Opinion issued August 27, 2019




                                     In The

                             Court of Appeals
                                    For The

                         First District of Texas
                            ————————————
                             NO. 01-18-00536-CV
                           ———————————
              STARNET INSURANCE COMPANY, Appellant
                                       V.
                          RICETEC, INC., Appellee


                   On Appeal from the 239th District Court
                           Brazoria County, Texas
                       Trial Court Case No. 94416-CV


                                 OPINION

      In this permissive interlocutory appeal, appellee, RiceTec, Inc., brought

claims for breach of contract and breach of the Prompt Payment Act against

appellant, StarNet Insurance Company, arising out of StarNet’s failure to provide
RiceTec a defense in a property damage lawsuit filed against RiceTec. The parties

filed cross motions for summary judgment on the question of whether the insurance

policy StarNet issued to RiceTec covered the lawsuit filed against RiceTec, such that

StarNet owed RiceTec a duty to defend. The trial court rendered an interlocutory

summary judgment order ruling that StarNet owed RiceTec a duty to defend. The

trial court granted permission for StarNet to file a petition for permissive

interlocutory appeal of the ruling, and this Court granted the petition for permissive

appeal. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(d); TEX. R. APP. P. 28.3.

      On appeal, StarNet argues that the trial court erred in granting RiceTec’s

motion for summary judgment and in denying its own motion for summary judgment

on the issue of whether it owed RiceTec a duty to defend. StarNet argues that the

plain language of an endorsement to the policy excludes coverage for the claims at

issue in the property damage lawsuit against RiceTec and therefore StarNet does not

owe a duty to defend RiceTec in that lawsuit.

      We reverse and remand.

                                    Background

A.    The Insurance Policy

      RiceTec is a company that produces and sells rice seeds. StarNet issued a

commercial general liability insurance policy (the Policy) to RiceTec that covered a

period from February 15, 2015, through February 15, 2016. The Policy had a limit


                                          2
of $1,000,000 per occurrence and a general aggregate limit of $2,000,000. The

Policy provided:

      1. Insuring Agreement
             a. We [StarNet] will pay those sums that the insured
             [RiceTec] becomes legally obligated to pay as damages
             because of “bodily injury” or “property damage” to which
             this insurance applies. We will have the right and duty to
             defend the insured against any “suit” seeking those
             damages. However, we will have no duty to defend the
             insured against any “suit” seeking damages for “bodily
             injury” or “property damage” to which this insurance does
             not apply.
             ....
             b. This insurance applies to “bodily injury” and “property
             damage” only if:
                    (1) The “bodily injury” or “property damage” is
                    caused by an “occurrence” that takes place in the
                    “coverage territory”;
                    (2) The “bodily injury” or “property damage”
                    occurs during the policy period; and
                    (3) Prior to the policy period, no insured listed under
                    Paragraph 1. of Section II – Who Is An Insured and
                    no “employee” authorized by you to give or receive
                    notice of an “occurrence” or claim, knew that the
                    “bodily injury” or “property damage” had occurred
                    in whole or in part. . . .

The Policy defined “bodily injury” as “bodily injury, sickness or disease sustained

by a person, including death resulting from any of these at any time”; “coverage

territory” as including “the United States of America”; “occurrence” as “an accident,

including continuous or repeated exposure to substantially the same general harmful

                                           3
conditions”; and “suit” as “a civil proceeding in which damages because of ‘bodily

injury,’ ‘property damage’ or ‘personal and advertising injury’ to which this

insurance applies are alleged.” The Policy defined “property damage” as “[p]hysical

injury to tangible property, including all resulting loss of use of that property” or

“[l]oss of use of tangible property that is not physically injured.”

      The Policy included multiple exclusions which set out situations in which the

insurance coverage provided by StarNet to RiceTec did not apply. The Policy stated,

in relevant part:

      2. Exclusions
             This insurance does not apply to:
             ....
             f. Pollution
             (1) “Bodily injury” or “property damage” arising out of the
             actual, alleged or threatened discharge, dispersal, seepage,
             migration, release or escape of “pollutants”:
                    (a) At or from any premises, site or location which is or
                    was at any time owned or occupied by, or rented or loaned
                    to, any insured.
                    ....
                    (d) At or from any premises, site or location on which any
                    insured or any contractors or subcontractors working
                    directly or indirectly on any insured’s behalf are
                    performing operations if the “pollutants” are brought on or
                    to the premises, site or location in connection with such
                    operations by such insured, contractor or subcontractor.
             ....
             j. Damage to Property
                                           4
             “Property damage” to:
             ....
             (5) That particular part of real property on which you or any
             contractors or subcontractors working directly or indirectly on
             your behalf are performing operations, if the “property damage”
             arises out of those operations;
             ....

The Policy defined “pollutants” as “any solid, liquid, gaseous or thermal irritant or

contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and

waste.”

      The Policy also included numerous endorsements. At issue in this case is the

Agricultural Chemicals Applicator Coverage endorsement (the Endorsement).

Under the Endorsement, the “per occurrence limit” was $25,000, the “annual

aggregate” was $50,000, and the per-occurrence deductible for property damage was

$5,000. The Endorsement then provided:

      With respect to the “bodily injury” or “property damage” arising out of
      the application of herbicides, pesticides, fertilizers or similar
      agricultural chemicals, (1)(d) of Exclusion f. Pollution under Section
      I – Coverage A – Bodily Injury and Property Damage Liability and
      (5) of Exclusion j. Damage to Property of SECTION I –
      COVERAGES, COVERAGE A – BODILY INJURY AND
      PROPERTY DAMAGE LIABILITY do not apply.
      However, coverage provided by this endorsement is excluded for any
      “bodily injury” or “property damage” resulting from:
      ....



                                          5
             5. The application of herbicides, pesticides, fertilizers or
             similar agricultural chemicals by aircraft owned, operated
             by, rented or loaned to you or by any non-owned aircraft.
      ....

