Gulf Metals Industries, Inc. v. Chicago Insurance

giv- (еxplaining which at 176 that com- guaranty transaction for 851 S.W.2d mercially disposition en. of collat- reasonable recovery deficiency eral is condition why see no reason the term “debtor” We suit). Rabi- disposition Because of our of when im- should have a different error, of we need not point nowitz’s second dispose of collateral a posing duty point his first of error. See Tex. consider manner than commercially reasonable R.App.P. 47.1. duty. prohibiting when the waiver of Furthermore, construing guarantor as a of the trial judgment We reverse 9.501(c) is consistent debtor under section take render Cadle debtor with the article nine definition of by its claim. nothing payment or other person “the who owes obligation secured.” performance & Bus. Tex. Ann. Com.Code 9.105(a)(4) (Vernon § Supp.1999). We 9.501(c)applies guar-

hold that section to a

antor of a secured transaction and there- prohibits guarantor,

fore as well as waiving duty of

primary obligor, from in possession a lender of collateral to dis- INDUSTRIES, INC., GULF METALS commercially in a pose of the collateral Corporation, Reduction and Gulf Therefore, Rabinow- reasonable manner. Corporation Reduction as a Successor duty dispose itz could not waive Cadle’s Company, Appel Zinc to Southern commercially in a reason- of the collateral lants, able manner. v. establishing The burden of COMPANY, CHICAGO INSURANCE in a com sale of collateral was conducted Casualty Company, Fire Interstate & mercially reasonable manner is on the Lloyds Company, Delta Insurance seeking the balance creditor to recover Company, In First State Insurance obligation after the sale remaining on America, Company North surance of the collateral. Greathouse Charter Casualty Company, Continental Bank-Southwest, Nat’l 851 S.W.2d Company, Insurance Transcontinental (Tex.1992); Inc. v. Sunjet, 176-77 Ford Lloyds Texas, Transportation CNA Motor Credit 703 S.W.2d Fidelity Company, & Casu Insurance 1985, writ); (Tex.App.-Dallas no Friedman alty Company New York Funding Corp., v. Atlantic Compаny, and Glen Falls Insurance writ). (Tex.App.-San Antonio Appellees. stipulated that there is no parties the collateral in this case was dis proof No. 03-98-00013-CV. in a reasonable posed commercially Texas, Appeals Court Indeed, solely on manner. Cadle relies Austin. it of the Rabinowitz’s “waiver” to relieve Because presenting proof. burden of such May Rabinowitz, concluded that as a we have duty could not waive Cadle’s guarantor, commercially of the collateral in a

dispose manner, Cadle has failed to

reasonable the second

meet its burden. We sustain discharged Rabinowitz is

point of error. obligation imposed by further Greathouse,

guaranty this case. See precludes coverage and thus

unambiguous resulting costs cleanup for environmental Metals’ sale of zinc materials. from Gulf affirm. We will AND PROCEDURAL FACTUAL

BACKGROUND essentially un- background facts are Metals, a disputed. Gulf Houston-based in the business of corporation, has been Mullen, Brown & Michael G. McCarroll buying, selling, recycling, processing Hartline, Austin, Appellants. Oaks for approxi- metals since 1951. From scrap 1977 until Southern Zinc sold mately Nissenbaum, Long L. Mark Nissenbau by-products zinc materials and tо Gulf Levit, Francisco, Christopher & San W. During peri- Industries. this same ‍‌​‌‌‌​‌‌​‌‌​‌​​‌‌‌‌‌​​​‌​​‌​‌‌​‌‌‌​​​‌‌​​​​​​​‌‌‍Metals Patterson, L.L.P., Martin, Bracewell & od, Zinc Gulf Metals both Southern Fun- Cougill, Thomas L. Funderburk & by-prod- Industries sold zinc materials and derburk, L.L.P., Houston, Hoyt, R. Scott lo- Company, ucts to the Stoller Chemical L.L.P., Gibson, Crutcher, Dallas, Dunn & Carolina, where cated South Stoller Appellees. for agricultural manufactured and sold fertiliz- JONES, supplements. B.A. er In Gulf Reduction Before Justices SMITH with Zinc Corporation merged Southern and YEAKEL. Zinc’s assets and and absorbed Southern YEAKEL, LEE Justice. liabilities. Industries, Inc., Appellants Gulf Metals the record that appear It does not Re- Corporation, Gulf Reduction and Gulf Industries, Metals Gulf Reduction Gulf Corporation knew, duction as successor Zinc Corporation, or Southern Zinc the dis- Company1 appeal know, Southern had reason to that Stoller’s grant summary judgment trict court’s fertilizer-manufacturing operations would all of whom at one time appellees, favor envi- adverse effects on the have serious policies оr another issued insurance to of the Throughout ronment. the time sales, Metals claims that the fertilizer-manufacturing operations Gulf Metals.2 Gulf that, ruling thought as a to have involving district court erred zinc were not law, qualified polluter’s matter of ex- ramifications serious environmental policies neighboring property groundwater. in the clusion clause contained However, at the groundwater Metals the soil and insurance issued CIC to Gulf America, Industries, Company Continental Ca- Reduc- of North 1. Gulf Metals Inc. and Gulf Corporation corporations; Company, tion are affiliated Insurance sualty Transcontinental designation, Texas, Met- we will use their own als,” "Gulf Transporta- Company,CNA Lloyds of jointly we to both entities. when refer Fidelity Casualty Company, & tion Insurance Company and Glen of New York Insurance petition named 2. Gulf Metals’ third amended Company. Chicago Insur- Falls Insurance including twenty companies, Chica- insurance Casualty Company Fire & ance and Interstate go Company, as defendants in this Insurance after this Company settled with Gulf Metals judgment lawsuit. The district court’s final appeal subsequently dis- was filed and were granted summary for motions However, style from the suit. missed com- behalf of numerous defendant insurance Industries, Inc., case remains Metals Gulf panies by generally name and denied all other Company, et Chicago et al. al. relief, disposing claims thus of Gulf Metals’ clarity we refer to the For convenience against any Appellees in this other insurers. defendants, including company insurance originally Chicago Insurance Court were appellees, collectively remaining as those Casualty Compa- Company, Fire & Interstate "CIC.” Company ny, Lloyds Insurance of Tex- Delta as, Company, Insurance First State Insurance liability All insurance sold later found to contam- Stoller Site were doing it started busi- to Gulf Metals after the United Envi- inated. States (the “EPA”) with Stoller in 1977 exclude ness Agency Protection ronmental pol- damage for caused contaminants ordеr requiting an administrative issued lutants, the “sudden but all also contain cleanup participate Gulf Metals to exception. How- EPA and accidental” and reimburse the Stoller Site ever, none at issue defines cleanup costs. South Car- existing and accidental.” “sudden agency environmental issued a olina’s state Metals similar order to Gulf CIC, against suit brought Gulf Metals purchased seeking Metals has declaration Since liability not bar comprehensive general polluter’s exclusion did arising at compa- claims policies from numerous insurance for the environmental Metals focused including appellees. policies nies These Stoller Site. Gulf that the word provide, part, exception argued that and “sud- relevant the insurer interpreted to reasonably will “all sums which the insured shall den” can pay that the pay damages “unexpected,” liable to mean so “sudden legally become as injury pollution or dam- bodily property exception because оf and accidental” coverage long as age applies, which this insurance caused exclusion would reinstate to ” underlying an occurrence.... define as the event was accident, standpoint “an including “occurrence” as: and unintended from the conditions, injurious summary exposure judg- which re- insured. moved for CIC ment, bodily injury sults in or necessari- property damage responding that “sudden” period requiring a element during policy expected ly temporal neither contains standpoint any nor from the that be swift or discharge pollutants intended liability for the exclusion to abrupt exception insured.” qualified polluter’s added the ex- an affirmative de- apply. CIC claimed clusion, because, provides: which that existed fense zinc leakage under its interpretation, bodily insurance does not apply

