Payne v. United States Fidelity & Guar. Co.

• Decision Date: 21 November 1985
• Docket Number: No. 84-1443-CIV-EPS.,84-1443-CIV-EPS.
• Citation: 625 F. Supp. 1189
• Parties: William U. PAYNE; Flora A. Payne and Lowell E. Payne, Plaintiffs, v. UNITED STATES FIDELITY AND GUARANTY COMPANY; and Maryland Casualty Co., Defendants.
• Court: U.S. District Court — Southern District of Florida

625 F. Supp. 1189

William U. PAYNE; Flora A. Payne and Lowell E. Payne, Plaintiffs, v. UNITED STATES FIDELITY AND GUARANTY COMPANY; and Maryland Casualty Co., Defendants.

No. 84-1443-CIV-EPS.

United States District Court, S.D. Florida, Miami Division.

November 21, 1985.

John Wilcox, Miami, Fla., for plaintiffs.

William Flynn, Miami, Fla., for USF & G.

James Blecke, Miami, Fla., for Maryland.

MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT AGAINST DEFENDANT USF & G

SPELLMAN, District Judge.

This CAUSE comes before the Court on the Plaintiffs' and Defendant's Motions for Summary Judgment on the question of whether the insurer is obligated to defend the Plaintiffs against the actions filed by the United States Environmental Protection Agency (EPA) and the Florida Department of Environmental Regulation (DER). The parties are not here seeking a determination of the insurer's obligations to indemnify the Plaintiffs for any potential liability in the main case and acknowledge that questions of fact remain to be resolved as to coverage for any damages.

The Plaintiffs herein obtained a policy of Comprehensive General Liability Insurance from the Defendant, United States Fidelity and Guaranty Company (USF & G), covering their interest in a parcel of property in Medley, Florida, for the term beginning May 24, 1974 and ending May 24, 1977. During this period, Pepper's Steel and Alloy Company rented adjacent property to operate a metal recovery business. Pepper's was engaged in recycling metals from transformers and wire purchased from Florida Power and Light. In 1982 an analysis of the soil in this vicinity and of the water revealed an intense anomaly of oil layers with substantial concentrations of polychlorinated biphenyls and other pollutants. In July 1983, the EPA and DER filed separate and independent suits against the Plaintiffs identifying them as potentially responsible parties. In essence, the Complaints alleged that the Plaintiffs herein had not undertaken an effort to control or contain the spread of the PCBs at the site and refused to grant the EPA and its contractors access to the site to undertake remedial action. The suits initiated enforcement action and sought cleanup and other relief.

In September 1983, the Plaintiffs notified USF & G of the suits and demanded a defense pursuant to the terms of their policy. When the insurer denied coverage, the Plaintiffs filed a declaratory action seeking an interpretation of their rights and the insurer's duties under the policy. At the initial status conference, the parties agreed that as to the duty to defend, there appeared to be no triable issues of fact, and the Court invited the parties to file Motions for Summary Judgment on this issue. After having reviewed and considered the Motions for Summary Judgment, the Memoranda of law, the pleadings, and the affidavits, and after having heard and considered oral argument of counsel, this Court GRANTS the Plaintiffs' Motion for Partial Summary Judgment against the Defendant, USF & G. Because this is a case of first impression in Florida, the issues herein warrant extended analysis.

II.

The construction and effect of a written contract of insurance is a matter of law to be determined by the court. St. Paul Mercury Insurance Co. v. Huitt, 336 F.2d 37 (6th Cir.1964). Since the jurisdiction of this Court is based on diversity and since the insurance contract was issued in Florida, this Court must look to Florida law in its interpretation of the policy. Id. USF & G's duty to defend the Plaintiffs herein rests entirely upon the meaning of the provisions of the policy and its legal effect. Such a determination is most appropriate for summary judgment. See Buckner v. Physicians Protective Trust Fund, 376 So.2d 461 (Fla.Dist.Ct.App.1979).

The pivotal sections of the insurance policy are as follows:

Coverage

The Company will pay on behalf of the insured all sums which the Insured shall become legally obligated to pay as damages because of ... bodily injury ... property damage ... to which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient.

Occurrence

"Occurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the Insured.

Property Damage

(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or

(2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

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, 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 and accidental.

III.

The Defendant contends that the allegations set forth in the Complaints filed by the EPA and the DER fail to allege facts requiring USF & G to provide a defense for the Plaintiffs. The policy only covers pollution if such "discharge, dispersal, release or escape is sudden and accidental." The Defendant then argues that the Plaintiffs herein knew that Pepper's was draining the oil and consented to this activity. From there, USF & G concludes that such knowledge and consent on the part of the Plaintiffs amount to "intent," and that intentionally allowing the release of hazardous substances precludes classifying this discharge as "sudden and accidental" within the embrace of the policy.

To bolster this line of reasoning, the Defendant cites American States Insurance Co. v. Maryland Casualty Co., 587 F.Supp. 1549 (S.D.Mich.1984). American States was a declaratory judgment action brought by an insurance company against its insured and other insurance carriers. The precise issue before the court was which, if any, of the carriers owed the insured, National Drum, a duty to defend it in four underlying lawsuits arising out of the dumping of toxic waste materials. The insurance policy at issue contained an exclusion clause identical to the one in the instant case.

The Michigan court in American States found that none of the insurers had a duty to defend the insured. This decision rested upon the court's determination that the release of the toxic materials was "continuous" and not "sudden or accidental." The court in so concluding emphasized the fact that in the suits filed against National Drum, it was alleged that the Defendant "entered into agreements to unlawfully dispose of the toxic materials" and was "the originator or producer" of the toxic wastes. Id at 1551. It is crucial to note that in the suits filed against the Plaintiffs herein, it is nowhere alleged that the insured have generated or produced the hazardous substances. Nowhere...