Memorandum Opinion and Order – Page 1

IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

EVANSTON INSURANCE COMPANY, §

§

Plaintiffs, §

§

v. § Civil Action No. 3:05-CV-2068-L

§

MATT ADKINS, INDIVIDUALLY AND §

D/B/A CIRCLE 4M WELDING AND §

FABRICATION, and TEXAS §

INDUSTRIES, INC., and §

TXI OPERATIONS, L.P., §

§

Defendants. §

MEMORANDUM OPINION AND ORDER

Before the court are two motions for summary judgement: Plaintiff’s Motion for Summary

Judgment, filed by Evanston Insurance Company (“Evanston”) on December 13, 2005; and

Defendants/Counter-Plaintiffs Texas Industries, Inc. and TXI Operations, L.P.’s Motion for

Summary Judgment, filed by the named Defendants (collectively, “TXI”) on March 30, 2006. After

careful consideration of the motions, briefs in support, responses, replies, summary judgment

evidence, record and applicable law, the court denies Plaintiff’s Motion for Summary Judgment.

The court also denies in part and grants in part Defendants/Counter-Plaintiffs Texas Industries,

Inc. and TXI Operations, L.P.’s Motion for Summary Judgment.

I. BACKGROUND

This is an insurance coverage dispute. Plaintiff Evanston issued a commercial general

liability policy (number CL 421100513) to Defendant Matt Adkins, doing business as Circle 4M

Welding and Fabrication (“Adkins”). Defendants TXI own and operate The Midlothian Cement

 

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TXI filed suit against Adkins on June 17, 2005, in the 40th Judicial District Court of Texas in Ellis

County, cause number 69077. Separately, TXI’s insurance company, Factory Mutual Insurance Company,

also filed suit against Adkins in the 40th Judicial District Court of Texas, cause number 69210. The two suits

were consolidated; thus, this court will refer to the state court claims as one lawsuit.

2

TXI objects to Evanston’s failure to join TXI’s insurance company, Factory Mutual, as a “necessary

party” to this action, because Factory Mutual’s separate state lawsuit against Adkins over the same fire was

consolidated with TXI’s action. Factory Mutual may have the same interest as TXI in declaring Evanston

obligated to defend Adkins; however, Factory does not qualify as a “necessary party since complete relief

without any inconsistencies may be granted in this case without its presence. See Fed. R. Civ. P. 19(a). 

Further, if Factory believes that it should protect its interests in this case, it may seek intervention pursuant

to Federal Rules of Civil Procedure 24.

Memorandum Opinion and Order – Page 2

Plant in Midlothian, Texas. TXI hired Adkins as an independent contractor for welding services at

the cement plant. TXI has sued Adkins in state district court for allegedly causing a fire at the

cement plant on January 7, 2003.1 Adkins subsequently filed for bankruptcy protection. The

bankruptcy court lifted the automatic stay protections so that TXI may attempt to recover for its state

court claims from Adkins’s insurance company, Evanston. Evanston then filed this action seeking

a declaratory judgment that its policy does not cover Adkins’s liabilities for the fire, and, therefore,

it has no duty to defend or to indemnify Adkins in any judgment that may issue from the state

claims. TXI filed a counter-claim in this court seeking a declaratory judgment that would obligate

Evanston to defend Adkins in the state lawsuit.2

 Both parties then filed motions for summary

judgment.

II. MOTIONS FOR SUMMARY JUDGMENT

A. Legal Standard

1. Summary Judgment

Summary judgment shall be rendered when the pleadings, depositions, answers to

interrogatories and admissions on file, together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party is entitled to judgment as a matter

 

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of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Ragas v.

Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). A dispute regarding a material fact

is “genuine” if the evidence is such that a reasonable jury could return a verdict in favor of the

nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a

motion for summary judgment, the court is required to view all inferences drawn from the factual

record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v.

Zenith Radio Corp., 475 U.S. 574, 587 (1986); Ragas, 136 F.3d at 458. Further, a court “may not

make credibility determinations or weigh the evidence” in ruling on a motion for summary

judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477

U.S. at 254-55.

Once the moving party has made an initial showing that there is no evidence to support the

nonmoving party’s case, the party opposing the motion must come forth with competent summary

judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere

conclusory allegations are not competent summary judgment evidence, and thus are insufficient to

defeat a motion for summary judgment. Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996).

Unsubstantiated assertions, improbable inferences and unsupported speculation are not competent

summary judgment evidence. See Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, 513

U.S. 871 (1994). The party opposing summary judgment is required to identify specific evidence

in the record and to articulate to the precise manner in which that evidence supports his claim.

Ragas, 136 F.3d at 458. Rule 56 does not impose a duty on the court to “sift through the record in

search of evidence” to support the nomovant’s opposition to the motion for summary judgment. Id.;

see also Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 & n.7 (5th Cir.), cert. denied, 506 U.S.

