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Pontchartrain Natural Gas System v. Texas Brine Company, LLC

Court of Appeals of Louisiana, First Circuit

October 11, 2018

PONTCHARTRAIN NATURAL GAS SYSTEM, K/D/S PROMIX, L.L.C., AND ACADIAN GAS PIPELINE SYSTEM
v.
TEXAS BRINE COMPANY, LLC

          On Appeal from the 23rd Judicial District Court In and for the Parish of Assumption State of Louisiana Trial Court No. 34, 265 Honorable Thomas J. Kliebert, Jr., Judge Presiding

          James C. Percy Kevin O. Ainsworth Baton Rouge, LA Brett S. Venn New Orleans, LA Attorneys for Plaintiffs/Appellees, Pontchartrain Natural Gas System, K/D/ S Promix, L.L.C., and Acadian Gas Pipeline System

          Glen E. Mercer Kourtney T. French New Orleans, LA Attorneys for Third -Party Defendants/ Appellees, Zurich American Ins. Co., Steadfast Ins. Co., and American Guarantee & Liability Ins. Co.

          James M. Garner Leopold Z. Sher Peter L. Hilbert, Jr. Martha Y. Curtis Jeffrey D. Kessler Amanda R. Schenck New Orleans, LA Theodore L. Jones Baton Rouge, LA Robert Ryland Percy, III Gonzales, LA Eric J. Mayer Houston, TX Travis J. Turner Gonzales, LA Attorneys for Defendant -Appellant, Texas Brine Company, LLC

          BEFORE: McCLENDON, HIGGINBOTHAM, AND HOLDRIDGE, JJ.

          HIGGINBOTHAM, J.

         This appeal involves one of the many disputes related to the Bayou Corne sinkhole that appeared in Assumption Parish in August 2012. The issues surrounding this particular appeal concern coverage provided by insurance policies that pre-date the occurrence of the sinkhole and whether the insurance companies involved have a duty to defend the main defendant, Texas Brine Company, LLC.

         BACKGROUND

         The plaintiffs in the underlying litigation, Pontchartrain Natural Gas System, K/D/S Promix, L.L.C., and Acadian Gas Pipeline (collectively referred to as "Pontchartrain"), are the owners and operators of natural gas pipelines and storage facilities in the vicinity of property where the Napoleonville Salt Dome is located. The defendant, Texas Brine Company, LLC ("Texas Brine"), operates brine production wells on the property above the salt dome. Pontchartrain filed suit against Texas Brine and its insurers, some of which are Zurich American Insurance Company, Steadfast Insurance Company, and American Guarantee and Liability Insurance Company (collectively referred to as "Zurich").

         By means of three supplemental and amending petitions, Pontchartrain alleged that on August 3, 2012, a sinkhole was caused by the failure of a salt cavern connected with Texas Brine's brine production well known as Oxy Geismer #3 Well ("OG3"), and that the sinkhole damaged Pontchartrain's pipelines and storage facilities. In each of the amended petitions, Pontchartrain asserted that Texas Brine's actions caused instability and subsidence underground that led to the sinkhole that caused physical damage to its pipelines and storage facilities. In response to Pontchartrain's lawsuit, Texas Brine filed third-party demands against many parties and other insurers not relevant to this appeal, and specifically sought defense and indemnity from Zurich pursuant to insurance policies issued to Texas Brine between March 2009 and March 2012, prior to the development of the sinkhole in August 2012. Zurich has provided a defense and indemnity to Texas Brine with respect to sinkhole claims under the policies that were in effect on the date of the sinkhole, and those policies are no longer at issue because they have been exhausted. This particular appeal concerns the "pre-2012" policies issued by Zurich to Texas Brine.[1]

         After much discovery, Zurich eventually filed motions for summary judgment against Pontchartrain and Texas Brine, claiming that Pontchartrain's claims for any potential pre-2012 damage and insurance coverage by Zurich should be dismissed with prejudice. Zurich maintained that Pontchartrain's claims for damages were connected only with the emergence of the sinkhole in August 2012, and that although Pontchartrain had attempted to make a "damage due to subsidence" argument, there simply was no proof, only speculation, concerning any pre-sinkhole damages. Zurich primarily relied on admissions made by Pontchartrain during the discovery process, that Pontchartrain had no evidence of pre-sinkhole damage, that Pontchartrain was unaware of any damage to its pipelines and storage facilities prior to the emergence of the sinkhole, and that Pontchartrain was not actually seeking any pre-sinkhole damages. Thus, Zurich argued that none of the pre-2012 policies were triggered since property damage did not occur during the effective dates of any of the pre-2012 policy periods and, therefore, they had no duty to indemnify or defend Texas Brine pursuant to the pre-2012 policies that had clearly expired five months before the sinkhole appeared.

