New Castle County v. Hartford Acc. and Indem. Co., Nos. 89-3814

• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
• Writing for the Court: Before BECKER and NYGAARD, Circuit Judges, and RE
• Citation: 933 F.2d 1162
• Parties: , 21 Fed.R.Serv.3d 1181, 21 Envtl. L. Rep. 21,153 NEW CASTLE COUNTY, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, a corporation of the State of Connecticut, Home Insurance Company, a corporation of the State of New Hampshire, New Hampshire Insurance Company, a corporation of the State of New Hampshire, Continental Casualty Company, a corporation of the State of Illinois, United States Fire Insurance Company, a corporation of the State of New York, Insurance Company of North America, a corporation of the State of Pennsylvania, Continental Insurance Company, a corporation of the State of New Hampshire, United States Liability Insurance Company, a corporation of the State of Pennsylvania, National Union Fire Insurance Company, a corporation of the Commonwealth of Pennsylvania, Twin City Fire Insurance Company, a corporation of the State of Minnesota, Aetna Casualty and Surety Company, a corporation of the State of Connecticut, and Zurich Insurance Company, a Swiss corporation Continental Casualty Company ("CNA'), Appellant.
• Docket Number: Nos. 89-3814,90-3012 and 90-3030
• Decision Date: 29 May 1991

Page 1162

933 F.2d 1162 33 ERC 1169, 21 Fed.R.Serv.3d 1181,
21 Envtl. L. Rep. 21,153 NEW CASTLE COUNTY,
v.
HARTFORD ACCIDENT AND INDEMNITY COMPANY, a corporation of
the State of Connecticut, Home Insurance Company, a
corporation of the State of New Hampshire, New Hampshire
Insurance Company, a corporation of the State of New
Hampshire, Continental Casualty Company, a corporation of
the State of Illinois, United States Fire Insurance Company,
a corporation of the State of New York, Insurance Company of
North America, a corporation of the State of Pennsylvania,
Continental Insurance Company, a corporation of the State of
New Hampshire, United States Liability Insurance Company, a
corporation of the State of Pennsylvania, National Union
Fire Insurance Company, a corporation of the Commonwealth of
Pennsylvania, Twin City Fire Insurance Company, a
corporation of the State of Minnesota, Aetna Casualty and
Surety Company, a corporation of the State of Connecticut,
and Zurich Insurance Company, a Swiss corporation
Continental Casualty Company ("CNA'), Appellant. Nos. 89-3814, 90-3012 and 90-3030. United States Court of Appeals,
Third Circuit. Argued Aug. 28, 1990.
Decided April 30, 1991.
As Amended May 29, 1991.

Page 1165

Arthur Makadon (argued), David L. Cohen, Geoffrey A. Kahn, Walter M. Einhorn, Jr., Gilpin W. Bartels, Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., John G. Mulford, Michael J. Goodrick, Theisen, Lank, Mulford and Goldberg, P.A., Wilmington, Del., for CNA, appellant.

Joseph D. Tydings (argued), Jerold Oshinsky, Catherine Serafin Sponseller, Anderson, Kill, Olick & Oshinsky, Washington, D.C., George H. Seitz, III, Prickett, Jones, Elliott, Kristol and Schnee, Wilmington, Del., for New Castle County, appellee.

Clifford B. Hendler (argued), John I. Stewart, Jr., Scott L. Winkelman, William D. Wallace, Crowell & Moring, Dennis M. Flannery, A. Stephen Hut, Jr., Wilmer, Cutler & Pickering, Washington, D.C., for Insurance Co. of North America, appellee.

William J. Cattie, III, Heckler & Cattie, Wilmington, Del., Edward B. Deutsch, Laurence M. McHeffey, Loren L. Pierce, McElroy, Deutsch & Mulvaney, Morristown, N.J., for U.S. Fire Ins. Co., appellee.

