Queen City Farms, Inc. v. Central Nat. Ins. Co. of Omaha

Decision Date09 September 1994
Docket NumberNo. 59594-1,59594-1
Citation126 Wn.2d 50,882 P.2d 703
CourtWashington Supreme Court
Parties, 882 P.2d 703, 39 ERC 1554, 63 USLW 2200 QUEEN CITY FARMS, INC., a Washington corporation, Respondents, v. The CENTRAL NATIONAL INSURANCE COMPANY OF OMAHA, et al., Petitioners.

As Amended Sept. 29, 1994.

Clarification Granted and Reconsideration Denied March 22,


Aiken, St. Louis & Siljeg, P.S., Pamela A. Lang, Steven Soha, Gordon and Polscer, Martin C. Loesch, William J. Price, Robert G. Mitchell, Jacquelyn A. Beatty, Seattle, Wiley, Rein & Fielding, Thomas W. Brunner, Robert B. Bell, Daniel E. Troy, Russell Sullivan, Laura A. Foggan, Carol Barthel, Washington, DC (Vicki Robinson, of counsel), for petitioners Central Nat. Ins. Co., Highlands Ins. Co. and Maryland Cas. Co.

Lane, Powell, Spears & Lubersky, David M. Schoeggl, Wilbur J. Lawrence, Linda Blohm Clapham, Seattle, for petitioner Earnest A. Moore & Companies.

Preston, Thorgrimson, Shidler, Gates & Ellis, Desmond L. Brown, Paul J. Lawrence, Seattle, for Queen City Farms.

Thomas S. James, Jr., Donald S. Kunze, Seattle, amicus curiae, for petitioners on behalf of the Ins. Environmental Litigation Ass'n.

Patrick M. O'Loughlin, Seattle, Victor C. Harwood, III, Edward Zampino, Bernadette M. Peslak, Hackensack, NJ, amicus curiae, for petitioners on behalf of Aetna Cas. & Sur. Co.

Andrew H. Salter, Seattle, amicus curiae, for petitioners on behalf of Liberty Mut. Ins. Co.

Charles C. Gordon, William G. Clark, Seattle, amici curiae, for respondent on behalf of the Boeing Co., Champion Intern. Corp., Time Oil Co. and Monsanto Co.

Carol A. Wardell, Wenatchee, amicus curiae, for respondent on behalf of PUD Dist. No. 1 of Chelan County.

Donald C. Brockett, Spokane County Prosecutor, James Emacio, Chief Deputy, Frank Conklin, Spokane, amicus curiae, for respondent.


This case involves coverage issues under comprehensive general liability policies for losses resulting from contamination of groundwater when toxic materials leaked from waste pits where hazardous materials had been deposited. A number of issues involve construction of policy provisions, particularly pollution exclusions. Additional issues involve misrepresentation defenses raised by some insurers. We affirm the Court of Appeals' holding that coverage is provided under one insurer's policies, that factual questions remain as to whether there is coverage under the remaining policies at issue, and that the insurers' misrepresentation defenses fail. Our analysis differs in some respects from that used by the Court of Appeals, particularly as to the misrepresentation issues.

Queen City Farms, Inc. (QCF) brought this declaratory judgment action against several of its insurers seeking a determination that the insurers were responsible for clean-up costs incurred by QCF as a consequence of contamination resulting from leaking of hazardous wastes from a waste disposal site on property owned by QCF in Maple Valley. In 1979 the United States Environmental Protection Agency (EPA) and the Washington State Department of Ecology began investigating the property for hazardous waste contamination. In 1983, EPA testing revealed groundwater contamination. QCF was identified as a potential responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), as amended, 42 U.S.C. § 9601 et seq. (1980). Strict liability is imposed under CERCLA. QCF entered consent decrees with the EPA agreeing, with The Boeing Company (Boeing) (the major disposer of wastes at the site), to clean up the site. By the time of trial, QCF had paid $1.8 million in clean-up costs, with potential liability of $5.5 million.

Queen City Farms, Inc., (QCF) was incorporated in 1966, and is a subsidiary of the Seattle Disposal Company (SDC). In 1951, SDC purchased land in Maple Valley, Washington known as Queen City Farms, for use as a hog farm. The hog farm operated for a few years in the 1950's.

In the mid-1950's, representatives from the King County Health Department approached SDC's owners and requested that they permit oil, paint, roofing materials, and tar to be disposed of on the property because the County did not own an adequate disposal site. In 1956, local industries began depositing industrial wastes into a natural depression on the property.

