Sylvester Bros. Development Co. v. Great Cent. Ins. Co.

• Decision Date: 28 January 1992
• Docket Number: No. C0-91-1080,C0-91-1080
• Citation: 480 N.W.2d 368
• Parties: SYLVESTER BROTHERS DEVELOPMENT COMPANY, d/b/a East Bethel Landfill, Appellant, v. GREAT CENTRAL INSURANCE COMPANY, et al., Defendants, The Federated Mutual Insurance Company, Respondent, Commercial Union Insurance Company, et al., Respondents, North River Insurance Company, a/k/a U.S. Insurance Group, Respondent. Auto-Owners Insurance Company, Respondent, Interstate Fire & Casualty Company, Respondent.
• Court: Minnesota Court of Appeals

Page 368

480 N.W.2d 368

SYLVESTER BROTHERS DEVELOPMENT COMPANY, d/b/a East Bethel

Landfill, Appellant, v. GREAT CENTRAL INSURANCE COMPANY, et al., Defendants, The Federated Mutual Insurance Company, Respondent, Commercial Union Insurance Company, et al., Respondents,

North River Insurance Company, a/k/a U.S. Insurance Group,

Respondent.

Auto-Owners Insurance Company, Respondent,

Interstate Fire & Casualty Company, Respondent.

No. C0-91-1080.

Court of Appeals of Minnesota.

Jan. 28, 1992.

Review Denied March 26, 1992.

Syllabus by the Court

First, there are genuine issues of material fact concerning whether the operator expected or intended the groundwater contamination. Second, release of contaminants from a landfill into the groundwater is the triggering event for purposes of determining the applicability of the pollution exclusion. Third, the exception to the pollution exclusion provision is not ambiguous because it is susceptible of one reasonable interpretation.

Forest D. Nowlin, Gary Hansen, Dawn L. Gagne, Timothy J. Dolan, Doherty, Rumble & Butler, P.A., St. Paul, for Sylvester Bros., Development Co. d/b/a East Bethel Landfill.

James Jardine, Joseph T. Treanor, Jardine, Logan & O'Brien, St. Paul, for Great Cent. Ins. Co., et al., and Federated Mut. Ins. Co.

John M. Anderson, Charles E. Lundberg, Bassford, Heckt, Lockhart, Truesdell & Briggs, P.A., Minneapolis, for Commercial Union Ins. Co., et al.

B.C. Hart, David E. Bergquist, Fabyanske, Svoboda, Westra, Holper & Davis, Minneapolis, Stephen H. Cohen, McElroy, Deutsch & Mulvaney, Morristown, N.J., for North River Ins. Co., a/k/a U.S. Ins. Group.

James A. Reding, Sylvia Ivey Zinn, Reding & Votel, St. Paul, for Auto-Owners Ins. Co.

Dale O. Thornsjo, Peterson & Hektner, Ltd., Minneapolis, for Interstate Fire & Cas. Co.

David E. Herr, Mary R. Vasaly, Maslon Edelman Borman & Brand, Minneapolis, for amicus curiae East Bethel PRP Group.

Hubert H. Humphrey, III, Atty. Gen., Stephen Shakman, Barbara Lindsey Sims, Sp. Asst. Attys. Gen., St. Paul, for amicus curiae State of Minn.

Larry D. Espel, Thomas J. Barrett, Thomas C. Mielenhausen, Popham, Haik, Schnobrich & Kaufman, Ltd., Minneapolis, for amici curiae Honeywell, Inc., et al.

Michael Berens, Andrea L. Sahlin, Kelly & Berens, P.A., Minneapolis, and Thomas W. Brunner, Carol Barthel, James M. Johnstone, Wiley, Rein & Fielding, Washington, D.C., for amicus curiae Ins. Environmental Litigation Assoc.

Robert M. Austin, Lauris A. Heyerdahl, Austin & Abrams, Minneapolis, and Diane L. Jennings, John B. Haarlow, Stephen M. Murray (of counsel), Lord, Bissell & Brook, Chicago, Ill., pro hac Vice, for amicus curiae John Richard Lundbrook Youell.

Considered and decided by SHORT, P.J., and SCHUMACHER, and KLAPHAKE, JJ.

OPINION

SHORT, Judge.

This action involves the question of insurance coverage for groundwater contamination caused by the leaching of pollutants from a landfill. Appellant Sylvester Brothers Development Company (the operator) brought an action for declaratory judgment against its general and excess insurance carriers to determine which of the insurance companies were liable to pay the costs of remedying the environmental damage. The operator reached settlement agreements with two insurance companies, Great Central Insurance Company and Northwestern National Insurance Company. The remaining insurers moved for summary judgment based primarily on the pollution exclusion clause in their respective policies. In granting summary judgment for the insurers, the trial court held the cost of remedying groundwater contamination was not covered as property damage under the insurance policies. On appeal, the operator argues the trial court erred in concluding the polluting activity was a continuous and repeated process and in interpreting the exception to the pollution exclusion provision. Even if the pollution exclusion clause does not bar the operator's claims, the insurers argue they are entitled to summary judgment because the groundwater contamination is not an "occurrence" as defined in their policies and the contamination was a "known risk." We affirm in part, reverse in part, and remand.

