Sulphuric Acid Trading v. Greenwich Ins.

• Decision Date: 31 July 2006
• Parties: SULPHURIC ACID TRADING CO., INC. v. GREENWICH INSURANCE COMPANY, et al.
• Court: Tennessee Court of Appeals

211 S.W.3d 243

SULPHURIC ACID TRADING CO., INC. v. GREENWICH INSURANCE COMPANY, et al.

Court of Appeals of Tennessee, Eastern Section, at Knoxville.

May 24, 2006 Session.

July 31, 2006.

Permission to Appeal Denied by Supreme Court December 18, 2006.

Joel J. Henderson and Edward D. Lamar, Greenville, Mississippi, and David F. Hensley, Chattanooga, Tennessee, for the appellant, Sulphuric Acid Trading Company, Inc.

Michael E. Richardson, Chattanooga, Tennessee, for the appellee, Xavier Chemical Company.

Charles Platto and Sarah Shelburne North, Norwich, Vermont, and Shelby Grubbs, Leah Gerbitz, and Robert F. Parsley, Chattanooga, Tennessee, for the appellee, Greenwich Insurance Company.

OPINION

CHARLES D. SUSANO, JR., J., delivered the opinion of the court, in which HERSCHEL P. FRANKS, P.J., and SHARON G. LEE, J., joined.

The plaintiff, Sulphuric Acid Trading Company, Inc., ("the Owner"), entered into an agreement with the defendant, Xavier Chemical Company ("the Loading Company"), by the terms of which the Loading Company was to transload the Owner's product, sulphuric acid, from railcars to tanker trucks. The Loading Company subcontracted with Bulkmatic Transport, Inc., to accomplish the transfer of the sulphuric acid for subsequent distribution to the Owner's customers. James Gregory Johnson was employed by Bulkmatic and was in the process of transferring the sulphuric acid when a transloading coupling on top of the rail tank car allegedly broke. Approximately 1,800 gallons of sulphuric acid were sprayed into the air and onto the surrounding area. Johnson was severely injured when the sulphuric acid was sprayed on his face and body. The Loading Company was insured under a comprehensive general liability policy issued by the defendant Greenwich Insurance Company ("the Insurance Company"). After Johnson sued Owner and the Loading Company, the Owner filed a declaratory judgment action against the Insurance Company asserting that Johnson's claims were covered under the policy. The suit also named the Loading Company as a defendant. The trial court granted the Insurance Company's motion for summary judgment, finding that the Absolute Pollution Exclusion in the policy excluded coverage for Johnson's claims. The Loading Company and the Owner appeal. We affirm.

I.

The underlying facts are not in dispute. The Owner was the owner of the sulphuric acid involved in this case. The Owner and the Loading Company entered into a "terminaling" agreement pursuant to which the Loading Company was to transload sulphuric acid from railcars to tanker trucks for storage at a former U.S. Army post. The Loading Company had not completed renovations to its storage location when the first shipment of sulphuric acid arrived. As a consequence, the Loading Company had to subcontract with Bulkmatic Transport, Inc., to make the transfer of the sulphuric acid.

Johnson was employed by Bulkmatic. On January 3, 2001, Johnson was involved in transferring sulphuric acid to a tanker truck when, according to Johnson, the transloading coupling on top of the rail tank car broke. Approximately 1,800 gallons of sulphuric acid were sprayed into the air and onto the surrounding property. The sulphuric acid was expelled as high as 26 feet in the air; it was said to be comparable to an uncapped fire hydrant. The sulphuric acid sprayed Johnson's face and body causing significant injuries. An employee of Bulkmatic gave deposition testimony that the environmental cleanup cost was in the range of $100,000.

Johnson filed suit against several entities, including the Owner and the Loading Company. Johnson claimed, among other things, that both the Owner and the Loading Company negligently failed to inspect the equipment and failed to adequately warn of potential hazards. The Owner was eventually granted summary judgment in the lawsuit filed by Johnson.

The Loading Company was the named insured in a comprehensive general liability policy issued by the Insurance Company. The Insurance Company denied coverage for Johnson's claims based upon an "Absolute Pollution Exclusion" contained in the insurance policy. This exclusion provides, in relevant part, as follows:

ABSOLUTE POLLUTION EXCLUSION — COMMERCIAL GENERAL LIABILITY (OCCURRENCE)

* * *

It is ... understood and agreed that this endorsement shall be applicable to all coverages set forth in this policy or appended by endorsement thereto, including but not limited to COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY....

