Transamerica Ins. Co. v. Duro Bag Mfg. Co.

• Decision Date: 16 February 1995
• Docket Number: No. 93-6218,93-6218
• Citation: 50 F.3d 370
• Parties: 25 Envtl. L. Rep. 20,695 TRANSAMERICA INSURANCE COMPANY, Plaintiff-Appellee, v. DURO BAG MANUFACTURING COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 370

50 F.3d 370

25 Envtl. L. Rep. 20,695

TRANSAMERICA INSURANCE COMPANY, Plaintiff-Appellee, v. DURO BAG MANUFACTURING COMPANY, Defendant-Appellant.

No. 93-6218.

United States Court of Appeals Sixth Circuit.

Argued Jan. 17, 1995.

Decided Feb. 16, 1995 ^*.

David A. Brill, Goldberg & Simpson, Louisville, KY.

David P. Cutler (argued and briefed) and Edwin J. Hull, Goggins, Cutler & Hull, Chicago, IL, for plaintiff-appellee.

Thomas C. Hill, Taft, Stettinius & Hollister, Cincinnati, OH, Catherine J. Serafin, James R. Wagner (briefed), Anderson, Kill, Olick & Oshinsky, Washington, DC, and Eugene R. Anderson (argued), Anderson, Kill, Olick & Oshinsky, New York City, for defendant-appellant.

Douglas W. Becker (briefed), Becker, Farris & Gallagher, Louisville, KY, Daniel I. Davidson (argued and briefed), Russell F. Smith, III, Spiegel & McDiarmid, Washington, DC, Zachary M. Kafoglis (briefed), Satterfield & Kafoglis, Bowling Green, KY, and Laura A. Foggan (briefed), Wiley, Rein & Fielding, Washington, DC, for amici curiae.

Before: ENGEL, KENNEDY, and SUHRHEINRICH, Circuit Judges.

KENNEDY, Circuit Judge.

In 1989, the Environmental Protection Agency ("EPA") sued defendant, Duro Bag Manufacturing Company, seeking to hold it liable for the costs of cleaning up environmental damage at a Kentucky landfill. Defendant notified its insurer, plaintiff Transamerica Insurance Company, of the suit and sought coverage. Plaintiff denied coverage and filed the instant declaratory judgment action, seeking a court order holding that the pollution exclusion clause contained in the policy bars coverage. The District Court granted summary judgment in favor of plaintiff, and defendant now appeals. We affirm.

I.

From 1973 to 1979, defendant deposited drums and fiberboard barrels containing ink and glue at the Newport landfill in Kentucky. In 1989, the EPA filed suit against defendant, seeking to hold the company liable for the costs of the clean-up. Defendant's insurer denied coverage and filed the instant declaratory judgment action. This action was stayed pending the outcome of the EPA suit. After the EPA and defendant negotiated a settlement for $350,000, the stay was lifted, and the parties filed cross-motions for summary judgment. The key dispute revolves around the meaning of the phrase "sudden and accidental" in the pollution exclusion clause. Interpretation of insurance contracts is, of course, a matter of state law, and defendant asked the District Court to certify this question to the Kentucky Supreme Court.

The District Court initially agreed, but revoked that consent when the parties were unable to agree on a certification order. The District Court then proceeded to rely on Sixth Circuit precedent to hold that the meaning of "sudden and accidental" was unambiguous under Kentucky law and that the pollution exclusion clause applied to the facts at hand. Defendant now appeals.

II.

A. Certification

Defendant complains that the District Court erred in not certifying this question to the Kentucky Supreme Court and filed a motion asking this Court to certify the question. The decision whether or not to utilize a certification procedure lies within the sound discretion of the district court. Lehman Bros. v. Schein, 416 U.S. 386, 391, 94 S.Ct. 1741, 1744, 40 L.Ed.2d 215 (1974). Resort to the certification procedure is most appropriate when the question is new and state law is unsettled. Id. at 390-91, 94 S.Ct. at 1743-44; see also Fischer v. Bar Harbor Banking & Trust Co., 857 F.2d 4, 7 (1st Cir.1988), cert. denied, 489 U.S. 1018, 109 S.Ct. 1135, 103 L.Ed.2d 196 (1989); Florida ex rel. Shevin v. Exxon Corp., 526 F.2d 266, 274-75 (5th Cir.), cert. denied, 425 U.S. 930, 96 S.Ct. 1659, 48 L.Ed.2d 172 (1976).

Such is not the case here. As we discuss below, this Court has already examined Kentucky law on this issue and found it to be relatively settled. See United States Fidelity & Guaranty Co. v. Star Fire Coals, 856 F.2d 31 (6th Cir.1988). Although Kentucky has not addressed the exact question at issue, it does have well-established principles to govern the interpretation of insurance contracts. Accordingly, the District Court did not err in refusing to certify the question. For the same reasons, we also decline to certify it.

B. Interpretation of "Sudden and Accidental"

As with many commercial liability policies issued in the 1970's, the policies at issue in this case all contain the so-called pollution exclusion clause, which reads:

This insurance does not apply; ... (j) to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutant into or on land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

This clause, with its "sudden and accidental" language, has created enormous amounts of litigation.

Indeed, we have already interpreted this clause under Kentucky law. Id. In Star Fire Coals, this Court declared:

We believe the everyday meaning of the term "sudden" is exactly what this clause means. We do not believe that it is possible to define "sudden" without reference to a temporal element that joins together conceptually the immediate and the unexpected. It must also be emphasized that the focus of this "sudden and accidental" exception to the general pollution exclusion clause is on the nature of the discharge of the pollution itself, not on the nature of the damages caused.

.. Thus, we believe that such pollution exclusion clauses apply to the release of wastes and pollutants taking place on a regular basis or in the ordinary course of business.

Id. at 34-35.

Defendant attempts to avoid the effects of Star Fire Coals by arguing that the Kentucky Supreme Court would not reach this same conclusion. In support of its argument, defendant points to a 1991 decision of the Kentucky Supreme Court: James Graham Brown Foundation v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273 (Ky.1991). ¹ According to defendant, in Brown Foundation, the...