IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-20354

NOBLE ENERGY INC; ST PAUL SURPLUS LINES INSURANCE

COMPANY; ASSOCIATED ELECTRICAL & GAS INSURANCE SERVICES,

LTD

Plaintiffs-Appellants

BITUMINOUS CASUALTY COMPANY

Defendant-Appellee

Appeals from the United States District Court 

for the Southern District of Texas

Before KING, WIENER, and ELROD, Circuit Judges.

WIENER, Circuit Judge:

This insurance coverage dispute concerns whether, pursuant to a general

liability insurance policy issued by Defendant-Appellee Bituminous Casualty

Company (“Bituminous”) to T&L Lease Services, Inc. (“T&L Lease”) (the

“Bituminous policy”), Bituminous had a duty to defend and owes indemnity to

one ofthe Plaintiffs-Appellants, Noble Energy, Inc. (“Noble”), in connection with

the underlying lawsuit arising from an explosion at an oilfield recycling facility.

Noble and its insurers, Plaintiffs-Appellants St. Paul Surplus Lines Insurance

Company (“St. Paul”) and Associated Electrical & Gas Insurance Services

(“Aegis”), appeal the district court’s grant of summary judgment in favor of

Bituminous. Plaintiffs-Appellants urge that the court erred when it held that

United States Court of Appeals

Fifth Circuit

F I L E D

June 2, 2008

Charles R. Fulbruge III

Clerk
No. 07-20354

2

(1) Noble was not an “additional insured” under the Bituminous policy, and (2)

even if, arguendo, Noble was an additional insured, the policy’s pollution

exclusion negates coverage of Noble’s alleged liabilities. Convinced that the

district court properly held that the pollution exclusion applies to the claims

asserted against Noble in the underlying lawsuit, we affirm its ruling that

Bituminous does not have a duty to defend or indemnify Noble, making

resolution ofthe question whether Noble was an additional insured unnecessary.

I. FACTS AND PROCEEDINGS

Noble is engaged in the exploration for and production of petroleum. St.

Paul issued commercial general liability and automobile insurance policies to

Noble, and Aegis also issued liability insurance to Noble, covering the time when

the incident described below occurred.

In August 2000, Noble and T&L Lease entered into a Master Service

Agreement (the “Noble/T&L Agreement”), pursuant to which T&L Lease was

retained by Noble to collect and dispose of Basic Sediment and Water (“BS&W”)

from Noble’s storage tanks, which are located near two petroleum wells. The

Noble/T&L Agreement required T&L Lease to provide additional insurance

coverage to Noble under T&L Lease’s general liability and auto policies. Soon

after entering into the Noble/T&L Agreement, T&L Lease subcontracted its

obligations to an affiliated corporation, T&L Environmental Services, Inc. (“T&L

Environmental”). Together, T&L Lease and T&L Environmental purchased

from Bituminous a commercial general liability policy (the aforementioned

“Bituminous policy”), a commercial auto policy, and a commercial umbrella

policy. The term of each policy was from April 1, 2002 to April 1, 2003.

On January 13, 2003, T&L Environmental dispatched two trucks to pick

up BS&W from Noble’s storage tanks and haul the BS&W to a disposal facility

off premises. After collecting the BS&W from the tanks and loading it into the

two trucks, the T&L Environmental workers drove to a facility owned and
No. 07-20354

3

operated by BLSR Operating, Ltd. (“BLSR”) in Rosharon, Texas. When the T&L

Environmental drivers arrived at the BLSR facility, each backed his truck onto

a mud disposal and washout pad, then got out of the truck to complete

paperwork, leaving the diesel engine running. While the BLSR employees were

unloading the BS&W, the trucks’ engines began to race. One of the engines

exploded, causing a fire that engulfed both trucks. A T&L Environmental

employee and two BLSR employees were killed, and several other workers were

injured. It was later determined that combustible vapors from the BS&W, which

contained gas condensate, had caused the diesel engines to race, leading to the

explosion and fire.

