IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 09-50984

MID-CONTINENT CASUALTY COMPANY,

Plaintiff - Appellant

v.

BAY ROCK OPERATING COMPANY; FELICIANA CORPORATION;

DUNCAN UNDERWOOD; EVERETT DESHA; SEELIGSON OIL

COMPANY, LTD.; ST. PAUL SURPLUS LINES INSURANCE COMPANY,

as insurer of Hollimon Oil Company and J. Charles Hollimon, Inc. and as

alleged subrogee/real party in interest of Hollimon Oil Corporation

Defendants - Appellees

Appeal from the United States District Court

for the Western District of Texas

Before DAVIS, SMITH, and HAYNES, Circuit Judges.

HAYNES, Circuit Judge:

Appellant Mid-Continent Casualty Company (“Mid-Continent”) appeals

the district court’s grant of summary judgment in favor of Appellees Bay Rock

Operating Company (“Bay Rock”), the Feliciana Corporation, Duncan

Underwood, Everett DeSha, the Seeligson Oil Company, and St. Paul Surplus

Lines Insurance Company (“St. Paul”), as subrogee of Hollimon Oil Corporation

(“HOC”). We AFFIRM.

United States Court of Appeals

Fifth Circuit

F I L E D

August 4, 2010

Lyle W. Cayce

Clerk

Case: 09-50984 Document: 00511193916 Page: 1 Date Filed: 08/04/2010
I. FACTUAL AND PROCEDURAL HISTORY

Feliciana Corporation, Duncan Underwood, Everett DeSha, and the

Seeligson Oil Company (collectively, the “working interest owners”) owned a

Texas oil well named Striebeck No. 1. The working interest owners designated

HOC as the operator of the well, and HOC hired Bay Rock to supervise and

manage the drilling of the well. Under Bay Rock’s supervision, Striebeck No. 1

suffered a blowout, causing property damage and the loss of gas from the well.

In the wake of the blowout, Bay Rock contacted Cudd Pressure Control to obtain

well-control services. HOC incurred the costs to control, repair, evaluate, and

complete the well after the blowout. HOC had a well-control policy with St.

Paul, and St. Paul paid the costs incurred by HOC pursuant to a settlement

agreement after HOC demanded coverage for the costs.

Thereafter, St. Paul and the working interest owners brought suit in Texas

state court, accusing Bay Rock of negligently causing the blowout. A state court

jury found that Bay Rock was negligent and awarded St. Paul and the working

interest owners: (1) the costs incurred to control the well; (2) the costs incurred

to repair, evaluate, and complete the well; and (3) the value of the gas lost in the

blowout. The San Antonio Court of Appeals affirmed, and the Texas Supreme

Court denied Bay Rock’s petition for review and its petition for rehearing.

1

Bay Rock had a commercial general liability policy (the “CGL Policy”) and

an umbrella policy (the “Umbrella Policy”) (collectively, the “Policies”) with

Mid-Continent. Mid-Continent defended Bay Rock in the state court action

under a reservation of rights letter. After judgment was entered against Bay

Rock, Mid-Continent brought this diversity action in federal district court,

Bay Rock Operating Co. v. St. Paul Surplus Lines Ins. Co., 298 S.W.3d 216 (Tex. 1

App.-San Antonio), pet. denied, 2010 Tex. LEXIS 336 (Tex. 2010) (denying motion for

rehearing). 

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seeking a declaration that Bay Rock’s damages were not covered by the Policies.

Mid-Continent and Appellees both moved for summary judgment. The district

court granted Appellees’ motion for summary judgment and denied

Mid-Continent’s motion. This appeal followed.

II. STANDARD OF REVIEW

We review the district court’s grant of summary judgment de novo, and we

may affirm on any grounds supported by the record. Berquist v. Washington

Mut. Bank, 500 F.3d 344, 348-49 (5th Cir. 2007). When reviewing a grant of

summary judgment, the court views all facts and evidence in the light most

favorable to the non-moving party. United Fire & Cas. Co. v. Hixson Bros., 453

F.3d 283, 285 (5th Cir. 2006). However, to avoid summary judgment, the

non-movant must go beyond the pleadings and come forward with specific facts

indicating a genuine issue for trial. Piazza’s Seafood World, LLC v. Odom, 448

F.3d 744, 752 (5th Cir. 2006). Because both Mid-Continent and Appellees moved

for summary judgment, this court reviews “each . . . motion independently,

viewing the evidence and inferences in the light most favorable to the nonmoving

party.” Ford Motor Co. v. Tex. Dep’t of Transp., 264 F.3d 493, 498 (5th Cir.