B.    The Dishman Lawsuit

      On September 15, 2015, Zachary Dishman, Josey Dishman, and Dishman

Rice Farms Partnership (collectively, the Dishmans) filed suit against RiceTec and

other defendants in Jefferson County, Texas (the Dishman lawsuit). The Dishmans

alleged that, beginning on April 23, 2015, RiceTec, through its agent, fellow

defendant Twin County Air-AG, Inc., “commenced the aerial spraying of herbicide

on RiceTec-farmed plots of land adjacent to [the Dishmans’] Property” and the

herbicide “was over sprayed, drifted or otherwise came onto” the Dishmans’

property. The Dishmans alleged that the herbicide sprayed on behalf of RiceTec

“killed or damaged” approximately 742 acres of the Dishmans’ rice crop, causing

over $1,000,000 in damages.

      The Dishmans asserted causes of action against RiceTec for negligence and

trespass, and they also alleged that the aerial spraying of herbicide constituted an

“inherently or intrinsically dangerous or ultra-hazardous activity” that caused harm

to the Dishmans. The Dishmans later amended their petition to add a cause of action

for gross negligence, alleging that Twin County Air-AG, acting on behalf of

RiceTec, commenced aerial spraying of herbicide on RiceTec’s property on April


                                          6
23 and April 25, 2015. The Dishmans alleged that the “herbicide supplied by

RiceTec, Inc. was sprayed, over sprayed, drifted, or was otherwise allowed . . . to

come onto” the Dishmans’ property. They alleged that because RiceTec had sold the

Dishmans the seed used to plant their rice crop, RiceTec had knowledge of the

Dishmans’ farming activities, RiceTec’s decision to use aerial spraying of herbicide

on its property “involved an extreme degree of risk [to the Dishmans] considering

the probability and magnitude of the potential harm to [the Dishmans’] young rice

crop,” and RiceTec commenced aerial spraying with conscious indifference to the

Dishmans’ rights.

      RiceTec notified StarNet of the Dishman lawsuit.1 On December 1, 2015,

StarNet denied coverage for the claims asserted against RiceTec. In the letter

informing RiceTec of the denial of coverage, StarNet set out multiple provisions of

the Policy that it believed were relevant to its decision, including the Endorsement.

StarNet stated:

      After review of the complaint [in the Dishman lawsuit] we have
      determined that the allegations do not meet the coverage terms within
      your policy. The allegations address property damage resulting from an
      agricultural application performed by Twin County Air-AG.

      As we previously discussed, there is an exclusion within an attached
      endorsement to your policy. Endorsement – Agricultural Chemicals
      Applicator Coverage further states that coverage provided by the

1
      Although there is no supporting documentation in the record, both parties note in
      their appellate briefs that the parties in the Dishman lawsuit reached a settlement
      agreement in January 2019.
                                           7
      endorsement is excluded relative to the application of herbicides,
      pesticides, fertilizers or similar agricultural chemicals by aircraft
      owned, operated by, rented or loaned to you or by any non-owned
      aircraft.

StarNet declined to make any defense or indemnity payments under the Policy.

      On July 31, 2017, counsel for RiceTec requested that StarNet reconsider its

decision to deny coverage. Two months later, StarNet denied the request for

reconsideration, stating that it “remains of the position that there is no coverage

under the StarNet policy for the claims that have been asserted against RiceTec in

the [Dishman] lawsuit.” StarNet stated in this letter:

      [The Endorsement] affixed to the StarNet policy does not serve to grant
      coverage. Instead, with respect to claims of bodily injury or property
      damage arising out of the application of herbicides, pesticides,
      fertilizers, or similar agricultural products, the endorsement merely
      provides that subsection f.(1)(d) of the Pollution Exclusion set forth in
      the StarNet policy shall not serve to negate coverage. The endorsement
      then sets forth five situations in which there shall be no coverage for
      claims for bodily injury or property damage arising out of the
      application of herbicides, pesticides, fertilizers, or similar agricultural
      products regardless of whether subsection f.(1)(d) of the Pollution
      Exclusion set forth in the StarNet policy is otherwise applicable,
      including “[t]he application of herbicides, pesticides, fertilizers or
      similar agricultural chemicals by aircraft owned, operated by, rented or
      loaned to you or by any non-owned aircraft.” In sum, Exclusion 5. in
      the [Endorsement] merely confirms that, although there may be
      coverage for some claims for bodily injury or property damage arising
      out of the application of herbicides, pesticides, fertilizers, or similar
      agricultural products, there can be no such coverage for any such claims
      if the application was accomplished by aerial means.




                                          8
StarNet stated that its position was that the Endorsement “effectively and

unequivocally serves to negate insurance coverage under the StarNet policy for the

claims that have been asserted against RiceTec” in the Dishman lawsuit.

C.    The Underlying Proceedings

      On November 30, 2017, RiceTec filed the underlying suit against StarNet in

Brazoria County. RiceTec asserted that the allegations in the Dishman lawsuit did

“not support application of any exclusions or limitations to coverage under the

StarNet Policy” and that, based on the allegations in the Dishman lawsuit and the

unambiguous language of the Policy, “StarNet is obligated to defend RiceTec in the

Dishman Lawsuit and to reimburse RiceTec’s defense costs.” RiceTec brought a

breach of contract claim against StarNet, alleging that, under the Policy, StarNet had

a duty to defend RiceTec in the Dishman lawsuit and breached that duty when it

refused to defend RiceTec. RiceTec also asserted a claim against StarNet under the

Prompt Payment Act—Texas Insurance Code chapter 542—alleging that it was

entitled to payment by StarNet of its defense costs in the Dishman lawsuit and that

StarNet violated Insurance Code section 542.060 by failing to acknowledge that it

owed obligations to RiceTec under the Policy.2 RiceTec also sought declarations that



2
      See TEX. INS. CODE ANN. § 542.060(a) (“Except as provided by Subsection (c), if
      an insurer that is liable for a claim under an insurance policy is not in compliance
      with this subchapter [addressing prompt payment of claims], the insurer is liable to
      pay the holder of the policy . . . , in addition to the amount of the claim, interest on
                                             9
StarNet had a duty to defend it for the claims asserted in the Dishman lawsuit and a

duty to reimburse it for the defense costs it had incurred.

