Petition for Writ of Certiorari — Chemical Distributors, Inc. v. Resure, Inc.

FILED

97 1142 DEC 2 2 1997

NO.

Iu the

Supreme Court of the United States

OCTOBER TERM, 1997

RESURE, INC.

Plaintiff-Respondent

versus

CHEMICAL DISTRIBUTORS, INC.

Defendant-Petitioner

ON PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

LAURENCE E. BEST

(Louisiana Bar No. 3012)

BEST KOEPPEL

LL&E Tower, Suite 2200

909 Poydras Street

New Orleans, Louisiana 70112

Telephone: 504/593-2400

Counsel of Record for

Defendant-Petitioner,

CHEMICAL DISTRIBUTORS, INC.

AB Letter Service, Inc., 327 Chartres St., New Orleans, La. (504) 581-5555

WoW

i

QUESTIONS PRESENTED FOR REVIEW

In this insurance coverage dispute, general liability in-

surer, Resure Inc., moved the District Court for summary

judgment discharging its defense and indemnity obligation

to its insured, Chemical Distributors,Inc., for claims arising

from a tank truck explosion. The involved tank truck was

not owned or operated by the insured, was not on the in-

sured’s premises, nor in the service of the insured at the time

of the explosion. The insurer asserted that coverage for claims

arising from the explosion is excluded by the “Absolute Pollu-

tion Exclusion” endorsement of the policy. However, the law _

of the State of New Mexico, applicable to interpretation of

the policy, requires consideration of the reasonable expecta-

tions of the insured when interpreting the extent and effect

of exclusionary clauses.

The District Court, granting summary judgment, ex-

plicity held “the doctrine of resonable expectations plays no

part in interpreting the pollution exclusion clause at issue,”

since “it probably has little application in the business in-

surance context.” The District Court additionally noted,

“even if it is appropriate to apply the doctrine in certain

business settings, it should not be applied here, since ... the

President and Chief Executive Office [sic] ... personally par-

ticipated in procuring the policy ....”

The issues presented for review are:

1. Whether the District Court properly dismissed

and omitted application of the doctrine of reasonable expec-

tations in considering and interpreting the policy exclusion;

2. Whether the District Court properly crafted

limitations upon application of the doctrine of reasonable

ii

expectations, where none exist in the clear and unambiguous

pronouncement of the applicable state’s law;

8. Whether, on considering summary judgment, it was pro-

per for the District Court to concoct and draw factual in-

ferences regarding the relative sophistication of the insured’s

representatives and other matters, against the interest, of

the non-movant.

iii

LIST OF PARTIES AND PERSONS

Petitioner

i lists the following parties to the proceedings

Plaintiff-Respondent

RESURE, INC.

A Syndicate on the Illinois Insurance Exchange

311 S. Wacker Drive, Suite 400

Chicago, Illinois 60606

Ralph S. Hubbard, III, Esq.

Loree Peacock Lebouef, Esq.

LUGENBUHL, BURKE, WHEATON, PECK

RANKIN & HUBBARD

Pan American Life Center 601 Poydras Street,

Suite 2775

New Orleans, Louisiana 70130

Attorneys for Plaintiff-Respondent

Defendant-Petitioner

CHEMICAL DISTRIBUTORS, INC.

3911 Monroe Road

Farmington, New Mexico 87401

Laurence E. Best, Esq.

Andre’ C. Gaudin, Esq.

BEST KOEPPEL

909 Poydras Street, Suite 2200

New Orleans, Louisiana 70112

Attorneys for Defendant-Petitioner

iv

LIST OF PARTIES AND PERSONS (continued)

5. SAFEWAY TRANSPORTATION, INC.

634 Highway 190 West

Port Allen, Louisiana 70767

6. Ward F. LaFleur, Esq.

PREIS, KRAFT & ROY

102 Versailles Boulevard, Suite 400

P.O. Drawer 4-C

Lafayette, Louisiana 70509

Attorney for Safeway Transportation, Inc.

3 Edward Buggage

164 Belle Print Lane

Napoleonville, Louisiana 70390

8. Scott F. McCants

440 North Broadmoor Circle

Baton Rouge, Louisiana 70815

9. Charles R. Moore, Esq.

MOORE, WALTERS, SHOENFELT

& THOMPSON

6513 Perkins Road

Baton Rouge, Louisiana 70898

Attorney for Edward Buggage and

Scott F. McCants

10. Saul Kimble

13024 West Highway 190

Port Allen, Louisiana 70707

11. Walton J. Barnes, II, Esq.

$51 St. Ferdinand

Baton Rouge, Louisiana 70802

Attorney for Saul Kimble

Vv

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW........cccccccccoosess. i

LIST OF PARTIES AND PERSONG............c.ccccccccocososeses iii

TATE. OF COT IRN Th vscessicsccsncsececosaceossceseseniéseeeesoosseescce. Vv

TABLE OF AUTHORITITEG..............ccccccccccccccosccosscosccoceees vii

REFERENCE TO OFFICIAL/UNOFFICIAL

I ix

STATEMENT OF JURISDICTION........ccccccccccococosececececeeee x

STATEMENT OF THE CASE .............cccccccccccsccosesoscseseceseses 1

pT RT RRO 7

I. THE DISTRICT COURT DISMISSED THE

LAW OF NEW MEXICO, AND ER-

RONEOUSLY CRAFTED PROBABLE

LIMITATIONS UPON APPLICATION OF

TE a ae 7

Il. THE DISTRICT COURT IMPROPERLY

DREW FACTUAL INFERENCES

AGAINST THE NON-MOVANT, CDI......c.ccccccccsscsss 12

Cindi shel ae 16

vi

TABLE OF CONTENTS (continued)

APPENDIX

1. Appendix A

JUDGMENT dated June 26, 1996, granting

plaintiff-respondent’s Motion for Summary

2. Appendix-B

RULING ON PLAINTIFF’S MOTION FOR

SUMMARY JUDGMENT dated May 31, 1996...

8, Appendix-C

RULING of the United States Court of Appeals

for the Fifth Circuit, AFFIRMING Judgment of

the District Court, entered May 8, 1997.............

4. Appendix-D

RULING of the United States Court of Appeals

for the Fifth Circuit, DENYING Petition for

Rehearing, entered September 23, 1997..............

5. Appendix-E

ENDORSEMENT #3, ABSOLUTE POLLUTION

EXCLUSION, excerpted from Resure, Inc. Policy

Dein, TG, TI Wein cucccchexsasotesosstescateseceoncseoneeqsasnecesse

6. Appendix-F

AFFIDAVIT of Jerry Wood, dated December 26,

A-15

vii

TABLE OF AUTHORITIES

Cases: Page

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106

S.Ct. 2505, 91 L.Ed.2d 202 (1986)............cececccccosseees 13.14

Barth v. Coleman, 118 N.M. 1, 878 P.2d 319

tS RSC tae OTL 7,8,9,10

Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106

S. Ct. 2548, 2554, 91 L.Ed.2d 265 (1986)..................... 13

Collister v. Nation Wide Life Ins. Co., 479 Pa. 579,

388 A.2d 1346, 1354 (1978) cert. denied, 439

U.S. 1089, 99 S. Ct. 871, 59 L.Ed.2d 55 CRO TO) .ccccocee 7,8

INA Life Ins. Co. v. Brundin, 522 P.2d 236, 242

MOF SECS aaa a a 7

Jimenez v . Foundation Reserve Ins. Co., 107

N.M. 322, 324-25, 757 P.2d 792, 794-95 CRI. .cccccccceess 7

Knowles v. United Servs. Auto. Ass’n, 113 N.M.

