SnyderGeneral Corp. v. Century Indem. Co.

• Citation: 907 F. Supp. 991
• Decision Date: 21 November 1995
• Docket Number: Civ. A. No. 3:93-CV-0832-D.
• Parties: SNYDERGENERAL CORPORATION, Plaintiff, v. CENTURY INDEMNITY COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Texas

907 F. Supp. 991

SNYDERGENERAL CORPORATION, Plaintiff, v. CENTURY INDEMNITY COMPANY, Defendant.

Civ. A. No. 3:93-CV-0832-D.

United States District Court, N.D. Texas, Dallas Division.

November 21, 1995.

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D. Ronald Reneker (argued), of Bush Craddock & Reneker, L.L.P., Dallas, TX, and Michael L. Jones and Frieda A. Clark of Henry, Meier & Jones, L.L.P., Dallas, TX, for plaintiff.

Ralph W. Dau (argued) and Jeffrey W. Kilduff of O'Melveny & Myers, Los Angeles, CA, and Morris Harrell and Jerry K. Warren of Locke Purnell Rain & Harrell, Dallas, TX, for defendant.

FITZWATER, District Judge:

This action to recover pursuant to a comprehensive general liability umbrella insurance policy for environmental cleanup costs, and on related theories, requires the court to interpret three separate provisions of the policy: (1) the pollution exclusion; (2) the "care, custody or control" exclusion; and (3) the term "damages" in the insuring agreement of the policy. Because the court holds that the cleanup costs are not "damages" within the meaning of the policy, the court concludes that plaintiff is not entitled to recover the environmental cleanup expenses for which it sues.

I

Plaintiff SnyderGeneral Corporation ("SnyderGeneral") brings this lawsuit to recover from defendant Century Indemnity Company ("Century") for breach of contract, breach of duty of good faith and fair dealing and violation of the Texas Insurance Code, and declaratory judgment, based upon Century's refusal to pay a claim made by SnyderGeneral pursuant to a comprehensive general liability ("CGL") umbrella policy (the "Policy") that SnyderGeneral purchased from Century. The Policy insured SnyderGeneral during the period April 3, 1983 to April 3, 1984. By incorporating the terms of an underlying CGL policy owned by SnyderGeneral,¹ the Policy excluded coverage for pollution liability except for "sudden and accidental" discharges. The Policy provided, in relevant part:

This insurance does not apply: ... to ... 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 water course or body of water: but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

D.MSJ App. Ex. 3, Exclusion (f) (emphasis added).

In April 1982 SnyderGeneral purchased the Climate Control Division of The Singer Company. As part of the purchase, SnyderGeneral acquired a manufacturing facility located in Wilmington, North Carolina. From April 1982 to July 1988 SnyderGeneral operated the Wilmington facility. In 1988 SnyderGeneral sold the facility to Heatcraft, Inc. ("Heatcraft"), retaining responsibility for the pollution discharge that is the subject of this litigation. SnyderGeneral used and stored the industrial degreaser solvent trichloroethane ("TCA") during the manufacturing process. SnyderGeneral employees checked the level of TCA in the storage tanks on a daily basis. Plant Manager Donald Knowlton noticed a dramatic loss of TCA from one of the tanks on November 18, 1983. SnyderGeneral employees observed several leaks, each the size of the end of a ballpoint pen,² on the side of that tank. They also saw rust surrounding the holes, and concluded the leak had been caused by corrosion.

The groundwater at the Wilmington facility is now contaminated with TCA. SnyderGeneral regularly pumped the groundwater from wells for use during its manufacturing process.

Over a number of years, SnyderGeneral incurred environmental cleanup costs that it contends were the result of the 1983 TCA discharge. SnyderGeneral made these expenditures in order to comply with an Administrative Order on Consent governing the voluntary cleanup of the Wilmington facility. Neither SnyderGeneral, nor its successor, Heatcraft, was sued regarding the cleanup of the Wilmington facility. In a May 1988 letter, SnyderGeneral notified Century of its claim for Policy coverage for the cleanup expenses. SnyderGeneral's counsel advised Century of the claim in letters written in July 1992 and October 1992. The parties dispute whether Century responded to this correspondence.

Century now moves for summary judgment on the breach of contract claim³ based on three Policy provisions: (1) the pollution exclusion; (2) the "care, custody or control" exclusion; and (3) the term "damages" in the insuring agreement of the Policy. Century also contends it is entitled to summary judgment on SnyderGeneral's claim for breach of duty of good faith and fair dealing and violation of the Texas Insurance Code.

