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Pennzoil-Quaker State Co. v. Am. Int'l Specialty Lines Ins. Co. - 653 F. Supp. 2d 690 (S.D. Tex. 2009)

Rule:

An insurer is not liable for breach of Chapter 542 of Texas Insurance Code where the underlying lawsuits were not covered under the policy.

Facts:

Pennzoil-Quaker State Company sued its insurer, American International Specialty Lines Insurance ("AISLIC"), alleging breach of contract and a violation of Chapter 542 of the Texas Insurance Code. Pennzoil obtained a pollution legal liability policy from AISLIC for its Shreveport, Louisiana refinery. From January to May 2001, Pennzoil was sued in five lawsuits filed in the Louisiana state courts by residents who lived near the refinery. In the suits, the plaintiffs alleged that Pennzoil released various pollutants into the air and groundwater surrounding the refinery, causing physical injury, mental distress, and property damage. The lawsuits were administratively consolidated in June 2003. Pennzoil seeks a defense and indemnity from AISLIC for these lawsuits.

Issue:

Did AISLIC violate Chapter 542 of the Texas Insurance Code?

Answer:

No

Conclusion:

Pennzoil's motion for summary judgment that it has satisfied its deductible obligation is denied. The Court held that because an insurer is liable for a violation of Chapter 542 of the Texas Insurance Code if it has a duty to defend a covered lawsuit and it fails to do so, and because there has been no finding that Pennzoil has satisfied its deductible, Pennzoil is not entitled to summary judgment that AISLIC violated the Texas Insurance Code. 

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