      StarNet answered and asserted affirmative defenses. It acknowledged that it

had issued an insurance policy to RiceTec, but it alleged that the Policy “contain[ed]

or incorporate[d] certain provisions, exclusions, and endorsements that preclude or

limit coverage, in whole or in part.” StarNet alleged that several Policy exclusions,

including exclusions f (pollution) and j (damage to property), applied and precluded

coverage of the claims asserted in the Dishman lawsuit. StarNet also alleged that,

under the Endorsement, it had no duty to defend or indemnify RiceTec in the

Dishman lawsuit.

      RiceTec moved for traditional summary judgment on all of its claims.

RiceTec argued that it was entitled to judgment as a matter of law because the claims

asserted against it in the Dishman lawsuit were covered under the unambiguous

language of the Policy. Specifically, RiceTec argued that the Policy applied to

property damage—defined as “physical injury to tangible property”—caused by an

“occurrence” that takes place in the “coverage territory”—defined as including the

United States of America—during the policy period. The Dishman lawsuit alleged

that RiceTec damaged the Dishmans’ rice crops by negligently spraying the crops



      the amount of the claim at the rate of 18 percent per year as damages, together with
      reasonable and necessary attorney’s fees.”).
                                           10
with herbicide in April 2015, during the policy period. RiceTec argued that because

the claims asserted against it in the Dishman lawsuit potentially fell within the scope

of coverage provided by the Policy, StarNet owed RiceTec a duty to defend as a

matter of law.

      RiceTec also argued that none of the Policy’s exclusions—including the

pollution and the damage to property exclusions—applied to bar coverage under the

Policy. RiceTec further argued that the Endorsement did not preclude coverage of

the claims in the Dishman lawsuit. RiceTec argued that the Endorsement “serves to

provide only certain limited coverage where coverage would otherwise be excluded

by section (1)(d) of exclusion f (Pollution) or section (5) of exclusion j (Damage to

Property),” but neither of those exclusions was applicable to the claims asserted in

the Dishman lawsuit. RiceTec also argued that the Endorsement stated that

“coverage provided by this endorsement is excluded for any ‘bodily injury’ or

property damage’ resulting from [t]he application of herbicides, pesticides,

fertilizers or similar agricultural chemicals by aircraft owned, operated by, rented or

loaned to you or by any non-owned aircraft,” but the Endorsement did not state that

it “negates coverage that the underlying policy already provides,” and the coverage

that RiceTec sought was provided by the Policy, not the Endorsement.

      Finally, RiceTec argued that StarNet had a “clear and unqualified duty to

defend” it in the Dishman lawsuit, but had failed to fulfill this duty. RiceTec


                                          11
requested that the trial court grant summary judgment, award damages—including

attorney’s fees RiceTec had incurred in the Dishman lawsuit, statutory penalties

under the Prompt Payment Act, and attorney’s fees in the coverage proceeding—

and declare that StarNet owed RiceTec an ongoing duty to defend it in the Dishman

lawsuit.

      StarNet also moved for traditional summary judgment on RiceTec’s claims.

StarNet argued that it had no duty to defend RiceTec because the unambiguous

language of the Endorsement excluded coverage for the claims asserted against

RiceTec in the Dishman lawsuit. StarNet argued that the Endorsement modified the

Policy by providing that, for claims for bodily injury or property damage arising out

of the application of herbicides, subsection (1)(d) of the pollution exclusion and

subsection (5) of the damage to property exclusion do not apply, and coverage exists

for these claims under the Policy. However, the next portion of the Endorsement

“operate[d] to limit the coverage provided by the first full paragraph of that

endorsement” by negating the coverage provided by the Endorsement in certain

situations, including in cases involving property damage resulting from the

application of herbicides by aircraft. StarNet argued that, when reading the Policy

and the Endorsement together, “any coverage for ‘property damage arising out of

the application of herbicides’ is excluded if the ‘property damage result[ed]

from . . . [t]he application of herbicides . . . by aircraft owned, operated by, rented or


                                           12
loaned to [RiceTec] or by any non-owned aircraft.’” Because the Dishman lawsuit

alleged that the Dishmans’ rice crops were damaged as a result of herbicides aerially

sprayed by RiceTec and its agents, StarNet argued that the claims in the Dishman

lawsuit unambiguously fell within the exclusion set out in the Endorsement, and

StarNet thus had no duty to defend RiceTec in the Dishman lawsuit.

      StarNet accordingly argued that RiceTec was not entitled to a declaration that

StarNet had a duty to defend RiceTec in the Dishman lawsuit or that StarNet had a

duty to pay RiceTec’s defense costs. StarNet also argued that because it had no duty

to defend RiceTec, it also had no duty to indemnify RiceTec for any settlement or

judgment that might be obtained in the Dishman lawsuit. StarNet further contended

that it was entitled to summary judgment on all of RiceTec’s claims against it

because all of RiceTec’s claims were predicated on StarNet owing RiceTec a duty

to defend under the Policy.

