United States Court of Appeals

for the Fifth Circuit ____________

No. 21-10938

____________

Liberty Mutual Fire Insurance Company; Liberty 

Insurance Corporation, 

Plaintiffs—Appellees, 

versus

Copart of Connecticut, Incorporated, 

Defendant—Appellant. 

______________________________

Appeal from the United States District Court 

for the Northern District of Texas

USDC No. 3:19-CV-2748

______________________________

Before Higginbotham, Southwick, and Higginson, Circuit 

Judges.

Stephen A. Higginson, Circuit Judge: 

Defendant-appellant Copart of Connecticut appeals the district 

court’s grant of summary judgment in favor of plaintiffs-appellees Liberty 

Mutual Fire Insurance Company and Liberty Insurance Corporation. For 

the following reasons, we affirm in part and reverse in part.

United States Court of Appeals

Fifth Circuit

FILED

July 31, 2023

Lyle W. Cayce

Clerk

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I.

Copart of Connecticut, Inc. (“Copart”) is a subsidiary of Copart, Inc., 

an online car-auction company that sells used, wholesale, and repairable

vehicles. Copart owns several parcels of land in Lexington County, South 

Carolina, on which it operates “machine salvage junkyard and vehicle wash 

facilities.” This appeal concerns whether Copart’s insurer must defend or 

indemnify Copart with respect to a lawsuit filed against it in South Carolina.

A.

On October 14, 2016, eight property-owner plaintiffs (the “Livingston 

Plaintiffs”) sued Copart in South Carolina state court. The case was later 

removed to the U.S. District Court for the District of South Carolina. In their 

complaint, the Livingston Plaintiffs allege that they own properties located 

near Copart’s land and that Copart’s operations have damaged their 

properties. Specifically, the Livingston Plaintiffs allege that a continuously 

flowing spring-fed stream, Tom’s Creek, originates “on or directly east” of 

one of Copart’s properties and that this creek system runs through, or feeds 

wetlands on, the Plaintiffs’ properties. They allege that wrecked and 

salvaged vehicles and machines stored on unpaved lots on Copart’s property 

are “variously leaking gasoline, oil, hydraulic fluids, antifreeze, and other 

hazardous fluids and materials into the soil.” According to the Livingston 

Plaintiffs’ complaint, “[d]uring any significant rainfall event, water, soil, 

sediment and hazardous materials and chemicals are washed from the Copart 

property into Tom’s Creek ultimately through the Plaintiffs’ properties.” 

They allege that this has “dramatically changed the nature of [their]

property,” by way of “aesthetic[]” damage “in the form of cloudy water for 

several days, after each rainfall event,” and a “negative[] impact[]” on the 

“flora and fauna in and around streams and ponds on Plaintiffs’ property.”

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The Livingston Plaintiffs further allege that “scientific testing 

conducted on a variety of samples from points on the periphery of [Copart]’s 

property and within the Tom Creek’s watershed, reveal alarming levels of 

heavy-metals and other dangerous elements.” The Livingston Plaintiffs 

allege that these samples show “large concentrations of aluminum, lead, 

titanium, arsenic, and copper throughout,” and that “[t]hese are the same 

elements found within various components of motor vehicles, such as 

batteries, radiators and fuel.”

The Livingston Plaintiffs allege violations of the Resource 

Conservation and Recovery Act, the Clean Water Act, and the South 

Carolina Pollution Control Act, as well as claims for negligence, negligence 

per se, nuisance, and trespass.

B.

During the relevant periods, Copart held insurance policies with 

Liberty Mutual Fire Insurance Company (“LMFIC”) and Liberty Insurance 

Corporation (“Liberty Insurance”) (collectively, “Liberty”). Copart and 

Liberty dispute whether, in light of certain “pollution” exclusions in the 

relevant policies, Liberty has a duty to defend or indemnify Copart with 

respect to the South Carolina case (the “Underlying Suit”).1

LMFIC issued five commercial general liability (“CGL”) policies to 

Copart, for policy periods spanning from 2012 to 2017. The parties agree 

that the policies are substantively identical in relevant part. Coverage A of 

the CGL policies provides that LMFIC

_____________________

1

 As the parties confirmed at oral argument, the Underlying Suit was resolved by 

settlement while this appeal was pending. See Stipulation of Dismissal with Prejudice, 

Livingston, Jr. v. Copart of Conn., Inc., No. 17-2543 (D.S.C. May 31, 2022), ECF No. 196.

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will pay those sums that the insured becomes legally obligated 

to pay as damages because of “bodily injury” or “property 

damage” to which this insurance applies. We will have the 

right and duty to defend the insured against any “suit” seeking 

those damages. However, we will have no duty to defend the 

insured against any “suit” seeking damages for “bodily 

injury” or “property damage” to which this insurance does not 

apply.

This coverage is subject to an exclusion for damages caused by 

pollution. Specifically, Coverage A, as amended by an endorsement, 

excludes from coverage any “‘[b]odily injury’ or ‘property damage’ which 

would not have occurred in whole or part but for the actual, alleged or 

threatened discharge, dispersal, seepage, migration, release or escape of 

‘pollutants’ at any time.” The policies define “pollutants” as “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.”

