2007 policies

provides that coverage is excluded for “any loss, cost or expense” arising out

of any:

(a) Request, demand, order or statutory or

regulatory requirement that any insured or others test for, monitor, clean up,

remove, contain, treat, detoxify or neutralize, or in any way respond to, or

assess the effects of, “pollutants”; or

(b) Claim or “suit” by or on behalf of a

governmental authority for damages because of testing for, monitoring, cleaning

up, removing, containing, treating, detoxifying or neutralizing, or in any way

responding to, or assessing the effects of, “pollutants.”

Section I(A)(2)(f)(2) further provides that

“this paragraph does not apply to liability for damages because of ‘property

damage’ that the insured would have in the absence of such request, demand,

order or statutory or regulatory requirement, or such claim or ‘suit’ by or on

behalf of a governmental authority.” [5]

The term “governmental authority” is undefined

by the policy, and we have not found—and the parties have not directed us

to—any case law analyzing the types of entities classified as “governmental

authorities” for purposes of such exclusions.

Although Dallas National argues that cities and municipal water

authorities, like the plaintiffs in the underlying lawsuits, have been

construed to be “governmental authorities,” the cases cited by Dallas National

(1) do not involve pollution exclusions contained in commercial general

liability insurance policies, [6]

(2) involve suits by private parties to recover cleanup costs incurred

as result of orders issued by a state environmental protection agency, [7] or

(3) involve suits in which the insured was required to pay corrective action

damages to a state environmental protection agency. [8]

We

agree with Sabic that the term “government authority” is ambiguous as it is

used in the policies. Accordingly, we

must adopt Sabic’s interpretation of this policy provision so long as Sabic’s

interpretation is not unreasonable. See Evanston Ins. Co. , 256 S.W.3d at 668 . This is the case even if Dallas National’s

construction “appears to be more reasonable or a more accurate reflection of

the parties’ intent.” See id .

We cannot adopt a construction that renders any portion of a policy

meaningless, useless, or inexplicable. ATOFINA

Petrochemicals, Inc. v. Cont’l Cas. Co., 185 S.W.3d 440, 444 (Tex. 2005)

(per curiam) (rejecting policy construction that would render coverage

illusory); Kelley‑Coppedge, Inc. , 980 S.W.2d at 464 .

Here,

Sabic urges this Court to interpret the term “governmental authority” as a

governmental agency that has some authority

to issue and/or enforce environmental cleanup demands or

orders. Dallas National urges us to

adopt a broader interpretation of the term “governmental authority” which would

essentially encompass any governmental body, regardless of its enforcement

capabilities. Neither Sabic’s nor Dallas

National’s interpretations render any portion of the policies meaningless,

useless, or inexplicable. Thus, both are

reasonable interpretations of the policy term.

With regard to exclusionary clauses such as this one, however, the

insured’s interpretation need not be the only

reasonable interpretation to prevail; it need only be a reasonable interpretation.

See Evanston Ins. Co. , 256

S.W.3d at 668 . Having determined that

Sabic’s narrower interpretation of the term “government authority” is not

unreasonable, we will adopt this interpretation for purposes of our analysis.

The

plaintiffs in the underlying lawsuits allege that they are “municipal

corporation[s] comprising the habitants within [their] boundaries.” They further allege that they possess powers

“conferred upon them by law,” without specifying any law, and that they have

“inherent authority” to “preserve or benefit the corporate property,” and to

“maintain actions to recover damages to corporate property.” The plaintiffs do not allege that they have any

authority to demand or compel the cleanup of such corporate property, or that

any governmental authority has actually requested, demanded, or otherwise

ordered any entity to respond in any way to, or assess the effects of, MTBE in

the environment. It is apparent from the

pleadings in the underlying lawsuits that the plaintiffs in those cases filed

suit to recover for damages to their property, just as any other property owner

would be entitled to do. They are not

acting in any type of governmental capacity.

Accordingly, the plaintiffs are not “government authorities” as

contemplated by the policies, and we therefore conclude that the pollution

exclusions do not preclude Dallas National’s duty to defend Sabic in the underlying

lawsuits.

Because

we hold the claims in the underlying lawsuits against Sabic are not excluded

from coverage by the pollution exclusions contained in Dallas National’s

policies, we need not address whether

such claims fall within the exception to the exclusion contained in the 2004–2007

policies.

Conclusion

We affirm the trial court’s summary

judgment.

Jim

Sharp

Justice

Panel consists of Justices Jennings, Alcala, and Sharp.

[1] All of the underlying

lawsuits were consolidated into one multidistrict‑litigation proceeding

presently pending in the Southern District of New York. The Florida and New York suits raise

virtually identical allegations.

[2] The plaintiffs in the underlying lawsuits are: City of

Greenlawn Water District; Albertson Water District; Town of Huntington/Dix

Hills Water District; City of Glen Cove Water District; Homosassa Water

District; Tampa Bay Water; The City of Inverness; and the City of Crystal

River.

[3] See Tex. Civ. Prac. & Rem. Code Ann. § 37.003(a) (West 2009).

[4] On December 20, 2007, Dallas

National filed its opposition to Sabic’s motion for summary judgment, and Sabic

filed its reply to Dallas National’s objections on January 3, 2008. Sabic filed its objections to Dallas

National’s motion for summary judgment on January 11, 2008. On March 7, 2008, Dallas National filed its supplemental

brief in support of its motion for summary judgment, and Sabic responded to the

supplemental brief on March 14, 2008.

[5] The 2003–2004

policy does not contain this exception to the pollution exclusion. Also, unlike the other three policies, the 2003–2004

policy states that coverage is excluded for any loss, cost or expense arising

out of any “request, demand or order.”

[6] Baycol, Inc. v. Downtown Dev.

Auth. , 315 So. 2d 451, 461 (Fla. 1975)

(recognizing municipality as type of government authority); City of Hollywood v. Yarborough , 274 So. 2d 526, 528 (Fla. 1973) (same); Philbrick v.

City of Miami Beach , 3

So. 2d 144, 145 (Fla. 1941) (considering City of Miami a governmental

authority); Browne v. City of Miami , 948 So. 2d 792, 794 (Fla. Dist. Ct. App. 2006)

(describing City of Miami as “local governmental authority”).

[7] Nascimento v. Preferred Mut. Ins.

Co. , 513 F.3d 273, 274 (1st Cir. 2008) (suit brought

by private party to recover costs associated with cleaning up oil that had

leaked from defendant’s underground storage tank in response to Notice of

Responsibility order issued by Massachusetts Department of Environmental

Protection to plaintiffs and defendant ordering them to clean up spill); Utica

Mut. Ins. Co. v. Weathermark Invs., Inc. , 292 F.3d 77, 79 (1st Cir. 2002) (suit brought by private party

in response to Notice of Responsibility order issued by Massachusetts

Department of Environmental Protection ordering party to respond to oil leak).

[8] Mont. Petroleum Tank Release Bd. v. Crumleys, Inc. , 2006 Mont. Dist. LEXIS 38 , 1–2 (Mont. Dist. Ct. 2006); Mont. Petroleum Tank Release Bd. v. Great

Am. Alliance Ins. , 2006 Mont. Dist. LEXIS 510 (Mont. Dist. Ct. 2006).