2001).

III. DISCUSSION

Mid-Continent raises a number of arguments for reversing the district

court’s grant of summary judgment. First, Mid-Continent argues that St. Paul

had no right to bring the underlying state court action. Second, Mid-Continent

asserts that the damages awarded against Bay Rock do not fall within the

Policies’ general grants of coverage. Finally, Mid-Continent argues that certain

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exclusions or limitations remove from coverage the damages at issue. We will

address each of Mid-Continent’s arguments in turn.

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A. St. Paul’s Subrogation Rights

Mid-Continent argues that St. Paul lacked the legal capacity to bring the

underlying liability suit as HOC’s subrogee and, therefore, there is no coverage

for the damages awarded against Bay Rock. The district court found that the

issue of St. Paul’s right of subrogation was litigated in the state court action and

that Mid-Continent was barred from re-litigating it. Under Texas law, a party’s

“legal authority to sue or be sued, is an issue” that cannot be attacked in “a

separate proceeding.” See Presley v. Republic Energy Drilling, L.L.C., No.

2-07-225-CV, 2008 WL 4053002, at *3-*4 (Tex. App.-Fort Worth Aug. 29, 2008,

no pet.). Nevertheless, Mid-Continent argues that it is not collaterally estopped

3

from re-litigating St. Paul’s subrogation right because it was not in privity with

Bay Rock. We disagree.

An insurer in a coverage case will be barred from re-litigating a particular

issue from the underlying liability case if: (1) the issue raised in the coverage

suit was raised and determined in the liability suit; (2) the issue determined in

the liability suit was essential to the judgment in the liability suit; and (3) the

necessary requirement of privity exists between the insurer and the insured. See

Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794, 802 (Tex. 1992); Columbia

Mut. Ins. Co. v. Fiesta Mart, Inc., 987 F.2d 1124, 1127 (5th Cir. 1993). The

The district court applied Texas law, and the parties do not appeal the district court’s 2

application of Texas law. Accordingly, we will apply Texas law here. See Tifford v. Tandem

Energy Corp., 562 F.3d 699, 705 n.2 (5th Cir. 2009).

According to the comments to Texas Rule of Appellate Procedure 47.7, “[a]ll opinions 3

and memorandum opinions in civil cases issued after the 2003 amendment have precedential

value.” Therefore, even though this decision is unpublished, it has precedential value under

Texas law.

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requisite degree of privity between an insurer and its insured can exist if: (1) the

insurer controlled the insured’s defense in the liability suit; and (2) the insurer

and the insured do not hold conflicting positions with respect to the issue

determined in the liability suit. See State Farm Lloyds v. Borum, 53 S.W.3d

877, 886-88 (Tex. App.-Dallas 2001, pet. denied) (showing that privity can be

established if the insurer controls an insured’s litigation and is not in conflict

with the insured as to the particular issue to be re-litigated); see also Benson &

Ford, Inc. v. Wanda Petroleum Co., 833 F.2d 1172, 1174 (5th Cir. 1987) (citing

“a liability insurer assum[ing] control of a defense” as an example of the control

necessary to find privity). Mid-Continent controlled Bay Rock’s defense, and its

position with respect to St. Paul’s subrogation right is the same as Bay Rock’s

position. Accordingly, we conclude that Mid-Continent was in privity with Bay

Rock, and, as a result, Mid-Continent is collaterally estopped from re-litigating

St. Paul’s right of subrogation.

4

B. The Policies’ General Grants of Coverage

Mid-Continent asserts that the district court erred in finding that the

damages awarded against Bay Rock fell under the Policies’ general grants of

coverage. Mid-Continent’s brief raises two arguments to support its assertion:

(1) the damages awarded against Bay Rock are not covered because HOC did not

have an ownership interest in Striebeck No. 1; and (2) the damages at issue are

not covered because they were not because of property damage as required by

the Policies. This section will address each of Mid-Continent’s arguments in

turn.

The San Antonio Court of Appeals’s opinion in the underlying state court action 4

shows that the issue of St. Paul’s subrogation right was fully litigated in that action and that

the determination of that issue was essential to the state court judgment. Bay Rock Operating

Co., 298 S.W.3d at 222-26. 

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1. Ownership Argument

Mid-Continent argues that the damages awarded against Bay Rock are not

covered because HOC did not have an ownership interest in Striebeck No. 1.

