Compass Ins. Co. v. City of Littleton
| Citation | 984 P.2d 606 |
| Decision Date | 28 June 1999 |
| Docket Number | No. 96SC852.,96SC852. |
| Parties | COMPASS INSURANCE COMPANY, a New York corporation; American Employers' Insurance Company, a/k/a Commercial Union Insurance Company, a/k/a Employer's Fire Insurance Company, a Massachusetts corporation; The Hartford Accident and Indemnity Company, a Connecticut corporation; Fireman's Fund Insurance Companies, a California corporation; The American Insurance Company, A New Jersey corporation; and American States Insurance Company, Petitioners/Cross-Respondents, v. CITY OF LITTLETON, Colorado, a municipal corporation; and City of Englewood, Colorado, a municipal corporation, Respondents/Cross-Petitioners, v. Guaranty National Insurance Company, a Colorado corporation, Cross-Respondent/Cross-Petitioner. |
| Court | Supreme Court of Colorado |
Cooper & Clough, P.C., John E. Clough, Denver, Colorado, Traub, Eglin, Liberman, Straus, Richard J. Rogers, Stephen D. Straus, Hawthorne, New York, Attorneys for Petitioner/Cross-Respondent Compass Insurance Company.
Markusson, Green & Jarvis, P.C., James K. Green, Kristin G. Lindberg, Denver, Colorado, Attorneys for Petitioner/Cross-Respondent Commercial Union Assurance Companies.
Roberts & Zboyan, P.C., JoAnne M. Zboyan, Ricardo M. Barrera, Denver, Colorado, Hogan & Harston, L.L.P., William J. Bowman,David G. Leitch, Washington, D.C., Attorneys for Petitioner/Cross-Respondent Hartford Accident and Indemnity Company.
Cook, Fitch & Hames, Scott R. Cook, Englewood, Colorado, Kaufman & Logan LLP, W. Martin Tellegen, San Francisco, California, Attorneys for Petitioners/Cross-Respondents Fireman's Fund Insurance Company and The American Insurance Company.
Richard W. Laugensen, Denver, Colorado, Bingham Summers, Welsh & Spillman, Martha S. Hollingsworth, James M. Hinshaw, Indianapolis, Indiana, Attorneys for Petitioner/Cross-Respondent American States Insurance Company.
Grimshaw & Harring, A Professional Corporation, Larry W. Berkowitz, William J. Brady, Lisa K. Norberg, Denver, Colorado, Attorneys for Respondent/Cross-Petitioner City of Littleton.
Daniel Brotzman, City Attorney, City of Englewood, Englewood, Colorado, Semple, Miller, DeLay & Mooney, P.C., Martin Semple, Denver, Colorado, Anderson, Kill and Olick, P.C., Edward M. Joyce, John P. Gasior, New York, New York, Attorneys for Respondent/Cross-Petitioner City of Englewood.
Diana L. Terry, Denver, Colorado, Attorney for Cross-Respondent/Cross-Petitioner Guaranty National Insurance Company.
White & Steele, P.C., Frederick W. Klann, Denver, Colorado, Attorneys for Amicus Curiae Insurance Environmental Litigation Association.
P.B. Lynn Walker, Lakewood, Colorado, Attorney for Amicus Curiae Waste Management, Inc.
Zevnik, Horton, Guibork, McGovern, Palmer & Fognani, L.L.P., Brian L. Duffy, Denver, Colorado, Michael Y. Horton, Mark B. Hartzler, Los Angeles, California, Matthew W. Cockrell Chicago, Illinois Attorneys for Amicus Curiae City and County of Denver.
Kevin S. Hannon, Denver, Colorado, Attorney for Amicus Curiae Colorado Trial Lawyers Association.
Geoffrey T. Wilson, General Counsel, Denver, Colorado, Inman, Flynn & Biesterfield, P.C., Richard P. Brentlinger, Joel A. Moritz, Michael J. Glade, Robert J. Thomas, Denver, Colorado, Attorneys for Amicus Curiae Colorado Municipal League.
This appeal raises important and difficult issues of insurance contract interpretation concerning whether certain insurance policies provide liability coverage for environmental pollution under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).
For a period of several years, Englewood and Littleton (the Cities) jointly operated a wastewater treatment facility that disposed of sewage sludge at the Lowry Landfill. The Environmental Protection Agency (EPA) subsequently notified the Cities that under CERCLA, the Cities were potentially responsible for clean-up costs necessitated by the release of hazardous wastes from the Lowry Landfill. The Cities filed suit, seeking a declaratory judgment that insurance policies they purchased during the 1970s and 1980s from various insurance companies (Insurers) must provide coverage for their liability arising out of their disposal of sewage sludge at the Lowry Landfill and seeking specific performance of the policies as well as damages for breach of contract.