703, 705, 832 P.2d 394, 396 (1992)............................ 7,13

Morton International Inc. V. General Accident

Insurance Co. of America, 134 N.J. 1, 629 A.2d

oe SRERRRE CRAY A tiene 11

Red Panther Chemical Company v. Insurance

Company of the State of Pennsylvania, 43 F.3d

514, 518 (10th Cir. 1904)..............c.cccccccecesesesesesoseseeeeees. 12

viii

TABLE OF AUTHORITIES (continued)

Cases: Page

South Central Bell Telephone Co. V. Ka-Jon Food

Stores, 644 So.2d 357, vacated and remanded

on other grounds, 644 So.2d 368 (1994)..........ceseeeees 11

Statutes, Rules and Other Materials:

BB UBC. § TDG a...ccccccccocecsscccssrssocctosscscccesensecosesosnccsenesscessese x

DB UBD. © TBD nn acsscsstecsicrisiiinssctineciaiseiapumvensinnssecnsseseceneqoons 6

Federal Rules of Appellate Procedure, Rule 3................... 6

Federal Rules of Civil Procedure 56(C)...........s-ssesseseseees 13

Rules of the Supreme Court of the United States,

ix

REFERENCE TO OFFICIAL/

UNOFFICIAL REPORTS

The opinions and decisions delivered by the lower courts

in the present case have not been published in any official

or unofficial report.

x

STATEMENT OF JURISDICTION

This Honorable Court has jurisdiction over this Peti-

tion pursuant to the Rules of the Supreme Court of the United

States, Rule 10, and 28 U.S.C. $1254. A final judgment was

rendered by the United States District Court for the Middle

District of Louisiana on June 26, 1996, against defendant-

petitioner, Chemical Distributors, Inc., and in favor of

plaintiff-respondent, Resure, Inc., discharging Resure, Inc.’s

obligation to defend and indemnify Chemical Distributors,

Inc., under a policy of insurance issued to Chemical

Distributors, Inc., and further awarding reimbursement of

prior defense expenditures to Resure, Inc. Said judgment was

affirmed on appeal to the United States Court of Appeals for

the Fifth Circuit in judgment rendered and entered May 8,

1997. Chemical Distributors, Inc.’s subsequent Petition for

Rehearing was denied in judgment rendered and entered

September 23, 1997.

ak TT

1

STATEMENT OF THE CASE

Chemical Distributors, Inc. (“CDI”) is a company prin-

cipally engaged in the re-packaging, blending and distribu-

tion of bulk chemical products purchased from chemical

manufacturing concerns. At all times relevant (and at pre-

sent), the company owned and operated a re-packaging and

distribution facility located in Port Allen, Louisiana.

In connection with these pursuits, CDI contracted the

services of Safeway Transportation, Inc. (“Safeway”), a motor

carrier and hauling contractor licensed by the State of Loui-

siana, to haul chemical commodities. Pursuant to Uniform

Hauling Contract entered between Safeway and CDI,

Safeway hauled and delivered chemical products to CDI’s

Port Allen facility, utilizing tractors and tank trailers own-

ed or leased by Safeway, and operated by drivers in the

employ of Safeway.

The loss which underlies this insurance coverage

dispute arises from the explosion of a tank truck leased to

Safeway by TMI Industries, Inc. (“TMI”). Significantly, the

explosion of the tank truck occurred NOT while the

tank truck or Safeway was performing services for CDI,

NOR on the premises of CDI, but during the course of work

Safeway was performing for another of its customers,

Uniroyal Chemical Company, Inc. (hereinafter “Uniroyal’’).

The tank truck exploded while temporarily parked at TMI’s

holding facility in Port Allen. CDI’s alleged liability was

predicated on the fact that the tank truck which exploded

had, two days prior to the explosion, been utilized by Safeway

in delivering the chemical product, sodium bisulfite, to CDI’s

Port Allen facility.

The explosion of the tank truck on July 16, 1993

caused multiple personal injuries and property losses to per-

sons and facilities in the vicinity of the explosion, all flow-

ing from the concussive impact of the explosion itself and the

release of the contents of the tank truck. An emergency en-

vironmental response, or clean- , of the affected area was

immediately undertaken by Uniroyal. Uniroyal thereafter

filed suit against the manufacturers of the chemical product

in shipment, Deltech Corporation (“Deltech”), against its car-

rier and transportation broker, U.S. Comex Corporation,

against carrier, Safeway, and against the tank truck owner,

TMI, seeking reimbursement of and/or contribution toward

costs Uniroyal incurred as a result of the explosion.

Safeway filed a third-party demand in that action

against CDI, alleging entitlement to indemnification from

and/or contribution toward any amounts which Safeway

might ultimately be cast liable on the main demand. The

allegations of Safeway’s third-party demand against CDI

comprise, in their entirety, the following:

IV.

Third-party plaintiff has denied any and all

liability unto plaintiff for damages allegedly sus-

tained in the principal action, and further, third-

party plaintiff avers that any damages suffered by

plaintiff were caused by the negligence, strict

liability and/or other legal fault of third-party

defendants, CHEMICAL DISTRIBUTORS, INC.

and COASTAL TERMINAL SYSTEMS “LA”, INC.

V.

Third-party plaintiff avers that should plaintiff

be determined to have sustained damages as

8

alleged, which is at all times denied, said damages

which flow therefrom were not caused nor con-

tributed by any negligence, fault, want of due care,

strict liability or breach of any duty or obligation

alleged to have been owed by tiiird-party plaintiff,

but rather, such was caused by the fault,

negligence, want of due care, strict liability, and/or

breach of responsibilities and obligations owed by

third-party defendants, CHEMICAL

DISTRIBUTORS, INC. and COASTAL TER-

MINAL SYSTEMS “LA”, INC.

VI.

In the event third party plaintiff is held liable

or responsible unto plaintiff with respect to the prin-

cipal demand, which is at all times denied, third-

party plaintiff is entitled to complete indemnity for

any and all sums paid or collected, together with

reasonable attorney’s fees and all costs of defense

from third-party defendants herein, CHEMICAL

DISTRIBUTORS, INC. and COASTAL TER-

MINAL SYSTEMS “LA”, INC., for any negligence,

fault, want of due care, strict liability of breach of

any obligations or duties owed by third-party plain-

tiff unto original plaintiff, being merely passive,

secondary and technical, and that of third-party

defendant is primary, active and real.

Vil.

