West American Ins. Co. v. Johns Bros., Inc.

• Citation: 435 F.Supp.2d 511
• Decision Date: 13 June 2006
• Docket Number: Civil Action No. 2:05cv506.
• Parties: WEST AMERICAN INSURANCE COMPANY, Plaintiff, v. JOHNS BROTHERS, INC., and Paula Thompson, individually and as parent and next friend of Ross Clapham and Kendal Clapham, and Paul Clapham, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

435 F.Supp.2d 511

WEST AMERICAN INSURANCE COMPANY, Plaintiff, v. JOHNS BROTHERS, INC., and Paula Thompson, individually and as parent and next friend of Ross Clapham and Kendal Clapham, and Paul Clapham, Defendants.

Civil Action No. 2:05cv506.

United States District Court, E.D. Virginia, Norfolk Division.

June 13, 2006.

Craig David Roswell, Jeffrey Allan Wothers, Kathleen Louise Henley Petty, Sung Bin Yhim, Niles Barton & Wilmer LLP, Baltimore, MD, for Plaintiff.

J. Gray Lawrence, Jr., William Lane Nuckols, Faggert & Frieden PC, Mark Randolf Baumgartner, Pender & Coward PC, Virginia Beach, VA, I. Lionel Hancock, III, Bohannon, Bohannon & Hancock, Norfolk, VA, for Defendants.

ORDER AND OPINION

FRIEDMAN, District Judge.

This matter is presently before the court on cross-motions for summary judgment. Plaintiff, West American Insurance Company, seeks a declaratory judgment that it is not required to defend nor indemnify Johns Brothers, Inc., a policy holder, in a lawsuit filed against Johns Brothers in state court by one of Johns Brothers' clients. After extensive briefing on the cross-motions for summary judgment, the parties agreed that a trial does not appear necessary and that in light of the parties stipulation to the operative facts and extensive briefing, oral argument on the cross-motions also does not appear necessary. After examination of the briefs and record, the court agrees that oral argument is unnecessary because the facts and legal arguments are adequately presented in written form. For the reasons set out herein, the court GRANTS defendant Johns Brothers' motion and DENIES plaintiff's motion.

I. Factual and Procedural Background

This matter arises from a heating oil spill that occurred at the residence of Paula Thompson, Paul Clapham, Ross Clapham, and Kendal Clapham ("the Claphams"). Johns Brothers, a residential heating oil supplier, both supplied heating oil to the Claphams' home and maintained the Claphams' heating system pursuant to a service contract. The underlying damage prompting the Claphams' lawsuit against Johns Brothers occurred as a result of a corroded oil return line that started leaking oil sometime between October 2004 and the end of January of 2005. During such period, the Claphams repeatedly contacted Johns Brothers complaining of oil odors inside their home and Johns Brothers made several visits to the Claphams' residence to monitor the heating system, deliver oil, and respond to the Claphams' complaints. Heating oil was delivered on the following dates and in the following amounts: October 29, 2004, 254.2 gallons; December 23, 2004, 144 gallons; and January 28, 2005, 162.9 gallons (Pretrial Conf. Order at I.15). Other visits were made on the following dates and the following services were performed: October 30, 2004, Johns Brothers replaced the furnace's fuel pump and checked operations; January 17, 2005, the furnace was tested to see if it still qualified for the service agreement; January 30, 2005, Johns Brothers discovered oil standing on the ground in the crawl space underneath the Claphams' home and closed off the oil tank; and January 31, 2005, the leaking oil return line was repaired (Compl. ¶¶ 12-19; Pretrial Conf. Order at I.21-22).

West American filed the instant action pursuant to this court's diversity jurisdiction seeking a declaratory judgment establishing that the damages sustained by the Claphams are not covered by the Commercial General Liability ("CGL") policy that plaintiff issued to Johns Brothers. West American and Johns Brothers agree that coverage turns on the application of the insurance policy's "Pollution Exclusion" to the facts before the court.¹ The court has previously entered an Order in this matter dismissing cross-claims for the underlying damages filed by the Claphams, and the parties have stipulated to the dismissal of two co-defendants: the Virginia Department of Environmental Quality and Petro-chem Recovery Services, Inc., the company that provided oil remediation services on the Claphams' property. The cross-motions for summary judgment have been fully briefed and are now ripe for review.

