Court Opinion

ID: 9366815
Source: CourtListenerOpinion
Date Created: 2023-01-28 01:00:23.017629+00
Date Added: 2024-06-11T17:15:55.114039
License: Public Domain

Case: 22-50432        Document: 00516626109             Page: 1      Date Filed: 01/27/2023

             United States Court of Appeals
                  for the Fifth Circuit
                                                                              United States Court of Appeals
                                                                                       Fifth Circuit
                                      No. 22-50432
                                    Summary Calendar                                 FILED
                                                                              January 27, 2023
                                                                                Lyle W. Cayce
   Finger Oil & Gas, Incorporated,                                                   Clerk

                                                                   Plaintiff—Appellant,

                                            versus

   Mid-Continent Casualty Company,

                                                                  Defendant—Appellee.

                     Appeal from the United States District Court
                          for the Western District of Texas
                               USDC No. 5:20-CV-712

   Before Stewart, Duncan, and Wilson, Circuit Judges.
   Per Curiam:*
         This appeal arises out of an insurance coverage dispute between
   Finger Oil & Gas, Inc. (“Finger Oil”), the insured, and Mid-Continent
   Casualty Company (“Mid-Continent”), the insurance provider. The
   magistrate judge granted Mid-Continent’s motion for summary judgment,
   and Finger Oil appeals the magistrate judge’s dismissal of its

         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-50432      Document: 00516626109          Page: 2   Date Filed: 01/27/2023

                                    No. 22-50432

   misrepresentation and breach of contract claims. For the following reasons,
   we AFFIRM.
                    I. Facts & Procedural History
          Finger Oil is an insured under a policy issued by Mid-Continent,
   which provides general liability insurance. On July 19, 2019, Finger Oil was
   drilling at its own natural gas well, named Drushel #1, located in Jackson
   County, Texas when a valve failed and the well blew out. In response, Finger
   Oil contacted Desiree Scrimger, the commercial-lines account manager at
   Marsh USA, Inc. (“Marsh”), Finger Oil’s insurance agent, to inquire
   whether it was covered for the blow out. Because Scrimger was unfamiliar
   with the policy, she reached out to an underwriter at Mid-Continent
   requesting that it “confirm that this insured has Blow Out and Cratering
   coverage and advise the limit.” Mid-Continent’s underwriter replied in an
   email stating:
          The policy ML1419 Oil & Gas Endorsement IV Blow-Out and
          Cratering has a box to X if the coverage is excluded. The
          ML1419 for this policy is not X’d. The limit for Blow Out and
          Cratering is included within the CG0001 Commercial General
          Liability Form, Section III Limits of Insurance.
   Based on this response, Scrimger emailed Finger Oil as follows:
          Per the underwriter regarding coverage, the Blowout and
          Cratering are included within the limit of insurance. Limits are
          $1M occurrence/$2M aggregate. Please note that each claim is
          based on its own merit and this is just verifying the coverage in
          place.
   Thereafter, a claims specialist at Mid-Continent informed Finger Oil that it
   would be reviewing the policy regarding coverage for the incident.
   Nevertheless, before the claim was approved, Finger Oil, relying on
   Scrimger’s email as confirmation that it was covered for the incident, hired

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                                    No. 22-50432

   several contractors to work on the well and incurred bills for these services in
   the amount of $641,590.90.
          Mid-Continent subsequently denied Finger Oil’s insurance claim,
   which was for expenses incurred while repairing property from the well blow
   out and the costs to bring the well under control. Mid-Continent determined
   that there was no coverage under the policy for these damages based on two
   exclusions. First, Mid-Continent stated that the policy included an exclusion
   entitled “Damage to Property” in Section 1.2.j(1) (“Ownership Exclusion”)
   which excluded from coverage “property damage” to:
          Property you own, rent, or occupy, including any costs or
          expenses by you, or any other person, organization or entity,
          for repair, replacement, enhancement, restoration or
          maintenance of such property for any reason, including
          prevention of injury to a person or damage to another’s
          property.
   According to Mid-Continent, this exclusion “preclude[d] coverage of costs
   and expenses associated with the repair or replacement of a well structure
   that Finger Oil owns.” Second, it stated that the policy included
   endorsement ML1419 (“Oil & Gas Endorsement”) which excluded from
   coverage:
          Any loss, cost or expense incurred by you or at your 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.
   According to Mid-Continent, this endorsement “preclude[d] coverage for
   the costs and expenses submitted for controlling and bringing the well under
   control.”