In addition to its CGL policies with LMFIC, Copart also purchased 

umbrella policies with Liberty Insurance for policy periods spanning from 

2014 to 2017. The parties agree that the policies are substantively identical 

in relevant part. Under the umbrella policies, Liberty Insurance has “the 

right and duty to defend any ‘suit’ seeking damages covered by this 

insurance, . . . when: (1) [t]he total applicable limits of ‘underlying insurance’ 

have been exhausted by payment of judgments or settlements; or (2) [t]he 

damages sought because of ‘bodily injury[,’] ‘property damage’ or ‘personal 

and advertising injury’ to which this insurance applies would not be covered 

by ‘underlying insurance’ or ‘other insurance.’” The umbrella policies list

the LMFIC CGL policies as “underlying insurance.”

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Like the CGL policies, the umbrella policies contain in an 

endorsement an exclusion for damages caused by pollution.2 The pollution 

endorsement also modifies the duty to defend with respect to pollutionrelated damages. It provides that, “[f]or the purposes of this endorsement,” 

Liberty Insurance “will have the right and duty to defend any ‘suit’ seeking 

damages covered by this insurance, . . . if the ‘retained limit’ has been 

exhausted by payment of damages that would be covered by this 

endorsement.’” The “retained limit” for purposes of the endorsement is 

$1,000,000.

C.

On November 18, 2019, Liberty filed a declaratory action against 

Copart in the U.S. District Court for the Northern District of Texas. Liberty 

alleged in its complaint that LMFIC was “currently defending Copart in the 

Underlying Suit pursuant to its reservation of rights and [sought], by this 

action, a declaration that it has a right to withdraw that qualified defense.” 

Liberty cited the Livingston Plaintiffs’ pleadings, and the pollution exclusion 

in its CGL and umbrella policies, and asked the court for, inter alia, a 

declaration that Liberty has “no duty to defend or indemnify Copart or any 

other person in connection with the claims asserted in the Underlying Suit 

and therefore ha[s] no duty to pay any portion of the defense costs incurred 

or paid by any person in connection with the Underlying Suit.”

Liberty later moved for summary judgment seeking a declaration that 

it had no duty to defend or indemnify Copart as to the Underlying Suit. 

_____________________

2

 The pollution exclusion in the umbrella policies uses language that is similar, but 

not identical, to its counterpart in the CGL policies. The umbrella policies’ exclusion also 

has further exceptions not found in its CGL counterpart, but, for reasons we will explain, 

we need not reach the meaning of those provisions in order to resolve this appeal.

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Copart filed an opposition to Liberty’s motion, as well as its own crossmotion for partial summary judgment on the duty to defend.

The district court granted Liberty’s motion for summary judgment 

and denied Copart’s cross-motion. The court found that the pollution 

exclusion was unambiguous and that it was “clear” that the Livingston 

Plaintiffs alleged damages caused by pollutants, so Liberty had no duty to 

defend under the CGL policies. The court further found that there was no 

duty to defend under the umbrella policies because the $1,000,000 retained 

limit had not been exhausted. The court then found that, “[b]ecause Liberty 

Mutual has no duty to defend the Underlying Suit, it follows that it has no 

duty to indemnify.” Final judgment issued for Liberty the same day.

Copart timely appealed, challenging the district court’s conclusions.

II.

A district court’s judgment on cross motions for summary judgment 

is reviewed de novo, “addressing each party’s motion independently, viewing 

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

party.” Siplast, Inc. v. Emps. Mut. Cas. Co., 23 F.4th 486, 492 (5th Cir. 2022) 

(per curiam) (citations omitted). We affirm a grant of summary judgment

“only if there is no genuine issue of material fact and the party is entitled to 

prevail as a matter of law.” Id. (citation omitted). The court “may affirm a 

summary judgment on any ground supported by the record, even if it is 

different from that relied on by the district court.” Campos v. Steves & Sons, 

Inc., 10 F.4th 515, 520 (5th Cir. 2021) (citations omitted). The interpretation 

of insurance policies is reviewed de novo as well. Richard v. Anadarko 

Petroleum Corp., 850 F.3d 701, 707 (5th Cir. 2017) (citations omitted).

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The law of the forum state, Texas, applies in this diversity case. 

Siplast, 23 F.4th at 492 (citations omitted). “Under Texas law, an insurer 

may have two responsibilities relating to coverage—the duty to defend and 

the duty to indemnify.” Id. (quoting ACE Am. Ins. Co. v. Freeport Welding & 

Fabricating, Inc., 699 F.3d 832, 839 (5th Cir. 2012)). These two duties are 

distinct, and the duty to defend is generally broader than the duty to 

indemnify. Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 490 (Tex. 

2008). This is because “[a]n insurer must defend its insured if a plaintiff’s 

factual allegations potentially support a covered claim, while the facts actually 

established in the underlying suit determine whether the insurer must 

indemnify its insured.” Id. (emphasis added) (citation omitted).

III.

We first consider whether Liberty has a duty to defend Copart in the 

Underlying Suit. Whether an insurer has a duty to defend is a determination 

governed by the “eight-corners rule.” Siplast, 23 F.4th at 492 (citing 

Richards v. State Farm Lloyds, 597 S.W.3d 492, 494 (Tex. 2020)). Under the 

eight-corners rule, “an insurer’s ‘duty to defend is determined by the claims 

alleged in the petition and the coverage provided in the policy.’” Richards, 

597, S.W.3d at 494 (quoting Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. 

