Liberty Mut. Ins. Co. v. Triangle Industries, Inc.

• Decision Date: 10 March 1992
• Docket Number: PROPERTY-LIABILITY,No. 91-1685,91-1685
• Citation: 957 F.2d 1153
• Parties: , 60 USLW 2635, 22 Envtl. L. Rep. 20,827 LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff-Appellee, v. TRIANGLE INDUSTRIES, INCORPORATED, a/k/a ANC Holdings, Incorporated; Triangle PWC, Incorporated, Defendant & Third Party Plaintiffs-Appellants, v. NEW JERSEYGUARANTY ASSOCIATION, on Behalf of IDEAL MUTUAL INSURANCE COMPANY, in liquidation, Zurich-American Insurance Companies, 91-1685 Zurich Insurance Company, Third Party Defendants-Appellees, and Wausau Insurance Companies, Employers Insurance of Wausau, Third Party Defendants. Westinghouse Electric Corporation, International Business Machines Corporation, Olin Corporation, American Fiber Manufacturers Association, American Petroleum Institute, Chemical Manufacturers Association, Insurance Environmental Litigation Association, Amici Curiae.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1153

957 F.2d 1153

35 ERC 1369, 60 USLW 2635, 22 Envtl.

L. Rep. 20,827

LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff-Appellee, v. TRIANGLE INDUSTRIES, INCORPORATED, a/k/a ANC Holdings, Incorporated; Triangle PWC, Incorporated, Defendant & Third Party Plaintiffs-Appellants, v. NEW JERSEY PROPERTY-LIABILITY GUARANTY ASSOCIATION, on

Behalf of IDEAL MUTUAL INSURANCE COMPANY, in liquidation,

Zurich-American Insurance Companies, 91-1685 Zurich

Insurance Company, Third Party Defendants-Appellees,

and

Wausau Insurance Companies, Employers Insurance of Wausau,

Third Party Defendants.

Westinghouse Electric Corporation, International Business

Machines Corporation, Olin Corporation, American Fiber

Manufacturers Association, American Petroleum Institute,

Chemical Manufacturers Association, Insurance Environmental

Litigation Association, Amici Curiae.

No. 91-1685.

United States Court of Appeals Fourth Circuit.

Argued Dec. 3, 1991.

Decided March 2, 1992.

As Amended March 10, 1992.

Stephen M. Orlofsky, Blank, Rome, Comisky & McCauley, Cherry Hill, N.J., argued (Carlo Scaramella, on brief), for defendants and third party plaintiffs-appellants.

Lee Hadas Glickenhaus, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Boston, Mass., argued, for third party defendants-appellees.

William F. Greaney, Covington & Burling, Washington, D.C., for amici curiae American Petroleum Institute and Chemical Mfrs. Ass'n; H. Woodruff Turner, Peter J. Kalis, David M. Aceto, Thomas M. Reiter, William J. Pohlman, Kirkpatrick & Lockhart, Pittsburgh, Pa., for Amici Curiae Westinghouse Elec. Corp., American Fiber Mfrs. Ass'n, Intern. Business Machines Corp., and Olin Corp., on the brief.

Thomas W. Brunner, Marilyn E. Kerst, Steven B. Long, Wiley, Rein & Fielding, Washington, D.C., for amicus curiae Ins. Environmental Litigation Ass'n.

Before ERVIN, Chief Judge, NIEMEYER, Circuit Judge, and SHEDD, United States District Judge for the District of South Carolina, sitting by designation.

OPINION

NIEMEYER, Circuit Judge:

The question of whether insurance provides coverage for pollution damage is currently an important one that has far-reaching financial implications. ¹ The answer determines who in the first instance bears the cost of pollution cleanup, although we recognize that it does not ultimately relieve the entire economy of the financial burden. In this case we conclude that certain insurance policies, interpreted in accordance with the law of New Jersey, do not provide coverage for the unintended environmental damage which allegedly continues to arise from the past regular surface disposal in a landfill of the waste products of a standard manufacturing process. We therefore affirm the judgment of the district court.

I

Triangle Industries, Inc., and its subsidiary, Triangle PWC, Inc., (collectively referred to as "Triangle") were involved in the fabrication of wire and cable at a processing plant in Glen Dale, West Virginia. As part of the fabrication process, Triangle utilized a method of "pickling" the steel used to make its wires and cables which produced a waste product known as "lime-stabilized waste pickle liquor sludge." Between November 1977 and October 1980, this limestabilized waste pickle liquor sludge was trucked by an independent contractor from the Triangle plant in West Virginia to a landfill near St. Clairsville, Ohio, where it was poured onto the ground. ² Shortly after Triangle ceased disposing of the sludge at the site, the Ohio Environmental Protection Agency conducted tests and discovered that hazardous materials were leaking from the landfill.

After conducting some of its own tests, on December 7, 1984, the United States Environmental Protection Agency notified Triangle, as well as other companies, that it considered them "potentially responsible parties" under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601 et seq. (1988). On October 3, 1985, Triangle and the other potentially responsible parties entered into an administrative consent agreement with the federal agency, in which the companies agreed to begin cleaning up the site.

