THE KANSAS CITY SOUTHERN RAILWAY COMPANY AND UNION PACIFIC RAILROAD COMPANY Plaintiff-Respondent
THE WOOD ENERGY GROUP, INC. AND CHARTIS SPECIALTY INSURANCE COMPANY Defendant-Applicant
Application for Writs from the Second Judicial District Court
for the Parish of Bienville, Louisiana Trial Court No. 44216,
Honorable Charles Glenn Fallin, Judge.
DURRETT LAW OFFICES, LLC By: John Andrew Durrett, Michael R.
Smith, Counsel for Appellant, AIG Specialty Insurance
Company, (formerly Known as Chartis Specialty Insurance
AKERMAN, LLP By: Brent Connley Wyatt Matthew Schroeder Elliot
Strader, Counsel for Appellant, AIG Specialty Insurance
Company, (formerly Known as Chartis Specialty Insurance
DUNBAR, LLC By: Patrick A. Talley, Jr. Jeremy Thomas Grabill,
Counsel for Appellee, The Kansas City Southern Railway
Company and Union Pacific Railroad Company.
& NEWELL By: Daniel W. Newell Counsel for Appellee, The
Kansas City Southern Railway Company and Union Pacific
MOORE, STEPHENS, and McCALLUM, JJ.
environmental contamination case, Chartis Specialty Insurance
Company, now known as AIG Specialty Insurance Company
("AIG"), and Kansas City Southern Railway Company
and Union Pacific Railroad Company (collectively "the
Railroads") have sought supervisory review with this
Court following the trial court's denial of AIG's
motion for summary judgment and the Railroads' motion for
partial summary judgment. At issue in these motions was
whether a primary insurance policy and an excess insurance
policy issued by AIG to the Wood Energy Group, Inc.
("Wood"), provided coverage for losses allegedly
exceeding $1 million that were incurred by the Railroads when
remediating a site where Wood had processed railroad
crossties under a contract with the Railroads.
that the subject policies did not provide coverage for the
Railroads' losses, we affirm the trial court's denial
of the Railroads' motion for partial summary judgment,
but reverse the denial of AIG's motion for summary
2009, Wood entered into an agreement with Union Pacific
Railroad Company ("Union Pacific") for the
recycling of creosote-treated wooden rail crossties. Kansas
City Southern Railway Company ("KCS") entered into
a similar agreement with Wood the following year. Wood agreed
to provide supervision, labor, equipment, materials,
transportation, and permits to remove and dispose of the
Railroads' used crossties. The resulting materials would
be processed as fuel. Wood's operations were to take
place on property ("site") owned by Louisiana &
North West Railroad Company ("LNW") in Gibsland,
Louisiana, that was leased by Wood.
the terms of the agreements with the Railroads, Wood agreed
to procure and maintain commercial general liability
insurance and pollution liability insurance during the life
of the agreement.
issued a primary policy with Wood as the named insured that
afforded commercial general liability and pollution legal
liability coverage. The policy period was from June 30, 2012,
to June 30, 2013. AIG also issued a commercial excess policy
with Wood as the named insured. The excess policy period was
the same as for the primary policy. Coverage under the excess
policy would be triggered by coverage under the underlying
policy, which was the primary policy.
February 6, 2012, the Environmental Protection Agency gave
notice to LNW of an administrative order for violation of the
Clean Water Act at the site. The alleged violations included
the failure to obtain the necessary permit, the failure to
install adequate storm water controls, and the discharge of a
pollutant into the waters of the United States.
10, 2012, the Louisiana Department of Environmental Quality
("LDEQ") gave Wood notice of a potential penalty
regarding violations at the site. Wood was accused of: (1)
processing regulated solid waste without a permit or
authorization; (2) transporting regulated solid waste to an
unauthorized, nonpermitted facility; (3) failing to obtain an
air permit; and (4) failing to obtain a permit for water
January of 2013, Wood filed for Chapter 11 bankruptcy. The
next month, Wood converted its bankruptcy to a Chapter 7
bankruptcy. Wood left a literal mess for others to rectify.
April 1, 2013, the LDEQ sent Wood a consolidated compliance
order and notice of potential penalty. The LDEQ asserted that
Wood had lacked a permit or other authority to dispose of
and/or process solid waste at the site. The LDEQ had
conducted a site inspection there on February 19, 2013, and
had found large volumes of accumulated creosote-treated
crossties, which were considered solid waste, as well as
several areas of stained soils and areas of pooled water with
an oily sheen. The LDEQ noted that processing of solid waste
at the site had stopped.
