St. Paul Fire and Marine Ins. Co. v. Warwick Dyeing Corp.
| Decision Date | 09 February 1994 |
| Docket Number | No. 93-1721,93-1721 |
| Citation | 26 F.3d 1195 |
| Parties | ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Plaintiff-Appellee, v. WARWICK DYEING CORPORATION, Defendant, Appellant. . Heard |
| Court | U.S. Court of Appeals — First Circuit |
Thomas M. Reiter with whom David M. Jones, John M. Edwards, Linda E. Presson, Kirkpatrick & Lockhart, Nicholas Gorham, Edmund L. Alves II and Gorham & Gorham were on brief, for appellant.
Michael Rubin, Asst. Atty. Gen. and Environmental Advocate, Office of the Atty. Gen., and Jeffrey B. Pine, Atty. Gen. of Rhode Island, on brief, for State of Rhode Island, amicus curiae.
Louis V. Jackvony III, on brief, for Town of North Smithfield, amicus curiae.
John F. Bomster, John A. Tarantino, W. James McKay, Victoria M. Almeida, W Mark Russo, Sherry A. Giarrusso, Adler Pollock & Sheehan Incorporated and Andrew C. Spacone, on brief, for Textron, Inc., amicus curiae.
Kimball Ann Lane with whom Craig R. Brown, Anne T. Turilli, Julie B. Pollack, Roger D. Brown, Adams, Duque & Hazeltine, James T. Murphy and Hanson, Curran, Parks & Whitman, were on brief, for appellee.
Laura A. Foggan, Lon A. Berk, Celiza P. Braganca and Wiley, Rein & Fielding, on brief, for Insurance Environmental Litigation Ass'n, amicus curiae.
Before TORRUELLA, CYR and BOUDIN, Circuit Judges.
This case concerns the oft-litigated pollution exclusion clause commonly found in general liability insurance policies. Insurance coverage under this clause, or the lack thereof, has engendered bitter and frequent disputes between insurance companies and policyholders facing some form of environmental liability. We enter the fray secure in the knowledge that, regardless of our holding, we will have followed a sizeable number of the courts that have considered the issue. Upon our own consideration of the pollution exclusion clause as applied to the specific facts of this case, we cast our lot with those courts narrowly construing the breadth of coverage afforded under the clause. We thus affirm the district court's order of summary judgment in favor of plaintiff-appellee.
Plaintiff-appellee, St. Paul Fire and Marine Insurance Company ("St. Paul"), brought this action in the district court to obtain a declaratory judgment that St. Paul had no obligation under an insurance contract issued to the defendant, Warwick Dyeing Corporation ("Warwick"), to defend or indemnify Warwick for claims arising from environmental damages at the Landfill & Resource Recovery Superfund Site in North Smithfield, Rhode Island (the "L & RR landfill" or the "Site"). St. Paul asserted in its complaint that, among other things, the pollution exclusion clause of the insurance policy barred coverage for contamination at the L & RR landfill after Warwick arranged for the disposal of its waste materials at the Site.
Warwick is in the business of dyeing, finishing and coating synthetic and synthetic-natural fiber blend fabrics. In July of 1979, Warwick hired ACME Services, Inc. ("ACME"), a duly licensed waste hauler, to collect, haul away, and dispose of various waste materials generated by Warwick's West Warwick plant. The waste contained certain hazardous substances. ACME hauled the waste to the L & RR Site, also duly licensed, and disposed of it in the landfill. One ACME truck driver stated in an affidavit that he discharged waste directly into the landfill by opening a drain valve on his truck and letting the waste pour onto the ground. There is no evidence, however, that Warwick knew where or how ACME disposed of its waste materials. Furthermore, no party or governmental agency has alleged that Warwick or ACME improperly discharged Warwick's waste materials.
On September 18, 1989, the United States Environmental Protection Agency ("EPA") notified Warwick that it had determined Warwick was a "potentially responsible party" ("PRP") under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. Secs. 9601 et seq., with respect to contamination at the L & RR Site. The EPA stated that the L & RR Site experienced releases and threatened releases of hazardous substances requiring the EPA to undertake cleanup activities for which the PRP's could be held liable pursuant to Sections 104, 106(a) and 107(a) of CERCLA. 42 U.S.C. Secs. 9604, 9606(a) & 9607(a).