Farther, in the alternative, third-party plein-

tiff alleges that the negligence, fault, want of due

care, strict liability or breach of any obligations or

duties owed by third-party defendants herein,

4

CHEMICAL DISTRIBUTORS, INC. and

COASTAL TERMINAL SYSTEMS “LA”, INC.,

constituted a contributory proximate cause of the

alleged accident and damages at issue, and accor-

dingly, SAFEWAY as third-party plaintiff is entitl-

ed to contribution or apportionment of damages

commensurate with the degree of responsibility of

the various contributing parties.

Safeway’s third-party demand is silent as regards the specific

duties or obligations allegedly breached by CDI.

Subsequent to the filing of Uniroyal’s lawsuit, two per-

sonal injury lawsuits were filed on behalf of three claimants,

Edward Buggage, Scott McCants and Saul Kimble. Buggage

and McCants leveled allegations of fault, indiscriminately,

against multiple defendants, including Uniroyal, Safeway,

TMI, Deltech and CDI. Kimble alleged fault and liability in

CDI in a single allegation, as follows:

18.

C.D.I. Inc., upon information and belief, was re-

quired to properly clean the tanker to prepare same

for the receipt of the chemicals herein named which

ultimately exploded.

Thus, the allegations of fault and liability on the part

of CDI in the underlying proceedings posit CDI’s alleged

failure to completely remove all residue of sodium bisulfite,

which Safeway had delivered to CDI’s Port Allen facility on

July 14, 1993, from the tank truck which subsequently ex-

ploded on July 16, 1993. CDI vehemently denied this allega-

tion, noting that Safeway was contractually obligated to

5

clean-out its tank trucks following completion of hauling

assignments on behalf of CDI. Ultimately, during the penden-

cy of the present coverage proceeding, CDI was dismissed and

exonerated on motion for summary judgment granted in the

Uniroyal matter.

At all times relevant, CDI was insured by Resure, Inc.

(“Resure”) pursuant to a policy of comprehensive general

liability insurance, Policy No. DOL-177523. Though under-

taking CDI’s defense in the third-party action and in the

subsequent personal injury suits, Resure issued a reserva-

tion of rights on or about September 9, 1994, setting forth

multiple coverage defenses under the applicable policy, in

cluding its assertion that coverage for the third-party demand

asserted by Safeway and the personal injury claims of Bug-

gage, McCants and Kimble, is excluded pursuant to the “Ab-

solute Pollution Exclusion” endorsement of the policy.

Resure initiated the present proceeding, filing Com-

plaint for Declaratory Judgment against CDI, requesting

judgment discharging its obligation to defend and indemnify

CDI in connection with claims arising out of the tank truck

explosion, and additionally requesting reimbursement of ex-

penses incurred on behalf of CDI in defending these claims.

In its Complaint, Resure outlined and asserted several

defenses to coverage under the terms of the Policy issued to

CDI, allegedly negating in the first instance or otherwise ex-

cluding coverage for claims arising from the explosion.

Resure subsequently filed a Motion for Summary Judg-

ment seeking summary disposition of one of the defenses to

coverage asserted in its Complaint. Specifically, Resure re-

quested a summary determination that the “Absolute Pollu-

tion Exclusion” of the Policy (Appendix No. 5) unambiguously

applied to the claims arising from the July 16, 1993 incident,

excluded coverage for all such claims and that, therefore,

Resure was not obligated to defend CDI of and from such

claims. In addition, Resure again sought reimbursement of

expenditures incurred on behalf of CDI in defending personal

dent. The Honorable John V. Parker, Judge, United States

District Court for the Middle District of Louisiana, decided

Resure’s Motion for Summary Judgment on briefs, without

oral argument, issuing his Ruling on Plaintiff's Motion for

Summary Judgment on May 31, 1996. (Appendix No. 2.)

Judgment pruportedly conforming to Judge Parker’s Ruling

was entered June 26, 1996. (Appendix No. 1.)

Appeal of the District Court’s ruling was taken to the

United States Court of Appeal for the Fifth Circuit, pursuant

to Federal Rules of Appellate Procedure, Rule 3, and 28

U.S.C. § 1291. The Judgment was affirmed on appeal, in a

per curium ruling entered May 8, 1997. (Appendix No. 3.)

CDI’s subsequent request for rehearing, including a request

for the assignment of written reasons, was denied in ruling

entered September 23, 1997. (Appendix No. 4.)

CDI respectfully requests review of the District Court’s

explicit refusal to consider CDI’s “reasonable expectations”

when interpreting the policy, as is required by the inter-

pretive rules prescribed by the law of New Mexico (applicable

to the policy at issue). CDI further requests review of the

District Court’s crafting of limitations upon application of

the doctrine of reasonable expectations, which is nowhere sup-

ported by the law of New Mexico. Finally, CDI requests

review of the propriety of the District Court’s concoction of

factual inferences, all of which were construed against CDI,

the non-movant, and all in derogation of proper procedure

on consideration of motion for summary judgment.

|

7

ARGUMENT

1. THE DISTRICT COURT DISMISSED THE

LAW OF NEW MEXICO, AND ERRONEOUS-

, LY CRAFTED PROBABLE LIMITATIONS

UPON APPLICATION OF THAT LAW

The law of New Mexico with respect to the interpreta-

tion of insurance policies and the application of exclusionary

clauses is set forth by the Supreme Court of New Mexico in

Barth v. Coleman, 118 N.M. 1, 878 P.2d 319, 323 (1994), as

follows:

When deciding whether an exclusionary

clause is effective to nullify coverage under an in-

surance policy, we give consideration to the

reasonable expectations of the insured,

Knowles v. United Servs. Auto. Ass’n, 113 N.M. 703,

705, 832 P.2d 394, 396 (1992); Jimenez v. Founda-

tion Reserve Ins. Co., 107 N.M. 322, 324-25, 757 P.2d

792, 794-95 (1988). ...

The doctrine of reasonable expectations is not

restricted to those cases in which the policy

language is at issue. See INA Life Ins. Co. v. Brun-

din, 522 P.2d 236, 242 (Alaska 1975) (noting that

“{a] lay person’s expectations of insurance coverage

are of course formed by many factors besides the

language of the policies themselves”). Often, the

| dynamics of the insurance transaction, and not the

7 language of the contract itself, determine what the

reasonable expectations of the insured are. See Col-

lister v. Nation Wide Life Ins. Co., 479 Pa. 579,

alee enema RiEEne

8

388 A.2d 1846, 1854 (1978), cert. denied, 439 U.S.

1089, 99 S. Ct. 871, 59 L.Ed.2d 55 (1979), see also

Brundin, 533 P.2d at 242 (concluding that an in-

sured’s expectations were at least partially

generated by printed advertising flyers describing

coverage). Accordingly, courts must “examine

the dynamics of the insurance transaction to

ascertain what are the reasonable expectations

of the consumer.” Collister, 388 A.2d at 1354.

Barth, 878 P.2d at 323 (emphasis ours).

Without any reference, whatsoever, to competing or

supervening authority, the District Court rejected the clear

and explicit directive of Barth, stating:

The Court finds that the doctrine of reasonable ex-

pectations plays no part in interpreting the pollu-

tion exclusion clause at issue. The doctrine is in-

tended to protect unsophisticated laymen, and

hence it probably has little application in the

business insurance context.

