Affirmed and Opinion Filed July 21, 2015




                                         S   In The
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                      No. 05-13-01106-CV

                       NICHOLAS PETROLEUM, INC., Appellant
                                     V.
                   MID-CONTINENT CASUALTY COMPANY, Appellee

                      On Appeal from the 160th Judicial District Court
                                   Dallas County, Texas
                             Trial Court Cause No. 11-02336

                             MEMORANDUM OPINION
                         Before Justices Bridges, Lang, and Lang-Miers
                                  Opinion by Justice Bridges
       This case involves an insurance coverage lawsuit filed by appellant Nicholas Petroleum,

Inc. (“Nicholas”) against its insurer, appellee Mid-Continent Casualty Company (“Mid-

Continent”). The trial court granted a traditional summary judgment in favor of Mid-Continent.

On appeal, Nicholas argues the trial court erred by granting summary judgment because a factual

dispute exists as to when Mid-Continent’s coverage obligations began. Mid-Continent responds

it conclusively established no coverage existed under its insuring policies. We affirm.

                                          Background

       Nicholas owns and operates a gas station in Dallas, Texas.          Mid-Continent issued

Nicholas a Pollution Liability and Environmental Damage Policy Declaration, which provided

coverage for its underground storage tanks, for the policy period of September 17, 2007 to

September 17, 2008, and a renewal for the policy period of September 17, 2008 to September 17,
2009. Both policies are claims-made policies and explicitly state, “THIS INSURANCE DOES

NOT APPLY TO CLAIMS WHICH OCCUR BEFORE THE RETROACTIVE DATE SHOWN

HERE: 9/17/07.” Nicholas claims Mid-Continent issued an earlier policy that covered the policy

dates of May 12, 2006 to May 12, 2007; however, Nicholas admits to only receiving a copy of

the original Certificates of Insurance and not a copy of the insurance policy itself. The record

does not contain a copy of this policy.

          The 2007 and 2008 policies provided the following:

                     I.        INSURING AGREEMENT

                               Coverage A:

                                          We will pay those sums that an insured is legally
                                          obligated to pay as a result of a release(s) from
                                          scheduled Storage Tank System(s) commencing
                                          after the Retroactive Date which result in Bodily
                                          Injury or Property Damage to which this insurance
                                          applies. We will have the right and duty to defend
                                          any claim seeking those damages. All claim(s)
                                          must be reported to the company, in writing, by the
                                          Named Insured during the Policy Period or
                                          Extended Reporting Period, if applicable.1

“Release” is defined in the policies as “any spilling, leaking, emitting, discharging, escaping or

leeching of one or more Regulated Substances from a Storage Tank System into groundwater,

surfacewater, surface or subsurface soils, or the atmosphere.” The policies further provide it is a

condition precedent to coverage that “In the event of a Claim under Coverage A, the Insured

shall give us written notice as soon as possible but in any event no later than thirty (30) days

after receipt of the Claim by the Insured.” The policies define “Claim” under Coverage A to

mean “A written demand received by an Insured seeking a remedy and alleging liability or

responsibility on the part of an Insured for Loss.” The policies define “Loss” as “monetary

     1
       The policies also provided for “Coverage B” and “Coverage C”; however, because of our disposition of the appeal under “Coverage A,”
we do not discuss them. Further, the record does not show, and the parties have not argued, that the policies have an “Extended Reporting
Period.”



                                                                  –2–
awards or settlements of compensatory damages arising from Bodily Injury or Property

Damage.”

          On May 10, 2006, the Texas Commission on Environmental Quality (“TCEQ”) sent

Nicholas a letter advising that subsurface contamination had been reported, and “Because the

storage tank system at your facility was close to the area of contamination . . . you are requested

to make immediate arrangements to determine whether there is any evidence of contamination

due to leakage or spillage from your tank system.” The letter specified samples should be tested

for certain hazardous substances, some of which fell under the policies’ definition of “Regulated

Substances.”2 The TCEQ further required Nicholas to contact an environmental consulting firm

to conduct a subsurface assessment of the area around its storage tanks. The letter also informed

Nicholas that “As a potential responsible party (RP), you are responsible to pursue whatever

actions are necessary to minimize any imminent impacts or threats to human health and safety

and to stabilize the conditions caused by your storage tank system.”