The EPA noted that "responsible parties" include "persons who arranged for disposal of hazardous substances found at the site." Under CERCLA, a person that generates hazardous substances and arranges for their disposal is strictly liable, regardless of whether the person was at fault or whether the substance actually caused or contributed to any damage, for all costs of remediating environmental damages at the site where the substances ultimately are disposed. See Dedham Water Co. v. Cumberland Farms Dairy, Inc., 889 F.2d 1146, 1150-56 (1st Cir.1989); O'Neil v. Picillo, 883 F.2d 176, 177-83 (1st Cir.1989), cert. denied, 493 U.S. 1071, 110 S.Ct. 1115, 107 L.Ed.2d 1022 (1990).
The EPA alleged that Warwick was a "responsible party" at the L & RR Site because it had arranged, "by contract agreement, or otherwise," for the "disposal" of hazardous substances at the L & RR Site. The EPA demanded reimbursement of the response costs, mainly for investigation and monitoring, that it had incurred and planned to incur at the Site.
On June 29, 1990, the EPA issued an administrative order, pursuant to Secs. 104(e) & 106(a) of CERCLA, 42 U.S.C. Secs. 9604(e) & 9606(a), against twenty-five respondents, including Warwick, demanding that the respondents perform certain remedial activities at the L & RR Site. The order alleged that Warwick "arranged for the disposal of water soluble dye and fibers containing acids and VOCS [volatile organic compounds], which were disposed of at the Site." According to the EPA, the hazardous substances at the L & RR Site had been poured directly into the landfill or deposited in drums into the landfill. The EPA's order documented the results of an investigation showing that "the landfill continues to release Hazardous Substances to the environment." The EPA made no allegations, however, that waste was improperly disposed of or discharged at the Site or that the landfill was improperly maintained. In fact, no specific cause of the contamination was mentioned beyond the fact that the named respondents disposed of waste at the Site. The EPA ordered that respondents undertake various remedial activities to monitor and prevent the further release of hazardous substances and to reimburse the EPA for its previous and future actions at the Site.
On July 25, 1991, a group of fourteen plaintiffs that were also named by the EPA as PRPs at the L & RR Site filed suit against Warwick and forty-six others for recovery of past and future response costs incurred at the Site. The suit asserted that Warwick was jointly and severally liable for having "arranged for the disposal of hazardous substances" at the site. Subsequent to the filing of this suit, Warwick entered into a settlement agreement with the plaintiffs under which Warwick paid $40,000 and assigned its rights under the St. Paul insurance policies to the plaintiffs.
During the EPA's actions and the private lawsuit, Warwick notified St. Paul, its general liability insurance carrier, that it was seeking defense costs, and possibly, indemnity coverage for the claims made by the EPA and the private plaintiffs. St. Paul denied that coverage existed under the applicable insurance policies for the claims against Warwick and eventually brought this action to obtain an enforceable declaration of noncoverage.
St. Paul issued a series of "Comprehensive General Liability Policies" ("CGL" policies) to Warwick that provided Warwick with continuous coverage from 1971 through 1985 for general commercial risks.
The insurance policies provided:
The Company [St. Paul] will pay on behalf of the Insured [Warwick] 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 policies thus provided coverage for property damage caused by an "occurrence" which the policies defined 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.
Following this insuring clause was a list of exclusions from coverage, including the pollution exclusion at issue here (the "exclusion"). Although the policies varied from year to year, the following is representative of the language of the exclusion:
It is agreed that the 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.
The exclusion contained an exception (the "exception") which stated:
This exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.
St. Paul filed its action on January 27, 1991. In response to motions for summary judgment made by both parties, the federal magistrate recommended that the district court enter a judgment in favor of St. Paul. The magistrate held that the pollution exclusion barred coverage for Warwick's claims because the discharge of pollutants at the L & RR Site was neither "sudden" nor "accidental" as required by the...
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