Some surviving employees and the estates of the deceased employees (the

“Plaintiffs”) filed suits against T&L Environmental, T&L Lease, Noble, and

several other companies (the “underlying lawsuit”). Thereafter, Noble’s

insurance broker, Marsh USA Inc., sent a demand letter to Bituminous,

asserting that Bituminous was obligated to defend and indemnify Noble in the

underlying lawsuit because Noble was an additional insured under the

Bituminous policy. Bituminous rejected this demand.

In April 2004, Noble entered into a settlement agreement with the

Plaintiffs in the underlying lawsuit. Pursuant to the agreement, St. Paul and

Aegis paid approximately $14,400,000 to the Plaintiffs on Noble’s behalf. In a

separate transaction, Bituminous paid approximately $5,650,000 to settle the

claims asserted directly against its insureds, T&L Lease and T&L

Environmental.

In June 2005, Noble, St. Paul, Aegis, and Bituminous arbitrated the issue

whether Noble had released its contractual indemnity claim against Bituminous

when it settled with the Plaintiffs. The arbitrator concluded that Noble had

properly preserved that claim.
No. 07-20354

1 The district court also rejected the Appellants’ claim that Bituminous had a duty to

defend and indemnify Noble pursuant to the additional-insured clause in the Noble/T&L

Agreement. To the extent that the Appellants re-urge this contention on appeal, we adopt the

district court’s reasoning in rejecting it.

2 Adams v. Travelers Indem. Co., 465 F.3d 156, 163 (5th Cir. 2006).

4

Several months later, Noble, St. Paul, and Aegis (collectively, the

“Appellants”) filed this breach-of-contract and declaratory-judgment action

against Bituminous in Texas state court. After Bituminous removed the suit to

federal court, both sides filed summary judgment motions. The Appellants

insisted in their first motion that Bituminous had a duty to defend Noble in the

underlying lawsuit; in their second motion, they asserted that Bituminous has

a duty to indemnify them for monies paid to the Plaintiffs pursuant to Noble’s

settlement agreement, up to the Bituminous policy’s limit of one million dollars.

Bituminous filed a cross-motion for summary judgment, contending that it did

not have a duty to defend and does not owe indemnification to Noble.

The district court granted Bituminous’s motion for summary judgment,

holding that Bituminous did not have a duty to defend Noble because (1) Noble

was not an additional insured under the terms of the Bituminous policy, and (2)

even if Noble were an additional insured, that policy’s pollution exclusion would

bar coverage of the Plaintiffs’ claims.1 The court determined further that,

because Bituminous did not have a duty to defend Noble, the Appellants’

summary judgment motion for indemnity was moot. After the district court

denied the Appellants’ alternative motions for a new trial and to alter or amend

the judgment, the Appellants timely filed a notice of appeal.

II. ANALYSIS

A. Standard of Review

We review a district court’s grant of summary judgment de novo, applying

the same standards as the district court.2 Summary judgment “should be
No. 07-20354

3 Fed. R. Civ. P. 56(c).

4 United Nat’l Ins. Co. v. Hydro Tank, Inc., 497 F.3d 445, 448 (5th Cir. 2007), amended

on rehearing by No. 06-20335, 2008 WL 1799963 (5th Cir. Apr. 22, 2008) (internal quotation

marks and citations omitted).

5 Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995).

6

Id.

7

Id.

5

rendered ifthe pleadings,the discovery and disclosure materials on file, and any

affidavits show that there is no genuine issue as to any material fact and that

the movant is entitled to judgment as a matter of law.”3

B. Controlling Law

“Texas follows the ‘eight-corners’ rule of insurance contract interpretation.