          On August 2, 2006, an attorney representing Coit Partners, L.P., who owned a

Washington Mutual building next to Nicholas’s gas station, referred to as the “WAMU site,” sent

a letter to Nicholas explaining the firm has been retained to pursue claims related to the

contamination of the WAMU site from what appeared to be leaking from underground storage

tanks at the gas station. The letter alleged Coit Partners had been damaged because a buyer

terminated a contract to purchase the WAMU site after the discovery of contamination during the

inspection.

          On August 23, 2006, the TCEQ sent another letter stating it received Nicholas’s Phase I

Environmental Site Assessment sent in response to the TCEQ’s May 10, 2006 letter, but the


     2
       The hazardous substances included benzene, toluene, ethylbenzene, and total xylene (BTEX), total petroleum hydrocarbone (TPH), and
polycyclic aromatic hydrocarbons (PAHs), volatile organic compounds (VOCs), RCRA metals, and methyl tertiary butyl ether (MTBE).



                                                                 –3–
assessment did not contain any subsurface investigation as requested in the May 10, 2006 letter.

The TCEQ again advised Nicholas to contact a registered environmental consulting firm.

       The TCEQ continued to send similar letters to Nicholas on July 12, 2007, September 12,

2007, February 5, 2008, and July 13, 2008. Nicholas never responded. Nicholas also never

responded to Coit Partners’s demands for alleged damages to the WAMU site caused by leakage

from the storage tanks.

       On August 4, 2008, Coit Partners filed its original petition against Nicholas for damages

suffered because of the “migration of off-site contamination onto its property.”

       In early September of 2008, motorists in the area of the gas station reported smelling gas

and shortly thereafter, the TCEQ sent Mr. Lonnie Gilley to conduct an investigation. His

investigation lasted from September 5, 2008 until October 17, 2008. Gilley’s investigation

located a leak in a super unleaded line. The leak was repaired by October 20, 2008. However,

because of the leak, Gilley (on behalf of the TCEQ), directed Nicholas to contact a licensed

correction action specialist to assess the extent of the contamination and submit a release

determination report.

       HKC and Associates, Inc. conducted the release determination, and Hassan Chamseddin

prepared the report. The report stated “analytical results of the water samples from the two wells

showed BTEX, MTBE, and TPH . . . .” Mulaw Worash, the tank owner contact person for

Nicholas, signed the report on November 25, 2008 certifying that he reviewed the report for

accuracy.

       According to Nicholas, the TCEQ first “formally notified” it of a “release,” as defined

under the policy, on its property in a February 5, 2009 letter. Approximately two months later,

on April 10, 2009, Nicholas notified Mid-Continent of the litigation with Coit Partners resulting

from environmental contamination. In a letter dated May 11, 2009, Mid-Continent denied

                                               –4–
coverage based on Nicholas’s failure to notify the insurer of a claim within thirty days, as

required by the policy. It further denied coverage based on certain exclusions.

       Nicholas ultimately settled the lawsuit with Coit Partners and entered into an agreed

judgment in which Nicholas agreed to pay $175,000, plus five percent interest, over a period of

years with the final payment due on December 31, 2013.           Because Mid-Continent denied

coverage and refused to reimburse Nicholas for the agreed judgment, Nicholas filed the

underlying lawsuit alleging breach of contract, violations of the Texas Insurance Code, and a

breach of the duty of good faith and fair dealing.

       Mid-Continent filed a no-evidence motion for summary judgment, which the trial court

denied. It later filed a traditional motion for summary judgment and argued Nicholas failed to

provide the required notice of a claim, an expert report provided by Chamseddin established a

release happened in 2005, which was before any insurance policy provided coverage, and certain

policy exclusions applied.     The trial court granted Mid-Continent’s traditional motion for

summary judgment without specifying the grounds for its order.

