Intel Corp. v. Hartford Acc. & Indem. Co.

• Decision Date: 24 December 1991
• Docket Number: No. 89-15165,89-15165
• Citation: 952 F.2d 1551
• Parties: , 60 USLW 2463, 60 USLW 2480, 22 Envtl. L. Rep. [PG20,968 INTEL CORPORATION, Plaintiff-Appellee, v. HARTFORD ACCIDENT & INDEMNITY COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1551

952 F.2d 1551

35 ERC 1216, 60 USLW 2463, 60 USLW

2480, 22 Envtl. L. Rep. [PG20,968

INTEL CORPORATION, Plaintiff-Appellee, v. HARTFORD ACCIDENT & INDEMNITY COMPANY, Defendant-Appellant.

No. 89-15165.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 18, 1990.

Decided Dec. 24, 1991.

Raoul D. Kennedy, Stephen G. Schrey, Crosby, Heafey, Roach & May, Oakland, Cal., for defendant-appellant.

John A. Skelton, Jr., Williams, Kelly, Polverari & Skelton, Redwood City, Cal., for plaintiff-appellee.

Timothy R. Patterson, Deputy Atty. Gen., San Diego, Cal., for amicus.

Robert N. Saylor, William F. Greaney, Steven G. Bradbury, Covington & Burling, Washington, D.C., Robert T. Haslam, Stanley Young, Heller, Ehrman, White & McAuliffe, Palo Alto, Cal., for amici curiae The American Petroleum Institute, The Chemical Mfrs. Ass'n, The Boeing Co., Ciba-Geigy Corp., and NI Industries, Inc.

David R. Berz, Stanley M. Spracker, Randy Chartash, Weil, Gotshal & Manges, Washington, D.C., Terry W. Bird, Bird, Marella, Boxer, Wolpert & Matz, Los Angeles, Cal., for amicus curiae Purex Industries, Inc.

Kirk A. Pasich, Paul, Hastings, Janofsky & Walker, Los Angeles, Cal., for amici curiae Martin-Marietta Corp. and Northrop Corp.

Appeal from the United States District Court for the Northern District of California.

Before LIVELY, ^* FLETCHER and REINHARDT, Circuit Judges.

FLETCHER, Circuit Judge:

Hartford Accident and Indemnity Company ("Hartford") appeals the district court's grant of summary judgment to Intel Corporation ("Intel"). The district court held that the insurance policy issued by Hartford to Intel covered expenses incurred by Intel pursuant to a consent decree it had entered into with the United States Environmental Protection Agency (the "EPA"); under the consent decree, Intel agreed to clean up toxic waste contamination at the site of a former manufacturing facility.

We affirm in part, reverse in part and remand.

BACKGROUND

I.

Intel is a manufacturer of semiconductors. Its headquarters are located in Santa Clara, California. During the late 1960's through the early 1980's, Intel maintained a number of production facilities in Northern California. This case involves an Intel facility located on Middlefield Road in Mountain View, California. The property was leased to Intel by Renault & Handley.

Intel engaged in manufacturing on the property from 1968 through 1980. As part of the manufacturing process Intel used chemical solvents which contained various combinations of the following substances:

                1,1,1,-trichloroethane, trichloroethylene, trichlorobenzene, dichloroethylene, phenol, and xylene.   Each of these substances has been classified as a "hazardous substance" within the meaning of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA")
                

Intel stored these hazardous chemicals in an underground storage tank. Evidently, the tank was meant only for temporary use. The chemicals were to be transported eventually to another location for permanent disposal.

In 1980 Intel discontinued manufacturing operations at the Mountain View facility. Because Intel's lease continued through 1984, it sought to sublet the property. As part of this process Intel commissioned soil sampling and testing of the grounds encompassing the area. The tests revealed that the site was contaminated by hazardous waste solvents present both in the soil and in the groundwater beneath the soil.

Intel contacted several government agencies about the problem and initiated a more thorough investigation of the contamination. Soon thereafter Intel began cleanup efforts by excavating the storage tank, removing the adjoining soils, and employing a pump-absorption filtration system to decontaminate the underground water.

