ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., G012053

• Citation: 17 Cal.App.4th 1773,22 Cal.Rptr.2d 206
• Decision Date: 24 August 1993
• Docket Number: No. G012053,G012053
• Court: California Court of Appeals
• Parties: ACL TECHNOLOGIES, INC., Plaintiff and Appellant, v. NORTHBROOK PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant and Respondent.

Page 206

22 Cal.Rptr.2d 206

17 Cal.App.4th 1773

ACL TECHNOLOGIES, INC., Plaintiff and Appellant, v. NORTHBROOK PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant and Respondent.

No. G012053.

Court of Appeal, Fourth District, Division 3, California.

Aug. 24, 1993.

Certified for Partial Publication ^*

As Modified Sept. 21, 1993.

Review Denied Nov. 17, 1993.

[17 Cal.App.4th 1776] Aprahamian & Ducote, Harold A. Ducote, Jr., Richard J. Aprahamian, Mark D. Alpert, Newport Beach, Susan M. Trager, Geoffrey K. Willis and David E. Kendig, Irvine, for plaintiff and appellant.

[17 Cal.App.4th 1777] Latham & Watkins, David L. Mulliken, Kristine L. Wilkes and Michael D. Ramsey, San Diego, as amici curiae on behalf of plaintiff and appellant.

Long & Williamson, Patrick A. Long, John A. Delis, Santa Ana, Gleason, McGuire & Shreffler, Philip J. McGuire and David E. Schroeder, Chicago, IL, for defendant and respondent.

Hufstedler, Kaus & Ettinger, John P. Olson, Los Angeles, Wiley, Rein & Fielding, Thomas W. Brunner, Christopher D. Cerf, James P. Anasiewicz, Washington, DC, Buchalter, Nemer, Fields & Younger, Randolph P. Sinnott, Cheryl A. Orr, Los Angeles, Harwood Lloyd, Victor C. Harwood, III, Edward Zampino and Bernadette M. Peslak, Hackensack, NJ, as amici curiae on behalf of defendant and respondent.

OPINION

SILLS, Presiding Justice.

I. INTRODUCTION

Insurance claims arising out of leaking underground storage tanks raise the question of who will pay for the cleanup of millions of tons of toxic waste produced in the United States since World War II. This problem has sparked a legal war that has raged in both federal and state courts from Maine to California. (See Northern Ins. Co. v. Aardvark Associates (3d Cir.1991) 942 F.2d 189, 191; see also Avondale Industries, Inc. v. Travelers Indem. Co. (2d Cir.1989) 887 F.2d 1200, 1201 ["the vast carelessness that created the conundrum of hazardous waste ... will not be quickly or easily remedied"].) Much of the strife has focused on the precise issue of whether the "sudden and accidental" exception to the pollution exclusion contained in the 1973 version of the standard comprehensive general liability insurance policy (CGL) allows for coverage for pollution which escaped gradually.

This case, like many throughout the country, involves a claim for expenses to clean up pollutants which leaked from rusted and corroded underground storage tanks. The trial judge found the release of the pollutants was gradual. He therefore held, among other things, that the pollution exclusion precluded coverage. We agree and affirm the judgment in favor of the insurer. Gradual is the opposite of sudden.

II. FACTS

In August 1984 ACL Technologies purchased some property in an industrial section of Santa Ana. About the same time the company obtained a CGL policy from Northbrook Property and Casualty Insurance Company, with the policy period from September 28, 1984 to September 28, 1985. Unknown to ACL at the time, the property contained underground storage tanks which had been used to store hazardous substances for over two decades.

ACL first learned of the tanks in late 1985 or early 1986 when the Santa Ana Fire Department ordered the company to "establish testing conditions" on the tanks or remove them. City officials later explained that a city ordinance required all underground storage tanks be monitored and used or declared out of service and removed.

In January, February and April 1988 the tanks were removed. They were rusted and had many small holes (largest about an inch in diameter); a particularly large (12,000 gallon) tank had a split seam about an inch and one-half long at the junction of the end and side plates. Corrosion was visible in the area of the split. Photographs were taken of the newly removed tanks.

Soil samples from the area around the tanks showed contamination. The city and the California Regional Water Quality Control Board then ordered ACL to develop a cleanup plan. ACL presented Northbrook with a claim for the cost of the cleanup, which Northbrook denied. ACL then filed this lawsuit for breach of contract and declaratory relief.

The CGL policy issued by Northbrook contained this exclusion: "This part does not insure: [p] (f) 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."

