James River Ins. Co. v. Ground down Engineering, No. 07-13207.

Decision Date20 August 2008
Docket NumberNo. 07-13207.
Citation540 F.3d 1270
PartiesJAMES RIVER INSURANCE COMPANY, a foreign corporation, Plaintiff-Appellant, v. GROUND DOWN ENGINEERING, INC., a Florida Corporation, Laurel A. Hall, individually, Priority Development, L.P., a foreign limited partnership, Defendants-Appellees.
CourtU.S. Court of Appeals — Eleventh Circuit

John R. Hargrove, W. Kent Brown, Carol A. Gart, Paula J. Phillips, Gordon, Hargrove & James, P.A., Fort Lauderdale, FL, Sina Bahadoran, Hinshaw & Culbertson, LLP, Miami, FL, for Plaintiff-Appellant.

Elizabeth Ashley McRae, Carey, O'Malley, Whitaker & Manson, P.A., Brett Wadsworth, Tampa, FL, for Defendants-Appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before EDMONDSON, Chief Judge, and PRYOR and KRAVITCH, Circuit Judges.

KRAVITCH, Circuit Judge:

James River Insurance Company appeals the district court's dismissal of its claim seeking a declaratory judgment that it is not obligated to provide a legal defense to Ground Down Engineering under the insurance policy Ground Down purchased from James River. James River also appeals the denial of its summary judgment motion. James River argues that the "pollution exclusion" in the policy excuses it from the obligation to defend Ground Down and Ground Down's engineer, Laurel Hall, in a suit filed by Priority Development for negligently failing to discover construction debris and fuel tanks during an environmental site assessment. For the following reasons, we conclude that the district court erred in holding that the pollution exclusion does not apply. We, therefore, vacate the district court's dismissal and remand with instructions for the district court to enter an order granting summary judgment to James River.

BACKGROUND

Priority Development's predecessor in interest hired Ground Down to conduct a "Phase I Site Assessment" of real property it was considering purchasing. According to the report generated by Ground Down's engineer, the purpose of this assessment was to satisfy one of the requirements for Priority to qualify for the "innocent landowner defense" under the Comprehensive Environmental Response, Compensation, and Liability Act (known as CERCLA or Superfund). The assessment report stated that it was also intended to identify "Recognized Environmental Conditions" which referred to "the presence or likely presence of any Hazardous Substances or Petroleum Products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of any Hazardous Substances or Petroleum Products."

Ground Down completed its assessment and reported that no recognized environmental conditions had been found. Priority then purchased the property. After Priority began developing the site, it found "a significant amount of construction debris," several 55-gallon drums, and half of an underground storage tank. Priority filed suit against Ground Down and Laurel Hall for breach of contract, negligent misrepresentation, and negligence for failing to properly complete the Phase I Site Assessment. In its complaint, Priority alleged that testing revealed the drums and the underground storage tank previously contained petroleum, and that Priority, therefore, had to remove the drums and the surrounding soil and dispose of them at a special waste facility. Priority also alleged that the construction debris caused an elevation in the level of methane gas on the property which also required expensive environmental remediation.

Ground Down submitted a claim to its insurance company, James River, requesting provision of a legal defense in the suit with Priority and payment of any resulting damages under its professional liability insurance policy. James River began providing a defense under a reservation of rights but also filed suit in federal court seeking a declaratory judgment that it was not required to provide coverage owing to the "pollution exclusion" contained in the policy.

The policy provides coverage for wrongful acts in Ground Down's performance of or failure to perform professional services. The covered "professional services" are services that Ground Down is qualified to perform in its "capacity as an architect, engineer, landscape architect, land surveyor or planner."

