American Nat. Fire Ins. Co. v. B & L Trucking and Const. Co., Inc., 64435-7

CourtUnited States State Supreme Court of Washington
Citation134 Wn.2d 413,951 P.2d 250
Decision Date19 February 1998
Docket NumberNo. 64435-7,64435-7
Parties, 46 ERC 1652 AMERICAN NATIONAL FIRE INSURANCE Co., Plaintiff, v. B & L TRUCKING AND CONSTRUCTION CO., INC. a corporation; Eagle Trucking, Inc., a corporation; Camille M. Fjetland, as successor in interest to William K. Fjetland, deceased, and John Doe Fjetland, individually and as a marital community; and Executive Bark, Inc., a corporation, Respondents, Northern Insurance Company of New York, a corporation, Petitioner.

Page 413

134 Wn.2d 413
951 P.2d 250, 46 ERC 1652
AMERICAN NATIONAL FIRE INSURANCE Co., Plaintiff,
v.
B & L TRUCKING AND CONSTRUCTION CO., INC. a corporation;
Eagle Trucking, Inc., a corporation; Camille M. Fjetland,
as successor in interest to William K. Fjetland, deceased,
and John Doe Fjetland, individually and as a marital
community; and Executive Bark, Inc., a corporation, Respondents,
Northern Insurance Company of New York, a corporation, Petitioner.
No. 64435-7.
Supreme Court of Washington,
En Banc.
Argued June 10, 1997.
Decided Feb. 19, 1998.

[951 P.2d 251]

Page 417

Williams, Kastner & Gibbs, Frankie Crain, Seattle, Wiley, Rein & Fielding, Thomas Brunner, Daniel Troy, Scott S. Harris, Laura Foggan, Washington, DC, for Petitioner.

Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim, Linda Young, Bradley Maxa, Tacoma, for Respondents.

Thomas James, Seattle, John Barry, Paul Janaskie, Washington, DC, on behalf of Insurance Environmental Litigation, Amicus Curiae.

William Hickman, Mary DeYoung, on behalf of American States Insurance Environmental Litigation, Amicus Curiae.

David Brenner, Seattle, Michael Lynch, Meryl Neiman, Pittsburgh, PA, on behalf of Puget Sound Energy, Inc., Amicus Curiae.

David Schoeggl, Linda Clapham, Tammy Lewis, Seattle, on behalf of Certain London Market Insurers, Amici Curiae.

Gabriel Gedvila, Weyehaeuser Co., Tacoma, Charles Gordon, Jeffery Tilden, Seattle, Eugene Anderson, Robert Horkovich, Peter Andrews, New York City, on behalf of Weyerhaeuser Co., Amicus Curiae.

Page 418

JOHNSON, Justice.

This case presents the issue of whether pollution cleanup costs should be allocated between insurer and insured when the pollution occurred over many years and the insured was insured during only a portion of the entire polluting period. Eagle Trucking, Inc. and its owner, William Fjetland, were held liable in a CERCLA 1 action for a percentage of the cleanup costs of a contaminated landfill. Fjetland brought claims against its insurers seeking coverage for these costs. The trial court allocated costs between insured and one of its insurers, The Maryland/Northern Insurance Company of New York, on a pro rata basis. The Court of Appeals, however, held that because of ambiguity in the insurance policy language, costs may not be allocated. We affirm the Court of Appeals.

FACTS

Fjetland 2 operated several businesses, including Eagle Trucking and B & L Trucking & Construction (Fjetland). Fjetland hauled smelter slag from the copper smelter owned by Asarco Incorporated (Asarco) to the log yards in the Port of Tacoma. The slag was used as ballast for log export companies' yards. Although slag was once thought to be inert, experts later determined when ground up, mixed with wood waste, and exposed to water, it leached contaminants.

In 1978, Fjetland purchased the B & L Landfill site (Landfill), which is located in a wetlands area in Milton, Washington. Shortly after purchasing the property, Fjetland began hauling slag, mixed with wood waste, from the log yards to the Landfill. These materials were removed from log yards to the Landfill in order to make room for fresh materials, which provide new working surfaces for loading equipment and log storage. At the end of 1980, the Landfill was closed and the permit for the Landfill was

Page 419

withdrawn because of new legislation relating to the definition of wetlands and the filling of those lands. Fjetland continued to dump materials in the Landfill, but for purposes of contouring the land.

Throughout the years in question, Fjetland had purchased comprehensive general liability insurance (CGL insurance) from a number of insurance companies, including The Maryland/Northern Insurance Company of New York (Northern) and American National Fire Insurance (American National). Each policy issued by Northern lists as insureds, among others, both William Fjetland and Eagle Trucking. The policies were issued as follows: (1) an annual policy issued August 15, 1978 and canceled as of May 3, 1979 (Policy 78-79); (2) a policy issued August 11, 1980 through August 11, 1983, renewed annually [951 P.2d 252] (Policy 80-83); and (3) an annual policy issued August 11, 1983 through August 11, 1984 (Policy 83-84). Other policies included Policy 84-85 from United Pacific and Policy 85-86 from American National.

