Sinclair Oil Corp. v. Republic Ins. Co.

Decision Date30 December 1996
Docket NumberNo. 95-62,95-62
Citation929 P.2d 535
PartiesSINCLAIR OIL CORPORATION, a Wyoming corporation, Appellant (Plaintiff), v. REPUBLIC INSURANCE COMPANY, a Delaware corporation, Appellee (Defendant). SINCLAIR OIL CORPORATION, a Wyoming corporation, Appellant (Plaintiff), v. ROYAL INSURANCE COMPANY OF AMERICA, a North Carolina corporation, formerly Royal Globe Insurance Company; and Safeguard Insurance Company, a Connecticut corporation, Appellees (Defendants).
CourtWyoming Supreme Court

John B. "Jack" Speight, Robert T. McCue, and Dominique D.Y. Cone of Hathaway Speight & Kunz, Cheyenne, Jack E. Stanfield of Smith, Stanfield & Scott, Laramie, Robert N. Sayler of Covington & Burling, Washington, D.C., Brent Manning of Holme, Roberts & Owen, Salt Lake City, UT, for Appellant.

William U. Hill, Attorney General; Mary B. Guthrie, Deputy Attorney General; and Keith Burron, Assistant Attorney General, Cheyenne, for Amicus Curiae State of Wyoming (in support of Appellant).

J. Kent Rutledge and Loyd E. Smith of Lathrop & Rutledge, Cheyenne, Charles K. O'Neill, James C. LaForge, and Timothy M. Hughes of Chadbourne & Parke, New York City, for Appellee Republic Insurance Company.

Thomas A. Nicholas of Hirst & Applegate, Cheyenne, Donald T. McMillan and Christopher A. Crevasse of Rivkin, Radler & Kremer, Santa Rosa, CA, for Appellees Royal Insurance Company of America and Safeguard Insurance Company.

Jon T. Dyre of Crowley, Haughey, Hanson, Toole & Dietrich Billings, MT, for Amicus Curiae Insurance Environmental Litigation Association (in support of Appellees). Of Counsel: Laura A. Foggan, Daniel E. Troy, and Edward J. Grass of Wiley, Rein & Fielding, Washington, D.C.

Gregory C. Dyekman of Dray, Madison & Thomson, P.C., Cheyenne, Edward Zampino and Peter E. Mueller of Harwood Lloyd, Hackensack, NJ, for Amicus Curiae The Aetna Casualty & Surety Company (in support of Appellees).

Before TAYLOR, C.J., THOMAS, GOLDEN * and LEHMAN, JJ., and KAUTZ, District Judge.

THOMAS, Justice.

The issues in this case come before the court as certified questions from the United States District Court for the District of Wyoming. The court is called to furnish a definitive legal connotation to phrases in exclusions clauses of commercial insurance policies that preserve coverage for "sudden and accidental" discharges of pollutants. Our study of the problem persuades us that these words are not ambiguous, and as used in these policies, the phrases encompass a temporal aspect that must coincide with an accidental occurrence to the end that such a discharge must be caused by an abrupt and unforeseen event that occurs unexpectedly, without notice, or with very brief notice. The certified questions are answered more definitively in the body of this opinion, and the case is returned to the United States District Court for the District of Wyoming for such further proceedings as it may deem appropriate.

The questions that were certified to this court, pursuant to WYO. STAT. § 1-13-104 through 107 (1988) 1 are:

1. Whether, in the commercial insurance policies at issue, the language of the exclusion clauses that preserve coverage for "sudden and accidental" discharges of pollutants applies to gradual and unintentional discharges of pollutants. In other words, whether "sudden" has a temporal meaning;

2. Whether the undefined phrase "sudden and accidental" is ambiguous in the context of the exclusion clauses in the commercial policies at issue.

The parties and those filing briefs as amicus curiae were faithful to these statements of the questions certified when setting forth the issues presented for review. In the plethora of materials that were filed with this court, however, they were not disciplined with respect to the requirements of our certification rules in articulating their respective statements of the facts. We emphasize the language of WYO. R. APP. P. 11.03 (emphasis added):

A certification order shall set forth:

(a) The questions of law to be answered;

(b) A statement of all facts relevant to the questions certified;

(c) The nature of the controversy in which the questions arose; and

(d) A designation of the party or parties who will be the appellant(s), i.e. the party holding the affirmative, in the appellate court.

This court has the opportunity to expand upon the "statement of all facts relevant to the questions certified" by invoking WYO. R. APP. P. 11.04, which provides in pertinent part:

The reviewing court may require the original or copies of all, or of any portion of the record before the certifying court, to be filed under the certification order, if, in the opinion of the reviewing court, the record or any portion may be necessary in answering the questions.

We did not, however, avail ourselves of that opportunity. Consequently we rely exclusively upon the Certification Order from the United States District Court for the District of Wyoming to the Supreme Court of the State of Wyoming, which set forth these facts:

Statement of Facts

This declaratory judgment action involves the question of insurance coverage for alleged pollution contamination damages under insurance policies issued by the defendants. The policies all covered the LARCO refinery operation. The refinery is located near Casper, Wyoming and is currently operated by Sinclair. Various entities have made claims against Sinclair based upon allegations the refinery operations resulted in pollution contamination.

Sinclair has generally contested the contamination claims by disputing the existence, extent, cause, and timing of the alleged pollution contamination. However, it has settled with at least one group of claimants.

Defendants Royal Insurance Company and Safeguard Insurance Company issued general liability policies. Defendant Republic issued excess umbrella liability policies. Republic's umbrella liability policies were excess to primary liability coverage provided by a nonparty to these cases. Republic's umbrella policies cover different years than do the Royal and Safeguard general liability policies.

The Republic policies all provide:

1. COVERAGES: To indemnify the Insured for all sums which the insured shall be obligated to pay by reason of the liability imposed upon him by law or liability assumed by him under contract or agreement for damages, and expenses, all as included in the definition of "ultimate net loss" because of

(a) personal injury,

(b) property damage,

(c) advertising liability

as defined herein and caused by or arising out of an occurrence anywhere in the world.

The Republic policies all define "occurrence" as:

(a) an accident, or (b) an event, or continuous or repeated exposure to conditions which results during the policy period, in personal injury, property damage, or advertising liability (either alone or in combination) neither expected nor intended from the standpoint of the insured.

Two of the three Republic policies contain the following exclusion:

It is agreed that this policy does not apply to liability for personal injury or property damage arising out of the discharge, dispersal, release, escape or seepage 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, unless such discharge, dispersal, release or escape is sudden and accidental.

The third Republic policy contains the following exclusion:

It is understood and agreed that this policy does not apply to liability for personal injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, oil, petroleum substance or derivative, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants. This exclusion does not apply to the pollution of the land or atmosphere if such discharge, dispersal, release or escape is sudden and accidental.

It is further understood and agreed as respects the discharge, dispersal, release, escape or seepage of smoke, soot, vapors, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon any non-navigable body of water or watercourse from the operation of an oil or gas pipeline by the Named Insured this policy shall apply as is [sic] such discharge, dispersal, release, escape or seepage had emanated into or upon land or the atmosphere. This clause shall apply only if such discharge, dispersal, release, escape or seepage is sudden or accidental.

The Royal and Safeguard policies provide:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A, bodily injury or

Coverage B, 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 ...

The Royal and Safeguard policies define "occurrence" as:

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.

The Royal and Safeguard policies contain the following 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.

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