Claussen v. Aetna Cas. & Sur. Co.

• Decision Date: 07 December 1987
• Docket Number: No. CV185-248.,CV185-248.
• Citation: 676 F. Supp. 1571
• Parties: Henry H. CLAUSSEN, Plaintiff, v. The AETNA CASUALTY & SURETY COMPANY, First Defendant, and Federal Insurance Company, Second Defendant, et al.
• Court: U.S. District Court — Southern District of Georgia

676 F. Supp. 1571

Henry H. CLAUSSEN, Plaintiff, v. The AETNA CASUALTY & SURETY COMPANY, First Defendant and Federal Insurance Company, Second Defendant, et al.

No. CV185-248.

United States District Court, S.D. Georgia, Augusta Division.

December 7, 1987.

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

James A. Eichelberger, Neely & Player, Atlanta, Ga., Robert L. Allgood, Allgood & Childs, A. Montague Miller, Thomas Tucker, Dye, Miller, Tucker & Everitt, Augusta, Ga., Thomas E. McCarter, David A. Handley, Smith, Gambrell & Russell, Atlanta, Ga., Wiley S. Obenshain, III, Fulcher, Hagler, Reed, Obenshain, Hanks & Harper, Augusta, Ga., James B. Hiers, Jr., Donald F. Daugherty, Swift, Currie, McGhee & Hiers, Robert L. Todd, C. Michael Johnson, Atlanta, Ga., William Byrd Warlick, Augusta, Ga., for defendants.

ORDER

EDENFIELD, District Judge.

A number of motions are presently before the Court. Third party defendant Highlands Insurance Company (Highlands) has filed a motion for summary judgment. Defendants Aetna Casualty & Surety Co. (Aetna), Harbor Insurance Co. (Harbor), and American Home Assurance Co. (American Home) have moved for entry of final judgment. Plaintiff has moved for an Extension of Discovery Time and for Reconsideration of Order Granting Aetna's Motion to Quash Subpoena.

I. Background

In one way or another, all of the motions pending in this case relate to the Court's construction of the "pollution exclusion clause." The pollution exclusion clause is a standard provision in general comprehensive liability policies, and has been since 1970. The clause denies coverage for pollution-related bodily injury or property damage. It contains an exception which states that the pollution exclusion does not apply where a release, dispersal, or escape of pollutants is "sudden and accidental."

Plaintiff, Henry H. Claussen, brought this action to obtain a declaration that he is covered under various insurance policies for pollution-related liability incurred as a result of the gradual release, over a period of years, of hazardous wastes from land owned by him¹ near Jacksonville, Florida. Plaintiff's land, known as the Picketville landfill (Picketville), has been used by the City of Jacksonville, pursuant to a contract, for the disposal of wastes.

By Order dated August 11, 1987,² summary judgment was granted in favor of Aetna, American Home, and Harbor on the ground that liability incurred as a result of the release of hazardous wastes from Picketville fell within the pollution exclusion and, because the hazardous wastes were released gradually over a period of years, did not fall within the exception to the pollution exclusion for "sudden and accidental" releases.

Before the pollution exclusion was inserted into insurance policies, coverage of pollution-related liability depended on whether the pollution giving rise to liability fell within the definition of "occurrence." Liability arising from "occurrences" was covered and included "unintended and unexpected" pollution; intentional and expected pollution was not covered. See generally, Note, The Pollution Exclusion Through the Looking Glass, 74 Geo.L.J. 1237, 1246-51 (1986). Courts generally held that pollution-related damage occurring gradually over the years could constitute an occurrence as long as the damage was unintended and unexpected. Id.

The pollution-exclusion clause, as construed by the Court in its Order of August 11, worked a sharp change in coverage for pollution-related liability. By excluding coverage for pollution-related damages unless the release of pollutants is "sudden and accidental," the clause eliminated from coverage a significant category of risk: pollution-related damages which are unexpected and unintended but which result from pollution released gradually over the years. This is just the sort of risk for which plaintiff seeks coverage in this case. In its prior Order, the Court gave effect to the commonly understood meaning of the word "sudden" and affirmed the insurance companies' denial of coverage.³