Gary W. Aber, Heiman, Aber & Goldlust, Wilmington, Del., James E. Rocap, III, Thomas B. Carr, D. Bradley Clements, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for Aetna Cas. & Sur. Co., appellees.

Dennis D. Ferri, Michael A. Pedicone, Dennis D. Ferri, P.A., Wilmington, Del., Philip A. Ryan, German, Gallagher & Murtagh, Philadelphia, Pa., for U.S. Liability Ins. Co., appellee.

Norman M. Monhait, Morris, Rosenthal, Monhait & Gross, P.A., Wilmington, Del., Roger E. Warin, Virginia L. White-Mahaffey, Anita G. Raby, Janet W. Steverson-Wright, Steptoe & Johnson, Washington, D.C., for The Home Ins. Co., appellee.

Alfred J. Kuffler, Michael B. McCauley, Stephen M. Calder, Kevin G. O'Donovan, David R. Kunz, Palmer, Biezup & Henderson, Philadelphia, Pa., for John Richard Ludbrooke Youell, amicus curiae.

Charles M. Oberly, III, Atty. Gen., State of Del., Robert S. Kuehl, Stuart B. Drowos, Deputy Attys. Gen., Dept. of Justice, Wilmington, Del., for State of Del., amicus curiae.

Ernest D. Preate, Jr., Atty. Gen., Com. of Pa., Harrisburg, Pa., for Commonwealth of Pa., amicus curiae.

Bert W. Rein, Thomas W. Brunner, Sharon Rau Dissinger, Wiley, Rein & Fielding, Washington, D.C., for Insurance Environmental Litigation Ass'n, amicus curiae.

William H. Allen, William F. Greaney, Martin Wald, Covington & Burling, Washington, D.C., for E.I. du Pont de Nemours & Co., ICI Americas, Inc., Intern. Business Machines Corp., Olin Corp., The American Petroleum Institute, and The Chemical Mfrs. Ass'n, amici curiae.

Before BECKER and NYGAARD, Circuit Judges, and RE, Chief Judge, Court of International Trade. ^*

 OPINION OF THE COURT
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                 TABLE OF CONTENTS
                 PAGE
                I. Introduction 1167
                II. Facts and Procedural History 1169
                 A. PreOperation Events 1170
                 B. The County's Operation of the Tybouts Corner Landfill 1171
                 C. PostOperation Events 1171
                 D. The Three Underlying Lawsuits Against the County 1173
                 E. The Insurance Coverage Litigation 1173
                 F. The Significant PostTrial Events 1174
                III. Appellate Jurisdiction 1176
                 A. Appeal Number 893814 1176
                 1. The Rule 59(e) Versus Rule 60(b) Issue 1176
                 2. The Jurisdictional Effect of CNA's CrossClaims 1177
                 B. Appeal Number 903030 1179
                IV. The Insurance Coverage Issues 1180
                 A. Preliminary Matters 1180
                 1. CNA's Contracts of Insurance 1180
                 2. The Burden of Proof in Insurance Cases 1181
                 3. The Interpretation of Insurance Policies Under 1182
                 Delaware Law
                 4. The Issues on Appeal 1183
                 5. Our Scope of Review 1183
                 B. The "As Damages" 1184
                 Clause
                 1. Background 1184
                 2. CNA's Contentions on Appeal 1185
                 3. The County's Response 1187
                 4. Legal, Technical Meaning or Plain, Ordinary 1188
                 Meaning?
                 C. The "Occurrence" Clause 1191
                 D. The 1192
                 "Pollution
                 Exclusion"
                 Clause
                 1. The Meaning of the Word "Sudden" 1193
                 a. The significance of multiple dictionary 1193
                 definitions
                 b. The rule that all words in a policy should 1194
                 be given effect
                 c. The existence of judicial disagreement 1195
                 d. The drafting and marketing history of the 1196
                 pollution exclusion clause
                 e. Conclusion 1198
                 2. The Damage/Discharge Distinction 1199
                 a. The case law 1200
                 b. The history of the pollution exclusion: 1201
                 does it shed any light on the import of
                 the damage/discharge distinction?
                 c. The economic rationale underlying the 1202
                 damage/discharge distinction
                 d. Evidence suggesting that the discharge of 1202
                 leachate from Tybouts Corner was not
                 unexpected
                 e. Conclusion 1203
                V. CNA's CrossClaims 1203
                 A. The Timeliness of CNA's CrossClaims Under the Parties' 1203
                 February 1986 Stipulation
                 B. The "Settlement Bar" Issue 1205
                VI. Conclusion 1207
                ----------
                 BECKER, Circuit Judge.
                

