Bituminous Cas. Corp. v. Advanced Adhesive Technology, Inc.

• Decision Date: 23 January 1996
• Docket Number: No. 94-9278,94-9278
• Citation: 73 F.3d 335
• Court: U.S. Court of Appeals — Eleventh Circuit
• Parties: BITUMINOUS CASUALTY CORPORATION, Plaintiff-Counter-Defendant, Appellant, v. ADVANCED ADHESIVE TECHNOLOGY, INC., Defendant-Counter-Claimant, Appellee, Georgia Pad, Inc., Defendant-Appellee.

Page 335

73 F.3d 335

64 USLW 2544

BITUMINOUS CASUALTY CORPORATION, Plaintiff-Counter-Defendant, Appellant, v. ADVANCED ADHESIVE TECHNOLOGY, INC., Defendant-Counter-Claimant, Appellee, Georgia Pad, Inc., Defendant-Appellee.

No. 94-9278.

United States Court of Appeals, Eleventh Circuit.

Jan. 23, 1996.

John M. Bovis, William S. Allred, Bovis, Kyle & Burch, Atlanta, GA, for appellant.

John T. Minor, III, William Francis Jourdain, Robert Greg McCurry, Minor, Bell & Neal, Dalton, GA, for appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before HATCHETT, DUBINA and BLACK, Circuit Judges.

HATCHETT, Circuit Judge:

Following Georgia law in this diversity case, we hold that a pollution exclusion provision in a commercial liability insurance policy is ambiguous and must be construed against the insurer. We affirm the district court.

BACKGROUND

Appellee Advanced Adhesive Technology, Inc. (Advanced) manufactures and sells adhesive products. Appellant Bituminous Casualty Corporation (Bituminous) sold Advanced a general commercial liability insurance policy (GCL policy) effective from January 1, 1993, to January 1, 1994. Bituminous also issued an umbrella insurance policy to Advanced effective from July 9, 1993, to April 1, 1994.

The GCL policy contains, through an endorsement, a "POLLUTION EXCLUSION" that precludes coverage for:

(1) Bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants.

(2) Any loss, cost or expense arising out of any governmental direction or request that the named insured test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants.

Subparagraph (1) above does not apply to bodily injury or property damage caused by heat, smoke or fumes from a hostile fire. As used in this exclusion, a hostile fire means one which becomes uncontrollable, or breaks out from where it was intended to be.

Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

The GCL policy interprets "bodily injury" to include death. The umbrella policy contains a similar pollution exclusion and defines "bodily injury" in the same manner.

On May 12, 1993, E. Lee Bazini died while allegedly installing carpet on his boat using an Advanced product, AAT-1108 Headliner and Boat Adhesive (AAT-1108). On August 30, 1993, Bazini's estate (the estate) made a claim against Advanced alleging that Bazini died from inhaling the dichloromethane fumes of AAT-1108 and that the labels on the AAT-1108 container possessed insufficient warnings as to the proper use of the product. ¹ Thereafter, Advanced sought coverage from Bituminous in the form of a legal defense and indemnification. In January 1994, Bituminous filed this lawsuit in the Northern District of Georgia, seeking a declaration that the GCL policy "does not afford coverage for the Bazini claims by operation of the ... [pollution] exclusion." Advanced asserted a counterclaim contending that Bituminous "will deny coverage under the Umbrella Policy for the Bazini claim for the exact reason that [Bituminous] has denied coverage under the [GCL] policy." Both parties filed motions for summary judgment.

In an order dated October 24, 1994, the district court first concluded that AAT-1108's vapors constituted "pollutants." The court went on to hold, however, that

(1) Plaintiff's failure to include the word "emission" within the pollution exclusion, (2) the tenuousness of the use of "discharge, dispersal, release or escape" to describe the chemical process at issue, and (3) the factual distinctions which separate this case from all others ... lead the court to conclude that the pollution exclusion, as applied in this instance, is ambiguous. The clause must, therefore, be construed against Plaintiff.

Accordingly, the court granted Advanced's motion for summary judgment, denied Bituminous's

motion for summary judgment, and dismissed the case. This appeal followed. ²

CONTENTIONS

Bituminous contends that the pollution exclusion is unambiguous and clearly applies to permit the insurance company to deny coverage to Advanced on the estate's claim. Thus, Bituminous asserts that the district court erred in granting Advanced's motion for summary judgment and in denying its motion for summary judgment.