 

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832 (1992). “Only disputes over facts that might affect the outcome of the suit under the governing

laws will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248. Disputed

issues which are “irrelevant and unnecessary” will not be considered by a court in ruling on a

summary judgment motion. Id. If the nonmoving party fails to make a showing sufficient to

establish the existence of an element essential to its case and on which it will bear the burden of

proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.

2. Duty to Defend

TXI seeks a declaration of coverage for the underlying state court claims. Evanston asserts

that TXI’s underlying lawsuit only alleges economic damages not covered by the policy or,

alternatively, that four exclusions in the policy apply to exclude coverage. In determining whether

an insurer has a duty to defend, the court must examine the pleading upon which the insurer based

its refusal to defend the action. See Canutillo Indep. Sch. Dist. v. Nat’l Union Fire Ins. Co., 99 F.3d

695, 701 (5th Cir. 1996). Texas courts follow the “eight corners” rule, which requires the trier of fact

to examine only the allegations in the underlying complaint and the insurance policy, see id.; see

also Gulf Chem. & Metallurgical Corp. v. Associated Metals & Minerals Corp., 1 F.3d 365, 369 (5th

Cir. 1993), without reference to their veracity. See Argonaut Southwest Ins. Co. v. Maupin, 500

S.W.2d 633, 635 (Tex. 1973). 

In reviewing the underlying pleadings, the court must focus on the factual allegations that

show the origin of the damages rather than on the legal theories alleged. Am. States Ins. Co. v.

Bailey, 133 F.3d 363, 369 (5th Cir. 1998); Nat’l Union Fire Ins. Co. v. Merchants Fast Motor Lines,

Inc., 939 S.W.2d 139, 141 (Tex. 1997) (citing Adamo v. State Farm Lloyds Co., 853 S.W.2d 673,

676 (Tex. App.–Houston [14th Dist.] 1993, writ denied) (“It is not the cause of action alleged which

 

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Adkins has filed only one document in this action, a three-sentence answer that may be characterized

as a general denial of liability, citing to his bankruptcy petition. TXI, as a named defendant in this litigation,

and as a counter-claimant, bears the same burden that Adkins has to show that its state claims fall within the

policy’s coverage. See, e.g., Bituminous Cas. Corp. v. Garcia, 223 F.R.D. 308, 311 (N.D. Tex. 2004); Nat’l

Am. Ins. Co. v. Breaux, 368 F.Supp.2d 604, 620-21 (E.D. Tex. 2005). 

Memorandum Opinion and Order – Page 5

determines the coverage but the facts giving rise to the alleged actionable conduct.”)). The

allegations in the underlying petition are to be interpreted liberally, resolving any doubt in favor of

the insured. National Union, 939 S.W.2d at 141. The duty to defend arises when the facts alleged

in the petition, if taken as true, potentially state a cause of action within the terms of the policy.

Canutillo, 99 F.3d at 701. Thus, it is the insured’s burden to show that the claim against it is

potentially within the policy’s coverage.3 Id. An insurer has an obligation to defend an insured if

the petition alleges at least one cause of action within the policy’s coverage. Id. If, however, under

the facts alleged, there is a prima facie showing that the claim is not covered under the policy, the

insurer has no duty to defend. See National Union, 939 S.W.2d at 141.

The interpretation of an insurance policy is a question of law. New York Life Ins. Co. v.

Travelers Ins. Co., 92 F.3d 336, 338 (5th Cir. 1996). Insurance policies are contracts and are

governed by the principles of interpretation applicable to contracts. Amica Mut. Ins. Co. v. Moak,

55 F.3d 1093, 1095 (5th Cir. 1995) (citing Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 665 (Tex.

1987)). As this is a diversity case, Texas rules of contract interpretation control. See id.; see also

Potomac Ins. Co. v. Jayhawk Medical Acceptance Corp., 198 F.3d 548, 550 (5th Cir. 2000).

Unlike the duty to defend, which is based on the allegations in the petition, the duty to

indemnify is triggered by the actual facts establishing liability in the underlying suit. See Trinity

Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 823 (Tex. 1997). If there is no duty to defend, there

is no duty to indemnify. See Bailey, 133 F.3d at 368. Thus, the court must first determine whether

 

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TXI’s pleadings in the underlying lawsuit potentially state claims covered by the Adkins policy and,

if so, whether any of the four provisions raised by Evanston exclude coverage. 