The insurer’s duty to defend is determined by the underlying plaintiff’s

pleadings, considered in light of the policy provisions, without regard to the

truth or falsity of those allegations. If the pleadings allege facts stating a cause

of action potentially falling within the insurance policy’s scope of coverage, the

insurer has a duty to defend. Doubtful cases will be resolved in favor of the

insured. The insured party bears the initial burden of showing that there is

coverage, while the insurer bears the burden of showing that any exclusion in

the policy applies.”4

In Texas,“[i]nsurance policies are controlled by rules of interpretation and

construction which are applicable to contracts generally.”5 Policy language is not

ambiguous if it can be given a definite or certain legal meaning butis ambiguous

if it is subject to two or more reasonable interpretations.6“Whether a contract

is ambiguous is a question of law for the court to decide by looking at the

contract as a whole in light of the circumstances present when the contract was

entered.”7
No. 07-20354

8 Lincoln Gen. Ins. Co. v. Aisha’s Learning Ctr., 468 F.3d 857, 858 (5th Cir. 2006).

9 See, e.g., CBI Indus., 907 S.W.2d at 521 (holding that absolute pollution exclusion in

policy is neither patently nor latently ambiguous); Zaiontz v. Trinity Universal Ins. Co., 87

S.W.3d 565, 571 (Tex. App.–San Antonio 2002, pet. denied) (holding that absolute pollution

exclusion is not latently ambiguous).

6

C. Pollution Exclusion

The Appellants contend that the district court erred when it held that (1)

Noble was not an additional insured under the Bituminous policy, and (2) the

policy’s pollution exclusion negates coverage of the Plaintiffs’ claims against

Noble. An insurer’s duty to defend is separate from and broader than its duty

to indemnify.8 Convinced that the plain language of the exclusion clause

unambiguously excludes coverage of each the claims asserted by the Plaintiffs

against Noble in the underlying lawsuit even if Noble were held to be an

additional insured, we affirm the district court’s ruling that Bituminous was not

obligated either to defend or indemnify Noble. Accordingly, it is not necessary

for us to address whether Noble was an additional insured under the Bituminous

policy. 

The pollution exclusion clause in the policy states that the policy does not

cover liability for:

(1) Bodily injury or property damage arising out of the

actual, alleged or threatened discharge, dispersal, release or escape

of pollutants.

. . . . 

Pollutants means any solid, liquid, gaseous or thermal irritant

or contaminant, including smoke, vapor, soot, fumes, acids, alkalis,

chemicals and waste. Waste includes materials to be recycled,

reconditioned or reclaimed.

Texas courts have consistently held similar pollution exclusions to be

unambiguous.9 Like those courts, we hold the pollution exclusion here at issue
No. 07-20354

10 Specifically, the Plaintiffs alleged that “[t]he combustible vapors, and associated

liquid provided by ... Noble ... was a cause in fact of the subject explosion and fire.”

7

to be unambiguous. We turn, therefore, to consider whether the accident that

allegedly caused the Plaintiffs’ injuries arose out of a “discharge, dispersal,

release or escape of pollutants.”

The Plaintiffs alleged that the BS&W was the proximate cause of the

explosion and fire that had caused their deaths or injuries.10 According to their

petitions, “[d]uring the unloading process, hazardous, harmful substances were

released into the disposal facility,” which included “hazardous chemical,

hazardous wastes, hazardous chemicals [sic], and hazardous hydrocarbons.” The

Plaintiffs alleged further that “[w]hile the trucks were unloading, the diesel

engines began to ingest the combustible vapors in the fuel rich atmosphere,

which resulted in the speed of one or both of the engines to increase

uncontrollably,” ultimately causing the ensuing explosion and fire. The

Plaintiffs categorized the BS&W at issue as “unwanted waste material” and

“hazardous oilfield waste.” Additionally, the Plaintiffs alleged that “Noble knew

that the tank bottoms on the wells in question contained a mixture of highly

flammable gas condensate and presumably innocuous basic sediment and waste

such that the material[] was more akin to gasoline than salt water.” 

Based on these allegations and the Bituminous policy language, we hold

that the Plaintiffs’ claims, arising as they did out of the explosion and fire at the

BLSR facility, fall squarely within the policy’s pollution exclusion: Under the

Plaintiffs’ allegations, the BS&W and the combustible vapors that emanated

from it indisputably meet the policy’s definition of “pollutant”; and Noble’s

alleged liability for the workers’ deaths and bodily injuries indisputably arose

out of the discharge, dispersal, release, or escape of the BS&W and its vapors.

