Hiland Partners GP Holdings, LLC v. National Union Fire Insurance Co. of Pittsburgh
2017 U.S. App. LEXIS 1696
| 8th Cir. | 2017Background
- Hiland owned a natural-gas processing facility and contracted Missouri Basin to perform work; Missouri Basin's CGL policy from National Union named Hiland as an additional insured via contract-based endorsement.
- A subcontractor's employee (Chapman) was seriously injured in an explosion after condensate overflowed from Hiland's tanks while Missouri Basin/B&B were removing water; the Chapmans sued Hiland and later settled.
- National Union denied a defense/indemnity obligation under Missouri Basin's policy, invoking an absolute pollution exclusion that defined "pollutants" to include liquids and chemicals.
- Hiland sued for declaratory judgment; cross-motions for summary judgment followed. The district court held the pollution exclusion barred coverage and granted National Union summary judgment.
- On appeal under North Dakota law, the Eighth Circuit affirmed, concluding condensate fit the policy's pollutant definition and that Hiland failed to prove it met the exclusion's reporting exception.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the pollution exclusion is ambiguous | Hiland argued (on appeal) the exclusion could be ambiguous and should be construed for the insured | National Union: exclusion language is clear and unambiguous | Waived by Hiland for failure to raise below; majority rule supports exclusion unambiguous |
| Whether condensate qualifies as a "pollutant" under the policy | Condensate is a saleable product and not a pollutant; harm was from explosion, not contamination | Condensate is a liquid contaminant/irritant (flammable, volatile, explosive) fitting the definition | Condensate is a pollutant; explosion arose from its release — exclusion applies |
| Whether the "operations"/owned-or-occupied subparts of the exclusion apply | Hiland argued exceptions/limitations should permit coverage | National Union argued (and proved) the exclusion subdivisions applied to this on-site release | Subdivisions (1)(a) and (1)(d) applied; exclusion bars coverage |
| Whether the policy's exception (commencement during policy + discovery within 7 days + written report within 21 days) applies and who bore proof | Hiland: district court wrongly required Hiland to affirmatively prove timely reporting at summary judgment | National Union: exclusion applies; insured bears burden to show an exception applies after insurer proves exclusion | Insurer proved exclusion; Hiland failed to produce specific facts showing timely written notice within 21 days, so exception did not apply |
Key Cases Cited
- Church Mut. Ins. Co. v. Clay Ctr. Christian Church, 746 F.3d 375 (8th Cir. 2014) (absolute pollution exclusions are unambiguous in most jurisdictions)
- Noble Energy, Inc. v. Bituminous Cas. Co., 529 F.3d 642 (5th Cir. 2008) (condensate met an identical policy's pollutant definition; explosion arose from release)
- United Fire & Casualty Co. v. Titan Contractors Serv., Inc., 751 F.3d 880 (8th Cir. 2014) (pollution exclusion does not apply if substance caused injury in a manner other than by irritating/contaminating)
- Aetna Cas. & Surety Co. v. Dow Chem. Co., 933 F. Supp. 675 (E.D. Mich. 1996) (petroleum products treated as contaminants under pollution exclusions)
- Doe Run Res. Corp. v. Lexington Ins. Co., 719 F.3d 868 (8th Cir. 2013) (criticizing Hocker Oil and treating oil products as pollutants)