Co., 279 S.W.3d 650, 654 (Tex. 2009)). “The ‘four corners’ of the petition 

and the ‘four corners’ of the policy together comprise the ‘eight corners’ that 

give the rule its name.” Id. at 494-95. A court may not consider “facts 

ascertained before the suit, developed in the process of the litigation, or by 

the ultimate outcome of the suit” as part of its duty-to-defend determination. 

Canutillo Indep. Sch. Dist. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 99 F.3d 

695, 701 (5th Cir. 1996) (quoting Gulf Chem. & Metallurgical Corp. v. 

Associated Metals & Minerals Corp., 1 F.3d 365, 369 (5th Cir. 1993)); see also

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Am. Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 153-54 (Tex. Ct. App. 

1990). Nor may the court “imagine factual scenarios which might trigger 

coverage.” Waste Mgmt., Inc. v. AIG Specialty Ins. Co., 974 F.3d 528, 535 (5th 

Cir. 2020) (quoting Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Merchs. Fast 

Motor Lines, Inc., 939 S.W.2d 139, 142 (Tex. 1997) (per curiam)).

The duty to defend “is determined by the third-party plaintiff’s 

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

truth or falsity of those allegations.” GuideOne Elite Ins. Co. v. Fielder Rd. 

Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006) (citations omitted). The 

analysis focuses on the facts alleged in the pleadings, not the legal theories 

asserted. Evanston Ins. Co. v. Legacy of Life, Inc., 645 F.3d 739, 745 (5th Cir. 

2011) (citations omitted). “[I]n case of doubt as to whether or not the 

allegations of a complaint against the insured state a cause of action within 

the coverage of a liability policy sufficient to compel the insurer to defend the 

action, such doubt will be resolved in insured’s favor.” Waste Mgmt., 974 

F.3d at 535 (quoting Nat’l Union, 939 S.W.2d at 141).

“If coverage is found for any part of a suit, the insurer must defend 

the entire suit.” Allstate Ins. Co. v. Disability Servs. of the Sw. Inc., 400 F.3d 

260, 263 (5th Cir. 2005) (citations omitted).

A.

The CGL policies provide that Liberty has no duty to defend Copart 

in suits alleging harms to which the insurance under the policies does not 

apply. The policies exclude from coverage any damages that “would not 

have occurred in whole or part but for the actual, alleged or threatened

discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at 

any time.” “Pollutants” are in turn defined as “any solid, liquid, gaseous or 

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

alkalis, chemicals and waste.”

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As a threshold matter, Copart does not dispute that the CGL policies’ 

pollution exclusion is unambiguous as written. Courts applying Texas law 

have consistently interpreted pollution exclusions such as this to be absolute 

and unambiguous. See, e.g., Noble Energy, Inc. v. Bituminous Cas. Co., 529 

F.3d 642, 646 (5th Cir. 2008) (“Texas courts have consistently held similar 

pollution exclusions to be unambiguous.” (first citing Nat’l Union Fire Ins. 

Co. v. CBI Indus., Inc., 907 S.W.2d 517, 521 (Tex. 1995); and then citing 

Zaiontz v. Trinity Universal Ins. Co., 87 S.W.3d 565, 571 (Tex. Ct. App. 

2002)); see also Peleus Ins. Co. v. Ron Sparks, Inc., 2022 WL 4125222, at *3 

(N.D. Tex. Sept. 8, 2022) (finding that an identically worded pollution 

exclusion was unambiguous). 

Nor is there a serious dispute that the pollution exclusion applies to at 

least some of the Livingston Plaintiffs’ allegations.

3 A review of the 

complaint against the language of the pollution exclusion confirms the 

exclusion’s applicability. The Livingston Plaintiffs allege that Copart’s 

activities have led to the discharge of various hazardous materials and 

chemicals, including, inter alia, gasoline, oil, antifreeze, hydraulic fluids, 

lead, and arsenic, that have in turn caused aesthetic harm in the form of 

cloudy water and physical harm to nearby flora and fauna. The complaint 

thus includes many allegations that fit within the CGL policies’ pollution 

exclusion—that is, allegations of damage resulting “in whole or part” from 

Copart’s “discharge, dispersal, seepage, migration, release or escape of” 

materials including “chemicals and waste.”

_____________________

3

 As Liberty and Copart acknowledge on appeal, the operative pleading for this 

court’s duty-to-defend analysis is the Livingston Plaintiffs’ Third Amended Complaint, 

filed in federal court in South Carolina on March 9, 2018. See Northfield Ins. Co. v. Loving 

Home Care, Inc., 363 F.3d 523, 528 (5th Cir. 2004) (“The duty to defend is determined by 

consulting the latest amended pleading.” (citation omitted))). 