         Texas Brine opposed Zurich's motions for summary judgment, arguing that the motions were premature as discovery was still ongoing and that there was no conclusive evidence that Pontchartrain's damages did not occur prior to the emergence of the sinkhole. Texas Brine relied on experts' affidavits based on an expert's report suggesting that there was soil movement in the sinkhole area prior to the emergence of the sinkhole, and that movement could have damaged Pontchartrain's pipelines, thereby triggering the pre-2012 Zurich policies. Texas Brine also contended that it had ongoing third-party claims against Zurich that remained.[2] Pontchartrain did not substantively oppose Zurich's motions for summary judgment.[3] Zurich objected to Texas Brine's reliance on expert testimony by filing motions to strike the expert report and the expert's affidavits. Further, Zurich argued that because Pontchartrain undisputedly disavowed seeking damages for property damage that occurred prior to the development of the sinkhole in August 2012, any expert testimony speculating as to hidden pre-sinkhole damage was irrelevant, inadmissible, and did not identify any genuine issue of material fact.

         On April 24, 2017, the district court heard Zurich's motions for summary judgment at the same hearing as many other motions and exceptions involving multiple parties and related district court numbers in this ongoing, complex litigation. Argument was heard regarding Zurich's pre-2012 insurance policies. Several other insurance companies of pipeline companies with claims against Texas Brine were arguing the same motions in different district court numbers at the same hearing. Zurich objected on the record as to the admissibility of Texas Brine's expert report and affidavits. The district court took the matter under advisement, and on May 23, 2017, the court issued reasons for judgment, finding that the pre-2012 policies only covered property damage that occurred during the policy periods, not afterwards, and that Pontchartrain had not alleged any pre-sinkhole damage to their pipelines or storage facilities nor was Pontchartrain seeking pre-sinkhole damages.

         A judgment was signed on September 13, 2017, reflecting the district court's findings, granting summary judgment in favor of Zurich as to Pontchartrain's claims only and dismissing Pontchartrain's direct action claims against Zurich with prejudice. Further, the district court specifically denied Zurich's motion for summary judgment against Texas Brine, finding that a genuine issue of material fact existed as to whether Zurich owed Texas Brine a duty to defend against the possible manifestation of pre-2012 damages on the remaining third-party demands. Texas Brine appealed the judgment insofar as it dismissed Pontchartrain's direct action claims against Zurich. Zurich filed a motion to dismiss and stay the appeal for lack of jurisdiction and, alternatively answered Texas Brine's appeal, seeking reversal of the part of the district court's ruling on Zurich's duty to defend Texas Brine since a judicial determination had been made that the pre-2012 policies did not provide any potential coverage for Pontchartrain's claims for indemnity under the policies.

         APPELLATE JURISDICTION

         The judgment at issue dismissed all of the direct action claims in Pontchartrain's principal demand against Zurich; however, it did not dismiss the third-party demands filed by Texas Brine against Zurich. Thus, Zurich moves this court to dismiss Texas Brine's appeal of what appears to be a partial final judgment that did not dispose of all claims against Zurich since Texas Brine's third-party demands against Zurich still remain. Since the judgment was not designated as final and appealable by the district court, Zurich argues there is no appealable judgment for this court to consider under its appellate jurisdiction.

         Texas Brine opposes the motion to dismiss, asserting that the judgment is appealable under La. Code Civ. P. art. 1915(A)(1), because it dismisses all of Pontchartrain's direct action claims against Zurich. Texas Brine further argues that the judgment is appealable under La. Code Civ. P. art. 1915(A)(3), because the final judgment between Pontchartrain and Zurich affects Texas Brine's third-party demands against Zurich. Thus, Texas Brine maintains that certification of the judgment as final and appealable was not necessary.

         After further review by this merits panel, we find that the judgment is final and appealable without the need for designation, pursuant to La. Code Civ. P. art. 1915(A)(3) and well-established jurisprudence. In Estate of Kirsh v. Blanchard, 2011-1835 (La.App. 1st Cir. 8/9/12), 2012 WL 3228973, *3 (unpublished opinion), writ denied, 2012-2502 (La. 1/18/13), 107 So.3d 632, this court discussed a similar judgment. In that case we noted that Article 1915(A)(3) provides that a final judgment may be rendered and signed by the district court when the court grants a motion for summary judgment as provided by Articles 966 through 969 of the Code of Civil Procedure, but not including a summary judgment granted pursuant to Article 966(E). Louisiana Code of Civil Procedure article 966(E) states in part that a "summary judgment may be rendered dispositive of a particular issue, theory of recovery, cause of action, or defense, in favor of one or more parties, even though the granting of the summary judgment does not dispose of the entire case." In this case, the summary judgment that was rendered does not qualify as an Article 966(E) judgment, because all of the principal demand claims of Pontchartrain against Zurich were dismissed with prejudice. Thus, we find that no Article 1915(B)(1) certification was required, and the summary judgment rendered in favor of Zurich is final and appealable under Article 1915(A)(3) and Article 1911(B), which provides that an appeal may be taken from a final judgment under Article 1915(A) without the judgment being so designated.

         Further, while generally an appeal may not be taken from the denial of a motion for summary judgment pursuant to La. Code Civ. P. art. 968, when there is an appeal from a final judgment, i.e., a district court's grant of summary judgment, an interlocutory ruling may also be reviewed by the appellate court. See Lambert Gravel Co., Inc. v. Parish of West Feliciana, 2015-1225 (La.App. 1st Cir. 9/20/16), 234 So.3d 889, 895-896. Therefore, we will consider whether the district court erroneously denied Zurich's motion for summary judgment on the duty to defend issue. Consequently, we deny ...


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