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StarNet Insurance Co. v. RiceTec, Inc.

Court of Appeals of Texas, First District

August 27, 2019

STARNET INSURANCE COMPANY, Appellant
v.
RICETEC, INC., Appellee

          On Appeal from the 239th District Court Brazoria County, Texas Trial Court Case No. 94416-CV

          Panel consists of Justices Keyes, Higley, and Landau.

          OPINION

          Evelyn V. Keyes Justice

         In this permissive interlocutory appeal, appellee, RiceTec, Inc., brought claims for breach of contract and breach of the Prompt Payment Act against appellant, StarNet Insurance Company, arising out of StarNet's failure to provide RiceTec a defense in a property damage lawsuit filed against RiceTec. The parties filed cross motions for summary judgment on the question of whether the insurance policy StarNet issued to RiceTec covered the lawsuit filed against RiceTec, such that StarNet owed RiceTec a duty to defend. The trial court rendered an interlocutory summary judgment order ruling that StarNet owed RiceTec a duty to defend. The trial court granted permission for StarNet to file a petition for permissive interlocutory appeal of the ruling, and this Court granted the petition for permissive appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(d); Tex.R.App.P. 28.3.

         On appeal, StarNet argues that the trial court erred in granting RiceTec's motion for summary judgment and in denying its own motion for summary judgment on the issue of whether it owed RiceTec a duty to defend. StarNet argues that the plain language of an endorsement to the policy excludes coverage for the claims at issue in the property damage lawsuit against RiceTec and therefore StarNet does not owe a duty to defend RiceTec in that lawsuit.

         We reverse and remand.

         Background

         A. The Insurance Policy

         RiceTec is a company that produces and sells rice seeds. StarNet issued a commercial general liability insurance policy (the Policy) to RiceTec that covered a period from February 15, 2015, through February 15, 2016. The Policy had a limit of $1, 000, 000 per occurrence and a general aggregate limit of $2, 000, 000. The Policy provided:

         1. Insuring Agreement

a. We [StarNet] will pay those sums that the insured [RiceTec] becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.
b. This insurance applies to "bodily injury" and "property damage" only if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";
(2) The "bodily injury" or "property damage" occurs during the policy period; and
(3) Prior to the policy period, no insured listed under Paragraph 1. of Section II - Who Is An Insured and no "employee" authorized by you to give or receive notice of an "occurrence" or claim, knew that the "bodily injury" or "property damage" had occurred in whole or in part. . . .

         The Policy defined "bodily injury" as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time"; "coverage territory" as including "the United States of America"; "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions"; and "suit" as "a civil proceeding in which damages because of 'bodily injury,' 'property damage' or 'personal and advertising injury' to which this insurance applies are alleged." The Policy defined "property damage" as "[p]hysical injury to tangible property, including all resulting loss of use of that property" or "[l]oss of use of tangible property that is not physically injured."

         The Policy included multiple exclusions which set out situations in which the insurance coverage provided by StarNet to RiceTec did not apply. The Policy stated, in relevant part:

         2. Exclusions

This insurance does not apply to: . . . .
f. Pollution
(1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants":
(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured.
(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations if the "pollutants" are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor.
j. Damage to Property
"Property damage" to:
(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage" arises out of those operations;

         The Policy defined "pollutants" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste."

         The Policy also included numerous endorsements. At issue in this case is the Agricultural Chemicals Applicator Coverage endorsement (the Endorsement). Under the Endorsement, the "per occurrence limit" was $25, 000, the "annual aggregate" was $50, 000, and the per-occurrence deductible for property damage was $5, 000. The Endorsement then provided:

With respect to the "bodily injury" or "property damage" arising out of the application of herbicides, pesticides, fertilizers or similar agricultural chemicals, (1)(d) of Exclusion f. Pollution under Section I - Coverage A - Bodily Injury and Property Damage Liability and (5) of Exclusion j. Damage to Property of SECTION I - COVERAGES, COVERAGE A - BODILY INJURY AND PROPERTY DAMAGE LIABILITY do not apply.
However, coverage provided by this endorsement is excluded for any "bodily injury" or "property damage" resulting from:
5. The application of herbicides, pesticides, fertilizers or similar agricultural chemicals by aircraft owned, operated by, rented or loaned to you or by any non-owned aircraft.

         B.The Dishman ...


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