Aetna Cas. and Sur. Co. v. General Dynamics Corp., s. 91-2252

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Citation968 F.2d 707
Docket NumberNos. 91-2252,91-2254,s. 91-2252
Parties, 23 Envtl. L. Rep. 20,055 AETNA CASUALTY AND SURETY COMPANY, Appellant, v. GENERAL DYNAMICS CORPORATION, Appellee. AETNA CASUALTY AND SURETY COMPANY, Appellee, v. GENERAL DYNAMICS CORPORATION, Appellant.
Decision Date02 September 1992

James E. Rocap, Washington, D.C., argued (Niki Kuckes and D. Bradley Clements, Washington, D.C. and Robert T. Haar, St. Louis, Mo., on the brief), for appellant.

James T. Price, Kansas City, Mo., argued (Thomas J. Wilcox and Marilyn P. Dunn, Kansas City, Mo., and Thomas E. Douglass and Bruce D. Ryder, St. Louis, Mo., on the brief), for appellee.

Before WOLLMAN and BEAM, Circuit Judges, and VAN SICKLE, * Senior District Judge.

WOLLMAN, Circuit Judge.

Aetna Casualty and Surety Company appeals, and General Dynamics Corporation cross-appeals, from the district court's 1 declaratory judgment interpreting four comprehensive general liability insurance policies. We affirm in part and reverse and remand in part.

Between May 1, 1975, and July 1, 1978, Aetna issued four consecutive comprehensive general liability insurance policies (CGLs) to General Dynamics. Each of the four policies provides that Aetna will indemnify General Dynamics only for those "sums which the insured shall become legally obligated to pay as damages because of ... bodily injury or property damage." Each policy further provides that Aetna shall have "the right and duty to defend any suit against the insured seeking damages on account of such bodily injury [or] property damage." Each policy also contained the following exclusionary provision:

This insurance does not apply:

... to 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 or other irritants, contaminants or pollutants 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.

After being served with lawsuits concerning environmental contamination at seven sites and with letters from federal and state environmental protection agencies or from private parties demanding that it clean up environmental wastes at nine other sites (the sixteen sites being located in eight different states), General Dynamics forwarded to Aetna notice of these lawsuits and environmental protection agency letters and demanded that Aetna provide a defense of the actions and reimburse any sums paid by General Dynamics to resolve the matters. In response, Aetna denied coverage as to two of the sites, but agreed to defend the other lawsuits under a reservation of rights. Aetna later withdrew its defense commitment and filed this action for declaratory judgment in November of 1988.

The district court held that the case was not ripe as to four of the sixteen sites because no suit had been filed nor any settlements achieved at the four sites. As to the remaining twelve sites, the district court applied this court's decision in Continental Insurance Co. v. Northeastern Pharmaceutical & Chemical Co., 842 F.2d 977 (8th Cir.) (en banc ), cert. denied, 488 U.S. 821, 109 S.Ct. 66, 102 L.Ed.2d 43 (1988) (NEPACCO ). The district court held that Aetna had no duty to defend or indemnify General Dynamics in connection with suits seeking solely the recovery of environmental response costs because the CGL term "damages," under Missouri law, does not include equitable relief. At six of the twelve sites, however, claims were included for damage to natural resources. As the district court noted, under NEPACCO claims for natural resource damages are claims for "damages." Id. at 983-84, 987. The district court then determined that the CGL's pollution exclusion did not exempt Aetna from its duty to defend claims for natural resource damages at the six sites. It reasoned that the words "sudden and accidental" mean only "unexpected."

The district court also determined that Aetna's duty to defend General Dynamics against "any suit ... seeking damages" was not triggered by the demand letters issued by the Environmental Protection Agency and its state counterparts in Massachusetts and New Hampshire. Finally, the district court concluded that Aetna was not obligated to pay for defense costs at

four sites on the basis of promises not contained in the CGLs.

AETNA'S APPEAL
I.

Aetna contends that the district court improperly interpreted the pollution exclusion clause in the CGLs. As set forth above, this exclusion forecloses coverage for all discharges, dispersals, releases, and escapes of pollutants that are not "sudden and accidental." The district court found the term "sudden" to be ambiguous and concluded that a "sudden" discharge, dispersal, etc., may include events occurring over a long period of time, as long as the resulting damage is "unexpected."