High levels of arsenic and other metals were discovered around the Tacoma tideflats area in 1980 and testing of the Landfill in early 1982 revealed arsenic in the Landfill. In an action under CERCLA to determine allocation of remediation costs for the Landfill, the United States District Court determined liability as follows: Asarco would bear 79 percent; Murray Pacific (a log yard owner), 7 percent; William Fjetland, 7 percent; and Eagle Trucking, 7 percent. Another Fjetland entity, B & L Trucking, was found not liable. The court made clear it was not assessing liability against Fjetland or Eagle Trucking for pre-1981 activities and that slag, not wood waste, caused the damage.

As one of Fjetland's insurers, American National sought a declaratory judgment in state court that it was not responsible to cover contamination costs at the Landfill and also sought contribution and/or indemnity from Northern and other insurers. Northern cross-claimed, seeking a declaration of no coverage. Fjetland cross-claimed against all insurers. The trial court found the United

Page 420

Pacific policy did not afford coverage. Several parties were dismissed; some settled. Northern and Fjetland remain.

Prior to trial, Northern sought summary judgment on a number of issues. The trial court granted summary judgment for Northern as to liability under all policies that terminated before 1981, basing its decision on the United States District Court's ruling in the CERCLA action that Fjetland and Eagle Trucking had no liability prior to 1981. The trial court denied summary judgment for Northern that Policy 83-84 did not provide coverage because the Landfill was not listed as part of Fjetland's insured premises. Northern also sought a ruling that the pollution clause excluded coverage because Fjetland had intentionally discharged waste at the Landfill. The court denied the motion, finding there was a question of fact as to whether Fjetland had knowledge he was discharging waste materials.

Also, prior to trial, the court ruled on cross motions for summary judgment regarding whether remediation costs should be allocated between insurer and insured. Fjetland argued its insurers have a joint and several obligation to provide full coverage. Northern argued a proportionate share of the costs should be allocated between insured and uninsured periods and, therefore, Fjetland should share liability with its insurer. The court ruled the costs would be allocated equally on a pro rata/per year basis between insurer and insured based on insured and uninsured periods. Uninsured periods include the years following the month and year in which the jury determined the insureds expected property damage at the Landfill. In a separate ruling, the court determined the allocation period would begin January 1981 and end April 29, 1987, which is the date Fjetland received the cleanup order.

The case was then tried to a jury with the sole issue being whether Fjetland or Eagle Trucking "expected" damage at the Landfill and, if so, what was the earliest date of expected damage. The jury found Fjetland or Eagle Trucking expected damage as of June 1982. The trial court

Page 421

entered a declaratory judgment, incorporating its previous rulings on summary judgment motions and also ruling Northern had an obligation for coverage under Policy 80-83 for the period August 11, 1980 through August 11, 1981; Northern had an obligation for coverage under Policy 80-83 for the period August 11, 1981 through June 1982 (based on the jury's finding of "expected" damages); Northern had no obligation for coverage under Policy 82-83 and no obligation under Policy 83-84. Attorney fees were awarded Fjetland in the amount of $133,911.99. Northern was, therefore, obligated under its policies in effect between 1981 and June 1982 only and was liable for two-sevenths of the remediation costs.

The parties cross-appealed. The Court of Appeals affirmed most of the judgments of the trial court, but reversed the ruling regarding allocation. The court held the policy provisions of "occurrence" and the "pollution exclusion" had been met and, because of ambiguity in the policy language, there [951 P.2d 253] should be no allocation of damages, even though Fjetland was insured during only a portion of the polluting period. American Nat'l Fire Ins. Co. v. B & L Trucking & Constr. Co., 82 Wash.App. 646, 651, 920 P.2d 192 (1996). We accepted review of the allocation issue. The issue before us is whether pollution cleanup costs should be allocated between insurer and insured when the pollution occurred over many years and the insured was insured during only a portion of the entire polluting period.

ANALYSIS

Neither Northern nor Fjetland challenge the trial court's rulings regarding which policies provide coverage. The issue before us is not which policies are triggered, but rather, whether the triggered policies cover costs incurred after June 1982. This is solely an allocation issue and requires us to analyze the language of the policies. The triggered policies are Policy 80-81 and Policy 80-83 through June 1982.

Under the policies at issue, Northern insured Fjetland, stating:

Page 422

The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A. bodily injury or

Coverage B. property damage

to which this insurance applies, caused by an occurrence....

Clerk's Papers at 233.

" [P]roperty damage" means (1) physical injury to or destruction of tangible property which occurs during the policy period....

. . . . .

"[O]ccurrence" means an...

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