Opinion ID: 51540
Heading Depth: 2
Heading Rank: 2

Heading: Contractors Limitation Endorsement

Text: Motiva additionally cites the umbrella policy's Contractors Limitation Endorsement (CLE) clause, arguing that the CLE provides coverage even if the Pollution Exclusion applies. The CLE excludes Motiva from coverage for any tort liability assumed by Hydro Tank under its contract with Motiva, unless coverage for the assumed liability is available pursuant to the underlying CGL policy. [7] Motiva argues that since Hydro Tank assumed liability for the Duriso claims under its contract with Motiva, and those losses were covered by the CGL, the umbrella policy therefore adopts the coverage of the CGL with regard to Motiva's liability. As a result, says Motiva, the Pollution Exclusion is irrelevant to the entire indemnity question because the CLE permits coverage for the Duriso claims irrespective of the Pollution Exclusion. In contrast, United National argues that the CLE does not nullify the Pollution Exclusion and that the CLE cannot be read to create coverage that does not otherwise exist. Both Texas insurance law and the language of the umbrella policy support United National's argument. An exclusion like CLE § III(a) cannot affirmatively grant coverage that would not otherwise exist under the policy and is to be read independently of every other exclusion contained therein. See Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133-34 (Tex.1994) (coverage excluded under a specific policy provision cannot be reinstated by another more general grant of coverage). Moreover, each policy provision is, to the greatest extent possible, to be given independent significance and effect. See id. at 133; Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 666 (Tex.1987). No single provision should be interpreted in isolation from the rest of the policy. See Forbau, 876 S.W.2d at 134. Motiva's CLE claim ignores these maxims. What Motiva's argument amounts to is that the prefatory language of CLE § III creates an exception not only to the exclusions contained in CLE § III(a)-(c), but to every exclusion contained in the United National policy  including the Pollution Exclusion. Put otherwise, CLE § III overrides all other policy provisions. Accepting this argument would require this court to disregard the explicit exclusion provisions that comprise most of the United National policy, which plainly state that [t]his insurance does not apply to several enumerated types of property damage and bodily injury, including injury by pollutants. Motiva provides no legitimate basis upon which the language of CLE § III can be construed to reach such a sweeping result. Moreover, the authority Motiva cites in support of its expansive reading of the CLE is distinguishable. In XL Specialty Insurance Co. v. Kiewit Offshore Service, Ltd., 336 F.Supp.2d 673 (S.D.Tex.2004), the district court interpreted an umbrella policy with a CLE clause identical to the instant one to permit the kind of follow-form coverage Motiva advocates. Id. at 676. Significantly, however, the CLE at issue in XL Specialty did not contain additional relevant exclusion clauses, such as a pollution exclusion. Thus, the XL Specialty court never considered the only question relevant to Motiva's argument: whether additional exclusionary clauses contained in an umbrella policy are trumped by a CLE exclusion. Motiva also cites Gould, Inc. v. Arkwright Mutual Insurance Co., 907 F.Supp. 103 (M.D.Pa.1995). Like the policy in XL Specialty, the Gould policy contained a CLE that permitted follow-form coverage according to the terms of the underlying insurance. See id. at 106. Unlike United National's CLE language, however, the policy language found to grant coverage in Gould was part of a specific exception to the pollution exclusion clause. See id. at 106-07 (This policy shall not apply, unless insurance is provided by a policy listed in the schedule of underlying insurance . . . to any liability of any insured arising out of the discharge, dispersal, release or escape of . . . pollutants.). [8] The instant policy contains no such exception. Accordingly, the district court correctly noted that applying the logic of Gould to the instant policy would be at odds with the Texas canons of interpretation. A recent decision of the Texas Supreme Court further contradicts Motiva's claim. In Fiess v. State Farm Lloyds, 202 S.W.3d 744 (Tex.2006), the court interpreted a homeowners' policy that excluded any loss caused by mold, but permitted any ensuing loss for water damage that would otherwise be covered under the policy. Because mold-related losses were explicitly barred by the mold exclusion, the court opined that the ensuing loss clause could not create mold-loss coverage even though the mold damage arose in part because of water damage. See id. at 748-52. In so ruling, the court reaffirmed the general interpretive maxim that a general clause permitting coverage cannot render ineffective another clause that contains a specific and unambiguous coverage exclusion. See Forbau, 876 S.W.2d at 133-34. Motiva's reading of the United National CLE would require this court to hold that an exception to an exclusion contained in an umbrella policy's CLE can impliedly neutralize all other specific exclusions to coverage. We decline to reach this anomalous result.