(Appendix No. 2, (emphasis ours).) Was the District Court

correct to ignore and dismiss the unambiguous directive of

the Supreme Court of New Mexico - because it probably has

little application in the business context. There is simply

NO New Mexico authority for this proposition; moreover,

the cited case, Barth, itself involves business insurance!

The District Court, again without authority, likewise

dismissed and ignored the directive that a court considering

5 ‘

an exclusionary clause, must consider the reasonable expec-

tations of the insured by examining “the dynamics of the

insurance transaction.” Barth, 878 P.2d at 323. The

District Court did not and could not consider the dynamics

of the insurance transaction” simply because no record of that

transaction was placed before the Court by the moving par-

ty, Resure. CDI submits that its rights under the Resure

policy-specifically, whether an exclusion designed to

withdraw coverage for industrial pollution applies to the tank

truck explosion-must be examined in the manner prescrib-

ed by the law of New Mexico.

In this regard, the Barth decision is factually instruc-

tive as well. The coverage issue in Barth involved the inter-

pretation and application of an assault and battery exclu-

sion contained within a bar owner’s liability policy. The

underlying claim arose from a barroom fist-fight between two

patrons, with the liability of the bar owner predicated upon

his failure to control and prevent escalation of the alterca-

tion, which resulted in the fight and the plaintiff's injuries.

The assault and battery exclusion, not unlike the exclusion

at issue here, appeared by its terms to wholly negate coverage

for the incident and specifically provided as ‘llows:

[(Thhe insurance does not apply to bedi!s injury or

property damage arising out of assault and battery

or out of any act or omission in connection with the

prevention or suppression of such acts, whether

caused by or at the instigation or direction of the

insured, his employees, patrons or any other person.

Barth, 878 P.2d at 322-23. After re-stating the law of New

Mexico relative to the interpretation of exclusionary clauses

(excerpted above), the court went on to note:

—~rrrrrreee

10

In this case, there is no ambiguity caused by

the language of the policy itself. The policy clearly

excluded coverage for assault and battery. Barth’s

damages resulted from an assault and battery.

Under the literal terms of the policy, Barth’s

damages would not be covered. This analysis of

the policy language does not, however, end our

inquiry.

Barth, 878 P.2d at 323 (emphasis ours). Pursuant to the

foregoing, the District Court’s conclusion that the policy was

not, on its face, ambiguous, should not have concluded its

inquiry.

The Barth court went on to find, upon examining the

“dynamics of the insurance transaction,” that the

policyholder was not sufficiently informed about the nature

of the coverage he was purchasing, nor how the policy was

being procured, nor from what company he was purchasing

the policy. Moreover, the court found that the policyholder

had no notice that the policy contained an assault and bat-

tery exclusion prior to the barroom fight, and credited his

testimony that he had specifically communicated to his in-

surance brokers that he needed insurance to cover alterca-

tions between the bar’s patrons. The court ultimately

concluded-only after considering evidence regarding the

transaction-that the insurance transaction gave rise to a

reasonable expectation that the policy would conform to the

coverage requested, and held that the policy covered plain-

tiffs damages, notwithstanding the assault and battery

exclusion.

Resure presented no evidence, whatsoever, regarding

ee

11

the “dynamics of the insurance transaction” which produc-

ed the policy at issue in this case. This is no doubt due to

the fact that there were multiple intermediaries involved in

the transaction which produced the policy at issue, including,

at least, Bederra Insurance Services, Inc. and the brokerage

firm which directly negotiated the policy with CDI.

On the other hand, CDI submitted the affidavit of Mr.

Jerry Wood, President and Chief Executive Officer of CDI,

who was responsible to and in fact procured the insurance

policy at issue. (Appendix No. 6.) Therein, Mr. Wood affir-

matively stated that he has no recollection of any explana-

tion or warning provided by the insurance brokers regarding

the effect of a pollution damage exclusion and the resulting

limitations or loop-holes in coverage for fortuitous or acciden-

tal events, nor specifically for tank truck accidents. Mr. Wood

stated that it was and remains his expectation that the com-

prehensive general liability insurance coverage purchased

would provide CDI with a defense and indemnification for

the tank truck incident. Required to draw all inferences in

favor of the non-moving party, the District Court avoided

the impact of Mr. Woods’ positive and uncontroverted

evidence on this issue-the very issue of reasonable

expectations-by tossing out the whole interpretive

scheme prescribed by the law of New Mexico.

Finally, considering the historical intent and emergence

of pollution exclusion clauses, which were introduced by the

insurance industry to deal with and limit coverage for emerg-

ing environmental pollution claims arising from industrial

activities!, the need for consideration of the

1South Central Bell Telephone Co. v. Ka-Jon Food Stores, 644 So.2d 357,

vacated and remanded on other grounds, 644 So.2d 368 (1994); Morton In-

ternational Inc. v. General Accident Insurance Co. of America, 184 N.J.

1, 629 A.2d 831 (N.J. 1993).

12

insured’s reasonable expectations is all the more acute. Even

the courts have had no little difficulty interpreting and ap-

plying pollution exclusion clauses, and no obvious organiz-

ing principle has emerged to distinguish cases finding pollu-

tion exclusions unambiguous when applied to the facts of an

underlying claim, from those that have reached the opposite

conclusion.2 The facts underlying the present coverage

dispute range far from the typical industrial emissions

scenario, and instead involve the chance explosion of a tank

truck not owned or operated by the insured, not on the

premises of the insured, nor even in the service of the insured

at the time of the casualty. CDI submits that its expectation

of coverage under a general liability policy for such a for-

tuitous event is not subject to summary disposition, especially

when considering the analytical and interpretative rules

prescribed by the law of New Mexico.

On the basis of the evidence before the District Court,

or more precisely the lack thereof, summary judgment as to

Resure’s defense and indemnity obligation to CDI was wholly

inappropriate. More significantly, however, the District

Court’s refusal to apply the interpretive scheme prescribed

by the Supreme Court of the State of New Mexico, and the

District Court’s implementation of unsupported limitations

upon consideration of an insured’s reasonable expectations,

cannot withstand scrutiny, and must be reversed.

II. THE DISTRICT COURT IMPROPERLY

DREW FACTUAL INFERENCES AGAINST

THE NON-MOVANT, CDI

The District Court’s grant of summary judgment was

appropriate only if the record discloses “that there is no

2See, Red Panther Chemical Company v. Insurance Company of the State

of Pennsylvania, 43 F.3d 514, 518 (10th Cir. 1994) and cases cited therein.

13

genuine issue of material fact and that the moving party is

entitled to a judgment as a matter of law.” Fed. R. Civ. P.

56(c). The party seeking summary judgment bears the initial

burden of identifying those portions of the pleadings and

discovery on file, together with any affidavits, which it

believes demonstrate the absence of a genuine issue of

material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106

S. Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). If the movant car-

ries its burden, the burden shifts to the non-movant to show

that summary judgment should not be granted. Id. at 324-25,

106 S. Ct. at 2553-54. In any event, the court must draw

all justifiable inferences in favor of the nonmoving par-

ty. Anderson wv. Liberty-Lobby, Inc. 477 U.S. 242, 255, 106

S.Ct. 2505, 2513-14, 91 L.Ed.2d 202 (1986Xemphasis ours).

