Opinion ID: 152248
Heading Depth: 3
Heading Rank: 2

Heading: The Well Control Provision

Text: 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 or bringing under control any oil, gas, or water well. The CGL Policy defines Coowner 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 co-owners 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 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.