This at was not “sudden” in the Stoller Site damage injury property arising or out of sought partial time. Gulf sum- Metals also release, discharge, dispersal, or es- mary judgment the “sudden and acci- smoke, soot, fumes, vapors, cape of a exception dental” did not constitute valid acids, alkalis, chemicals, toxic or liquids affirmative for CIC.3 defense irritants, gases, waste materials or other pollutants contaminants or upon into or judgment final incor- The district court’s land, atmosphere any or watercourse ruling of the court porated earlier orders water; or body of but this exclusion of proving that Gulf Metals had the burden apply discharge, disper- does not such if exception that the “sudden and accidental” sal, escape or is release sudden and 1) declaring: coverage, did not bar accidental. patent that there nor latent was neither added). Thus, and acci- pro- phase this added “sudden (Emphasis 2) dental”; “sudden,” the term as provides damage vision caused temporal a pollutants used contains policy, contaminants or is excluded 3) element; unless their introduc- “sudden “rapid tion and accidental.” In and аccidental” means unex- is “sudden such event, summary damage pected.” granted comes within cov- The court the basis that Gulf erage judgment to the exclusion. CIC on as stipulate places at the Stoller Site was and CIC Gulf Met- of containment Gulf Metals rapid discharge, a responsible als is unable to show that for or all of or escape dispersal, release contaminants damage. pollution-related place pollutants from their intended tract, a court “ascertain the intent prov- Metals could not meet its burden of should parties expressed did not bar cover- in the instru ing that the exclusion Union, at denied ment.” National age. The district also added) Forbau, 876 summary judg- (emphasis (citing partial Metals’ motion for 133). “If a contract written is ment. a given so worded that it can be definite or it legal meaning, ambig certain then is not DISCUSSION Union, uous.” National 907 S.W.2d at reviewing The standards for motion Coker, 520; Coker summary judgment are well estab (Tex.1983). However, if language “the (1) summary judg lished: the movant fоr subject to two or more policy or contract showing ment has the burden of that no ambigu it is interpretations, reasonable genuine issue of material fact exists and Union, 520; ous.” National 907 S.W.2d at that it is entitled to as matter also 972 S.W.2d at 741. see (2) law; deciding whether there is a involves an exclu “Where disputed precluding material fact issue sionary provision policy, of an insurance summary judgment, evidence favorable to adopt must the construction ... [courts] true; the nonmovant will be taken as urged by long the insured as as the con (3) every reasonable inference must be unreasonable, not if the struction is even of the and indulged favor nonmovant by appears the insurer urged construction resolved in favor. See Nix doubts its to be more reasonable or a more accurate Co., Property Management on v. Mr. 690 Balan parties’ reflection of the intent.” (Tex.1985). 546, The func S.W.2d 548-49 dran, National (quoting at 741 972 S.W.2d not to summary judgment tion of is de Energy v. Hudson Union Fire Ins. Co. by jury, prive litigants right of the to trial (Tex.1991)). Co., 552, 811 S.W.2d 555 patently but eliminate unmeritorious to Swilley v. generally claims and defenses. See An in a contract will (Tex.1972). 64, Hughes, “patent” 68 or categories: 488 S.W.2d fall into one of two “A is evident patent “latent.” contracts, are and National the face of the contract.” governed by their construction is the same Union, “A am- 907 at 520. latent S.W.2d of to all con applicable rules construction a contract which is biguity arises when tracts. See Balandran v. Ins. Co. Safeco unambiguous applied on its face is Am., 738, (Tex.1998); 972 S.W.2d 740-41 subject it deals and an matter with which v. National Union Fire Ins. Co. CBI In col- ambiguity appears by reason of some (Tex.1995). dus., 517, 907 520 In S.W.2d lateral matter.”4 Id. contract, construing an insurance its terms issues, Gulf Metals “ordinary generally By its first three given are their in not court erred Security Mut. asserts that the district accepted meaning.” Cas. (Tex. Johnson, the circumstances considering v. evidence of Co. 584 S.W.2d 704 1979). quali- of the primary goal promulgation of the court “is provision to fied give expression polluter’s еffect the written exclusion evidence, at issue. This intent.” 972 added) Metals, the inten- urges shows that (emphasis (quoting S.W.2d at 741 Gulf Beaston, the clause was Ins. v. 907 tion of the drafters of State Farm Co. Life (Tex.1995) coverage for inten- only Forbau v. the exclusion bar S.W.2d 433 Co., material tional and there are no pollution Aetna Ins. 876 S.W.2d 133 Life (Tex.1994)). at and showing a written con- facts construing street, latent- example green houses on it would be court used this The district Union, called for ly ambiguous.” National Union: a contract "[I]f National green goods to be to ‘the house on delivered at 520 n. 4. Street,’ were in fact two Pecan and there that “acci- agree Texas or Because courts expected the Stoller Site was around unfore- sug- by generally Gulf Metals. Gulf Metals dental” describes intended event, e.g., Re- “possibly that the see gests terms seen and the that the dis- Heyward, evidence ambiguous,” Nat’l. Ins. Co. public Life (Tex.1976), would aid court failed consider giving trict 536 S.W.2d assert- vio- the same would “sudden” Metals, discharge by ed Gulf give that we each requirement late the trigger rapid need pollutants one stated: effect. As court has word concur coverage Gulf Metals’ favor. We ‘sudden very “The use words is no that the pollution that there evidence ... reveal a clear intent accidental’ expected by Gulf was either or intended two differently, stating words define the Thus, our whether the inquiry Metals. Reading ‘sud- requirements. separate advanced Metals of construction context, i.e., by the joined in its den’ “sudden and accidental” ‘accident,’ ‘and’ to word word qualified polluter’s used ‘sudden,’ conclusion is that inescapable interpretation. is a reasonable clause unex- including concept if even Energy at 555 Hudson adds additional pectedness, also and [sic] Barnett v. Ins. (citing Aetna Life al- ‘unexpectedness’ is element because (Tex.1987)). ad- ready expressed ‘accident.’ This Qualified Exclusion Polluter’s temporal meaning element is ditional Patently Ambiguous is not Clause sudden, i.e., brevity. abruptness meaning only sudden as unex- To define correctly The district held unintended, as a and therefore pected patent “sudden accidental” is not accidental, would restatement of In so re mere ly ambiguous. doing, the court Mustang Equipment requirement lied ‍‌​‌‌‌​‌‌​‌‌​‌​​‌‌‌‌‌​​​‌​​‌​‌‌​‌‌‌​​​‌‌​​​​​​​‌‌‍on Tractor Co. render suddenness & Co., Liberty v. Mutual 76 F.3d surplusage.” mere Cir.1996). (5th Mustang ap 89 Tractor Tractor, Mustang (quoting 76 F.3d at 92 in plied pollu Texas law interpreting Assoc., Inc., Co. v. Northern Ins. Aardvark liability clause a general tion-exclusion of (3d Cir.1991));5 189, 192-93 see 942 F.2d policy almost identical to the clause here. In SnyderGeneral Corp. Century v. also court, Mustang applying The Tractor after (N.D.Tex. Co., 991, F.Supp. dem. 907 997 construction, Texas rules of contractual 1995), part part, vacated in aff'd an opposite reached conclusion to (5th Cir.1997). 536 113 F.3d analyzing urged by Gulf Metals when Mustang analysis, In its joined “sudden” as with “accidental” to court concluded that the context Tractor accidental.” form “sudden and control its which a word is used must court reasoned that the use оf both Tractor, 76 F.3d Mustang definition. re together separate words reflected two analysis Mustang find Tractor’s 92. We de quirements. Because “accidental” agree inqui event, persuasive and that contextual an unforeseen scribes or here. Gulf ry approach is the follow meaning the same to “sudden” to ascribe a urges that review of dictionaries Metals would render terms redundant that definitions of the word “sud reveals the rule that word in a con violate each con emphasize that the word given effect. The court stated den” often tract be “unexpected” a or “unforeseeable” “sudden” therefore must contain tains help- be abrupt may or brief. While dictionaries temporal meaning element element.6 made, Associates, construing coming, done "[HQappening, "sud- 5. Aardvark while accidental,” unexpectedly; warning, a quickly, without of in the context den did so Dictionary attack.” Random House sudden Pennsylvania state law. (Stuart Language English 1900 B. Flexner ed., 1987); "Hаppening previous no- without ful to the they construction, extent set forth the ordi- and concluded that “‘[s]ud- words, nary, meaning they usual provide may only reasonably den’ be construed to inadequate ambiguity. test for To al- Tractor, mean quick Mustang or brief.” low the existence of more than one dictio- 92-93; 76 F.3d at see Guaranty also Nat’l nary definition to be the qua sine non of Co., Mfg. 192, Ins. Co. v. Vic 143 F.3d ambiguity would eliminate contextual anal- (5th Cir.1998); Transmission, E. Texas ysis terms; contractual a time defi- (“[A] 870 F.Supp. at 1350 definition of nition appeared dictionary of whatever ‘sudden’ which divorces it from the mean- credibility or usage, that definition could ing of ‘abrupt’ ‘swift’ and is an unreason- said be “reasonable” and thus render able and tortured and not most, many, if ambiguous. words Dic- one which Supreme Court of Texas is abstract, tionaries define words likely adopt.”). while courts must determine the recently, Until no Texas state court had context, particular terms in a here a examined the polluter’s exclusion. specific poliсy. Dictionary defi- In Mesa v. Operating Co. Un nitions alone can therefore be accorded California Co., ion Insurance little weight determining ambiguity. h.), (Tex.App. pet. no fact that different people reading dif- - Dallas ferent Fifth dictionary Appeals, relying Court of definitions the same Mus might tang word reach Tractor interpretations SnyderGeneral, different applied of that word does not reading analysis make each a contextual to the same clause and interpretation agree here, reasonable. We that we consider and found that with holding those courts that such defini usage “common term ‘sudden’ in provide significant tions help deter a temporal Oper cludes element.” Mesa mining whether a term has two reasonable ating, agree. at 755. Without resort We meanings. County See New Castle work, to a reference it is difficult to think Accident & Indem. 933 F.2d where, normal, of a situation in a common Hartford (3rd Cir.1991); 1193-94 Cyprus Pla ordinary interchange, person would teau Mining Corр. v. Commonwealth Ins. intending use “sudden” without impart (D.Utah 972 F.Supp. 1384-85 immediacy. sense of 1997); In re Texas E. Corp. Transmission PCB Coverage Contamination Ins. Litiga Metals num Gulf directs us to a tion, 1293, 1348 F.Supp. (E.D.Pa.1992), 870 judicial ber of in supporting decisions its (3rd grounds, on other 15 F.3d 1249 terpretation aff'd meaning of “sudden” as mere Cir.), denied, 915, cert. 513 U.S. 115 S.Ct. ly “unexpected,” thereby imparting no (1994). L.Ed.2d 206 temporal element. Indeed a substantial number of courts nationwide have exam

