Continental Cas. v. Advance Terrazzo & Tile, 05-3594.

• Citation: 462 F.3d 1002
• Decision Date: 30 August 2006
• Docket Number: No. 05-3594.,05-3594.
• Parties: CONTINENTAL CASUALTY COMPANY; Transportation Insurance Company, Appellees, v. ADVANCE TERRAZZO & TILE COMPANY, INC.; James M. Fanjoy; Nancy L. Fanjoy, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

462 F.3d 1002

CONTINENTAL CASUALTY COMPANY; Transportation Insurance Company, Appellees, v. ADVANCE TERRAZZO & TILE COMPANY, INC.; James M. Fanjoy; Nancy L. Fanjoy, Appellants.

No. 05-3594.

United States Court of Appeals, Eighth Circuit.

Submitted: May 19, 2006.

Filed: August 30, 2006.

Michael J. Rothman, argued, Minneapolis, MN, for appellant.

Robert E. Salmon, argued, Minneapolis, MN, for appellee.

Before SMITH, HANSEN, and COLLOTON, Circuit Judges.

SMITH, Circuit Judge.

Advance Terrazzo and Tile Company, Inc. ("Advance Terrazzo") and James and Nancy Fanjoy ("the Fanjoys") appeal the district court's¹ declaratory judgment in favor of insurance companies Continental Casualty Company and Transportation Insurance Company ("insurance companies"). The Fanjoys sued Advance Terrazzo and others after James Fanjoy was allegedly exposed to an excessive amount of carbon monoxide gas released from Advance Terrazzo's propane-powered grinders, causing him to fall and injure his back at a construction site. The district court found that the insurance companies had no duty to defend Advance Terrazzo in a lawsuit brought by the Fanjoys based upon the "absolute" pollution exclusion contained in the insurance policies. We affirm.

I. Facts

In March 1999, Advance Terrazzo, as subcontractor for Gopher State Contractors, Inc. ("Gopher State"), installed terrazzo flooring in the hallways of a school building for the Foley Independent School District in Foley, Minnesota. Advance Terrazzo used its own propane-powered terrazzo floor grinders, which emit carbon monoxide as a gaseous exhaust byproduct. James Fanjoy, an independent contractor for a painting subcontractor, was working on drywall at the construction site. According to Fanjoy, carbon monoxide emitted from Advance Terrazzo's propanepowered grinders caused him to fall and sustain injuries that have left him physically and mentally impaired.

On January 21, 2002, Fanjoy and his wife sued Advance Terrazzo, Gopher State, and Fanjoy's employer in state court. The complaint alleges that Advance Terrazzo was negligent in failing to provide proper ventilation when operating its floor grinders and failed in its duty to properly monitor the work environment for carbon monoxide gas. Advance Terrazzo's insurance companies² began defending Advance Terrazzo in the state lawsuit. However, the insurance companies later filed the instant declaratory judgment action in federal court, contending that the absolute pollution exclusion³ bars coverage under the general liability policy issued to Advance Terrazzo.

The general liability policy provided coverage for claims based upon bodily injury or property damage, but the policy specifically excludes coverage for bodily injury or property damage caused by pollution in what is referred to as the absolute pollution exclusion:

f. Pollution

(1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations:

(i) If the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor . . .

Pollution is defined under the policy as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Id. at 432.

Advance Terrazzo moved to dismiss the declaratory judgment complaint or, in the alternative, to stay the action based on the abstention doctrine, claiming that there is no Minnesota Supreme Court decision governing this case. The district court denied the motion, resolving the coverage issues based upon existing Minnesota case law. The insurance companies then filed for summary judgment to determine whether the policies at issue apply to the underlying state lawsuit. The district court granted the insurance companies' motion for summary judgment, finding that the insurance companies' absolute pollution exclusion barred coverage of the Fanjoys' claims against Advance Terrazzo under Minnesota law. Advance Terrazzo and the Fanjoys appeal.