      The trial court granted RiceTec’s motion for summary judgment and denied

StarNet’s motion for summary judgment solely on the question of whether StarNet

owed RiceTec a duty to defend. The trial court’s order on the motions stated:

      The Court finds that the underlying petition in the Dishman Lawsuit
      alleges facts that potentially bring the alleged injury within the terms of
      coverage in the relevant StarNet Policy. Based on this substantive
      finding, the Court determines that StarNet has a duty to defend RiceTec
      in the Dishman Lawsuit.
      It is therefore ORDERED that:


                                          13
            1. Plaintiff RiceTec, Inc.’s Amended Motion for Traditional
            Summary Judgment against StarNet is GRANTED as to
            StarNet’s duty to defend only, with the remaining issues in that
            motion being held for further consideration.
            2. Defendant StarNet’s Traditional Motion for Summary
            Judgment is DENIED as to StarNet’s duty to defend only, with
            the remaining issues in that motion being held for further
            consideration.
            3. StarNet owes RiceTec an ongoing duty to defend RiceTec
            from the claims against RiceTec in the Dishman Lawsuit.
      The Court further finds that there is a controlling question of law as to
      which there is a substantial ground for difference of opinion regarding
      whether StarNet has a duty to defend RiceTec in the underlying
      Dishman Lawsuit. An immediate appeal from this order may materially
      advance the ultimate termination of this litigation because RiceTec’s
      remaining damage claim for attorney’s fees, expenses and penalty
      interest against StarNet is based upon StarNet’s duty to defend.
      It is therefore further ORDERED that the parties are granted permission
      to appeal this Order to the court of appeals as a permissive interlocutory
      appeal pursuant to Rule 168 of the Texas Rules of Civil Procedure and
      Section 51.014(d) of the Texas Civil Practice and Remedies Code.

This Court granted StarNet’s petition for permissive interlocutory appeal.

                                  Duty to Defend

      StarNet argues that the trial court erred in granting RiceTec’s motion for

summary judgment and in denying its own motion for summary judgment because,

under the plain language of the Policy and the Endorsement, StarNet did not owe

RiceTec a duty to defend in the Dishman lawsuit.




                                         14
A.    Standard of Review

      We review a trial court’s ruling on a summary judgment motion de novo. City

of Richardson v. Oncor Elec. Delivery Co., 539 S.W.3d 252, 258 (Tex. 2018). To

prevail on a traditional summary judgment motion, the movant bears the burden of

proving that no genuine issues of material fact exist and that it is entitled to judgment

as a matter of law. TEX. R. CIV. P. 166a(c); City of Richardson, 539 S.W.3d at 258–

59. When a party moves for summary judgment on its own claim, it must establish

each essential element of its cause of action as a matter of law. Lawyers Title Co. v.

J.G. Cooper Dev., Inc., 424 S.W.3d 713, 717 (Tex. App.—Dallas 2014, pet. denied).

For a defendant to be entitled to traditional summary judgment, the defendant must

conclusively negate at least one essential element of each of the plaintiff’s causes of

action or conclusively establish each element of an affirmative defense. Williams v.

Bell, 402 S.W.3d 28, 35 (Tex. App.—Houston [14th Dist.] 2013, pet. denied); see

also Cmty. Health Sys. Prof’l Servs. Corp. v. Hansen, 525 S.W.3d 671, 681 (Tex.

2017) (stating that matter is conclusively established if reasonable people could not

differ as to conclusion to be drawn from evidence).

      On cross-motions for summary judgment, each party bears the burden of

establishing that it is entitled to judgment as a matter of law. City of Garland v.

Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000). When the trial court grants

one summary judgment motion and denies the other, the reviewing court should


                                           15
review both parties’ summary judgment evidence, determine all questions presented,

and render the judgment the trial court should have rendered. S. Crushed Concrete,

LLC v. City of Houston, 398 S.W.3d 676, 678 (Tex. 2013); City of Garland, 22

S.W.3d at 356.

B.    Determining Whether Duty to Defend Exists

      Generally, in liability insurance policies, an insurer “assumes both the duty to

indemnify the insured, that is, to pay all covered claims and judgments against an

insured, and the duty to defend any lawsuit brought against the insured that alleges

and seeks damages for an event potentially covered by the policy, even if groundless,

false or fraudulent,” subject to the terms of the insurance policy. D.R. Horton-Tex.,

Ltd. v. Markel Int’l Ins. Co., 300 S.W.3d 740, 743 (Tex. 2009). However, the duty

to defend and the duty to indemnify “are distinct and separate duties,” and one duty

may exist without the other. Id. (quoting Utica Nat’l Ins. Co. v. Am. Indem. Co., 141

S.W.3d 198, 203 (Tex. 2004)); Farmers Tex. Cty. Mut. Ins. Co. v. Griffin, 955

S.W.2d 81, 82 (Tex. 1997) (per curiam) (“[A]n insurer may have a duty to defend

but, eventually, no duty to indemnify.”). An insurer’s duty to indemnify is controlled

by the “facts actually established in the underlying suit” against the insured and

“whether the damages caused by the actions or omissions proven are covered by the

terms of the policy.” D.R. Horton-Tex., 300 S.W.3d at 744. In this case, the trial

court’s summary judgment order states that the court granted RiceTec’s summary


                                         16
judgment motion and denied StarNet’s motion “as to StarNet’s duty to defend only,

with the remaining issues in [the] motion[s] being held for further consideration.”

We therefore only address whether StarNet has a duty to defend RiceTec in the

Dishman lawsuit, and we do not address StarNet’s duty to indemnify.

      In determining whether an insurer has a duty to defend, Texas courts follow

the “eight corners” rule. Ewing Constr. Co. v. Amerisure Ins. Co., 420 S.W.3d 30,

33 (Tex. 2014); Evanston Ins. Co. v. Legacy of Life, Inc., 370 S.W.3d 377, 380 (Tex.

2012). Under the eight corners rule, we look to the facts alleged within the four

corners of the pleadings, measure the facts alleged against the language within the

four corners of the insurance policy, and determine if the facts alleged “present a

matter that could potentially be covered by the insurance policy.” Ewing Constr.,

420 S.W.3d at 33; Evanston Ins., 370 S.W.3d at 380. We will not read facts into the

pleadings, nor will we look outside the pleadings or imagine factual scenarios that

might trigger coverage. Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279

S.W.3d 650, 655 (Tex. 2009) (quoting Nat’l Union Fire Ins. Co. of Pittsburgh, Pa.

v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 142 (Tex. 1997) (per curiam)).