The terms of the Policies do not require HOC to have an ownership interest in

Striebeck No. 1 for there to be coverage, and Mid-Continent does not cite any

authority that supports such a proposition. Accordingly, we conclude that MidContinent’s first argument is without merit.

The Policies contain similar grants of coverage. The CGL Policy states

that Mid-Continent “will pay those sums that [Bay Rock] becomes legally

obligated to pay as damages because of . . . ‘property damage’ . . . .” Similarly,

the Umbrella Policy states that Mid-Continent “will indemnify [Bay Rock] for

ultimate net loss in excess of the retained limit because of . . . property damage

. . . .” The CGL Policy and the Umbrella Policy both define “property damage,”

in relevant part, as: (1) “Physical injury to tangible property, including all

resulting loss of use of that property. . . .;” or (2) “Loss of use of tangible property

that is not physically injured.” Accordingly, to prove coverage, Bay Rock only

had to show: (1) that it was legally obligated to pay the damages awarded

against it; and (2) that the damages awarded were because of physical injury to

tangible property. Nothing in the Policies require the claimant—HOC—to have

an ownership interest in the property that was damaged for coverage to exist.

To support its ownership argument, Mid-Continent also asserts that the

underlying state lawsuit “established that [HOC] suffered no injury in the

blowout.” This argument, however, does not show that HOC needed to have an

ownership interest in Striebeck No. 1 for there to be coverage. Moreover, the

underlying state lawsuit actually established the opposite of Mid-Continent’s

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assertion because the state court jury found that HOC incurred losses and

awarded it damages as a result.

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Accordingly, HOC’s lack of an ownership interest in Striebeck No. 1 did

not defeat Bay Rock’s claim for coverage.

2. “Because of Property Damage”

Mid-Continent also argues that the damages awarded against Bay Rock

were not related to any physical injury to tangible property and, therefore, are

not covered by the Policies. Specifically, Mid-Continent argues that the

following costs are not covered: (1) the costs to control Striebeck No. 1; and (2)

the costs to repair, complete, and evaluate the well. The district court found

6

that all of these damages were the result of physical injury to tangible property

and, therefore, they were covered by the Policies. Mid-Continent argues that the

district court’s finding was erroneous. To support its argument, Mid-Continent:

(1) argues that Appellees failed to demonstrate that the costs at issue were

related to property damage; (2) argues that there was no injury to the wellbore;

and (3) argues that the completion and evaluation costs were not incurred

because of the blowout. We will address each of Mid-Continent’s arguments in

turn.

Mid-Continent’s first argument asserts that Appellees failed to

demonstrate that the costs at issue were related to any property damage. MidIf Mid-Continent is making this “no loss” argument in an attempt to re-litigate 5

whether HOC incurred any losses at all, the doctrine of collateral estoppel would bar it from

re-litigating the issue of HOC’s losses, because the facts of this case show: (1) the issue of

HOC’s losses was litigated in the underlying liability suit; (2) the issue of HOC’s losses was

essential to the state court judgment because HOC had to suffer losses to be awarded

damages; and (3) Mid-Continent was in privity with Bay Rock because Mid-Continent

controlled Bay Rock’s defense, and its position with respect to HOC’s losses is the same as Bay

Rock’s position. See Getty Oil, 845 S.W.2d at 802; Borum, 53 S.W.3d at 886-88.

 In its reply brief, Mid-Continent concedes coverage for the lost gas award. 

6

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Continent’s first argument is based on the fact that HOC and the working

interest owners were not awarded other costs beyond the costs to control, repair,

complete, and evaluate the well. The bare fact that certain other costs were not

awarded does not show that Appellees failed to demonstrate that the costs that

were awarded were related to property damage. In the district court, Appellees

demonstrated that the costs at issue were related to property damage by

showing that they were incurred because of the blowout and the resulting

property damage from it. Accordingly, we conclude that Appellees did show that

the costs at issue were related to property damage and that Mid-Continent’s first

argument fails to indicate any genuine issue for trial.

Mid-Continent’s second argument asserts that there was no injury to the

wellbore and, therefore, a reasonable jury could find that none of the costs

awarded were related to property damage. The only evidence that

Mid-Continent cites to support its argument directly contradicts its assertion.

7

As a result, we hold that Mid-Continent’s second argument fails to create a fact

issue as to any of the damages awarded against Bay Rock.

