Dimmitt Chevrolet, Inc. v. Southeastern Fidelity Ins. Corp.

Citation636 So.2d 700
Decision Date01 July 1993
Docket NumberNo. 78293,78293
Parties, 62 USLW 2042, 18 Fla. L. Weekly S400 DIMMITT CHEVROLET, INC., et al., Appellants, v. SOUTHEASTERN FIDELITY INSURANCE CORPORATION, Appellee.
CourtUnited States State Supreme Court of Florida

Alan C. Sundberg and William F. McGowan, Jr. of Carlton, Fields, Ward, Emmanuel, Smith and Cutler, Tallahassee, and Thomas K. Bick and Joseph W. Dorn of Kilpatrick and Cody, Washington, DC, for appellants.

Robert E. Austin, Jr., Leesburg, and Hal K. Litchford and Kristyn D. Elliott, Orlando, for appellee.

Robert A. Butterworth, Atty. Gen. and Jeff G. Peters, Asst. Atty. Gen., Tallahassee, amicus curiae for State.

Jeffrey S. Kurtz, City Atty., Delray Beach, and Steven R. Berger and Bradley H. Trushin of Wolpe, Leibowitz, Berger & Brotman, Miami, amicus curiae for City of Delray Beach.

Jeffrey A. Tew and Daniel A. Casey of Kirkpatrick and Lockhart, Miami, amici curiae for The American Fiber Mfrs Ass'n, The American Petroleum Institute, The Chemical Mfrs Ass'n, Intern. Business Machines Corp. and Olin Corp.

George K. Rahdert of Rahdert & Anderson, St. Petersburg, Luther T. Munford of Phelps Dunbar, Jackson, MS; and Richard N. Dicharry and Pamela G. Michiels of Phelps Dunbar, New Orleans, LA, amicus curiae for John Richard Ludbrooke Youell on behalf of Underwriters at Lloyd's, London.

Ronald L. Kammer of Hinshaw and Culbertson, Miami, and Thomas W. Brunner, James M. Johnstone and Lainie J. Simon of Wiley, Rein and Fielding, Washington, DC, amici curiae for Ins. Environmental Litigation Ass'n, Service Ins. Co., Florida Farm Bureau Ins. Co., and American Sur. & Cas. Co.

The Motion for Rehearing is granted. The opinion filed in this case on September 3, 1992, is withdrawn and the following opinion dated July 1, 1993, is substituted in lieu thereof.

McDONALD, SHAW, GRIMES and KOGAN, JJ., concur.

BARKETT, C.J., and OVERTON and HARDING, JJ., dissent.

ON MOTION FOR REHEARING GRANTED

PER CURIAM.

This cause is before the Court on the following certified question of law from the United States Court of Appeals in Industrial Indemnity Insurance Co. v. Crown Auto Dealerships, Inc., 935 F.2d 240 (11th Cir.1991):

WHETHER, AS A MATTER OF LAW, THE POLLUTION EXCLUSION CLAUSE CONTAINED IN THE COMPREHENSIVE GENERAL LIABILITY INSURANCE POLICY PRECLUDES COVERAGE TO ITS INSURED FOR LIABILITY FOR THE ENVIRONMENTAL CONTAMINATION THAT OCCURRED IN THIS CASE.

We have jurisdiction. Art. V, Sec. 3(b)(6), Fla. Const. See also Sec. 25.031, Fla.Stat. (1991); Fla.R.App.P. 9.150.

The court of appeals set forth the following statement of facts and procedural history of this case for our consideration.

The following facts, taken from the district court's opinion, Industrial Indem. Ins. Co. v. Crown Auto Dealerships, 731 F.Supp. 1517, 1518-19 (M.D.Fla.1990), are undisputed. Appellants Dimmitt Chevrolet, Inc. and Larry Dimmitt Cadillac, Inc. ("Dimmitt") operated two automobile dealerships. From 1974 through 1979, Dimmitt sold the used crankcase oil generated by its business to Peak Oil Company ("Peak"). From 1954 to 1979, Peak recycled the oil at its plant in Hillsborough County, Florida for sale as used oil.

In 1983, the Environmental Protection Agency ("EPA") determined that Peak's oil operations had resulted in extensive soil and groundwater pollution at and around the plant site. Much of this pollution resulted from Peak's placement of waste oil sludge in unlined storage ponds. Chemicals from the sludge then leached into the soil and groundwater. Some of the pollution also derived from oil spills and leaks at the site, including a 1978 incident in which a dike collapsed and allowed oily wastewater to be released from a holding pond, and the occasional runoff of contaminated rainwater.