The trial court granted summary judgment to Insurers based on the pollution exclusions in their policies. In addition, the trial court granted summary judgment to some Insurers based on provisions in their policies that exclude coverage for joint ventures that are not also named as insureds under the policies.
The court of appeals affirmed in part and reversed in part. See City of Englewood v. Commercial Union Assurance Cos., 940 P.2d 948 (Colo.App.1996)
. The court of appeals held that the trial court erred in granting summary judgment based on the pollution exclusion clause. See id. at 956. However, the court of appeals affirmed the trial court's order granting summary judgment to various insurers based on the joint venture clause. See id. at 956-57. This court granted certiorari on several issues.1 We affirm in part and reverse in part.
First, we affirm the court of appeals' judgment that the trial court erred in granting summary judgment based on the pollution exclusion clauses in Insurers' policies, although we do so for different reasons. We decline to follow the interpretation of the standard pollution exclusion clause set forth by the Tenth Circuit in Broderick Investment Co. v. Hartford Accident & Indemnity Co., 954 F.2d 601 (10th Cir.), cert. denied, 506 U.S. 865, 113 S.Ct. 189, 121 L.Ed.2d 133 (1992). In contrast to the Tenth Circuit, we construe the words "discharge, dispersal, release or escape" contained in the pollution exclusion clause to refer to the release of pollution from the Lowry Landfill and not the initial disposal of sewage sludge into the landfill by the Cities. In Hecla Mining Co. v. New Hampshire Insurance Co., 811 P.2d 1083, 1092 (Colo.1991), we held that the words "sudden and accidental," contained in the exception to the pollution exclusion clause, meant "unexpected and unintended." Thus, we hold that coverage is restored because the EPA made no allegations that when the Cities disposed of sewage sludge at the Lowry Landfill, they intended or expected that pollutants would be released from the Lowry Landfill as a consequence of their activity. Hence, we hold that Insurers have a duty to defend because of the exception to the pollution exclusion clause, and the trial court erroneously granted summary judgment for Insurers.
Second, we hold that the court of appeals erred in affirming the trial court's ruling that the Bi-City Plant was a joint venture. Because the term "joint venture" as used in certain insurance policies is undefined and ambiguous, we construe that term against Insurers to exclude an entity formed for the limited purpose of providing more efficient municipal services. Therefore, we reverse the court of appeals in its judgment affirming the trial court's rulings granting summary judgment to some Insurers based on the joint venture clause.
Finally, we hold that EPA actions under CERCLA constitute suits, thereby triggering Insurers' duty to defend, and we hold that response costs under CERLCA are covered damages under the insurance policies.
In 1973, the Cities entered into an agreement to build and operate a Bi-City Wastewater Treatment Facility (Bi-City Plant) to process their sewage. From the spring of 1977 through the summer of 1980, the Bi-City Plant disposed of its sewage sludge at the Lowry Landfill in east Denver.
In 1985, the EPA sent a letter to Englewood notifying the city that it was one of many Potentially Responsible Parties (PRPs) who, under CERCLA,2 were jointly and severally liable for the costs of cleaning up the Lowry Landfill. This letter alleged that "[y]our company and many others have disposed of waste at the Lowry Landfill" and that the EPA "has information indicating that your company did, by contract agreement or otherwise, arrange for the disposal, treatment, or transportation for disposal or treatment of hazardous substances at the Lowry Landfill." The letter further alleged that a release of hazardous substances at the landfill was potentially contaminating groundwater:
EPA has determined that a release of hazardous substances, as defined by Section 101(14) of CERCLA, has occurred at Lowry. At present, hazardous substances are contaminating the alluvial and bedrock systems at and around the site. Both the alluvial and bedrock aquifers under the Lowry Landfill site are groundwater sources for existing and potential consumption uses offsite, including the supply for domestic, irrigation, and stock watering purposes. EPA will upon request discuss this information with you and provide additional information on the nature and extent of releases at the site.
Three years later, in 1988, the EPA sent two letters addressed to the Bi-City Plant. The first one was a PRP letter alleging that the Plant disposed of hazardous substances at the Lowry Landfill:
EPA has evaluated information concerning persons who may have generated, transported, or disposed of hazardous substances, pollutants, or contaminants at Lowry Landfill. Based on this evidence, EPA believes you may be a potentially responsible party ("PRP") with respect to this site.... Specifically, EPA has reason to believe that you arranged, by contract, agreement, or otherwise, for the disposal, treatment, or transportation for the disposal or treatment of hazardous substances found at the facility.
A month later, EPA sent the Bi-City Plant a "Special Notice Letter" informing the Bi-City Plant of the commencement of a sixty-day period of formal negotiations between the EPA and the PRPs associated with the Lowry Landfill.
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