American Nat. Fire Ins. Co. v. B & L Trucking & Const. Co., Inc.

Decision Date17 May 1996
Docket NumberNo. 17010-8-II,17010-8-II
Citation82 Wn.App. 646,920 P.2d 192
PartiesAMERICAN NATIONAL FIRE INSURANCE COMPANY, Plaintiff, v. B & L TRUCKING & CONSTRUCTION CO., INC., a corporation; Eagle Trucking, Inc., a corporation; Camille M. Fjetland, as successor in interest to William K. Fjetland, deceased, and Jane Doe Fjetland, individually and as a marital community; and Executive Bark, Inc. a corporation, Respondents, and Northern Insurance Company of New York, a corporation, Appellant.
CourtWashington Court of Appeals
Bradley Alan Maxa, Linda C.J. Young, and Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim, Tacoma, for Respondents
OPINION

BRIDGEWATER, Judge.

Northern Insurance Company of New York appeals from a judgment requiring it to provide coverage under its policies with William Fjetland for the damage done by pollution from dumpings by Fjetland-owned entities into a landfill where a combination of slag and woodwaste had unexpectedly produced arsenic as a contaminate. We hold that the policy provisions of "occurrence" and the "pollution exclusion" have been met; and that because of ambiguity in policy language there should be no apportionment of damages even though Fjetland was insured only during a portion of the polluting period.

In 1974, Fjetland began hauling slag from ASARCO, a copper smelter in greater Tacoma, to log yard operators in the Tideflats where it was used as fill. Though this rock/metal by-product of smelting operations was once thought to be inert (i.e. non-contaminating), experts belatedly determined that it leaches when in comes in contact with water. As slag contains the metallic by-products of the smelting operation (including arsenic and lead), slag leachate can contain high levels of these, and other, contaminants.

After 1974, Fjetland, through two of his corporations (B & L Trucking & Construction Co., Inc. and Eagle Trucking Inc.), began hauling woodwaste/slag to various landfills. Woodwaste is not normally harmful. It is simply the naturally occurring by-product of decaying wood which, unless it is found in high concentrations, "can be beneficial by supplying needed nutrients to micro-organisms."

In 1978, Fjetland purchased property which, after the Tacoma-Pierce County Health Department approved a permit, he used as a landfill, "hauling ... bark, dirt, rocks and whatever slag" needed to be removed from the log yards. Though the landfill was operated by Eagle Trucking, as there were no buildings at the landfill, its operations were conducted from B & L's nearby business office on Marine View Drive.

In January 1981, the federal government classified the landfill as a wetland area. As a result, the Health Department issued a cease-and-desist order to Fjetland. However, through 1982, it allowed him to continue to bring material into the landfill for the limited purpose of "contouring" the land. Soon thereafter, with the Health Department's approval, Fjetland began a woodwaste recycling operation at the landfill. All operations in the landfill stopped in July 1984 when Pierce County found it was being operated in violation of the zoning regulations.

Over the years, Fjetland purchased general liability insurance policies from a variety of insurers, including American National Fire Insurance (American National) and Northern Insurance Company of New York (Northern). At issue here is an annual policy issued August 15, 1978 (Policy 78-79), annual policies issued from August 11, 1980, to August 10, 1983 (Policy 80-83), and an annual policy issued August 11, 1983 (Policy 83-84). Under these policies (with relevant differences discussed below), Northern agreed to insure Fjetland and his corporations for damages "caused by an occurrence and arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the named insured conducted at or from the insured premises." An "occurrence" was defined as: "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." (Emphasis added.) Furthermore, these policies contained a "pollution clause" which excluded coverage for "discharge, dispersal, release or escape" of "waste materials or other irritants, contaminants or pollutants into or upon land," unless "such discharge, dispersal, release or escape is sudden and accidental."

