Bell Lumber and Pole Co. v. U.S. Fire Ins. Co.

Decision Date13 July 1995
Docket NumberNo. 94-2649,94-2649
PartiesBELL LUMBER AND POLE COMPANY, Plaintiff-Appellant, v. UNITED STATES FIRE INSURANCE COMPANY; Continental Casualty Company, Defendants-Appellees. Hartford Accident and Indemnity Company; Liberty Mutual Insurance Company, Defendants. Westchester Fire Insurance Company; Centennial Insurance Company, Defendants-Appellees. State of Minnesota, Amicus Curiae.
CourtU.S. Court of Appeals — Eighth Circuit

Thomas Charles Mielenhausen, Minneapolis, MN, argued (James A. Mennell, on the brief), for appellant.

Robert Edward Salmon, Minneapolis, MN, argued (Andrew W. Horstman, Richard W. Bale, Stacy A. Broman, Scott P. Drawe and Louise A. Behrendt, on the brief), for appellee.

Before McMILLIAN, Circuit Judge, JOHN R. GIBSON, Senior Circuit Judge, and SHAW, * District Judge.

McMILLIAN, Circuit Judge.

Bell Lumber and Pole Company (Bell Lumber) appeals from final orders entered in the United States District Court 1 for the District of Minnesota, granting summary judgment in favor of Continental Casualty Company (CCC) and Centennial Insurance Company (Centennial), Bell Lumber & Pole Co. v. United States Fire Ins. Co., 847 F.Supp. 738 (D.Minn.1994) (Bell Lumber I ), and United States Fire Insurance Company (U.S. Fire), and Westchester Fire Insurance Company (Westchester). Id., 853 F.Supp. 315 (D.Minn.1994) (Bell Lumber II ). (CCC Centennial, U.S. Fire, and Westchester are collectively referred to as the carriers.) For reversal, Bell Lumber argues, among other things, that the district court erred in holding that (1) the qualified pollution exclusion contained in the relevant comprehensive general liability (CGL) and umbrella liability policies issued by the carriers to Bell Lumber barred coverage and (2) there are no genuine issues of material fact as to the inclusion of a qualified pollution exclusion in the policy issued by CCC to Bell Lumber. Also before us on this appeal is a motion by the carriers to strike portions of Bell Lumber's brief which refer to certain rulings by the district court in Bell Lumber's favor. We held the present appeal in abeyance pending the appeal to the Minnesota Supreme Court in SCSC Corp. v. Allied Mutual Ins. Co., 515 N.W.2d 588 (Minn.Ct.App.1994) (SCSC I ), which has now been decided. Id., 533 N.W.2d 603 (Minn.1995) (SCSC II ). For the reasons discussed below, we affirm the orders of the district court.

Background

The background of this case is well-stated in the district court's orders of March 21 and May 26, 1994. Bell Lumber I, 847 F.Supp. at 740-42; Bell Lumber II, 853 F.Supp. at 316-17. Thus, we provide only a brief summary of the facts.

Bell Lumber operates a wood treatment facility in New Brighton, Minnesota, where it treats wood poles used for power and telephone lines. The dispute in the present case involves whether or not Bell Lumber is entitled to coverage for pollution-related costs under various policies issued by the carriers. Between December 19, 1971, and January 1, 1975, Centennial provided umbrella excess liability insurance coverage to Bell Lumber. The Centennial policy contained a qualified pollution exclusion. We assume, for purposes of this appeal, that from May 19, 1972, to May 19, 1975, CCC provided CGL coverage to Bell Lumber. However, as explained below, we also conclude that, if such a CCC policy existed, it would have included a standard qualified pollution exclusion. Between May 19, 1975, and November 1, 1987, U.S. Fire provided CGL coverage to Bell Lumber and Westchester provided comprehensive catastrophe (umbrella) liability coverage to Bell Lumber. The U.S. Fire and Westchester policies each contained a qualified pollution exclusion.

The qualified pollution exclusion was substantially the same for each of the insurance policies at issue in the present case. Under these provisions, coverage would be excluded for property damage arising out of the release or escape of contaminants into the soil or groundwater, with the qualification--or exception--that coverage would be allowed if the release or escape were both "sudden and accidental."

