# Zurich Am. Ins. Co. v. Burlington N. & Santa Fe Ry. Co. Supreme Court of Texas, No. 25-0511 **Zurich Am. Ins. Co. v. Burlington N. & Santa Fe Ry. Co., No. 25-0511, is before the Supreme Court of Texas. Key issue: Whether an insurer's contribution to a settlement exhausts its policy limits and ends its duty to defend, or whether the insured must expressly agree in the settlement that the payment exhausted the limits.** Practice areas: insurance ## Key issues - Whether an insurer's contribution to a settlement exhausts its policy limits and ends its duty to defend, or whether the insured must expressly agree in the settlement that the payment exhausted the limits. - How to count occurrences under premises-liability policies when more than a thousand claimants allege asbestos exposure from a railroad's decades of vermiculite transportation, and whether the insurer may recoup defense costs. ## Factual History W.R. Grace mined asbestos-contaminated vermiculite near Libby, Montana, and shipped it nationwide by rail. A loading dock used to load the vermiculite onto rail cars was insured by Grace under three Owners', Landlords', and Tenants' Liability (OL&T) policies issued by Zurich American Insurance Company's predecessor, Maryland Casualty Company, covering April 20, 1965 through April 20, 1974. Burlington Northern and Santa Fe Railway Company (BNSF) became a target of more than 1,000 asbestos-exposure lawsuits from Libby residents and sought defense and coverage under those policies and others (Brief on the Merits (Petitioner), PDF pp. 5, 13). BNSF's OL&T insurers funded a 2012 settlement of earlier Libby claims, to which Zurich contributed $5.4 million; this coverage dispute concerns claims filed after that settlement (Brief on the Merits (Petitioner), PDF pp. 5-6). ## Procedural History The coverage suit began as a declaratory action by Arrowood, another BNSF insurer, in the 352nd District Court of Tarrant County (Judge Josh Burgess); after other insurers settled, the only remaining dispute was between BNSF and Zurich. On cross-motions for summary judgment the trial court granted BNSF's motion, declared that Zurich owed a duty to defend lawsuits alleging asbestos exposure during the policy period or silent on the date, and declared that each plaintiff's exposure was a separate accident or occurrence (Petition for Review #2 (Zurich), PDF p. 9; Cross-Petition for Review (BNSF), PDF pp. 9-10). The Second Court of Appeals (Kerr, J., joined by Birdwell and Walker, JJ.) affirmed the duty to defend, reversed on the number of occurrences by holding BNSF's conduct was a single accident or occurrence, held Zurich failed to prove its $5.4 million payment exhausted the policies, and affirmed denial of Zurich's recoupment claim. Zurich American Insurance Co. v. Burlington Northern & Santa Fe Railway Co., No. 02-23-00245-CV, 2025 WL 807496 (Tex. App.—Fort Worth Mar. 13, 2025, pet. filed) (mem. op.) (Petition for Review #2 (Zurich), PDF pp. 9-10). Zurich and BNSF each petitioned for review on September 5, 2025. The Court requested briefs on the merits, which have been filed through reply briefs in August and September 2026; parts of the briefing are sealed or redacted (Docket). ## Issues Presented Zurich presents: (1) whether the court of appeals erred in affirming summary judgment for BNSF on exhaustion and the duty to defend, including by placing the burden on Zurich and requiring express acknowledgment of exhaustion in the settlement; (2) whether the Libby lawsuits allege claims potentially within the policies' premises-operations coverage; (3) whether Zurich may recoup the defense costs it paid; and (4) as the prevailing party, whether it is entitled to remand on attorney's fees under the Uniform Declaratory Judgments Act (Brief on the Merits (Petitioner), PDF pp. 5-7; Petition for Review #2 (Zurich), PDF p. 12). BNSF presents: whether the court of appeals correctly found a duty to defend but erred in counting the number of accidents or occurrences, and alternatively whether it erred in concluding that the 1965 policy did not provide defense costs beyond the indemnity limit (Brief on the Merits (Respondent) (BNSF), PDF pp. 4-6). ## Legal Arguments **Zurich American Insurance Company (Petitioner):** BNSF bears the burden to show an ongoing duty to defend, and Zurich exhausted the available limits by contributing $5.4 million to the 2012 settlement, which ended the duty. The court of appeals erred by requiring that the insured expressly agree that the payment exhausted the limits, because the OL&T policy language controls and does not require such an acknowledgment, and the requirement will chill settlements between insurers and insureds. BNSF cannot avoid its burden by arguing about how the settlement was allocated. The policies provide premises coverage, not general liability coverage, so bodily injury away from the loading dock and BNSF's transportation activities fall outside premises-operations coverage, and BNSF cannot rewrite the policies after declining more extensive completed-operations coverage. Zurich also argues it is entitled to recoupment of defense costs once limits are exhausted, which it says Montana law allows, or at least a fact issue exists, and that it should be remanded for a fee determination as the prevailing party (Brief on the Merits (Petitioner), PDF pp. 5-7). **Burlington Northern and Santa Fe Railway Company (Respondent and Cross-Petitioner):** The court of appeals correctly determined that Zurich owes a defense, but it stretched Texas law beyond any prior holding to find a single, roughly 70-year-long accident or occurrence. BNSF argues Texas courts apply the "cause test" to count occurrences, which this Court has not itself applied, and that the underlying complaints, including the McGarvey and Lewis complaints, allege many different acts and omissions that give rise to multiple accidents or occurrences. It says the court relied on inapplicable authority creating a conflict with other courts, rendered the policy language meaningless, and could not escape the pleadings through "same general conditions" language. Alternatively, BNSF argues the court of appeals erred in holding that the 1965 policy did not provide defense costs beyond the indemnity limits (Brief on the Merits (Respondent) (BNSF), PDF pp. 4-6; Cross-Petition for Review (BNSF), PDF pp. 4-5). ## Stated Reasons the Court Should Take the Case Zurich says the case raises critical questions about how Texas law handles settlement of insurer-insured disputes and determines policy exhaustion and termination of the duty to defend when the number of occurrences is disputed, and that the court of appeals created a new requirement of express acknowledgment of exhaustion that contradicts authority that the policy controls (Petition for Review #2 (Zurich), PDF p. 11). BNSF says the court of appeals stretched Texas law beyond any prior holding in finding a single decades-long occurrence and conflicted with other courts, and that the Court has not yet applied the cause test (Cross-Petition for Review (BNSF), PDF pp. 4-5). ## Practice Area Tags insurance ## Procedural Posture/Vehicle Petition for review and cross-petition for review from the Second Court of Appeals, which affirmed in part and reversed in part a declaratory judgment on summary judgment concerning an insurer's duty to defend, the number of occurrences, exhaustion of policy limits, and recoupment. The Court requested and received merits briefing, granted both petitions on October 2, 2026 and set oral argument for November 4, 2026. ## Amicus Involvement None --- Source: The SCOTX Report, https://scotxreport.com/cases/25-0511. AI-generated summary of the Court's opinion, orders and the parties' briefs, with pin cites to the page of each document; verify against the Court's own documents at search.txcourts.gov.