From January 1, 1981, to April 4, 1987, Triangle maintained a number of insurance policies with three different insurers. All of the policies include covenants to defend and indemnify Triangle against covered property damage, but each policy also expressly excludes coverage for certain categories of pollution damage.

While the particular language of specific policies will be discussed later in some detail, it is useful to note at this point that this case involves, generally, three categories of insurance coverage. First, there are comprehensive general liability policies which contain what will be termed the "original" pollution exclusion clause. One of these policies, issued by Ideal Mutual Insurance Company, covered the years 1981 and 1982. The other, issued by Liberty Mutual Insurance Company, covered the period from January 1, 1982, to July 1, 1982. Second, there are comprehensive general liability policies with a "modified" pollution exclusion clause. Liberty Mutual issued policies of this type to Triangle, covering the period from July 1, 1982, to January 1, 1984. Afterwards, Zurich Insurance Company issued such policies covering the period from January 1, 1984, to April 1, 1987. Third, Zurich issued to Triangle a "claims-made" pollution liability insurance policy with a clause excluding certain sites, which covered the period from May 15, 1984, to May 15, 1985.

On March 7, 1985, Triangle notified all of its insurers that it had been named a potentially responsible party and asked that they bear Triangle's investigatory and legal expenses, furnish Triangle a defense in its attempt to avoid or minimize, through litigation, the requirement of paying for the extensive environmental cleanup, and indemnify Triangle for actual cleanup costs. Of course, Triangle conceded "a reservation of rights by the carriers as to their ultimate responsibilities for indemnification." Because Ideal Mutual was in receivership, the receiver, New Jersey Property-Liability Guaranty Association, responded to Triangle, denying coverage under the policy with Ideal Mutual. Zurich responded on April 1, 1985, explaining that it questioned whether the pollution damage in Ohio was covered by its policies, but would handle "this matter under a full and complete reservation of rights." However, on August 28, 1985, Zurich withdrew its participation in Triangle's defense, effective October 1, 1985. Liberty Mutual responded on February 27, 1986, after Triangle sent them a second letter, agreeing to participate in Triangle's defense despite reservations regarding indemnity. Liberty Mutual continued to assist in Triangle's defense until February 1, 1988, when Liberty Mutual concluded that Triangle was not covered by any of its policies and so too withdrew its defense.

Shortly thereafter, Liberty Mutual brought this diversity action, asking for a declaratory judgment that it owes no duty to defend Triangle. Triangle asserted counterclaims and third-party claims against the other insurers, seeking a declaration that a defense is owed.

The district court certified legal questions to the West Virginia Supreme Court of Appeals, which replied that, under West Virginia's choice-of-law rules, New Jersey law governs the interpretation of all of the insurance contracts. Subsequently, on cross motions for summary judgment, the district court held that although the environmental damage allegedly caused by dumping Triangle's sludge into the Ohio landfill was neither intended nor expected by Triangle, none of the insurance policies covered such damages by reason of pollution exclusions. 765 F.Supp. 881. This appeal followed.

II

Before beginning our analysis of the various insurance policies which are at issue in this appeal, we note that a federal court sitting in diversity has a duty to apply the operative state law as would the highest court of the state in which the suit was brought. Having certified the question to the highest court of West Virginia and thereby determined that the law of New Jersey governs the construction of each of Triangle's insurance contracts, it was the duty of the district court, as it is ours, to interpret these instruments as would the New Jersey Supreme Court. See Brendle v. General Tire & Rubber Co., 505 F.2d 243, 245 (4th Cir.1974).

The best evidence to this effect would be, of course, a decision by the highest court of New Jersey which addresses the contract interpretation issues now before us, but that court has not spoken to many of these questions. In such circumstances, the state's intermediate appellate court decisions "constitute the next best indicia of what state law is," although such decisions "may be disregarded if the federal court is convinced by other persuasive data that the highest court of the state would decide otherwise." 19 Charles A. Wright, Arthur R. Miller & Edward H. Cooper Federal Practice & Procedure § 4507, at 94-95 (1982). See also West v. American Tel. & Tel. Co., 311 U.S. 223, 237, 61 S.Ct. 179, 183, 85 L.Ed. 139 (1940). In predicting a decision of the state's highest court we can further consider, among other things, canons of construction, restatements of the law and treatises that are regularly applied by the courts of the state and whose use for a particular purpose is approved by the state's highest court, see Fried v. North River Ins. Co., 710 F.2d 1022, 1025 (4th Cir.1983), and General Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1125 (6th Cir.1990), recent pronouncements of general rules or policies by the state's highest court, see Woodruff v. Tomlin, 616 F.2d 924, 930 (6th Cir.), cert. denied, 449 U.S. 888, 101 S.Ct. 246, 66 L.Ed.2d 114 (1980), or even that court's well considered dicta, see 19 Wright, Miller & Cooper, supra, at 97. Decisions of the state's trial courts may also be considered...