B. Analysis

Under the “eight corners” rule, this court must use specific language from the underlying

lawsuit and the insurance policy to evaluate Evanston’s duty to defend Adkins. Before the court

analyzes the specific language, however, it will first paraphrase and summarize the relevant facts

and contentions. TXI hired Adkins to do welding work on a “scrubber tank,” a ninety-foot high

structure, forty feet across in diameter. The scrubber “filtered exhaust gases from the pre-heater dust

collectors” at Kiln No. 5 at the cement plant. Adkins was to replace an expansion joint at the

scrubber’s outlet and exhaust air duct. This required Adkins and his four-man crew to first remove

flanges around the joint by welding. Inside the scrubber tank, about two feet below the outlet duct

that required welding, sat two levels of “polypropylene mist eliminators” (also referred to as

“demisters”). Around 10:30 p.m. on January 7, 2003, molten metal particles from the welding came

into contact with the polypropylene demisters and caused a fire inside the scrubber. Adkins

extinguished this fire and had his crew return to work without notifying TXI. Moments later,

Adkins’s crew noticed black smoke from inside the scrubber. A second fire then erupted and

ultimately damaged Kiln No. 5. TXI’s investigation showed that, most likely, the first fire caused

by the welding sparks hitting the demisters led the demisters to emit gases that ultimately erupted

into the second fire.

Evanston asserts it has no duty to defend Adkins in this matter on four grounds. First,

Evanston asserts that TXI’s underlying lawsuit does not state a claim covered by the terms of

Adkins’s insurance policy because it seeks economic damages, not property damages. If TXI has

 

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Since both parties have filed motions for summary judgment, supporting briefs, appendices,

responses and replies, the court will cite to each filing as follows: (1) Brief in Support of Plaintiff’s Motion

for Summary Judgment (“Evanston’s Motion”); (2) Brief in Support of Defendants Texas Industries, Inc. and

TXI Operations, L.P.’s Response to Plaintiff’s Motion for Summary Judgment (“TXI’s Response”); (3)

Plaintiff’s Reply to the Response of Defendants Texas Industries, Inc. and TXI Operations, L.P. to Plaintiff’s

Motion for Summary Judgment (“Evanston’s Reply”); (4) Brief in Support of Defendants/Counter-Plaintiffs

Texas Industries, Inc. and TXI Operations, L.P.’s Motion for Summary Judgment (“TXI’s Motion”); (5)

Brief in Support of Evanston Insurance Company’s Opposition to Defendant’s Motion for Summary

Judgment” (“Evanston’s Response”); (6) Defendants/Counter-Plaintiffs Texas Industries, Inc. and TXI

Operations, L.P.’s Reply Brief in Support of Their Motion for Summary Judgment (“TXI’s Reply”); (7)

TXI’s Second Amended Original Petition filed in State District Court (“TXI’s State Petition”); (8) Evanston

Insurance Company Policy No. CL 421100513 (“Evanston Policy”).

Memorandum Opinion and Order – Page 7

suffered “property damage” that would be covered by the policy, Evanston argues in the alternative

that three exclusions apply to defeat coverage. The absolute pollutant exclusion bars coverage for

damages stemming from a release of “pollutants.” In this case, Evanston contends that the molten

metal particles from the welding and the gases emitted from the polypropylene demisters are

pollutants. Evanston asserts that the welder’s endorsement also applies the policy’s definition of

“pollutant” to bar coverage for liabilities arising out of welding in or around areas containing

pollutants. Finally, Evanston argues that exclusions j(5) and (6) preclude coverage for real property

damage where Adkins was working or any property damage caused by his incorrectly performed

work. TXI argues that each of these grounds fails, and thus it is entitled to a declaration that

Evanston has a duty to defend Adkins.

1. Covered Claims

Evanston’s first theory for denying its duty to defend is based on the lack of “property

damage” in TXI’s underlying claims.4 Evanston’s Motion at 11; Evanston’s Response at 5. As

Evanston points out, TXI’s underlying lawsuit states: “TXI has suffered economic damages in the

form of a gross business interruption loss of $3,916,905.00, for which TXI is now suing.” TXI’s

State Petition” at 9 (emphasis added). Evanston asserts that “business interruption” losses are not

 

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property damages, but rather economic losses not covered by Adkins’s general liability policy. Id.

Evanston’s policy defines “property damage” as 

(a) Physical injury to tangible property, including all resulting loss of use of that

property. All such loss of use shall be deemed to occur at the time of the physical

injury that caused it; or (b) Loss of use of tangible property that is not physically

injured. All such loss of use shall be deemed to occur at the time of the “occurrence”

that caused it. 

