Bitco General Insurance Corporation v. J. Burns Brown Operating Co.

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
BITCO GENERAL INSURANCE
CORPORATION,
Plaintiff-Appellee,
v.
J. BURNS BROWN OPERATING CO.,
Defendant-Appellant.
No. 20-35490
D.C. No. 4:18-cv-00087-BMM
MEMORANDUM*
Appeal from the United States District Court
for the District of Montana
Brian M. Morris, District Judge, Presiding
Submitted April 14, 2021**
Seattle, Washington
Before: O’SCANNLAIN, GRABER, and CALLAHAN, Circuit Judges.
J. Burns Brown Operating Co. appeals the district court’s grant of summary
judgment in BITCO General Insurance Corporation’s favor. At issue is whether
the umbrella insurance policy J. Burns purchased from BITCO covers pollution
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
FILED
APR 19 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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costs that J. Burns incurred after one of its wells discharged oil and related
contaminants into a reservoir. The district court held that the policy bars coverage.
We have jurisdiction under 28 U.S.C. § 1291, and reviewing de novo, AXIS
Reinsurance Co. v. Northrop Grumman Corp., 975 F.3d 840, 844 (9th Cir. 2020),
we affirm.1
The umbrella policy excludes coverage for pollution-caused property
damage, with one exception: The exclusion does not apply if J. Burns possesses
“underlying insurance” for pollution costs “at the limits shown in the schedule of
underlying insurance.” That schedule, in turn, lists a $1 million each-occurrence
limit on J. Burns’s primary policy, but the primary policy provides only $100,000
in pollution coverage. So while J. Burns’s “underlying insurance” does cover
some of the company’s cleanup costs, it does not do so at the requisite limits.
Accordingly, the narrow exception to the pollution exclusion does not apply, and
the umbrella policy bars coverage. See Performance Mach. Co. v. Yellowstone
Mountain Club, LLC, 169 P.3d 394, 403 (Mont. 2007) (“Where the language of a
contract is unambiguous, the duty of the court is to apply [it] as written.”).
J. Burns concedes that this view is reasonable but argues that the policy is
ambiguous. We disagree. Contrary to the company’s contention, a reasonable
policyholder would understand the need to have $1 million in pollution coverage.
1 We grant J. Burns’s request for judicial notice. See Fed. R. Evid. 201(d).

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The language about the primary policy’s limits applying “whether or not such is
collectible” means only that the umbrella policy will not drop down if J. Burns
recovers less than the primary policy’s $1 million limit, which comports with the
way umbrella policies typically work. See 15 Couch on Ins. § 220:34 (3d ed.
2020). This language cannot reasonably be read as negating the requirement that J.
Burns have a certain level of pollution coverage. If that were the case, the
exception would always apply, and the exclusion would be superfluous. See
Mont. Petro. Tank Release Comp. Bd. v. Crumleys, Inc., 174 P.3d 948, 957 (Mont.
2008) (stressing that, “if possible,” courts must reconcile a policy’s “various parts
to give each meaning and effect” (internal quotation marks and citation omitted)).
J. Burns’s remaining arguments are likewise unavailing. Although a “follow
form” policy typically provides the same coverage as an underlying one, the term
carries little weight here. It appears only in the exclusion’s title, and a reasonable
policyholder would not construe “POLLUTION EXCLUSION–FOLLOW FORM”
as providing pollution coverage based solely on the latter two words. Finally,
because the exclusion is unambiguous, we reject J. Burns’s argument that, as an
oil-and-gas company, it could reasonably expect BITCO, an oil-and-gas insurer, to
cover its pollution costs. See id. at 958 (“[A] policyholder’s expectations which
are contrary to a clear exclusion from coverage are not objectively reasonable.”
(internal quotation marks and citation omitted)).

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AFFIRMED.

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