FACTS

In 1969, before there were state or county regulations governing disposal of waste, the operator established an open dump at the East Bethel landfill site in Anoka County. At that time, waste received by the operator included film and photo processing chemicals, oil filters containing waste oil, asphalt and solvents, paint, ink, liquid ether, foundry slag, asphalt tar, roofing materials, waste ash, kerosene, oil-soaked rags, cleaning solvents and dry cleaning solvents. Some of the waste arrived in 55-gallon drums. Before covering the drums with soil, the operator instructed its employees to puncture the drums to allow their contents to drain onto the ground. This procedure was believed necessary to minimize the risk of explosion when the drums were crushed or compacted. At that time, operators believed the soil underlying a dump or landfill would act as a filter to prevent pollutants from migrating into and contaminating the groundwater.

In 1970 and 1971, regulations were adopted by both the Minnesota Pollution Control Agency (MPCA) and Anoka County which prohibited the acceptance of toxic and hazardous waste by landfills because of the potential for causing groundwater problems. Following promulgation of these regulations, the operator ran the East Bethel site as one of the state's first sanitary landfills. Anoka County recommended that hazardous wastes be placed into a transfer facility until they could be removed to an approved hazardous waste facility. As part of the licensing requirement, the operator also installed wells to provide access for monitoring the groundwater.

In 1974, East Bethel became a "modified sanitary" landfill, accepting only demolition fill, certain waste generated by companies involved in the construction industry and municipal solid waste brought by individuals living in the area. The landfill continues to operate as a modified sanitary/demolition landfill today.

In 1980, Anoka County hired an engineering firm to evaluate data collected from the testing of groundwater at four of the county's landfill sites. In January of 1981, the engineering firm submitted a report to Anoka County which stated the liquid that percolated through the landfill (leachate) from the waste deposits had affected the groundwater quality.

Based on the available data, it is concluded that leachate migration from [East Bethel] likely does not represent an imminent health hazard. Site specific landfill monitoring data, however, indicate that leachate migration from * * * East Bethel * * * has affected the quality of the surface groundwater systems downgradient of the refuse * * * * This finding is based on groundwater monitoring which shows elevated levels of parameters which are indicative of landfill leachate in monitoring wells downgradient of the refuse * * * * Data collected in 1978 by the MPCA confirmed that Well 3 is the well that is most affected by leachate * * * *

Based upon the preceding evaluation, leachate is being generated by this landfill and has impacted the quality of groundwater at Well 3 and at the trailer well. The groundwater elevation data indicate that leachate from a portion of the landfill will move to the southwest and that leachate from the remaining portion of the landfill will move to the wetland tributary to Neds Lake. The data do not indicate the presence of an imminent hazard but potential risks are that the leachate plume could move to the southwest and affect existing or future water supply wells in that area; that groundwater mounding beneath the refuse could cause leachate to migrate radially from the landfill and affect possible future wells northwest of the landfill; and that vertical migration could occur in the future and affect the quality of deeper aquifers. Until the present limits and quality of the leachate plume are better defined, the likelihood of these risks occurring cannot be predicted. The existing monitoring system is not adequate to define the limits of the leachate plume.

(Emphasis in original.) On January 22, 1981, Anoka County sent a copy of this report to the operator. The letter accompanying the report expressly referred to "the impact of landfill on our groundwater resources."

In June 1982, a report prepared by another engineering firm indicated the leachate impact had extended beyond the southern boundary of the East Bethel site. In 1984, engineers concluded there was extensive groundwater contamination at East Bethel. The MPCA placed East Bethel on the permanent list of priorities established under the Minnesota Environmental Response and Liability Act (MERLA), Minn.Stat. ch. 115B (1984). The MPCA notified the operator it was considered a potentially responsible party for studying and remediating the groundwater contamination. Further review and examination of soil and groundwater quality confirmed that East Bethel could be the source from which hazardous substances were entering the groundwater.

In 1985, the MPCA requested the operator to sign a consent order agreeing to perform an investigation and cleanup of groundwater contamination at East Bethel. Under the consent order, the operator is obligated to pay the costs it incurs in performing these activities and to reimburse the MPCA for any costs it incurs in supervising, reviewing and performing tests relative to the MERLA study and remedial action. The operator seeks to recover all of these costs from its insurers.

ISSUES

I. Are there disputed fact issues concerning whether the operator expected groundwater contamination at the East Bethel site?

II. What is the critical event for purposes of determining the applicability of the pollution exclusion provision?

III. Is the exception to the pollution exclusion clause ambiguous?

IV. Did the operator improperly submit materials on...