Opinion:National American Insurance Co. v. New Dominion, 2021 OK 62
Subject matter:Insurance Defense 
Date Decided:November 23, 2021
Trial Court:District Court of Lincoln County; Judge Ashwood
Route to this Court:Appeal of Final Order from Bench Trial; Retained
Facts:National American Insurance Company (“NAICO”) brought suit against New Dominion, LLC, seeking declaratory judgment that four consecutive commercial general liability policies it had issued to New Dominion did not provide coverage for bodily injury and property damage claims asserted in a number of separate lawsuits (“the Earthquake Lawsuits”). These claims allegedly arose out of seismic activity caused by New Dominion’s oil and gas operations. New Dominion filed a counterclaim alleging breach of contract, seeking defense and indemnity, and asserting equitable claims for estoppel and reformation. The trial court bifurcated the issues pleaded, conducting separate bench trials for the contract interpretation questions and the equitable claims. Following the first bench trial, the court issued a declaratory judgment holding that the Total Pollution Exclusions and the Subsidence and Earth Movement Exclusions in the commercial general liability policies clearly and unambiguously precluded coverage for the claims asserted in the Earthquake Lawsuits. Following the second trial, the court estopped NAICO from denying claims for bodily injury during one of the four policy periods but denied all other equitable claims.
Standard of Review:De Novo as to questions of law; Factual findings sustained unless clearly against the weight of the evidence. 
Analysis:Total Pollution Exclusion: The Total Pollution Exclusion excludes coverage for bodily injury and property damage “which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.” Pollutants are defined within the policies as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Waste refers to “materials to be recycled, reconditioned, or reclaimed.” The Court first concludes that Total Pollution Exclusion is ambiguous, insofar as the phrase “irritant or contaminant” does not clearly encompass the wastewater at issue in the case. The Court next finds that construing the ambiguity in favor of the insured, it was reasonable for New Dominion to have understood the Total Pollution Exclusion as applicable only in instances where bodily injury or property damage resulted from the irritating or contaminating nature of a pollutant. “Moreover, this Court will not endorse an absurdly expansive reading of the Total Pollution Exclusions and, in so doing, legitimize a fairly transparent attempt by NAICO to further limit its exposure by invoking inapplicable exclusions to deny coverage.” Subsidence and Earth Movement Exclusions: Policy Periods 1 & 2, the provision states that this insurance does not apply to “property damage”, whether direct or indirect, arising out of, caused by, resulting from, contributed to, or aggravated by the subsidence, settling, expansion, sinking, slipping, falling away, tilting, caving in, shifting, eroding, mud flow, rising or any other movement of land or earth, whether or not any of the foregoing emanate or arise from or are related to the operations of the insured or any other person for whose acts the insured is legally liable. The Court concludes that the Subsidence Exclusions in Policy Periods 1 and 2 clearly and unambiguously preclude coverage for the events that form the basis of the Earthquake Lawsuits. While the term “earthquake” is omitted from the list of events for which coverage would be denied, the list comprises nearly every event that is commonly associated with an earthquake. Thus, it would be absurd to find that the Subsidence Exclusions do not contemplate earthquakes as well. Policy Period 3 the provision adds “earthquake” to the list of non-covered events from which property damage might result.  The inclusion of the term “earthquake” only serves to more explicitly preclude coverage for incidents like those which form the basis of the Earthquake Lawsuits. Practical Effect of Decision:  The Court appears to say that bodily injury is covered under the policy but not property damage. 
Outcome:Affirmed in part and reversed in part; cause remanded for proceedings consistent with opinion. 
Vote:Darby, C.J., Kane, V.C.J., Kauger, Winchester, Gurich, Rowe, Kuehn, JJ., concur.Edmondson, Combs, JJ., concur in part, dissent in part.
Other: Case No. 116,989, Mid-Continent Casulaty Company v. Crown Energy, which involves a similar issue related to an insurer’s duty to defend the underlying earthquake lawsuit is still pending.