Trial was to the court, which specifically found that the pollutants escaped through leaks caused by corrosion, and that this corrosion occurred gradually over an "extended" period of time. Accordingly, the court concluded that any coverage otherwise provided by the policy was excluded under the policy's pollution exclusion. As the judge put it, "[t]he word 'sudden' is directed at rupture or human error, an explosion, a spill, something which occurs abruptly, and the term is used to specifically exclude the situation which happens in this case, and that is the corrosion over an extended period of time of the pipes or tanks in the ground which could actually cause a leaking situation over several years, such as in this case."

ACL now appeals from the ensuing judgment. ¹

III. DISCUSSION

A. Gradual is the Opposite of Sudden

The supreme courts of Massachusetts, ² Michigan, ³ North Carolina, ⁴ and Ohio ⁵ have held that the word "sudden" or the phrase "sudden and accidental" as used in the 1973 pollution exclusion did not allow for liability coverage arising from gradual pollution, with state intermediate appellate courts and federal courts construing state law unanimously taking the same position in Indiana, ⁶ Kansas, ⁷ Kentucky, ⁸ New Hampshire, ⁹ Pennsylvania, ¹⁰ South Carolina, ¹¹ Tennessee, ¹² and Utah. ¹³ With our opinion today, and the recent decision in Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 752, 15 Cal.Rptr.2d 815 [" 'Sudden' Events Start Abruptly"], California should be added to this list.

On the other hand, state supreme courts in Colorado, ¹⁴ Georgia, ¹⁵ Illinois, ¹⁶ West Virginia, ¹⁷ and Wisconsin ¹⁸ have held the words allowed for coverage of gradual pollution as long as the pollution was unintended and unexpected. State intermediate appellate courts and federal courts construing state law appear united on the same result in Delaware, ¹⁹ Minnesota, ²⁰ New Jersey, ²¹ and Washington. ²²

Courts have divided on the subject in Florida, ²³ with no definitive word yet from its state supreme court. ²⁴ Also, while not directly considering the gradual-sudden dichotomy, the state high courts of New York ²⁵ and Iowa ²⁶ have treated the "accidental" component of the pollution exclusion in such a way as to indicate that they probably will construe "sudden" as unambiguous. Dicta from state intermediate appellate courts in Oregon ²⁷ and Maryland ²⁸ indicate that those jurisdictions would probably also hold the same way. On the other hand, dicta from the state supreme courts of Arkansas ²⁹ and Alaska ³⁰ lean in the opposite direction. And there is a comparatively early decision from the state supreme court of Maine, which, while it is sometimes put in the sudden-is-ambiguous column, did not address the gradual-sudden dichotomy and contains something for both sides. ³¹ The same may be said for a federal district court decision out of Missouri. ³²

In light of the foregoing, it would appear that claims by one side or the other for possession of the "majority rule" are at present premature. ³³ The best we can do is note how the jurisdictions are divided as we write in the late spring and summer of 1993. ³⁴

Courts on both sides of the divide have generally joined issue on the problem of the multiple shades of meaning inherent in the word "sudden." (See Holmes, The Theory of Legal Interpretation (1899) 12 Harv.L.Rev. 417 ["A word generally has several meanings, even in the dictionary. You have to consider the sentence in which it stands to decide which of those meanings it bears in the particular case, and very likely will see that it there has a shade of significance more refined than any given in the wordbook."], quoted in Shell Oil, supra, 12 Cal.App.4th at p. 737, 15 Cal.Rptr.2d 815.) As ACL and amicus curiae Montrose Chemical Company remind us, sudden (at least in some contexts) can mean "unexpected." ³⁵ Courts holding in favor of coverage have tended to emphasize that some dictionary definitions of the word do not necessarily convey a sense of abruptness. (See, e.g., New Castle, supra, 933 F.2d at 1193 ["the word has more than one reasonable definition"].) ³⁶

While ACL and Montrose Chemical Company have emphasized that this court is not bound by the recent decision in Shell Oil Co. v. Winterthur Swiss Ins. Co., supra, 12 Cal.App.4th 715, 15 Cal.Rptr.2d 815, we believe that Shell Oil was correctly decided. It followed the basic framework for interpreting insurance contracts articulated by our Supreme Court in Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264-1265, 10 Cal.Rptr.2d 538, 833 P.2d 545 and AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822, 274 Cal.Rptr. 820, 799 P.2d 1253. Using this framework, there is no way that we could come to any other conclusion than that reached in the Shell Oil decision: the "sudden and accidental" language in the CGL pollution exclusion does not allow for coverage for gradual pollution. ³⁷ Here is that framework:

"If contractual language is clear and explicit, it governs." (Bank of the West, supra, 2 Cal.4th at p. 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545, citing Civ.Code, § 1638; AIU, supra, 51 Cal.3d at p. 822, 274 Cal.Rptr. 820, 799 P.2d 1253 [the intent of the parties "is to be inferred, if possible, solely from the written...