LaFarge Corp. v. Travelers Indem. Co., 96-2469

• Decision Date: 11 August 1997
• Docket Number: No. 96-2469,96-2469
• Citation: 118 F.3d 1511
• Parties: 28 Envtl. L. Rep. 20,032, 11 Fla. L. Weekly Fed. C 312 LAFARGE CORPORATION, Plaintiff-Appellant, v. TRAVELERS INDEMNITY CO., Appalachian Insurance Company, Northbrook Insurance Company, Defendants-Appellees, First State Insurance Company, et al., Defendants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1511

118 F.3d 1511

28 Envtl. L. Rep. 20,032, 11 Fla. L. Weekly

Fed. C 312

LAFARGE CORPORATION, Plaintiff-Appellant, v. TRAVELERS INDEMNITY CO., Appalachian Insurance Company, Northbrook Insurance Company, Defendants-Appellees, First State Insurance Company, et al., Defendants.

No. 96-2469.

United States Court of Appeals, Eleventh Circuit.

Aug. 11, 1997.

Charles P. Schropp, Schropp Buell & Elligett, P.A., Tampa, FL, Jill A. Douthett, Denise D. Colliers, Hoyle Morris & Kerr, Philadelphia, PA, for Plaintiff-Appellant.

Herbert J. Baumann, Jr., William Daskam, IV, Lisa A. Oonk, Butler, Burnette & Pappas, Tampa, FL, for Travelers Indemnity Co.

Caryl E. Delano, Harris Barrett Mann & Dew, St. Petersburg, FL, Anthony R. Gambardella, Michael E. Buckley, Rivkin Radler Bayh Hart & Kremer, Uniondale, NY, for Northbrook Ins. Co.

John K. Horstman, Williams & Montgomery, Ltd., Chicago, IL, for Appalachian Ins. Co.

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

Before EDMONDSON, Circuit Judge, and KRAVITCH and HENDERSON, Senior Circuit Judges.

PER CURIAM:

The plaintiff-appellant, LaFarge Corporation ("LaFarge"), initiated this action seeking a declaratory judgment that Travelers Indemnity Co. ("Travelers") and a number of other insurance companies ¹ were under a duty to defend and indemnify it against claims by the United States Environmental Protection Agency ("EPA") concerning the maintenance of a toxic waste disposal site in Tampa, Florida. The parties eventually filed cross-motions for summary judgment relating to the question of the defendants' liability to defend LaFarge. The district court granted the defendants' motion for summary judgment and denied LaFarge's motion. The court concluded that Florida substantive law governed this dispute and that, under the law of Florida, the defendants did not breach any duty to defend or indemnify LaFarge for the alleged environmental damage at issue here. LaFarge filed this appeal from the final summary judgment. For the reasons stated herein, we affirm the judgment of the district court.

I. FACTS

For a period of time in the 1970's, the disposal facility was operated as a "borrow pit" from which sand was excavated and sold. The owners thereafter allowed it to be used as a depository area for various waste materials. At about the same time, LaFarge's predecessor in interest, General Portland, Inc. ("GPI"), contracted with Jernigan Trucking Company ("Jernigan") for hauling away waste from its cement operations. Jernigan told GPI that the waste would be hauled to a proper landfill but, for five or six months in 1973, diverted the material to the Tampa location because the owners did not charge for its permanent disposal there. Responding to complaints from nearby property owners, Hillsborough County ordered the Tampa site's owners to cease all dumping in 1976. In state court litigation over contamination from the Tampa site filed in 1978 and made a part of the record in this case, Jernigan was adjudged to be GPI's agent.

At least by 1982, the EPA had begun investigating and preparing for a cleanup at the Tampa pit. LaFarge acquired GPI in 1983. In July, 1988, LaFarge was notified by the EPA that it was being investigated as a generator of toxic wastes at the location. Subsequently, in October, 1990, the EPA informed LaFarge that it had been named a party potentially responsible for the costs of investigating and cleaning up the pollution at the Tampa site under the mandate of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. § 9607 et seq.

From January 1, 1972 through April 1, 1985, Travelers had issued a series of comprehensive general liability insurance policies to GPI and LaFarge. From January 1, 1972 through April 1, 1984, the remaining defendants had sold various umbrella and excess general liability insurance policies to GPI and LaFarge. LaFarge notified Travelers of the EPA proceedings against it in November 1990 and also notified the excess insurance carriers of the EPA's claims.