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The central dispute here is whether the Livingston Plaintiffs have 

alleged any facts that do not fall within the pollution exclusion. To get around 

the exclusion, Copart must identify allegations of harm by non-pollutants 

alone. We reiterate that the exclusion negates coverage for harms that 

“would not have occurred in whole or part but for” pollutants. Given the 

breadth of the exclusion, Copart must identify allegations in the Livingston 

complaint that are confined to non-pollutants. If the complaint contains such 

allegations, then the suit triggers Liberty’s duty to defend, despite that the 

other allegations in the complaint may be excluded. Evanston Ins. Co., 645 

F.3d at 745 (“If any allegation in the complaint is even potentially covered by 

the policy then the insurer has a duty to defend its insured.” (emphasis in 

original) (citation omitted)). 

In search of non-excluded allegations, Copart points out that the 

Livingston Plaintiffs’ complaint names “30+ independent substances,” 

including some non-pollutants such as water, soil, and sediment. Copart 

relies, in various ways, on the complaint’s allegations regarding these 

substances to argue that the Underlying Suit contains allegations not 

excluded from coverage by the pollution exclusion, thereby triggering 

Liberty’s duty to defend. None of Copart’s arguments is persuasive.

First, Copart asserts that Liberty unjustifiably reads the Livingston 

Plaintiffs’ allegations to refer to a “composite,” “inseparable” substance—

namely, polluted water—that damaged the Livingston Plaintiffs’ properties. 

Copart contends that the Livingston Plaintiffs’ complaint is better read as 

alleging harm from a long list of “independent” substances, some of which 

are pollutants and some of which are not. Read this way, Copart argues, the 

Livingston Plaintiffs’ complaint alleges harm from non-pollutants alone.

But this argument is meritless. Copart is correct that the complaint 

mentions many different substances, some of which, like water, may indeed 

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be non-pollutants.4 But it exceeds the bounds of plausibility to interpret the 

complaint as alleging “independent” harm by the non-pollutant substances. 

The narrative thrust of the complaint is that rainfall carries pollutant-laden 

stormwater from Copart’s properties to the plaintiffs’ properties and thereby 

causes them harm. The water is indeed alleged to include some nonpollutants like soil, sediment, dirt, rock, and sand, but the water is also 

consistently and repeatedly alleged to include “hazardous materials and 

chemicals” and “chemical waste.” With only one discernible exception, 

discussed infra, Copart cites no specific allegation from the complaint 

supporting its position that the pleading can be read to allege harm by nonpolluted water alone.5

_____________________

4

 We accept arguendo Copart’s contention that some of the named substances are 

not pollutants under the exclusion, but we need not, and do not, resolve this question one 

way or the other.

5

 In support of its position, Copart cites two unpublished district-court cases from 

Virginia. Neither is germane. First, in Nationwide Mutual Insurance Co v. Boyd Corp., No. 

09-211, 2010 WL 331757 (E.D. Va. Jan. 25, 2010), the district court found that a pollution 

exclusion did not preclude a duty to defend because, while the underlying complaint 

contained “several allegations of damage from ‘polluted stormwater,’ there [we]re also 

allegations in the complaint of damage from ‘water’” alone. Id. at *4. The court pointed 

in part to “allegations of damage attributable to excess water flow,” which was not a 

“pollutant” under the policy. Id. Here, the Livingston Plaintiffs make no comparable 

allegation.

Copart’s second case, Builders Mutual Insurance Co. v. Half Court Press, LLC, No. 

09-46, 2010 WL 3033911 (W.D. Va. Aug. 3, 2010), more closely resembles this case. There, 

the court considered an allegation that the insured, a property developer, had negligently 

failed “to create and maintain sufficient detention basins and erosion and sediment control 

measures,” causing the underlying plaintiffs’ downslope property to be damaged by “the 

continued presence of such water, dirt, spoil, rock, sand, silt, debris and/or other such 

sediment.” Id. at *3. The court read this statement to “allege[] damage from water, in 

addition to damage from sediment,” and found a duty to defend because “[w]ater is not a 

pollutant under the exclusion.” Id. at *3-4. But these allegations differ from those of the 

Livingston Plaintiffs. Damage in the form of “continued presence of water,” due to a 

failure to maintain detention basins and erosion controls, sounds less in pollution than the 

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Detached from the allegations as written, Copart instead argues that 

the non-pollutant substances “could,” in fact, “potentially be the damagecausing culprit,” i.e., “the source of at least some of the damage alleged by 

the Underlying Plaintiffs.” Copart asserts that “[n]on-polluted stormwater 

flowing from Copart’s property after a significant rain event could stir up 

[non-pollutant] substances . . . resulting in cloudy water” on the Livingston 

Plaintiffs’ properties, and that such a “possibility is entirely compatible with 

the allegations in the Livingston Complaint.” But these arguments are out 

of bounds on the duty-to-defend analysis, under which the court may not 

“imagine factual scenarios which might trigger coverage.” Waste Mgmt., 974 

F.3d at 535 (quoting Nat’l Union, 939 S.W.2d 139 at 142). The duty to defend 

is governed by the allegations in the complaint, and the complaint alleges 

harm by water laden with pollutants.

Finally, Liberty’s interpretation of the complaint—i.e., “composite” 

stormwater laden with various substances including pollutants, rather than 

“30+ independent substances,” any or all of which allegedly caused harm—

is broadly consistent with this court’s decision in Noble Energy, 529 F.3d at 

642. There, the court found that a pollution exclusion applied to negate the 

insurer’s duty to defend where the underlying plaintiffs alleged damage from 

“a mixture of highly flammable gas condensate and presumably innocuous 

basic sediment and waste.” Id. at 647 (emphasis added). As in Noble, that 

the alleged water contains some “presumably innocuous” materials does not 

push the complaint’s allegations outside the scope of the pollution exclusion.

