Shalimar Contractors v. American States Ins. Co.

• Decision Date: 19 August 1997
• Docket Number: Civil Action No. 95-A-1302-N.
• Citation: 975 F.Supp. 1450
• Parties: SHALIMAR CONTRACTORS, INC., Plaintiff, v. AMERICAN STATES INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Middle District of Alabama

975 F.Supp. 1450

SHALIMAR CONTRACTORS, INC., Plaintiff, v. AMERICAN STATES INSURANCE COMPANY, Defendant.

Civil Action No. 95-A-1302-N.

United States District Court, M.D. Alabama, Northern Division.

August 19, 1997.

Russell T. Duraski, W. Mark Anderson, Montgomery, AL, for Plaintiff.

James E. Williams, Montgomery, AL, Dennis F. Cantrell, Indianapolis, IN, for Defendant.

Memorandum Opinion

ALBRITTON, District Judge.

This cause is presently before the court on a Motion for Summary Judgment, filed by the Defendant, American States Insurance Company ("American"), on May 28, 1997.

The Plaintiff, Shalimar Contractors, Inc. ("Shalimar"), initially filed this action in the Circuit Court of Montgomery County on September 1, 1995 seeking a declaratory judgment that American has a duty to defend, provide coverage, and indemnify Shalimar in an underlying action filed in the Circuit Court of Montgomery County in which Shalimar is a named defendant. On the basis of diversity jurisdiction, 28 U.S.C. § 1332, American removed the case to this court on October 10, 1995. In its Motion for Summary Judgment, American contends that under the insurance policy that it issued to Shalimar it has no obligation to defend Shalimar in the underlying lawsuit or to indemnify Shalimar for any liability that it may incur as a result of the underlying lawsuit.

Summary Judgment Standard

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). When the moving party bears the burden of proof at trial, as in the present case, the movant

must show affirmatively the absence of a genuine issue of material fact: it must support its motion with credible evidence ... that would entitle it to a directed verdict if not controverted at trial. In other words, the moving party must show that, on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the non-moving party. If the moving party makes such an affirmative showing, it is entitled to summary judgment unless the non-moving party, in response, come[s] forward with significant, probative evidence demonstrating the existence of a triable issue of fact.

United States v. Four Parcels of Real Property, 941 F.2d 1428, 1438 (11th Cir.1991) (en banc) (citations and internal quotation marks omitted).

Where the burden of proof at trial is on the non-moving party, the movant can meet this standard by submitting affirmative evidence negating an essential element of the non-movant's claim, or by demonstrating that the non-moving party's evidence itself is insufficient to establish an essential element of his claim. Id. at 322, 106 S.Ct. at 2552.

The burden then shifts to the non-moving party to make a showing sufficient to establish the existence of all essential elements to his claims, and on which he bears the burden of proof at trial. Id. To meet this burden, the non-moving party cannot rest on the pleadings, but must by affidavit or other appropriate means, set forth specific facts showing there is a genuine issue for trial. Id. at 324, 106 S.Ct. at 2553. A dispute of material fact "is `genuine' ... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Where the parties' factual statements conflict or inferences are required, the court will construe the facts in the light most favorable to the nonmovant. Barnes v. Southwest Forest Industries, 814 F.2d 607, 609 (11th Cir. 1987).

Facts & Procedural History

The evidence submitted to the court, viewed in the light most favorable to the Plaintiff, establishes the following facts:

From October 1992 through October 1993, American Owens, Inc., was the general contractor on a project to perform lead abatement and other general construction work for the Montgomery Housing Authority at its Riverside Heights Housing Project. American Owens, Inc., in turn, entered into a subcontract with Shalimar under which Shalimar would perform lead abatement at the Riverside Heights project.

In July of 1993, Debra Caldwell and her two young boys, Byron and Nordricquis, resided at 17 Eugene Street in the Riverside Heights Housing Project. During that period of time, Shalimar was performing lead abatement work in other apartments in the same apartment building in which the Caldwells resided. In particular, Shalimar was performing lead abatement work in unit 15, the apartment unit next door to the Caldwells' residence.

The Caldwells subsequently filed suit in the Circuit Court of Montgomery County against, among other defendants, Shalimar. The Caldwells allege that Shalimar performed dangerous work and that in the course of performing the lead abatement work, Shalimar temporarily left debris containing lead on the porch beside the Caldwells' apartment unit prior to its being removed from the work site. The Caldwells further allege that Shalimar temporarily discarded out in the open, the lead-contaminated clothing worn by its workers prior to its being removed from the work site. As a result of these alleged acts, the Caldwells allege that Byron and Nordricquis Caldwell were exposed to lead and now show dangerous and abnormally high levels of lead in their blood systems, and have also become ill and suffered medical complications as a result of their exposure to lead.

American initially issued Shalimar a general liability policy of insurance for a policy term of July 1, 1991 through July 1, 1992. This insurance policy was renewed for an additional period extending through October, 1993. The insurance policies issued by American contained the following language:

(2) Exclusions. This insurance does not apply to: ...

f. (1) "Bodily injury" or "property damage" arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants:

(a) At or from any premises, site or location which is owned or occupied by, or rented or loaned to, any insured;

(b) At or from any premises, site or location which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste;

(c) Which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for any insured or any person or organization for whom you may be legally responsible; or

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations:

(i) if the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor; or

(ii) if the operations are to test for, monitor, clean up, remove, contain, treat, detoxify, or neutralize, or in any way respond to, or assess the effects of pollutants....

(2) Any loss, cost, or expense arising out of any:

(a) Request, demand or order that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to or assess the effect of pollutants; or

(b) Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of pollutants.

Pollutants means any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned, or reclaimed.

Shalimar provided American with timely notice of the Caldwells' claims, demanded that American defend and protect Shalimar's interests, and demanded that American provide coverage under Shalimar's insurance policy. Relying on the aforementioned exclusion, American refused Shalimar's repeated requests to provide them with coverage and a defense in the underlying lawsuit filed by the Caldwells.

Discussion

The Plaintiff correctly points out that, because this court's jurisdiction in this case is based on diversity of citizenship, the substantive law of Alabama applies to this action. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Therefore, this court is "bound to decide the case the way it appears the state's highest court would." Towne Realty, Inc. v. Safeco Ins. Co., 854 F.2d 1264, 1269 n. 5 (11th Cir.1988).

"An insurance company's duty to defend its insured is determined by the language of the insurance policy and by the allegations in the complaint giving rise to the action against the insured." Ajdarodini v. State Auto Mut. Ins. Co., 628 So.2d 312, 313 (Ala.1993); Ladner & Co. Inc. v. Southern Guar. Ins. Co., 347 So.2d 100, 102 (Ala.1977). Under Alabama law, the insured bears the burden of establishing coverage by demonstrating that a claim falls within the insurance policy, Colonial Life & Accident Ins. Co. v. Collins, 280 Ala. 373, 194 So.2d 532, 535 (1967), while the insurer bears the burden of proving the applicability of any policy exclusions. Universal Underwriters Ins. Co. v. Stokes Chevrolet, 990 F.2d 598, 605 (11th Cir.1993) (citing United States Fidelity & Guar. Co. v. Armstrong, 479 So.2d 1164, 1168 (Ala.1985)); see also Jordan v. National Accident Ins. Underwriters, Inc., 922 F.2d 732, 735 (11th Cir.1991).

According to the Alabama Supreme Court, "insurance companies have the right to limit the coverage offered through the use of exclusions in their policies, provided that those exclusions do not violate a statute or public policy." Hooper v. Allstate Insurance Company, ...