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                                      No. 22-50432

          Finger Oil filed suit against Mid-Continent in state court asserting
   several causes of action. 1 These claims included: (1) misrepresentation claims
   for violations of § 541.051 of the Texas Insurance Code and the Texas
   Deceptive Trade Practices Act (“DTPA”); 2 (2) breach of contract claims;
   and (3) a claim that Mid-Continent failed to timely investigate the claim in
   violation of § 542.055 and § 542.056 of the Texas Insurance Code. The suit
   was removed to federal court and thereafter the parties consented to proceed
   before a magistrate judge who subsequently held a pretrial conference. After
   the conference, the magistrate judge directed Finger Oil to amend its state
   court petition to “clarify its factual allegations and conform with federal
   pleading requirements.” Finger Oil did not file an amended complaint as
   directed.
          Mid-Continent then filed a motion for summary judgment, which the
   magistrate judge granted in part. It dismissed all of Finger Oil’s claims,
   except the breach of contract claim to the extent it involved Mid-Continent’s
   failure to pay costs and expenses for repair of the well. Both Mid-Continent
   and Finger Oil filed motions for reconsideration. After conducting a hearing
   and allowing the parties to file supplemental briefing, the magistrate judge
   granted Mid-Continent’s motion for reconsideration and denied Finger Oil’s
   motion for reconsideration. In doing so, it reversed its decision to deny
   summary judgment on the remaining breach of contract claim for repairing
   the well. It held that after further review of the policy and hearing the parties’
   arguments, it was clear that Finger Oil was not entitled to recover costs and

          1
            Finger Oil also brought suit against Marsh and the underwriter at Marsh for
   misrepresentation. The underwriter at Marsh was dismissed as improperly joined and
   Marsh is not a party to this appeal.
          2
               The DTPA claim for “false, misleading, or deceptive acts” arises
   under § 17.46(b) of the Texas Business and Commerce Code. Tex. Bus. & Com. Code
   § 17.46(b).

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                                    No. 22-50432

   expenses for repairing the well because it owned the well in question, and the
   policy only provided third-party liability coverage, not first-party liability
   coverage. Finger Oil then appealed the magistrate judge’s dismissal of its
   misrepresentation and breach of contract claims.
                          II. Standard of Review
          “In this diversity case, we review the district court’s grant of
   summary judgment de novo, applying Texas law.” Certain Underwriters at
   Lloyd’s of London v. Lowen Valley View, L.L.C., 892 F.3d 167, 170 (5th Cir.
   2018). “The court shall grant summary judgment if the movant shows that
   there is no genuine dispute as to any material fact and the movant is entitled
   to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “All reasonable
   inferences must be viewed in the light most favorable to the party opposing
   summary judgment, and any doubt must be resolved in favor of the non-
   moving party.” In re La. Crawfish Producers, 852 F.3d 456, 462 (5th Cir. 2017)
   (citations omitted).
                               III. Discussion
          We turn first to the magistrate judge’s dismissal of Finger Oil’s
   misrepresentation claims, which arise under the DTPA and the Insurance
   Code. Finger Oil argues that Mid-Continent negligently misrepresented that
   its policy provided coverage for blowout and cratering when it knew, but did
   not disclose, that there were exclusions that applied to the coverage. “The
   general rule is that in the absence of an affirmative misrepresentation, a
   mistaken belief about the scope of coverage is not actionable under the DTPA
   or the Insurance Code.” Manion v. Sec. Nat. Ins. Co., 2002 WL 34230861, at
   *2 (Tex. App. Aug 15, 2002, no pet.) (citing Sledge v. Mullin, 927 S.W.2d 89,
   94 (Tex. App.—Fort Worth 1996, no writ)). However, when “an insurer or
   agent does more than represent that a policy provides full coverage—such as
   representing that coverage exists in a specific situation—the insurer or agent

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                                         No. 22-50432

   may be liable for a misrepresentation under the DTPA.” Wyly v. Integrity Ins.
   Sols., 502 S.W.3d 901, 908 (Tex. App. 2016, no pet.) (upholding
   misrepresentation claim where insurer told insured that policy provided
   coverage from “loading to unloading” and that the insured would be covered
   under several scenarios posed by the insured).
           We agree with the magistrate judge’s conclusion that Mid-
   Continent’s statement does not amount to an actionable misrepresentation
   under the circumstances presented here. 3 Finger Oil’s agent asked Mid-
   Continent whether it had blow out and cratering coverage, to which Mid-
   Continent correctly replied that it did. Mid-Continent’s statement was more
   akin to a general statement that the policy included such coverage, rather
   than it was to a misrepresentation of specific policy terms. Indeed, Finger Oil
   was warned in the same email to “[p]lease note that each claim is based on
   its own merit and” that the statement was “just verifying the coverage in
   place.” Hence, Finger Oil was not “led wrongly to believe that [its] policy
   provided protection against a particular risk that was in fact excluded from
   the policy’s coverage.” May v. United Servs. Ass’n of Am., 844 S.W.3d 666,
   669-70 (Tex. 1992). The summary judgment evidence therefore does not
   support Finger Oil’s misrepresentation claims.
           Finger Oil also challenges the dismissal of its breach of contract
   claims, arguing that the policy covered costs and expenses incurred for (1)
   repairing property from the well blow out and (2) the costs to bring the well
   under control. We disagree.