Resure would be entitled to summary judgment in this

case only if it established all facts necessary to show that

its “Absolute Pollution Exclusion” clause is effective to

nullify coverage for the underlying claims. A particular fac-

tual matter is material to this coverage determination if

resolution of that fact in favor of one party might affect the

outcome of the suit under governing law. Anderson v. Liber-

ty Lobby, Inc., 477 U.S. 242, 106 S. Ct.. 2505, 91 L. Ed. 2d

202 (1986). The law governing interpretaion of the policy

under scrutiny is provided by the State of New Mexico.

As fully set forth above, “{elxclusionary clauses in in-

surance policies are to be narrowly construed with the

reasonable expectations of the insured providing the

basis for...analysis.” Allstate Ins. Co. v. Stone, 116 N.M.

464, 467, 863 P.2d 1085, 1088 (19993), citing Knowles v. United

Servs. Auto. Ass’n, supra. What were CDI’s expectations of

coverage relative to the tank truck explosion, and were those

expectations reasonable?

14

CDI established, via the Affidavit of its President and

Chief Executive Officer, Mr. Jerry Wood (Appendix No. 6),

that CDI received no warning from Resure’s producing broker

that the policy would void coverage of liability claims aris-

ing from tank truck accidents. Mr. Wood, as his affidavit

establishes, fully expected that insurance coverage would ob-

tain for claims such as have arisen from the tank truck acci-

dent, which did not involve CDI’s premises, equipment, pro-

ducts or chemicals.

The District Court rejected this factual showing, stating

the following:

Even if it is appropriate to apply the doctrine in

certain business settings, it should not be applied

here, since Jerry Wood, President and Chief Ex-

ecutive Officer [sic] of CDI since 1986, personally

participated in procuring the policy issued by

Resure to CDI.

(Appendix No. 2.) It appears the District Court disposed of

-CDIs factual showing by concocting certain inferences regar-

ding the nature of the insurance transaction, and the relative

sophistication of Mr. Wood vis-a-vis the scope and extent of

the absolute pollution exclusion clause. On the foundation

of these adverse inferences, the District Court apparently con-

cluded that CDI’s expectations of coverage for the tank truck

incident were unreasonable.

Such adverse factual conclusions are, in the first in-

stance, improper on summary judgment. Moreover, all fact

questions are to be viewed in the light most favorable to the

non-movant. Anderson v. Liberty Lobby, Inc., supra; Hassan

v. Lubbock Independent School District, 55 F.3d 1075, 1078

(5th Cir.), cert. denied, -U.S.-, 116 S. Ct. 532, 133 L. Ed. 2d

|

15

438 (1995). Thus, any factual inferences regarding the degree

of Mr. Wood’s sophistication, particularly in light of his sim-

ple declaration that he expected coverage would obtain for

the tank truck incident, must be drawn in CDI’s favor.

Likewise, any factual inferences respecting the content or

“dynamics” of the insurance transaction, especially consider-

ing Mr. Wood’s undisputed statement that no discussion of

any kind was had relative to the alleged exclusion of coverage

for all tank truck accidents, should have been drawn in CDI’s

favor. At the very least, further scrutiny of the transaction

was required by the established law of this Honorable Court.

Directly contrary to this Honorable Court’s admonition

that a court considering summary judgment must draw all

justifiable inferences in favor of the nonmoving party, Ander-

son v. Liberty Lobby, Inc., supra, the District Court crafted

adverse factual inferences regarding the “dynamics” of the

relevant insurance transaction, and rejected the undisputed

facts set forth by CDI in responding to Resure’s motion for

summary judgment, in order to support its rejection of CDI’s

reasonable expectations of general liability coverage for the

underlying tank truck explosion and its rejection of the

prevailing law of New Mexico’s high court. The reality is that

the content of the insurance transaction, which must be ex-

plored under New Mexico’s interpretive scheme, was and is

not susceptible of summary adjudication under the facts set

forth by Resure in its motion. The District Court’s adverse

application of factual inferences, contrary to the dictates of

federal summary judgment standards in contravention of the

mandates of applicable New Mexico law, placing the federal

courts below, sitting in diversity, in direct conflict with New

Mexico law, as enunciated by its Supreme Court, must be

reversed.

16

CONCLUSION

Defendant-petitioner, Chemical Distributors, Inc.,

respectfully submits that the District Court’s summary judg-

ment in favor of Resure, Inc. directly conflicts with the basic

tenets of Federalism which must be maintained in the exer-

cise of diversity jurisdiction, and should be reversed. The

District Court’s refusal to apply the clear and well-settled

law of the State of New Mexico, and its refusal to consider

CDI’s reasonable expectations of coverage in this scenario,

all against the backdrop of the reigning uncertainty respec-

ting the intent and extent of absolute pollution exclusions,

was clearly improper and should be reversed. Further, the

District Court’s rejection of CDI’s factual showing, by con-

cocting unsupported and adverse factual inferences, was im-

proper and requires reversal.

Respectfully submitted,

LAURENCE E. BEST

BEST KOEPPEL

LL&E Tower, Suite 2200

909 Poydras Street

New Orleans, Louisiana 70112

Telephone: 504/593-2400

Telecopier: 504/593-2401

Counsel of Record for

Defendant-Petitioner,

CHEMICAL DISTRIBUTORS, INC.

17

CERTIFICATE OF SERVICE

I DO HEREBY CERTIFY that I have on this 22nd

day of December, 1997, served the foregoing Petition for Writ

of Certiorari on all counsel of record, by placing a copy of

same in the United States Mail, properly addressed and first

class postage prepaid, or by hand delivery, as follows:

Ralph S. Hubbard, III, Esq. (7040)

Loree Peacock Lebouef, Esq. (21801)

LUGENBUHL, BURKE, WHEATON, PECK

RANKIN & HUBBARD

Pan American Life Center

601 Poydras Street, Suite 2775

New Orleans, Louisiana 70130

Ward F. LaFleur, Esq. (1770)

PREIS, KRAFT & ROY

102 Versailles Boulevard, Suite 400

P.O. Drawer 4-C

Lafayette, Louisiana 70509

Charles R. Moore, Esq. (9604)

MOORE, WALTERS, SHOENFELT & THOMPSON

6513 Perkins Road

Baton Rouge, Louisiana 70898

Walton J. Barnes, II, Esq. (2769)

351 St. Ferdinand

Baton Rouge, Louisiana 70802

LAURENCE E. BEST

A-l

APPENDIX A

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

FILED

JAN 26

RESURE, INC., °

Plaintiff * CIVIL ACTION NO.:

95-274-B-M2

VS. .

CHEMICAL DISTRIBUTORS, * JUDGE PARKER

SAFEWAY TRANSPORTA- MAGISTRATE

TION, INC., EDWARD BUG- * NOLAND

GAGE, SCOTT F. MCCANTS

AND SAUL KIMBLE .

JUDGMENT

In accordance with this Court’s Ruling on Plaintiff's

Motion for Summary Judgment filed into the record on May

31, 1996.

