                 United States Court of Appeals,

                         Fifth Circuit.

                             No. 93-7463.

     MERIDIAN OIL PRODUCTION, INC. (formerly known as El Paso
Exploration Company) and El Paso Natural Gas Company, Plaintiffs-
Appellants,

                                  v.

   HARTFORD ACCIDENT AND INDEMNITY COMPANY, et al., Defendants-
Appellees.

                         July 28, 1994.

Appeal from the United States District Court for the Southern
District of Texas.

Before REAVLEY and JONES, Circuit Judges, and JUSTICE,* District
Judge.

     REAVLEY, Circuit Judge:

     The insured sought indemnity from its insurer for pollution

damages the insured caused a landowner in drilling and plugging an

oil and gas well.   The insurer obtained summary judgment in the

district court, upon the holding that the pollution was not a

covered "occurrence."   That court also rejected the insured's

Stowers1 settlement claim.    We affirm.

                              BACKGROUND

     This insurance coverage dispute stems from an underlying

property damage suit, in which judgment for the landowner was

affirmed by the Tenth Circuit in Marshall v. El Paso Natural Gas


     *
      District Judge of the Eastern District of Texas, sitting by
designation.
     1
      See G.A. Stowers Furniture Co. v. American Indem. Co., 15
S.W.2d 544 (Tex.Comm'n App.1929, holding adopted).

                                  1
Co., 874 F.2d 1373 (10th Cir.1989). In the Marshall suit, Meridian

Oil Production, Inc. ("Meridian") (formerly known as El Paso

Exploration Co.), was found liable to Donnie and Christie Marshall

for the damage to their land caused by Meridian's operation of an

oil and gas well on the Marshall property.    The evidence in that

case showed that Meridian failed to protect a fresh water aquifer,

discharged contaminants into open pits on sandy soil, and plugged

the abandoned well without guarding against migration between zones

and formations.    The Oklahoma jury awarded Marshall $400,000 for

actual damages and $5,000,000 for punitive damages.

     The present action followed Meridian's demand for indemnity

for the Marshall damages under its comprehensive general liability

policies issued by defendants Hartford Accident and Indemnity

Company (Hartford), Meridian's primary insurer, and the London

Market insurers, who provided excess and umbrella insurance to

Meridian.    The district court rejected the claim for coverage for

the reason that the discharge and release of contaminants was

deliberate, causing damage that was the natural result of intended

action.     Alternatively, the court held that the discharge and

release was not sudden and accidental, and was therefore within the

pollution exclusion of the policy.

     Meridian further claimed that Hartford breached its duty to

act reasonably in settlement negotiations under Stowers, but the

court held that Hartford committed no breach of duty where it

reserved its rights in defending the insured and succeeded in

declining coverage.


                                  2
                                   DISCUSSION

 Coverage of Liability for Occurrence

           The Hartford policy defines an "occurrence," the liability

for    which    it   protects    Meridian,   as   "an    accident,      including

continuous or repeated exposure to conditions, which results in

bodily injury or property damage neither expected nor intended from

the standpoint of the insured."         The parties agree that Texas law

applies.       Texas courts afford coverage for fortuitous damages but

deny coverage when damages are the natural and probable consequence

of    intentional    conduct.2     Regardless     of    whether   the   policies

involved are worded to cover "accidents" or "occurrences," all


       2
      See State Farm Fire & Casualty Co. v. S.S., 858 S.W.2d 374,
377-78 (Tex.1993) (applying intentional injury exclusion and
acknowledging that coverage exists only for undesigned injury and
events which do not result as the natural and probable
consequence of actions); Republic Nat'l Life Ins. Co. v.
Heyward, 536 S.W.2d 549, 557 (Tex.1976) ("injuries are
"accidental' and within the coverage of an insurance policy ...
if from the viewpoint of the insured, the injuries are not the
natural and probable consequence of the action or occurrence
which produced the injury; or in other words, if the injury
could not reasonably be anticipated by insured, or would not
ordinarily follow from the action or occurrence which caused the
injury."); Southern Farm Bureau Casualty Ins. Co. v. Brock, 659
S.W.2d 165, 166-67 (Tex.App.—Amarillo 1983, writ. ref'd n.r.e.)
(no coverage because insured intentionally rammed another vehicle
and insured knew or should have known that damage was a natural
and probable consequence of act); Ritchie v. John Hancock Mut.
Life Ins. Co., 521 S.W.2d 367, 368 (Tex.App.—Waco 1975, no writ)
(when one in all reasonable probability expects event to result
from his voluntary conduct, event is not an accident); Chen v.
Metropolitan Ins. and Annuity Co., 907 F.2d 566, 568-69 (5th
Cir.1990) (applying Texas law, question was whether coverage did
not exist because death was the "natural and probable"
consequence of ingesting too much alcohol at a Chinese festival);
Travelers Insurance Co. v. Volentine, 578 S.W.2d 501, 503
(Tex.App.—Texarkana 1979, no writ) (in an occurrence policy,
accident means an "unexpected, unforeseen or undesigned happening
or consequence.")

