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Docket Number

No. 84-923.

Attorney(S)

Brame, Bergstedt and Brame, Joe A. Brame, Lake Charles, for defendant-appellant-appellee. R. Keith Findley, Lake Charles, for defendants-appellees-appellants. Collings Collings, R. William Collings, Lake Charles, for plaintiff-appellee-appellant. Stockwell, Sievert, Viccellio, Clements Shaddock, Bernard H. McLaughlin, Jr., J. Fred Patin, Robert L. Dow, Lake Charles, Gachassin and Hunter, Nicholas J. Sigur, LaFayette, Leithead, Scott, Boudreau, Myrick Richard, Edward Myrick, Lake Charles, for defendants-appellees.

Judges

KNOLL, Judge.

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Smart Summary

Court of Appeal of Louisiana, Third Circuit — E.A. Bell v. Sediment Removers, Inc., et al. (Dec. 12, 1985)

Factual and Procedural Background

Edwin A. Bell ("Bell") brought a trespass action against Firestone Tire and Rubber Company ("Firestone"), Sediment Removers, Inc. ("Sediment Removers"), and L.F. Reeves d/b/a Reco Construction Company ("Reeves") arising from the disposal of non-toxic industrial waste into a four-acre borrow pit that Bell and Reeves co-owned. Firestone produced the waste; Sediment Removers contracted to remove and dispose of it; Reeves hauled and deposited the material at the pit. When dumping occurred, Bell obtained an injunction halting further dumping. At the time the disposal stopped, 8,069 cubic feet of waste had been deposited; the evidence indicated dumping occurred on Reeves's side without Bell's permission, and some portion of the waste (composed of approximately 80% water and 20% sludge) migrated onto Bell's side.

Firestone and Sediment Removers filed a third-party claim against American Employers Insurance Company ("American Employers") asserting comprehensive general liability coverage and seeking attorney's fees for failure to defend. Sediment Removers also filed a third-party demand against Reeves for indemnity and contribution. The trial court directed a verdict dismissing Firestone and, after trial, held Reeves, American Employers, and Sediment Removers solidarily liable to Bell for $12,500 and awarded Sediment Removers $5,000 in attorney's fees for American Employers' failure to defend. Firestone was dismissed at trial; only Bell, Sediment Removers, and American Employers appealed. The appellate court reversed the award of damages to Bell and found American Employers owed a duty to defend Sediment Removers, pretermitting other issues.

Legal Issues Presented

Whether Bell proved his damages by a preponderance of the evidence.
Whether Firestone was improperly dismissed from the lawsuit.
Whether fault or negligence was shown on the part of Sediment Removers.
Whether there was a legal relationship between Reeves and Sediment Removers.
Whether American Employers provided coverage, and if so, whether coverage existed if the relationship between Reeves and Sediment Removers was either that of independent contractor or joint venturer.
Whether American Employers' insurance policy excluded coverage to Sediment Removers under its pollution exclusion.
Whether American Employers owed Sediment Removers a duty to defend.
Whether Bell's damage award should be increased.

Arguments of the Parties

Plaintiff-Appellant (E.A. Bell)

Sought damages for trespass resulting from the migration of Firestone's waste onto his portion of the borrow pit, including claimed diminution in property value, costs to remove sludge, compensation for unjust enrichment (disposal fees), and mental anguish associated with halting the dumping.

Defendants / Third-Party Plaintiffs (Firestone, Sediment Removers) and L.F. Reeves

Contended that, even if a technical trespass occurred, Bell failed to prove damage by a preponderance of the evidence.
At trial, Firestone was dismissed on a motion for directed verdict; Reeves, Sediment Removers, and American Employers were held solidarily liable at trial (subject to appeal on other points).

American Employers Insurance Company

Argued it was not required to defend Sediment Removers because (1) Sediment Removers had no fault apart from Reeves's actions (no vicarious liability relationship established), and (2) the policy's pollution exclusion and policy language meant that the 14-day dumping period did not constitute a "sudden" discharge and therefore excluded coverage.
Contended the trial court erred in awarding attorney's fees for failure to defend.

