Articles

Louisiana Third Circuit Affirms No Duty to Defend or Provide Coverage

Case:  Chalmers, Collins & Alwell, Inc. v. Burnett & Company, Inc., et al.
            Louisiana Third Circuit Court of Appeal
            No. 15-249, 175 So.3d 1100 (La. App. 3 Cir. 10/07/15)

Attorneys Jenny Michel and Jaime Landry in the Lafayette office served as counsel for Underwriters in this case, which they had successfully dismissed on a dispositive motion that was recently upheld on appeal, as discussed below.

Chalmers, Collins & Alwell, Inc. (“Chalmers”) contracted with Haland Operating Company, LLC (“Haland”) to perform consulting engineering services with respect to the drilling of certain wells. After numerous problems with the services provided by Chalmers, Haland refused to pay the balance due to Chalmers for those services and retained another engineering firm to complete the well. Chalmers instituted arbitration to recover its fees under the contract ($254,036). In response, Haland filed a Reconventional Demand asserting the alleged unsatisfactory work performed by Chalmers caused Haland damages in excess of $2.6 million. Chalmers then turned to its Commercial General Liability Underwriters and demanded that its Underwriters pay all the attorney’s fees and expenses associated with its defense of the very litigation instituted by Chalmers, as well as provide coverage for all or part of the $2.6 million plus damages for which it may be deemed liable for failing to satisfactorily perform its contractual obligations to Haland. Underwriters declined Chalmers’ demands and Chalmers instituted a declaratory action against its Underwriters seeking compensatory and exemplary damages, statutory penalties, declaratory judgment as to Underwriters’ duty to defend and indemnify Chalmers, attorneys’ fees and expenses in pursuit of declaratory judgment, and all costs and attorney’s fees incurred by Chalmers in defending the claims made against it in reconvention. The Fifteenth Judicial District Court granted summary judgment in favor of Underwriters, holding Underwriters owed no duty to defend or provide coverage to Chalmers for the claims asserted.

Chalmers appealed the trial court’s decision and the Third Circuit Court of Appeal affirmed, likewise finding the factual allegations of the underlying Reconventional Demand when compared with the terms and exclusions of the Policy, unambiguously excluded any possibility of coverage for the claims asserted. The Third Circuit further held logic dictates that if the Policy unambiguously excludes coverage for purposes of the insurer’s more expansive duty to defend, the insurer clearly owes no duty to provide coverage for any sums its insured may be legally obligated to pay.

The Third Circuit very methodically considered the coverage available under the Policy for each of the factual allegations of the Reconventional Demand and found coverage for each of the allegations to be unambiguously excluded by one or more terms and/or exclusions of the Policy, primarily relying upon the loss of hole or well and contractual liability exclusions. Particularly noteworthy is the court’s rejection of Chalmers’ argument that Haland’s claim for “any other relief to which it is entitled in law or in equity” should alone preclude a finding that coverage was not unambiguously excluded, as Chalmers presented no evidence as to what those other claims for relief might be. The court correctly noted that only the factual allegations of the demand may be considered and the allegations presenting a claim for “other relief” set forth no new facts which could be considered in determining the obligations at issue.

Related Practices


Related Attorneys

Find an Attorney

Each of the firm's offices include partners, associates and a professional staff dedicated to meeting the challenge of providing the firm's clients with extraordinary service.