Gastar Exploration LTD v. U. S. Speciality Insurance Co. and Axis Insurance Co.
412 S.W.3d 577
Tex. App.2013Background
- Gastar Exploration Ltd. sought coverage under two D&O policies (primary by U.S. Specialty and excess by AXIS) for seven suits filed during the policy period (Nov 1, 2008–Nov 1, 2009).
- The policies are claims-made, coverage applying only to Claims first made during the policy period, with defined terms including ‘Claim’ and ‘Policy Period.’
- Condition C (Interrelationship of Claims) treats related Claims as a single Claim made at the earliest time, potentially precluding coverage for later related Claims.
- Endorsement 10 replaces Exclusion I and narrows the preexisting prior-litigation exclusion, creating potential conflict with Condition C.
- Seven Gastar Suits were filed during the policy period; three prepolicy suits existed (2006) and are alleged to relate to the later suits.
- Gastar argued Endorsement 10 restores coverage that Condition C would otherwise narrow; the trial court granted summary judgment for insurers; the appellate court reverses and remands for resolution consistent with Endorsement 10.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Condition C controls coverage for the Seven Gastar Suits. | Gastar argues Condition C narrows coverage by aggregating claims; disputed as to control. | Insurers contend Condition C is a binding condition that precludes coverage. | Endorsement 10 controls; Condition C does not deny coverage. |
| Whether Endorsement 10 overrides Condition C to restore coverage. | Endorsement 10 restores coverage for claims related to pre-2000 litigation. | Endorsement 10 does not conflict with Condition C or restore broader coverage. | Endorsement 10 controls and restores coverage. |
| Whether the policy should be construed in favor of coverage given ambiguity. | Rules of construction favor the insured when language is ambiguous. | Policy terms should be harmonized, with most reasonable interpretation; insurers argue Condition C narrows scope. | Policy language ambiguous; Endorsement 10 controls in favor of coverage. |
Key Cases Cited
- Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118 (Tex. 2010) (interpret exclusions narrowly in favor of insured; harmonize provisions)
- Evanston Ins. Co. v. Legacy Life, Inc., 370 S.W.3d 377 (Tex. 2012) (definitions control and ambiguity resolved in insured's favor)
- Royal Maccabees Life Ins. Co. v. James, 146 S.W.3d 340 (Tex. App.—Dallas 2004) (interpret contract as a whole; favor coverage when ambiguity)
- Mesa Operating Co. v. Cal. Union Ins. Co., 986 S.W.2d 749 (Tex. App.—Dallas 1999) (endorsements supersede conflicting terms; coverage restored)
- PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630 (Tex. 2008) (exclusions and conditions are two sides of the same coin)
- Highwoods Props., Inc. v. Executive Risk Indemnity, Inc., 407 F.3d 917 (8th Cir. 2005) (related-claims provision narrows coverage; conditions and exclusions interact)
- Reeves County v. Houston Casualty Co., 356 S.W.3d 664 (Tex. App.—El Paso 2011) (distinguishes related-claims as condition/other-conditions)