The policy includes a "pollution exclusion" provision excluding from coverage "[a]ll liability and expense arising out of or related to any form of pollution, whether intentional or otherwise." The pollution exclusion states that the policy does not cover "any damages, claim, or suit arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of `pollutants.'" This includes

Any loss, cost, expense, fines and/or penalties arising out of any (1) request, demand, order, governmental authority or directive or that any private party or citizen action that any insured, or others, test for, monitor, clean up, remove, contain, treat, detoxify or neutralize or in any way respond to, or assess same, the effects of pollutants, environmental impairments, contaminants, or (2) any litigation or administrative procedure in which any insured or others may be involved as a party as a result of actual alleged or threatened discharge, dispersal, seepage, migration, release, escape or placement of pollutants, environmental impairments, or contaminants into or upon land, premises, buildings, the atmosphere, any water course, body of water, aquifer or ground water, whether sudden, accidental or gradual in nature or not, and regardless of when.

Pollutants are defined as "any solid, liquid, gaseous, fuel, lubricant, thermal, acoustic, electrical, or magnetic irritant or contaminant, including but not limited to smoke, vapor, soot, fumes, fibers, radiation, acid, alkalis, petroleums, chemicals or `waste.' `Waste' includes medical waste, biological infectants, and all other materials to be disposed of, recycled, stored, reconditioned or reclaimed."

The policy states that this exclusion applies "regardless of whether ... an alleged cause for the injury or damage is the Insured's negligent hiring, placement, training, supervision, retention, or, wrongful act."

The district court determined that the claim by Priority fell outside of the pollution exclusion, because Priority's claim arose out of the failure to carry out professional responsibilities, not out of pollution. The court also held that it would be "unconscionable at best" to interpret the policy as excluding from coverage claims relating to "any form of pollution, regardless of causation." Because Ground Down had not caused the pollution, the district court found that the exclusion should not apply. The district court thus concluded that James River was obligated to provide a defense for Ground Down, and dismissed its complaint. The court then denied James River's motion for summary judgment as moot.

STANDARD OF REVIEW

We review an order granting a motion to dismiss de novo, taking as true the facts alleged in the complaint. Doe v. Pryor, 344 F.3d 1282, 1284 (11th Cir.2003). To survive dismissal, "the complaint's allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a `speculative level'; if they do not, the plaintiff's complaint should be dismissed." See Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007) (retiring the often-criticized "no set of facts" language previously used to describe the motion to dismiss standard).

The interpretation of provisions in an insurance contract is a question of law reviewed de novo. Technical Coating Applicators, Inc. v. United States Fid. & Guar. Co., 157 F.3d 843, 844 (11th Cir. 1998).

We review de novo a district court's denial of summary judgment. Huff v. DeKalb County, Ga., 516 F.3d 1273, 1277 (11th Cir.2008). Summary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, presents no genuine issue of material fact and compels judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

DISCUSSION

James River argues that Priority's claims against Ground Down for the alleged failure to discover petroleum holding tanks and construction debris during the site assessment are claims "arising out of pollution" covered by the pollution exclusion. James River contends that Priority's request for compensation due to environmental remediation and delay due to contamination establishes that Priority's lawsuit "arises out of pollution."

Appellees, Ground Down and Priority, argue that there is no connection between the service performed negligently by Ground Down and the pollution found on the property. Appellees argue that the negligence at issue in the claim relates to improper performance of the environmental site assessment rather than negligently causing pollution. They assert that Ground Down's liability to Priority, therefore, depends on negligence in the duty to conduct the assessment rather than on the existence of pollutants. Appellees also argue that the construction debris at issue is not a pollutant within the meaning of the policy exclusion.

Does Priority's Claim "Arise Out Of" Pollution?

In interpreting insurance contracts, the Florida Supreme Court1 has made clear that "the language of the policy is the most important factor." Taurus Holdings, Inc. v. United States Fid. and Guar. Co., 913 So.2d 528, 537 (Fla.2005). "Under Florida law, insurance contracts are construed according to their plain meaning." Taurus, 913 So.2d at 532. Ambiguities in policy language "are construed against the insurer" in favor of coverage. Deni Assocs. of Fla. v. State Farm Fire & Cas. Ins. Co., 711 So.2d 1135, 1140 (Fla.1998). A contract provision is considered ambiguous if the "relevant policy language is susceptible to more than one reasonable interpretation, one providing...

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