Interstate Power v. INA, 97-834.

• Decision Date: 17 November 1999
• Docket Number: No. 97-834.,97-834.
• Citation: 603 N.W.2d 751
• Parties: INTERSTATE POWER COMPANY, Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, Appellee.
• Court: Iowa Supreme Court

603 N.W.2d 751

INTERSTATE POWER COMPANY, Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, Appellee.

No. 97-834.

Supreme Court of Iowa.

November 17, 1999.

As Amended on Denial of Rehearing January 13, 2000.

Richard W. Fields and Mark J. Plumer of Swidler & Berlin, Chartered, Washington, D.C., and John C. Hendricks of Stanley, Lande & Hunter, Davenport, for appellant.

Lawrence P. McLellan and Barbara A. Hering of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des Moines, and Paul R. Koepff, Rosemary B. Boller, and Ramon E. Reyes, Jr. of O'Melveny & Meyers LLP, New York, New York, for appellee Insurance Company of North America.

Mark McCormick of Belin Lamson McCormick Zumbach Flynn, Des Moines, and Lester O. Brown, Patricia A. Van Dyke, and Kenneth A. Remson of Jones, Day, Reavis & Pogue, Los Angeles, CA, for amicus curiae IES Utilities Company.

Laura A. Foggan, Joseph L. Ruby, and Andrew D. Tabachnik of Wiley Rein & Fielding, Washington, D.C., Fred M. Haskins, Des Moines, and William W. Graham of Law Offices of William W. Graham, Des Moines, for amici curiae Insurance Environmental Litigation Association and Iowa Insurance Institute.

Considered en banc.

CARTER, Justice.

Interstate Power Company (Interstate), the plaintiff in this declaratory judgment action, appeals from a summary judgment in favor of the defendant Insurance Company of North America (INA) with respect to Interstate's allegations that INA insured it against liability for environmental cleanup costs at several locations. After reviewing the record and considering the arguments presented, we affirm the judgment in part, reverse it in part, and remand the case to the district court for further proceedings.

The environmental damage that precipitated the present litigation occurred at nine sites owned or formerly owned by Interstate. Manufactured gas had been produced on these sites by Interstate, its predecessors in interest, or third parties. These sites are located in Clinton, Iowa; Mason City, Iowa; Galena, Illinois; Savanna, Illinois; Albert Lea, Minnesota; Austin, Minnesota; New Ulm, Minnesota; Owatonna, Minnesota; and Rochester, Minnesota. A chronology of the operations at these locations is listed below:

Date Location Opening, Closing Decommissioning 1856 Galena Plant Opened 1889 Clinton Plant Opened 1888 Rochester Plant Opened 1902 Owatonna Plant Opened 1904 Albert Lea Plant Opened Mason City Plant Opened 1906 Austin Plant Opened 1907 Savanna Plant Opened 1914 New Ulm Plant Opened 1932 Rochester Plant Closed 1933 Albert Lea Plant Closed 1935 Rochester Plant Decommissioned Austin Plant Closed 1936 Owatonna Plant Closed 1939 New Ulm Plant Closed 1945 Galena Plant Closed 1946 Galena Plant Decommissioned New Ulm Plant Decommissioned 1950 Owatonna Plant Decommissioned Austin Plant Decommissioned Albert Lea Plant Decommissioned 1951 Savanna Plant Closed 1952 Clinton Plant Closed Mason City Plant Closed Mason City Plant Decommissioned 1957 Clinton Plant Decommissioned

During the period from May 1, 1946, until May 1, 1964, INA provided general comprehensive liability insurance to Interstate. Interstate is claiming under the provisions of that insurance coverage relating to "property damage." It urges that such coverage extends to the liability imposed upon it by state and federal agencies for environmental cleanup costs at the sites that we have described.

During the years from May 1, 1946, to May 1, 1961, the INA policy provided that liability for property damage extended to "damages because of injury to or destruction of property including the loss of use thereof, caused by accident." In contrast, personal injury coverage under the policy during this period was provided on an "occurrence" basis. Interstate concedes that, in order for INA's liability policy to be triggered for the 1946-1961 period, it must establish that the environmental contamination that it is required to remediate was the result of accident.

