Blackhawk-Central City v. AMERICAN GUARANTEE

• Court: U.S. District Court — District of Colorado
• Citation: Blackhawk-Central City v. AMERICAN GUARANTEE, 856 F.Supp. 584 (D. Colo. 1994)
• Decision Date: 24 June 1994
• Docket Number: No. 93-B-1252,93-B-1282.,93-B-1252
• Parties: BLACKHAWK-CENTRAL CITY SANITATION DISTRICT, Plaintiff, v. AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, a New York corporation, and St. Paul Fire and Marine Insurance Company, a Minnesota corporation, Defendants.

856 F. Supp. 584

BLACKHAWK-CENTRAL CITY SANITATION DISTRICT, Plaintiff, v. AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, a New York corporation, and St. Paul Fire and Marine Insurance Company, a Minnesota corporation, Defendants.

Nos. 93-B-1252, 93-B-1282.

United States District Court, D. Colorado.

June 24, 1994.

Timothy J. Flanagan, Kutak Rock, Jon T. Bradley, Jerald J. Devitt, Myers Hoppin Bradley & Devitt, P.C., Denver, CO, for plaintiff.

Arthur R. Karstaedt, Hall & Evans, L.L.C., Denver, CO, Robert J. Bates, Jr., Pope & John, Ltd., Chicago, IL, for American Guarantee.

Douglas J. Cox, Cooper & Kelley, P.C., Denver, CO, for St. Paul Fire.

MEMORANDUM OPINION AND ORDER

BABCOCK, District Judge.

Plaintiff Blackhawk-Central City Sanitation District (the District) moves pursuant to Federal Rule of Civil Procedure 56 for partial summary judgment on the issue of defendants' duty to defend the District in underlying federal litigation. I hold that the pollution exclusion clauses in both defendants' insurance policies are fully enforceable in this action. American Guarantee and Liability Insurance Company (American), however, also provides coverage for personal injury to which the pollution exclusion clauses do not apply. Hence, I further hold that because the personal injury coverage may cover claims for trespass and nuisance in the underlying litigation, American has a duty to defend against these claims. Thus, as more fully explained below, the District's motion will be granted in part and denied in part.

I.

This suit arises out of American Guarantee and Liability Insurance Company (American)'s and St. Paul Fire and Marine Insurance Company (St. Paul)'s reliance on insurance policies issued to the District in denying a duty to defend the District on claims asserted against the District in Old Timer, Inc. v. Blackhawk/Central City Sanitation District, Civil Action No. 93-B-249 (Old Timer litigation), currently pending before me.

The District is a quasi-municipal corporation, organized pursuant to Colo.Rev.Stat. § 32-4-401, et seq., which owns and operates a sewage treatment facility on North Clear Creek in Blackhawk, Colorado. This facility treats sanitary sewer waste delivered from the municipalities of Central City and Blackhawk and, pursuant to a permit issued by the Colorado Department of Health, Water Control Division, discharges effluent into North Clear Creek.

During the time frame at issue in the Old Timer litigation, the District paid premiums in consideration for comprehensive general liability (CGL) insurance coverage under several policies provided by defendants American and St. Paul. In this motion, the District seeks a determination whether the defendants are contractually bound to defend the District in the Old Timer litigation in accordance with the insurance policies. The broader question whether these defendants have an obligation to indemnify the District for liability arising from the Old Timer litigation is not before me.

Venue for this action is proper as the District is a resident of, and the claim covered by these policies arose within, the State of Colorado. Jurisdiction is based upon diversity of citizenship pursuant to 28 U.S.C. § 1332 with an amount in controversy exceeding $50,000. The jurisdiction of this court was implicated by defendants' Notice of Removal pursuant to 28 U.S.C. §§ 1441, 1332, and 1446.

II.

A. Old Timer Litigation: On January 29, 1993, the Old Timer litigation was filed against the District and others in the United States District Court for the District of Colorado by the owners and owners' lessee of property downstream from the District's waste treatment facility (the Old Timer plaintiffs). The general allegations in the Old Timer complaint include that the District has, and continues to, discharge suspended solids, fecal coliform bacteria, ammonia, residual chlorine, and other chemicals and substances in amounts in excess of levels permitted by law. The complaint alleges that the substances contained in the District's effluent constitute "pollutants" within the meaning of the Clean Water Act § 502(6), 33 U.S.C. § 1362(6).

The Old Timer complaint alleges that, as a result of the excessive releases of permitted levels of effluent, the Old Timer plaintiffs have suffered a multitude of personal injuries and property damages. The Old Timer Complaint, while not specific as to dates when damages occurred, implicates a series of excessive effluent discharges by the District beginning in 1985 and continuing through the present. The complaint alleges that the District has violated its permit daily since at least November 1, 1990. The complaint further alleges that the District's conduct in violating and disregarding permit limitations was knowing, willful and negligent.