II

Century contends it is entitled to summary judgment dismissing SnyderGeneral's breach of contract claim. The first question presented is whether a reasonable trier of fact could find that the TCA discharge for which SnyderGeneral seeks coverage was "sudden and accidental."

A

The parties agree that this issue is governed by Texas law, which requires the court to interpret the phrase "sudden and accidental" as a matter of law. See Guaranty Nat'l Ins. Co. v. North River Ins. Co., 909 F.2d 133, 135 (5th Cir.1990) (stating that interpretation of insurance contract is question of law for court). Section 21.58(b) of the Texas Insurance Code provides that the insurer has the burden of establishing a policy exclusion. Tex.Ins.Code Ann. § 21.58(b) (West Supp.1995) ("The insurer has the burden of proof as to any avoidance or affirmative defense ... , and any language of exclusion in the policy and any exception to coverage claimed by the insurer constitutes an avoidance or an affirmative defense."). Where, as here, the dispute involves an exception to a policy exclusion, § 21.58(b) has been construed to place the burden of proof upon the insured. See Telepak v. United Servs. Auto. Ass'n, 887 S.W.2d 506, 506-07 (Tex.App.1994, writ denied). Therefore, SnyderGeneral has the obligation of establishing that its claim for coverage falls within the exception.

Because Century does not have the burden of proof, it can meet its summary judgment obligation by pointing the court to the absence of evidence to support SnyderGeneral's claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986). If Century does so, then SnyderGeneral must go beyond its pleadings and designate specific facts showing that there is a genuine issue for trial. See Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc) (per curiam). Summary judgment is mandatory where the nonmoving party fails to meet this burden. Id. at 1076. Consequently, to defeat Century's summary judgment motion, SnyderGeneral must adduce evidence that would permit a reasonable trier of fact to find that the discharge for which it seeks Policy coverage was "sudden and accidental."

B

The court will decide as a threshold issue whether the phrase "sudden and accidental" has a temporal component.⁴ Neither party has cited, nor has the court located, any controlling Texas case. In this diversity action the court must therefore make an Erie⁵ prediction concerning what the Texas Supreme Court would decide if presented with the question.

Some courts have held that the word "sudden" is subject to two reasonable interpretations. The term could connote an abrupt happening or a boom-type event, or it could refer to an unforeseen event. Under the doctrine of contra proferentem, courts construe ambiguities in favor of the insured, e.g., Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex.1984), and some have applied this doctrine to the pollution exclusion. By viewing the "sudden and accidental" language as ambiguous, these courts have allowed insureds to recover for unexpected or unforeseen pollution liability. E.g., Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1092 (Colo.1991) (holding that term "sudden" is ambiguous, and construing it in favor of insured to mean unexpected or unintended); Claussen v. Aetna Cas. & Sur. Co., 259 Ga. 333, 380 S.E.2d 686, 689-90 (1989) (holding that "sudden" refers to unexpectedness rather than to duration of event).⁶

Among federal courts, however, there is an "emerging majority" that holds that the term "sudden" unambiguously includes a temporal component. Trico Indus., Inc. v. Travelers Indem. Co., 853 F.Supp. 1190, 1194 (C.D.Cal. 1994) (citing cases from the "emerging majority").⁷ By invoking the plain meaning doctrine, courts that follow this analytical approach have concluded that "sudden" refers to an abrupt event. E.g., Upjohn Co. v. New Hampshire Ins. Co., 438 Mich. 197, 476 N.W.2d 392, 397 (1991) (holding that plain and ordinary meaning of term "sudden" includes temporal element joining together the immediate and the unexpected). Although insureds have pointed to dictionary definitions of "sudden" that include both abrupt as well as unforeseen events, the courts have rejected this argument by considering its context within the phrase "sudden and accidental." E.g., Trico Indus., 853 F.Supp. at 1194-95 (holding that sudden has temporal component despite differing dictionary definitions because "sudden" and "accidental" would otherwise have the same meaning).

The court predicts that the Supreme Court of Texas will agree with the emerging majority of federal courts and conclude that the phrase "sudden and accidental" has a temporal component. The word "sudden" appears as part of the phrase "sudden and accidental," and the word "accidental" already refers to unforeseen events. To hold that "sudden" can mean either abrupt or unforeseen is to render the word superfluous. Texas courts attempt to avoid redundancy by giving contractual terms independent meaning. See Collier v. Employers Nat'l Ins. Co., 861 S.W.2d 286, 288 (Tex.App.1993, writ denied) ("In all contract disputes, words that are subject...