*District Judge of the Southern District of Texas, sitting

by designation. 

United States Court of Appeals,

Fifth Circuit.

No. 94-20574.

The CONSTITUTION STATE INSURANCE COMPANY, Plaintiff-CounterDefendant-Appellee,

v.

ISO-TEX INC., Iso-Tex Diagnostics, Inc., Bio-Tex Laboratories,

Inc., Defendants-Counter-Plaintiffs-Appellants.

Aug. 21, 1995.

Appeal from the United States District Court for the Southern

District of Texas.

Before JONES and PARKER, Circuit Judges, and KAZEN*, District

Judge.

EDITH H. JONES, Circuit Judge:

In this insurance coverage dispute, the district court granted

summary judgment for Constitution State Insurance Co., denying

coverage to the insureds, Iso-Tex, Inc., Iso-Tex Diagnostics, Inc.,

and Bio-Tex Laboratories, Inc. (hereinafter, "Iso-Tex") for

liability to individuals injured by nuclear waste stored at IsoTex's facilities. With the case submitted in part on an Agreed

Stipulation of Facts, the district court relied upon an absolute

pollution exclusion in the policy. Iso-Tex appeals, suggesting

that the pollution exclusion does not apply to nuclear risks, or is

ambiguous and should be interpreted in its favor. We do not agree

and therefore affirm.

I. Factual Background

The insureds are in the business of handling, transporting,
storing, and disposing of radioactive medical waste. Iso-Tex

disposes of the radioactive medical waste by storage on its

premises in Friendswood, Texas. Iso-Tex held three commercial

general liability policies from Constitution State. The parties

agree that two of those policies do not apply, and coverage is

sought only under Policy No. CP 119455 ("the policy").

Iso-Tex was sued in a Texas state district court by plaintiffs

alleging wrongful death, personal injuries and "survivor" claims

"resulting from Iso-Tex's alleged deposit of "enormous quantities

of hazardous radioactive materials ... in close proximity to the

plaintiff's [sic] residences without the knowledge or warning to

the plaintiffs.' " Stipulated Facts, ¶ 3. Judgment was entered

against Iso-Tex for $7,000,000. Constitution State denied coverage

for the claims in that lawsuit, spawning this case.

The policy contained a "Nuclear Energy Liability Exclusion

Endorsement (Broad Form)" and an "Absolute Pollution Exclusion."

While the district court ruled that the "Nuclear Energy Liability

Exclusion Endorsement" did not exclude coverage for the claim in

the underlying lawsuit, she also decided that the "Absolute

Pollution Exclusion" did bar coverage, and granted the insurer's

motion for summary judgment.

II. Discussion

 The interpretation of an insurance contract, including the

question whether the contract is ambiguous, is a legal

determination, which, like the court's summary judgment, is

reviewed de novo on appeal. National Union Fire Ins. Co. v. Kasler

Corp., 906 F.2d 196, 198 (5th Cir.1990). In Texas, insurance
 

1The District Court's wording of the provision in its Order

of March 3, 1994 was incorrect, but not materially so.

Iso-Tex argues that the "Absolute Pollution Exclusion"

was not contained in the "Stipulated Facts" and was

therefore improperly considered by the district court. 

However, the exclusion appeared in the policy, which was an

exhibit to the stipulated facts. No more was necessary to

put the policy into the record. The district court

specifically found that the insurer had appropriately

preserved this argument by raising it in its original

complaint.

District Court's Order of November 16, 1993, p. 1-2. 

 

2The insurer added the following words in bold, capital

letters at the top of the page: "THIS ENDORSEMENT CHANGES THE

POLICY. READ IT CAREFULLY." 

contracts are interpreted by the same rules as are other contracts.

Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex.1994). If

an insurance policy is worded so that it can be given only one

reasonable construction, it will be enforced as written. State

Farm Fire & Cas. Co. v. Reed, 873 S.W.2d 698, 699 (Tex.1993). Only

where a contract of insurance is susceptible to more than one

reasonable interpretation must there be resort to the rule

requiring adoption of the interpretation most favorable to the

insured. Id.

The "Absolute Pollution Exclusion"1 contained in the policy

reads as follows:

EXCLUSION—ALL POLLUTION (ABSOLUTE)2

This insurance does not apply to:

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

permanent or transient contamination of the environment by

pollutants.

(2) Any loss, cost, or expense arising out of any governmental

direction or request that you test for, monitor, clean up,

remove, contain, treat, detoxify or neutralize pollutants.
Pollutants means any solid, liquid, gaseous, or thermal

irritant or contaminant, including smoke, vapor, soot, fumes,

acids, alkalis, chemical and waste. Waste includes materials

to be recycled, reconditioned or reclaimed.

Iso-Tex argues that the policy exclusion does not cover

biomedical nuclear waste as a matter of law, or alternatively that

the clause is ambiguous. Iso-Tex first avers that "nuclear waste

as handled by Iso-Tex has not been shown to be pollution."