II. Discussion

Advance Terrazzo submits three arguments on appeal. First, Advance Terrazzo requests that this court certify the legal question presented in this case to the Minnesota Supreme Court or, in the alternative, abstain from reaching a decision. Second, Advance Terrazzo argues that the absolute pollution exclusion contained in the general liability insurance policy is ambiguous and should not apply to ordinary business activities. Therefore, the policy should provide coverage to Advance Terrazzo for the Fanjoys' claims. Third, Advance Terrazzo avers that coverage should be found for other reasons, including (1) the "brought on"⁴ and "heater"⁵ exceptions to the absolute pollution exclusion provision and (2) estoppel. We will address each claim in turn.

A. Certification to the Minnesota Supreme Court

Both parties agree that Minnesota law governs this declaratory judgment action. Advance Terrazzo states that the Minnesota Supreme Court has not interpreted the absolute pollution exclusion, and thus, this court would have to predict how the Minnesota Supreme Court would resolve the issue. Additionally, the appellants claim that the Minnesota Court of Appeals' decisions are inadequate and improper precedent for interpreting the absolute pollution exclusion in the context of carbon monoxide emitted from ordinary business activities. Therefore, Advance Terrazzo asserts that the district court erred in denying its motion to certify and requests that this court certify to the Minnesota Supreme Court the question of whether the absolute pollution exclusion bars coverage for carbon monoxide emitted during ordinary business activities.

We hold that the district court did not abuse its discretion in denying the appellants' motion to certify this question to the Minnesota Supreme Court. In an order dated December 14, 2005, we addressed the certification issue stating, "Appellants' motion to certify a question of law to the Minnesota Supreme Court has been considered by the court and is denied." The argument has gained no additional merit in the interim, and we again decline appellants' request to certify this question to the Minnesota Supreme Court. The Minnesota Court of Appeals decisions are consistent and long-standing precedent. They provide adequate guidance as to the current state of Minnesota law.

B. Abstention

The appellants contend that the district court should not have exercised jurisdiction during the pendency of parallel state court proceedings. Alternatively, if this court finds that no parallel state court proceedings exist, the appellants claim that the district court should have exercised its discretion to stay or dismiss the action because, under the Detco factors, abstention is warranted. Scottsdale Ins. Co. v. Detco Indus., Inc., 426 F.3d 994, 998 (8th Cir.2005). The appellants argue, first, that state courts should clarify and settle the legal questions at issue rather than federal courts. Second, the state has an interest in resolving the unsettled question of Minnesota law on the absolute pollution exclusion, as well as deciding the factual question on the source of carbon monoxide in the pending state action. Third, the federal court, by abstaining, would allow the state court system to address the legal issues and clarify its legal precedent. For these reasons, inter alia, the appellants maintain that the district court abused its discretion in not staying or dismissing this action.

"We review for abuse of discretion a decision to stay or dismiss a declaratory judgment." Id. at 996. The court reviews de novo whether parallel proceedings were pending in state court at the time the insurance companies brought the declaratory judgment action. Id. "Generally, a federal district court must exercise its jurisdiction over a claim unless there are `exceptional circumstances' for not doing so." Id.

A threshold issue is whether parallel proceedings in state court were pending when the appellees brought this declaratory judgment action. Id. "Suits are parallel if substantially the same parties litigate substantially the same issues in different forums." Id. (internal quotation omitted). In Detco, we held that there were no parallel proceedings pending in state court because (1) the insurer was not a party to the suit pending in state court; and (2) the state court actions involved issues regarding the insured's liability, whereas the federal suit involved matters of insurance coverage. Id. at 997. The same is true of this case. The underlying state court action is between Advance Terrazzo and the Fanjoys; the insurance companies are not named parties in that action. Moreover, the state court action deals with Advance Terrazzo's liability for the Fanjoys' injuries, but the declaratory judgment action deals with whether or not the insurance companies must provide coverage to Advance Terrazzo under the policies. We conclude, therefore, that the suits are not parallel, "for the state court proceedings involve parties, arguments, and issues different from those in the federal court proceedings." Id.

Next, we address whether abstention by the district court would be appropriate in a declaratory judgment action in which there are no parallel state court proceedings. Id. We consider at least six factors in answering this question:

(1) whether the declaratory judgment sought will serve a useful purpose in clarifying and settling the legal relations in issue; (2) whether the declaratory judgment will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the federal proceeding; (3) the strength of the state's interest in having...