Sediment Removers, Inc. (as to insurance coverage)

Procured and specifically requested broader certificate language to enable bidding on the Firestone contract; the certificate provided broader liability coverage than American Employers' standard policy wording.
Relied on the certificate presented to Firestone; the insurer (American Employers) received a copy of that certificate and did not attempt to limit its terms.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Hoffpauir v. State Farm Mut. Auto Ins. Co., 427 So.2d 560 (La.App. 3d Cir. 1983), writ denied, 435 So.2d 449 (La. 1983)	Defines burden of proof by preponderance of the evidence and that direct or circumstantial evidence suffices when it makes the fact more probable than not.	Used to articulate that Bell bore the burden to prove damages by a preponderance and that proof may be direct or circumstantial.
Grandeson v. International Harvester Credit Corp., 223 La. 504, 66 So.2d 317 (1953)	In a trespass action, plaintiff must show damages based on the result or consequences flowing from the trespass.	Applied to state that Bell was required to show damages resulting from the act of trespass.
Meadors v. Cravy, 165 So.2d 546 (La.App. 2nd Cir. 1964)	If a plaintiff cannot substantiate his claim for damages by a preponderance of the evidence, he is due no damages.	Included among authority supporting dismissal of damages where not proved by preponderance.
Central Louisiana Electric Co. v. Mire, 140 So.2d 467 (La.App. 1st Cir. 1962)	Same principle: damages must be substantiated by preponderance.	Referenced as precedent supporting the requirement that damages be proved by a preponderance.
Guidry v. Matherne, 12 So.2d 19 (La.App. 1st Cir. 1943)	Same principle regarding proof of damages.	Referenced to support the rule that unproven damage claims yield no recovery.
Thomas v. Philip Werlein, Limited, 181 La. 104, 158 So. 635 (1935)	Precedent on requirement to prove damages in tort/trespass actions.	Used as historical authority supporting the need for proof of damages by preponderance.
McKowen v. McCraine, 244 So.2d 45 (La.App. 1st Cir. 1971)	Mental anguish does not necessarily flow from trespass and must be proven with sufficient evidence.	Applied to reject Bell's award for mental anguish due to lack of evidentiary support.
Patin v. Stockstill, 315 So.2d 868 (La.App. 1st Cir. 1975)	Definition/recognition of a "technical" trespass as unlawful physical invasion of property.	Applied to acknowledge Bell proved a technical trespass but not consequential damage from it.
Guilbeau v. Roger, 443 So.2d 773 (La.App. 3rd Cir. 1983), writ denied, 446 So.2d 1224 (La. 1984)	An insurer's obligation to defend is broader than its liability for damages; defense obligation is determined by the petition's allegations and exists unless the petition unambiguously excludes coverage.	Applied to analyze insurer's duty to defend Sediment Removers; court concluded duty arises unless petition unambiguously excludes coverage.
Flaherty v. Gulfco Life Insurance Company, 327 So.2d 436 (La.App. 3rd Cir. 1976), writ denied, 329 So.2d 430 (La. 1976)	Ratification principle: an insurer may be bound by the acts of its agent where it ratifies those acts, yielding broader coverage than the policy's base terms.	Applied to conclude American Employers, having received but not limited the certificate of insurance, ratified its agent's broader certificate language and became bound to the expanded coverage for duty-to-defend purposes.

Court's Reasoning and Analysis

The appellate court's analysis proceeded in two main strands: (1) evaluation of Bell's proof of damages in the trespass claim, and (2) determination of American Employers' duty to defend Sediment Removers.

On damages, the court applied the settled burden-of-proof rule that a plaintiff must prove damages by a preponderance of the evidence (citing Hoffpauir and related authorities). Although Bell established a "technical" trespass (an unlawful physical invasion), the court found that Bell failed to carry his burden to show that the physical invasion of non-toxic waste caused compensable damage to his property. The trial court itself noted an absence of proof as to how much sludge crossed onto Bell's side and admitted the evidence on the amount was "extremely weak." The appellate court emphasized additional facts in the record that undercut Bell's claim of unique injury attributable to the defendants: the pit had been used for disposal of various wastes for many years before Bell's purchase; Bell and Reeves had previously brought filter cake (possibly toxic) to the site; and Bell had purchased the pit as a disposal site for certain non-toxic contracts. The court concluded the trial court's monetary awards were not supported by the requisite preponderance of evidence, characterized the trial court's award as effectively penal in nature, and determined the awards (including the $2,500 for mental anguish and $10,000 for diminution/removal/unjust enrichment) were not adequately proven.

