Hudson Ins. Co. v. Double D Management Co., Inc.

• Decision Date: 28 June 1991
• Docket Number: No. 89-1631-CIV-T-17B.,89-1631-CIV-T-17B.
• Citation: 768 F. Supp. 1542
• Parties: HUDSON INSURANCE COMPANY, a Delaware Corporation, Plaintiff, v. DOUBLE D MANAGEMENT COMPANY, INC., a Florida corporation, Double D Properties, Inc., a Florida corporation, and Constitution State Insurance Company, a Connecticut corporation, Defendants.
• Court: U.S. District Court — Middle District of Florida

768 F. Supp. 1542

HUDSON INSURANCE COMPANY, a Delaware Corporation, Plaintiff, v. DOUBLE D MANAGEMENT COMPANY, INC., a Florida corporation, Double D Properties, Inc., a Florida corporation, and Constitution State Insurance Company, a Connecticut corporation, Defendants.

No. 89-1631-CIV-T-17B.

United States District Court, M.D. Florida, Tampa Division.

June 28, 1991.

Steven C. Davis, Jonathan L. Alpert, Peter J. Grilli, Wendy England, Alpert, Josey & Grilli, P.A., Tampa, Fla., for Hudson Ins. Co.

Katherine S. Dedrick, Jeffrey A. Siderius, John E. Herndon, Ronald L. Kammer, Hinshaw & Culbertson, Miami, Fla., for Constitution State Ins. Co.

Arnold L. Berman, West Palm Beach, Fla., for Double D Management Co., Inc. and Double D Properties, Inc.

ORDER

KOVACHEVICH, District Judge.

This cause is before the Court on Count II of Plaintiff's petition for declaratory relief. Before the Court are Plaintiff's first and second motions for summary judgment against Double D Management Co., Inc., and Double D Properties, Inc. ("Double D"), Defendant Double D's motions for summary judgment on "Damages," "Crop Dusting," and the "Pollution Exclusion," and Defendant Double D's motion for partial summary judgment on Hudson's duty to defend.

The central question is whether Defendant Double D's insurance policies with Hudson provide coverage for the Defendants against a claim for contribution and indemnity in an underlying third party action for CERCLA, 42 U.S.C. § 9606 et seq, response and clean-up costs.

I. JURISDICTION

Having decided the threshold issue of whether federal or state law applies to this action and ruled that state law applies, 768 F.Supp. 1538, this Court retains diversity jurisdiction over this case under 28 U.S.C. § 1332.

II. FACTUAL BACKGROUND

Double D manages certain agricultural property in West Palm Beach County, Florida. On various occasions and in connection with its management duties, Double D contracted with one of Juan Montalvo's companies, known as CHEMAIRSPRAY, to provide for the aerial application of insecticides, pesticides, and/or herbicides on Double D's property (Amended Third Party Complaint at paragraphs 2, 19, 20, Dkt. 91, Exhibit 1). In so doing, CHEMAIRSPRAY employees routinely loaded aircraft with the desired chemicals, applied those chemicals to the managed property via aerial application and, upon returning to the CHEMAIRSPRAY site, rinsed the aircraft's tanks of any remaining chemical residue (Dkt. 91, Exhibit 1). The resulting rinseate flowed off the CHEMAIRSPRAY runway and eventually into the ground nearby (Complaint, Southwest Florida Water Management District v. Montalvo, Case No. 88-8038-Civ-Davis (S.D.Fla., Dkt. 91, Exhibit 2). This caused pollution at the CHEMAIRSPRAY site and threatened nearby property (See Order Determining Liability Among Parties, entered February 15, 1989, Dkt. 91, Exhibit 3).

Two nearby property owners, Southwest Florida Water Management District and New Farm, sued Juan Montalvo and CHEMAIRSPRAY (the "Montalvo Group") seeking recovery under CERCLA, 42 U.S.C. § 9601 et seq., for the cost of investigation and cleanup of the polluted CHEMAIRSPRAY site. The Montalvo Group was found liable in the case of South Florida Water Management District v. Montalvo, Case No. 88-8038-Civ-Davis (S.D.Fla. Nov. 7, 1988), for the damage caused, including the assessment and cleanup of the site. Thereafter, the Montalvo Group filed an amended third party complaint seeking contribution and indemnity from Double D and other farms that had used the aerial spraying service for the liability assessed against them for response costs at the CHEMAIRSPRAY site.

In response to the Montalvo Group's third party action against Double D, Double D contacted both its primary liability carrier and its umbrella carrier, Hudson Insurance Company, requesting a defense against the Montalvo Group's third party action. Plaintiff Hudson then filed a declaratory judgment action to resolve whether Hudson and/or Constitution State owe a duty to defend and/or indemnify Double D in the underlying action.

