Canadyne-Georgia Corp. v. Continental Ins. Co.

• Decision Date: 08 September 1993
• Docket Number: CANADYNE-GEORGIA,No. 92-8547,92-8547
• Parties: CORPORATION, Plaintiff-Counter-Defendant, Appellant, v. CONTINENTAL INSURANCE COMPANY, Defendant-Counter-Claimant, Appellee, American Universal Insurance Company, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1547

999 F.2d 1547

CANADYNE-GEORGIA CORPORATION, Plaintiff-Counter-Defendant, Appellant, v. CONTINENTAL INSURANCE COMPANY, Defendant-Counter-Claimant, Appellee American Universal Insurance Company, et al., Defendants-Appellees.

No. 92-8547.

United States Court of Appeals Eleventh Circuit.

Sept. 8, 1993.

V. Robert Denham, Jr., Powell, Goldstein, Frazer & Murphy, Jeffrey H.E. Schoenberg, Linda G. Birchall, Atlanta, GA, Leon B. Kellner, Anderson, Kill, Olick & Oshinsky, P.C., Washington, DC, for appellant.

Brian P. Turcott, Fellows, Johnson, Davis & La Briola, Carey Micheal Johnson, George Terrell Davis, Atlanta, GA, for Continental.

Steven A. Miller, Drew, Eckl & Farnham, Richard T. Gieryn, Kevin E. Wolff, McElroy, Deutsch & Mulbaney, Morristown, NJ, for U.S. Fire Ins.

Ben L. Weinberg, Jr., Long, Weinberg, Ansley & Wheeler, Frederick N. Sager, Jr., Atlanta, GA, Maurya Crawford Keating, Wilson, Elser, Moskowitz, Edelman & Dicker, Eileen B. Eglin, New York City, for Northwestern Nat. Ins. Co.

Warner S. Fox, Freeman & Hawkins, Frank C. Bedinger, III, Atlanta, GA, for Admiral Ins. Co.

Stephen E. O'Day, Atlanta, GA, Mark W. Kinzer, Smith Gambrell & Russell, James P. Schaller, Jackson & Campbell, P.C., Antoinette Patterson LeBel, Washington, DC, for Lexington Ins. Co.

Vincent J. De Stefano, Jr., German, Gallagher & Murtaugh, Michael D. Gallagher, Philadelphia, PA, Robin L. Frazer, Swift, Currie, McGhee & Hiers, Atlanta, GA, for Stonewall Ins. Co.

Appeal from the United States District Court for the Northern District of Georgia.

Before KRAVITCH and HATCHETT, Circuit Judges, and ATKINS ^*, Senior District Judge.

HATCHETT, Circuit Judge.

In this lawsuit arising out of claims of contamination of the environment, we affirm the district court's summary judgment ruling that the appellant failed to give timely notice to insurers as the insurance policies required.

FACTS

This action involves a chemical manufacturing and formulating plant in Fort Valley, Georgia, and stems from the pesticide and chemical contamination at the Fort Valley Plant site and the Peach County Landfill site The Woolfolk Chemical Works, Inc. operated the Fort Valley Plant from December, 1972, until July, 1977, when Reichhold Chemicals, Ltd. acquired all stock of Woolfolk. From mid-1977 until mid-1984, the Fort Valley Plant was under the corporate structure of Reichhold. In June, 1984, Woolfolk changed its name to Canadyne-Georgia Corporation and Reichhold sold most of the assets of Canadyne to another corporation. Initially, the plant was constructed to produce a line of lead- and arsenic-based products used to support cotton growers. Production expanded in the 1950s to include the formulation of various organic pesticides, including DDT, Lindane, Toxaphene, and other chlorinated organics.

                in Powersville, Georgia, where the plant deposited waste over the years.   The Environmental Protection Agency (EPA) placed both sites on its National Priorities List pursuant to the "Superfund" Program.   Canadyne-Georgia Corporation, the appellant, filed the instant lawsuit against various insurance companies which issued policies to Canadyne covering the years from 1965 through 1984, for liability resulting from contamination of the surrounding environment. 1  Canadyne seeks review of the district court's summary judgment in favor of appellees for Canadyne's failure to give timely notice to appellees pursuant to the policies
                

The policies at issue include both primary policies and excess or umbrella policies. Canadyne sets forth the language typical of the primary policies concerning notice:

In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place, and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable.

The policies define the term "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended [by the] insured." "Property damage" means "physical injury to or destruction of tangible property ... including the loss of use thereof...." The primary policies exclude coverage for damage to property the insured owns, uses, or controls.