Evanston Policy at 13. While TXI did use the term “economic damages,” in reviewing the

underlying pleadings, this court must focus on the factual allegations that show the origin of the

damages, rather than on the legal theories alleged. See Bailey, 133 F.3d at 369. TXI’s State Petition

accuses Adkins of negligently causing a fire that “resulted in physical damage to Kiln No. 5 at the

Plant,” where “production of clinker (necessary to manufacture cement) was lost” for twenty-seven

days. TXI’s State Petition at 5. On its face, the petition alleges physical damage to TXI property

and a loss of use of that property for twenty-seven days. TXI may, indeed, have included

unrecoverable “economic” losses in its calculation of damages totaling $3,916,905. This court,

however, must apply the “eight corners” rule liberally in favor of the insured and resolve any doubt

in favor of the insured. See Primrose Operating Co. v. Nat’l Am. Ins. Co., 382 F.3d 546, 552 (5th

Cir. 2004). “If any allegation in the complaint is even potentially covered by the policy then the

insurer has a duty to defend its insured.” Id. (citing Enserch Corp. v. Shand Morahan & Co., Inc.,

952 F.2d 1485, 1492 (5th Cir. 1992)) (emphasis added by Primrose court). Therefore, Evanston’s

summary judgment motion on the ground that TXI failed to state a covered claim is denied, to the

extent that any portion of TXI’s total claim for damages includes physical damage to property

covered by the Evanston Policy.

 

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The court quotes from Evanston’s Motion, but disagrees with its contention that welding slag falls

within the policy’s definition of a pollutant merely because “it is a solid irritant, contaminant or waste.” The

policy defines pollutants as any “solid . . . irritant or contaminant, including but not limited to . . . waste.”

The adjective “solid” modifies the nouns “irritant or contaminant,” but not the noun “waste.” The court

points out that, by Evanston’s own definition, “waste” is merely an example of a possible “irritant or

contaminant.” 

Memorandum Opinion and Order – Page 9

2. Absolute Pollutant Exclusion

Evanston argues in the alternative that, even if TXI’s claim includes property damage, the

policy’s absolute pollutant exclusion bars coverage in this case. Evanston’s Response at 6.

Specifically, the absolute pollution exclusion bars coverage for:

[a]ny loss, cost, expense . . . arising out of . . . (2) any litigation or administrative

procedure in which any insured or others may be involved as a party as a result of

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

or placement of pollutants, environmental impairments, contaminants into or upon

land, premises, buildings, the atmosphere, any water course, body of water, aquifer

or ground water, whether sudden, accidental or gradual in nature or not, and

regardless of when.

Evanston Policy at “Combination General Endorsement” 4(B). The policy defines pollutants as

“any solid, liquid, gaseous, fuel, lubricant, thermal, acoustic, electrical, or magnetic irritant or

contaminant, including but not limited to smoke, vapor, soot, fumes, fibers, radiation, acid, alkalis,

petroleums, chemicals or waste. Waste includes medical waste and all other materials to be disposed

of, recycled, stored, reconditioned or reclaimed.” Id. Evanston contends that the molten metal

particles produced during Adkins’s work, called “welding slag,” fall within the definition of a

pollutant, since “it is a solid irritant, contaminant or waste.”5 Evanston’s Motion at 9. Additionally,

Evanston contends the gases emitted from the demisters as a result of contact with the welding slag

are pollutants under the policy. Id. Accordingly, the court must first determine whether either

substance falls within the policy’s definition of “pollutant” before it can determine whether the

absolute pollutant exclusion applies.

 

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6

 Western Alliance Ins. Co. v. Gill, 686 N.E.2d. 997 (Mass. 1997).

7 Freidline v. Shelby Ins. Co., 774 N.E.2d 37 (Ind. 2002).

Memorandum Opinion and Order – Page 10

Evanston’s broad definition for pollutant is similar to those found in other pollution

exclusion clauses that have posed problems for other courts determining the scope of these

exclusions. See, e.g., Certain Underwriters at Lloyd’s London v. C.A. Turner Construction Co., 112

F.3d 184 (5th Cir. 1997); Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037

(7th Cir. 1992); Richardson v. Nationwide Mutual Ins. Co., 826 A.2d 310 (D.C. App. 2003) (vacated

pursuant to settlement); Meridian Mutual Ins. Co. v. Kellman, 197 F.3d 1178 (6th cir. 1999); Nautilus

Ins. Co. v. Jabar, 188 F.3d 27 (1st Cir. 1999). As some of these courts have pointed out: 

The terms “irritant” and “contaminant,” when viewed in isolation, are virtually

boundless, for there is virtually no substance or chemical in existence that would not

irritate or damage some person or property. Without some limiting principle, the

pollution exclusion clause would extend far beyond its intended scope, and lead to

some absurd results. 

Certain, 112 F.3d at 188 (quoting, in part, Pipefitters, 976 F.2d at 1043). For example, the Seventh

Circuit in Pipefitters suggested it would be absurd to apply the pollution exclusion in common

accidents, such as a slip-and-fall caused by a spilled bottle of Drano, or an allergic reaction to

chlorine in a swimming pool, merely because both Drano and chlorine are chemicals that may

irritate or contaminate. Pipefitters, 976 F.2d at 1043.