       On appeal, Nicholas argues summary judgment was inappropriate because Mid-

Continent’s evidence failed to establish as a matter of law, or at the very least created a fact

issue, as to whether Nicholas’s storage tanks “released” regulated substances before the policy

periods. Nicholas further argues Mid-Continent failed to conclusively prove it was prejudiced by

Nicholas’s allegedly late notice of the claim.

                                       Standards of Review

       We review the trial court’s summary judgment de novo. Provident Life & Accident Ins.

Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). When reviewing a summary judgment, we take

as true all evidence favorable to the nonmovant, and we indulge every reasonable inference and

resolve any doubts in the nonmovant’s favor. Id. Under rule 166a(c), the party moving for


                                                 –5–
summary judgment bears the burden to show that no genuine issue of material fact exists, and it

is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Knott, 128 S.W.3d at 215.

Because the trial court’s order does not specify the grounds for summary judgment, we must

affirm the summary judgment if any of the theories presented to the trial court and presented for

appellate review are meritorious. Knott, 128 S.W.3d at 215.

       Under Texas law, the insured has the burden of establishing coverage under the terms of

the policy. Gilbert Tex. Const., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124

(Tex. 2010). If the insured proves coverage, then to avoid liability the insurer must prove an

exclusion bars coverage. Id. If the insurer proves that an exclusion applies, the burden shifts

back to the insured to show that an exception to the exclusion brings the claim back into

coverage. Id.

       When analyzing an insurance contract, we are guided by the well-established principles

of contract construction. State Farm Lloyds v. Page, 315 S.W.3d 525, 527 (Tex. 2010). Our

primary goal is to determine the contracting parties’ intent through the policy’s written language.

Id. We must read all parts of the contract together, giving effect to each word, clause, and

sentence, and avoid making any provision within the policy inoperative. Id. Our analysis of the

policy is confined to within the four corners of the policy itself. Id.

                                  Notice Required Under the Policy

       Because we can resolve this appeal by addressing the parties’ notice arguments, we will

address only that issue in which Nicholas contends Mid-Continent failed to conclusively

establish Mid-Continent was prejudiced by its late notice of a claim under the insuring policy.

See, e.g., Knott, 128 S.W.3d at 215 (when trial court’s order does not specify grounds for

summary judgment, we must affirm summary judgment if any of the theories presented to trial

court and presented for appellate review are meritorious).


                                                 –6–
           The September 17, 2007 to September 17, 2008 and September 17, 2008 to September

17, 2009 policies both contain the following notice provision:

                      II. CLAIM PROVISIONS

                                 A.         It is a condition precedent to coverage under this
                                            Policy that:

                                            1.         In the event of a Claim under Coverage A,
                                                       the Insured shall give us written notice as
                                                       soon as possible but in any event no later
                                                       than thirty (30) days after the receipt of the
                                                       Claim by the Insured.

According to Nicholas, it did not receive notice of a claim under Coverage A until the TCEQ

sent a letter on February 5, 2009 stating it “has become aware that a release has occurred from a

storage tank system [on Nicholas’s property]” and Nicholas was the “responsible party.”

           Nicholas concedes it failed to give notice of the Coit Partners lawsuit to Mid-Continent

until April 10, 2009, which is later than the 2008–2009 policy’s thirty-day notice provision.3

However, because it provided notice within the policy coverage period, Nicholas argues Mid-

Continent was required to establish it was prejudiced by Nicholas’s failure to give notice within

thirty days before denying coverage.                         Nicholas argues the record contains no evidence of

prejudice; therefore, the trial court could not grant summary judgment on Mid-Continent’s notice

argument. Mid-Continent responds it was not required to establish prejudice before denying

coverage. Both parties rely on Prodigy Communications Corp. v. Agricultural Excess & Surplus

Insurance Co., 288 S.W.3d 374 (Tex. 2009) to support their position.

           In Prodigy, the Texas Supreme Court was asked to determine whether the “notice-

prejudice rule applies to a claims-made policy when the notice provision requires that the

insured, ‘as a condition precedent’ to its rights under the policy, give notice of a claim to its

     3
       For purposes of our review, this policy is the only one at issue. Because Nicholas did not receive notice of a claim from the TCEQ until
February 5, 2009, the May 12, 2006 to May 12, 2007 and September 17, 2007 to September 17, 2008 policies are inapplicable.