However, the definition of pollution in the above clause includes

"any ... contaminant, including ... waste." The parties have

stipulated that Iso-Tex is "in the business of handling,

transporting, storing, and disposing of medical waste."

Iso-Tex next contends that if its biomedical nuclear waste

were considered "pollution," then there would have been no need for

the separate "Nuclear Energy Liability Exclusion Endorsement (Broad

Form)" found in the policy in question. This argument holds no

water; the nuclear exclusion only applies to "nuclear material" at

a "nuclear facility" or to injuries for which the insured is also

insured by "a nuclear energy liability policy issued by the Nuclear

Energy Liability Insurance Association." Stipulated Facts, ¶ 9.

This exclusion does not apply to Iso-Tex, whose activities, as

found by the district court, do not involve "nuclear material" of

that type, and whose operations do not fall within the definition

of a "nuclear facility." Further, Iso-Tex's nuclear liability

carrier denied coverage under a separate nuclear policy.

Accordingly, it is perfectly logical that Constitution State would

include both a nuclear liability exclusion for certain nuclear

operations that might be covered by separate insurance, and an

"Absolute Pollution Exclusion." The two clauses exclude separate,
but potentially overlapping types of conduct. The existence of a

nuclear exclusion does not prove that Iso-Tex's nuclear waste is

not pollution.

Iso-Tex further observes that its prior policies from

Constitution State contained "Absolute Nuclear Exclusion" clauses

applying to any "injury or damage to or arising out of any nuclear

device, radioactive material, isotope, ... or any other chemical

element having an atomic number above 83 or any other material

having similar properties of radioactivity." Because this

provision, which, Iso-Tex contends, would have excluded liability

for the underlying claims, was dropped from the subject policy, "it

would seen [sic] plausible that both parties understood the risk to

be insured to be the nuclear risk and that the "Absolute Pollution'

Exclusion would not apply to that risk." Iso-Tex seeks, in other

words, to manufacture an ambiguity from a comparison of the

previous and present policies. Iso-Tex supported this argument in

the district court with reference to industry custom and the

clauses' regulatory history before the Texas Insurance Board.

The problem with this argument is that it has been squarely

rejected by the Texas Supreme Court in interpreting a policy

containing a similar "absolute pollution exclusion":

If a written contract is so worded that it can be given

a definite or certain legal meaning, then it is not ambiguous.

Parol evidence is not admissible for the purpose of creating

an ambiguity.

If, however, the contract is reasonably susceptible to

more than one meaning, it is ambiguous. Whether a contract is

ambiguous is a question of law for the court. Only where a

contract is first determined to be ambiguous may the courts

consider the parties' interpretations, and admit extraneous

evidence to determine the true meaning of the instrument.
 

3The National Union policy before the State Supreme Court

stated:

This policy does not apply to ... any Personal [*3]

Injury or Property Damage arising out of the actual or

threatened discharge, dispersal, release or escape of

pollutants, anywhere in the world; ... "Pollutants"

means any solid, liquid, gaseous or thermal irritant or

contaminant, including smoke, vapor, soot, fumes,

acids, alkalis, chemicals and waste material. Waste

materials include materials which are intended to be or

have been recycled, reconditioned or reclaimed. 

When the language of the policy or contract is

susceptible to more than one reasonable construction, it is

patently ambiguous. A patent ambiguity is evident on the face

of the contract. A latent ambiguity arises when a contract

which is unambiguous on its face is applied to the subject

matter with which it deals and an ambiguity appears by reason

of some collateral matter. The circumstances surrounding and

underlying the contract are first applied to the subject

matter of the agreement. If a latent ambiguity arises from

this application, parol evidence of the parties' true

intentions is admissible....

The ambiguity must become evident when the contract is

applied to the surrounding circumstances, not after parol

evidence is admitted to create an ambiguity.

National Union Fire Ins. Co. v. CBI Indus., Inc., --- S.W.2d ----,

----, 38 Tex.Sup.Ct.J. 332, 1995 WL 92215, *2 (Tex. March 2, 1995)

(citations and footnotes omitted, emphasis added). In National

Union, the Texas Supreme Court reversed an intermediate court

decision that had remanded for further discovery to examine a

potential latent ambiguity in certain absolute pollution exclusion

clauses. The intermediate court based its opinion on precisely the

same "industry custom" and regulatory history discussion offered by

Iso-Tex in this case. Construing exclusions substantially similar

to that in the policy sub judice3, the Texas Supreme Court held:

Courts usually strive for uniformity in construing insurance

provisions, especially where, as here, the contract provisions

are identical across jurisdictions. Most courts which have

examined the same or substantially similar absolute pollution
exclusions have concluded that they are clear and unambiguous.

"This pollution exclusion is just what it purports to

be—absolute ... Alcolac[, Inc. v. California Union Ins. Co.],

716 F.Supp. 1546, 1549 (D.Md.1989). We agree. The language

in this pollution exclusion is clear and susceptible of only

one possible interpretation in this case.