IT IS HEREBY ORDERED, ADJUDGED AND

DECREED that Resure, Inc. has no obligation to defend or

indemnify Chemical Distributors, Inc. under that certain

A-2

policy of general liability insurance issued by Resure, Inc.

to Chemical Distributors, Inc., bearing policy number

DOL-177523, in connection with any and all suits which have

been or may be brought against Chemical Distributors, Inc.

arising out of that certain explosion of a tanker truck own-

ed by TMI Enterprise, Inc. in Port Allen, Louisiana, on or

about July 16, 1993 (the “Explosion Incident”).

IT IS FURTHER ORDERED, ADJUDGED AND

DECREED that Resure, Inc. is entitled to reimbursement

for any and all costs of defense, including attorney’s fees (the

“Costs of Defense”), it has or will have expended for the

benefit of Chemical Distributors, Inc. in connection with the

defense of the underlying property damage and personal in-

jury suits brought against Chemical Distributors, Inc. aris-

ing out of the Explosion Incident, including without

limitation:

a. Uniroyal Chemical Company, Inc. vs. Deltech Cor-

poration, U.S. Comex Corporation, Safeway

Transportation, Inc. and TMI Enterprise, Inc., Civil -

Action No. 983CV998-B-2, United States District

Court, Middle District of Louisiana;

b. Edward Buggage and Scott F. McCants vs. TMI

Enterprises, Inc., Safeway Transportation, Inc.,

Deltech, Inc., Uniroyal Chemical, Inc. Chemical

Distributors, Inc. and Commerce and Industry In-

surance Company, 18th Judicial District Court,

parish of West Baton Rouge, State of Louisiana,

Civil Action No. 26066, Division D;

c. Saul Kimble vs. Safeway Transportation, Inc.,

Deltech Corporation, U.S. Comex Corporation, TMI

Enterprise, Inc. Paul Fireman, C.D.I. Inc., and

A:-3

Commerce and Industry Insurance Company, 18th

Judicial District Court, parish of West Baton

Rouge, State of Louisiana, Civil Action No. 26065,

Division C.

IT IS FURTHER ORDERED, ADJUDGED AND

DECREED that Resure, Inc. is entitled to legal interest at

the Louisiana legal rate on all such Costs of Defense expended

by Resure, Inc. from the date of each such expenditure until

paid.

Baton Rouge, Louisiana, June 26, 1996

/s/__ John V. Parker

JOHN V. PARKER, CHIEF JUDGE

MIDDLE DISTRICT OF LOUISIANA

Respectfully submitted,

/s/ Loree Peacock LeBoeuf

RALPH S. HUBBARD III BAR NO. 7040

LOREE PEACOCK LEBOEUF, BAR NO. 21801

LUGENBUHL, BURKE, WHEATON,

PECK, RANKIN & HUBBARD

Pan American Life Center

601 Poydras Street, Suite 2775

New Orleans, Louisiana 70130

Telephone: (504) 568-1990

Attorneys for Resure, Inc.

A4

CERTIFICATE OF SERVICE

I do hereby certify that I have on this 24rd day of June,

1996, served a copy of the foregoing pleading on counsel for

all parties to this proceeding, by mailing the same by United

States mail, properly addressed, and first class postage

prepaid.

/s/ Loree Peacock LeBoeuf

At

APPENDIX B

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

FILED

MAY 31

RESURE, INC. CIVIL ACTION

VERSUS NUMBER 95-274

CHEMICAL |

DISTRIBUTORS, INC.;

SAFEWAY TRANSPORTA-

TION, INC.; EDWARD BUG-

GAGE; SCOTT F.

MCCANTS; AND SAUL

KIMBLE

RULING ON PLAINTIFF’S MOTION

FOR SUMMARY JUDGMENT

This matter is before the Court on a motion for sum-

mary judgment filed by the plaintiff, Resure, Inc. (“Resure,

Inc.”). For the reasons which follow, the motion is granted.

FACTS AND PROCEDURAL HISTORY

On July 16, 1993, a parked tanker truck exploded in

Port Allen, Louisiana, destroying several nearby vehicles and

releasing a plume of contaminants into the surrounding at~

mosphere. A chemical reaction inside the tank caused the

explosion, The truck was owned by TMI Enterprise, Inc., and

was, at the time of the explosion, leased to defendant Safeway

Transportation, Inc. (’’Safeway’’). The truck had,

DKT & ENTERED

DATE 5/31/96

NOTICE MAILED TO: Hubbard, Best, LaFleur, Moore,

DATE 5/31/96 ByHj Barres, JVP RL

A

been previously leased to defendant Chemical Distributors,

Inc. (“CDI”). The explosion was allegedly caused in part by

CDI’s failure to thoroughly clean the inside of the tank at

the end of CDI’s lease term.

As a result of the explosion, suits were filed in both state

and federal court. At least two state court suits are pending

in the Eighteenth Judicial District Court for the Parish of

West Baton Rouge, Louisiana. Both of those suits seek

damages for personal injuries suffered after being exposed

to the released contaminants. Two federal court suits are pen-

ding in the Middle District of Louisiana. One of those suits

seeks contribution for response costs incurred cleaning up

the explosion site. The other suit is the one presently before

the Court. In this suit, Resure, CDI’s commercial general

liability insurer, seeks a declaratory judgment that the facts

of this case come within the policy’s pollution exclusion clause

and that Resure is therefore not liable on the policy. Jurisdic-

tion is invoked under 28 U.S.C. § 1882. Named as defendants

are CDI, Safeway, Edward Buggage, Scott McCants, and Saul

Kimble. Buggage, McCants, and Kimble are plaintiffs in the

state court suits and have all named CDI as a defendant in

those suits. Safeway has filed a third party-complaint against

CDI in the other federal court suit. It appears from the record

that Resure has not been named as a defendant in any of

these other lawsuits.

On October 31, 1995, Resure filed the motion for sum-

mary judgment now before the Court. CDI filed its opposi-

tion two days after the deadline for opposing the motion had

passed, despite this Court having previously granted the

defendants an extension of time in which to file oppositions.

The other defendants filed oppositions adopting the

arguments advanced by CDI. The Court will consider CDI’s

arguments despite CDI’s failure to timely file its opposition.

A-7

SUMMARY JUDGMENT

Under Rule 56(c) of the Federal Rules of Civil Pro-

cedure, summary judgment is proper when “the pleadings,

depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is

no genuine issue as to any material fact and that the mov-

ing party is entitled to a judgment as a matter of law.!

ANALYSIS

The parties generally agree as to the facts and cir-

cumstances surrounding the explosion. What is disputed is

whether Louisiana or New Mexico law governs, and whether

the pollution exclusion clause is so unambiguous as to make

this case appropriate for summary judgment.

A. Choice of Law

Resure argues that New Mexico law should govern this

dispute. In support, Resure points out that CDI is a New Mex-

ico corportion, and that the insurance policy was negotiated

and delivered in New Mexico. Resure then argues that “if

the law of the place of ‘accident’ is applied to a multi-state

trucking company [like CDI], neither it nor its insurer have

any means of negotiating required coverage for the insured

with any degree of certainty.2 Resure also makes the related

argument that the application of the law of the place of the

accident could result in inconsistent results from state to

state. The defendants do not argue that Louisiana law should

1 See also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552,

91 L. Ed. 2d 265 (1986); Cormier v. Pennzoil Exploration & Prod. Co., 969

F.2d 1559, 1560 (th Cir. 1992).