LDEQ stated in the April 1 order and notice that it had found
that Wood had violated regulations by depositing and
processing regulated solid waste at the site without permit
or authorization. Wood was ordered to remove all deposited
regulated solid waste to an authorized facility, excavate
areas of visibly contaminated soil, take any and all measures
necessary to meet and maintain compliance with the solid
waste regulations, and submit a written report detailing the
actions to be taken to comply with the order.
August 28, 2013, Commercial Insurance Associates wrote to AIG
that it had been instructed by Maggie Smith, the trustee of
Wood's bankruptcy estate, to forward notice of a claim to
AIG. The letter further stated that it had received a
"direct action" from LNW regarding pollution at the
site as well as notice from the LDEQ regarding Wood's
noncompliance with Louisiana's waste disposal
letter to AIG dated August 28, 2013, LNW gave notice of a
claim against Wood under the primary and excess policies. The
letter further stated that LNW was providing notice to AIG
for itself as an additional insured under the policies as
28, 2014, the LDEQ sent demand letters to KCS and Union
Pacific regarding site remediation. The LDEQ demanded the
removal and proper disposal of solid wastes at the site, the
design and implementation of a remedial site investigation,
and the design and implementation of any corrective actions
necessary to address potential contamination of soil and/or
groundwater at the facility. The letters informed the
Railroads that soil and groundwater samples collected and
tested by LNW revealed concentration of known hazardous
substances in several soil samples that exceeded the
LDEQ's standards for arsenic and various semivolatile
organic compounds including benzo(a)anthracene,
benzo(a)fluoranthene, and benzo(a)pyrene.
Railroads, along with LNW, cooperated with the LDEQ's
demands to clean up the site. On March 31, 2016, KCS, in its
capacity as an additional insured and/or insured under the
policies, made demand on AIG to defend and indemnify it in
connection with the site remediation. KCS also stated it was
making demand on AIG as Wood's insurer. KCS's letter
listed Wood as the insured, KCS as an additional insured, and
the LDEQ as a claimant.
December 29, 2016, the Railroads filed this lawsuit against
Wood and AIG. The Railroads alleged that Wood was liable to
them for the costs of remediating the site, and they were
entitled to recover from AIG for any liability of Wood. They
also alleged that Wood and AIG were required to defend and
indemnify them in connection with the LDEQ's demands
because the Railroads were insureds and/or additional
insureds under the primary and excess policies issued by AIG.
Finally, the Railroads alleged that AIG had acted in bad
faith by denying coverage.
Union Pacific prayed for a judgment: (i) finding Wood liable
for environmental cost recovery, tort indemnity/contribution,
and/or contractual liability/indemnity; (ii) finding AIG
liable for Wood's damages; (iii) declaring and finding
that KCS and Union Pacific are insureds and/or additional
insureds under the AIG policies; and (iv) awarding damages
for AIG's bad faith failure to fulfill its defense and
December of 2018, the LDEQ provided notice that it had
reviewed a site investigation report and determined that no
further action was necessary at the site.
March of 2019, the Railroads filed a motion for partial
summary judgment in which they argued they are entitled to
summary judgment on the issue of coverage under the AIG
policies for their losses in connection with responding to
the LDEQ's demands. AIG filed its own motion for summary
judgment asserting there was no coverage under its policies
for the Railroads' losses.
that genuine issues of material fact remained, the trial
court denied the motions for summary judgment and partial
summary judgment. AIG and the Railroads then applied for
writs with this Court seeking supervisory review of the
judgment. AIG and the Railroads agreed that there were no
material facts in dispute, with the only issue being how the
insurance policies applied to those undisputed facts. This
Court consolidated the writs and granted them to docket.
determining whether or not a policy affords coverage for an
incident, it is the burden of the insured to prove the
incident falls within the policy's terms. Doerr v.
Mobil Oil Corp., 00-0947 (La. 12/19/00), 774 So.2d 119.
The insurer bears the burden of proving the applicability of
an exclusionary clause within a policy. Id.
the interpretation of insurance contracts, the Louisiana
Supreme Court has stated:
An insurance policy is a contract between the parties and
should be construed employing the general rules of
interpretation of contracts set forth in the Louisiana Civil
Code. The parties' intent, as reflected by the words of
the policy, determine the extent of coverage. La.Civ.Code
art. 2045[.] Words and phrases used in a policy are to be
construed using their plain, ordinary and generally
prevailing meaning, unless the words have acquired a
technical meaning. La.Civ.Code art. 2047.2. An insurance
policy should not be interpreted in an unreasonable or a
strained manner so as to enlarge or to restrict its
provisions beyond what is reasonably contemplated by its
terms or so as to achieve an absurd conclusion. Where the
language in the policy is clear, unambiguous, and expressive
of the intent of the parties, the ...