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Apollo Energy, LLC v. Certain Underwriters at Lloyd's, London

United States District Court, M.D. Louisiana

July 26, 2018

APOLLO ENERGY, LLC
v.
CERTAIN UNDERWRITERS AT LLOYD'S, LONDON

          RULING AND ORDER

          JOHN W. deGRAVELLES, UNITED STATES DISTRICT JUDGE

         I. PLAINTIFF'S ALLEGATIONS AND THE MOTION TO DISMISS

         This case concerns the existence of insurance coverage for a June 1, 2016 oil spill in Iberville Parish “experienced” by Plaintiff Apollo Energy, LLC. (Doc. 1-2 at 1-2). At the time of the spill, Plaintiff held a commercial general liability insurance policy (the “Policy”) through Defendant “Certain Underwriters at Lloyd's, London.” (Id. at 1). According to the Petition for Declaration of Coverage, Bad Faith and Damages that initiated this suit (the “Petition”), the Policy contained a total pollution exclusion that was “modified and deemed inapplicable” if each of four “conditions” of a pollution buyback endorsement were met. (Id.). These “conditions” included that: (1) the pollution “occurrence” for which coverage was sought was accidental and not expected or intended by the insured; (2) the occurrence commenced “at a specific time and date” during the term of the Policy; (3) the occurrence became known to the insured within 30 days of its commencement and was reported to Defendant “within 90 days thereafter”; and (4) the occurrence did not result from the insured's intentional or willful violation of law. (Id. at 1-2).

         Plaintiff reported the oil spill to Defendant on November 1, 2016. (Id. at 2). In subsequent communications between Plaintiff and Defendant, Plaintiff “conceded it had not met the 90 day reporting period” but argued that Defendant had not been prejudiced by the delay. (Id. at 2-3). Defendant ultimately denied Plaintiff's claim concerning the spill based on Plaintiff's failure to timely report. (Id. at 3). In this suit, Plaintiff contends that coverage existed for the oil spill and that Defendant is liable for damages associated with its denial of the claim. (Id. at 3-4).

         Defendant now moves to dismiss this action under Federal Rule of Civil Procedure 12(b)(6), arguing that compliance with the requirements of a pollution buyback endorsement is a condition precedent to coverage and a showing of prejudice is not required. (“Motion, ” Doc. 7-1 at 6-8). Plaintiff opposes, arguing that a showing of prejudice is required, (Doc. 12 at 3), and that whether the total pollution exclusion applies at all turns on the answers to several question of fact, including whether Plaintiff is a “polluter, ” whether the injury-causing substance is a “pollutant, ” and whether there was a “discharge, dispersal, seepage, migration, release or escape” of a pollutant, (id. at 3-6). Plaintiff also argues that, at the very least, leave to amend should be granted. (Id. at 1, 3).

         In reply, Defendant argues that the interpretation and application of a pollution buyback endorsement is a “legal, not factual” issue, and that, under Fifth Circuit law, no showing of prejudice is required. (Doc. 15 at 1). Defendant also contends that leave to amend should be denied, as there is “nothing by amendment that could make Plaintiff's claim anything other than a pollution claim.” (Id. at 2). In a footnote, Defendant argues that the Petition specifically pleads that the buyback endorsement applies, which could only be true if “a pollution claim is at issue.” (Id. at 1 n.1).

         II. LEGAL STANDARDS

         a. Rule 12(b)(6)

         In Johnson v. City of Shelby, Miss., ___ U.S. ___, 135 S.Ct. 346 (2014), the Supreme Court explained that “[f]ederal pleading rules call for a ‘short and plain statement of the claim showing that the pleader is entitled to relief,' Fed.R.Civ.P. 8(a)(2); they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.” 135 S.Ct. at 346-47 (citation omitted).

         Interpreting Rule 8(a), the Fifth Circuit has explained:

The complaint (1) on its face (2) must contain enough factual matter (taken as true) (3) to raise a reasonable hope or expectation (4) that discovery will reveal relevant evidence of each element of a claim. “Asking for [such] plausible grounds to infer [the element of a claim] does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal [that the elements of the claim existed].”

Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007) (emphasis in Lormand)).

         Applying the above case law, the Western District of Louisiana has stated:

Therefore, while the court is not to give the “assumption of truth” to conclusions, factual allegations remain so entitled. Once those factual allegations are identified, drawing on the court's judicial experience and common sense, the analysis is whether those facts, which need not be detailed or specific, allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” [Ashcroft v. Iqbal,556 U.S. 662, 678 (2009)]; Twombly, [550] U.S. at 556, 127 S.Ct. at 1965. This analysis is not substantively different from that set forth in Lormand, supra, nor does this jurisprudence foreclose the option that discovery must be undertaken in order to raise relevant information to support an element of the claim. The standard, under the specific language of Fed.R.Civ.P. 8(a)(2), remains that the defendant be given adequate notice of the claim and the grounds upon which it is based. The standard is met by the “reasonable inference” the court must make that, with or without discovery, the facts set forth a plausible ...

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