The Appellants’ contentions to the contrary are without merit.
No. 07-20354

11 112 F.3d 184 (5th Cir. 1997).

12 134 Cal. Rptr. 904 (Cal. Ct. App. 1977).

8

The Appellants first assert that the pollution exclusion does not apply

because the Plaintiffs’ injuries resulted from a fire caused by the combustible

vapors from the BS&W, acting not as a pollutant but as an accelerant. Thus, the

Appellants contend that the pollution exclusion is not implicated because the

Plaintiffs’ injuries resulted from a quality of the BS&W other than its quality as

a pollutant, viz., its quality as a flammable accelerant. The Appellants ignore,

though, that the combustible vapors from the gas condensate component of the

BS&W plainly meet the pollution exclusion’s unambiguous definition of

“pollutant.” For support of their “pollutant acting as a pollutant” argument, the

Appellants refer to Certain Underwriters at Lloyd’s London v. C.A. Turner

Construction Co.11 and Pepper Industries, Inc. v. Home Insurance Co.12 These

cases are inapplicable,though, because, among other things,the policies atissue

are distinguishable. The policy in Certain Underwriters did not define the term

“pollutant,” and the policy in Pepper offered a more limited exclusion, covering

only pollutants entering “into or upon land, the atmosphere or any watercourse

or body of water,” which language the court found to be ambiguous. In contrast

here, the Bituminous policy’s pollution exclusion precisely defines “pollutant”

and provides for broad exclusion of coverage, encompassing all bodily injury

“arising out of the actual, alleged or threatened discharge, dispersal, release or

escape of pollutants.” Moreover, the Appellants fail to recognize (or refuse to

acknowledge) that the hazardous quality of the vapors was the proximate cause

of the explosion that killed or injured the workers.

The Appellants nevertheless insistthatthe pollution exclusion should not

govern this case because its application here would ignore the “reasonable,

objective expectations of the insured.” As support for this argument, the
No. 07-20354

13 No. 3:05-CV-2068-L, 2006 WL 2848054, at *6 (N.D. Tex. Oct. 4, 2006) (mem. op.).

14 Id. at *7.

9

Appellants rely on a three-parttest crafted in Evanston Insurance Co. v. Adkins:

To determine whether the pollution exclusion applies, the court must ascertain

(1) “whether the substance at issue falls within the insurance policy’s literal

definition of pollutant”; (2) “whether it caused the damages in the underlying

insurance claim”; and (3) “whether common sense and the ‘reasonable, objective

expectations of the insured’ at the time of contracting make it reasonable to

trigger the pollutant exclusion.”13

We observe initially that, to our knowledge, the Adkins test has not been

expressly adopted by any other court. Furthermore, the rationale set forth in

Adkins is inapplicable to the instant circumstances. The Adkins court addressed

the question whether welding slag, which caused a fire, constituted a pollutant

under the pollution exclusion clause. The court ultimately determined that the

welding slag—molten metal particles from the welding—failed the third prong

of the test because “[i]t would defy common sense and all reasonable

expectations to interpret a welder's general liability insurance policy as negated

by its pollutant exclusion any time welding slag causes damage or injury.”14

Accordingly, the Adkins court declined to enforce the pollution exclusion after

determining that doing so would render the insurance contract nugatory. Unlike

the policy in Adkins, though, the Bituminous policy was not intended to insure

Noble from liability specifically and solely arising from the accumulation,

transportation, and disposal of BS&W, a minor, tertiary aspect of Noble’s

exploration and production endeavors. Therefore, even if the policy language at

issue were ambiguous and even if we were inclined to adopt the Adkins

three-part test, the Adkins rationale is inapposite. And, finally, under Texas
No. 07-20354

15 Constitution State Ins. Co. v. Iso-Tex Inc., 61 F.3d 405, 410 n.4 (5th Cir. 1995)

(citation omitted). 