Advanced responds that the district court (1) properly found that ambiguity exists as to whether the pollution exclusion applies to prevent coverage on the estate's claim, and (2) correctly construed that ambiguity against Bituminous. ³

DISCUSSION

The district court did not use extrinsic evidence in interpreting the insurance policies at issue; therefore, we review the district court using the de novo standard. See United Benefit Life Ins. Co. v. United States Life Ins. Co., 36 F.3d 1063, 1065 (11th Cir.1994).

In diversity cases, the choice-of-law rules of the forum state determine which state's substantive law applies. Federal jurisdiction in this case is based on diversity, and Georgia was the forum state. Under Georgia choice-of-law rules, interpretation of insurance contracts is governed by the law of the place of making. Insurance contracts are considered made at the place where the contract is delivered.

American Family Life Assur. Co. v. United States Fire Co., 885 F.2d 826, 830 (11th Cir.1989) (citations omitted). The insurance contracts in this case were delivered in Georgia; thus, Georgia substantive law controls.

In Georgia, ordinary rules of contract construction govern the interpretation of insurance policies. United States Fidelity & Guar. Co. v. Park 'N Go of Ga., Inc., 66 F.3d 273, 276 (11th Cir.1995) (certification to Georgia Supreme Court). "The rules of contract interpretation are statutory, and construction of a contract is a question of law for the court." Park 'N Go, 66 F.3d at 276; see also O.C.G.A. Secs. 13-2-1 through 13-2-4 (1982). Moreover,

[u]nder Georgia rules of contract interpretation, words in a contract generally bear their usual and common meaning. OCGA Sec. 13-3-2(2). However, "if the construction is doubtful, that which goes most strongly against the party executing the instrument or undertaking the obligation is generally to be preferred." OCGA Sec. 13-2-2(5). Georgia courts have long acknowledged that insurance policies are prepared and proposed by insurers. Thus, if an insurance contract is capable of being construed two ways, it will be construed against the insurance company and in favor of the insured.

Claussen v. Aetna Casualty & Sur. Co., 259 Ga. 333, 380 S.E.2d 686, 687-88 (1989). We apply these principles in assessing whether the terms "discharge," "dispersal," "release," or "escape" precisely describe the process that produced the vapors that allegedly killed Bazini.

In support of its motion for summary judgment, Advanced submitted an affidavit from its president, Benny Wood. In that affidavit A "discharge" is defined as, inter alia, "3: the act of discharging: removal of a load: UNLOADING ... 5: a firing off: expulsion of a charge: EXPLOSION ... 6a: a flowing or issuing out ... EMISSION, VENT ... b: something that is emitted or evacuated...." Webster's Third New International Dictionary 644 (1976) (emphasis added); see also Funk and Wagnalls Standard College Dictionary 378-79 (1974). Therefore, one of the definitions of "discharge" accurately describes the process in controversy; other common meanings of the word, however, do not. In Claussen, the Georgia Supreme Court addressed a similar situation when interpreting a pollution exclusion clause. The clause at issue there provided that the pollution exclusion did not apply when "such discharge, dispersal, release or escape is sudden and accidental." Claussen, 380 S.E.2d at 687. In deciding the meaning of "sudden," the court reasoned:

                Wood attested that "[a]ll adhesive products, including AAT-1108, by their nature, emit vapors in the process of adhesion."   The district court relied on this unrefuted evidence to determine that "the chemical reaction which create[d] these vapors is most accurately described by the term 'emission.' "   We agree with the district court's finding that the production of vapors from AAT-1108 constituted an "emission."
                

What is the meaning of the word "sudden" as it is used in the insurance policy? Claussen argues that it means "unexpected"; Aetna asserts that the only possible meaning is "abrupt." ...

The primary dictionary definition of the word is "happening without previous notice or with very brief notice; coming or occurring unexpectedly; not foreseen or prepared for." Webster's Third New International Dictionary, at 2284 (1986). See also, Funk and Wagnalls Standard Dictionary, at 808 (1980); Black's Law Dictionary, at 1284 (1979). The definition of the word "sudden" as "abrupt" is also recognized in several dictionaries and is common in the vernacular. Perhaps, the secondary meaning is so common in the vernacular that it is, indeed, difficult to think of "sudden" without a temporal connotation: a sudden flash, a sudden burst of speed, a sudden bang. But,...