In order to expand the capacity of the waste pit, the owners scooped out the depression, and formed three pits separated by berms, arranged so that as the first pit filled, the liquid wastes would flow into the next pit, and then into the third when the second filled. The ponds covered about an acre, and had a total capacity of about 1 million gallons.

Seattle Disposal Company also dumped wastes into the pits, but most of the waste disposed of in the pits was trucked in by Boeing. Boeing dumped wastes from 1957 to 1969. In one 3-year period, nearly 3 million gallons of Boeing's wastes were dumped into the pit. Much of this waste consisted of metal plating wastes with high concentrations of heavy metals. When tested in 1983, groundwater contamination from the wastes in the pits had resulted in highly toxic levels of one of the chemicals used in the plating process, hexavalent chromium.

No permits were ever issued for the disposal operation, although the King County Health Department and the State Pollution Control Commission were aware of and monitored the operation to some extent. One of SDC's owners testified that the ponds were checked all the time but the operation was never shut down. No thorough investigation of possible contamination ever occurred until the investigation begun in 1979, but in 1959 there was some evidence of contamination seeping into a nearby stream. When QCF was advised of the problem, they hired an engineering firm to conduct a study. An engineer working for the firm testified that he inspected the site, and found that branches sticking into the lake or stream had a coating of brownish red material on them. Testing of water on the property (including well water) was made, but did not reveal groundwater contamination.

In 1966 Queen City Farms was incorporated, and title to the property was transferred to it (the same people owned SDC and QCF). QCF continued to operate the disposal site. Two of the owners owned summer homes on the Maple Valley property near the waste ponds. The water supply for the homes and other activity on the farm came from an underground spring and well located about 2,000 feet downhill from the ponds. One of the owners of QCF (and SDC), Josie Razore, had the well water tested annually, but no contamination has ever been found in the well.

Evidence established that the ponds never overflowed, even when it rained. Periodically, when the level would get high, the owners would burn the pits. This lowered the level. The burning created a tar-like sludge that would sink to the bottom of the pits; there was testimony it lined the pits. There was testimony that hardpan clay was believed to lie under the pits. There was also evidence that the ground in the surrounding area was largely sand and gravel, and one of the owners testified that before the pits were sealed with burning, the waste would drain into the ground, where there was sand and gravel. Testimony of Banchero (May 12, 1988), at 51. He also said that "there's clay area around there, and I didn't know exactly how far down clay might have been...." Testimony of Banchero (May 12, 1988), at 51. He testified that in the early years of the dumping several pitfulls of liquid drained from the pits. Testimony of Banchero (May 12, 1988) at 75-76, 86. A gravel business began on the property in the 1950's and continues to operate. The owners testified they thought the clay, sand, and gravel would filter the wastes.

The owners testified that they never expected wastes from the ponds to contaminate the surrounding ground and groundwater.

Dumping continued until 1969, and then effectively ceased. Thereafter, the ponds remained on the property.

When this action was brought to determine QCF's insurers' responsibilities for coverage for the clean-up costs, numerous insurers were defendants. A number have settled, and others have brought successful motions for summary judgment of dismissal on various grounds. At this stage, four insurers remain in the action: (1) Ernest A. Moore & Companies (Lloyd's), (2) Highlands Insurance Company, (3) Central National Insurance Company of Omaha, and (4) Maryland Casualty Company. Highlands and Central National are sister companies, and will hereafter be referred to collectively as "Central National." These insurers provided excess liability coverage during relevant periods, from January 1, 1966 to January 1, 1969 (Lloyd's); from January 1, 1977 to March 11, 1982 (Central National) (both companies); and from January 1, 1975 to January 1, 1977 (Maryland Casualty).

The insurance policies issued by the insurers are comprehensive general liability policies, covering all risks or damage arising from an "occurrence" unless excluded.

The insurers other than Lloyd's sought summary judgment dismissing QCF's claims, arguing that coverage was excluded as a matter of law under pollution exclusions in their policies. (The Lloyds' policy does not contain a pollution exclusion.) The motion for summary judgment was denied. The case went to the jury under the theory that the pollution exclusions provided for the same coverage as did the occurrence provisions of the Central National and Maryland Casualty policies, because the trial court had ruled the two clauses are functionally the same.

QCF argued that under the occurrence clause, which defined an occurrence as "an accident or happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage," Clerk's Papers of Appellant vols. 2 & 3, at 448, 466, 495, 519, a...

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