A number of courts have found the pollution exclusion to be unambiguous and have concluded that "sudden" connotes a temporal element and requires that the pollution-causing event be abrupt, not gradual. See, e.g., Hartford Accident & Indemnity Co. v. United States Fidelity and Guaranty Co., 962 F.2d 1484 (10th Cir.1992) (Utah law); Liberty Mut. Ins. Co. v. Triangle Indus., Inc., 957 F.2d 1153, 1157 (4th Cir.1992) (New Jersey law); Northern Ins. Co. of N.Y. v. Aardvark Assoc., Inc., 942 F.2d 189, 192-94 (3d Cir.1991); A. Johnson & Co. v. Aetna Cas. & Sur. Co., 933 F.2d 66, 72-73 (1st Cir.1991); Ogden Corp. v. Travelers Indem. Co., 924 F.2d 39, 42 (2d Cir.1991); Florida Aerospace v. Aetna Cas. & Sur. Co., 897 F.2d 214, 219 (6th Cir.), cert. denied, --- U.S. ----, 111 S.Ct. 284, 112 L.Ed.2d 238 (1990); Olin Corp. v. Insurance Co. of N. Am., 762 F.Supp. 548, 560 (S.D.N.Y.1991); Liberty Mut. Ins. Co. v. SCA Serv., Inc., 412 Mass. 330, 588 N.E.2d 1346, 1349 (1992).

Some courts have reached a contrary result, holding that "sudden and accidental" means only unexpected or unintended. See, e.g., CPC Int'l Inc. v. Northbrook Excess and Surplus Ins. Co., 962 F.2d 77 (1st Cir.1992) (New Jersey law); New Castle County v. Hartford Accident and Indemnity Co., 933 F.2d 1162 (3rd Cir.1991) (Delaware law).

As stated above, Missouri law requires courts to give the terms of an insurance contract their plain meaning. NEPACCO, 842 F.2d at 985. In addition, Missouri law requires that all the terms of an insurance contract be given meaning. Harnden v. Continental Ins. Co., 612 S.W.2d 392, 394 (Mo.Ct.App.1981) (citation omitted). "[T]he courts are practically agreed that the words 'accident' and 'accidental' mean that which happens by chance or fortuitously, without intention or design, and which is unexpected, unusual and unforeseen." St. Paul Fire & Marine Ins. Co. v. Northern Grain Co., 365 F.2d 361, 364 (8th Cir.1966).

The pollution exclusion denies coverage unless the discharge is both sudden and accidental. The district court held that the phrase includes unexpected events occurring over an extended period of time. Since "accidental" includes the unexpected, however, the district court's construction gave no effect to the word "sudden." The term "sudden," we believe, "when considered in its plain and easily understood sense, ... is defined with a 'temporal element that joins together conceptually the immediate and the unexpected.' " The Upjohn Company v. New Hampshire Ins. Co., 438 Mich. 197, 476 N.W.2d 392, 397-98 (1991). Indeed, assigning meaning to both "sudden" and "accidental" eliminates any perceived ambiguity. The district court found "sudden" to be ambiguous because it could mean abrupt or unexpected. Because "accidental" includes the unexpected, however, "sudden" must mean abrupt. To hold otherwise would render the word "sudden" superfluous. See Hartford Accident & Indemnity Co. v. United States Fidelity and Guaranty Co., 962 F.2d 1484 (10th Cir.1992) (Utah law) ("We think the 'annexation' of 'sudden' to 'accidental' is precisely the issue: reading 'sudden' without a temporal component renders 'accidental' redundant." 962 F.2d at 1488.). Accordingly, we hold that the district court erred in its interpretation of the pollution exclusion clause and that it should have declared that the clause relieves Aetna of liability for the events described therein.

II.

Aetna also contends that the district court erred by holding that because no suits had yet been filed nor any settlements reached with respect to four of the sixteen sites, Aetna's declaratory judgment action was not ripe for adjudication as to those sites.

Aetna argues that since General Dynamics had made a clear demand for payment of defense and indemnity costs with respect to each of the four sites and because Aetna disputed those demands, there is a live justiciable controversy between the parties sufficient to invoke the jurisdiction of the district court. See Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 57 S.Ct. 461, 81 L.Ed. 617 (1937). General Dynamics does not address this issue on appeal; apparently it concedes that the district court's decision was in error. We agree with Aetna that a live justiciable controversy exists between the parties and hold that Aetna's suit is ripe with respect to the four sites.

GENERAL DYNAMICS' CROSS-APPEAL
I.

General Dynamics first argues that a recent decision from another circuit collaterally estops Aetna from denying that the term "damages," under Missouri law, includes environmental response costs. In Independent Petrochemical Corp. v. Aetna ("IPC" ), 944 F.2d 940 (D.C.Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1777, 118 L.Ed.2d 435 (1992), the District of Columbia Circuit, interpreting Missouri law, held that the term "damages" in an insurance contract includes environmental response costs. General Dynamics now asserts that Aetna is precluded...

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