      We consider the factual allegations without regard to their truth or falsity, and

we resolve all doubts regarding the duty to defend in the insured’s favor. Ewing

Constr., 420 S.W.3d at 33; see Evanston Ins., 370 S.W.3d at 380 (“Our precedent

favors insureds when examining both the complaint and the policy.”); Zurich Am.


                                          17
Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 491 (Tex. 2008) (“We resolve all doubts

regarding the duty to defend in favor of the duty, and we construe the pleadings

liberally.”). In reviewing the pleadings, we “look to the factual allegations showing

the origin of the damages claimed, not to the legal theories or conclusions alleged.”

Ewing Constr., 420 S.W.3d at 33; see Evanston Ins., 370 S.W.3d at 380 (“[W]e only

defer to a complaint’s characterization of factual allegations, not legal theories or

conclusions.”). If the pleadings contain even one covered claim, the insurer must

defend the entire suit. Evanston Ins., 370 S.W.3d at 380; Zurich Am. Ins., 268

S.W.3d at 491.

      The insured has the initial burden to establish coverage under the insurance

policy. Ewing Constr., 420 S.W.3d at 33; Gilbert Tex. Constr., L.P. v. Underwriters

at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010). If the insured establishes

coverage, then, to avoid liability, the insurer must prove that one of the policy’s

exclusions applies. Ewing Constr., 420 S.W.3d at 33; Gilbert Tex. Constr., 327

S.W.3d at 124. If the insurer proves the applicability of an exclusion, the burden

shifts back to the insured to establish that an exception to the exclusion restores

coverage. Ewing Constr., 420 S.W.3d at 33; Gilbert Tex. Constr., 327 S.W.3d at

124. If a petition does not allege facts within the scope of coverage under the

insurance policy, the insurer is not legally required to defend a suit against its

insured. King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002) (quoting


                                         18
Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821 (Tex. 1997)); see Pine

Oak Builders, 279 S.W.3d at 654; Gen. Star Indem. Co. v. Gulf Coast Marine

Assocs., Inc., 252 S.W.3d 450, 454 (Tex. App.—Houston [14th Dist.] 2008, pet.

denied).

      We construe insurance policies “using ordinary rules of contract

interpretation.” Nassar v. Liberty Mut. Fire Ins. Co., 508 S.W.3d 254, 257 (Tex.

2017) (per curiam). When doing so, we must determine the parties’ intent “as

reflected in the terms of the policy itself.” Id. at 257–58 (quoting Tanner v.

Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 831 (Tex. 2009)). We must

“examine the entire agreement and seek to harmonize and give effect to all

provisions so that none will be meaningless.” Id. at 258 (quoting Gilbert Tex.

Constr., 327 S.W.3d at 126). No phrase, sentence, or section should be isolated from

its setting and considered apart from other contractual provisions. Id. (quoting

Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994)). Unless the policy

itself dictates otherwise, we “give words and phrases their ordinary and generally

accepted meaning, reading them in context and in light of the rules of grammar and

common usage.” Id. (quoting RSUI Indem. Co. v. The Lynd Co., 466 S.W.3d 113,

118 (Tex. 2015)).

      If we determine that only one party’s interpretation of the policy is reasonable,

the policy is unambiguous and the reasonable interpretation should be adopted. Id.


                                          19
If, however, we determine that both parties’ interpretations are reasonable, the policy

is ambiguous. Id. The Texas Supreme Court has held:

      In that event, “we must resolve the uncertainty by adopting the
      construction that most favors the insured,” and because we are
      construing a limitation on coverage, we must do so “even if the
      construction urged by the insurer appears to be more reasonable or a
      more accurate reflection of the parties’ intent.”

RSUI Indem. Co., 466 S.W.3d at 118 (quoting Nat’l Union Fire Ins. Co. of

Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991)); see also

Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660, 668 (Tex.

2008) (“‘Exceptions or limitations on liability are strictly construed against the

insurer and in favor of the insured,’ and ‘[a]n intent to exclude coverage must be

expressed in clear and unambiguous language.’”) (quoting Nat’l Union Fire Ins. Co.

of Pittsburgh, Pa., 811 S.W.2d at 555).

      “‘[A]mbiguous’ means more than simply ‘denoting a lack of clarity in

language,’” and an insurance policy is not ambiguous simply because the parties

offer conflicting interpretations of the policy’s provisions. Nassar, 508 S.W.3d at

258 (quoting RSUI Indem. Co., 466 S.W.3d at 119). “A policy is ambiguous if it is

genuinely subject to more than one meaning after applying the pertinent rules of

contract interpretation.” Id. When interpreting language in an insurance policy, we

must determine whether the insured’s interpretation is reasonable. Id. If it is, then




                                          20
we must adopt the insured’s interpretation, even if the insurer’s interpretation is also,

or more, reasonable. Id.; RSUI Indem. Co., 466 S.W.3d at 119.

       When construing an insurance policy, we should read the policy and its

endorsements together “unless they are so much in conflict they cannot be

reconciled.” TIG Ins. Co. v. N. Am. Van Lines, Inc., 170 S.W.3d 264, 271 (Tex.

App.—Dallas 2005, no pet.). In the case of an irreconcilable conflict, endorsements

to a policy generally supersede and control over conflicting printed terms contained

within the main policy. Id.; see also TIG Ins. Co. v. San Antonio YMCA, 172 S.W.3d

652, 658 (Tex. App.—San Antonio 2005, no pet.) (stating that endorsements “often

are issued to add coverages that otherwise would be excluded,” but noting that

endorsements “cannot be read apart from the main policy” and that added provisions

in endorsements only supersede previous policy terms “to the extent they are truly

in conflict”).