In August, 1985, Intel entered into a consent decree with the EPA for the purpose of decontaminating the site. The purpose of the consent decree was to ensure that Intel, a "potentially responsible party" ("PRP"), would clean up the waste quickly and to eliminate the need for further legal proceedings. As part of the decree, Intel accepted responsibility without admitting liability. ¹

On January 10, 1985, the Middlefield Road site had been listed on the California State Priority List by the California Department of Health Services in accordance with the state's Health and Safety Code Section 25356. In the spring of 1985, the California Regional Water Quality Control Board issued separate waste discharge requirements to Intel requiring the company to prepare and implement plans for interim containment and cleanup at its facility. The state notified the EPA at this time of its actions and requested federal intervention.

On May 15, 1985, the EPA contacted Intel and indicated its intent to conduct a remedial investigation and feasibility study at the site. The EPA, however, offered Intel the option of undertaking both the investigation and cleanup itself. Intel submitted a proposal; the EPA accepted it. It was embodied in a consent decree. In the decree the EPA made findings that the site had been contaminated with the chemicals mentioned above, as well as others, to a degree warranting the site's inclusion on the National Priorities List. ² A hazard posed by the Middlefield Road site was its proximity to a major public water supply (the site lies within a half mile).

The EPA certified Intel's work plan as being consistent with the relevant standards and also noted that "all costs reasonably incurred for such work are necessary costs of response." Additionally, Intel and its co-respondents, Fairchild and Raytheon, were compelled to remit $50,000 to the EPA to cover the agency's costs for oversight and response costs in connection with the cleanup.

II.

From April 1, 1976 through April 1, 1983, Intel was insured under a series of insurance policies with Hartford; these policies covered the Mountain View facility. These "comprehensive general liability" ("CGL") insurance policies covered a limited array of risks incurred by Intel with respect to the subject property. The policy in effect from April 1, 1981 to April 1, 1982 (the "Policy") contained the following description of coverage:

The company will pay on behalf of the insured all sums which the insured shall Coverage A--bodily injury or

become legally obligated to pay as damages because of

Coverage B--property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.

It also contained a list of exclusions, including exclusion (f), under which the Policy did not apply

to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental;

and exclusion (k), under which the Policy did not apply

to property damage to

(1) property owned or occupied by or rented to the insured

(2) property used by the insured

(3) property in the care, custody or control of the insured or as to which the insured is for any purpose exercising physical control.

Intel contacted Hartford in October 1981 and told its insurer about its discoveries at the Mountain View plant. Intel submitted a claim for reimbursement for the reasonable and necessary investigation and cleanup costs incurred by Intel in connection with the facility. The basis of Intel's claim was the quoted insuring clause and another portion of the Policy defining an "occurrence." The Policy defines an "occurrence" as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured."

According to the district court, it is not clear when Intel actually filed its claim, but it is clear that Hartford denied the claim in a letter dated May 19, 1982. Hartford cited exclusion (k), the exclusion precluded coverage for damage to "property owned or occupied by or rented to the insured." Earlier, Hartford had informed Intel that other exclusions might apply: in a letter dated March 31, 1982, it directed Intel's attention to exclusion (f), as well as to exclusion (k) and others. In addition, according to Intel's complaint and Hartford's answer, on November 19, 1982, Hartford informed Intel that exclusion (f) would bar coverage.

After subsequent negotiations as to coverage failed, Intel brought suit against Hartford in California's Superior Court in the County of Santa Clara. Hartford successfully removed the case to federal court on November 20, 1986. The district judge dismissed the action without prejudice because of a lack of derivative jurisdiction under the applicable removal statute and lack of diversity. See Intel Corp. v. The Hartford Accident and Indemnity, Co., 662 F.Supp. 1507 (N.D.Cal.1987).

On June 2, 1987, Intel refiled in California Superior Court in Santa Clara County. The case was again removed to federal court. On August 24, 1987, Intel filed its original motion for summary judgment on the issue of coverage. The district court granted Intel's motion for summary judgment on April 28, 1988. The district court held, in essence, that "as a matter of law ... all expenses incurred by Intel pursuant...