AFTER REMAND FROM TEXAS SUPREME COURT, COURT OF APPEALS REVERSES SUMMARY JUDGMENT IN INSURER’S FAVOR IN COVERAGE SUIT

September 12, 2012

The El Paso Court of Appeals on August 29 reversed a summary judgment that a railroad’s comprehensive general liability policy did not cover a wrongful death suit arising out of allegations that improper failure to control vegetation led to an auto-train accident that killed two people and injured a third.  Burlington Northern & Santa Fe Railway Co. v. National Union Fire Ins. Co. of Pittsburgh, No. 08-06-00022, 2012 WL 3728176 (Tex. App.—El Paso August 29, 2012), is the El Paso court’s opinion following the Supreme Court’s per curiam remand of the case last year, 334 S.W.3d 217 (Tex. 2011), in which the high court held that the pleadings by themselves did not establish that the contractual provisions and other extrinsic evidence could not bring the vegetation control operations within the indemnity coverage of the applicable policy.

The vegetation control program at issue was performed by a company called SSI Mobley pursuant to a three-year contract with Burlington Northern & Santa Fe (“BNSF”).  BNSF was named as an additional insured under SSI Mobley’s CGL policy from National Union.  In its original opinion, the El Paso court had applied the eight corners rule to evaluate the duties to defend and indemnify.  The court then determined that the pleaded facts established that the policy’s “completed operations” exclusion applied, and affirmed the trial court’s judgment without considering extrinsic evidence.  The Supreme Court assumed without deciding that the court of appeals correctly determined that National Union owed no duty to defend, but that the court of appeals should have considered all the evidence presented by the parties in determining whether National Union was under a duty to indemnify BNSF.

On remand, the El Paso court first reconsidered its earlier opinion on the duty to defend, and, while still applying the eight-corners rule and refusing to consider extrinsic evidence, it changed its mind and held that the pleadings and policy established that National Union owed BNSF a defense.  Previously, the Court had relied on the fact that the underlying plaintiffs’ pleadings were in the past tense to determine that the “completed operations” provisions applied; in the new opinion, the Court decided that use of past tense in a petition is not unusual, and was not determinative.  The underlying petitions’ allegations established that the coverage exclusion that National Union relied on did not apply; thus, National Union owed a duty to defend.

The El Paso court then reconsidered its previous holding on the duty to indemnify in light of the Supreme Court’s opinion.  The court listed several pieces of evidence provided by both parties, and, without specific explanation, stated that the evidence raised fact issues that defeated summary judgment on that issue.  The court remanded to the trial court for further proceedings.