The insurance contracts issued by Travelers in effect for calendar years 1972 and 1973 and from April 1, 1981 through April 1, 1984 contained the following "expected or intended" pollution exclusion:

[T]his insurance does not apply:

to bodily injury or property damage arising out of any emission, discharge, seepage, release or escape of any liquid, solid, gaseous or thermal waste or pollutant

if such emission, discharge, seepage, release or escape is either expected or intended from the standpoint of any insured or any person or organization for whose acts or omissions any insured is liable.

With one exception, the policies covering the remaining years included the following "sudden and accidental" pollution exclusion:

This insurance does not apply:

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

The 1984 policy encompassed the following "non-sudden or gradual" language:

This insurance does not apply:

to bodily injury or property damage arising out of any emission, discharge, seepage, release or escape of any liquid, solid, gaseous or thermal waste or pollutant if such emission, discharge, seepage, release or escape is non-sudden or gradual from the standpoint of any insured or any person or organization for whose acts of omissions any insured is liable.

In response to LaFarge's notification of the EPA's potential charges against it, Travelers replied that these pollution exclusion clauses relieved it of any duty to defend LaFarge.

LaFarge then brought this action against Travelers and the excess coverage companies--Appalachian Insurance Co., First State Insurance Co., Gibraltar Casualty Co., Highlands Insurance Co., Northbrook Insurance Co. and Puritan Insurance Co.--seeking a declaration that the defendants had an obligation to defend and indemnify it against the EPA's claims and damages for breach of contract. As stated earlier, Travelers and LaFarge eventually filed cross-motions for summary judgment on the issue of the defendants' liability to defend LaFarge. Appalachian Insurance Co., Gibraltar Casualty Co. and Northbrook Insurance Co. eventually adopted Travelers' motion for summary judgment. On stipulations of the parties, LaFarge's causes of action against First State Insurance Co., Highland Insurance Co. and Puritan Insurance Co. ² were dismissed. The district court granted the defendants' motions for summary judgment ³ on the liability issues, denied LaFarge's motion and entered judgment accordingly. LaFarge filed this appeal from the final summary judgment.

II. STANDARD OF REVIEW

Our review of the district court's grant of summary judgment is plenary, and we apply the same legal standards as those used by the district court. Hoffman v. Allied Corp., 912 F.2d 1379, 1383 (11th Cir.1990). Further, the question of which state's substantive law applies in this diversity action is a legal question entitled to independent review on appeal. American Family Life Assurance Co. v. United States Fire Co., 885 F.2d 826, 830 (11th Cir.1989). The interpretation of an insurance contract is also a matter of law subject to de novo review. Dahl-Eimers v. Mutual of Omaha Life Insurance Co., 986 F.2d 1379, 1381 (11th Cir.1993). The district court's factual findings are evaluated under the clearly erroneous standard. Id.

III. DISCUSSION

A. Choice of Law.

In this diversity action, the federal courts must apply the substantive law of the forum state, Florida. Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Keller v. Miami Herald Publishing Co., 778 F.2d 711 (11th Cir.1985). This principle extends to the forum state's conflicts of law rules. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); American Family Life, 885 F.2d at 830.

LaFarge stressed in the district court that, under Florida conflicts of law principles, matters concerning the validity and substantive obligation of contracts are determined by the law of the place where the contract is made ("lex loci contractus "). Consequently, since the last act necessary to complete these contracts took place in Texas, the law of Texas applies to this case. Travelers, on the other hand, maintained that Florida would apply the "significant relationship" test here and would hold that Florida law governs the interpretation of the contracts at issue. The district court concluded that the Florida Supreme Court would apply the significant relationship test because all these contracts involve insurance on real property. "Florida has the most significant relationship with this transaction and the parties. The principal risk insured is located in Florida and was contemplated to remain unchanged. Indeed, Florida's interest in adjudicating interests related to pollution damage occurring in the state is substantial. Accordingly, Florida substantive law should govern...." 927 F.Supp. at 1537.

On appeal, LaFarge asserts that the district court erred in its finding that Florida law governs this case because recent decisions from this court and the Florida courts confirm that the Florida Supreme Court would adhere to the principle of lex loci contractus to resolve the conflicts of law issue here. It repeats its contention that since the contracts at issue here were finalized in Texas, the law of Texas governs the substantive issues before us. Even if this be true, LaFarge concedes that, on most of the contract law principles implicated by this case, Florida and Texas law are identical. In any event, Travelers urges that the...