251 So. 3d 1092
La. Ct. App.2018Background
- A 25-acre sinkhole formed after collapse of the former Oxy Geismar Well No. 3 (OG3); Texas Brine alleged the Hooker #1 oil well breached the common wall with OG3.
- Texas Brine sued multiple parties and filed an incidental demand asserting Sol Kirschner held an interest in Hooker #1; Texas Brine later named National Surety (insurer of Kirschner) as a third‑party defendant.
- National Surety issued a homeowner primary policy ($500,000) with a business‑activity exclusion but an "incidental business" exception (income < $10,000; not farming; no employees), and an excess follow‑form policy ($5,000,000) that lacked the incidental exception.
- National Surety moved for summary judgment, arguing the business exclusion applied because Hooker #1 was a commercial enterprise producing income and employing others; trial court granted summary judgment and dismissed Texas Brine’s claims against National Surety.
- The court of appeal reversed: insurer bears burden to prove an exclusion applies and that no exception applies; genuine issues of material fact existed whether Kirschner’s interest qualified as an "incidental business" (notably whether Kirschner’s annual gross from the well exceeded $10,000 and whether he had employees).
- Case remanded for further proceedings; appellate court declined to rely on certain unauthenticated proof and expert legal opinion offered by insurer. Costs assessed against National Surety.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether National Surety carried its burden to show the policy's business‑activity exclusion bars coverage | Texas Brine argued the insurer failed to prove the exclusion applies (and that disputed facts preclude summary judgment) | National Surety argued Hooker #1 was a commercial enterprise and the exclusion applies as a matter of law | Court: Insurer must prove an exclusion applies; here insurer failed to establish absence of genuine issues about the incidental‑business exception, so summary judgment reversed |
| Whether the Primary policy's "incidental business" exception (income < $10,000; no employees) is inapplicable | Texas Brine: disputed facts (no proof Kirschner earned >$10,000 annually; no employees; not farming) | National Surety: production figures and market prices show the well grossed well over $10,000 annually, so exception inapplicable | Held: Genuine issues of material fact exist (insurer’s evidence insufficiently authenticated and incomplete as to yearly receipts and Kirschner’s share/employment), so exception may apply; summary judgment improper |
| Proper allocation of burden on summary judgment over exclusions/exceptions | Texas Brine: insurer bears burden to prove exclusion and lack of exception | National Surety: urged revised application of burden (post‑2016 amendments) | Court: Insurer (mover) retains burden to prove exclusion and that exceptions do not apply; burden did not shift to Texas Brine |
| Admissibility and weight of evidence submitted by insurer (unauthenticated documents and expert legal opinion) | Texas Brine: objected to late/unauthenticated documents and to insurer’s expert legal conclusions | National Surety: relied on affidavits, production materials, EIA price data, and an expert report | Held: Court declined to credit insurer’s unauthenticated exhibits and rejected expert legal conclusions; many materials were insufficient to eliminate factual disputes |
Key Cases Cited
- Veuleman v. Mustang Homes, LLC, 110 So.3d 572 (La. 2013) (insurer bears burden to prove exclusion applies and exceptions do not)
- Bernard v. Ellis, 111 So.3d 995 (La. 2013) (insurance contracts construed by contract‑interpretation rules; enforce unambiguous terms)
- Jackson v. City of New Orleans, 144 So.3d 876 (La. 2014) (definition of material fact and summary judgment standard)
- Dixon v. Direct General Ins. Co. of La., 12 So.3d 357 (La. App. 1 Cir. 2009) (summary judgment appropriate to decide coverage as a matter of law)
- Miller v. Superior Shipyard & Fabrication, 836 So.2d 200 (La. App. 1 Cir. 2002) (insurance contract interpretation is a question of law suitable for summary judgment)