The Old Timer complaint seeks to impose civil penalties, payable to the United States Government, upon the District and recover damages to property, persons, and business. Specifically, the Old Timer plaintiffs seek recovery upon theories of: 1) past, present and continuing trespass; 2) public and private nuisance; 3) misrepresentation and concealment; 4) outrageous conduct; and 5) exemplary and punitive damages.

B. The Insurance Policies: The insurance policies issued by defendants purport to grant broad coverage in protecting the insured, the District, from liability resulting from bodily injury or property damage to another and arising out of an "accident" or "occurrence" taking place within the terms of the policies regardless of whether a claim is made before or after expiration of the policy itself. Significantly, the policies of both defendants contain pollution exclusion clauses, but three of the American policies contain coverage for personal injury that does not fall under the pollution exclusion clause.

American issued six CGL policies to the District, each for one year, running February to February, beginning February 18, 1987 through February 18, 1993. These policies are consecutively numbered as CPO-38-53-743-00 through CPO-38-53-743-05. The six American policies are listed below:

Policy No.           Policy Period       Hereinafter
                CPO-38-53-743-00     2/18/87-2/18/88     Policy 00
                CPO-38-53-743-01     2/18/88-2/18/89     Policy 01
                CPO-38-53-743-02     2/18/89-2/18/90     Policy 02
                CPO-38-53-743-03     2/18/90-2/18/91     Policy 03
                CPO-38-53-743-04     2/18/91-2/18/92     Policy 04
                CPO-38-53-743-05     2/18/92-2/18/93     Policy 05
                

Because American Policy 00, Policy 01, and Policy 02 are substantially similar, these three policies are frequently referred to as the "first three American policies." Also, because American Policy 03, Policy 04, and Policy 05 are substantially similar, these three policies are frequently referred to as the "last three American policies."

St. Paul issued two CGL policies of insurance to the District, Policy No. 583ZA3251, effective from February 18, 1983 through February 18, 1986 (Policy ZA), and Policy No. CK08300195, effective from February 18, 1986 through February 18, 1987 (Policy CK).

III.

Summary judgment is appropriate if the evidence demonstrates 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. See Fed.R.Civ.P. 56(c). Affidavits and evidence offered by a nonmovant must create a genuine issue for trial; viewing the evidence in the light most favorable to the nonmovant, it is not enough that the evidence be "merely colorable" or anything short of "significantly probative." Hall v. Bellmon, 935 F.2d 1106, 1111 (10th Cir.1991) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986)). When the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial. Id.; see also Anderson, 477 U.S. at 248-52, 106 S.Ct. at 2510-2512.

The court's function is not to weigh the evidence, but merely to determine whether there is sufficient evidence favoring the nonmovant for a finder of fact to return a verdict in that party's favor. Anderson, 477 U.S. at 251-52, 106 S.Ct. at 2511-12.

IV.

The duty to defend is broader than the duty to indemnify. An insurer seeking to avoid its duty to defend bears a heavy burden. An insurer has a duty to defend where the underlying complaint against the insured alleges any facts that might fall within the coverage of the policy. Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083 (Colo.1991). It is the factual allegations in the complaint, and not the legal claims, that determine an insurer's duty. Gerrity Co. v. CIGNA Property & Cas. Ins. Co., 860 P.2d 606, 607 (Colo.App.1993). If there is doubt as to whether a theory of recovery within the policy coverage has been pleaded, the insurer must accept the defense of the claim. Hecla Mining, 811 P.2d at 1089.

The determination of a duty to defend in this case depends on the terms in the insurance policies, and their interpretation based upon settled principles of contract interpretation. Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1090 (Colo.1991); Marez v. Dairyland Ins. Co., 638 P.2d 286, 288-89 (Colo.1981). I must follow Colorado law when interpreting the CGL policies at issue in this case. See Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Broderick Inv. Co. v. Hartford Acc. & Indem. Co., 954 F.2d 601, 606 (10th Cir.1992). Under Colorado law, the plain language of the contract controls. Chacon v. American Family Mut. Ins. Co., 788 P.2d 748, 750 (Colo.1990). The court is not to rewrite or override the intention of the parties which is expressed by clear unambiguous language in the contract. J.S. Enterprises, Inc. v. Continental Cas. Co., 825 P.2d 1020, 1023 (Colo.App.1991).

The Colorado Supreme Court has held that "a provision in a policy is ambiguous when it is reasonably susceptible to more than one meaning."...