499 P.3d 9
Okla.2021Background
- New Dominion purchased four consecutive NAICO commercial general liability (CGL) policies covering July 1, 2012–July 1, 2016 (Policy Periods 1–4). Policy language varied across years.
- Each policy included a Total Pollution Exclusion (excluding injury or damage "but for" discharge/release of "pollutants" defined to include "irritant or contaminant"). Subsidence/Earth Movement exclusions evolved: Periods 1–2 excluded property damage from land movement; Period 3 added "earthquake"; Period 4 broadened the exclusion to any loss, injury, or damage.
- In 2013–2014 New Dominion's agent (Tedford) and NAICO claims manager (Harrison) exchanged communications and a coverage opinion about earthquake-related exposure; some communications post-dated Policy Period 3 renewal.
- Plaintiffs in multiple lawsuits (the Earthquake Lawsuits) alleged New Dominion's wastewater injection caused seismic events causing bodily injury and property damage (claims arose between 2012–2016).
- NAICO denied coverage, invoking the Total Pollution and Subsidence/Earth Movement exclusions. NAICO sued for declaratory judgment; New Dominion counterclaimed for breach, estoppel/waiver, and reformation.
- Trial court: held Total Pollution Exclusions barred coverage and subsidence/earth movement exclusions barred coverage (but later estopped NAICO on some periods/claims). Oklahoma Supreme Court reviewed on appeal.
Issues
| Issue | Plaintiff's Argument (NAICO) | Defendant's Argument (New Dominion) | Held |
|---|---|---|---|
| Whether the Total Pollution Exclusion unambiguously bars coverage for earthquake-related bodily injury/property damage | Exclusion language ("irritant or contaminant" and "waste") plainly covers wastewater and thus bars coverage for harms "but for" a pollutant release | Phrase "irritant or contaminant" is ambiguous; exclusion reasonably read to apply only when injury results from pollutant's irritating/contaminating nature, not when injection-induced seismicity causes harm | Total Pollution Exclusion is ambiguous as to these events; reversed trial court on this ground — New Dominion could reasonably expect coverage. |
| Whether Subsidence / Earth Movement exclusions preclude coverage for earthquake-related claims (Periods 1–4) | Each period's exclusion must be read on its own terms; later policies don't alter earlier ones; the lists of earth movement events encompass earthquakes | Omitting the word "earthquake" in Periods 1–2 creates ambiguity (later inclusion shows insurer knew how to exclude earthquakes explicitly) | Subsidence exclusions in Periods 1–2 and the amended exclusions in Periods 3–4 are clear and unambiguous and bar coverage for the relevant earthquake-related property damage (trial court affirmed). |
| Whether New Dominion is equitably estopped from denying coverage based on agent/insurer statements | Agent lacked authority; statements were not false or were not reasonably relied upon; insured had notice of policy terms | Tedford's emails, coverage opinion, and Harrison's statement led New Dominion to reasonably believe it had coverage | Estoppel fails: (1) statements relied on occurred after renewal or were indefinite and not reasonably relied upon for renewal of Period 3; (2) for Period 4 insured had constructive knowledge of exclusion language; trial court's estoppel holdings reversed. |
| Whether policies should be reformed to provide earthquake coverage | No antecedent agreement existed; no fraud or mutual mistake to justify reformation | Communications reflect an antecedent agreement or mistake such that policies should be reformed to provide coverage | Reformation denied: no clear-and-convincing evidence of antecedent agreement, fraud, or mutual mistake; trial court's denial affirmed. |
Key Cases Cited
- Bituminous Cas. Corp. v. Cowen Constr., 55 P.3d 1030 (Okla. 2002) (addressed scope of pollution exclusion and whether limited to traditional environmental pollution)
- Broom v. Wilson Paving & Excavating, Inc., 356 P.3d 617 (Okla. 2015) (construing earth-movement exclusion and insurer's duty to use clear limiting language)
- Okla. Sch. Risk Mgmt. Tr. v. McAlester Pub. Schs., 457 P.3d 997 (Okla. 2019) (earth-movement exclusion ambiguity principles; omission/purposeful inclusion analysis)
- Max True Plastering Co. v. U.S. Fid. & Guar. Co., 912 P.2d 861 (Okla. 1996) (reasonable expectations doctrine for ambiguous policy language)
- Pipefitters Welfare Educ. v. Westchester Fire Ins. Co., 976 F.2d 1037 (7th Cir. 1992) (illustrative federal discussion on breadth of "irritant or contaminant" language in pollution exclusions)
- Cleary Petroleum Corp. v. Harrison, 621 P.2d 528 (Okla. 1980) (reformation requires antecedent agreement and clear-and-convincing evidence of mistake/fraud)
- Dodson v. St. Paul Ins. Co., 812 P.2d 372 (Okla. 1991) (contract interpretation and ambiguity are matters of law for the court)