C.     Whether StarNet Owes RiceTec a Duty to Defend in the Dishman Lawsuit

       The Policy issued by StarNet to RiceTec provided that StarNet “will pay those

sums that [RiceTec] becomes legally obligated to pay as damages because of ‘bodily

injury’ or ‘property damage’ to which this insurance applies” and that StarNet had

the “duty to defend [RiceTec] against any ‘suit’ seeking those damages.” The Policy

further provided that “[t]his insurance applies to ‘bodily injury’ and ‘property

damage’” only if three conditions were met: (1) the bodily injury or property damage


                                           21
was caused by an occurrence—defined in the Policy as an “accident”—that took

place in the coverage territory, which included the United States; (2) the bodily

injury or property damage occured during the policy period of February 15, 2015,

through February 15, 2016; and (3) prior to the policy period, no insured knew that

bodily injury or property damage had occurred, in whole or in part. The Policy

defined “property damage” as including “[p]hysical injury to tangible property,

including all resulting loss of use of that property.”

      The Policy then set out numerous exclusions, or instances in which insurance

coverage did not apply. Exclusion f, the “Pollution” exclusion, contained

subparagraph (1)(d), which provided that the Policy did not cover property damage

      arising out of the actual, alleged or threatened discharge, dispersal,
      seepage, migration, release or escape of “pollutants” . . . [a]t or from
      any premises, site or location on which any insured or any contractors
      or subcontractors working directly or indirectly on any insured’s behalf
      are performing operations if the “pollutants” are brought on or to the
      premises, site or location in connection with such operations by such
      insured, contractor or subcontractor.

The Policy defined “pollutants” as “any solid, liquid, gaseous or thermal irritant or

contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and

waste.” Exclusion j, the “Damage to Property” exclusion, contained subparagraph

(5), providing that the Policy did not cover property damage to “[t]hat particular part

of real property on which you or any contractors or subcontractors working directly




                                           22
or indirectly on your behalf are performing operations, if the ‘property damage’

arises out of those operations.”

      The Policy also contained multiple endorsements, including the “Agricultural

Chemicals Applicator Coverage” endorsement. The Endorsement stated, in bold

letters and in all caps, “THIS ENDORSEMENT CHANGES THE POLICY.”

The Endorsement then stated that it “modifies insurance provided under

the . . . COMMERCIAL GENERAL LIABILITY COVERAGE PART” of the

Policy, and it set out a schedule providing a $25,000 “Per Occurrence Limit,” a

$50,000 “Annual Aggregate,” and a $5,000 per-occurrence “Combined Bodily

Injury and/or Property Damage Liability Deductible.” Paragraph 1 of the

Endorsement provided:

      With respect to the “bodily injury” or “property damage” arising out of
      the application of herbicides, pesticides, fertilizers or similar
      agricultural chemicals, (1)(d) of Exclusion f. Pollution . . . and (5) of
      Exclusion j. Damage to Property . . . do not apply.

Immediately after this provision, paragraph 2 of the Endorsement stated: “However,

coverage provided by this endorsement is excluded for any ‘bodily injury’ or

‘property damage’ resulting from . . . 5. The application of herbicides, pesticides,

fertilizers or similar agricultural chemicals by aircraft owned, operated by, rented or

loaned to you or by any non-owned aircraft.”

      The parties differ in their interpretations of the Endorsement. StarNet argues

that paragraph 1 of the Endorsement modifies the Policy “by rendering subsection
                                          23
f.(1)(d) of the Pollution Exclusion and subsection j.(5) of the Damage to Property

Exclusion inapplicable with respect to claims for bodily injury or property damage

arising out of the application of herbicides, pesticides, fertilizers or similar

agricultural chemicals.” StarNet argues that this paragraph of the Endorsement does

not modify any other portion of the Policy, and therefore the terms of the Policy

“otherwise continue to apply.” StarNet argues that, when reading the Policy and the

Endorsement together, for claims of bodily injury or property damage arising out of

the application of herbicides, pesticides, fertilizers, or similar agricultural chemicals,

coverage consists of (1) the original coverage under the Policy, and (2) coverage that

would otherwise be excluded under subsection f.(1)(d) of the Pollution Exclusion

and subsection j.(5) of the Damage to Property Exclusion.

      However, StarNet argues, the next portion of the Endorsement, paragraph 2,

limits the coverage provided in paragraph 1 of the Endorsement. Specifically,

StarNet argues that

      When the plain meaning of the phrase “coverage provided by this
      endorsement” is applied to this exclusion, Exclusion no. 5
      unambiguously excludes any coverage for bodily injury or property
      damage arising out of the application of herbicides, pesticides,
      fertilizers or similar agricultural chemicals—regardless of whether
      subsection f.(1)(d) of the Pollution Exclusion or subsection j.(5) of the
      Damage to Property Exclusion would otherwise apply—if the bodily
      injury or property damage results from the application of herbicides,
      pesticides, fertilizers or similar agricultural chemicals by aircraft
      owned, operated by, rented or loaned to RiceTec or by any non-owned
      aircraft.


                                           24
StarNet contends that Exclusion (5) in the Endorsement “applies if the ‘property

damage’ results from the application of herbicides by any aircraft.”

      RiceTec disagrees with StarNet’s contention that the Endorsement “purports

to provide all of the coverage provided by the main coverage part” and instead argues

that, under its plain language, the Endorsement “only provides coverage by

nullifying f.(1)(d) of the pollution exclusion and j(5) of the damage to property

exclusion for certain injuries when those exclusions would otherwise apply.”

RiceTec argues that the Endorsement’s exclusion 5 does not apply in this case

because the claims asserted against RiceTec in the Dishman lawsuit do not fall

within subsection (1)(d) of the Pollution Exclusion or subsection (5) of the Damage

to Property Exclusion.

      If a claim for bodily injury or property damage falls within the terms of (1)(d)

of the Pollution Exclusion or (5) of the Damage to Property Exclusion, coverage for

that claim is excluded under the plain language of the main part of the Policy. If,

however, the claim is for bodily injury or property damage “arising out of the

application of herbicides, pesticides, fertilizers or similar agricultural chemicals,”

then, under the plain language of the Endorsement, neither of those specific

exclusions apply, and the claim, which would be otherwise excluded under the

Policy, is covered by the Endorsement. But the Endorsement contains its own

exclusions. The next section of the Endorsement states: “However, coverage


                                         25
provided by this endorsement is excluded for any ‘bodily injury’ or ‘property

damage’ resulting from” five specific situations, including the application of

herbicides by aircraft “owned, operated by, rented or loaned to [RiceTec] or by any

non-owned aircraft.” (Emphasis added.) The only coverage that the Endorsement

provides is coverage for claims for bodily injury or property damage arising out of

the application of herbicides, pesticides, fertilizers, or similar agricultural chemicals

that would otherwise fall within (1)(d) of the Pollution Exclusion or (5) of the

Damage to Property Exclusion and therefore would otherwise be excluded by those

provisions.

