Remington Arms Co. v. Liberty Mut. Ins. Co., Civ. A. No. 89-420-JLL.

• Decision Date: 23 December 1992
• Docket Number: Civ. A. No. 89-420-JLL.
• Citation: 810 F. Supp. 1406
• Parties: REMINGTON ARMS COMPANY, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Delaware

810 F. Supp. 1406

REMINGTON ARMS COMPANY, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant.

Civ. A. No. 89-420-JLL.

United States District Court, D. Delaware.

December 23, 1992.

COPYRIGHT MATERIAL OMITTED

Donald E. Reid and Alan J. Stone of Morris, Nichols, Arsht & Tunnell, and Richard Allen Paul and Pamela Meitner of E.I. DuPont De Nemours & Co., Wilmington, DE, and Joanne B. Grossman, William F. Greaney and Martin Wald of Covington & Burling, Washington, DC, of counsel, for plaintiff.

Lawrence S. Drexler of Elzufon, Austin & Drexler, Wilmington, DE, and John C. Sullivan, Peter F. Rosenthal, Stephen F. Brock, Karen C. Buck, Geoffrey J. Alexander and Mark A. Welge of Manta and Welge, Philadelphia, PA, of counsel, for defendant.

OPINION

LATCHUM, Senior District Judge.

I. INTRODUCTION

On August 11, 1989, plaintiff Remington Arms Company ("Remington") brought this diversity action against defendant Liberty Mutual Insurance Company ("Liberty Mutual") seeking declaratory relief and damages. Docket Item ("D.I.") 1. The gravamen of Remington's action is that defendant Liberty Mutual breached its contractual duty to defend and indemnify Remington, under the comprehensive general liability insurance policies and excess policies that Remington had purchased from Liberty Mutual, with respect to claims brought against Remington for environmental contamination at three sites in Connecticut: Remington Park, Barnum Avenue, and Lordship Point. Liberty Mutual filed a motion for partial summary judgment on the grounds that the pollution exclusion clause, which is contained in the insurance policies purchased by Remington from 1971 to 1980, removes Liberty Mutual's duty to defend and indemnify Remington for environmental contamination claims arising from 1971 to 1980. Thus, the resolution of Liberty Mutual's motion for partial summary judgment turns on the interpretation of the pollution exclusion clauses contained in the policies issued by Liberty Mutual to Remington.

As the Court noted in its July 29, 1992 opinion in this case, the parties have stipulated that Connecticut law governs this dispute. Remington Arms Co. v. Liberty Mutual Insurance Co., 796 F.Supp. 117, 118 (1992). Neither the parties nor the Court could discover any Connecticut case law concerning the proper construction to be given pollution exclusion clauses. Thus, Liberty Mutual's motion presents an issue of first impression under Connecticut law.

Confronted with this complete absence of any authority in Connecticut on this issue, the Court met with counsel on August 12, 1992, and directed their attention to the recent decisions of the United States Court of Appeals for the Third Circuit in the New Castle County v. Hartford Accident And Indemnity Co. litigation, New Castle VII, 970 F.2d 1267 (3d Cir.1992) and New Castle V, 933 F.2d 1162 (3d Cir.1991). In the New Castle litigation, the issue before the Third Circuit concerned the interpretation of a pollution exclusion clause identical to the one at issue in the present case in all material respects. Delaware law governed the controversy and, as in the present case, the issue before the Third Circuit was one of first impression because no Delaware law on point could be found. Mindful that the New Castle decisions involved an application of Delaware law and therefore represented only highly persuasive authority, the Court instructed the parties to discuss the impact of the New Castle decisions on the present case in their briefs supporting and opposing Liberty Mutual's motion for partial summary judgment. Before addressing the merits of Liberty Mutual's motion for partial summary judgment, the Court must determine whether the Supreme Court of Connecticut would follow the construction of the pollution exclusion clause employed by the Third Circuit in the New Castle litigation. See Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

A. PREDICTING HOW CONNECTICUT'S HIGHEST COURT WOULD CONSTRUE THE POLLUTION EXCLUSION CLAUSE

When, in a diversity case, the district court is confronted with a complete absence of any law on the issue presented in the state whose law governs, the district court must predict how the highest court of that state would decide the issue. Gruber v. Owens-Illinois Inc., 899 F.2d 1366, 1369 (3d Cir.1990). In making this prediction, the district court must consider all available data including analogous decisions of the state courts, restatements of the law, law review commentaries, and decisions from other jurisdictions. Id. quoting Grantham and Mann, Inc. v. American Safety Products, Inc., 831 F.2d 596, 608 (6th Cir.1987). A leading treatise on federal practice has described the task of the district court thusly:

When there is no persuasive state ruling on the question, the federal court must exercise its judgment based upon whatever principles of state law are applicable, or by recourse to the general rules of law applied according to its own best judgment, examining the decisions in other jurisdictions, the principles of the common law, other federal decisions, the American Law Institute's Restatement of the Law, and scholarly treatments of the law, including law review articles.

