Huntzinger v. Hastings Mut. Ins. Co.

• Decision Date: 28 April 1998
• Docket Number: No. 96-4163,96-4163
• Citation: 143 F.3d 302
• Parties: 28 Envtl. L. Rep. 21,283 Warren K. HUNTZINGER and Nancy J. Huntzinger, Plaintiffs-Appellants, v. HASTINGS MUTUAL INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 302

143 F.3d 302

28 Envtl. L. Rep. 21,283

Warren K. HUNTZINGER and Nancy J. Huntzinger, Plaintiffs-Appellants, v. HASTINGS MUTUAL INSURANCE COMPANY, Defendant-Appellee.

No. 96-4163.

United States Court of Appeals Seventh Circuit.

Argued May 14, 1997.

Decided April 28, 1998.

George Plews, Jeffrey Featherstun (argued), Plews, Shadley, Racher & Braun, Indianapolis, IN, for Plaintiffs-Appellants.

Mark R. Smith (argued), Smith & Bemenderfer, Indianapolis, IN, for Defendant-Appellee.

Before CUMMINGS, COFFEY and DIANE P. WOOD, Circuit Judges.

COFFEY, Circuit Judge.

Plaintiffs-appellants, Warren K. Huntzinger and Nancy J. Huntzinger ("the Huntzingers"), sought a declaratory judgment in federal district court on the question of whether their insurer, the defendant-appellee herein, Hastings Mutual Insurance Company ("Hastings"), owed a duty to defend and indemnify them in an action arising out of their alleged maintenance of a solid waste dump site on property they sold to Crossman Communities, Inc. ("Crossman"). The parties filed cross-motions for summary judgment. The court denied the Huntzingers' motion and entered summary judgment in Hastings' favor, finding that the policy's "owned-property" exclusion barred coverage. The Huntzingers appeal. We affirm.

I. BACKGROUND

On August 28, 1978, Warren Huntzinger, an Indiana resident, purchased approximately twenty-five acres of land in Pendleton, Indiana, which he subsequently transferred to his wife, Nancy Huntzinger ("Nancy"), also an Indiana resident. On March 8, 1993, Nancy executed a purchase agreement for the sale of the property to Crossman, a real estate development company whose expressed intention was to construct single-family detached homes on the site in accordance with plans prepared by the Huntzingers. ¹ Among the various provisions contained in the purchase agreement were the two paragraphs set forth below, whereby Nancy warranted and represented to Crossman that the land complied with all applicable environmental laws, ordinances and regulations:

Seller represents that, to the best of Seller's knowledge and belief, the Real Estate complies with all applicable laws, ordinances and regulations of all applicable governmental authorities, including, without limitation, those relating to health, environmental matters, hazardous waste, radon emission, toxic materials, and zoning matters.

* * * * * *

The representations, warranties, covenants, agreements and indemnities ... shall, for purposes of enforcement only, remain operative and shall survive the closing and the execution and delivery of the deeds and other documents conveying title....

The agreement further provided that the Huntzingers, "at their expense ... obtain an acceptable Environmental Site Assessment on the Real Estate." Accordingly, the appellants retained ATEC Associates, Inc. ("ATEC"), an environmental consulting firm, to conduct the assessment. In a letter dated April 15, 1993, ATEC notified the Huntzingers that, from 1892 through 1898, the Indiana Window Glass Company operated a facility in the northeast corner of the property and that, while the Company's physical plant had since been demolished, debris consisting of red bricks, fire bricks and glass shards remained scattered about the area. The report also noted the existence of a small pit, roughly three feet deep, located in the same vicinity as the debris. Even though the Huntzingers had knowledge of this information, they failed to disclose it and closed the deal with Crossman on June 3, 1993.

Exactly one year later, on June 3, 1994, Crossman filed a two-count complaint against the Huntzingers ² in the Superior Court of Madison, Indiana, alleging that:

12. Subsequent to the Closing, Plaintiff discovered an unpermitted solid waste dump site on the Real Estate, in violation of Indiana Code 13-7-4-1 and Indiana Regulations 329 IAC 2-4-2 and 329 IAC 4-4-4.

13. Defendant Warren K. Huntzinger directed the burial of the solid waste on the Real Estate. Defendant Nancy J. Huntzinger knew, or should have known, that solid waste was buried on the site at the time of the execution of the Purchase Agreement.

14. The establishment and maintenance of such solid waste dump site on the Real Estate by the Defendants constitutes a breach of the representations and warranties of the Purchase Agreement.

15. The Defendants knew, or should have known, that the establishment and maintenance of such solid waste dump on the Real Estate constituted a violation of the law and a breach of the representation and warranties of the Purchase Agreement.