From the 1920s until the early 1960s, Bell Lumber treated the poles with creosote. Bell Lumber's creosoting operations produced annually between 5,600 and 8,400 gallons of sludge containing creosote. In the mid-1940s, Bell Lumber began treating the poles with pentachlorophenol (penta). Bell Lumber applied the penta to the poles by placing the poles in treatment tanks and pumping hot and cold oil into the treatment tanks from storage tanks. After the hot and cold oil baths, the oil was removed from the treatment tanks and the poles were allowed to dry in the treatment tanks for several hours before being removed. The poles were inspected and then lifted from the tanks with a crane. On rare occasions, penta solution dripped off the poles during removal from the treatment tanks. Bell Lumber's penta treatments took place in an area referred to as the process area. The penta treatments created a sludge containing oil and penta emulsion, soil and wood particles, which was hauled from the process area to a separate disposal area. 2 Bell Lumber also sprayed penta solution to control weeds in another area where untreated wood was stored. At the time, penta was an approved herbicide.

Bell Lumber's operations involved the use of numerous tanks, pumps, and pipes, some of which were located underground. Despite Bell Lumber's regular efforts to maintain the integrity of the system, penta solution occasionally escaped into the ground from cracks or leaks in the underground components. In addition, mixtures of oil and creosote, and oil and penta, occasionally spilled onto the ground from storage and treatment tanks. Bell Lumber employees recalled fifteen such events. Some of the spills occurred as a direct result of human error--for example, when the tanks were accidentally overfilled or when someone failed to close a valve. Others were caused by boilovers, resulting from hot oil mixing with cold water within the treatment tanks. On one occasion in 1974, spilled penta solution reached nearby Pike Lake, killing some of the fish. As a result, Bell Lumber was required to clean up the spill.

The surface and subsurface soil near the process area was found to be contaminated with penta and creosote. The groundwater under the process area was found to be contaminated with over 200,000 gallons of penta. According to Bell Lumber's own expert, the fact that a significant amount of contaminated oil was observed to soak into the ground in the process area, such that little could be recovered, suggested that the majority of the spills were not recovered and therefore entered the groundwater and soil beneath the process area. We assume, for purposes of this appeal, that spills were the major source of groundwater and soil contamination at or below the process area.

In February 1984, the Minnesota Pollution Control Agency (MPCA) formally requested that Bell Lumber take specific actions to clean up surface and subsurface contamination. In 1985, pursuant to a consent order, Bell Lumber agreed to undertake the cleanup. In 1989, the Environmental Protection Agency (EPA) notified Bell Lumber that it would bring a claim against Bell Lumber for its investigation and remediation costs associated with surface and subsurface contamination at the New Brighton facility.

Bell Lumber brought this diversity action seeking declaratory judgment holding the carriers liable for cleanup and related past and future costs resulting from the creosote and penta contamination at the New Brighton facility. The carriers moved for summary judgment on grounds that they cannot be held responsible for Bell Lumber's pollution-related claims because such claims are precluded by the qualified pollution exclusions in their various policies. The district court granted the carriers' motions for summary judgment holding that Bell Lumber's claims were excluded as a matter of Minnesota state law based upon certain material facts not genuinely in dispute. Bell Lumber I, 847 F.Supp. at 747 (granting CCC and Centennial's motion for summary judgment); Bell Lumber II, 853 F.Supp. at 319 (granting U.S. Fire and Westchester's motion for summary judgment). Bell Lumber appealed. On appeal, Bell Lumber focuses specifically on the carriers' obligation to insure its liabilities for environmental damage arising out of penta spills which occurred in the process area of its New Brighton facility.

Discussion
The Qualified Pollution Exclusion

In its appeal from the district court's summary judgment decisions, Bell Lumber argues that the district court erred in its interpretation of the qualified pollution exclusion. More specifically, Bell Lumber argues that the district court erroneously held that there are no genuine issues of material fact, and the carriers are entitled to judgment as a matter of law, on the question of whether Bell Lumber has coverage in this case by operation of the "sudden and accidental" exception to the pollution exclusion.

We review a grant of summary judgment de novo. The question before the district court, and this court on appeal, is whether the record, when viewed in the light most favorable to the non-moving party, shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986) (Celotex ); Anderson v. Liberty Lobby, Inc., 477 U.S 242, 249-50, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986); Get Away Club, Inc. v. Coleman, 969 F.2d 664, 666 (8th Cir.1992); St. Paul Fire & Marine Ins. Co. v. FDIC, 968 F.2d 695, 699 (8th Cir.1992). Where the unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate. Crain v. Board of Police Comm'rs, 920 F.2d 1402, 1405-06...

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