Mid-Continent’s final argument asserts that the evaluation and

completion costs awarded against Bay Rock were not related to the blowout and,

therefore, a reasonable jury could find that the costs were not covered by the

Policies. As an initial matter, we note that the state jury award directly

contradicts Mid-Continent’s assertion; the jury award states that the completion

and evaluation costs awarded were damages that were suffered as a result of the

blowout. To the extent that Mid-Continent has created a fact issue as to

whether the completion and evaluation costs resulted from the blowout, we hold

The evidence cited by Mid-Continent states as follows: “It just turned out that there

7

was wellborn [sic] damage . . . .” 

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that Mid-Continent is collaterally estopped from re-litigating this issue because:

(1) the jury award shows that this issue was litigated in the underlying liability

suit; (2) this issue was essential to the underlying judgment because the jury

could not have awarded the completion and evaluation costs if they were not

because of the blowout; and (3) Mid-Continent and Bay Rock were in privity with

respect to this issue because Mid-Continent controlled Bay Rock’s defense and

both Mid-Continent and Bay Rock have the same position on the issue. See

Getty Oil, 845 S.W.2d at 802; Borum, 53 S.W.3d at 886-88.

In summary, because Mid-Continent has failed to create a triable jury

issue as to whether any of the damages awarded against Bay Rock were because

of physical injury to tangible property, we hold that the district court did not err

in concluding that the damages at issue were related to physical injury to

tangible property and, therefore, covered by the Policies.

C. Exclusions and Limitations

Mid-Continent raises a number of limitations and exclusions to coverage

and argues that the district court erred in finding that none of them were

applicable. We address each of the exclusions and limitations raised by MidContinent in turn.

1. The Underground Equipment Limitation

Mid-Continent argues that the CGL Policy’s “Underground Equipment

Limitation” removes from coverage the repair costs at issue, which were incurred

to remove a stuck drill pipe. Appellees assert that Mid-Continent waived this

argument. Mid-Continent rebuts Appellees’ assertion by stating that it raised

this argument in its complaint and in its summary judgment motions. The fact

that Mid-Continent raised this argument in its complaint will not save it from

waiver if it failed to present this argument in its summary judgment motions.

Grenier v. Cyanamid Plastics, Inc., 70 F.3d 667, 678 (1st Cir. 1995) (“Even an

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issue raised in the complaint but ignored at summary judgment may be deemed

waived.”). In its motions, Mid-Continent did cite the Underground Equipment

Limitation, but it only argued that the limitation removed from coverage

“property damage to ‘any casing, pipe, bit or tool . . . or other drilling . . .

equipment.’” Mid-Continent did not argue that the limitation applied to

removal of a drill pipe. Because Mid-Continent failed to raise its removal

argument in the district court, the argument is waived. See id.; see also See

Martco Ltd. P’ship v. Wellons, Inc., 588 F.3d 864, 877 (5th Cir. 2009)

(“[A]rguments not raised before the district court are waived and cannot be

raised for the first time on appeal.”).

2. The Well Control Provision

Mid-Continent argues that the control costs awarded against Bay Rock are

removed from coverage by an exclusion in the CGL Policy and a limitation in the

Umbrella Policy (collectively, the “Well Control Provision”). Mid-Continent

bears the burden of proving that an exclusion or limitation applies.

Underwriters at Lloyd’s of London v. Gilbert Tex. Constr., L.P., 245 S.W.3d 29,

33 (Tex. App.-Dallas 2007), aff’d, 2010 WL 2219645 (Tex. 2010). The district

court found that the Well Control Provision only removed from coverage those

control costs incurred at a well in which Bay Rock had a working interest, and,

because Bay Rock did not have working interest in Striebeck No. 1, the court

found that the costs to control Striebeck No. 1 were covered. We review the

district court’s policy interpretation de novo. Finger Furniture Co. Inc. v.

Commonwealth Ins. Co., 404 F.3d 312, 314 (5th Cir. 2005). We hold that the

district court did not err in its interpretation of the Well Control Provision.

The CGL Policy and the Umbrella Policy both remove from coverage “[a]ny

cost or expense incurred by [Bay Rock] or at [Bay Rock’s] request or by or at the

request of any ‘Co-owner of the Working Interest’ in connection with controlling

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or bringing under control any oil, gas, or water well.” The CGL Policy defines

“Co-owner of the Working Interest” as “any person or organization who is, with

[Bay-Rock], a co-owner, joint venturer or mining partner in mineral properties

. . . .” Mid-Continent argues that the control costs at issue were incurred at Bay

Rock’s “request” because it participated in obtaining well control services from

Cudd and, therefore, the control costs are removed from coverage by this

provision.

