69 F.3d 1160 (D.C. Cir. 1995), 94-7175, Charter Oil Co. v. American Employers' Ins. Co.

Docket Nº:94-7175.
Citation:69 F.3d 1160
Party Name:CHARTER OIL COMPANY, et al., Appellants, v. AMERICAN EMPLOYERS' INSURANCE COMPANY, et al., Appellees.
Case Date:November 14, 1995
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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69 F.3d 1160 (D.C. Cir. 1995)

CHARTER OIL COMPANY, et al., Appellants,



No. 94-7175.

United States Court of Appeals, District of Columbia Circuit

November 14, 1995

Argued Sept. 14, 1995.

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Appeal from the United States District Court for the District of Columbia (No. 83-cv03347).

Finley T. Harckham, with whom John H. Gross and Jerold Oshinsky, Washington, DC, were on the briefs, argued the cause, for appellants Charter Oil Company, et al.

James E. Rocap, III, with whom Niki Kuckes, Dennis M. Flannery, William J. Bowman, Dustin P. Finney, Jr., Steven G. Adams, Washington, DC, Andrew S. Amer, New York City, Arthur F. Sampson, III, Susan M. Muchmore, Lawrence E. Carr, Jr., Margaret H. Warner, Kyle A. Kane, Richard H. Gimer, Kathryn A. Underhill, Lisa B. Zucker, James P. Schaller, Timothy R. Dingilian, and James W. Greene, II, Washington, DC, were on the briefs, argued the cause, for appellees Aetna Casualty & Surety Co., et al.

Robert E. Heggestad, Washington, DC, filed the brief, for appellee Harbor Insurance Company.

Martin R. Baach, Washington, DC, filed the brief, for appellee Lloyd's London, et al. Michael Nussbaum, Washington, DC, entered an appearance.

Peter D. Coppelman, Acting Assistant Attorney General, Anne S. Almy, Steven R. Baer, and Evelyn S. Ying, Attorneys, United States Department of Justice, were on the brief, for amicus curiae United States of America.

Laura A. Foggan and Daniel E. Troy, Washington, DC, were on the brief, for amicus curiae Insurance Environmental Litigation Association.

S. Robert Sutton, North Potomac, MD, entered an appearance, for amicus curiae Transamerica Insurance Group.

Before: BUCKLEY, WILLIAMS and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge WILLIAMS.


In the early 1970s Independent Petrochemical Corporation ("IPC"), a wholly-owned subsidiary of plaintiff Charter Oil, was in the business of selling petrochemical products. As a courtesy to a customer, it arranged on several occasions for the disposal of waste oil by a St. Louis waste oil hauler, Bliss Oil, understanding that Bliss would take the oil to a waste disposal site. In fact, after Bliss Oil's president tasted the oil to check its suitability for other uses and found the flavor fit, Bliss sprayed it as a dust suppressant at various locations throughout Missouri. The sprayings occurred over a period of at least two months, with each spraying lasting about 30-40 minutes. The waste oil turned out to contain dioxin, a chemical compound alleged to cause harm to humans, animals, and plants. 1 The discharge of the dioxin-contaminated oil gave rise to claims against IPC by the federal government, the State of Missouri, and over 1,600 private plaintiffs, the latter seeking in aggregate $4 billion in compensatory damages and the same amount in punitive damages. IPC entered into settlements covering all of the claims and is now in bankruptcy. Its outstanding obligations include over $100 million owed to the federal government for clean-up of various sites in Missouri.

Charter and its affiliates (including IPC) sued several primary and excess insurers that had issued comprehensive general liability policies to them over the 1971-1983 period, seeking a declaratory judgment that these policies obliged the insurers to provide indemnification for all obligations arising out of Bliss's spraying activities. Each of the policies at issue contains one of four forms of pollution exclusion; three of the forms, on which the parties have focused, create an exception to the exclusion--i.e., affirmatively cover--harm from pollution releases that are

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"sudden and accidental." The first form (termed the "domestic insurers' exclusion" by the district court) provides:

[This insurance does not apply to] [b]odily 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 pollutants into or upon land, the atmosphere or any watercourse or body of water, but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

Joint Appendix ("J.A.") at 5067H (emphasis added). The second and third forms (the "London exclusion" and the "INA exclusion") are identical in all relevant respects. The fourth form, contained in policies issued by defendant Travelers, replaces the "sudden and accidental" language with a requirement that the discharge of pollutants be neither "expected" nor "intended."

