Longhorn Gasket & Supply Co. v. United States Fire Insurance Co.
698 F. App'x 774
| 5th Cir. | 2017Background
- Longhorn Gasket & Supply Co. (LGS) manufactured asbestos-containing gaskets; numerous long‑latency asbestos claims arose from exposure during the 1980s–1990s.
- Trinity (primary insurer) provided primary CGL coverage for 1983–1988; U.S. Fire (excess insurer) issued excess policies for Feb. 1, 1983–Feb. 1, 1986. Policies overlapped for May 21, 1983–Feb. 1, 1986.
- Trinity paid settlements and defense costs and intervened seeking reimbursement from U.S. Fire after Trinity’s primary limits for certain years were exhausted. LGS sued U.S. Fire; LGS later settled and was dismissed.
- The district court denied U.S. Fire’s motion that its pollution exclusion barred coverage, holding asbestos was not a pollutant or, alternatively, that a fact issue existed as to the “sudden and accidental” exception; it awarded Trinity reimbursement for settlement and defense costs.
- U.S. Fire appealed multiple issues; the Fifth Circuit addressed whether the pollution exclusion bars coverage and remanded the sudden-and-accidental exception to the district court.
Issues
| Issue | Plaintiff's Argument (Trinity) | Defendant's Argument (U.S. Fire) | Held |
|---|---|---|---|
| Whether the pollution exclusion in the excess policies bars asbestos claims | Pollution exclusion does not apply to asbestos; policies should be triggered and U.S. Fire must indemnify | Asbestos is an irritant/contaminant/pollutant released into the atmosphere; exclusion bars coverage | Held: Pollution exclusion applies — asbestos qualifies as an irritant/contaminant/pollutant under the policy language |
| Whether the “sudden and accidental” exception defeats the pollution exclusion | Exception applies (creates fact issue), so exclusion should not bar coverage | Even if exception asserted, U.S. Fire disputes its applicability on the facts | Remanded to district court to decide in first instance whether the sudden-and-accidental exception applies |
| Triggering of excess coverage (vertical vs. horizontal exhaustion) | Vertical exhaustion by policy year applies; Trinity entitled to recovery from excess once primary for same year exhausted | Argued horizontal exhaustion or other defenses meant excess was not triggered | Not decided here; court addressed exclusion first and did not resolve exhaustion questions on appeal |
| Whether Trinity is entitled to subrogation or costs | Trinity sought reimbursement and costs paid defending/settling claims | U.S. Fire argued subrogation rights and that award of costs was improper | Not resolved on the basis of this opinion; remand scope limited to sudden-and-accidental issue |
Key Cases Cited
- Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589 (5th Cir. 2011) (summary judgment standard and eight‑corners rule discussion)
- Mid–Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487 (5th Cir. 2000) (applying state law in diversity cases)
- D.R. Horton–Tex., Ltd. v. Markel Int’l Ins. Co., 300 S.W.3d 740 (Tex. 2009) (distinguishing duty to defend and duty to indemnify; factual inquiry for indemnity)
- Gilbert Tex. Const., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010) (burden shifts: insurer shows exclusion, insured must prove exception)
- Don’s Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20 (Tex. 2008) (plain‑meaning/ambiguity rules for insurance contracts)
- Nat’l Union Fire Ins. Co. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139 (Tex. 1997) (pleadings construed liberally in favor of insured for duty to defend)