On the duty-to-defend issue, the court noted the general principle that an insurer's duty to defend is broader than its ultimate liability and is tested by the allegations of the plaintiff's petition; coverage must be unambiguously excluded by the petition to relieve the insurer of defense obligations (citing Guilbeau). The court then examined the certificate of insurance Sediment Removers provided the owner (Firestone). The certificate contained broader liability coverage language indemnifying the owner for claims "in any manner caused by, incident to, connected with, resulting or arising from the performance of this contract..." — broader than American Employers' underlying policy terms. The court found the certificate language was specifically requested by Sediment Removers to qualify for the Firestone bid, that American Employers received a copy of the certificate and did not attempt to limit its terms, and therefore American Employers ratified the agent's act and became bound by the broader certificate coverage (citing Flaherty). Given the broader certificate, Bell's petition did not unambiguously exclude coverage; therefore American Employers owed Sediment Removers a duty to defend and the trial court's award of attorney's fees for failure to defend was proper.

Because the court found American Employers owed a duty to defend and Bell failed to prove damages by a preponderance of the evidence, the appellate court reversed the trial court's award of damages to Bell against Sediment Removers and American Employers and dismissed Bell's demands against those two entities with prejudice. The court expressly pretermitted discussion of other issues it found unnecessary to resolve in light of these holdings.

Holding and Implications

Core Ruling: The appellate court reversed the trial court's monetary judgment in favor of E.A. Bell against Sediment Removers, Inc. and American Employers Insurance Company, dismissed Bell's claims against those two defendants with prejudice, and affirmed the trial court in all other respects. The court also held that American Employers owed Sediment Removers a duty to defend under the broader certificate of insurance and affirmed the award of attorney's fees for failure to defend.

Direct consequences and practical implications:

Bell's damage award against Sediment Removers and American Employers was reversed and those claims were dismissed with prejudice.
The judgment previously rendered against L.F. Reeves d/b/a Reco Construction Company was final (no appeal by Reeves was pursued) and unaffected by the reversal as to Sediment Removers and American Employers.
American Employers was held to have owed Sediment Removers a duty to defend because of the broader certificate of insurance it received and did not limit; the attorney's-fee award for failure to defend was upheld.
The appellate court allocated trial-court costs one-half to Bell and one-half to Reeves; appeal costs were assessed one-half to Bell and one-half to American Employers.
No novel legal doctrine was announced; the court applied existing principles concerning burden of proof in trespass actions, proof required for mental anguish, insurer duty-to-defend standards, and ratification of an agent's issuance of broader certificate language to bind an insurer.

Disposition (as stated in the opinion): "REVERSED IN PART, AFFIRMED IN PART AND RENDERED."

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E.A. BELL, PLAINTIFF-APPELLANT-APPELLEE, v. SEDIMENT REMOVERS, INC. AND L.F. REEVES D/B/A RECO CONSTRUCTION COMPANY, DEFENDANTS-APPELLEES-APPELLANTS.

KNOLL, Judge.

This is a trespass action. Edwin A. Bell (hereafter Bell) sued Firestone Tire and Rubber Company (hereafter Firestone), the producer of certain non-toxic industrial waste material, Sediment Removers, Inc. (hereafter Sediment Removers), the holder of a contract with Firestone to remove the waste material, and L.F. Reeves d/b/a Reco Construction Company (hereafter Reeves), the hauler of the Firestone waste for Sediment Removers to a site Reeves and Bell co-own. Firestone and Sediment Removers filed a third party claim against American Employers Insurance Company (hereafter American Employers) claiming American Employers provided them with comprehensive general liability coverage, and owed them attorney's fees for failing to provide a defense. Sediment Removers also filed a third party demand against Reeves seeking indemnity and contribution. The trial court dismissed Firestone on a motion for directed verdict, and at the conclusion of the trial, held Reeves, American Employers and Sediment Removers solidarily liable to Bell for $12,500 damages, and awarded Sediment Removers $5000 attorney's fees for American Employers' failure to defend. Only Bell, Sediment Removers, and American Employers appeal, therefore, the judgment against L.F. Reeves d/b/a Reco Construction Company is final. The issues presented are: (1) whether Bell proved its damages by a preponderance of the evidence; (2) whether Firestone was improperly dismissed from the lawsuit; (3) whether fault or negligence was shown on the part of Sediment Removers; (4) whether there was a legal relationship between Reeves and Sediment Removers; (5) whether American Employers provided coverage, if any was owed, if the relationship between Reeves and Sediment Removers was either that of independent contractor or joint venturer; (6) whether American Employers' insurance policy excluded coverage to Sediment Removers under its pollution exclusion; (7) whether American Employers owed Sediment Removers a duty to defend; and (8) whether Bell's damage award should be increased. We reverse the trial court's award of damages to Bell, finding he failed to prove damages by a preponderance of the evidence, and that American Employers owed a duty to defend Sediment Removers, therefore, we pretermit discussion of all other issues.