           3
             The magistrate judge also dismissed the misrepresentation claims based on Finger
   Oil’s failure to amend its complaint to plead the “fraud-type allegations” with sufficient
   particularity to comply with the heightened pleading standard of Federal Rules of Civil
   Procedure 9(b) as directed. See Fed. R. Civ. P. 16(f) and 14(b).

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          “In Texas, insurance policies are contracts subject to the rules of
   contract construction.” Certain Underwriters at Lloyd’s of London, 892 F.3d
   at 170 (citing Mid–Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487, 491
   (5th Cir. 2000)). As with other contracts, courts “interpret and enforce them
   according to settled rules of construction” and “must give the policy’s words
   their plain meaning, without inserting additional provisions into the
   contract.” Nat’l Union Fire Ins. Co. of Pittsburgh v. Crocker, 246 S.W.3d 603,
   606 (Tex. 2008). Accordingly, courts must begin their analysis with the
   terms of the policy because they “presume parties intend what the words of
   their contract say.” Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s
   London, 327 S.W.3d 118, 126 (Tex. 2010). The words of the policy “are given
   their ordinary and generally-accepted meaning unless the policy shows the
   words were meant in a technical or different sense.” Id.
          The insured has the burden of establishing coverage under the
   policy. Id. at 124. If the insured establishes coverage, the burden shifts to the
   insurer to then prove the loss is within an exclusion. Id. If the insurer
   establishes that an exclusion applies, the burden shifts back to the insured to
   show that an exception to the exclusion brings the claim within coverage. Id.
   Applying this standard, we hold that the magistrate judge did not err in
   dismissing Finger Oil’s breach of contract claims.
          Recovering costs and expenses for the repair of Finger Oil’s well is
   expressly excluded from the policy. As noted, the policy contains an
   Ownership Exclusion preventing coverage of “property damage”
   to “property [Finger Oil] own[s] . . . including any costs or expenses incurred
   by [it] . . . for repair, replacement, enhancement, restoration, or maintenance
   of such property for any reason.” As recognized by the magistrate judge, this
   exclusion underscores that the policy only provides third-party liability
   coverage—i.e., coverage for property not owned or controlled by Finger Oil.
   See Eagle Water, L.L.C. v. Ash, 778 F. App’x 304, 305 n.1 (5th Cir. 2019) (per

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                                     No. 22-50432

   curiam) (“The purpose of owned property exclusions in general liability
   policies is to effectuate the intent that liability insurance is designed to
   provide compensation for damages to property not owned or controlled by
   the insured. It does not provide first party coverage for losses sustained by
   the insured on its own property.” (quotation omitted)). Finger Oil provides
   no basis for the court to question the clear terms of this exclusion, nor does it
   dispute that it owned the well in question.
          Rather, Finger Oil argues that this case is akin to Mid-Continent
   Casualty Company v. Bay Rock Operating Company, 14 F.3d 105 (5th Cir.
   2010), a case in which this court rejected the insurer’s argument that an oil
   and gas endorsement with identical language precluded coverage for repair
   costs. Bay Rock, however, is readily distinguishable. That case, unlike this
   one, involved damages to a well that the insured did not own. Whereas here
   Finger Oil is seeking reimbursement for damages to its own property.
   Accordingly, Bay Rock is not applicable here, and Finger Oil’s repair costs are
   not covered by the policy.
          Likewise, Finger Oil’s costs for bringing the well under control are not
   covered. Recall that the Oil and Gas Endorsement includes coverage for “the
   Blow Out and Cratering of any well” with the exclusion of “[a]ny loss, costs,
   or expense . . . in connection with controlling or bringing under control any
   oil, gas, or water well.” This provision unambiguously excludes coverage of
   expenses connected to controlling or bringing under control Finger Oil’s
   well. See Tristar Expl., Inc. v. Mid-Continent Cas. Co., 2007 WL 1816894, at
   *2 (Tex. App. June 26, 2007) (holding no breach of contract under similar
   policy language stating that coverage was “limited by the well control
   exclusion clause, meaning those expenses connected to controlling or
   bringing under control any gas, oil, or water well are excluded.”). Finger Oil
   again provides no basis for this court to interpret this exclusion in its favor.

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   The magistrate judge, therefore, did not err in holding that Finger Oil’s
   expenses for bringing the well under control were not covered by the policy.
                              IV. Conclusion
         For the aforementioned reasons, we AFFIRM.

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