      We therefore conclude that under the plain language of the Endorsement, the

five exclusions contained within the Endorsement only apply and exclude from

coverage certain classes of claims for bodily injury or property damage arising out

of the application of herbicides, pesticides, fertilizers, or similar agricultural

chemicals that would otherwise fall within (1)(d) of the Pollution Exclusion or (5)

of the Damage to Property Exclusion. See Nasser, 508 S.W.3d at 257–58 (stating

that, when construing insurance policies, courts must determine parties’ intent “as

reflected in the terms of the policy itself” and that courts must “examine the entire

agreement and seek to harmonize and give effect to all provisions so that none will

be meaningless”); Gilbert Tex. Constr., 327 S.W.3d at 126 (“Courts strive to honor

the parties’ agreement and not remake their contract by reading additional provisions


                                           26
into it.”); Fiess v. State Farm Lloyds, 202 S.W.3d 744, 753 (Tex. 2006) (“[I]n

construing insurance policies ‘where the language is plain and unambiguous, courts

must enforce the contract as made by the parties, and cannot make a new contract

for them, nor change that which they have made under the guise of construction.’”).

      Here, the Dishmans asserted claims against RiceTec and other defendants for

gross negligence and trespass, and they alleged that the defendants engaged in “an

inherently or intrinsically dangerous or ultra-hazardous activity.” Specifically, the

Dishmans alleged that on April 23 and 25, 2015, RiceTec, through the conduct of its

agent Twin County Air-AG, Inc., “commenced and continued the aerial spraying of

herbicide on RiceTec-farmed plots of land adjacent to [the Dishmans’] Property.”

The Dishmans alleged that the herbicide supplied by RiceTec and sprayed by Twin

County Air-AG “was sprayed, over sprayed, drifted, or was otherwise allowed . . . to

come onto” the Dishmans’ property, damaging the Dishmans’ 742-acre rice crop.

      RiceTec, as the insured, bore the initial burden of establishing coverage under

the Policy. See Ewing Constr., 420 S.W.3d at 33; Gilbert Tex. Constr., 327 S.W.3d

at 124. The Policy applies to property damage caused by an occurrence—defined as

“an accident”—that takes place in the coverage territory—defined as including the

United States—during the policy period if, prior to the policy period, no insured

knew that property damage had occurred. The Dishmans alleged that the aerial

spraying of herbicides on RiceTec’s property occurred on April 23 and 25, 2015,


                                         27
which was within the policy period of February 15, 2015, through February 15,

2016. The Dishmans also alleged that RiceTec and its agents negligently sprayed,

over sprayed, or allowed herbicides to come onto the Dishmans’ property, damaging

the Dishmans’ young rice crop. The Dishmans thus alleged an “occurrence” that

caused “property damage,” defined in the Policy as including “physical injury to

tangible property.” The Dishman lawsuit contained no allegation that, before the

policy period, RiceTec knew that property damage had occurred. RiceTec thus

initially established that the claims asserted against it in the Dishman lawsuit were

covered by the Policy.

      The burden thus shifted to StarNet to prove that an exclusion to the Policy

applied. See Ewing Constr., 420 S.W.3d at 33; Gilbert Tex. Constr., 327 S.W.3d at

124. StarNet argued that the Endorsement applied and precluded coverage of the

claims asserted against RiceTec in the Dishman lawsuit. StarNet argued, as it does

on appeal, that it had no duty to defend RiceTec because the Endorsement applied

to exclude coverage for the claims asserted in the Dishman lawsuit, and it argued

that the exclusions set out in the Endorsement apply to all claims for property

damage arising out of the application of herbicides regardless of whether the claim

would otherwise fall within (1)(d) of the Pollution Exclusion or (5) of the Damage

to Property Exclusion and that the claims asserted in the Dishman lawsuit fell within

exclusion (5) of the Endorsement.


                                         28
      RiceTec argues that the claims asserted in the Dishman lawsuit do not fall

within either section (1)(d) of the Pollution Exclusion or section (5) of the Damage

to Property Exclusion, and, therefore, the Endorsement does not apply and coverage

for the claims asserted against RiceTec exists under the terms of the Policy. We do

not agree. Section (1)(d) of the Pollution Exclusion excludes from coverage property

damage

      arising out of the actual, alleged or threatened discharge, dispersal,
      seepage, migration, release or escape of “pollutants” . . . [a]t or from
      any premises, site or location on which any insured or any contractors
      or subcontractors working directly or indirectly on any insured’s behalf
      are performing operations if the “pollutants” are brought on or to the
      premises, site or location in connection with such operations by such
      insured, contractor or subcontractor.