                                       3
offer minor variations of the same essential concept;                           coverage

does       not   exist    for   inevitable       results      which    predictably     and

necessarily emanate from deliberate actions.

       At oral argument, Meridian attempted to demonstrate that

damage to the Marshall property was accidental by equating itself

with       one   who     intentionally   goes         over    the     speed    limit   and

subsequently is involved in an unexpected collision;                            coverage

would       still   exist.       Although        we   agree    with     that   scenario,

Meridian's actions are closer to those of a reckless driver who

careens down a busy street while blindfolded and later claims he

had "good intentions" but didn't see the stop signs; the resulting

damage cannot be characterized as "unexpected."                           Although the

extent of monetary recovery for the damages in the present case

might have been unexpected, damage to the surface and subsurface

was a necessary companion event to Meridian's conduct. An operator

knows when the drill stem goes through a fresh water aquifer and

knows that if no surface casing or string of pipe is set in place

to protect the water from drilling mud, fluids and subsequent

contaminants, the fresh water will be polluted.3                          The operator

knows that the pollution will continue if no plug or cemented pipe

prevent migration of fluids up and down the well bore.                         Likewise,

       3
      As the judge in the Marshall trial noted, Meridian
proceeded to drill without using water stringers "knowing the
geology of the area, a decision that was exacerbated in that they
proceeded as they did after meeting with the Oklahoma Corporation
Commission officials, a meeting in which the problem was pointed
up and which was followed by a letter in October 1981 specifying
the problem and directing the use of stringers." The judge also
noted that the subject matter was general knowledge within the
drilling industry.

                                             4
contaminants dumped on sandy, permeable soil without adequate

lining will always pollute.         The Marshall record establishes as a

matter of law that the damages to the Marshall's land were not

unexpected from the standpoint of the insured.            Because Meridian's

conduct inevitably and predictably caused the pollution, summary

judgment for Hartford was correct.

 The Stowers Claim

          Because there was no coverage, Hartford had no duty to settle

the   case    in    response   to   the    Marshall   offer.   See   American

Physicians Insurance Exchange v. Garcia, 876 S.W.2d 842, 848-850

(Tex.1994).        We are not prepared to say, however, that an insurer

who defends an insured is absolved from all extra-contractual

duties in every case where the insurer is ultimately held to be

responsible for no coverage under the policy.4            If there is a duty

to defend, or if the insurer assumes that duty, the insurer must

perform with reasonable care.             The insurer may not prejudice the

possibilities of settlement for the insured.            In the instant case,

however, Hartford paid over a million dollars in defense costs;

the attorney was chosen by Meridian;              Meridian was informed of

events, told that coverage was a disputed matter, and told to

      4
      We have previously acknowledged that the Texas Supreme
Court has held that a plaintiff can recover damages from an
insurer's breach of the duty of good faith and fair dealing even
when there is no recovery under the policy. See First Texas Sav.
Ass'n v. Reliance Ins. Co., 950 F.2d 1171, 1178 (5th Cir.1992)
(explaining Viles v. Security Nat'l Ins. Co., 788 S.W.2d 566, 567
(Tex.1990)). However, the Texas Supreme Court has recently
granted a writ of error to hear Republic Ins. Co. v. Stoker, 867
S.W.2d 74 (Tex.App.—El Paso 1993), which squarely addresses the
question of whether an extra-contractual bad faith claim can
exist when coverage is lacking.

                                          5
negotiate a settlement for its own benefit if it chose. Meridian's

opportunity to settle was not prejudiced by Hartford and there was

no issue of lack of care in the defense.     Under the Texas law

represented by Garcia, we believe the summary judgment against

Meridian's Stowers claim was correct.

     AFFIRMED.




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