HARTFORD ACC. AND INDEM. CORP. v. USF&G CO.
| Decision Date | 28 February 1991 |
| Docket Number | Civ. No. 88-C-1051J. |
| Citation | 765 F. Supp. 677 |
| Parties | HARTFORD ACCIDENT AND INDEMNITY CORPORATION, a Connecticut corporation, Plaintiff, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, a Maryland corporation; El Paso Natural Gas, a Delaware corporation; Commercial Union Insurance Company, a Massachusetts corporation, Defendants. |
| Court | U.S. District Court — District of Utah |
Raymond M. Berry, Joy L. Clegg, Salt Lake City, Utah, for plaintiff.
Gary L. Johnson, Salt Lake City, Utah, for defendant U.S. Fidelity & Guar. Co.
Stephen Marshall, Van Cott, Bagley, Cornwall & McCarthy, Alan L. Sullivan, Salt Lake City, Utah, Nicholas J. Zoogman, Jerold Oshinsky, Anderson, Kill, Olick & Oshinsky, New York City, for defendant El Paso Natural Gas.
William W. Barrett, Kipp & Christian, Salt Lake City, Utah, for defendant Commercial Union Ins. Co.
On December 20, 1989, the court heard argument on two pending motions. The motions included: a Motion for Summary Judgment brought by plaintiff Hartford Accident and Indemnity Corporation ("Hartford") with respect to the "alienated premises exclusion" contained in an insurance policy (the "Liability Policy") issued by Hartford to defendant El Paso Natural Gas ("El Paso"); and a Motion to Compel brought by El Paso. The court took the Motions under advisement.
On September 19, 1990, and October 10, 1990, the court heard argument on cross Motions for Summary Judgment filed by Hartford and El Paso with respect to the "pollution exclusion" of the Liability Policy. The court also heard argument on two Motions for Summary Judgment brought by defendants United States Fidelity and Guarantee Company ("USFG") and Commercial Union Insurance Company ("Commercial"). USFG and Commercial claim that no controversy exists between Hartford and USFG, or Hartford and Commercial. The court took all Motions under advisement.
Having carefully considered the memoranda and arguments of counsel, and for the reasons set forth below, the court hereby issues its rulings:
Having based its ruling on the pollution exclusion, the court finds that it need not reach the questions presented by the parties' other pending motions.
Northwest Pipeline Corporation ("Northwest") owns and operates a natural gas transmission system which traverses the states of Washington, Oregon, Idaho, Wyoming, Utah, Colorado and New Mexico (the "System"). The System, which was constructed and placed in operation during the mid-1950's was acquired by El Paso in 1959. In 1974, El Paso sold the System to Northwest. El Paso agreed in the terms of the sale to indemnify Northwest for any liability or expenses arising from El Paso's activities prior to transferring the System.
During the 15 years El Paso owned the System, the company used an air compressor lubricating oil, Pydraul AC, at 15 of the System's compressor sites. Pydraul AC contains the toxic substance aroclor 1254, a polychlorinated biphenyl ("PCB").1 El Paso disposed of the used PCBs by routinely draining the contaminants directly into the ground, or periodically draining them into concrete sumps, which were later pumped out into dirt pits. Some pits contained pipes designed to discharge any waste overflow directly into the surrounding ground.2
In 1987, Northwest discovered the PCB contamination. Northwest reported the contamination to several government agencies, including the Environmental Protection Agency (the "EPA"). Pursuant to consent orders entered into with the EPA, Northwest cleaned up the contaminated equipment, drains, sumps, pits and surrounding ground.3
Relying on the sales agreement indemnification provision between Northwest and El Paso, Northwest filed a lawsuit against El Paso to recover the contamination clean up costs. El Paso agreed to pay Northwest $6.6 million dollars to settle that action. In turn, El Paso sought indemnification from Hartford, its insurance carrier, for the $6.6 million dollar settlement.4
On October 6, 1989, Hartford denied coverage of El Paso's claims. Hartford then instigated this action seeking a declaratory judgment that the Liability Policy excluded coverage of the PCB contamination. The narrow issue before the court, as presented in the parties' cross Motions for Summary Judgment, is whether the Liability Policy's pollution exclusion excludes coverage of such contamination.
The construction of an insurance contract is a matter of law that the court can resolve in the context of a motion for summary judgment. Adams-Arapahoe Joint School District v. Continental Ins. Co., 891 F.2d 772, 774 (10th Cir.1989). Contract construction remains a question of law even though the parties may disagree about the meaning of the contract, or even though one party may claim that the contract is ambiguous. Gomez v. American Electrical Power Service Corp., 726 F.2d 649, 651-52 (10th Cir.1984).
The issue before the court concerns the meaning of the pollution exclusion set forth in the Liability Policy issued by Hartford to its insured, El Paso. The exclusion provides in pertinent part:
This insurance does not apply:
(Emphasis in original).
The exclusion expressly states that unless the discharge of toxic chemicals is sudden and accidental, there is no coverage under the policy. The parties disagree as to the meaning of the phrase sudden and accidental. The parties also disagree as to whether the phrase concerns the nature of the discharge, or the nature of the damages caused by the discharge.
El Paso argues that the sudden and accidental language excludes coverage only if the damage caused by the contamination was unexpected and unintended from the standpoint of the insured. El Paso claims that the history of the insurance industry shows a clear intent to provide coverage, even from gradual pollution damage, if the damage was not intentionally caused by the policy holder. In the alternative, El Paso argues that the pollution exclusion is ambiguous, and therefore should be construed against the drafter, Hartford, and in favor of El Paso.
In contrast, it is Hartford's position that the court should look at the plain meaning of the terms sudden and accidental. Hartford claims that the phrase sudden and accidental excludes coverage if the discharge of the pollutants occurred without notice and such discharge was by chance. Thus, Hartford argues that El Paso's regular and repeated discharge of waste chemicals over a period of several years was not sudden and accidental because they did not occur without notice and by chance.
The courts are divided as to the proper interpretation of the terms sudden and accidental in the context of liability insurance. Some courts interpret the phrase to mean "unexpected and unintended." See e.g., Anderson & Middleton Lumber Co. v. Lumbermen's Mutual Casualty Co., 53 Wash.2d 404, 333 P.2d 938 (1959); New England Gas & Electric Ass'n v. Ocean Accident & Guarantee Corp., 330 Mass. 640, 116 N.E.2d 671, 680-81 (1953). Other courts find that the terms sudden and accidental mean "happening without notice and occurring by chance." See e.g., U.S. Fidelity & Guaranty v. Star Fire Coals, Inc., 856 F.2d 31 (6th Cir.1988); Great Lakes Container Corp. v. National Union Fire Ins. Co., 727 F.2d 30 (1st Cir. 1984). This court finds that the more well reasoned case law gives the phrase sudden and accidental its plain and simple meaning. Accordingly, the court is persuaded to adopt the current line of decisions which exclude coverage unless the contamination occurs without notice and such events happen by chance.
The courts adopting the plain and simple definition of sudden and accidental have uniformly found the regular and repeated discharge of waste to be excluded from coverage by the pollution exclusion. For example, in Great Lakes Container, the insured was alleged to have routinely discharged waste chemicals onto the site of its barrel-reconditioning facility as an aspect of its business operations. The court held that the insured's clean up cost recovery claim against its carrier fell "squarely" within the exclusion, and that no coverage existed. 727 F.2d at 33-34. Similarly, in U.S. Fidelity, the court found that coal dust waste generated by the normal operation of the insured, which was discharged on a routine, continuing basis, was excluded from coverage. 856 F.2d at 32. In both Great Lakes and U.S....
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