Indeed, many courts have applied the “common-sense approach” advocated by the Seventh

Circuit in Pipefitters and the Fifth Circuit in Certain when interpreting the scope of pollutant

exclusions. Courts have refused to apply the exclusion for liabilities arising from such accidents as

carbon monoxide poisoning at an Indian restaurant caused by a lack of air going to the chickenroasting clay oven;6

 toxic fumes from carpet glue that caused building occupants to become sick;7

 

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8

A-1 Sandblasting & Steamcleaning Co., Inc. v. Baiden, 643 P.2d 1260 (Ore. 1982).

9

Donaldson v. Urban Land Interests, Inc., 564 N.W.2d 728 (Wis. 1997).

Memorandum Opinion and Order – Page 11

paint damage to vehicles during spray painting of a bridge;8 illness from poor ventilation and high

levels of exhaled carbon dioxide at an office building.9

 In contrast, the Seventh Circuit ultimately

applied the pollution exclusion in Pipefitters for damages arising from the discharge of

polychlorinated biphenyls (PCBs) from an electrical transformer that the underlying defendant sold

to the underlying plaintiff scrap metal dealer. Pipefitters, 976 F.2d at 1044. The court held that no

matter how far the limiting principle extends, common sense would characterize the discharge of

eighty gallons of PCB-laden oil as pollution that would not typically ensue from the process of scrap

metal. Id. The Fifth Fircuit, which agreed with the Seventh Circuit’s common-sense approach, also

applied the pollution exclusion in its case. Certain, 112 F.3d at 188-89. In Certain, a welder

working at a chemical plant in Texas suffered injuries when heat from the hot pipe he had just

welded came into contact with the chemical stored inside the pipe to form a cloud of harmful phenol

gas. Id. at 185. The Fifth circuit held that the “substantial nature” of the discharge distinguished

the phenol gas cloud from the Seventh Circuit’s spilled Drano example. Id.

While none but the Certain decision from the above cases binds this court, a survey of these

decisions reveals some similarities in rationale this court finds persuasive. These cases also provide

the basis for a three-step approach to analyzing pollutant claims. First, the court should determine

whether the substance at issue falls within the insurance policy’s literal definition of pollutant. If

it does not, then no pollutant exclusion would apply, and no analysis is necessary. If, however, the

substance falls within the policy’s literal definition of pollutant, then the court must next determine

whether it caused the damages in the underlying insurance claim. See Certain 112 F.3d at 188;

Pipefitters, 976 F.2d at 1044. In Certain, the chemical stored inside the pipe where the welder

 

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worked was not the “pollutant” that caused the injuries; rather, it was the cloud of phenol fumes that

formed when the hot, newly welded pipe came into contact with the chemical that qualified as the

“pollutant” triggering the exclusion. Certain 112 F.3d at 188. Likewise, in Pipefitters, the scrap

metal salvaged by the underlying plaintiff would have fit the literal definition of a waste pollutant,

but it was the seepage of PBCs from inside the scrap transformer that caused the plaintiff’s damages

and triggered the pollutant exclusion. In this case, language from Evanston’s policy itself makes

causation a necessary element for triggering the pollutant exclusion. The clause excludes coverage

for expenses “arising out of” or “as a result of” the “discharge, dispersal, seepage, migration,

release, escape or placement of pollutants.” Evanston Policy at “Combination General

Endorsement” 4(B). If the substance did not cause the damages in the underlying claim, then no

pollutant exclusion applies, despite the substance meeting the literal definition of pollutant. 

If the substance at issue falls within the literal definition of pollutant, and it caused the

damages in the underlying claim, the court should make a third inquiry: whether common sense and

the “reasonable, objective expectations of the insured” at the time of contracting make it reasonable

to trigger the pollutant exclusion. See, e.g., Western Alliance, 686 N.E.2d at 1000 (unreasonable to

hold that carbon monoxide, which is naturally produced during cooking in an Indian Tandoori clay

oven, triggered pollutant exclusion for insured Indian restaurant); Donaldson, 564 N.W.2d at 732

(unreasonable to hold that carbon dioxide build-up caused by “an activity as fundamental as human

respiration” and poor ventilation triggered pollutant exclusion). As the court in Donaldson noted,

“[t]he reach of the pollution exclusion clause must be circumscribed by reasonableness, lest the

contractual promise of coverage be reduced to a dead letter.” Donaldson, 564 N.W.2d at 732. If,

as in Western Alliance and Donaldson, the court finds it unreasonable to apply the pollutant

 

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exclusion, then no exclusion is triggered, despite the substance meeting the policy’s literal definition

of pollutant and causing the damages in the underlying complaint. Having laid out this three-step

approach for analysis, this court will apply the approach to both the welding slag and the demister

gases to determine if either triggers the pollutant exclusion in Evanston’s policy.