_____________________

Livingston Plaintiffs’ alleged injuries, which focus on harm to flora and fauna and cloudy 

water, caused by the introduction of various substances, many of which are indisputably 

pollutants. In other words, the complaint at issue in Half Court could plausibly be read to 

allege harm by the presence of water itself, while the complaint here alleges harm from 

substances in that water. Regardless, even Half Court were comparable, we are not bound 

by this out-of-circuit opinion.

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For these reasons, the district court did not err in declining to read 

into the complaint allegations of “independent” harm by non-pollutants 

alone.

In a similar vein, Copart argues that the Livingston Plaintiffs allege 

damage caused by “various naturally occurring materials . . . in the 

stormwater” that are not pollutants under the CGL policies. Specifically, 

Copart contends that water, soil, sediment, dirt, rock, sand nutrients, 

biological material, and “other matter” are “indigenous to—indeed, 

prevalent in—the geographical area where the Copart and Underlying 

Plaintiffs’ properties are located and are not ‘pollutants.’” Copart cites nonTexas cases for the proposition that the pollution exclusion does not apply to 

substances like these and contends that the Livingston Plaintiffs’ allegations 

mentioning these substances give rise to a duty to defend.

But this argument rests on the faulty premise that we have already 

rejected. It does not matter if these “indigenous” substances are not 

pollutants under the policy because, as explained, the complaint alleges harm 

by stormwater laden with both non-pollutants and pollutants. And the 

pollution exclusion covers harms caused “in whole or part” by pollutants. 

Copart cites no allegations of harm by these “indigenous” substances alone.

And again, Copart transgresses the limits of the duty-to-defend 

inquiry when it asserts that, as a matter of fact, the cloudy water on the 

Livingston Plaintiffs’ properties “could have been caused by the discharge and 

movement of these natural, indigenous substances.” It is the allegations in 

the pleadings, not hypothetical facts, that dictate our analysis. Waste Mgmt., 

974 F.3d at 535.

In seeking to show that Liberty has a duty to defend, Copart 

emphasizes one specific allegation in the complaint above all else. In 

paragraph 118 of the complaint, which Copart dubs the “Water Trespass 

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Allegation,” the Livingston Plaintiffs allege that Copart’s “actions 

constitute a trespass by encroachment of water, sediment, and other matter 

onto Plaintiffs’ property.” Copart contends that this paragraph “alleges 

water as a cause of damage, clearly triggering Liberty Mutual’s duty to 

defend.” In other words, the argument goes, the Livingston Plaintiffs allege 

trespass caused by water alone, and water is a non-pollutant.

While the quoted allegation may admit of such an interpretation if 

read in isolation, “Texas law requires us to consider the allegations in the 

complaint along with any reasonable inferences that flow from the facts 

alleged”—that is, “all the facts alleged in combination”—when assessing 

the duty to defend. Liberty Mut. Ins. Co. v. Graham, 473 F.3d 596, 601-02

(5th Cir. 2006) (citing Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 645 (Tex. 

2005)). And the context surrounding this allegation defeats Copart’s 

proffered interpretation. The so-called Water Trespass Allegation is situated 

in a seven-paragraph cause of action asserting that Copart’s conduct satisfies 

the legal elements of trespass. The paragraph immediately preceding the 

cited allegation alleges that Copart has caused “harmful material to enter and 

flow onto Plaintiffs’ properties by permitting its improperly controlled 

stormwater, laden with soil, sediment, chemicals and other pollutants, to be 

discharged onto Plaintiffs’ properties.” Similarly, the very next paragraph 

alleges that Copart “knew or should have known that their activities in failing 

to properly manage their industrial and land disturbance activities in close 

proximity to Plaintiffs’ property would, to a substantial certainty, result in 

the discharge of stormwater laden with soil, sediment, and harmful chemicals 

onto the property of Plaintiffs.” The next two paragraphs each allege, again, 

that Copart is responsible for “stormwater laden with soil, sediment, and 

harmful chemicals on[] Plaintiffs’ properties . . . .”

This context instructs that the “water, sediment, and other matter” 

referred to in paragraph 118 is the same pollutant-laden stormwater that is 

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15

the subject of the rest of the trespass allegation. Indeed, this polluted 

stormwater is discussed throughout the complaint; paragraph 118 simply 

uses language that is less precise than other parts of the complaint. And 

although Copart urges us to resolve all doubts about this allegation in its 

favor, given the context and the inferences it yields, “the facts alleged” in 

this one phrase, in this one paragraph, “do not create that degree of doubt 

which compels resolution of the issue for the insured.” Nat’l Union, 939 

S.W.2d at 142.6

For the foregoing reasons, we affirm the district court’s conclusion 

that the Underlying Suit does not trigger Liberty’s duty to defend under the 

CGL policies. 

B.

Copart also contends that Liberty has a separate duty to defend under 

the umbrella policies. We disagree.

