South Cent. Bell Telephone Co. v. Ka-Jon Food Stores of Louisiana, Inc.

• Decision Date: 24 May 1994
• Citation: 644 So.2d 357
• Parties: 93-2926 La
• Court: Louisiana Supreme Court

Page 357

644 So.2d 357

93-2926 La. 5/24/94

SOUTH CENTRAL BELL TELEPHONE COMPANY v. KA-JON FOOD STORES OF LOUISIANA, INC. and Broadmoor Service Center, Inc.

No. 93-CC-2926.

Supreme Court of Louisiana.

May 24, 1994.

Rehearing Granted June 24, 1994.

Emile C. Rolfs, III, William F. Ridlon, II, Baton Rouge, for applicants.

Celia R. Cangelosi, Milton O. Walsh, Murphy J. Burke, III, Baton Rouge, Michael P. Colvin, New Orleans, Catherine S. Nobile, Frank A. Fertitta, Baton Rouge, for respondent.

Ralph S. Hubbard, III, New Orleans, Thomas W. Brunner, Laura A. Foggan, Carol A. Barthel, Washington, DC, for Insurance Environmental Litigation, amicus curiae.

Maureen N. Harbourt, Esteban Herrera, Jr., Baton Rouge, for Louisiana Chemical Ass'n, amicus curiae.

Francis S. Craig, III, Baton Rouge, Eugene R. Anderson, New York City, Martha Churchill, Chicago, IL, for Mid-America Legal Fund, amicus curiae.

[93-2926 La. 1] ORTIQUE, Justice. ¹

The resolution of this case requires the interpretation of an "absolute" pollution exclusion endorsement to a standard commercial general liability business insurance policy.

South Central Bell (Bell) filed suit against a convenience store operator and its insurer after gasoline, which accidentally leaked from the convenience store's underground storage tanks, damaged Bell's cables. Bell's suit requests tort damages for the losses it suffered, as well as injunctive relief to abate future damages from the continued presence of the gasoline in the groundwater surrounding its cables. The convenience store's insurer filed a motion for summary judgment claiming the policy at issue expressly excludes coverage for all claimed damages and requested relief based upon its pollution exclusion. The motion was denied by the trial court which determined the exclusion applies only to active polluters, and not to those who incidentally possess a pollutant which accidentally escapes. On the insurer's application for supervisory review, the appellate court granted summary judgment finding the exclusion "clearly and unambiguously" excludes coverage. We vacate the judgment.

The pollution exclusion does not preclude coverage of the damages caused to Bell's cables. However, regarding Bell's claim for injunctive relief, genuine issues of material fact remain as to whether the exclusion can be enforced due to the circumstances surrounding its issuance. Therefore, summary judgment denying insurance coverage on that claim was improperly granted by the appellate court.

[93-2926 La. 2] I.

Pursuant to a servitude, Bell has underground telephone cables running parallel to Florida Boulevard at Cora Drive in Baton Rouge. Defendants Broadmoor Service Center, Inc., Broadmoor Village, Inc. and/or Robert L. Cangelosi (Broadmoor), own real property where those two streets intersect. Broadmoor's tenant, Ka-Jon Food Stores of Louisiana, Inc. ² (Ka-Jon), insured under a business policy issued by State Farm Fire and Casualty Company (State Farm), operated a convenience store at that location in September, 1986. One of the items Ka-Jon sold was gasoline, which it stored in underground storage tanks. The tanks were owned by Broadmoor. Allegedly, the underground tanks leaked or discharged gasoline into the groundwater surrounding Bell's cables. The presence of the gasoline weakened the cables's plastic sheathing, permitting water to penetrate the sheathing and short out the telephone lines.

Bell filed this suit against defendants seeking both property damages and injunctive/remedial relief. It desires the injunctive/remedial relief to determine the nature and extent of the underground contamination and to require clean-up measures to abate future damages. Defendants responded by filing answers and numerous cross claims and/or third-party demands.