Mustang Tractor did not a mul- employ “sudden,” ined the construction of but tiple-dictionary-definition test to determine without a reaching whether “sudden” consensus.7 Gulf Met ambiguous. was The court placed proffers split authority “sudden” in als that this in its correct con- textual position part of the term regarding sug “sud- of “sudden” accidental,” den and applied Texas of gests rules that the term is ambiguous, thereby notice; very divided, coming tice or with brief evenly found these cases with almost unforeseen; occurring unexpectedly; unpre- holding pollution about half that a similar (6th pared Dictiоnary for.” Black’s Law 1432 coverage, exclusion clause barred the re- ed.1990); "[HQappening coming unexpect- holding mainder that it did not. The court edly.” Collegiate Webster's Ninth New Dictio- could "discern neither a trend nor noticeable (Frederick ed., 1988). nary 1178 C. Mish majority position.” County, New Castle 933 F.2d at 1195. Gulf Metals notes that this Many gathered of these cases are in New unchanged basically division has remained County Castle ty v. Accident & Indemni- Hartford County since the New Castle decision. Co., 1162, (3rd 933 F.2d 1195-96 n. 60-61 Cir.1991). County The New Castle

807 Insurance,8 ap- in Board rendering qualified its construction of the Texas State in- language, in change exclusion reasonable. We polluter’s proving clause judi presence conflicting The disagree. gradual pollution claims for tended that covered, to create cial decisions insufScient purpose not be as a matter of law. See Mesa ambiguity was to that occur- ensure new exclusion (citing at 756-57 Pac. Operating, Union be con- policies would not rence-based & Sur. Resources Co. Aetna Cas. the courts extend strued (Tex.App. claims. such - Fort denied)). other writ To hold Worth argues supreme Metals Gulf unduly ability would wise restrict al- opinion recent in Balandrán9 court’s contextual engage meaningful courts to sur- consideration circumstances lows would analyses of contract terms. Courts insurance rounding promulgation of an con longer be free reach their own exis- determining when policy form regarding clusions contract court, ambiguity. tence of an The district differing courts had developed once other Balandrán,10 benefit of cor- without the interpretations. See Const. T.C. Bateson interpre- rectly found that difference Lumbermens Co. v. Mut. Cas. create tation does not a latent (Tex.App. [14th - Houston or dis- that would allow introduction denied). writ Dist.] the insurance covery regarding of evidence that in the We hold context of the com- meaning of industry’s understanding of the general under prehensive liability policies time the clause at the it was drafted. case, examination this the word “sud- clearly imparts den” unambiguously conjunction must be Balandrán read temporal urgency, sense of and is there- with National Union.11 National Union patently fore not ambiguous. the issue of the breadth of “abso- involved Surrounding Circumstances exclusions,” namely provi- pollution lute Promulgation Policy Language found certain of insurance sions Ambiguity be used to Cannot Create an deny coverage any damage caused regardless why, by pollutants how