In ruling on INA's summary judgment motion, the district court concluded that it was undisputed in the motion papers that the contamination at issue occurred as a result of coal tar, coke, and other residues from the manufacturing process being allowed to accumulate on the unprotected earth, and thereafter be dissolved by rain, melting snow, or other sources of moisture. This process occurred over a period of decades. The court concluded from these circumstances that the environmental damages at issue here were the result of natural causes rather than being accidental. Although evidence was presented that some fuel spills may have occasionally occurred on these properties, Interstate no longer asserts that such spilling, accidental or otherwise, constitutes an accident or accidents triggering liability coverage under the INA policy. Rather, Interstate contends that the exposure of the coal tar, coke, and other residual solids from the manufacturing operations to natural precipitation is the defining event that constitutes an "accident" for purposes of INA's policy. Other facts which bear upon our decision will be considered in our discussion of the legal issues presented.

I. Whether the Alleged Property Damage was Caused by Accident.

In seeking to overturn the ruling of the district court on the policies in effect for the years 1946 to 1961, Interstate asserts that the district court improperly focused on whether there had been a causative event during the policy period that qualified as an accident. It argues that based on the language of the policy any accidental property damage during the policy period triggered coverage regardless of when and how the subsequent contamination took place. This assertion is designed to controvert temporal considerations contained in the district court's ruling. We believe, however, that it is not necessary to decide the motion for summary judgment based on temporal considerations. What happened here simply does not constitute an accident at any point in time.

The controlling consideration in interpreting insurance policies is the intent of the parties. Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd. v. Farmland Mut. Ins. Co., 568 N.W.2d 815, 818 (Iowa 1997); Pierce v. Farm Bureau Mut. Ins. Co., 548 N.W.2d 551, 555 (Iowa 1996). We ordinarily determine that intent from the language of the policy itself unless the policy is ambiguous. Farmland Mut., 568 N.W.2d at 818; Kibbee v. State Farm Fire & Cas. Co., 525 N.W.2d 866, 868 (Iowa 1994). When a policy term is not defined in the policy as in this case, we give the term its ordinary meaning. Pierce, 548 N.W.2d at 555.

The critical policy language in the present case provides:

I. Coverage.

The company hereby agrees to indemnify the insured [against]....

....

(b) Property Damage Liability.

For damages because of injury to or destruction of property, including the loss thereof, caused by accident.

(Emphasis added.) The policy language clearly focuses on the cause of the damage rather than the damage itself and requires that the cause be of accidental origin. In Dico, Inc. v. Employers Insurance of Wausau, 581 N.W.2d 607, 613 (Iowa 1998), we suggested (based on language in Farmland Mutual, 568 N.W.2d at 819) that "ground contamination, occurring over a period of time, falls outside the definition of `accident.'" The policy provisions in both the Dico, Inc. and Farmland Mutual cases differ substantially from those involved in the present litigation. Notwithstanding these differences, we accept as a general principle that ground contamination occurring over a period of time from a natural seeping process is not accidental when the sources of the contamination are manufacturing waste allowed to accumulate on or in the earth over a period of several decades. We find no error in the district court's granting of summary judgment for INA for the policy years 1946-1961.

II. Whether the District Court Correctly Granted Summary Judgment for the 1961-64 Policy Years.

The district court also granted summary judgment for INA for the policy years between May 1, 1961, and May 1, 1964. We agree with Interstate that this was a gratuitous act on the part of the court because INA's summary judgment motion only extended to matters relating to the policies in effect between 1941 and 1961. Ordinarily this would be ground for reversing that portion of the court's ruling without further discussion. See Prouty v. Clayton County, 264 N.W.2d 761, 762 (Iowa 1978)

(judgment should be reversed when court's ruling on motion extends beyond the issues presented). We note, however, that the parties have briefed this portion of the district court's ruling on the merits. Because, considering only the issues of law presented, we are in disagreement with the court's ruling, we consider these issues on the merits in order to provide guidance following remand.

Unlike the earlier policy years where liability insurance for property damage was limited to damage caused by accident, the policy in effect from May 1, 1961, to May 1, 1964, provided:

With respect to Coverage I(b) [Property Damage Liability], "occurrence" means either an accident happening during the policy period or a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to or destruction of property during the policy period. All damages arising out of such exposure to substantially the same general conditions shall be considered as arising out of one occurrence.

(Emphasis added.) The district court denied coverage under this clause on the grounds that (1) no occurrence under the policy definition occurred during the period from May 1, 1961, to May 1, 1964; and (2) Interstate failed to establish that the injury was unexpected and unintentional. We disagree with both of these conclusions.

The court's ruling that no occurrence, as defined in the policy, occurred during the time the policies were in force was premised on two factors....