State Farm denied liability on the principal, third-party and cross claims, asserting that the insurance policy it issued to Ka-Jon contains an exclusion of coverage for the claimed damages. It filed a motion for summary judgment urging the policy's Pollution Exclusion Endorsement entitled it to judgment on all claims as a matter of law since the policy unequivocally excludes coverage for property damage caused by gasoline leakage with the following language: "this policy does not apply ... to any ... property damage arising out of the actual, alleged or threatened discharge, dispersal, spill, release or escape of smoke, vapors, soot, fumes acids, alkalis, toxic chemicals, liquids, gases, waste materials ..., or other irritants, contaminants or pollutants ... at or from premises, owned, rented or occupied by the named insured." It argues that, "[g]asoline ... clearly fall[s] within the exclusion, if for no other reason than it actually damaged the telephone cables in question, and is thereby, de facto, 'an irritant, contaminant, or pollutant.' "

[93-2926 La. 3] Plaintiff Bell and defendant Broadmoor opposed the motion asserting that the policy's pollution exclusion is ambiguous because it fails to state whether it applies to intentional or negligent polluting, or both. They argued the exclusion does not apply "to those who only incidentally possess the pollutant in the course of their business" like Ka-Jon, but to insureds who "wantonly" or "indifferently" pollute, citing as authority the Fourth Circuit's interpretation of an absolute pollution exclusion in West v. Board of Com'rs, 591 So.2d 1358, 1360 (La.App. 4th Cir.1991). ³ They further contended that State Farm offered no evidence to show Ka-Jon intended to pay for business insurance which omitted coverage of routine and incidental risks of its convenience store's operations.

Following a hearing, the motion for summary judgment was denied. The trial court applied West v. Board of Com'rs, supra, ⁴ determining the pollution exclusion applies to active polluters but not to those who incidentally possess a pollutant which accidentally escapes.

State Farm sought supervisory review and its application was granted. South Central Bell Telephone Co. v. Ka-Jon Food Stores of Louisiana, 626 So.2d 1223 (La.App. 1st Cir.1993). The First Circuit determined the pollution exclusion "clearly and unambiguously excludes coverage for any damages to underground telephone cables due to the leakage of gasoline from underground storage tanks leased by the named insured." 626 So.2d at 1224. In rendering its decision, it expressly declined to follow the Fourth Circuit's decision in West v. Board of Com'rs, supra. ⁵ Id. Therefore, it entered judgment in favor of State Farm, granting its motion for summary judgment and dismissing all claims against it.

Since the decision of the First Circuit conflicts with the Fourth Circuit's decision in West v. Board of Com'rs, supra, ⁶ we granted Bell's application for writ of certiorari. South Central Bell Telephone Co. v. Ka-Jon Food Stores of Louisiana, 93-2926 (La. 2/4/94); 633 So.2d 158 [93-2926 La. 4] (La.1994). See Rule X, § 1(a)(1). We permitted the filing of amicus curiae briefs by the Insurance Environmental Litigation Association ⁷ in support of State Farm and by the Mid-America Legal Foundation ⁸ on behalf of Bell.

II.

The version of the Business Policy--Special Form 3 issued to Ka-Jon by State Farm was printed in July, 1982. It is a standard commercial general liability (CGL) policy ⁹ providing coverage per occurrence. ¹⁰ Its Business Liability Exclusions section contains the following pollution exclusion:

Under Coverage L, this policy does not apply:

* * * * * *

5. 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 the 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; ...

(bold in original; bold denotes terms defined by the policy)

[93-2926 La. 5] Ka-Jon's April 1, 1986 renewal of the policy, insuring the period which encompassed Bell's damages claim, added a Pollution Exclusion Endorsement (printed in March, 1986). This endorsement, known as an "absolute" pollution exclusion, replaced the previously quoted pollution exclusion. It provides as follows:

POLLUTION EXCLUSION ENDORSEMENT

It is agreed that Exclusion 5. (Exclusion 6. in the BUILDER'S RISK POLICY ) under Section II--BUSINESS LIABILITY EXCLUSIONS is deleted and replaced with the following:

Under Coverage L, this policy does not apply:

5. to any:

a. bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, spill, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials (including those to be recycled, reconditioned or reclaimed), or other irritants, contaminants or pollutants:

(1) at or from the premises owned, rented or occupied by the named insured;

(2) at or from any site or location used by or for the named insured or others for the handling, storage, disposal, processing or treatment of waste;

(3) which are at any time transported, handled, stored, treated, disposed of, or processed as waste by or for the named insured or any person or organization for whom the named insured may legally be responsible; or

(4) at or from any site or location on which the named insured, employee or any contractor or subcontractor working directly or indirectly on behalf of the named insured is performing operations:

(a) if the pollutants are brought on or to the site or location in connection with such operations; or

(b) if the operations are to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants;

b. loss, cost or expense arising out of any governmental direction or request that the named insured test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants.

...