Under Texas law, we are required to interpret “[c]ontract provisions . . .

so as to avoid meanings that produce unreasonable, oppressive, or absurd results

. . . .” Cont’l Sav. Ass’n v. U.S. Fid. & Guar. Co., 762 F.2d 1239, 1245 (5th Cir.

1985). Under Mid-Continent’s interpretation, the control costs awarded against

Bay Rock would have been covered if Bay Rock had refused to participate in

obtaining well control services from Cudd. In other words, because Bay Rock

made an affirmative attempt to mitigate the damages from the blowout, it lost

coverage. Mid-Continent’s interpretation creates a perverse incentive on the

part of insureds like Bay Rock to do nothing when a well goes out of control in

order to preserve their right to coverage. As a result, we cannot accept

Mid-Continent’s interpretation of the Well Control Provision because it leads to

unreasonable and absurd results.

Because we cannot accept Mid-Continent’s interpretation, we must now

determine whether the district court’s interpretation of the provision was a

reasonable one. The district court found that the Well Control Provision only

applied to costs to control a well in which an insured has a working interest (i.e.,

is a “co-owner”). The Well Control Provision plainly refers to Bay Rock’s coowners of a working interest, and it is uncertain whether this working interest

requirement was meant to apply to control costs incurred by Bay Rock or at Bay

Rock’s request. Under Texas law, courts “must resolve . . . uncertainty [in an

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insurance policy] by adopting the construction that most favors the insured.” See

Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d

552, 555 (Tex. 1991). Therefore, we must construe the Well Control Provision

as the district court did in favor of Bay Rock, and, as a result, we hold that the

control costs awarded against Bay Rock are covered by the Policies.

3. Exclusions 2.j.(5) and 2.j.(6) in the CGL Policy

Mid-Continent argues that exclusions 2.j.(5) and 2.j.(6) in the CGL Policy

exclude from coverage all the damages at issue. The district court found that

these exclusions were inapplicable because they were superseded by the CGL

Policy’s Oil & Gas Endorsement. We review the district court’s interpretation

of the policy de novo. Finger Furniture Co. Inc., 404 F.3d at 314. After

reviewing the terms of the policy, we conclude that these exclusions do not

negate coverage here.

8

“Endorsements to a policy generally supersede and control over conflicting

printed terms within the main policy;” however, the provisions found in the main

“policy and endorsement should be construed together unless” doing so would

negate or render superfluous the additional coverage afforded in the

endorsement. See Mesa Operating Co. v. Cal. Union Ins. Co., 986 S.W.2d 749,

754-55 (Tex. App.-Dallas 1999, pet. denied).

Exclusion 2.j.(5) excludes all property damage to real property that is the

subject of Bay Rock’s drilling operations. The Oil & Gas Endorsement provided

Bay Rock with additional coverage for property damage to “[a]ny formation

Mid-Continent only argues that the district court erred in finding that exclusions 8

2.j.(5) and 2.j.(6) were superseded. The district court also found that identical provisions in

the Umbrella Policy, exclusions 2.k.(3) and 2.k.(4), were superseded. Because Mid-Continent

fails to challenge the district court’s determination as to 2.k.(3) and 2.k.(4), any such argument

is waived. Askanase v. Fatjo, 130 F.3d 657, 668 (5th Cir. 1997) (“All issues not briefed are

waived.”). 

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strata or area in or through which exploration for or production of any substance

is carried on.” The application of exclusion 2.j.(5) would eliminate the additional

coverage that Bay Rock purchased with the Oil & Gas Endorsement.

Accordingly, we conclude that the district court did not err in finding that

exclusion 2.j.(5) was superseded.

Exclusion 2.j.(6) removes from coverage property damage to “that

particular part of any property that must be restored, repaired or replaced

because [Bay Rock’s] work was incorrectly performed on it.” Exclusion 2.j.(6)

has been interpreted to apply only to “property damage to parts of a property

that were themselves the subject of defective work by [an] insured.”

Mid-Continent Cas. Co. v. JHP Dev., Inc., 557 F.3d 207, 215 (5th Cir. 2009). As

a result, the exclusion “does not bar coverage for damage to parts of a property

that were the subject of only nondefective work by the insured and were

damaged as a result of the defective work by the insured on other parts of the

property.” Id. Given this interpretation of the exclusion, we will first address

whether exclusion 2.j.(6) even applies to the damages at issue.

