Devcon Int'l Corp. v. I. Cement & Bldg. Prod.S Inc. D/b/a Mark 21 Indus. Inc

Decision Date08 June 2010
Docket NumberNo. 07-4602,08-1996.,07-4602
Citation609 F.3d 214
CourtU.S. Court of Appeals — Third Circuit
PartiesDEVCON INTERNATIONAL CORPORATION; V.I. Cement & Building Products, Inc. d/b/a Mark 21 Industries, Inc., d/b/a Controlled Concrete Products, Inc., d/b/a Springfield Crusher, Appellants,v.RELIANCE INSURANCE COMPANY; Virgin Islands Insurance Guaranty Association, Appellees.

609 F.3d 214

DEVCON INTERNATIONAL CORPORATION; V.I. Cement & Building Products, Inc. d/b/a Mark 21 Industries, Inc., d/b/a Controlled Concrete Products, Inc., d/b/a Springfield Crusher, Appellants,
v.
RELIANCE INSURANCE COMPANY; Virgin Islands Insurance Guaranty Association, Appellees.

Nos. 07-4602, 08-1996.

United States Court of Appeals,
Third Circuit.

Submitted Under Third Circuit
LAR 34.1(a) May 6, 2010.

Filed: June 8, 2010.


609 F.3d 215

COPYRIGHT MATERIAL OMITTED

609 F.3d 216
Jack J. Aiello, Gunster, Yoakley & Stewart, West Palm Beach, FL, James L. Hymes, III, Law offices of James L. Hymes, III, St. Thomas, VI, for Appellants.

Richard H. Hunter, Hunter, Cole & Bennett, St. Croix, USVI, for Appellees.

Before SMITH, CHAGARES and JORDAN, Circuit Judges.
OPINION OF THE COURT
JORDAN, Circuit Judge.

Devcon International Corporation (“Devcon”) appeals an order of the District Court of the Virgin Islands of the United States entering a declaratory judgment in favor of Reliance Insurance Company (“Reliance”) on Devcon's claim that Reliance is required to defend and indemnify Devcon in a nuisance action brought against it in the Superior Court of the Virgin Islands (“the underlying action”). For the reasons that follow, we will affirm.


I. Factual Background

This case arises from an alleged nuisance caused by Virgin Islands Cement (“V.I. Cement”), a subsidiary of Devcon, at the Henry E. Rohlsen Airport (“the airport”) on the island of St. Croix, Virgin Islands.


A Facts Alleged In The Underlying Complaint

In September 1999, the Virgin Islands Port Authority (“VIPA”), which operates the airport, retained V.I. Cement to act as general contractor on a project to extend the airport's sole runway. Construction began the following month and generated large quantities of dust, which drifted over property belonging to the plaintiffs in the underlying action, all of whom live near the airport. The dust allegedly contaminated the plaintiffs' drinking water and cisterns and caused breathing disorders and other unspecified physical, emotional, and psychological damage. The plaintiffs also alleged that emissions from construction vehicles were causing similar problems, and that construction noise from the project deprived them of the quiet enjoyment of their properties.

In the spring of 2000, one of the plaintiffs filed a formal complaint with the Virgin Islands Department of Planning and Natural Resources (“DPNR”). DPNR investigators conducted an examination of the site and ordered VIPA to undertake immediate dust control measures and to submit a written plan for the relocation of residents during construction. On March 31, 2000, the DPNR issued a supplemental order that required VIPA to provide residents with uncontaminated potable water. On June 7, 2000, it rescinded its prior requirement that VIPA draft a plan for relocating residents, but it imposed additional dust remediation obligations. According

609 F.3d 217
to plaintiffs, neither VIPA nor its general contractor, V.I. Cement, ever fully remediated the dust problem, which continued despite the DPNR orders.

Plaintiffs filed the underlying suit on April 6, 2001, advancing various nuisance-related claims. The plaintiffs amended their complaint several times, the final version of which sets forth claims against V.I. Cement for nuisance, breach of the DPNR orders, trespass, negligence, and negligent and intentional infliction of emotional distress.


B The Pollution Exclusion And Proceedings In The District Court

V.I. Cement, acting through its parent company, Devcon, tendered defense of the plaintiffs' claims to Reliance, which had issued a commercial general liability policy to Devcon. Reliance initially informed Devcon that “it is questionable whether the insurance policy provides coverage for any of [plaintiffs'] claims” because the policy excluded coverage for injuries resulting from pollution caused by V.I. Cement. (App. at 689.) However, Reliance later agreed to defend Devcon pursuant to a reservation of rights letter under which Reliance asserted “the right to withdraw from the matter at any future date” if Reliance discovered that the plaintiffs' injuries were outside the scope of the insurance policy. ( Id.) Devcon then commenced the instant declaratory judgment action to ascertain Reliance's obligation to defend and indemnify it under the policy.