The lack of facial pollutants when the were released. insurance contracts not end before us does facts of procedural National Union inquiry, ambiguity may our because an similar to those before us. its insur- When by reason of matter. appear a collateral claim, ers denied for a Union, See National ‍‌​‌‌‌​‌‌​‌‌​‌​​‌‌‌‌‌​​​‌​​‌​‌‌​‌‌‌​​​‌‌​​​​​​​‌‌‍at 520. them. brought against an insured suit Metals asserts inclu prior summary judg- The insurers moved for sion of the polluter’s pollu- ment on the basis the “absolute liability these policies, clause in their clearly polices precluded tion exclusions” gradual covered the release law; a matter such of the insured of contamination as the release here. clause, policies, the of according responded by insertion of the virtue The Metals, exclusions, not change any patent was meant to these contained both existing coverage. ambiguities. that the latent trial court CIC contends The Department enti 8. Now the Texas of Insurance. 10. The district court rendered an order 1.01A(c) (West Interpreting Acci See Tex. Ins.Code Ann. art. tled "Order ‘Sudden and designation Supp.1999). change Subject used in The in title dental’ as 1997, 10, any September did not affect the State and incor actions taken Policies” 6, 1991, porated "Final Board of Insurance. See Act of June this order reference in his 13, 13.01, Leg., January Judgment” § 72d ch. art. 1991 Tex. rendered 1998. Ba July 1133. was decided Gen. Laws landran 1998. Am., Indus., 9. National Union Fire Ins. Co. v. CBI Balandran Ins. Co. 11. Safeco of 1998). (Tex. (Tex.1995). S.W.2d 738 907 S.W.2d ion, suрreme at 521. The granted companies’ the insurance motions 907 S.W.2d discovery. court refused to allow such summary judgment before the insured opportunity any had the to obtain docu- apparent It is that the “surround through discovery though ments even ing may circumstances” that be considered trial court did have before it certain insur- determining ambiguity are those sur relating ance to testi- industry documents contract, making rounding Board of mony before the State Insurance. body pro present regulatory those when a Union, National 907 S.W.2d at 519. The mulgates the of the contract: form trial appeals court of reversed the court’s must become evident The grant summary judgment of favor of the in context of when the contract is read insurers, holding that the trial court circumstances, not after it rendered abused its discretion when admitted to parol of intent is evidence summary judgment allowing before discov- the court ambiguity. create an Neither ery. discovery sought by at 520. The Id. parties’ briefs appeals’ opinion of nor that its the insured was evidence insurers facts have raised need for additional approved industry-wide knew and of dis- policies to apply the insurance concerning cussions the breadth of the deal. subject they matter with which “absolute exclusion” and under- accident, the relating to the facts would not exclude provision stood a result of hydrofluoric acid as release of Id. at 520- certain situations. injury accident, the personal the court supreme court reversed allegedly property damage claims appeals and affirmed the trial court. appear to be resulting from release surrounding cir- fully developed. The relating the rules of construction In the contract present when cumstances contract, su applicable to amply established into were was entered preme court National Union was care determining whether purpose for the ful circum “surrounding to restrict when on these exists this case outside the four corners of the stances” facts. policy could be considered. “Whether Id. at 521. law ambiguous question contract is us, before the facts the ease by looking for the court to decide at the pollutants into relating to the release the circum light contract as a whole at the Stoller groundwater the soil present stances when the contract was en resulting alleged damage Site and added) (emphasis (citing Id. at 520 tered.” fully devel from that release are likewise Coker, at 394 and R & P 650 S.W.2d deter oped. Nothing further is needed to Kirk, LaGuarta, Enterprises v. Gavrel & polluter’s ex mine whether the (Tex.1980)). Inc., No issue of ambiguous. clusion clause is However, interpretation of a parties’ present intentions is unless only contract can be considered after Id. at 521 n. 5. ambiguous. is first ambigu contract court has found the supreme ous. Id. The held breadth misconstrues the Gulf Metals ger sought evidence to be discovered was dealt with Balandran of Balandran. рarties’ interpretation only mane within the contradictory language found In re the “absolute exclusion.” 972 S.W.2d policy See itself. supreme in versing appeals, the court of the home was at 742 n. 3. The Balandrans’ by discovery found that the allowed of insurance pursuant court sured to a contract the insured the appeals gave policy promulgated the court of contained form go When “opportunity parol by to discover evidence the State Board of Insurance. to an damage in order to suffered due ing intentions their home leak, Balan- the underground plumbing ambiguity.” a latent National Un create of an existence determining the ered with their insurer. filed a claim drans “[bjecause the Balandrans’ of cover- types ambiguity, two but policy provided Their dwelling A it- is Coverage language insured the contract age. self, personal B Coverage insured reasonable, while on the ambiguity exists an face provided protec- A Coverage property. (emphasis Id. at 742 n. 3 the policy.” of added).12 loss unless physical for all risks of tion in the exclusion sec- excluded specifically coverage. The insurer assert-

