Bituminous Cas. Corp. v. Tonka Corp., 92-3187
| Decision Date | 21 December 1993 |
| Docket Number | No. 92-3187,92-3187 |
| Citation | 9 F.3d 51 |
| Parties | 24 Envtl. L. Rep. 20,456 BITUMINOUS CASUALTY CORPORATION, an Illinois corporation, Plaintiff-Appellee, v. TONKA CORPORATION, a Minnesota corporation, Defendant-Appellant, v. BITUMINOUS CASUALTY CORPORATION, The Travelers Insurance Company, North River Insurance Company, Great American Insurance Company, Industrial Indemnity Company, Zurich Insurance Company, United States Fire Insurance Company, Mission National Insurance Company, Twin City Fire Insurance Company, Counter-Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Mary R. Vasaly, Minneapolis, MN, argued (David F. Herr, Mallory K. Mullins and Anna L. Korinko, on the brief), for defendant-appellant.
Thomas E. Peterson and Leon R. Erstad, Minneapolis, MN, argued, for appellees.
Before BEAM, LOKEN, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
Tonka Corporation ("Tonka") appeals the district court's 1 grant of summary judgment declaring that Bituminous Casualty Corporation and several other insurance companies (collectively, "the Insurers") have no duty to defend or indemnify Tonka for its costs incurred in a proceeding initiated by the Minnesota Pollution Control Agency ("MPCA") to remedy groundwater contamination at Tonka's facility in Mound, Minnesota. The district court held that this contamination is not the result of an "occurrence" within the meaning of the Insurers' comprehensive general liability ("CGL") policies, and also is excluded from coverage by the pollution exclusion contained in many of the policies. We affirm.
Tonka manufactured metal toys at the Mound facility from 1955 until 1984. Prior to painting the toys, Tonka removed oil and grease by passing them through a vapor bath of trichloroethylene (TCE), a common solvent. This process generated a liquid waste of TCE and oil. After the 1950's, Tonka recovered the TCE in a still and reused it, leaving residue oil and stillbottom sludge that was stored in 55-gallon drums for disposal.
In 1985, an engineering study revealed that the groundwater surrounding Tonka's plant contains significant concentrations of TCE and other solvents. Acting under the Minnesota Superfund Act, Minn.Stat. Ch. 115B, the MPCA then issued a formal request that Tonka define and implement a remedial action plan to protect the environment from further releases of these hazardous substances. Tonka notified the Insurers and requested that they defend Tonka in this administrative enforcement proceeding. Bituminous and Travelers defended Tonka for over a year, but then commenced this action seeking a declaratory judgment that they have no duty to defend or indemnify under their CGL policies. Tonka counterclaimed for a declaration that each of the Insurers must defend and indemnify the company under those policies.
The CGL policies provide coverage for damages Tonka is legally obligated to pay because of property damage caused by an "occurrence," which is defined as "an accident, including injurious exposure to conditions, which results ... in bodily injury or property damage neither expected or intended from the standpoint of the insured." Most of the policies issued after 1972 contain a "pollution exclusion," which bars coverage for property damage arising out of the discharge of contaminants or pollutants unless the discharge was "sudden and accidental."
The district court granted the Insurers' motion for summary judgment, concluding that the groundwater contamination resulted from Tonka's "ongoing and routine disposal of TCE on its site," that Tonka "knew or should have known that there was a substantial probability that this release of TCE would cause property damage," and that the resulting damage was therefore not caused by an occurrence within the meaning of the Insurers' CGL policies. In addition, the court held that coverage is barred under those policies that contain a pollution exclusion because "there was nothing abrupt about the disposal of TCE at the Tonka site."
On appeal, Tonka argues that the district court erred both in granting summary judgment on the fact-intensive issue of whether the property damage in question was caused by an occurrence, and in interpreting the pollution exclusion. We review the district court's decision to grant summary judgment and its interpretation of state law de novo. See Salve Regina College v Russell, 499 U.S. 225, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991); Gumersell v. Director, Fed. Emergency Mgt. Agency, 950 F.2d 550, 553 (8th Cir.1991).
With regard to the pollution exclusion, we have recently held that in order to qualify for the "sudden and accidental" exception to that exclusion under Minnesota law the insured must show that its release of a contaminant was abrupt. See Bureau of Engraving v. Federal Ins. Co., 5 F.3d 1175, 1177 (8th Cir.1993). After careful review of the record, we conclude that the district court correctly held that the pollution exclusion applies to Tonka's release of TCE and other solvents into the groundwater at its plant, and that Tonka's ongoing and routine on-site disposal of these wastes was not "sudden" as a matter of law. See Sylvester Bros. Dev. Co. v. Great Central Ins. Co., 503 N.W.2d 793, 797 (Minn.App.1993); Krawczewski v. Western Cas. & Sur. Co., 506 N.W.2d 656 (Minn.App.1993). Accordingly, the district court properly granted summary judgment declaring that Tonka's claims are not covered under any policy containing the pollution exclusion.
However, not all the policies at issue contain a pollution exclusion. Therefore, like the district court, we must also address the "occurrence" issue. The question is whether the contamination of the groundwater under Tonka's plant resulted in property damage "neither expected nor intended from the standpoint of the insured." This is an objective standard; it turns upon whether the damage "should have been expected" by the insured. Bituminous Cas. Corp. v. Bartlett, 307 Minn. 72, 240 N.W.2d 310, 313 (1976). Under Minnesota law, "the word 'expected' denotes that the actor knew or...
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