The Reliance policy provides coverage for “those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage.... The bodily injury or property damages must be caused by an occurrence.” ( Id. at 898.) “Occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” ( Id. at 911.)

The policy also contains numerous exclusions that excise coverage for specific harms caused by the insured. In particular, the policy removes coverage for any “bodily injury and property damage which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time” (hereinafter “the pollution exclusion”). ( Id. at 892.) “Pollutants” are defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including, but not limited to, smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.” ( Id.)

The parties filed cross-motions for summary judgment in the District Court. The Court found that the pollution exclusion removed coverage for the plaintiffs' injuries and that Devcon had no reasonable expectation of coverage for such harms because they were beyond the scope of coverage. Accordingly, the Court entered a declaratory judgment in favor of Reliance, finding that it had no duty to defend or indemnify Devcon for the injuries allegedly caused by V.I. Cement. Devcon filed this timely appeal.


II. Discussion1

On appeal, Devcon argues that the scope of the pollution exclusion is ambiguous and that we must construe it to provide coverage for the harms in the underlying action. Alternatively, Devcon suggests that it reasonably believed that the insurance policy would provide coverage for construction-related harms such as those caused by dust and engine fumes, and it urges us to

609 F.3d 218
extend coverage under the doctrine of reasonable expectations. We address each of those arguments in turn.2
A. The Pollution Exclusion

To establish insurance coverage, the insured bears the initial burden of showing that the harm described in the plaintiff's complaint potentially falls within the scope of the policy. State Farm Fire & Cas. Co. v. Estate of Mehlman, 589 F.3d 105, 110 (3d Cir.2009). “If the complaint avers facts that might support recovery under the policy, coverage is triggered and the insurer has a duty to defend.” Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 225-26 (3d Cir.2005). The burden then shifts to the insurer to demonstrate that an exclusion places the particular harm outside of the policy's reach. Estate of Mehlman, 589 F.3d at 111. Exclusions from coverage are strictly construed against the insurer. Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 206-07 (3d Cir.2001).

In performing the foregoing analyses, the court must evaluate the terms of the policy to determine whether they are ambiguous. Lucker Mfg. v. Home Ins. Co., 23 F.3d 808, 814 (3d Cir.1994). A term is ambiguous if more than one reasonable interpretation of the term exists. Id. If the court finds that the policy is unambiguous, the court must give effect to the terms as stated on the face of the policy. However, if the court identifies an ambiguity in the policy, the court must resolve the ambiguity by giving effect to the interpretation of the term that is most favorable to the insured, as the non-drafting party. J.C. Penney Life Ins. Co. v. Pilosi, 393 F.3d 356, 364 (3d Cir.2004).

Reliance does not challenge Devcon's assertion that the injuries described in the underlying complaint fall within the policy's grant of coverage for bodily injury and property damage. Instead, Reliance argues that the pollution exclusion removes coverage for those harms. Devcon counters that the pollution exclusion was drafted for the purpose of excluding coverage for environmental pollution akin to the dumping of hazardous waste. According to Devcon, the exclusion is ambiguous, not because a particular term in the policy is susceptible to multiple interpretations, but because the exclusion, if read literally, would remove coverage for a large number of harms that do not implicate the environmental catastrophes that the exclusion was supposedly intended to address.

609 F.3d 219

We have previously addressed this type of argument in Reliance Insurance Company v. Moessner, 121 F.3d 895 (3d Cir.1997). In that case, the plaintiffs were injured when a device used to cure concrete products emitted hazardous amounts of carbon monoxide into an enclosed area, causing various non-fatal injuries. Id. at 898 & n. 1. The plaintiffs brought suit against the insured, which had purchased a general liability policy from Reliance that contained a pollution exclusion identical to the one in Devcon's policy. Id. at 899-900. Reliance brought a declaratory judgment action, and the insured responded with the same argument that Devcon currently makes: it argued that the pollution exclusion was ambiguous because “its terms ‘ suggest that the exclusion applies only to environmental catastrophes.’ ” Id. at 900. We rejected that argument as contrary to a facial reading of the policy. Applying Pennsylvania law, we held that the exclusion “admits of no ambiguity in its exclusion of claims such as those [alleged in the underlying action]. It clearly states that the exclusion applies to the escape of pollutants ‘at any time,’ and contains no language limiting its scope to environmental catastrophes.” Id. at 901.

Devcon argues that Moessner should not guide our decision because ...

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