In July 1987, the EPA notified appellants that a release of hazardous substances had occurred at the Peak site and that appellants were potentially responsible parties ("PRP") for the costs of investigating and cleaning up the pollution. This liability is imposed, pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Sec. 9607 et seq., on anyone who generates, transports, or disposes of hazardous substances. In February 1989, Dimmitt and other PRPs entered into two administrative orders with EPA. Without conceding liability, appellants agreed to undertake remedial measures at the Peak site.

Appellee Southeastern Fidelity Insurance Corporation ("Southeastern") provided comprehensive general liability ("CGL") insurance coverage to Dimmitt from 1972 through 1980. The policy covered Dimmitt

for all sums which the INSURED shall become legally obligated to pay as DAMAGES because of A. BODILY INJURY or B. PROPERTY DAMAGE to which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the INSURED seeking DAMAGES on account of such BODILY INJURY or PROPERTY DAMAGE, even if any of the allegations of the suit are groundless....

An "occurrence", is defined by the policy as

an accident including continuous or repeated exposure to conditions, which result in BODILY INJURY or PROPERTY DAMAGE neither expected nor intended from the standpoint of the INSURED....

However, the policy excluded coverage for

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 ... into or upon 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....

In October 1988, Southeastern filed a declaratory judgment action against Dimmitt, seeking a declaration by the district court that Southeastern owed no duty to defend or indemnify Dimmitt under the CGL policy. Dimmitt filed a counterclaim seeking a contrary declaration. Both parties subsequently filed motions for summary judgment. The district court granted summary judgment in favor of Southeastern, reasoning that the pollution exclusion was not ambiguous and that the word "sudden" should be given a temporal meaning. Industrial Indem. Ins. Co. v. Crown Auto Dealerships, 731 F.Supp. 1517 (M.D.Fla.1990). Accordingly, the district court ruled that the pollution at the Peak site occurred over a period of years and therefore could not be considered "sudden." The district court subsequently denied without opinion Dimmitt's motion to alter or amend the judgment.

Crown Auto, 935 F.2d at 241-42 (footnotes omitted).

As noted by the court of appeals, Dimmitt Chevrolet, Inc. (Dimmitt) was not the actual cause of the pollution damage at issue. Its liability, however, is not in dispute in this case. The issue before us is whether Dimmitt's comprehensive liability insurance policy was intended to cover hazardous waste pollution under the circumstances set forth in the court of appeals' opinion. The question turns on the meaning of the term "sudden and accidental" within the pollution exclusion clause of Dimmitt's policy.

Dimmitt asserts that the term "sudden and accidental" is ambiguous because it is subject to multiple definitions. Thus, because ambiguous terms within an insurance policy should be construed in favor of the insured, the policy should be construed in Dimmitt's favor. Dimmitt argues that the word "sudden" does not have a temporal meaning and that the term was intentionally written so as to provide coverage for unexpected and unintended pollution discharge.

Southeastern Fidelity Insurance Corporation (Southeastern) contends that the clause excludes coverage for all pollution except when the discharge or dispersal of the pollutant occurs abruptly and accidentally. As such, Southeastern asserts that it had no duty to defend or indemnify Dimmitt because the pollution by the actual polluter, Peak Oil Company (Peak), was gradual and occurred over a period of several years.

Both sides also argue that the drafting history of pollution exclusion clauses favors their respective positions. In this regard, it should be noted that comprehensive general liability (CGL) policies are standard insurance policies developed by insurance industry trade associations, and these policies are the primary form of commercial insurance coverage obtained by businesses throughout the country. Before 1966, the standard CGL policy covered only property and personal injury damage that was caused by "accident." Broadwell Realty Servs., Inc. v. Fidelity & Casualty Co., 218 N.J.Super. 516, 528 A.2d 76, 84 (1987). In 1966 the insurance industry switched to "occurrence-based" policies in which the term "occurrence" was defined 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.' " Broadwell, 528 A.2d at 84 (quoting 3 Rowland H. Long, The Law of Liability Insurance App-53 (1966)). Beginning in 1970, the pollution exclusion clause at issue in this case was added to the standard policy. Finally, the policy was again changed in 1984 by the addition of what has been called an "absolute exclusion clause," which totally excludes coverage for pollution clean-up costs that arise from governmental directives. Kenneth S. Abraham, Environmental Liability Insurance Law 161 (1991).

Dimmitt argues that because many state insurance commissioners approved the 1970 addition of the pollution exclusion clause without ordering a reduction in premiums, this indicates that the clause did little more than clarify coverage. Southeastern counters by saying that the reason there was no premium reduction in 1970 was because there had been no premium increase when the coverage was expanded in 1966 to cover occurrences. Both parties also rely on conflicting statements made by insurance representatives...

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