FACTS

Bell and Reeves own adjacent properties in Calcasieu Parish on which a four acre borrow pit traverses a common boundary. There is nothing in the pit to prevent waste from migrating from one side to the other. Prior to Bell's purchase of this property, the pit had been used for the disposal of various types of waste material, including the use of it as a ward dump. Waste material migrated across the pond prior to this trespass action.

In 1975 Firestone entertained bids for the removal of non-toxic, non-hazardous waste from its plant site and awarded the contract to Sediment Removers for disposal of the waste material in a landfill operation. Sediment Removers in turn contracted with Reeves for transportation of the waste material to the pit co-owned by Reeves and Bell. When Reeves began disposing the industrial waste in the co-owned pit, Bell obtained an injunction because of the violation of a servitude of passage granted Bell and Reeves under a prior contract. At the time Reeves and Sediment Removers halted their disposal activity 8,069 cubic feet of waste had been deposited. The evidence preponderates that the dumping was on Reeves's side of the pit, but without the permission of Bell, and an undetermined amount of waste material (composed of 80% water and 20% sludge) settled on Bell's side of the pit.

DAMAGES

Firestone, Sediment Removers and American Employers contend that even though there may have been a technical trespass on Bell's portion of the pit, Bell failed to prove that he was damaged by the trespass. We agree.

Plaintiff must prove by a preponderance of the evidence the damages caused by the tortfeasor. This burden of proof may be met by either direct or circumstantial evidence. Proof by direct or circumstantial evidence is sufficient to constitute a preponderance when, taking the evidence as a whole, such proof shows that the facts or causation sought to be proved is more probable than not. Hoffpauir v. State Farm Mut. Auto Ins. Co., 427 So.2d 560 (La.App. 3rd Cir. 1983), writ denied, 435 So.2d 449 (La. 1983). In a trespass action it is encumbent upon plaintiff to show damages based on the result or the consequences of an injury flowing from the act of trespass. Grandeson v. International Harvester Credit Corp., 223 La. 504, 66 So.2d 317 (1953). A plaintiff who is unable to substantiate his claim for damages in a trespass action by a preponderance of the evidence is due no damages. Meadors v. Cravy, 165 So.2d 546 (La.App. 2nd Cir. 1964); Central Louisiana Electric Co. v. Mire, 140 So.2d 467 (La.App. 1st Cir. 1962); Guidry v. Matherne, 12 So.2d 19 (La.App. 1st Cir. 1943); Thomas v. Philip Werlein, Limited, 181 La. 104, 158 So. 635 (1935).

The trial court awarded Bell $2500 for mental anguish he suffered as the result of bringing legal action to halt the dumping of Firestone's waste, and for a reduction of his property value. We disagree. Mental anguish does not result of necessity from a trespass or the encroachment on one's property; even though it may be compensatory, it must be proven with sufficient evidence. McKowen v. McCraine, 244 So.2d 45 (La.App. 1st Cir. 1971). The record is void of any evidence to support this award.

The trial court also awarded Bell $10,000 to compensate him for the depreciation of his land's value, the cost of removing the sludge from his property, and for any unjust enrichment for disposal fees paid to Reeves and Sediment Removers for disposal of waste on Bell's property.

Bell proved a technical trespass of Firestone's sludge on to his property, i.e., the unlawful physical invasion of his property. See Patin v. Stockstill, 315 So.2d 868 (La.App. 1st Cir. 1975). However, he failed to prove that his property was damaged by the physical invasion of nontoxic waste. Although the trial court awarded Bell damages, in its written reasons for judgment the court determined that Bell failed to prove damages but awarded damages because of "improper dumping." In its reasons, the court stated:

"While this Court is in agreement that plaintiff was damaged to some degree by the dumping of Reeves and Sediment Removers, this Court is of the opinion that plaintiff failed to prove with particularly [sic] the damages which it seeks . A reading of the record will show that there are numerous requests for different types of damages in this case. The plaintiff based one request on the value of the property. The plaintiff based another request on the cost of the removal of the sludge from the property. The problem this Court has is that the plaintiff failed to prove how much of the sludge came onto his property through the improper dumping of defendants. The evidence is extremely weak on this point. After long consideration, the Court finds that some award should be rendered for the improper dumping by defendants, but does not agree with the plaintiff as to the amount of that award." (Emphasis added.)