tion of the every differing interpretation Not exclusion, which the Balan- one such ed ambigui an creates policy of an insurance loss if cover their drans conceded would Indeed, by supreme the as observed ty. However, they ar- applied. the exclusion the insurer court, insured and “Both the (the B Coverage language that gued views of cov conflicting take likely to policy) section of the personal property conflicting expectations erage, neither but the exclusion exception to created to create disputation nor is sufficient ar- The insurer claimed their insurer. Ins. Forbau v. Aetna ambiguity.” Life exception only ap- the gued because (em (Tex.1994) B, to applied only it peared Coverage phasis original). con- The Balandrans personal propеrty. made the tended because law that “sudden hold as a matter of We to the exclusion claimed specific reference unambiguously clearly and and accidental” loss, insurer, applied it their re- urgency temporal a sense of imparts just personal-property loss. pollutants the release of quiring rules general court discussed the supreme ex- swift, trigger the rapid, abrupt to in- interpretation applicable contract exclusion qualified polluter’s ception to stated, “[ajpplying policies surance Metals clause and afford Gulf rules, conclude that the exclu- these we under consideration policies under subject to two repeal provision sion is on the face No exists here. interpretations, and is there- reasonable Metals, by CIC to Gulf issued ambiguous.” id. at 741. fore See sur- of the circumstances and evidence the form of promulgation rounding determining that Only after considered may not be those patently was reрeal provision therefore ambiguity. We create a latent did the court turn to a consid ambiguous three issues.13 Metals first overrule Gulf surrounding circumstances eration of the See 'promulgation form. cir id. The court concluded these CONCLUSION cumstances enforced the reasonableness holding court was correct The district am interpretation of the the Balandrans’ bars polluter’s exclusion policy. See biguous language found damage claims Metals’ coverage for Gulf stated that the specifically id. The court judg- affirm the a matter of law. We promul circumstances court. ment of the district form were not consid- gation argues that Gulf Metals In its final issue 13. The dissent likewise misconstrues implies assigned Balan- improperly Balandrán and to it breadth of the district holding National Union's drán has overturned quali- proving exception to the burden of determined before that parol must be uphold we polluter’s exclusion. Because fied is considered. evidence of intent judg- summary grant of court’s district Indus., Chicago Ins. Metals Inc. v. Gulf 993 S.W.2d CIC, as a matter which held ment in favor of (Tex.App 802 n. 2 . -Austin qualified polluter’s exclusion of law that J., h.) (Smith, dissenting). pet. We issue. unambiguous, address this we do not disagree Union and and believe that National harmony. are to be read in Balandrán Justice, National SMITH, (quoting at 741 Union dissenting. BEA ANN Energy Ins. v. Hudson Fire Co. majority’s interpreta I that the agree (Tex.1991) (emphasis add- tion of the “sudden and accidental” ed)). in Balandrán policy The at issue exclusion is emi qualified pollution in the to damage dwelling; excluded water reasonable, perhaps more reason nently to damage insureds conceded Indeed, able than the insured’s definition. under this exclusion their foundation fell joined majority I would have had this property down before the su opinion personal been handed in the language unless in Balan court issued its decision preme to the exclu- exception created an section America, dran v. Insurance Co. damage resulted when the structural sion Safeсo (Tex.1998). Because I find 972 S.W.2d 738 The exclusion re- plumbing from a leak. finding a compels that Balandrán relied on covered peal that the insureds and acciden reading insured’s of “sudden accidental dis- against personal property reasonable, I hold that tal” is also would of water or charge leakage or overflow in granting summary the trial court erred plumbing system. a steam from within I respectfully favor of CIC.1 further provided part policy This dissent. l.h through l.a under Sec- that “Exclusions Signiñcance Balandrán apply do not to loss tion I Exclusions l.h ex- Exclusion simple by peril.” involved a issue: caused this Balandrán a resulting a standard damage whether homeowner’s cluded structural by to a foundation caused damage covered not Balandrans did plumbing leak. The underground plumbing year leak. One loss, but re- any personal property suffer earlier, the Fifth Circuit had addressed that exclu- argue to lied on this sentence and held that under question the identical damage the loss apply l.h did not to siоn reading policy provi- its of Texas law the by plumbing a leak. their home caused damage to a unambiguously sion excluded insisted, the Fifth relying on The insurer by plumbing foundation caused a leak. that an Sharp, opinion Circuit’s earlier Sharp v. Farm Fire & Cas. Ins. State property personal found in the (5th Cir.1997). Co., 115 F.3d 1258 could not be coverage section of the court held that the insured’s the exclusion found used to avoid therefore, reasonable; the exclu- was not case, In that section. dwelling coverage unambiguous, and the insured sion was concluded: the circuit court had ambi- not entitled to the benefit of the was Sharps’ situa- sympathetic We guity. See id. at 1262-63. tion, agree spe- that text but we cannot exam- supreme In Balandrán the B, which cifically Coverage included in and reached a provision ined the same may only personal property, applies result, essentially holding different A, which Coverage ap- into imported misapplied Fifth Texas law Circuit house, in order dwelling оr plies to the Furthermore, gave the court Shaij). a loss that does to create reading of what can be consid- generous damage. personal property not involve interpretation” ered “reasonable unambig- policy clearly Sharps’ an insured. Courts per- dwelling losses and uously divides urged by ... adopt the construction “must separate into two property sonal losses as that construction is long the insured as appear It therefore would ‘coverages.’ unreasonable, the construction even if nonsensical, rejection of the and a to be appears to be more urged the insurer to reach policy, structure of the obvious reasonable or a more accurate reflection of solely [personal applies into text that intent.” did not have the benefit the trial court 1. Because Balandrán had not been decided analysis. supreme hearing, court's most recent summary judgment the time of the ad- is not the insurer intended property losses] to determine extent individual dwelling Balan- coverage ambiguity, section]. of under missible create [the to De- of what the drón held that evidence F.3d at Sharp, 115 revising in partment of Insurance intended interpretation find the To insured’s in could be considered policy the form provision and am policy “reasonable” the inter- party’s either determining whether supreme the court Balandrán biguous, was reasonable. policy the pretation of standard rules of contract con applied (1) insurance contracts are sub struction: to con- asked the trial court Gulf Metals ject to the same of construction as rules surrounding similar circumstances sider contracts, (2) goal primary the is to other the at issue the of form promulgation give to the expression effect written pri- that dispute. argues this Metals (3) intent, parties and the court will strive pollu- of or to the inclusion the sentence, give every clause in liability clause ter’s exclusion rendering portion and word to avoid clearly covered the policies, these inoperative. gradual of con- but unintentional release 741. The court on to add: at went “While and sought It to discover tamination. parol evidence of the intent not drafting have consider the court ‍‌​‌‌‌​‌‌​‌‌​‌​​‌‌‌‌‌​​​‌​​‌​‌‌​‌‌‌​​​‌‌​​​​​​​‌‌‍historical ambiguity, admissible to create an the con the regulatory concerning and evidence may light tract be read in the sur of adoption pollution the clause of exclusion rounding circumstances determine that the argued Metals issue. Gulf (em whether an exists.” Id. surrounding promul- circumstances the omitted). added, phasis Further citations pollution clause gation of the exclusion more, proper the court it thought to con would that the and acci- reveal “sudden sider the circumstances the surrounding was to re- language dental” not meant of promulgation form deter policy then-existing of uninten- strict mining whether the Balandrans’ interpre pollution. tional responded CIC Noting tation was reasonable. that insur Insurance, State now the De- Board adopted by ers must use forms the State Insurance, partment of intended ensure Insurance, Board of that an earlier version that not occurrence-based would exclusion-repeal the form contained lan those be construed to cover claims such as guage unquestionably applied to presented here. Without the benefit dwelling personal as well as Balandrón, loss, trial and court followed property that the revision mistaken simplify form was intended to view of Fifth Circuit language any coverage to restrict Tractor & Co. Mustang Equipment available, previously the court Liberty concluded 76 F.3d 89 Mutual Insurance (5th interpretation that “the Cir.1996), Balandrans’ be and refused to consider comes even more when reasonable we con re- surrounding circumstance evidence surrounding sider the circumstances garding promulgation of the “sudden form.” promulgation this Id. accidental” in- to determine whether Balаndrán that insurance is recognizes sured’s was reasonable. regulated industry regulato- Balandrón, is ad- Under such evidence ry entity promulgates mandatory poli- which ambiguity, missible to determine cy party forms is a silent to contract that parties’ interpretations exists when both written must be on such forms. The sur- I would hold reasonable. rounding circumstance evidence that present erred trial court case supreme reviewed Balandrón con- granting summary without party in went to the intent of this silent cir- sidering parol this evidence promulgating form. While evi- what an dence of individual insured cumstances. majority points ing coverage pollution?