In the decision under review here, the district court granted the insurers' motion for summary judgment on claims governed by Missouri law. Independent Petrochemical Corp. v. Aetna Casualty & Sur. Co., 842 F.Supp. 575 (D.D.C.1994). The court's key ruling was that the phrase "sudden and accidental" is unambiguous and means "unexpected, unintended, and abrupt." Id. at 579-80. This appeal followed. We affirm, rejecting Charter's contentions that the phrase "sudden and accidental" is sufficiently ambiguous to allow recovery for the injury from Bliss's sprayings and that representations made to state insurance regulators when insurers introduced the pollution exclusion create a public policy bar to its enforcement as interpreted by the district court.

Although all parties agree that Missouri law controls, we have no ruling from the Missouri courts interpreting "sudden and accidental." See Independent Petrochemical Corp., 842 F.Supp. at 578. Other circuits have certified questions to state supreme courts concerning the interpretation of the pollution exclusion, e.g., Claussen v. Aetna Casualty & Sur. Co., 865 F.2d 1217, 1220 (11th Cir.1989), but that solution is not available here because the Missouri Supreme Court declines to answer questions certified to it by federal courts. See Harber v. Altec Indus., Inc., 5 F.3d 339, 340 (8th Cir.1993); Independent Petrochemical Corp. v. Aetna Casualty & Sur. Co., 944 F.2d 940, 944 (D.C.Cir.1991).


  1. "Sudden and Accidental."

    Charter argues, first, that the phrase "sudden and accidental" is facially ambiguous and thus, under standard principles of insurance law and specifically those of Missouri, Peters v. Employers Mutual Casualty Co., 853 S.W.2d 300, 302 (Mo.1993); Krombach v. Mayflower Ins. Co., 827 S.W.2d 208, 210 (Mo.1992), should be interpreted to embrace rather than exclude coverage. Second, it argues that even if the phrase is not facially ambiguous, extrinsic evidence reveals a "latent ambiguity," which (unless clearly resolved by extrinsic evidence in favor of the insurer) again requires an interpretation favoring coverage.

    1. Facial Ambiguity.

    1. The Anti-redundancy Canon.

      Charter says that "sudden" is ambiguous in that it may be interpreted to mean either "unexpected and unintended" (the interpretation favored by Charter) or "unexpected, unintended, and abrupt" (the interpretation favored by the insurers and adopted by the district court). In support of its position, Charter points to dictionary definitions of "sudden" that emphasize the element of unexpectedness and downplay or ignore that of abruptness. E.g., Webster's Third New International Dictionary 2284 (1981) (listing, as the first definition of "sudden," "happening without previous notice or with very brief notice: coming or occurring unexpectedly: not foreseen or prepared for"). The district court rejected Charter's interpretation, relying heavily on the Eighth Circuit's construction of Missouri law in Aetna Casualty & Sur. Co. v. General Dynamics Corp., 968 F.2d 707 (8th Cir.1992). There the court held that the word "sudden," when joined with "accidental," imposes a requirement of temporal abruptness. Id. at 710. To rule

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      otherwise, it said, would render "sudden" superfluous in the phrase "sudden and accidental," since "accidental" already imposes a requirement of unexpectedness. Id. Missouri law requires that all terms of an insurance contract be given meaning; thus, "sudden" cannot mean merely unexpected. General Dynamics, 968 F.2d at 710. Rather, under Missouri law's dictate that policy language be given its plain meaning, "sudden" must mean "quick" or "abrupt." Id.

      Under the "home circuit" rule of Abex Corp. v. Maryland Casualty Co., 790 F.2d 119, 125-26 (D.C.Cir.1986), we "defer to the local circuit's view of the law of a state in its jurisdiction when that circuit has made a reasoned inquiry into state law, unless we are convinced that the court has ignored clear signals emanating from the state courts." Judges of the home circuit are likely to be more experienced in the law of states within their circuit than are outsiders; and, as diversity cases calling for application of a state's law are likely to arise predominantly within the circuit including the state, such deference makes for uniform results taking advantage of that expertise. General Dynamics therefore controls our interpretation of "sudden and accidental" unless we conclude that the court "clearly misread" Missouri law. Abex, 790 F.2d at 126. As rulings in this very litigation show, our deference under Abex is not slavish. Thus, in Independent Petrochemical Corp., 944 F.2d at 944-47 (D.C.Cir.1991), we refused to defer to the Eighth Circuit's conclusion that the term "damages" in the standard-form comprehensive general liability policy did not include environmental clean-up costs. We noted that the Eighth Circuit's decision was at odds with every other case applying the rules of insurance contract interpretation in force in Missouri, and we concluded that the decision...

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