J. Moore, et al., 1A Moore's Federal Practice ¶ 0.3082 at 3088-3090 (2d ed. 1991 & 1991-92 Cumulative Supp.).

The pollution exclusion clause contained in the Liberty Mutual policy which the Court is called upon to construe under the laws of Connecticut excludes coverage of claims for:

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.

(D.I. 267.) This pollution exclusion clause contained in the Liberty Mutual policy mirrors the pollution exclusion clause utilized by virtually all insurance carriers in the industry. The clause was created by the insurance industry in an effort to limit insurance coverage of pollution related losses. Since its introduction into the insurance industry's standard general comprehensive liability policy in 1970, the pollution exclusion clause has generated an explosion of litigation. Note, The Pollution Exclusion Clause Through The Looking Glass, 74 Geo.L.J. 1237, 1251 (1986). The text of the exclusion forecloses coverage for damage resulting from the "discharge" of "contaminants". However, the clause contains an exception to the general rule of exclusion. Where the "discharge" of "contaminants" is "sudden and accidental", coverage is not foreclosed by the exclusion. In the present case, the pollution exclusion clause appears in every comprehensive general liability policy and excess policy that Remington purchased from Liberty Mutual from 1971 to 1980. Liberty Mutual contends that the claims at issue fall within the ambit of the pollution exclusion. By contrast, Remington contends that the claims at issue are encompassed by the exception for "sudden and accidental" discharges and therefore, Remington argues that the exception supplies the basis for its breach of contract claim against Liberty Mutual.

1. Canons of Insurance Policy Interpretation Under Connecticut Law

Under Connecticut law, there are three canons of insurance policy interpretation which must be borne in mind when predicting how the Connecticut Supreme Court would construe the pollution exclusion clause at issue. Firestine v. Poverman, 388 F.Supp. 948, 951 (D.Conn.1975) (applying Connecticut law). The first of these canons is that:

Where an insurer sets up a special exclusion for the purpose of withdrawing from the coverage a specific liability it was unwilling to provide indemnity for, the burden is on the insurer to prove that exception.

Id. quoting American Insurance Co. v. Saulnier, 242 F.Supp. 257, 259 (D.Conn. 1965); see also O'Brien v. John Hancock Mutual Life Insurance Co., 143 Conn. 25, 119 A.2d 329 (1955).

The second canon is that insurance policies are to be construed in accordance with ordinary parlance. Thus, the language of the policy "must be accorded its natural and ordinary meaning and courts cannot indulge in a forced construction ignoring provisions or so distorting them as to accord a meaning other than that evidently intended by the parties." Hammer v. Lumberman's Mutual Casualty Company, 214 Conn. 573, 573 A.2d 699, 704 (1990); see also Firestine, 388 F.Supp. at 951. However, when the policy is ambiguous, "such ambiguity is, in accordance with standard rules of construction, resolved against the insurance company." Schultz v. Hartford Fire Insurance Co., 213 Conn. 696, 569 A.2d 1131, 1135 (1990); see also Firestine, 388 F.Supp. at 951. This rule is derived from the doctrine of contra proferentem which is utilized by courts in interpreting adhesion contracts, of which insurance policies are a variety. Under the doctrine of contra proferentem, ambiguities in adhesion contracts are construed against the drafter.

The third canon is that an insurance policy "must be construed as a whole, and all of its relevant provisions are to be considered in connection with one another." Firestine, 388 F.Supp. at 951; see also General Construction Co. v. Aetna Casualty & Surety Co., 151 Conn. 684, 202 A.2d 146 (1964). Furthermore, "every provision of an insurance policy is to be given effect, if possible, and no word or clause eliminated as meaningless, or disregarded as inoperative, if any reasonable meaning consistent with the other parts of the policy can be given to it." Hammer, 573 A.2d at 709 quoting Schultz, 569 A.2d at 1136. Accordingly, the proper interpretation of the exclusion clause at issue must not focus upon the pollution exclusion clause in isolation, but must focus upon the pollution...