Claussen v. Aetna Cas. & Sur. Co.

Citation754 F. Supp. 1576
Decision Date07 December 1990
Docket NumberNo. CV 185-248.,CV 185-248.
PartiesHenry H. CLAUSSEN, Plaintiff, v. The AETNA CASUALTY & SURETY COMPANY, Defendant.
CourtU.S. District Court — Southern District of Georgia

David E. Hudson, Augusta, Ga., for plaintiff.

Michael R. Johnson, Linda B. Foster, John W. Winborne, Neely & Player, Atlanta, Ga., Robert L. Allgood, Allgood & Daniel, Augusta, Ga., for Aetna Cas. & Sur. Co.

A. Montague Miller, Thomas Tucker, Dye, Miller, Tucker & Everitt, Augusta, Ga., for Federal Ins. Co.

Thomas E. McCarter, David A. Handley, Smith, Gambrell & Russell, Atlanta, Ga., for Continental Cas. Co.

Wiley S. Obenshain, III, Fulcher, Hagler, Reed, Obenshain, Hanks & Harper, Augusta, Ga., for Mission Nat. Ins. Co., Mission Ins. Co. and American Assur. Co.

James B. Hiers, Jr., Donald F. Daugherty, Swift, Currie, McGhee & Hiers, Atlanta, Ga., for Highlands Ins. Co.

Robert L. Todd, C. Michael Johnson, Atlanta, Ga., William Byrd Warlick, Augusta, Ga., for Harbor Ins. Co.


EDENFIELD, Chief Judge.

As Yogi Berra once said, "it's like déjà vu all over again." Once again, the Court is asked to decide the summary judgment motion of the defendant, Aetna Casualty and Surety Company ("Aetna"). Aetna requests summary judgment against the plaintiff, Henry Claussen, on three grounds. First, Aetna claims that Claussen's claim is barred by the "owned property exclusion." Second, Aetna claims that the pollution discharge was "sudden," even as the Georgia Supreme Court has defined the word. Third, Aetna claims that the response costs demanded by the EPA are not "damages" within the meaning of the policy. The Court rejects all three arguments. Aetna's motion for summary judgment is therefore DENIED. Also before the Court is Claussen's motion to amend the complaint, adding a claim under O.C. G.A. § 33-4-6 (1990) for extra damages and attorneys fees. The Court GRANTS the plaintiff leave to file this amended complaint.


Since 1966, Henry Claussen has owned, either individually or through corporations, land in Florida known as Pickettville. In 1968, the city of Jacksonville, Florida contracted to use the site as a landfill. Beginning in 1971, the city dumped industrial and chemical waste there. In 1977, the city closed the site and returned it to Claussen, filled, graded, and seeded.

The parties dispute whether Claussen knew that the city planned to dump toxic wastes on the site. During negotiations of the contract, the city directed Claussen's attorney to impress upon his client the city's need to dump "anything" at Pickettville. Thus, Claussen wrote that the city would have the right to dump "garbage and other debris and material in accordance with the city's waste disposal needs." Whether Claussen meant this language to allow the dumping of toxic wastes is a disputed question.

In 1982 the EPA, acting pursuant to Sections 106 and 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. §§ 9606, 9607 (1988), notified Claussen that it was investigating the release of hazardous materials from the landfill. In June 1982, Claussen met with representatives of EPA and several other potentially responsible parties ("PRPs"). At the meeting, Claussen and the city of Jacksonville agreed to cooperate in remedying the problems at the landfill. They constructed a barrier to prevent spill-off of the toxic materials into a nearby creek. Ultimately, EPA determined that the barrier failed to work; ground water beneath the site had been contaminated by toxic substances. EPA required new remedial investigations and feasibility studies.

Claussen was insured from 1973 to 1985 under comprehensive general liability ("CGL") insurance policies issued by Aetna. The policies stated in relevant part:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of property damage to which this insurance policy applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such ... property damage, even if any of the allegations of the suit are groundless, false or fraudulent, ....

The definition section states: "Property damage means physical injury to or destruction of tangible property which occurs during the policy period,...." There were also several exclusion clauses in the policy. The "pollution exclusion" clause, exclusion (f), excludes coverage for pollution-related property damage unless the discharge of pollution is "sudden and accidental." The "owned property" clause, exclusion (k), bars coverage for claims based solely on damage to the insured's property. It reads:

This insurance does not apply:

(k) to property damage to
(1) property owned or occupied by or rented to the insured
(2) property used by the insured, or
(3) property in the care, custody or control of the insured or as to which the insured is for any purpose exercising physical control....