Pertinent Policy Provisions

Hudson issued two commercial umbrella liability policies to Double D, No. HA-01604 and HN-01646, covering the period from September 30, 1983 to October 1, 1985. The policies are "umbrella" policies which obligate Hudson to indemnify Double D for "all sums which the Insured shall be legally obligated to pay as ultimate net loss" as a result of personal injury property damages, and advertising liability caused by an "occurrence" during the policy period. "Ultimate net loss" is defined under the policies as "the sum actually expended or payable in cash to procure settlement or satisfaction of the Insured's legal obligation for damages...." "Occurrence" is defined by the policy as "an accident, or a happening or event, or continuous or repeated exposure to conditions, which unexpectedly or unintentionally results in damage."

However, the policies contain various exclusionary clauses, two of which are pertinent to the outcome of this litigation. The policies each include a pollution exclusion clause stating that the policy does not apply:

to personal injury or property damages arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes ... into or upon the land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

Additionally, both policies include crop dusting exclusions. Policy No. HN-01646 states:

In consideration of the premium paid, and notwithstanding anything contained in this policy to the contrary, it is agreed that this policy shall not apply to personal injury or property damages arising out of the operation of an aircraft by or on behalf of the Insured for the purposes of dusting and spraying operations.

The exclusions as noted above are most important to resolution of the issue of coverage in this case.

III. STANDARD OF REVIEW

Summary judgment is appropriate when "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Rule 56(c) Fed.R.Civ.P. The Supreme Court of the United States held, in Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986):

In our view the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to establish the existence of an essential element to that party's case, and on which that party will bear the burden of proof at trial.

477 U.S. at 322, 106 S.Ct. at 2552, 91 L.Ed.2d at 273.

Burden of Proof

An insured has the burden of proving that the claim against it is covered by the insurance policy. Gilman v. U.S. Fidelity & Guar. Co., 517 So.2d 97 (Fla. 1st DCA 1987); Melville v. American Home Assurance Co., 584 F.2d 1306, 1308 (3d Cir.1978); Fischer v. Porter v. Liberty Mutual Ins. Co., 656 F.Supp. 132, 140 (E.D.Pa.1986). The burden of proving an exception to coverage is on the insurer. 656 F.Supp. at 140. However, the courts are split as to whether the insurer or insured has the burden of proving an exception to an exclusion. The one court which has considered the "sudden and accidental" exception to a "pollution exclusion" clause held that the insured had the burden of proving that the "sudden and accidental" exception applied. Fischer v. Porter, supra, 656 F.Supp. at 140; see also Fireman's Fund Ins. Co. v. Ex-Cell-O-Corp., 702 F.Supp. 1317, 1328 (E.D.Mich.1988) (adopting the Fischer court's ruling on the burden of proving "sudden and accidental" exception). Accordingly, this Court finds that as to the "sudden and accidental" exception to the "pollution exclusion" the burden of proof is upon Double D to prove that the "sudden and accidental" exception applies; as to the "crop dusting" exclusion, the burden of proof falls upon Hudson to prove that the exclusion applies.

IV. DISCUSSION

The issues urged by the Plaintiff in seeking summary judgment are issues of law and contract interpretation. Whether the Plaintiff must defend and indemnify Defendants turns on one or more of the following issues: (a) whether the clean-up and investigation costs for the CHEMAIRSPRAY site constitute "damages" under the policies; (b) whether the Defendant's claim for coverage is precluded by the pollution exclusion clause or falls within the "sudden and accidental" exception under which the policy must pay; (c) whether the "crop dusting" exclusions of the policies preclude coverage. The strongest arguments concern the exclusionary provisions. However, this Court notes that clean-up costs qualify as damages under the policies. AIU Ins. Co. v. FMC Corp., 51 Cal.3d 807, 274 Cal.Rptr. 820, 799 P.2d 1253 (1990).

As the Court in AIU points out, numerous state and federal courts have addressed the issue of whether clean-up costs under environmental statutes constitute "damages" within insurance policy coverage. Nearly every state appellate decision has concluded that clean-up costs incurred under environmental statutes are covered by policies identical to those at issue in this case. See, e.g., Aerojet-General Corp. v. Superior Court, 211 Cal.App.3d 216, 257 Cal.Rptr. 621 (1989); C.D. Spangler Construction Co. v. Industrial Crankshaft & Engineering Co., Inc., 326 N.C. 133, 388 S.E.2d 557 (1990); Compass Ins. Co. v. Cravens, Dargan & Co., 748 P.2d 724 (Wyo.1988); United States Fidelity & Guar. Co. v. Specialty Coatings Co., 180 Ill.App.3d 378, 129 Ill.Dec. 306, 535 N.E.2d 1071, app. denied 127 Ill.2d 643, 136 Ill. Dec. 609, 545 N.E.2d 133 (1989); Upjohn Co. v. New Hampshire Ins. Co., 178 Mich. App. 706, 444 N.W.2d 813 (Mich.App.1989); CPS Chemical Co., Inc. v. Continental Ins. Co., 222 N.J.Super. 175, 536 A.2d 311 (1988); Cf., Braswell v. United States Fidelity & Guar. Co., 300 S.C. 338, 387 S.E.2d 707 (S.C.App.1989).

However, federal courts...