In 1980, high levels of arsenic and other contaminants were discovered around the Commencement Bay area. By the mid-1980s, testing established Fjetland's landfill was contaminated by arsenic. In February 1989, Fjetland and his corporations were named as third-party defendants in a federal CERCLA action 1. In March, 1991, the federal court held as to Fjetland's landfill: (1) slag, rather than woodwaste, caused the contamination; (2) B & L was not responsible for any of the clean-up costs; (3) ASARCO was wholly liable for clean-up costs prior to 1981; and (4) Fjetland and Eagle Trucking were both 7% liable for the post-1981 clean-up costs.

In February, 1990, American National filed this declaratory judgment action against Fjetland and his corporations. American National asserted Fjetland "expected" contamination at his landfill and the "pollution" of his landfill was not "sudden" or "accidental," and thus it was not required to provide coverage for damages relating to the landfill contamination. In the same action, American National sought contribution/indemnity from Northern.

Northern brought a cross-claim for declaratory judgment against Fjetland based upon the similar language of its own policies. Fjetland brought cross-claims against all of his insurers seeking a declaration of coverage for any damages relating to the landfill contamination. Fjetland also requested reasonable attorney's fees.

Prior to trial, Northern moved for summary judgment on a number of issues. Northern sought a ruling it was not obligated to provide coverage for the landfill as that property was not listed as part of Fjetland's "insured premises." Noting Policy 78-79 and Policy 80-83 included language covering "business ... conducted at or from the insured premises," but that Policy 83-84 did not, the trial court denied the motion as to Policy 78-79 and 80-83, but granted it as to Policy 83-84.

Northern also sought a ruling that Fjetland was not entitled to coverage because under the "pollution clause" he had "intentional[ly]" discharged "log yard waste" at the landfill. Finding that the policy was ambiguous and there was a question of fact as to whether Fjetland had knowledge that he was discharging "waste materials," the trial court denied the motion.

Northern also sought a ruling that "remediation [costs] shall be allocated pro rata between [Fjetland] and its insurers based on the insured and uninsured periods of property damage at the landfill." Fjetland responded with his own motion on this issue, arguing all of his insurers were jointly and severally liable regardless of the period of their coverages. The trial court agreed with Northern there should be such an allocation, but left the length of the allocation period undecided.

Fjetland died on June 8, 1991. In the federal CERCLA action, in which Northern was not a participant, he had been deposed. In this case, he had also been deposed and one of the insurers asked him "[d]o you adopt the testimony that you gave in the [CERCLA] proceeding." Fjetland stated he did and the CERCLA deposition was made an exhibit to the deposition. Northern moved to exclude the introduction of statements from the CERCLA deposition. The trial court denied the motion, holding the CERCLA deposition had been "incorporated" and Northern had "waived" any objection.

Fjetland moved in limine to prevent admission of evidence of the existence of the "pollution clause." Finding that the factual issues under the "pollution clause" were similar to the factual issues under the "occurrence" clause, the trial court granted the motion.

At trial, the issue was what Fjetland knew and when he knew it. Testimony was given by officials from the Washington State Department of Ecology (WDOE) and the Tacoma-Pierce County Health Department. There was testimony of an occasional woodwaste "leachate breakout" from the landfill, but none of these breakouts caused any environmental damage.

By deposition testimony, Fjetland denied ever knowing about the contamination problems of slag and stated he only learned of the contamination problems at his landfill around 1982, after testing had occurred. Louis Miller, Jr., manager of a log yard, testified Fjetland never expressed any concern about contamination from slag in that time period.

The evidence adduced at trial demonstrated that, although the arsenic began to leach as soon as the slag was dumped into the landfill, the contamination was not related to the woodwaste. Furthermore, the evidence demonstrated that had only woodwaste been placed in the landfill, there would not have been any arsenic contamination or resulting necessity for a clean-up.

The jury found Fjetland had expected property damage in "June 1982." On February 19, 1993, after Fjetland's attorney presented an affidavit detailing $181,445.70 in attorney's fees and costs, the trial court entered partial declaratory judgment and final judgment pursuant to CR 54(b) in favor of Fjetland and awarded him $133,911.99 in attorney's fees.

On February 26, 1993, the trial court held a hearing to determine the apportionment period. After hearing argument, the court picked April 29, 1987, as the final date of that period. The...

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