In Orange Cup Drive In LLC v. Mid-Continent Casualty Co., No. 05-21-00448-CV, 2023 WL 110190 (Tex. App.—Dallas, Jan. 5, 2023, mem. op.), Orange Cup operated a convenience store and decided to open the inactive gas station at its site. Gasoline and diesel fuel was used to test the existing tanks and lines, leading to oil releases from the lines to the gas pumps, which permeated the soil.  Subsequently, Orange Cup sought coverage under its pollution liability and environmental damage insurance policy with Mid-Continent Casualty Company (“MCC”). The policy had three coverage parts: Coverage A applied to claims by third parties for property damage caused by a release; Coverage B applied to cleanup costs incurred by the insured; and Coverage C applied to expenses to repair or replace the storage tank system.  MCC paid $75,000—the maximum amount available—under Coverage C.  MCC did not pay any amount under Coverage A.  MCC did not pay any amount under Coverage B because Orange Cup had neither paid the deductible nor provided the documentation to support its claim for cleanup costs.

Consequently, Orange Cup filed suit against MCC asserting claims of violations of the Texas Insurance Code, the Deceptive Trade Practices Act, and for common law bad faith and fraud.  Orange Cup contended: (1) it was made to believe that it had coverage for third party liability; (2) MCC took advantage of Orange Cup's lack of expertise and knowledge to misrepresent to Orange Cup that it had coverage for liability from a third party claim; (3) MCC refused to approve the contractor to conduct the cleanup of the environmental leakages on Orange Cup's premises and refused to approve any expenses above Orange Cup's deductible, in violation of the parties' Rule 11 agreement; and (4) MCC refused Orange Cup's request to appoint its own contractor to conduct the cleanup if it disapproved of Orange Cup's choice.  In response, MCC moved for summary judgment on all the extracontractual claims, which the trial court granted.  

On appeal, the Court of Appeals concluded that “Orange Cup failed to raise genuine issues of material fact that it lost policy benefits or suffered an independent injury as a result of MCC's [alleged] statutory violation or bad faith; [thus], the trial court did not err by granting summary judgment for MCC. The Court reasoned that, as to Coverage A, the only affidavit testimony of the belief that Coverage A would cover claims made by Orange Cup's landlord did not provide any facts supporting a contention that the belief was based on any false representation or other statutory violation by MCC. As to Coverage B, the only summary judgment evidence was that of MCC regarding Orange Cup's failure to comply with MCC's numerous requests for documentation showing that Orange Cup was “legally obligated to pay” for a “confirmed release” under the policy.  Further, Orange Cup’s alleged damages all arose from its alleged loss of benefits under the policy, not from an independent injury.

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