16 See, e.g., Ind. Lumbermens Mut. Ins. Co. v. W. Oregon Wood Prods., Inc., 268 F.3d

639, 644-45 (9th Cir. 2001).

10

law, the reasonable expectations of the insured are not to be considered when

the policy language is unambiguous, as is the situation here.15

The Appellants next assert that the Plaintiffs’ allegations fall within the

scope of the policy’s hostile-fire exception to the pollution exclusion, which

exception states

[The pollution exclusion clause] does not apply to bodily injury or

property damage caused by heat, smoke or fumes from a hostile

fire. As used in this exclusion, a hostile fire means one which

becomes uncontrollable, or breaks out from where it was intended

to be.

Once again, the Appellants’ proposition misses the mark. The hostile-fire

exception applies only if a pre-existing fire causes the pollution.16 Here, the

reverse occurred: The pollutant itself directly caused the fire at the BLSR

facility, not vice versa, so the hostile-fire exception cannot apply.

Finally,the Appellants advance thatthe pollution exclusion does not apply

because (1) the combustible vapors from the gas condensate component of the

BS&W does not constitute a “pollutant” under the policy, and (2) even if it is a

pollutant, it was not “discharged, dispersed, or released” into the environment.

Both contentions are misguided. As previously noted, the Plaintiffs alleged in

their petitions that the BS&W (including its gas condensate component) is a

pollutant under the terms of the Bituminous policy and categorized the BS&W

as “unwanted waste material” and “hazardous oilfield waste.” In the policy’s

pollution exclusion, “waste” is plainly identified as constituting a pollutant.

Furthermore, we reject the Appellants’ argument that the BS&W was not

discharged, dispersed, or released into the environment simply because it was
No. 07-20354

17 See Certain Underwriters at Lloyd’s London v. C.A. Turner Constr. Co., 112 F.3d 184,

188 (5th Cir. 1997) (pollution exclusions are not limited “to only those discharges causing

environmental harm”); Hamm v. Allstate Ins. Co., 286 F. Supp. 2d 790, 794-95 & n.2 (N.D.

Tex. 2003) (pollution exclusion barred insurer’s duty to defend when injury resulted from

indoor accumulation oftoluene fumes during an office renovation); Zaiontz v. Trinity Univ. Ins.

Co., 87 S.W.3d 565, 571-72 (Tex. App.–San Antonio 2002, pet. denied) (injury caused by “odor

eliminator” chemical that was confined to its proper area of application triggered pollution

exclusion).

18 See, e.g., United Nat’l Ins. Co. v. Hydro Tank, Inc., 497 F.3d 445, 448 (5th Cir. 2007),

amended on rehearing by No. 06-20335, 2008 WL 1799963 (5th Cir. Apr. 22, 2008).

11

“confined within the area of its intended use.” The Appellants ignore entirely

the substantial body of case law holding that substances need not be released into

the surrounding environment to qualify as pollutants for purposes of a pollution

exclusion clause.17 Thus, a pollution exclusion clause applies whenever a

pollutant causes harm by a physical mechanism enumerated in the policy,

irrespective of where the injury took place or whether the pollutant was released

into the environment.

III. CONCLUSION

The Bituminous policy’s pollution exclusion eschews coverage of the

claims asserted against Noble in the underlying lawsuit. Accordingly,

Bituminous did not have a duty to defend Noble and does not owe Noble

indemnification. As noted above, the duty to indemnify under an insurance

policy is separate from and narrower than the duty to defend, and the court

may consider facts outside the pleadings to determine whether a duty to

indemnify exists under a policy.18 As the Bituminous policy does not cover

the underlying claims asserted against Noble, Bituminous had no duty to

defend Noble and has no duty to indemnify Noble under these circumstances. 

And, as the Bituminous policy’s pollution exclusion would eliminate coverage

of Noble’s alleged liabilities to the Plaintiffs, even if Noble were deemed to be

an additional insured, we need not and thus do not address the district court’s

holding that Noble was not an additional insured. 
No. 07-20354

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AFFIRMED.