The to footnote three as of unintentional I justification ignoring significant for this may.2 think Balandrán holds that it We in rule of construction set forth Balan surrounding don’t know whether the cir- dran, and instead reaches back to the ear cumstance evidence here will make Gulf ner In language in National Union Fire Metals’ this ex- Industries, Inc., surance Co. v. CBI clusion clause more reasonable not be- (Tex.1995), stating that S.W.2d cause the triаl court refused to consider it. parties’ interpretation of a contract can be summary I would reverse the only considered after the court has found and remand for the trial court to read the Indeed, ambiguous. the contract to be present light contract in of such evidence. agrees parol Balandrán that evidence of Reasonably Interpret- “Sudden” Can be cannot intent be considered “Unexpected” ed To Mean policy ambig unless the is first found to be disagree majority’s I with the claim that Balandran, uous. See 972 S.W.2d at 741. “provide significant help dictionaries in However, specifically Balandrán holds determining whether a term has two rea- surrounding that circumstance evidence meanings.” sonable It is true that courts regarding promulgation of the form must of words in a determine not may “extrinsic evidence” and be context; agree I also that particular dictio- determining par considered whether a provide inadequate naries alone an test ty’s interpretation of the is reason However, ambiguity. dictionary defini- points able. As the dissent Balandrán out, may provide guidance tions when the con- this rule is at odds with the Fifth Nothing that text not. holding Sharp phrase Circuit’s the insured does about “may point process requires not to the revision “sudden and accidental” “sudden” an ambiguity.” temporal create 972 to contain a element. The con- (Owen, J., dissenting) at 745 (quot simply text in which the is used 1262). ing Sharp, 115 F.3d at In the does not such a construction. mandate case, present majority follows the view that “sud- majority When the asserts expressed by in the Justice Owen Balan- in ordinary den” is never used conversa- drán Fifth dissent and Circuit tion what it is temporal aspect, without Sharp, that evidence what the former really saying is that “sudden” can never policy form stated and intent of those only “unexpected.” mean This notion is language who revised its is extrinsic evi by any dictionary usage, not supported may dence be considered until the caselaw, I authority. other believe determines that an exists that it is to read “sudden” to reasonable policy. apparent on the face of the “unexpected.” Georgia mean As the Su- contradiction footnote between three and preme Court observed: holding may contract read “the usage, “sudden” popular [E]ven its in light surrounding circumstances duration of usually does not describe the an to determine whether ex event, unexpectedness: but rather its ists,” 972 can be harmon storm, a sudden a sudden turn if regulated ized we consider the nature of road, sudden death. Even when used rely insurance contracts. Can Gulf Metals event, word describe the onset of representations allegedly made has an industry Department temporal elastic connotation Suddenly, with language expectations: “sudden and accidental” varies it’s spring. exist- revised form would not restrict contract, regard majority got making present In this I think the it not those backwards when it held that "the 'surround- regulatory body promulgates when a the form ing may circumstances’ that be considered in of the contract.” determining ambiguity are those accidental, the sudden- render would v. Aetna Cas. & Sur. 259 Ga. Claussen Id. (1989). surplusage.” requirement mere Accord- ness 380 S.E.2d “unex- ingly, leading provide dictionaries Mustang Tractor’s reason flaw in notice” as previous or “without pected” “acciden assumption that ing is the court’s primary definitions of “sudden.”3 un unforeseen or tal” means law, the proposition for which “sud- Texas at the der arriving In conclusion Insur National Republic “unex- cited accidental” cannot mean den and Life Heyward, v. ance Co. unintended,” 536 S.W.2d majority re- and the pected (Tex.1976). However, inappo-s is that case opinion on the Fifth Circuit’s lies v. interpret the Mustang Equipment Tractor & Co. generally Texas courts ite.4 Co., “unintended” Liberty Mutual 76 F.3d “accidental” mean word Cir.1996). context,5 (5th from oth majority ob- and cases As the insurance 89 Mustang that “ac Tractor court stated serves, jurisdictions support the view er is adds an element of intent agree courts that ‘accidental’ cidental” that “Texas “unexpected.” un- from “sudden” or missing or generally describes unforeseen See, Queen Farms, City Inc. v. Cen e.g., Id. event....” at 92. expected Co., 536, Ins. 124 882 tral Nat’l Fifth reasoned that the insured’s Wash.2d Circuit (1994) New Castle 703, (citing 721 meaning P.2d “sudden” & Indem. County Accident unexpected redundancy created because Hartford Cir.1991)). Co., 1162, 1194 (3d already conveyed unexpected. “accidental” 933 F.2d Therefore, concluded, addition, de leading primarily it define sud- dictionaries “[t]o unintended, meaning only or unin- “accidental” as without unexpected den as fine tended, many foreseeability.6 and therefore a mere restatement element of While pollu- exception 3. See Webster’s Third Dic- and accidental” New International den ed., 1986) (defin- tionary (Philip 2284 B. tion exclusion. Gove ing happening as: without "sudden” "la. notice; previous very Cowan, or notice with brief Trinity 945 5. Universal Ins. Co. v. See occurring coming unexpectedly: or 819, (insured's not seen (Tex.1997) 827-28 omitted]”; [usage prepared examples or purposes of conduct not an "accident” for Heritage Dictionary En- The American acted