Phelps Dunbar LLP | January 30, 2018
A Louisiana court of appeal affirmed a grant of summary judgment in favor of an insurer where the alleged damage did not manifest during the policy periods. Crosstex Energy Servs., LP v. Texas Brine Co., LLC, 2017-0863 (La. App. 1 Cir. 12/21/17).
The insured, operator of an underground salt dome, had CGL policies for multiple policy periods that provided coverage for property damage, defined as “physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it….” Years after the last policy expired, a sinkhole appeared near the salt dome. The plaintiffs in the underlying litigation, who own and operate a gas pipeline that traverses the edge of a salt dome, sued the insured alleging that the sinkhole was caused by its operations. The insured filed a declaratory judgment demanding defense and indemnity from various insurers under certain liability policies pre-dating the sinkhole. The insurers moved for summary judgment claiming they had no duty to defend or indemnify because the alleged damage did not occur during the policy periods. The district court granted the motion and the insured appealed, arguing that the policies do not limit coverage to property damage that manifests itself during the policy period and should be interpreted to cover possible hidden property damage that may have resulted from earth movement that may have occurred during the policy periods.
The court of appeal affirmed, finding that the underlying petition did not allege damage prior to the appearance of the sinkhole, and dismissed the insured’s argument that genuine issues of material fact existed as to whether hidden damage occurred before the appearance of the sinkhole due to subsidence and other invisible underground damage in the prior years.