Plaintiff has submitted to the Court certain documents which he hopes will move the Court to reconsider its construction of the pollution-exclusion clause. These documents show that, at the time the pollution exclusion clause was first inserted into insurance policies (1970), the Insurance Rating Board (which represents the insurance industry and on which defendant Aetna participated) represented to the Georgia Insurance Department that "the impact of the pollution exclusion clause on the vast majority of risks would be no change. It is rather a situation of clarification ... Coverage for expected or intended pollution and contamination is not now present as it is excluded by the definition of occurrence. Coverage for accidental mishaps is continued. ..." See Letter from R. Stanley Smith, Manager of the Insurance Rating Board, to the Georgia Insurance Department dated June 10, 1970 (attached as Appendix B). This statement clearly understates the substantial change in coverage worked by the pollution exclusion clause. On the basis of this statement, and others like it, plaintiff would have the Court reconsider its construction of the pollution exclusion. Plaintiff asserts that the insurance companies should be estopped from contradicting the representations made to the Georgia Insurance Department as to the effect of the pollution exclusion clause.

II. Analysis

The Court does not wish to condone the conduct of the insurance industry that plaintiff has exposed. The statements made by the Insurance Rating Board to the Georgia Insurance Department, if not fraudulent, certainly were not straightforward. The Rating Board downplayed the substantial effect the pollution exclusion clause would have on existing coverage in an effort to obtain approval for the clause's insertion into insurance policies.⁴ For several reasons, however, the Court is not persuaded that its prior decision should be disturbed.

First, and most importantly, under Georgia law the Court is not to look beyond the language of a contract to ascertain its meaning when the language is clear and unambiguous. Southern Federal Savings & Loan Ass'n. v. Lyle, 249 Ga. 284, 287, 290 S.E.2d 455 (1982); Reuss v. Time Insurance Co., 177 Ga.App. 672, 673, 340 S.E.2d 625 (1986). Further, words in contracts are to be construed according to their ordinary meaning. Stinchcomb v. Clayton County Water Auth., 177 Ga. App. 558, 561, 340 S.E.2d 217 (1986); O.C. G.A. § 13-2-2(2). As commonly understood, the word "sudden" in the pollution exclusion clause connotes abruptness. The gradual leaching of hazardous wastes into the ground water and soil surrounding Pickettville cannot honestly be characterized as sudden. These principles lie at the heart of the Court's analysis in its August 11 Order, and demand the same result today. Accordingly, the Court reaffirms the grant of summary judgment to Aetna, Harbor, and American Home.

Additionally, the Insurance Rating Board's representations to the Georgia Insurance Department, viewed in historical perspective, were not as devious as they appear at first glance. As noted above, prior to the insertion of the pollution exclusion clause into insurance policies, pollution-related damage was covered only if it fell within the definition of "occurrence." Occurrence, in turn, was defined as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured."⁵See Note, The Pollution Exclusion Clause Through The Looking Glass, 74 Geo.L.J. 1237, 1246-47 (1986). The insurance industry anticipated that the definition of occurrence would preclude coverage for most pollution-related damage because of the requirement that damage be unintended and unexpected to be covered. Id. at 1248. The insurance industry miscalculated: courts interpreted occurrence broadly, holding pollution-related damage to be unintended (and therefore covered) even when an insured knowingly discharged pollutants into the environment, as long as the specific damage giving rise to liability was unintended; (2) public awareness of environmental contamination grew and was accompanied by a sharp increase in pollution liability litigation. Id. at 1246-53. In this context, the representations made by the Insurance Rating Board were, to a degree, accurate; the insurance industry was merely trying, through the pollution exclusion clause, to prevent courts from extending coverage to risks that were not calculated into premiums under occurrence-based policies, and were not anticipated when the definition of occurrence was drafted. Id.; See also Developments in the Law — Toxic Waste Litigation, 99 Harv.L. Rev. 1458, 1575 (1986) ("the sharp increase in environmental litigation and the courts' broad construction of insurance policies have combined to shock the insurance industry."). Thus, in 1970, the Insurance Rating Board's representation that the pollution exclusion clause was designed to maintain the status quo was, from the standpoint of insurance companies, true.

Still, the Insurance Rating Board did fail to reveal to the Georgia Insurance Department the change in coverage worked by the suddenness requirement. This clearly worked a sharp change in prior coverage because "occurrence" expressly included "continuous or repeated exposure to conditions." See supra, note 4 and accompanying text. However, it is not clear whether the significance of this change was fully understood in 1970; environmental disasters such as Love Canal and Pickettville, which are the result of gradual contamination, are a relatively recent phenomenon.

Thus, the hands of the insurance companies, while not immaculate, are not as dirty as plaintiff contends. The insurance companies have not, as plaintiff suggests, perpetrated a fraud on the Court by arguing in favor of a construction which...