                                                                    –7–
insurer ‘as soon as practicable . . . but in no event later than ninety (90) days after the expiration

of the Policy Period or Discovery Period.’” Id. at 375.4

           The parties disputed whether notice was given “as soon as practicable” but agreed the

insured provided notice within the ninety-day cut off period. Id. The insurer also admitted it

was not prejudiced by the delayed notice. Id.

           The court noted that, while the notice provision was a “condition precedent,” it needed to

“go further to determine whether prejudice is, or is not, required.” Id. at 378. The court then

explained the main difference between an occurrence-based and claims-made policy: a claims-

made policy limits the liability to claims asserted during the policy period, which allows insurers

to calculate risks and premiums with greater precision. Id. at 379.

           The court concluded the obligation to provide notice of a claim “as soon as practicable”

was not a material part of the bargained-for exchange under “this” claims-made policy. Id. at

382. It determined that in a claims-made policy, when an insured gives notice of a claim within

the policy period or other specified reporting period, the insurer must show that the insured’s

noncompliance with the “as soon as practicable” notice provision prejudiced the insurer before it

may deny coverage. Id. It reasoned that under these facts, the insurer was not denied the benefit

of the claims-made nature of its policy because it could not “close its books” on the policy until

ninety days after the discovery period expired. Id. (citing F.D.I.C. v. Mijalis, 15 F.3d 1314, 1330

(5th Cir. 1994) (noting that “the notice requirements in claims made policies allow the insurer to

‘close the books’ on a policy at its expiration and thus to ‘attain a level of predictability

unattainable under standard occurrence policies’”)).




     4
       The court had previously determined in PAJ, Inc. v. Hanover Insurance Co., 243 S.W.3d 630, 636–37 (Tex. 2008) that an insured’s failure
to timely notify its insurer of a claim or suit does not defeat coverage under an occurrence-based policy if the insurer is not prejudiced by the
delay.



                                                                     –8–
       Nicholas argues Prodigy supports its position that a showing of prejudice is required

because, like the insured in Prodigy, it failed to comply with the condition precedent notice

requirement; however, it provided notice within the policy period.      Mid-Continent contends it

was not required to show prejudice before denying coverage because the type of policy and the

language of the notice provision is different from the one at issue in Prodigy.

       We first address Mid-Continent’s argument regarding the type of policy at issue. While

we agree with Mid-Continent that one goal of a pollution liability and environmental damage

coverage policy is to address contamination so as to minimize both damage to the environment

and an insurer’s exposure under the policy, we do not find this distinction from the “Directors’

and Officers’ Liability Insurance Policy” analyzed in Prodigy alone to be determinative. Rather,

we conclude the distinction lies in the issue decided, as framed by the Prodigy court, and the

difference in the notice provision in Mid-Continent’s policy.

       The court’s focus in Prodigy was on the “as soon as practicable” language of a notice

provision and whether the “condition precedent” was an essential part of the bargained-for

exchange. The court stated “an immaterial breach does not deprive the insurer of the benefit of

the bargain . . . and Prodigy’s obligation to provide [the insurer] with notice of a claim ‘as soon

as practicable’ was not a material part of the bargained-for exchange” so as to defeat coverage.

Id. at 382; see also Greene v. Farmers Ins. Exch., 446 S.W.3d 761, 769 (Tex. 2014)

(acknowledging the holding in Prodigy as to whether the “as soon as practicable” language was

an essential part of the bargained-for exchange under the policy). Thus, the court concluded that

as long as an insured provided notice within the policy period, despite failing to provide notice

“as soon as practicable,” the insurer could not deny coverage unless the insurer showed prejudice

from the delay.