The damages awarded by the court are penal in nature and, therefore, are clearly improper in this tort action.

The record is void of how much of the sludge transmigrated to Bell's side of the borrow pit. Further, the record establishes that for many years prior to this trespass action the pit was used as a disposal site for industrial waste. Bell admitted that he and Reeves hauled filter cake, which may have been toxic according to some of the expert testimony, to this site prior to his purchase of the land. Likewise the record is clear that the pit was used as an industrial dump site for many years prior to Bell's purchase, and that Bell himself purchased the pit as a disposal site for certain nontoxic industrial waste removal contracts that he serviced. We therefore conclude that the trial court was manifestly erroneous in awarding damages which were not proved by a preponderance of the evidence.

DUTY TO DEFEND

The trial court ruled that American Employers provided comprehensive general liability insurance to Sediment Removers, and awarded it $5000 attorney's fees for American Employers failure to defend. American Employers contends the trial court erred in making this award.

An insurer's obligation to defend suits against its insured is broader than its liability for damage claims. The insurer's obligation to defend suits against the insured is determined by the allegations of the plaintiff's petition with the insurer being obligated to provide a defense unless the petition unambiguously excludes coverage. Guilbeau v. Roger, 443 So.2d 773 (La.App. 3rd Cir. 1983), writ denied, 446 So.2d 1224 (La. 1984).

American Employers' refusal to provide Sediment Removers a defense is based on two grounds: (1) Sediment Removers was not guilty of any negligence or fault apart from Reeves's actions, and no legal relationship was established with which to make Sediment Removers vicariously liable; and (2) the policy of insurance between Sediment Removers and American Employers unambiguously excludes coverage because the dumping of Firestone's waste material over a period of 14 days did not constitute a "sudden" discharge.

Since we find that American Employers owed Sediment Removers a duty to defend based on the certificate of insurance, we will not treat the issues raised by American Employers. The certificate of insurance provides:

"Liability Coverage: The Contractor [Sediment Removers] shall indemnify Owner [Firestone] and save it harmless from damage to Owner's property and from all claims and judgments for injury or death to persons or property damage (including costs of litigation and attorney's fees) made or obtained against owner by third persons including Owner's and Contractor's employees and agents, based on injuries to person or property, in any manner caused by, incident to, connected with, resulting or arising from the performance of this contract or the presence of Contractor's employees and/or agents on Owner's premises, regardless of whether such claims are alleged to be caused by negligence, or otherwise, on the part of the Owner or its employees but the Contractor will not be responsible for loss, damage or injury, including death, caused by the sole negligence of the Owner or its employees, excepting however, injury to or death of employees of the Contractor, from any cause whatsoever."

This language was specifically requested by Sediment Removers to enable it to bid on the Firestone contract, and is broader than the provisions of American Employers' insurance policy. The record shows that American Employers received a copy of the certificate of insurance and made no attempt to delimit its terms. Accordingly, American Employers ratified the acts of its agent thereby binding it to the broader coverage. See Flaherty v. Gulfco Life Insurance Company, 327 So.2d 436 (La.App. 3rd Cir. 1976), writ denied, 329 So.2d 430 (La. 1976). In light of the expanded terms of the certificate of insurance, we cannot say that Bell's petition unambiguously excludes coverage. Therefore, we find no error in the trial court's award of attorney's fees to Sediment Removers for American Employers' failure to defend.

For the foregoing reasons, the judgment of the trial court is reversed insofar as it renders judgment in favor of E.A. Bell and against Sediment Removers, Inc. and American Employers Insurance Company, and accordingly:

IT IS ORDERED, ADJUDGED AND DECREED that the demands of E.A. Bell against Sediment Removers, Inc., and American Employers Insurance Company are dismissed with prejudice. In all other respects the judgment of the trial court is affirmed. All costs of the trial court are assessed one-half to E.A. Bell and one-half to L.F. Reeves d/b/a Reco Construction Company, Inc.

Costs of this appeal are assessed one-half to E.A. Bell and one-half to American Employers Insurance Company.

REVERSED IN PART, AFFIRMED IN PART AND RENDERED.

BELL v. SEDIMENT REMOVERS, INC