The relevant endorsement in the umbrella policies provides that 

Liberty “will have the right and duty to defend any ‘suit’ seeking damages 

covered by this insurance, . . . if the ‘retained limit’ has been exhausted by 

payment of damages that would be covered by this endorsement.’” The 

“retained limit” is $1,000,000. The parties do not dispute that the retained 

limit has not been exhausted. This would appear to end this court’s inquiry 

as to the umbrella policies: the duty to defend the Underlying Suit does not 

_____________________

6

 Copart asserts in a footnote that its interpretation of the Water Trespass 

Allegation is plausible because the encroachment of water alone can constitute trespass 

under South Carolina law. But, again, this observation misses the point, because the duty 

to defend is concerned with the facts alleged, not the legal theories asserted. Evanston Ins. 

Co., 645 F.3d at 745 (citations omitted).

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attach unless and until the limit has been exhausted, and it has not been 

exhausted.

Copart attempts to get around this fact in two ways. First, Copart 

contends that the district court erred in granting summary judgment on this 

basis because Liberty did not raise the retained-limit issue in its motion for 

summary judgment. But even though Copart is right about Liberty’s initial 

omission,7 this argument is unavailing. The district judge “is free to grant 

summary judgment on the basis of any facts shown by competent evidence in 

the record.” United States v. Hous. Pipeline Co., 37 F.3d 224, 227 (5th Cir. 

1994) (citations omitted). And in any event, this court in its appellate role

“may affirm a summary judgment on any ground supported by the record.” 

Campos, 10 F.4th at 520, 526 (citations omitted). The retained-limit 

argument and the supporting portions of the record are fully before this court.

Copart cites this court’s decision in Federal Deposit Insurance Corp. v. 

Laguarta, 939 F.2d 1231 (5th Cir. 1991) for the proposition that, while we 

generally may affirm summary judgment on a ground not relied upon below, 

Liberty’s failure to raise the retained limit as a ground for summary judgment 

means that this court may not rely on it to affirm summary judgment on 

appeal. But Laguarta’s holding is more qualified than Copart implies. The

court in Laguarta held that it would be improper “under the circumstances 

of th[at] case to affirm a summary judgment on . . . grounds that were neither 

_____________________

7

 While Liberty quoted the “retained limit” language in its opening summaryjudgment brief, this quotation of the policy was Liberty’s sole reference to the retained 

limit, and it was unaccompanied by any arguments addressing its effect. Indeed, rather 

than argue the retained-limit point, Liberty merely asserted that “[n]one of the exceptions 

to the [umbrella policies’] [pollution] exclusion apply,” and that Liberty therefore has no 

duty to defend under the umbrella policies. Liberty first argued the retained-limit issue in 

its combined opposition to Copart’s motion for summary judgment and reply in support of 

its own motion for summary judgment.

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raised below by [the appellee] nor even raised sua sponte by the district 

court,” because “the parties were not afforded an opportunity to develop the 

issue below, and it was not implicit or included in the issues or evidence 

tendered below.” Id. at 1240. In such a case, the opposing party may lack 

notice of the issue, and the record may be inadequately developed in relevant 

respects. Id. These are not the circumstances here. The parties here had an 

opportunity to develop the retained-limit issue below, and it was the entire 

basis of the district court’s ruling as to the umbrella policies. There is no 

suggestion that the record is inadequately developed on this issue, which 

merely requires the court to read an insurance policy.

Copart argues in the alternative that the retained-limit provision is 

without effect. It contends that the provision is found in an endorsement 

(#8) that conflicts with a different endorsement (#14) in the umbrella 

policies, and that this conflict generates an ambiguity that must be resolved 

in favor of Copart. The asserted conflict is as follows. 

The umbrella policies’ main coverage form provides, in Section 1.b, 

that Liberty’s duty to defend is triggered when (a) Copart’s underlying 

insurance has been exhausted, or (b) Copart’s underlying insurance does not 

cover a claim but the umbrella insurance does. Endorsement #14, titled 

“Duty to Defend Amendment,” modifies one sentence in Section 1.b, but 

not the provisions just cited. Specifically, Endorsement #14 replaces the 

sentence, “However, we have no duty to defend any ‘suit’ if any other 

insurer has a duty to defend all or a portion of that ‘suit,’” with the sentence, 

“However, we have no duty to defend any ‘suit’ against the insured if any 

other insurer has a duty to defend the insured against all or a portion of that 

‘suit.’” Endorsement #14 makes no other change to Section 1.b.

Endorsement #8, titled “Combined Named Peril and Time Element 

Pollution Liability Coverage—with Duty to Defend and ProductsCase: 21-10938 Document: 00516840351 Page: 17 Date Filed: 07/31/2023
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Completed Operations Amendment,” also modifies Section 1.b. And unlike 

Endorsement #14, Endorsement #8 modifies Section 1.b’s duty-to-defend 

criteria. Specifically, it provides that, “[f]or the purposes of this 

endorsement,” the duty to defend is triggered not by criteria (a) and (b) listed 

above, but instead “if the ‘retained limit’ has been exhausted by payment of 

damages that would be covered by this endorsement.’” “[T]his 

endorsement” consists of a pollution exclusion, as well as a series of 

exceptions to the exclusion. Endorsement #8 uses the “other insurer” 

sentence as modified by Endorsement #14 (rather than the sentence from the 

primary coverage form), and otherwise leaves the rest of Section 1.b 

unchanged.