2 Pl.’s Mem. In Supp. of Mot. for Summ. J. at 7.

A$

govern this dispute, but instead argue that regardless of

whose law applies, summary judgment is inappropriate.

Klaxon Co. v. Stentor Electric Manufacturing Co.° re-

quires the Court to apply Louisiana’s choice-of-laws provi-

sions. Applying Louisiana Civil Code article 3515 and 3537,

the Court finds that New Mexico law must govern this

dispute. When confronted with similar cases, Louisiana

courts consistently apply the law of the state in which the

insurance policy was executed.

B. The Pollution Exclusion Clause

The Resure policy insures against claims for “bodily

injury” and “property damage.” “Bodily injury” is defined

as “bodily injury, sickness or disease sustained by any per-

son.” “Property damage” is defined as “physical injury to

or destruction of tangible property . . . including the loss of

use thereof. . . or loss of use of tangible property which has

not been physically injured or destroyed.”

The disputed clause in the insurance policy reads as

follows:

This insurance does not applly . . . to “bodily

injury” or “property damage” (inclusing the loss

of the use thereof) caused by, contributed to or aris-

ing out of the actual or threatened discharge,

dispersal, release or escape of smoke, vapors, soot,

fumes, acids, alkalis, toxic chemicals, liquids or

3 813 U.S. 487, 496, 61 S. Ct. 1020, 1021-22, 85 L. Ed. 1477 (1941).

5 See Partin v. Dolby, 652 So. 2d 670, 674 (La. App. 1st Cir. 1998); Holcomb

v. Universal Ins. Co., 640 So. 2d 718, 722 (La. App. 3d Cir.), writ denied,

644 So.2d 643 (1994); Levy v. Jackson, 6126 So. 2d 894, 897 (La. App. 4th

Cir. 1999).

A9

gases, waste materials or other irritants into or

upon the land the atmosphere or any course or body

of water, whether above or below ground.

It is understood and agreed that the intent

and effect of this exclusion is to delete from any and

all coverage afforded by this policy and [sic] claim,

action, judgment, liability, settlement, defense or

expense (including any loss, cost or expense aris-

ing out of any governmental direction or request

that the “insured” test for, monitor, clean-up,

remove, contain, treat, detoxify or neutralize

pollutants) in any way arising out of such actual

or threatened discharge, dispersal, release or

escape, whether such results from the “insured” ac-

tivities or the activities of others and weather [sic]

or not such is sudden or gradual and whether or

not such is accidental, intended, forseeable, ex-

pected, fortuitous or inevitable and wherever such

occurs.

Resure argues that the clause is unambiguous and that

its application to the facts is clear. The defendants do not

argue that the language of the clause is ambiguous, nor do

they argue that a literal reading of the clauses renders the

policy inapplicable to the facts of this case. They instead

argue that based on the history of pollution exclusion clauses,

it is unclear whether this clause applies to these facie. The

defendants contend that pollution exclusion clauses are

generally directed at the insured’s own polluting activities.

They point out that the July 16 explosion did not result from

CDI’s own polluting activities, and thus conclude that it is

unclear whether the clause applies in this case.

This argument is without merit. The second paragraph

of the clause expressly states that this particular exclusion

A-10

applies regardless of whether the discharge results from the

insured’s activities or from the activities of others.5 Turn-

ing to the individual claims levied against CDI, Buggage and

McCants allege that “as a result of the explosion, [they]

breathed in air contaminated with the chemicals in the trailer

and sustained personal injury.”® Similarly, Kimble alleges

that he suffered respiratory ailments as a result of “the

release of gases, fumes and chemicals which invaded his

body.”? These allegations clearly come within the policy ex-

clusion for bodily injury caused by or arising out of the

discharge, dispersal, release or escape of toxic chemicals in-

to the atmosphere. Kimble also alleges he “further suffered

damages to his motor vehicle, ‘® though it is unclear whether

the damage was caused by the explosion itself or by the

released pollutants. In either event, this claim clearly comes

within the exclusion for property damage caused by or aris-

ing out of the discharge, dispersal, release or escape of toxic

chemicals into the atmosphere.

In order to evaluate Safeway’s third-party complaint

filed against CDI in the other federal court lawsuit, it is

necessary to consider the numerous theories of recovery

5 Also, as previously noted, related litigation is pending before this Court.

The Court in that case has already found a similar pollution exclusion

clause to be unambiguous and applicable regardless of the manner in which

the accident arose. Uniroyal Chem.Co. v. Deltech Corp., No. 93-998 (M.D.

La. Dec. 27, 1995) (granting the defendant insurer’s motion for summary

judgment). See also Bituminous Casualty Corp. v. Kenworthy Oil Co., 912

F. Supp. 238, 240-41 (W.D. Tex. 1996).

6 Pet. For Damages at 3, Buggage v. TMI Enters., Inc., No 26066 (La. 18th

ID.C..

7 Pet. at 3, Kimble v. Safeway Transp., Inc., No. 26065 (La. 18th J.D.C.).

8 Pet. at 3, Kimble v. Safeway Transp., Inc., No. 26065 (La. 18th J.D.C.).

A-ll

asserted by Uniroyal against Safeway.® Without going into

detail, the Court is satisfied that these various theories of

recovery all come within the Resure policy pollution exclu-

sion clause. The Court also notes that to the extent CDI is

found liable for response costs incurred cleaning up the ex-

plosion site, those costs are likely not “bodily injury” or “pro-

perty damage” within the meaning of the policy.!°

The defendants next argue that summary judgment is

inappropriate because Resure has failed to address the poten-

tial impact of New Mexico’s doctrine of reasonable expecta-

tions. That doctrine holds that “if the language of the [in-

surance] policy is such that a layman could not understand

its full impact, the policy [will] be interpreted in such a man-

ner as to yield maximum protection consistent with policy

language and the reasonable expectations of the

9 Uniroyal seeks compensatory damages from Safeway under the follow-

ing theories of recovery: The Comprehensive Environmental Response,

Compensation and Liability Act, 42 U.S.C.A. § 9601-9675 (West 1995);

The Louisiana Hazardous Materials Transportation and Motor Carrier

Safety Law, La. R.S. 32:1501-:1521 (West 1989 & Supp. 1996); negotiorum

gestio; unjust enrichment; general tort law; and general agency law.

Uniroyal also seeks punitive damages under Louisiana Civil Code article

2315.3, although the policy contains a punitive damages exclusion clause

that would likely absolve Resure of any liability for punitive damages,

regardless of the effect of the polution exclusion clause.

10 Ajgo in the other federal court lawsuit, Union America has intervened

as the insurer of Enercon Trucking, Inc. (“Enercon”), which owned seven

trailer units that were destroyed by the explosion. Union America paid

Enercon’s claim, then intervened as Plaintiff and named CDI as a defen-

dant. Although Union America is not a party to the case presently before

the Court, the Court notes that Union America’s claims woud certainly

come within the Resure policy exclusion for property damage caused by

or arising out of the discharge, dispersal, release or escape of toxic

chemicals into the atmosphere.