II. Standard of Review

Summary judgment is only appropriate when the court, viewing the record as a whole and in the light most favorable to the non-moving party, determines that there exists no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Terry's Floor Fashions, Inc. v. Burlington Indus., 763 F.2d 604, 610 (4th Cir.1985); Fed. Rule. Civ. Pro. 56(c). Although the court must draw all inferences in the non-movant's favor, once the movant has properly filed evidence supporting summary judgment, the non-moving party may not rest upon mere allegations in the pleadings, but must instead set forth specific facts in the form of exhibits and sworn affidavits illustrating a genuine issue for trial. Celotex, 477 U.S. at 322-24, 106 S.Ct. 2548; Cray Communications, Inc. v. Novatel Computer Sys., Inc., 33 F.3d 390, 393-94 (4th Cir.1994). In other words, while the movant carries the burden to show the absence of a genuine issue of material fact, when such burden is met, it is up to the non-movant to establish the existence of such an issue. Id.; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

Summary judgment is not reserved for situations where no factual issues are in dispute; rather, to find against the moving party the court must find both that material facts are in dispute and that the disputed issues are genuine. Fed Rule of Civ. Proc. 56(c). Disputed facts are material if they are necessary to resolving the case and to be genuine they must be based on more than speculation or inference. See Thompson Everett, Inc. v. National Cable Advertising, L.P., 57 F.3d 1317, 1323 (4th Cir.1995). If the moving party advances evidence suggesting that there is not a genuine and material dispute, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts," as the existence of a scintilla of evidence is insufficient to defeat a motion for summary judgment. Matsushita, 475 U.S. at 586, 106 S.Ct. 1348; Catawba Indian Tribe of S.C. v. South Carolina, 978 F.2d 1334, 1339 (4th Cir.1992). Resolution of the instant matter through a grant of summary judgment is "especially appropriate ... because the construction of insurance contracts is a legal question well suited for resolution by the court." Clark v. Metropolitan Life Ins. Co., 369 F.Supp.2d 770, 774 (E.D.Va.2005).

III. Analysis

West American and Johns Brothers agree that the resolution of this matter turns on the application of the pollution exclusion contained in the CGL policy issued by West American.² The pertinent text of the pollution exclusion states:

2. Exclusions

This insurance does not apply to:

. . . . .

f. Pollution

(1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants":

. . . . .

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations if the "pollutants" are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor.

(Def. Mo. Summ. J. Ex.E at OHIO 472-73).³ In applying the pollution exclusion to the instant facts, there are three separate questions the court must address. First, does heating oil qualify as a "pollutant." Second, even if heating oil qualifies as a pollutant in most circumstances, did the parties intend heating oil to be covered under the insurance policy at issue as the majority of Johns Brothers' revenue is derived from the sale of fuel oil and the service of equipment that utilizes such oil. Third, was Johns Brothers "performing operations" at the Claphams' home at the time the oil was released as contemplated by the language of the pollution exclusion.

A. Is Heating Oil a "pollutant"?

Johns Brothers argues that heating oil is not a "pollutant" under the insurance policy and therefore, damages caused by the release of heating oil into the ground are within the policy's coverage. The definition section of the CGL policy defines a "pollutant" as:

[A]ny solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

(Policy OHIO 485). Johns Brothers contends that the above quoted definition is ambiguous with respect to heating oil and therefore, must be construed in favor of coverage. See Lincoln Nat. Life Ins. Co. v. Commonwealth Corrugated Container Corp., 229 Va. 132, 137, 327 S.E.2d 98, 101 (1985) ("Because the policy language is ambiguous, it will be construed strictly against the insurer ... [and] the court will adopt that construction which will afford coverage."). Contract language is deemed ambiguous "when it may be understood in more than one way or when it refers to two or more things at the same time." Granite State Ins. Co. v. Bottoms, 243 Va. 228, 234, 415 S.E.2d 131, 134 (1992). However, language should not be deemed ambiguous "merely because the parties disagree as to the meaning of the terms used." Plunkett v. Plunkett, 271 Va. 162, 167, 624 S.E.2d 39, 42 (2006).

In contrast, West American contends that the pollution exclusion is unambiguous and that the court should look to federal and state statutes and state regulations in order to determine what qualifies as a pollutant. See City of Chesapeake v. States Self-Insurers Risk Retention Group, Inc., 628 S.E.2d 539 (2006). In City of Chesapeake, a case involving the release of trihalomethanes ("THMs"), the ...