A federal appeals court upheld a lower court ruling on Tuesday, saying an FCCI Insurance Group must contribute to an Old Republic Insurance Group’s defense costs in litigation against a commercial driller.
Old Republic Unit BITCO General Insurance Corp. and the FCCI Monroe Guaranty Insurance Co. had both issued commercial general liability insurance to San Antonio, Texas-based 5D Drilling & Pump Service Inc., according to the judgment of the 5th U.S. Circuit Court of Appeals in New Orleans in BITCO General Insurance Corp., formerly known as Bituminous Casually Corp. v. Monroe Guaranty Insurance Co., a member of the FCCI Insurance Group.
In the summer of 2014, David Jones hired 5D to drill a 3,600-foot-deep commercial irrigation well through an aquifer that runs beneath his farm. 5D is alleged to have failed to drill the well properly and in June 2016, Mr. Jones the company for breach of contract and negligence, according to the verdict.
5D informed the insurers of the lawsuit, which was eventually settled. BITCO agreed to defend 5D, while Monroe refused, claiming that the alleged property damage occurred outside the insurance period and citing two business risk exclusions in its policy.
BITCO brought an action before the US District Court in San Antonio, requesting a declaratory judgment. Monroe also had to defend the company and regain its share of the defense.
The district court ruled in favor of BITCO and was confirmed by a court panel with three judges. After requesting and receiving a decision from the Texas Supreme Court that it could consider external evidence in the case, the appellate court said that the case’s submission “claims potential harm within Monroe’s policy period, sufficient to trigger the obligation to defend.”
The panel also considered that two policy exceptions do not apply. Monroe “can not show that any of the exceptions unequivocally apply to all alleged damages,” the panel said, confirming the lower court’s ruling.
Lawyers in the case did not respond to requests for comment.