Id. at *3, at ---- (emphasis added). Iso-Tex relied heavily on the

reasoning of the intermediate court in its briefs to this court;

the reversal of that court's decision is fatal here.

Certainly, there is no "patent ambiguity" as that term is

defined by National Union, supra. See also, Tri County Svc. Co. v.

Nationwide Mut. Ins. Co., 873 S.W.2d 719, 721 (Tex.App.—San Antonio

1993, writ denied) ("On the basis of the plain language of the

exclusion in question, virtually all courts in other jurisdictions

which have considered such an exclusion have found that it

precludes all coverage of any liability arising out of the release

of pollutants." (emphasis in original)). Iso-Tex argues, however,

that the pollution exclusion is patently ambiguous when the "waste"

in question is nuclear waste, in part because nuclear operations

are covered by a separate exclusion in this and other similar

policies. Iso-Tex cites no authority or rationale for the

distinction. Given the strict rules of construction against a

drafter, an insurance provider would be motivated to draft

overlapping and redundant clauses which exclude coverage for the

same conduct. The existence of various "nuclear exclusions" in a

policy does not make them less comprehensive nor require that the

words "pollution" or "waste" be given other than their ordinary

meanings.

Iso-Tex makes a related argument that ambiguity exists in the

meaning of the word "waste" in the policy. Specifically, Iso-Tex
contends that "[a] reasonable interpretation of waste would be that

it is material that is to be "recycled, reconditioned, or

reclaimed' and a pollutant including any solid, liquid, gaseous or

thermal irritant or contaminant, such as "smoke, vapor, soot,

fumes, acids, alkalis, chemicals' and not nuclear." This contrived

attempt at a definition of waste is based on Iso-Tex's earlier

argument that the existence of other exclusions dealing with

nuclear material necessitates the interpretation of the term

"pollutants" to exclude all things nuclear. The cases cited by

Iso-Tex are inapposite. The court in In Re Hub Recycling, Inc.,

106 B.R. 372, 374 (D.N.J.1989) found coverage for a claim of

trespass from dumping of construction debris because for waste to

be pollutant, it must be an irritant or contaminant. Similarly, in

West Bend Mutual Ins. Co. v. Iowa Iron Works, Inc., 503 N.W.2d 596,

600 (Iowa 1993), the court found coverage for a claim arising out

of the dumping of clean sand. The Iowa Supreme Court found "waste"

had a narrower meaning in the "Absolute Pollution Exclusion" than

it did in Iowa's anti-dumping statute, and thus a claim arising

from improper disposal of waste (under Iowa law) was covered where

the dumped waste was not an "irritant or contaminant." In Minerva

Enterp. Inc. v. Bituminous Cas. Corp., 312 Ark. 128, 851 S.W.2d

403, 406 (1993), the Arkansas Supreme Court found coverage for a

claim of damage to a mobile home flooded as a result of negligent

maintenance of a septic system because the exclusion did not apply

to "common household waste" but instead only to "industrial

pollutants." None of these holdings benefits Iso-Tex, because its

radioactive waste was clearly a contaminant and Iso-Tex cannot deny
 

4Iso-Tex also argued for coverage on the grounds of its

"reasonable expectations." This court needs not address IsoTex's "reasonable expectations" argument in light of the absence

of ambiguity. National Union, supra. However, the argument

lacks merit as Texas law does not recognize coverage because of

"reasonable expectation" of the insured. Forbau v. Aetna Life

Ins. Co., 876 S.W.2d 132, 134 (Tex.1994) ("[N]either conflicting

expectations nor disputation is sufficient to create an

ambiguity.") (on rehearing, vacating its prior opinion). Justice

Doggett, writing in dissent, would have considered "reasonable

expectations." Id. at 140 & n. 8 (Doggett, J., dissenting and

dissenting from rehearing). This is of little help to Iso-Tex. 

that it is an "industrial polluter."

Neither do we find this to be a case of "latent ambiguity" in

the application of the policy to the surrounding circumstances. As

in National Union, the stipulated surrounding circumstances appear

to be fully developed and unproblematic. The underlying claim for

bodily injury arose out of Iso-Tex's alleged contamination of

residences with "waste."

 Iso-Tex has failed to produce any evidence of a patent or

latent ambiguity. In light of the Texas Supreme Court's holding in

National Union, the district court correctly interpreted the

"Absolute Pollution Exclusion" and found that Constitution State

owes no coverage or indemnity for the claims for bodily injury

arising out of contamination by nuclear waste.4

Additionally, Iso-Tex claims summary judgment was improper

because Constitution State "misrepresented the type of policy IsoTex was purchasing and should be estopped from denying coverage."

As the record does not indicate that this contention was presented

to the district court or that any evidence was adduced to support

it, the argument is deemed waived.

III. CONCLUSION
Summary declaratory judgment for the insurer was proper

because the policy expressly and absolutely excluded coverage for

the nuclear waste pollution which gave rise to the underlying

claim.

For the foregoing reasons, the decision of the district court

is AFFIRMED.