The Dishman lawsuit alleged that herbicide RiceTec, through its agent Twin County

Air-AG, aerially sprayed on its own property “was sprayed, over sprayed, drifted, or

was otherwise allowed . . . to come onto” the Dishmans’ property, causing damage

to the Dishmans’ rice crop. On appeal, RiceTec argues that the allegations in the

Dishman lawsuit were “not limited to the theory that the herbicide seeped, migrated,

escaped or was otherwise discharged, dispersed or released from RiceTec’s

property,” but were instead “sufficiently broad to include the theory that the

herbicide was sprayed directly upon the Dishmans’ rice crops, possibly from above

the Dishmans’ own property.” However, even construing the Dishman lawsuit as

alleging that herbicide was sprayed directly onto the Dishmans’ rice crops from the


                                        29
RiceTec property—in addition to alleging the drifting of herbicides sprayed onto the

RiceTec property to the Dishmans’ property—this action still constitutes an actual

“discharge” or “release” of pollutants.3

      Subsection (1)(d) excludes from coverage property damage arising out of the

actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or

escape of pollutants “[a]t or from any premises, site or location on which any insured

or any contractors or subcontractors working directly or indirectly on any insured’s

behalf are performing operations if the ‘pollutants’ are brought on or to the premises,

site or location in connection with such operations by such insured, contractor, or

subcontractor.” The Dishman lawsuit alleged that Twin County Air-AG, acting on

behalf of RiceTec, aerially sprayed herbicide supplied by RiceTec onto RiceTec’s

property, and the herbicide—whether sprayed directly onto the Dishman property or

sprayed onto the RiceTec property and then traveled to the Dishman property—

damaged the Dishmans’ rice crop.

      RiceTec argues that the facts alleged in the Dishman lawsuit do not fall within

subsection (1)(d) because the Dishmans alleged that RiceTec and its agents acted

negligently when the herbicide was sprayed onto the Dishmans’ property; the

Dishmans did not allege that RiceTec “requested or authorized” Twin County Air-


3
      The Policy broadly defines “pollutants” as “any solid, liquid, gaseous or thermal
      irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis,
      chemicals and waste.”
                                           30
AG to spray the Dishmans’ crops. RiceTec argues that, as a result, Twin County Air-

AG was not acting on RiceTec’s behalf. We disagree with this contention. The

Dishman lawsuit repeatedly refers to Twin County Air-AG as RiceTec’s agent,

responsible for actually conducting the aerial spraying of herbicides on RiceTec’s

property. It is immaterial that the Dishman lawsuit does not allege that RiceTec

requested or authorized Twin County Air-AG to spray the Dishmans’ crops; what is

material is that the Dishman lawsuit alleged that RiceTec engaged Twin County Air-

AG to spray its own crops and that, in the course of this activity, the Dishmans’

crops were damaged. The Dishman lawsuit thus alleged facts that property damage

arose out of the actual “discharge, dispersal, seepage, migration, release, or escape”

of pollutants—herbicides—at or from a premises, site, or location, on which Twin

County Air-AG, a contractor working on RiceTec’s behalf, performed operations—

the aerial spraying of cops with herbicides—and the pollutants were brought to the

premises in connection with the operations by the insured, RiceTec. The Dishman

lawsuit thus alleged facts that fall within subsection (1)(d) of the Pollution

Exclusion.4


4
      On appeal, RiceTec also argues that subsection (1)(d) of the Pollution Exclusion is
      inapplicable because neither RiceTec nor Twin County Air-AG was performing
      operations on the Dishmans’ property, and therefore any release of pollutants on
      that premises does not implicate (1)(d). The Dishman lawsuit does not contain any
      allegations that RiceTec or Twin County Air-AG conducted any operations on—or
      over—the Dishmans’ property. Instead, the Dishmans alleged that the aerial
      spraying of herbicide occurred on “RiceTec farmed plots of land adjacent to [the
                                          31
      Under paragraph one of the Endorsement, subsection (1)(d) of the Pollution

Exclusion does not apply to claims of property damage arising out of the application

of herbicides, pesticides, fertilizers, or similar agricultural chemicals. This paragraph

thus brings the claims asserted against RiceTec in the Dishman lawsuit back within

the scope of coverage under the Policy. The Endorsement then states, however, that

coverage provided by the endorsement is excluded for property damage resulting

from “[t]he application of herbicides, pesticides, fertilizers or similar agricultural

chemicals by aircraft owned, operated by, rented or loaned to [RiceTec] or by any

non-owned aircraft.” The language of this exclusion in the Endorsement is broad

enough to encompass application of herbicides by aircraft that is owned, or not

owned, by RiceTec. The Dishman lawsuit contained no allegations concerning the

ownership of the aircraft used in the herbicide-spraying incident, but it undisputedly

alleged that the herbicides that damaged the Dishmans’ rice crops were applied




      Dishmans’] property,” and the herbicides were “sprayed, over sprayed, drifted, or
      [were] otherwise allowed . . . to come onto” the Dishmans’ property. However, to
      the extent the Dishman lawsuit can be read as including an allegation that aerial
      spraying occurred over the Dishmans’ property, leading to herbicides being sprayed
      directly onto the Dishmans’ rice crop, subsection (1)(d) excludes from coverage
      property damage arising out of the actual “discharge, dispersal, seepage, migration,
      release or escape” of pollutants at or from any premises, site, or location on which
      the insured or its contractors working on the insured’s behalf are performing
      operations. The Dishmans’ property constitutes “any premises, site, or location” on
      which Twin County Air-AG, RiceTec’s contractor working on its behalf, performed
      the operation of aerial spraying of herbicides.
                                           32
aerially. The allegations in the Dishman lawsuit thus fall within exclusion 5 in the

Endorsement.

      We conclude that exclusion 5 contained within the Endorsement operates to

preclude coverage of the claims asserted against RiceTec in the Dishman lawsuit.

Because the claims in the Dishman lawsuit fall within an exclusion of coverage, as

a matter of law, StarNet does not owe RiceTec a duty to defend in the Dishman

lawsuit. See King, 85 S.W.3d at 187 (“If a petition does not allege facts within the

scope of coverage, an insurer is not legally required to defend a suit against its

insured.”). We therefore hold that the trial court erroneously granted RiceTec’s

motion for summary judgment and denied StarNet’s motion for summary judgment.

      We sustain StarNet’s issues on appeal.

                                    Conclusion

      We reverse the trial court’s summary judgment ruling that StarNet owed

RiceTec a duty to defend in the Dishman lawsuit, and we remand this case for further

proceedings consistent with this opinion.




                                             Evelyn V. Keyes
                                             Justice

Panel consists of Justices Keyes, Higley, and Landau.



                                        33