Copart contends that these two endorsements conflict. It argues that 

Endorsement #14 provides for a duty to defend if the underlying insurance 

excludes coverage (here, via the CGL policies’ pollution exclusion) and the 

umbrella policies provide coverage (here, via a particular exception to the 

pollution exclusion not found in the CGL policies). Endorsement #8, on the 

other hand, provides for a duty to defend only if the retained limit has been 

exhausted. Copart cites case law suggesting that conflicting endorsements to 

an insurance policy generate an ambiguity as a matter of law that must be 

resolved in favor of the insured. See INA of Tex. v. Leonard, 714 S.W.2d 414, 

417 (Tex. Ct. App. 1986) (finding that two conflicting endorsements created 

an ambiguity that had to be resolved in favor of coverage for the insured); 

Pogo Res., LLC v. St. Paul Fire & Marine Ins. Co., No. 19-2682, 2022 WL

209276, at *15 (N.D. Tex. Jan. 24, 2022) (“When, as here, an endorsement 

narrowing coverage creates ambiguity by conflicting with an endorsement 

expanding coverage, the construction that affords coverage to the insured 

governs.”).

But Copart’s argument ignores the language of the endorsements, as 

well as fundamental principles of insurance-policy interpretation. Under 

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Texas law, when interpreting an insurance contract, the court “must read all 

parts of the contract together, giving effect to each word, clause, and 

sentence, and avoid making any provision within the policy inoperative.” 

State Farm Lloyds v. Page, 315 S.W.3d 525, 527 (Tex. 2010). Endorsements 

to insurance policies should not be read into meaninglessness. See Primrose 

Operating Co. v. Nat’l Am. Ins. Co., 382 F.3d 546, 559 (5th Cir. 2004).

Here, the two endorsements can be interpreted in a way that gives 

effect to each. Endorsement #14 modifies Section 1.b as to Liberty’s duty to 

defend Copart in circumstances where another insurer has such a duty. This 

is the only modification that Endorsement #14 makes to Section 1.b. The 

endorsement is general in scope and does not purport to attach to any 

particular types of claims. Endorsement #8, on the other hand, modifies the 

duty to defend only as to claims that are covered by that endorsement, i.e., 

pollution claims. The modification begins with the phrase, “For the purposes 

of this endorsement.” Copart does not acknowledge this limitation on the 

endorsement’s scope. Accordingly, Endorsement #14 is best read as 

modifying the general duty-to-defend provisions of the umbrella policy, while 

Endorsement #8 is best read as modifying the duty-to-defend provisions only 

for claims implicated by that endorsement, i.e., for pollution-related 

damages. Copart’s perception of ambiguity ignores the plain language of the 

endorsements, and its proposed construction reads parts of the 

endorsement—namely, the retained-limit provision in Endorsement #8—

out of the policy, in contravention of Texas law. Page, 315 S.W.3d at 527; 

Primrose Operating Co., 382 F.3d at 559.

For the foregoing reasons, we affirm the district court’s conclusion 

that Liberty has no duty to defend under the umbrella policies.

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* * *

Because Liberty has no duty to defend Copart under the CGL policies 

or the umbrella policies, we affirm summary judgment in favor of Liberty as 

to its duty to defend.

IV.

Copart also appeals the district court’s grant of summary judgment in 

favor of Liberty as to Liberty’s duty to indemnify. “In Texas, an insurer’s 

duties to defend and indemnify its insured are ‘distinct and separate 

duties.’” Colony Ins. Co. v. Peachtree Const., Ltd., 647 F.3d 248, 252 (5th Cir. 

2011) (quoting Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821-22 

(Tex. 1997)). While the duty to defend is determined “solely by the facts

alleged in the petition and the terms of the policy,” the duty to indemnify 

“generally cannot be ascertained until the completion of litigation, when 

liability is established, if at all.” Id. at 253 (citations omitted). In this way, 

“[t]he difference between the two [duties] is a matter of timing.” Id.

Here, the district court addressed Liberty’s duty to indemnify Copart 

in one sentence, writing that, “[b]ecause Liberty Mutual has no duty to 

defend the Underlying Suit, it follows that it has no duty to indemnify.” In 

so holding, the court cited American States Insurance Co. v. Bailey, 133 F.3d 

363 (5th Cir. 1998), in which this court wrote that “[l]ogic and common sense 

dictate that if there is no duty to defend, then there must be no duty to 

indemnify.” Id. at 368. But this ipso factorule has been abrogated in the years 

since Bailey. As this court later explained in Peachtree:

In many cases an insurer may have a duty to defend but, 

eventually, no duty to indemnify. This has led some courts to 

observe that in Texas the duty to defend is broader than the 

duty to indemnify, because an insurer is obligated to defend 

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whenever there is any potential basis for liability under the 

policy, while the duty to indemnify may never be realized. 

Other courts have run with this concept, erroneously holding 

that because the duty to defend is broader than the duty to 

indemnify, there can be no duty to indemnify absent a duty to 

defend.