A-12

insured.!! The rationale for the doctrine is that “the insured

most often is a layman, the average man or woman on the

street, who is not a college graduate or a student of insurance

law... . They cannot, ordinarily, read and understand the

rai Eee ere

policy ....

The Court finds that the doctrine of reasonable expec-

tations plays no part in interpreting the pollution exclusion

clause at issue. The doctrine is intended to protect un-

sophisticated laymen, and hence it probably has little applica-

tion in the business insurance context. Even if it is ap-

propriate to apply the doctrine in certain business settings,

it should not be applied here, since Jerry Wood, President

and Chief Executive Office of CDI since 1986, personally par-

ticipated in procuring the policy issued by Resure to CDI.

Finally, the doctrine should not be invoked to create an am-

biguity in an otherwise unambiguous policy provision.15

The Court therefore finds that the facts of this case fall

within the policy’s pollution exclusion clause, and that Resure

is entitled to summary judgment as a matter of fact and law.

C. Reimbursement of Defense Costs

After being informed of the first lawsuit filed against

CDI, Resure retained an attorney to defend CDI’s interests.

However, Resure had serious doubts whether CDI was

11 Davison v. Business Men’s Assurance Co. of Am., 518 P.2d 776, 778

(N.M. 1974). See also Pribble v. Aetna Life Ina. Co., 501 P.2d 255, 260 (N.M.

1972).

12 Read v. Western Farm Bureau Mut Ina. Co., 563 P.24 1162, 1166 (N.M.

Ct. App. 1977).

13 See Davison, 518 P.2d at 778-79.

A-13

entitled to coverage under the policy. Accordingly, in a let-

ter dated September 9, 1994, Resure reserved all its rights

under the policy, including its right to reimbursement of any

costs of defense. Pursuant to that reservation, Resure now

seeks reimbursement for its costs of defense, including all

attorney fees paid by it. The defendants have not addressed

this issue in their opposition memorandums.

Resure timely reserved its rights under the policy. That

reservation specifically referred to the possibility that Resure

might seek reimbursement for any and all costs of defense.

There is nothing in the record to suggest CDI objected to the

reservation. Accordingly, Resure is entitled to reimbursement

for all costs of defense.

Therefore:

IT IS ORDERED that the plaintiff's motion for sum-

mary judgment be and it is hereby GRANTED.

Judgment shall be entered dismissing this suit with

prejudice.

Baton Rouge, Louisiana, May 31, 1996.

/s/ John V. Parker

JOHN V. PARKER, CHIEF JUDGE

MIDDLE DISTRICT OF LOUISIANA

A-14

APPENDIX C

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 96-30773

FILED

MAY 08 1997

RESURE, INC.,

Plaintiff-Appellee,

versus

CHEMICAL DISTRIBUTORS, INC.,

Defendant-Appellant.

Appeal from the United States District Court

For the Middle District of Louisiana

(95-CV 274 BM2 )

Before HIGGINBOTHAM, WIENER, and DENNIS, Circuit

Judges.

PER CURIAM:

AFFIRMED. See Local Rule 47.6.*

* Pursuant to Local Rule 47.5, the court has determined that this opinion

should not be published and is not precedent except under the limited cir-

cumstances set forth in Local Rule 47.5.4.

A-15

APPENDIX D

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 96-30773

FILED

SEP 23 1997

RESURE, INC.,

Plaintiff - Appellee

v.

CHEMICAL DISTRIBUTORS, INC.,

Defendant - Appellant

Appeal from the United States District Court for the

Middle District of Louisiana, Baton Rouge

ON PETITION FOR REHEARING

Before HIGGINBOTHAM, WIENER, and DENNIS, Circuit

Judges.

PER CURIAM:

IT IS ORDERED that the petition for rehearing filed

in the above case is denied.

ENTERED FOR THE COURT:

/s/ James L. Dennis

United States Circuit Judge

A-16

APPENDIX E

ENDORSEMENT #3

This endorsement effective 5-16-93 a.m. and, forms a part

of policy No. DOL-177523 issued to CHEMICAL

DISTRIBUTORS, INC.

ABSOLUTE POLLUTION EXCLUSION

Exclusion (f) is deleted from form L6395A and is replac-

ed by the following:

() to “bodily injury” or “property damage” (including

the loss of the use thereof) caused by, contributed to or aris-

ing out of the actual or threatened discharge, dispersal,

release or escape of smoke, vapors, soot, fumes, acids, alkalis,

toxic chemicals, liquids or gases, waste materials or other

irritants into or upon the land the atmosphere or any course

or body of water, whether above or below ground.

It is understood and agreed that the intent and effect

of this exclusion is to delete from any and all coverage af-

forded by this policy and claim, action, judgment, liability,

settlement, defense or expense (including any loss, cost or

expense arising out of any governmental direction or request

that the ‘insured’ test for, monitor, clean-up, remove, con-

tain, treat, detoxitfy or neutralize pollutants) in any way aris-

ing out of such actual or threatened discharge, dispersal,

release or escape, whether such results from the ‘insured’

activities or the activities of others and weather or not such

is sudden or gradual and whether or not such is accidental,

intended, forseable, expected, fortuitous or inevitable and

wherever such occurs.

(signed)

Authorized Representative

A-17

APPENDIX F

STATE OF NEW MEXICO

COUNTY OF (SAN JUAN)

BEFORE ME, the undersigned authority, personally

came and appeared:

JERRY WOOD

who, after being duly sworn, did depose and state that:

1. He is currently employed by Chemical

Distributors, Inc., in the capacity of President and Chief Ex-

ecutive Officer, and has been employed in that capacity since

19(86);

2. Inhis capacity as President and Chief Executive

Officer, he is responsible for procuring liability insurance

coverage for Chemical Distributors, Inc.;

3. He personally participated in procuring the com-

prehensive general liability insurance coverage ultimately

issued to Chemical Distributors, Inc. by Resure, Inc. under

Policy No. DOL-177523;

4. He has no recollection of receiving any explana-

tion or warning, in connection with procuring the aforesaid

comprehensive general liability insurance coverage, regar-

ding the effect of a pollution damage exclusion upon coverage

for liability arising from fortuitous or accidental events;

A-18

5. He has no recollection of receiving any explana-

tion of warning, in connection with procuring the aforesaid

comprehensive general liability insurance coverage, regar-

ding the effect of a pollution damage exclusion upon coverage

for liability arising from tank truck accidents;

6. He expected that the comprehensive general

liability insurance coverage ultimately issued to Chemical

Distributors, Inc. by Resure, Inc., under Policy No.

DOL-177523, would apply to claims arising from the tank

truck accident of July 16, 1993.

7. All of the above is true and correct to the best of

his knowledge, information and belief.

(Signed)

JERRY WOOD

Sworn to and subscribed before

me, Notary Public, this (26th)

day of Décember, 1995

(Signed)

NOTARY PUBLIC

Name _ (Tina Smith)

My Commission Expires (7/27/96)