Mid-Continent argues that Bay Rock was contracted to supervise the

drilling of Striebeck No. 1 as a whole, and, because the damages at issue

resulted from Bay Rock’s defective supervision, all property damage related to

the well is excluded by 2.j.(6). Mid-Continent’s argument is inconsistent with

the case law and the terms of the exclusion, which restricts the exclusion to

property damage to that particular part of Striebeck No. 1 that was the subject

of Bay Rock’s defective work. The state liability suit established that the

damages at issue were incurred as a result of “Bay Rock’s negligent decision to

drill ahead without running a true formation integrity test (“FIT”), also known

as a ‘shoe test’ or ‘casing seat test,’ to ensure that the intermediate casing seat

and surrounding formation could withstand the anticipated higher pressures as

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they drilled further down-hole.” Bay Rock Operating Co., 298 S.W.3d at 227,

230. The state court suit shows that the intermediate casing seat and the

surrounding formation were the property that was the subject of Bay Rock’s

defective work, and, as a result, exclusion 2.j.(6) only applies to property damage

to that property; the exclusion does not apply to any resulting damage to other

property. Mid-Continent does not point to any evidence that any of the costs

awarded were specifically for property damage to the intermediate casing seat

or the surrounding formation. Consequently, we hold that exclusion 2.j.(6) does

9

not apply to any of the damages at issue.

If we accepted Mid-Continent’s interpretation of 2.j.(6), as applying to any

and all property damage to Striebeck No. 1, we would still find 2.j.(6)

inapplicable because Mid-Continent’s interpretation would cause an

irreconcilable conflict between the exclusion and the additional coverage

purchased by Bay Rock in the Oil & Gas Endorsement. In the Oil & Gas

Endorsement, Bay Rock purchased coverage for any damage to the formation,

strata, or area in which it worked, as well as coverage for all surface and

subsurface property damage from a blowout. The application of exclusion

10

Mid-Continent’s brief fails to argue or present any evidence to show thatthe damages 9

at issue were for property damage to the intermediate casing seat or the surrounding

formation, and it is not our duty to search the record for such evidence. See Forsyth v. Barr,

19 F.3d 1527, 1537 (5th Cir. 1994) (noting that it is not the duty of this court to “sift through

the record in search of evidence to support a party’s opposition to summary judgment”). 

Paragraph IV of the Oil & Gas Endorsement contains a provision (“the Blowout 10

Endorsement”) that states as follows: “Unless so indicated below, the Blow-out and Cratering

of any well is included within the Limit of Insurance.” The language immediately following

the Blowout Endorsement states, “[i]f so indicated, this insurance does not apply to ‘Property

Damage’ on or above the surface of the earth caused by the blow-out or cratering of any well”

(the “Surface Limitation”). The Surface Limitation was not indicated as applicable. MidContinent argues that the language of the Surface Limitation mirrors the scope of coverage

found in the Blowout Provision and, therefore, the provision only covers property damage on

or above the surface of the earth. Appellees argue that the plain language of the Blowout

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2.j.(6), as interpreted by Mid-Continent, would exclude from coverage all the

additional property damage coverage described within the Oil & Gas

Endorsement. Accordingly, even if we accepted Mid-Continent’s interpretation,

we would still find exclusion 2.j.(6) inapplicable because Mid-Continent’s

interpretation would lead us to conclude that the exclusion was superseded.

In summary, we find that the district court did not err in finding that

exclusions 2.j.(5) and 2.j.(6) did not remove from coverage the damages awarded

against Bay Rock.

IV. CONCLUSION

Because Mid-Continent has failed to show that the district court

committed reversible error in granting Appellees summary judgment, we

AFFIRM.

Provision provides coverage for both surface and subsurface property damage; Appellees’

argument is further supported by the fact that the Surface Limitation does not mirror the

terms of the Blowout Endorsement as other limitations in the endorsement do. The

interpretations provided by Appellees and Mid-Continent are both reasonable interpretations

of the Oil & Gas Endorsement’s blowout coverage. When there are two reasonable

interpretations of a policy provision, Texas law requires us to construe the provision in favor

of the insured, “even if the construction urged by the insurer appears to be more reasonable

or a more accurate reflection of the parties’ intent.” Hudson Energy Co., 811 S.W.2d at 555.

Accordingly, we must adopt the reasonable interpretation offered by Bay Rock and the other

appellees. 

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