647 F.3d at 253-54 (cleaned up) (citations omitted). Thus, the assumption 

that the duty to indemnify cannot exist where there is no duty to defend is

“faulty.” Id. at 254. Indeed, the court in Peachtree noted that the Texas 

Supreme Court had recently “clarified that an insurer may have a duty to 

indemnify even though the duty to defend never arises.” Id. (citing D.R. 

Horton-Texas, Ltd. v. Markel Int’l Ins. Co., 300 S.W.3d 740, 744-45 (Tex. 

2009)). Accordingly, in Peachtree, “the district court’s summary judgment 

for [the insurer] was both premature and incorrect.” 647 F.3d at 255.

Such are the circumstances here. The district court granted summary 

judgment for Liberty on its duty to indemnify while the Underlying Suit 

remained pending. In this regard, summary judgment was premature. 

Moreover, the district court found no duty to indemnify solely because it had 

found that Liberty had no duty to defend. In this sense, summary judgment 

was based on a “faulty assumption” and was incorrect. “[T]he facts 

adduced at trial might differ from the allegations, and thus, a duty to 

indemnify could be shown notwithstanding the absence of a duty to defend.” 

Id. at 254.

Liberty cites the Texas Supreme Court’s decision in Farmers Texas 

County Mutual Insurance Co. v. Griffin, 955 S.W.2d 81 (Tex. 1997) for the 

proposition that the duty to indemnify may be “justiciable before the 

insured’s liability is determined in the liability lawsuit when the insurer has 

no duty to defend and the same reasons that negate the duty to defend 

likewise negate any possibility the insurer will ever have a duty to 

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indemnify.” In Griffin, for instance, the court explained that “[n]o facts 

c[ould] be developed in the underlying tort suit that c[ould] transform a 

drive-by shooting into an ‘auto accident,’” for the purposes of coverage. Id. 

A no-indemnity finding before resolution of the underlying lawsuit was 

therefore appropriate.

But this is not such a case. The duty to defend is negated here because 

the Livingston Plaintiffs only allege damage caused, either in whole or in part,

by pollutants. But evidence arising from or related to the Underlying Suit 

may reveal that non-pollutants caused the plaintiffs’ damage.8 Indeed, it is 

here that Copart’s theories regarding the factual cause of the Livingston 

Plaintiffs’ injuries—not germane to the duty-to-defend question—come to 

hold water. If, for example, relevant evidence shows that the plaintiffs’ 

“cloudy water” was caused only by sand and sediment, then the pollution 

exclusion may not apply. If this were so, Liberty may be obligated to 

indemnify Copart.

Indeed, over-application of Griffin is precisely what the Texas 

Supreme Court reined in when it decided D.R. Horton. The court wrote:

_____________________

8

 We reiterate that the Underlying Suit has now settled. But the issue of 

indemnification remains live in this case because Copart seeks, and Liberty opposes, 

indemnification for that settlement amount. But, because the Underlying Suit has settled, 

the relevant factfinding—namely, whether and to what extent the settlement amount is 

covered by Liberty’s policies with Copart—will take place on remand in this coverage 

litigation. See, e.g., Columbia Mut. Ins. Co. v. Fiesta Mart, Inc., 987 F.2d 1124, 1126-29 (5th 

Cir. 1993) (noting that, under Texas law “a prior judgment establishing liability is not 

binding in a subsequent proceeding on coverage” and proceeding to assess whether an 

insurer must indemnify a settlement reached by its insured); Enserch Corp. v. Shand 

Morahan & Co., 952 F.2d 1485, 1493-94 (5th Cir. 1992) (explaining that, “[a]lthough the 

insurers are bound by the settlement [the insured] arranged for itself in this case, they are 

not estopped from contesting coverage of that liability,” and deciding that the “case must 

be remanded for findings to make the necessary apportionment between damages for which 

the insurers owe, and those for which they do not owe, [the insured] a duty to pay”).

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[The insurer] reasons that if the terms of the policy, when read 

in light of the allegations asserted in the petition, do not give 

rise to a duty to defend, then proof of all of those allegations 

could not give rise to a duty to indemnify. It relies on Griffin

for this proposition, but the holding in Griffin was fact-specific 

and cannot be construed so broadly. . . . [Griffin’s] conclusion 

was grounded on the impossibility that the drive-by shooting in 

that case could be transformed by proof of any conceivable set 

of facts into an auto accident covered by the insurance policy. 

It was not based on a rationale that if a duty to defend does not 

arise from the pleadings, no duty to indemnify could arise from 

proof of the allegations in the petition. These duties are 

independent, and the existence of one does not necessarily 

depend on the existence or proof of the other.

300 S.W.3d at 744-45 (citations omitted).

We heed this guidance and decline Liberty’s invitation to apply the 

Griffin holding to this case. As discussed above, this is not a case where no 

“conceivable set of facts” could give rise to coverage.

We therefore reverse summary judgment as to indemnity and remand 

for factfinding to determine Liberty’s duty to indemnify Copart with respect 

to the Underlying Suit.

V.

We AFFIRM summary judgment as to Liberty’s duty to defend 

Copart in the Underlying Suit. We REVERSE summary judgment as to 

Liberty’s duty to indemnify Copart with respect to the Underlying Suit and 

REMAND to the district court for further proceedings to determine 

Liberty’s indemnity obligation, if any.

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