a. Welding slag

Evanston asserts that welding slag, the molten metal particles ejected in the process of

welding, is a pollutant because it is a “solid or thermal irritant or contaminant.” Taken literally,

welding slag appears to fall within the policy’s definition of pollutant; therefore, the court must next

determine whether the substance caused the damages in the underlying suit. TXI’s State Petition

identifies “molten metal particles” from the welding coming into contact with the polypropylene

demisters as the “most probable” cause of the first fire, which then “caused the mist eliminator(s)

to catch fire and emit gases ultimately erupting in the subsequent fire.” TXI’s State Petition at 4

(emphasis added). Since the welding slag may have caused the damages in the underlying suit, the

court turns to the final inquiry: whether common sense and the insured’s reasonable, objective

expectations at the time of contracting make it reasonable to trigger the pollutant exclusion. The

answer to this final question is, unequivocally, “no.”

Because interpretation of insurance contracts in Texas follows the same rules as

interpretation of other contracts, this court must give effect to the written expression of the parties’

intent. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994). The contract or insurance

policy must be considered as a whole, and the court must read all parts of the policy together to

ascertain the agreement of the parties. See id. Applying such rules of construction, this court

refuses to find that under the circumstances in this case welding slag, which is present whenever one

 

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10A dictionary definition of polypropylene is: “any of various thermoplastic plastics or fibers that

are polymers of propylene.” Merriam-Webster’s Collegiate Dictionary 963 (11th ed. 2004). 

Memorandum Opinion and Order – Page 14

welds, or the molten metal particles produced during welding, qualifies as a “pollutant” under this

policy, since such an interpretation would lead to clearly absurd results. Evanston issued a

commercial general liability policy to Adkins, a welder. It 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 damages or injury. Such an interpretation would

reduce the contractual promise of coverage to a dead letter. Accordingly, this court finds that even

though welding slag falls within the policy’s literal definition of a pollutant, and even though the

slag is the alleged cause of the damages in the underlying suit, the pollutant exclusion does not apply

to bar coverage based on the presence of welding slag.

 b. Gases emitted from polypropylene demisters

Evanston also asserts that the “gases emitted from the demisters as a result of contact with

the welding slag” are pollutants. Evanston’s Motion at 9. These “gases” are not identified by any

pleading, brief or other evidence currently before this court and are referred to only once in TXI’s

State Petition. Specifically, the state petition identifies molten metal particles from the welding

coming into contact with the polypropylene demisters as the “most probable” cause of the first fire,

which then “caused the mist eliminator(s) to catch fire and emit gases ultimately erupting in the

subsequent fire.” TXI’s State Petition at 4 (emphasis added). The substances emitted from the

demisters might fall within the policy’s broad definition of a pollutant as a “gaseous . . . irritant or

contaminant,” because they were “gases.” The word “gaseous,” however, simply modifies the nouns

“irritant or contaminant,” which are not defined in the policy. This court takes judicial notice,

pursuant to Federal Rules of Evidence 201, that polypropylene is a type of plastic;10 however, the

 

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court lacks sufficient information to make a factual determination of whether the “gases” emitted

from the polypropylene demisters are “irritants or contaminants,” such that would place the gasses

within the policy’s pollutant definition. Gases naturally exist in all environments where human

beings are found, including the oxygen we breath in and the carbon dioxide we exhale. Since

“gaseous” modifies “irritant or contaminant,” Evanston must show how the unidentified “gases”

emitted from the polypropylene demisters would either irritate or contaminate so as to put them

within the policy’s literal definition of a pollutant.

Furthermore, even if the gases could literally fall within the policy’s pollutant definition,

they do not trigger the pollutant exclusion because they did not cause the damages in the underlying

suit. TXI’s state petition identifies “molten metal particles” from the welding coming into contact

with the polypropylene demisters as the “most probable” cause of the first fire, which then “caused

the mist eliminator(s) to catch fire and emit gases ultimately erupting in the subsequent fire.” TXI’s

State Petition at 4 (emphasis added). It is possible to interpret from this statement that the fire and

resulting damages “arise out of” or are a “result of” the “discharge, dispersal, seepage, migration,

release, escape or placement of pollutants.” The pleadings, however, also place the cause of the fire

and ensuing damages on the negligent welding, setting off a chain reaction leading to both fires.

Since the allegations in the underlying petition must be interpreted liberally, resolving any doubt in

favor of the insured, this court will accept TXI’s summary judgment argument that the “gases” did

not cause the fire, but rather that Adkins’s negligent welding, coming into contact with the

demisters, caused TXI’s damages. See National Union, 939 S.W.2d at 141. Accordingly, the court

denies Evanston’s summary judgment motion on the ground that either the welding slag or the

demister gases triggered its pollutant exclusion.

