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Guaranty Nat'l Ins. Co. v. Vic Mfg. Co.

Citation: 28 ELR 21366
No. 97-20730, 143 F.3d 192/(5th Cir., 06/05/1998)

The court holds that the insurer of a dry cleaning equipment manufacturer has no duty-to-defend the manufacturer for claims arising out of perchloroethylene (perc) contamination caused by the equipment. The court first notes that because the perc contamination is clearly within the insurance policy's pollution exclusion, the manufacturer has the burden to show that the pollution was sudden and accidental. Under Texas law, the sudden and accidental requirement unambiguously excludes coverage for all pollution that is not released quickly as well as unexpectedly and unintentionally. The court then holds that the contamination does not fall under the sudden and accidental exception. The insurer's duty-to-defend is determined solely from the allegations in the petitions, and although the petitions use the words "sudden and accidental," they describe gradual pollution in the regular course of the dry cleaning business. Further, to the extent that the pleadings are incomplete, the extrinsic evidence shows that there is no duty-to-defend in this case. The interrogatories demonstrate that the pollution was not the result of sudden and accidental events. Although a single covered claim will suffice to require the insurer to defend the entire case, the factual allegations in this case do not create a single covered cause-of-action. Pollution is not sudden and accidental when it consists of repeated, regular discharges over numerous years in the usual course of business operations. The fact that the insured may have also experienced isolated spills or minor accidents over the same period of time is irrelevant. Last, the court holds that it will not reach the issue of the insurer's duty-to-indemnify. This issue was not decided by the trial court and was not brought forward on appeal.

Counsel for Plaintiffs
Daniel F. Shank
Davis & Shank
1415 Louisiana St., Ste. 4200, Houston TX 77002
(713) 659-1010

Counsel for Defendant
David H. Brown
Vinson & Elkins
2300 First City Tower
1001 Fannin St., Houston TX 77002
(713) 758-2098

Before DeMoss and Parker, JJ.