Molton, Allen and Williams, Inc. v. St. Paul Fire & Marine Ins. Co.

• Decision Date: 03 June 1977
• Citation: 347 So.2d 95
• Parties: MOLTON, ALLEN AND WILLIAMS, INC., a corporation v. ST. PAUL FIRE AND MARINE INSURANCE CO. SC 2006, SC 2007.
• Court: Alabama Supreme Court

Page 95

347 So.2d 95

MOLTON, ALLEN AND WILLIAMS, INC., a corporation v. ST. PAUL FIRE AND MARINE INSURANCE CO.

SC 2006, SC 2007.

Supreme Court of Alabama.

June 3, 1977.

Frank M. Bainbridge and William O'Neal Whitt, Jr., Birmingham, for appellant.

Lyman H. Harris and Charles C. Pinckney, Birmingham, for appellee.

MADDOX, Justice.

This appeal involves the construction of a "pollution exclusion" in a liability insurance policy. Plaintiffs, landowners living adjacent to a real estate development, filed a class action against defendants, Woodhaven Lakes Estates, Molton, Allen and Williams, Inc., Garrison Construction Company, and other fictitious parties, in which they alleged that the defendants, in developing a subdivision, negligently caused sand and dirt to pass from the subdivision onto their property. Another similar action was also filed against the developers and it was consolidated with the class action suit. Developer, Molton, Allen and Williams, filed a third-party complaint in both actions against its public liability insurer, St. Paul Fire and Marine Insurance Company, seeking indemnity under the terms of two contracts. The third-party actions were consolidated and tried upon a stipulation of facts and other designated exhibits, including a jar of the "sand" or "mud." The trial court entered a final judgment on the third-party claims, finding that St. Paul is not due to afford the developer a defense or pay any judgment obtained against it because a "pollution" exclusionary clause in each policy is effective to exclude insurance coverage for the liability, or potential liability, of the developer arising out of its activities that are the subject matter of the principal actions. The circuit court ordered the third-party complaints against St. Paul to be dismissed with prejudice. The trial court, pursuant to Rule 54(b), determined that there was no just reason for delay, and directed the entry of a final judgment on the third-party claims. The developer appealed. We reverse.

STATEMENT OF THE FACTS

In the early spring of 1972, Molton, Allen and Williams began a real estate development (Woodhaven Lakes Subdivision) on land adjacent to plaintiffs. Most of the Woodhaven Subdivision property is located on a mountain that rises above three lakes and the natural flow of surface water during rainfall is from the land of the Woodhaven development onto the land of the plaintiffs. As the natural flow of surface water is dictated by the terrain, rainwater and surface water pass from the Woodhaven land onto the plaintiffs' land in natural depressions, wet-weather streams and natural streams. Beginning in 1972, some or all of the defendants began constructing roads in connection with the Woodhaven development. Approximately eleven miles of roads were cleared and cut, and drainage ditches were built alongside the roads. The roads remained unpaved at least until the spring of 1974, when the second principal action was filed.

The earth in the Woodhaven Subdivision is composed in part of sandstone. During the delay between the time the roads were physically located and the date the roads were paved, rain fell upon and flowed across the roads, adjacent ditches, and cuts and fills caused by the construction. It is St. Paul issued two policies of insurance to Molton, Allen and Williams which afforded to it property damage insurance. The original policy (No. 601 NA 2839) had an effective date of May 4, 1972. The second policy (No. 601 NA 3485) had an effective date of May 4, 1973.

alleged that the rain and surface water washed or carried the sandstone and sandstone-type materials found naturally in the earth to break down into sand and that this material was deposited onto the plaintiffs' property and into the three lakes, thus destroying the beauty of plaintiffs' property and the usefulness and beauty of the lakes.

The disputed policy provisions of the original and second policy, respectively, read:

"It is agreed that the Insuring Agreement to which this endorsement is attached does 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 watercourse or body of water; but this endorsement does not apply if such discharge, dispersal, release or escape is sudden and accidental and is neither expected nor intended from the standpoint of the insured."

"This Insuring Agreement does 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 watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden or accidental."

ISSUES

1. Whether or not under the terms of either "pollution exclusion" in the policy of insurance here involved, the washing of natural materials from the earth, such as sand, from a construction site, down wet-weather streams by virtue of rainfall, is an intentional, expected and nonaccidental discharge, dispersal, release or escape of smoke, vapor, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants.

2. Whether or not under the terms of a "pollution exclusion" in a policy of insurance the washing of natural materials from the earth, such as sand, down wet-weather streams by virtue of rainfall from a real estate development is an intentional act from the standpoint of the insured performed with the specific intent to cause harm to a third party.

Molton, Allen and Williams contends that exclusions in insurance policies are construed most strongly against the insurer. Molton, Allen and Williams points out that "pollution exclusions" are relatively new to the insurance industry and research reveals that there are no decisions which construe this type of pollution exclusion under this factual situation. Thus, this is a case of first impression, not only in Alabama, but perhaps for the country.

Molton, Allen and Williams contends that the washing of sand down wet-weather streams by virtue of rainfall into the lakes owned by the plaintiffs was not an intentional act resulting in an intentional injury within the meaning of the pollution exclusions. Molton, Allen and Williams further contends that the courts, in construing "intentional act" exclusion clauses have consistently held that not only must the act of the insured be done intentionally to avoid coverage, but it also must be done with the specific intent to cause harm to a third party. Molton, Allen and Williams asserts that the burden of proof is on St. Paul to establish its defense that Molton, Allen and Williams' claim is barred by the exclusionary provisions of the...