 

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3. Welder’s Endorsement

If either the welding slag or the demister gases qualifies as a “pollutant” under the policy,

Evanston contends the welder’s endorsement also bars coverage. Evanston’s Motion at 9. The

welder’s endorsement excludes liability arising from welding under certain conditions, including

“[a]ny welding in or around areas containing explosives or pollutants.” Evanston Policy at “Welders

Endorsement” (3). The court agrees that a substance satisfying the policy’s “pollutant” definition

from the absolute pollutant exclusion would also apply to the welder’s endorsement. For the same

reasons that the court determined that welding slag does not trigger the policy’s pollutant exclusion,

even if it could be defined as a “pollutant,” welding slag also will not trigger the welder’s

endorsement. See infra at 13. If the court accepts Evanston’s assertion that welding slag, created

during the normal course of welding, is a pollutant because it is a “solid or thermal irritant or

contaminant,” then all welding done by Adkins would take place “around areas containing . . .

pollutants,” and no welding accidents would ever be covered by this general liability policy issued

to a welder. This interpretation produces an unreasonable and absurd result when considering all

parts of the policy together as a whole. 

While welding slag does not qualify as a “pollutant” under the terms of this policy and the

applicable law, this court lacks factual information to determine whether the gases emitted from the

demisters qualify as pollutants within the terms of the policy. If the unidentified gases are in fact

irritants or contaminants within the policy’s pollutant definition, then the welder’s endorsement may

bar coverage. The court sees no inconsistency in finding, on the one hand, that the demister gases

do not trigger the pollutant exclusion, even if they are determined to be “pollutants,” while holding,

on the other hand, that the demister gases, if determined to be “pollutants,” would trigger the

 

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welder’s endorsement. The two exclusions operate independently and merely share a definition of

“pollutant.” Under the pollutant exclusion, even when a substance meeting the policy’s literal

definition of pollutant exists, no exclusion is triggered unless that substance caused the damages

claimed, and common sense would not make it unreasonable to define the substance as a “pollutant”

within the meaning of the policy. Under the welder’s endorsement, welding under certain risky

circumstances, including areas near pollutants, would eliminate coverage. It is irrelevant under the

welder’s endorsement whether the substance at issue caused the damages; however, common sense

and the insured’s reasonable, objective expectations at the time of contracting should not make it

unreasonable to define the substance a “pollutant” within the meaning of the policy under this

provision. 

To summarize, if the demister gases are deemed “pollutants,” it appears to the court that the

welder’s endorsement was designed to deny coverage for precisely the type of negligent conduct that

forms the basis of TXI’s suit against Adkins. TXI has basically alleged that after Adkins’s welding

caused the first fire, “his alleged failure to [put out that fire], coupled with a choice to go back to

work, caused the ensuing fire.” TXI’s Response at 8. TXI also explains that no gas emitted from

the demisters until after the first fire. TXI’s State Petition at 4; TXI’s Reply at 5. Thus, if the gases

that emitted between the first and second fire are determined to be “pollutants,” then Adkins’s

“choice to go back to work” in an area with pollutants would trigger the welder’s endorsement,

excluding coverage for damages caused by the second fire. Again, this court lacks the factual

information necessary to determine whether the gases emitted by the demisters should fall within

the meaning of “pollutant” under this policy.

4. “Business Risk” Exclusions Under j(5), (6)

 

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Evanston’s final contention for denying coverage stems from exclusions labeled j(5) and j(6),

which deny coverage for 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; or

(6) That particular part of any property that must be restored, repaired or replaced

because ‘your work’ was incorrectly performed on it.

Evanston Policy at 4 (emphasis added). “Your work,” is defined as “work or operations performed

by you or on your behalf,” and “materials, parts or equipment furnished in connection with such

work or operations.” Evanston Policy at 13. These types of provisions are commonly referred to

as “business risk” exclusions because they generally deny coverage for the insured’s defective work.

See, e.g., Taylor v. Travelers Ins. Co., 40 F.3d 79, 82 (5th Cir. 1994). 

Evanston contends that j(5) excludes coverage for the property damage TXI claims in this

case, because TXI’s petition indicates the damages arise out of Adkins’s operations. See Evanston’s

Motion at 10. Since j(5) and (6) distinguish between “real” property and “any” property, this court

finds that j(5) bars coverage only for real property damage claims made by TXI. TXI’s State

Petition does not allocate its total claim for $3,916,905 between real or other property damages. See

TXI’s State Petition at 9. To the extent that TXI’s lawsuit seeks damages for non-real property

damages, j(5) would not bar coverage.

Evanston also contends that j(6) excludes coverage for any of TXI’s property damage claims

because TXI has alleged that Adkins performed his work incorrectly, resulting in the fire.

