Solvent Underwriters v. Furmanite America, Inc., No. 14-07-00889-CV (Tex. App.-- Houston [14th Dist.] February 5, 2009) see Furmanite Opinion
Insurance companies are usually the ones that write the insurance policies, and this case gives a striking illustration of just how treacherous that activity can be -- I meaning using words. The case has many twists. The part that interests us is a Pollution Buyback Endorsement that partially reinstates coverage for certain pollution liability risks otherwise excluded by the pollution exclusion. The Endorsement provides:
Nothwithstanding the [Pollution Exclusion] . . . coverage . . . will apply to . . . personal property or bodily injury or loss of, damage to or loss to use of property . . . caused by seepage and pollution ... or contamination of air . . .
Provided that . . . the following conditions are met:
(a) . . . the loss is accidental . . .
(b) the loss became known to the Assured within 7 days after its commencement . . .
(c) the loss was reported in writing to these Underwriters within 14 days after having become known to the Assured.
Furmanite contracts with refineries and chemical plants to fix leaks and prevent the escape of hazardous liquids or gas from plant pipes or equipment while (and this is the tricky part) the plant remains on-line and operating. Nobody is perfect, and in 2003, Furmanite was sued along with the refinery by a former engineer with the plant who alleged continual exposure to toxic airborne chemicals between 1992 and 1999. Furmanite sought coverage, and Solvent Underwriters denied the claim, in part based on the conditions of the Buyback Endorsement.
Furmanite admitted that the alleged injury was not discovered within 7 days or reported within 14 days of discovery. The Endorsement should apply anyway, argued Furmanite, and the trial and the appellate courts agreed. On what basis, you ask.
Furmanite asserted that the conditions following "provided that" apply only to instances of property damage, not personal or bodily injury. The Endorsement uses the word "loss" only in reference to property, and, in general, "loss" is typically linked to property damage, not bodily injury. Although recognizing that "loss" is not always used exclusively to mean property damage, the Court held that the parties' intent as expressed in the language of the policy [Court's emphasis], was to limit the conditions only to property damage.
The Court attempted to explain why such a limitation would make sense by reasoning that damage to property is immediately apparent, and an insurer would need to quickly inspect the property. "Bodily injury, however, is frequently not as apparent as property damage, and . . . often manifests itself much later." Not. There are about as many latent property damage cases as bodily injury cases. Let's be honest. Solvent Underwriters did not intend to leave itself wide open for long-tail bodily injury risks. They just screwed up in drafting the Endorsement.
They as much as said so by arguing that the Court should read "loss" to mean"occurrence," which typically refers to both bodily injury and property damage in general liability polices. The obvious rejoinder to this is the old saw that insurance companies hate, "Well, if you meant to write 'occurrence' why didn't you do so?" There it is. Even though the exposure to the toxic stuff occurred a decade before the claim came to light, the Court held that the insurer had to prove that the delay in reporting the claim prejudiced the insurer's rights, which an insurer can almost never do early in the lawsuit. Case closed.
Words.
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