inten insurance because insured ed., (William glish Language 1286 Morris copying photo tionally purposefully 1973) (defining Happening "1. "sudden” as: showing graphs plaintiff them to unforeseen.”); warning; Law without Black’s friends); Argonaut Mau Ins. Co. v. Southwest (6th ed.1990) Dictionary (defining 633, ("Where 1432 "sud- (Tex.1973) pin, 635 "Happening previous den” as: without notice voluntary and the acts and intentional notice; very coming act, with brief or occur- or natural injury is the result of unforeseen; ring unexpectedly; unprepared accident”) (quoting caused result was not for.”). Even in Random House definition Fidelity & Guar. Thomason v. United States quoted by majority, temporal element (5th Cir.1957)); Wessinger 248 F.2d 417 only meanings pro- Exch., (Tex. one of exists in the three 949 S.W.2d v. Fire Ins. Dictionary See Random (if vided. House pet.) producing no App. acts - Dallas ed., (Stuart English Language 1900 B. Flexner involuntarily alleged injuries were committed 1987) (defining "happening, "sudden” as unintentionally, are acci and dental); results of acts made, coming, quickly, or done without warn- Operating Mesa Co. v. but see Califor added). ing, unexpectedly (emphasis or 755-56 ") Union Ins. nia h.) ("The (Tex.App. pet. - Dallas encompasses already term "accidental” killing "ac- Heyward held that is whether being concepts unexpected and unintend within the of a life insurance cidental” terms 92). Tractor, ed.”) (citing Mustang 76 F.3d viewpoint of policy is determined insured, viewpoint not the of the one who killing; the the in- test is whether Dic- does Third International 6. See Webster’s New ed., 1986) reasonably anticipated (Philip (defining tionary should have B. sured Gove ensuing bring own death. happening conduct would about his as: "2b. his "accidental” intent, Hey- Heyward, design, motivation 536 S.W.2d at 552-54. without or obvious < "col- through definition of inattention ‍‌​‌‌‌​‌‌​‌‌​‌​​‌‌‌‌‌​​​‌​​‌​‌‌​‌‌‌​​​‌‌​​​​​​​‌‌‍carelessness ward thus does control the <"loss>.”); "shooting> < A Dictio- in the "sud- lision> "accidental” as word is used necessarily connotes “unforeseen” also define “accident” as an unforeseeable dental” occurrence, these definitions are often sec- in addition to its natural of “unin- above, ondary.7 Finally, often As discussed this inter- tended.” meanings, use that have similar words largely unsupported by rele- pretation qualified pollution such as in the authority. Nor is “sudden” vant Texas “discharge, dispersal, where the words re- required temporal to contain a element escape” lease or are all used to describe dic- either Texas caselaw or authoritative potentially polluting events. See New Cas- Thus, ac- reading tionaries. “sudden and at 1194. County, tle 933 F.2d unin- cidental” to mean reasonable, ambiguous tended is and the brief, points out in its it As Gulf Metals interpreted must be favor of is not redundant to describe an event as the insured. “unintended,” since “unexpected” both subjective hopes the latter term describes Balandrán, the supreme pro- desires, or while the former addresses circumstances claimed objective concept more of what is foresee- evidence is admissible to detеrmine wheth- Thus, lottery winning able or foreseen. exists. Balandrán also er jackpot could be described as generous standard as to sets a new and unintended, receiving but not while a “reasonable in- what can be considered far speeding driving ticket for above the exception to a terpretation” of posted speed limit would be unintended Without the benefit of the su- exclusion. probably unexpected. but "Whilethe decision, the trial court preme court’s can terms “sudden” and “accidental” over- summary judgment against granted lap degree, nothing to some about insured, holding interpre- that Gulf Metals’ present context makes Metals’ inter- tation of “sudden and accidental” is unrea- unreasonable; particularly pretation this summary sonable. I would reverse the light of the rule that so well-settled the cause to the judgment and remand liability exceptions or limitations on discovery trial court to abow further strictly against construed the insurer and agents appelleе insur- evidence that in favor of the insured. See National to state insur- companies represented ance Energy Union Fire Ins. Co. v. Hudson and acciden- ance boards that the “sudden (Tex.1991); 811 555 Ram- pollution tal” say Maryland Am. Ins. Gen. long as would not ehminate (Tex.1976). Reading intended expected was not “unex- “sudden and accidental” to mean from the of the insured. standpoint pected and unintended” is reasonable. Be- Mustang contrary cause Tractor’s conclu- I upon assumption, a flawed

sion rests majority’s rebanee on that case

believe misplaced.

to be by the redundancy upon relied only if

Mustang Tractor court is created begins assumption

one with the “acci- nary Legal Usage (Biyan happening that oc- Modern A. desirable or unfortunate law, 1995) ("In distinc usually Gamer ed. the usual unintentionally and results curs loss; without the harm, tion is that an accident occurs casualty; injury, damage, or mis- it.”) purpose person willful who causes hap; accidents. 2. Law such automobile "mistake”) (em (contrasting "accident” with injury happening resulting in that is in phasis original). injured person way fault for which sought. legally compensation indemnity is See, Dictionary e.g., 7. The Random House unexpectedly, happens with- event that (Stuart English Language B. Flexner cause.”). plan out a deliberate ed., 1987) (defining "accident” as: I. an un-

Case Details

Case Name: Gulf Metals Industries, Inc. v. Chicago Insurance

Court Name: Court of Appeals of Texas

Date Published: May 13, 1999

Citation: 993 S.W.2d 800

Docket Number: 03-98-00013-CV

Court Abbreviation: Tex. App.