Evanston’s Motion at 10. TXI makes two allegations against Adkins in its state petition, one for

negligence, and another for breach of warranty. On the negligence claim, TXI alleges that Adkins

should have used a different type of welding equipment that would not have thrown sparks as far;

 

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that Adkins failed to ensure a safe working environment (in part by failing to put out the first fire

or to notify TXI of that fire); that Adkins’s failure to use ordinary care in both performing the work

and in supervising his crew all proximately caused the fire. TXI’s State Petition at 6. On the breach

of warranty claim, TXI alleges that Adkins failed to perform his services “in a good and

workmanlike manner.” Id. These are distinct and different claims. One alleges negligence, causing

a fire. The other alleges poor quality of work performed by Adkins. As noted above, exclusions like

j(6) are commonly referred to as “business risk” exclusions because they deny coverage for the

insured’s defective work. In this case, Evanston’s j(6) provision specifically denies coverage for

any property that must be “restored, repaired or replaced” due to Adkins’s defective work. TXI’s

breach of warranty claim against Adkins is one for defective work. Therefore, the policy would not

cover any damages TXI contends it incurred in order to restore, repair or replace the expansion joint

that Adkins was in the process of removing when the fire occurred. Since this court must interpret

TXI’s pleading liberally, resolving any doubt in its favor, it appears that TXI’s total claim for

$3,916,905 includes damages beyond the cost of restoring, repairing or replacing the expansion

joint. To the extent that TXI claims damages for property (other than real property) destroyed by

Adkins’s negligence, rather than his inadequate welding, neither j(5) nor j(6) bars coverage for those

damages. Evanston’s summary judgment motion on these grounds will be denied in accordance with

these conclusions. 

 

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III. TXI’S MOTION FOR SUMMARY JUDGMENT

Defendants/Counter-Plaintiffs TXI have also filed a summary judgment motion in this case.

TXI’s Motion incorporates the arguments from its Response to Evanston’s Motion (and Brief in

Support thereof), and requests this court to consider the two motions as “cross-motions for summary

judgment.” TXI’s Motion at 3. In essence, TXI advances no independent grounds for judgment as

a matter of law in its favor. Rather, TXI asserts that, because none of Evanston’s arguments denying

coverage is valid, Evanston must defend Adkins in the state lawsuit, entitling TXI to judgment as

a matter of law in this action. See TXI’s Motion at 2. In particular, TXI contends that (1) it has

stated a claim for property damages, beyond pure economic loss, covered by the Evanston policy;

that (2) coverage may not be denied on the grounds that either the welding slag or the demister gases

are pollutants that trigger exclusions because they are not pollutants; and (3) that the “business risk”

j(5) and (6) exclusions do not bar coverage because TXI has claimed damages beyond the defective

work performed by Adkins. See generally, TXI’s Response; TXI’s Motion. This court, having

addressed each of these arguments in turn while addressing Evanston’s Motion, concludes: (1) TXI’s

state claims, to the extent those claims include property damage covered by the policy, are not

excluded from coverage, and, therefore, grants TXI’s Motion on this ground; (2) welding slag does

not qualify as a pollutant under the circumstances of this case and does not trigger any coverage

exclusions, and, therefore, grants TXI’s Motion on this ground; (3) this court lacks factual

information to determine whether demister gases qualify as pollutants triggering Evanston’s policy

exclusions, and, therefore, denies TXI’s Motion on this ground; and (4) the “business risk” j(5) and

(6) exclusions deny coverage for any damages to real property caused by Adkins, but not other

property damages beyond the defective work performed by Adkins, and, therefore, to this extent,

 

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grants TXI’s Motion on this ground. Accordingly, this court grants in part TXI’s Motion and

denies in part TXI’s Motion to the extent herein set forth. Evanston has asserted four bases that

it believes preclude coverage. On three of these, the court has ruled against Evanston. The court,

however, because of a fact question, is unable to rule on the issue of the demister gases. As

summary judgment is not appropriate on the issue of whether the demister gases qualify as

pollutants, the court cannot make any declaration at this stage whether Evanston has a duty to defend

Adkins.

IV. CONCLUSION

For the reasons stated herein, a genuine issue of a material fact exists as to whether the

demister gases emitted qualify as “pollutants” to trigger either the pollutant exclusion or the welder’s

endorsement. Neither Evanston nor TXI has met its burden of showing that no fact question remains

on that material issue. Therefore, this court denies Plaintiff’s Motion for Summary Judgment. The

court grants in part and denies in part as herein set forth Defendants/Counter-Plaintiffs Texas

Industries, Inc. and TXI Operations, L.P.’s Motion for Summary Judgment.

It is so ordered this 4th day of October, 2006.

_________________________________

Sam A. Lindsay

United States District Judge

 

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