Page 1167

I. INTRODUCTION

These consolidated appeals present important questions about the meaning of the "pollution exclusion" and "as damages" clauses found in post-1970 comprehensive general liability ("CGL") insurance policies. These issues frequently recur in cases involving insurance coverage of environmental damage caused by the discharge of pollutants--a genre of litigation that has become a staple of many federal courts' dockets.

The standard CGL policy provides coverage for "all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage ... caused by an occurrence." ¹ An "occurrence" is an "accident" that, during the policy period, results in damage "neither expected nor intended from the standpoint of the insured." The standard CGL policy also contains an exclusionary clause, known as the "pollution exclusion," which disclaims coverage "for bodily injury or property damage arising out of the discharge, dispersal, release or escape" of pollutants. This exclusion, however, is not absolute; it contains an exception providing for coverage where the bodily injury or property damage results from a "discharge" of pollutants that is "sudden and accidental."

These appeals arise from a declaratory judgment action brought in 1985 by New Castle County, Delaware (the "County") in the district court for the District of Delaware against twelve insurance companies that had issued CGL policies to the County. ² The County sought a declaration of the carriers' duties under their respective policies to defend and indemnify it in three underlying lawsuits. These suits originated from the County's operation of and the discharge of pollutants from the Tybouts Corner landfill, which served from 1969 until 1971 as the County's primary location for the disposal of solid wastes. The three underlying lawsuits allege, in essence, that the landfill has poisoned local residents' drinking water.

When the Llangollen landfill, which the County had used as its municipal waste disposal site since 1960, neared its capacity in 1968, the County, after some preliminary investigation, concluded that a sanitary landfill remained the best means available to dispose of solid waste materials and chose Tybouts Corner as the successor site. This location was selected due to its proximity to the County's population center, the potential for land reclamation, and the prospects for long-term use. County officials also predicted that the operation of a landfill at Tybouts Corner would have minimal environmental impact. ³

Little was known in 1968 about the environmental danger posed by sanitary landfills. At that time, the primary concerns raised by landfills were "direct-contact environmental problems"--i.e., "vectors, such as rodents and seagulls, blowing paper, odors, and keeping the waste covered." ⁴ Few then recognized the extent to which landfills above the water table threaten to pollute the underlying aquifers through the discharge of "leachate." ⁵ By 1985, however,

Page 1168

leachate emanating from Tybouts Corner and allegedly contaminating neighboring drinking wells had become a multi-million dollar headache for the County, prompting the County to turn to its insurance carriers for financial relief.

In response to the County's declaratory judgment action, the insurers raised a number of different defenses based on the terms and exclusions of their policies and on the facts and circumstances of the County's management of the Tybouts Corner landfill. After extensive discovery, the district court issued two decisions denying defendants' motions for summary judgment.

On November 2, 1987, the district court filed an opinion in which it rejected defendants' argument that the "sudden and accidental" exception to the "pollution exclusion" clause only applies to damage resulting from an "abrupt" or "brief" discharge of pollutants. See New Castle County v. Hartford Accident & Indemnity Co., 673 F.Supp. 1359 (D.Del.1987) ("New Castle I"). The district court concluded that the meaning of the word "sudden" is ambiguous...