* * * * * *

19. By reason of the breach of the representations and warranties ..., Plaintiff has a set-off against the debt owing to Defendant Nancy J. Huntzinger in the amount of at least One Hundred Nine Thousand Four Hundred Eighty-Four and 08/100 Dollars ($109,484.08).

Crossman sought an unspecified amount of damages for the costs associated with disposing of the solid waste, remediating the property, its lost business and goodwill, damage to its reputation, and reasonable attorney's fees.

From December 16, 1988, through December 16, 1994, the span of time during which Crossman filed its suit, the Huntzingers carried their comprehensive general liability ("CGL") insurance with Hastings, a Michigan corporation. This policy specified the types of injuries and injury causes for which Hastings would provide coverage, to wit:

COVERAGE A--FARM AND PERSONAL LIABILITY

We pay, up to our limit of liability, all sums for which any insured is legally liable because of bodily injury or property damage caused by an occurrence to which this coverage applies.

We will defend any suit seeking damages, provided the suit resulted from bodily injury or property damage not excluded under this coverage.

(boldface in original). The insurance contract also expressly barred coverage for certain liabilities by way of exclusionary terms, two of which, commonly known as "owned-property" and "pollution" exclusions, provided:

Exclusions That Apply Only to Farm and Personal Liability--This policy does not cover liability:

* * * * * *

d. For damage to property owned by any insured.

* * * * * *

f. Resulting from the actual, alleged or threatened discharge, dispersal, release or escape of pollutants....

(boldface in original). The Huntzingers, relying on the above "Farm and Personal Liability" provision, requested that Hastings defend them in the Crossman action. In response thereto, Hastings examined the allegations in Crossman's complaint and compared them with the language of the Huntzingers' insurance policy, only to conclude and inform the Huntzingers, in a letter dated May 13, 1994, that "there is no coverage for this claim" because: (1) the Crossman suit did "not originate from an 'occurrence' as defined by your [the Huntzingers'] policy"; (2) "[e]ven if the events complained of by [Crossman] did constitute an 'occurrence' ..., it is clear that these events took place outside the period during which you were insured by Hastings ...."; (3) the policy "exclude[s] coverage for liability arising from the actual, alleged or threatened discharge, dispersal, release or escape of pollutants" ; and (4) the "policy does not cover liability 'resulting from premises owned, rented or controlled by an insured other than the insured premises.' " The Huntzingers settled with Crossman for $30,000.00 on December 14, 1994, and thereafter petitioned Hastings to reconsider its earlier decision to deny them coverage. Hastings did not deviate from its earlier position expressed in its letter of May 13, 1994, and again maintained that it had no obligation to defend and/ or indemnify the Huntzingers.

In the wake of these events, the Huntzingers, asserting diversity jurisdiction under 28 U.S.C. § 1332, sought a declaratory judgment in federal district court, claiming that Hastings was obligated to indemnify them for the $51,424.26 expense they incurred in settling the Crossman suit, an amount equalling the total of the $30,000 settlement, plus $21,424.26 in attorney's fees. Both parties subsequently filed motions for summary judgment. Hastings argued that the Huntzingers were not entitled to indemnification since the Crossman complaint failed to allege an "occurrence" which caused "property damage," and even if such were not the case, that the owned-property and the pollution exclusions nevertheless acted to bar coverage. The Huntzingers, on the other hand, contended that the Crossman complaint did in fact allege "property damage" caused by an "occurrence," that the pollution exclusion was "absolute" and, therefore, ambiguous, see American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind.1996) (holding that an "absolute" pollution exclusion is ambiguous and, therefore, must be construed against the insurer), and that the "owned-property" exclusion was inapplicable because "the Crossman Complaint arose over one year after the Huntzingers had already sold the property to Crossman." ³ The trial court granted Hastings' motion for summary judgment, and denied the Huntzingers'. The judge found that the Crossman complaint set forth allegations coming within the parameters of the terms "occurrence" and "property damage," as defined under the policy, but opined that insofar as "[t]he relevant date is the date of any alleged property damage, not the date a suit is filed ... [t]his case falls squarely within the owned property exclusion." (Mem. & Ord., at 15 (citation omitted)). ⁴

II. ISSUES

This appeal presents us with two issues. Initially, we consider whether the Huntzingers have waived any of the arguments they now advance against the applicability of the owned-property exclusion by having failed to raise them before the district court. And second, we shall determine whether the trial court properly concluded that the "owned-property" exclusion set forth within the Huntzinger's insurance policy precludes coverage on Crossman's underlying...