Although Aetna had notice of the EPA proceedings, it declined to defend Claussen or to reimburse him for the sums he was obligated to pay to clean up the site. Claussen sued, seeking a declaratory judgment that under the CGL policies, Aetna must defend Claussen and cover Claussen's costs incurred in connection with EPA's demand that he investigate the site and prepare and implement a plan for eliminating the environmental concerns on the Pickettville property.

On August 22, 1986, the defendant Aetna filed a motion for summary judgment, claiming, among other things, that it was not obligated under the CGL policies because of the "pollution exclusion" clause. On August 11, 1987, this Court ruled in Aetna's favor on this motion. The Court held that "sudden" had a temporal meaning and that the release of pollutants at the Pickettville site was gradual. Claussen v. Aetna Casualty & Sur. Co., 676 F.Supp. 1571, 1580 (S.D.Ga.1987). The Court did not rule on the defendant's other grounds for summary judgment. The plaintiff appealed to the Court of Appeals for the Eleventh Circuit, which certified a question to the Georgia Supreme Court. 865 F.2d 1217 (11th Cir.1989). Essentially, the Eleventh Circuit asked for the Georgia Supreme Court's definition of "sudden." The Georgia Supreme Court unfortunately declared that the word had two possible meanings, "abrupt," the meaning this Court found, and "unexpected and unintentional." Claussen, 259 Ga. 333, 338, 380 S.E.2d 686 (1989). The Georgia Supreme Court construed the word in favor of the insured, to mean "unexpected or unintentional." The Eleventh Circuit then remanded the case for further consideration. 888 F.2d 747 (11th Cir.1989).

Aetna now renews its motion for summary judgment. In addition, Claussen requests leave to amend the complaint, adding a claim of bad faith refusal to afford coverage to the plaintiff.

I. The Owned Property Exclusion

As noted above, Aetna's insurance policy did not cover claims based solely on damages to Claussen's property. According to Aetna, the pollution discharge from the Pickettville property damaged only the ground water beneath Claussen's own land. Aetna notes that under Georgia law, a property owner owns all that is below and above his property. O.C.G.A. §§ 44-1-2(B); 51-9-9; City of Hawkinsville v. Clark, 135 Ga.App. 875, 219 S.E.2d 577 (1975). Accordingly, Aetna asserts that the environmental disaster at the Pickettville site damaged only Claussen's own property, and Aetna is not liable.

Aetna's argument fails for three reasons. First, under controlling law, Claussen does not own the ground water under his land. Thus, the owned property exclusion does not bar coverage for any damage to the ground water. Second, the toxic dumping damaged not only Claussen's land, but also surrounding land and water. Third, EPA required Claussen to clean up the site to prevent damage to third person's property as well as his own property.

The defendant correctly notes that Georgia law controls this case. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), requires that this Court, when sitting in diversity, apply the substantive law that the Georgia state courts would apply. Id. That principle applies to Georgia's whole law, and therefore this Court must also apply Georgia choice of law rules. Day & Zimmerman v. Challoner, 423 U.S. 3, 4, 96 S.Ct. 167, 167, 46 L.Ed.2d 3 (1975); see Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Under Georgia conflicts law, "the rule of lex loci contractus controls all substantive matters, such as the nature, construction and interpretation of contracts." Manderson & Assoc., Inc. v. Gore, 193 Ga.App. 723, 389 S.E.2d 251 (1989) (citations and emphasis omitted). In determining who owns property, however, Georgia follows the traditional situs rule: "Law governing the title and disposition of land is exclusively subject to the laws of the State where it is situated." King v. King, 203 Ga. 811, 817, 48 S.E.2d 465 (1948). The Georgia Supreme Court has emphatically stated:

Much of the confusion in this branch of the law conflicts would not, it is submitted, exist if the courts would merely follow the controlling principle and cease to create exceptions, followed by limitations on the exceptions, and then undertake to distinguish, and to refine the distinctions, and the distinguish the refinements; but instead to follow the course mapped out centuries ago, to wit, that as to contracts affecting realty the law of the State where the land lies will be applied....

Clark v. Baker, 186 Ga. 65, 77, 196 S.E. 750 (1938). In this case, although the contracts were made in Georgia, the real property affected is in Florida. Therefore, the Court will follow Florida law to determine who owns the groundwater under Claussen's property.

In Florida, a landowner does not own the ground water under his land. According to...

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