                                                –9–
       Here, Mid-Continent’s notice provision required Nicholas to not only provide notice of a

claim “as soon as possible,” but also required notice of a claim “ . . . in any event no later than

thirty (30) days after receipt of the Claim by the Insured.” This additional restrictive language

was not present in the Prodigy notice provision. As such, the court did not consider whether an

insurer must show prejudice before denying coverage when an insured fails to provide notice

under a claims-made policy that includes a specific time-frame for providing written notice.

       The parties’ intent must be taken from the contract itself, not from the parties’ present

interpretation, and the contract must be enforced as written. Lewis v. Foxworth, 170 S.W.3d 900,

903 (Tex. App.—Dallas 2005, no pet.). We may neither rewrite the contract nor add to its

language.   Id.   It is undisputed the policy unambiguously states the notice provision is a

condition precedent to coverage.      Thus, given the specificity of the language, the notice

provision is a material part of the bargained-for exchange in this policy, and Nicholas’s failure to

comply with the notice provision was a material breach.

       Therefore, Nicholas failed to give written notice of a claim as soon as possible or within

the only other time period allowed under the notice provision—thirty days after receipt of a

claim. We will neither ignore the plain language of the policy which required Nicholas to

comply with the notice provision as a condition precedent to coverage nor read into the policy

language requiring Mid-Continent to establish it was prejudiced by Nicholas’s failure to comply.

See Tenneco Inc. v. Enter. Prod. Co., 925 S.W.2d 640, 646 (Tex. 1996) (“We have long held that

courts will not rewrite agreements to insert provisions parties could have included or to imply

restraints for which they have not bargained.”). Because the purpose of a claims-made policy is

to define the limits of the insurer’s obligation, when there is no timely notice, there is no

coverage. Id. at 380 (citing 13 COUCH ON INSURANCE 3D § 186:13). Therefore, Mid-

Continent established as a matter of law that Nicholas failed to comply with the policy’s notice

                                               –10–
provision. Accordingly, the trial court properly granted summary judgment in its favor. We

overrule Nicholas’s second issue.

                                    Extracontractual Claims

       In its final issue, Nicholas argues a factual dispute exists as to whether Mid-Continent

acted in bad faith. Mid-Continent responds summary judgment was appropriate because it

established as a matter of law it did not have a duty to defend under its policies. We agree with

Mid-Continent.

       Nicholas asserted breach of contract and insurance code violations against Mid-Continent

for denying its claim and failing to objectively investigate the claim. It also alleged Mid-

Continent breached its duty of good faith and fair dealing. Because we have concluded summary

judgment for Mid-Continent was proper, Nicholas’s arguments as to its extracontractual claims

necessarily fail. See, e.g., Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 341 (Tex. 1995) (“As a

general rule, there can be no claim for bad faith when an insurer has promptly denied a claim that

is in fact not covered.”); Crocker v. Am. Nat’l Gen. Ins. Co., 211 S.W.3d 928, 936 (Tex. App.—

Dallas 2007, no pet.). Nicholas’s final issue is overruled.

                                           Conclusion

       Having concluded Mid-Continent presented uncontroverted evidence that a release

occurred prior to any insurance policy requiring coverage, Mid-Continent established as a matter

of law it had no duty to defend Nicholas’s claim. Moreover, Nicholas failed to comply with a

specific notice requirement, which was a condition precedent to coverage. Accordingly, the trial

court properly granted summary judgment in favor of Mid-Continent.




                                               –11–
The judgment of the trial court is affirmed.




131106F.P05                                    /David L. Bridges/
                                               DAVID L. BRIDGES
                                               JUSTICE




                                       –12–
                                         S
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

NICHOLAS PETROLEUM, INC.,                            On Appeal from the 160th Judicial District
Appellant                                            Court, Dallas County, Texas
                                                     Trial Court Cause No. 11-02336.
No. 05-13-01106-CV         V.                        Opinion delivered by Justice Bridges.
                                                     Justices Lang and Lang-Miers participating.
MID-CONTINENT CASUALTY
COMPANY, Appellee

     In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.

        It is ORDERED that appellee MID-CONTINENT CASUALTY COMPANY recover its
costs of this appeal from appellant NICHOLAS PETROLEUM, INC.


Judgment entered July 21, 2015.




                                              –13–