This insurance shall not apply to:

(1) "Bodily injury", "property damage", "personal injury", or "advertising injury" which would not have occurred in whole or in part but for the actual, alleged, possible, or threatened, intentional or unintentional, discharge, disposal, dispersal, seepage, migration, release or escape of pollutants; or

(2) "Bodily injury", "property damage", "personal injury", or "advertising injury" arising out of or in any way related to exposure to pollutants, including but not limited to the inhaling or ingesting of pollutants; or

(3) Any loss, cost or expense arising out of or in any way related to any request, demand, order, directive, complaint or "suit" by or on behalf of any person, group of persons or entity, including any governmental entity, that any insured or any other person, group of persons or entity test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to or assess pollutants or the effects of pollutants. Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including but not limited to smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste includes material to be recycled, reconditioned or reclaimed.

(Bold print and capitalization in original; emphasis added).

After the Insurance Company denied coverage pursuant to the above exclusion, the Owner brought a declaratory judgment action seeking a declaration that the incident involving Johnson was covered under the policy. The Owner contends that it is an additional insured under the policy. The Loading Company sought both indemnification and defense costs incurred in connection with the lawsuit filed by Johnson. Since it was granted summary judgment in Johnson's lawsuit, the Owner is seeking only its defense costs.

The trial court entered an order granting the Insurance Company's motion for summary judgment. As relevant to this appeal, the order provides as follows:

It is the contention of [the Insurance Company] that this language [in the Absolute Pollution Exclusion] is clear and unambiguous and excludes any coverage for damages arising out of the lawsuit [filed by Johnson]. It is the contention of [the Loading Company and the Owner] that the language is inherently ambiguous and, therefore, is to be construed against the insurance carrier who drafted the agreement.

The Court has reviewed the cases which find the coverage ambiguous as well as those which find the exclusion is unambiguous and binding on the parties. The Court recognizes that exclusions in insurance contracts will be liberally interpreted in favor of the insured against the insuror if ambiguous. Sturgill v. Life Insurance Company of Georgia, 62 Tenn.App. 550, 465 S.W.2d 742 (Tenn. App.1970). The Court further recognizes it is to determine whether there is any material issue of law or fact which would preclude entry of the summary judgment. Byrd v. Hall, 847 S.W.2d 208 (Tenn.1993). The Court further recognizes that some courts have adopted the "reasonable expectation" doctrine, applied it to the Absolute Pollution Exclusion, and held the exclusion not enforceable. Atlantic Mutual Insurance Company v. McFadden, 413 Mass. 90, 595 N.E.2d 762 (1992).

This Court finds no ambiguity in the exclusion as applied to the instant case. The exclusion clearly applies to bodily injury or personal injury such as that suffered by James Gregory Johnson. This incident occurred because of the unintentional discharge or release or escape of a pollutant as defined by the contract, sulphuric acid. The definition of pollutant specifically includes acid. [The Owner] argues that sulphuric acid is not an acid within the definition of the policy. The Court is precluded from creating an ambiguity in an insurance contract where none exists and giving to words meanings other than those ordinarily understood. American National Property & Casualty v. Gray, 803 S.W.2d 693 (Tenn.Ct.App.1990). An ordinary person clearly would understand sulphuric acid to be an acid within the terms and provisions of the policy. Further, the incident giving rise to the case before the Court involved the unintentional discharge or release of a large quantity of sulphuric acid which is a pollutant by the contractual definition. Accordingly, the Court rejects the arguments made against the motion for summary judgment and grants summary judgment on the basis of the pollution exclusion contract.

Summary judgment also is sought on the basis that under the findings of Judge Thomas [in the underlying lawsuit by Johnson, the Owner] is not an additional insured under the vendor's endorsement as [the Owner] is not a seller or distributor of [the Loading Company's] products. Rather, [the Owner] was the distributor and owner of the product.¹ Therefore, the vendor's endorsement does not apply. . . . . Accordingly, judgment is entered in behalf of [the Insurance Company] on all claims. . . . .

(Footnote added).

II.

The Owner appeals, generally claiming the trial court erred when it granted the Insurance Company's motion for summary judgment. The Owner more specifically argues that the trial court erred when it concluded the Absolute Pollution Exclusion was applicable to the personal injuries suffered by Johnson while transferring the sulphuric acid. The Owner's third issue is its claim that the trial court erred when it concluded the Owner was not an additional insured under the insurance policy. The...