The excess/umbrella policies provide coverage only upon exhaustion of Canadyne's underlying insurance coverage. The excess/umbrella policies require the insured to give "prompt written" notice upon knowledge that an "occurrence presents the potential that [the insurer] may be liable." ²

Canadyne also carried environmental impairment liability (EIL) insurance. These policies covered

costs and expenses of operations designed to remove, neutralize or clean up any substance released or escaped which had caused ... or could cause Environmental Impairment if not removed, neutralized or cleaned up, to the extent that such costs and expenses ... have become payable by the Insured either in the endeavor to avert or reduce a loss covered by this Policy or for operations outside the Insured's premises as a result of legal obligation....

Fort Valley Plant Site

Mr. Thurmond began work at the Fort Valley plant in 1947 as plant engineer and became vice president in charge of production in 1972. Thurmond testified that from 1947 through 1983, exhaust fans at the plant would vent pesticide dust material directly out of the buildings, and he recalled dust two inches thick accumulating in places in the pesticide formulation buildings. Thurmond Thurmond testified that in the early 1980s, the EPA characterized the materials handled at the plant as hazardous waste, and Woolfolk did not dispute such characterization of the materials. Thurmond acknowledged that during the early 1980s, the EPA characterized arsenic, Lindane, Toxaphene, Chlordane, and DDT as hazardous waste, and Canadyne knew that the EPA banned DDT and Chlordane from sale and Lindane and Toxaphene for certain uses.

                acknowledged that the installation of dust collection equipment did not prevent dust from escaping and getting into the atmosphere, and that this dust accumulation outside the buildings was subject to rainwater wash-off into the soil.   Thurmond testified that pesticide dust residue would fall through the wooden floors in the buildings into the ground underneath.   Thurmond testified that workers at the plant rinsed out drums containing technical pesticide products, and the runoff would enter into a drainage ditch running along the property.   Thurmond stated that pesticide Toxaphene would spill because of overflow of the Toxaphene storage tanks.   Thurmond testified to receiving a letter dated March 16, 1971, from the State Water Quality Control Board notifying Canadyne that the state's inspection of the plant revealed the sources of pollution from the plant to be (1) drum washing operations, (2) surface drainage, (3) spills and tank overflows.   Thurmond acknowledged that pollution was a concern of the Water Quality Control Board because these toxic substances traveled off-site
                

Mr. Cleveland, former plant manager, testified that operations at the plant were dusty, and dust containing pesticides would get blown and tracked outdoors. Cleveland acknowledged that incidental spills of pesticide products occurred in the day-to-day formulation process, and personnel at the plant rinsed drums containing residue of technical pesticides, and the runoff from such rinsing proceeded into drainage ditches.

In 1982, Canadyne hired an environmental consulting firm, Dames and Moore, which informed Canadyne that arsenic, lead, and zinc existed in the shallow groundwater at the plant site, and the levels exceeded the water quality standards. Canadyne subsequently hired another environmental consultant, Clayton Environmental. Clayton Environmental, after installing wells to test the groundwater, discovered significant contamination in the groundwater at the plant site. Thereafter, Canadyne retained the services of the law firm of Powell, Goldstein, Frazer, and Murphy to represent the company on environmental and insurance matters. Canadyne also notified the EPA and the Georgia Environmental Protection Division (EPD) of the Department of Natural Resources (DNR) that the groundwater at the plant site was contaminated with hazardous waste incidental to the production process.

On June 26, 1984, Canadyne and Reichhold notified its EIL carrier of the plant site contamination. On February 26, 1985, attorneys for Canadyne wrote Canadyne's EIL broker, the London Agency, and enclosed a letter from the EPD stating that the plant site was a candidate for inclusion on the EPA's National Priorities List, pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. § 9605 (1993).

During this time period, Canadyne was in the process of selling its plant. In Canadyne's First Amendment to Purchase Agreement (purchase agreement) with Security Chemical Company dated August 2, 1984, it states that "groundwater sampling has also been conducted by Clayton at certain wells located on the site and in surrounding areas.... It is acknowledged that such testing indicates both soil and groundwater contamination at certain locations tested." Pursuant to the purchase agreement, Canadyne agreed to indemnify, to defend, and hold the purchaser harmless from and against all actions, costs, and expenses arising out of soil or groundwater contamination at the plant site.

In early 1985, Canadyne retained the services of another environmental consultant, Applied Engineering and Science (AES). AES conducted additional investigations of the problems at the plant site. AES states in its summary report dated April, 1986, that

deep soil contamination at [the plant site] is the probable...