Lake Charles, Louisiana - May 30, 2006 - On May 24, 2006, in an important victory for policyholders seeking coverage for losses governed by Louisiana law, the Court of Appeal for the Third Circuit denied the Application for Supervisory Writ of Liberty Mutual Insurance Company ("Liberty Mutual") on a choice-of-law issue, agreeing with the trial court that genuine issues of material fact remained concerning what state's law should govern the Liberty Mutual insurance policy in question. (In Re:EDC Contractor Insurance Litigation, CW 05-1064.)

This litigation arises out of thousands of personal injury claims brought against ConocoPhillips Company, successor-by-merger to Conoco Inc. ("ConocoPhillips"), and others, for alleged exposure to discharged ethylene dichloride ("EDC") at ConocoPhillips's Docks Facility in Westlake, Louisiana.  In the lawsuit, ConocoPhillips has sought insurance coverage as an additional insured under the insurance policies sold to various contractors working for ConocoPhillips during the cleanup of the discharged EDC, which ConocoPhillips discovered in late March 1994.  Liberty Mutual insured one of those contractors, S&B Engineers & Constructors, Ltd ("S&B"). ConocoPhillips was represented by Anderson Kill & Olick, P.C. and G. Andrew Veazey of Huval, Veazey, Felder & Aertker.  Liberty Mutual was represented by George B. Hall, Jr., Stephen P. Hall, and Marian T. Harrison of Phelps Dunbar, LLP, and Allen J. Mitchell, II of Mitchell & Blanco. In the trial court, Liberty Mutual moved for summary judgment arguing that the policy it sold to S&B was governed by Texas, rather than Louisiana, law, and that under Texas law, the claim for coverage of ConocoPhillips was barred by a so-called pollution exclusion.  Liberty Mutual asserted that under Louisiana jurisprudence, because the insurance policy allegedly was negotiated, executed, and delivered in Texas, the policy must be construed under Texas law.  Liberty Mutual noted that S&B was a Texas company, and that the policy was sold to S&B in Texas through a Liberty Mutual sales office located in Texas. ConocoPhillips argued in opposition that it should be the place of the risk, not the place of alleged issuance or delivery, that must control what law will apply to an insurance policy.  Because all of the underlying claims in this case were brought by Louisiana residents against ConocoPhillips for alleged injuries sustained in Louisiana arising from activities undertaken in Louisiana, ConocoPhillips contended that Louisiana jurisprudence should apply.  Further, ConocoPhillips asserted that under the applicable Louisiana Code provisions, additional discovery was needed to determine the expectations of the parties regarding choice of law.  For example, ConocoPhillips sought discovery about whether Liberty Mutual expected Texas law to apply to a claim such as the one at issue, as well as the nature of the negotiations that led up to the policy that Liberty Mutual eventually sold to S&B. The Third Circuit Court of Appeal agreed with the trial court that additional discovery was necessary before a choice-of-law decision could be rendered.  The Third Circuit noted that ConocoPhillips pressed for discovery, including a corporate deposition, which Liberty Mutual did not allow.  Further, although Liberty Mutual put in an affidavit to support its position, the Court of Appeal found that "[i]n many respects, [the affiant's] statements were non-specific and self-serving; they essentially tracked the factors enumerated in Article 3537." In addition, the Third Circuit observed that the affidavit did "not detail what the 'negotiations' between S&B and Liberty Mutual involved."  For example, the court asked, "[d]id S&B simply request a CGL policy with a[] blanket additional insured provision or did representatives of both companies negotiate back and forth regarding specific coverage provisions and exclusions to be included in the policies?" The court also wondered whether the additional insured endorsement was "negotiated between S&B and Liberty Mutual or did S&B simply request the endorsement with no discussion at all?"  Further, the court asked "[d]id S&B question the application of the additional insured endorsement regarding contracts it performed outside the state of Texas?"  The court also agreed with the trial court that information was needed regarding whether "the premium charged for the additional insured endorsement [was] a flat rate premium or was it calculated based on factors which are pertinent to the issues here." The court "considered the numerous cases cited by Liberty Mutual which indicate it would be appropriate to apply Texas law," but found that "there is no discussion in those cases of the specific facts outlined above" and the court could not "tell from the discussions in those cases whether there was extensive discovery concerning the negotiation and issuance of the policies, whether the negotiations for the issuance of the policies were detailed, or whether a simple request for a policy was submitted by the insured to its insurer."  Accordingly, "Liberty Mutual ha[d] not established that it [wa]s 'entitled to judgment as a matter of law.'" For more information, please contact:Carol A. UeckermanCommunications/Marketing Managercueckerman@andersonkill.com(212) 278-1339