Western World Ins. Co. v. Stack Oil, Inc.

• Decision Date: 26 December 1990
• Docket Number: No. 626,D,626
• Citation: 922 F.2d 118
• Parties: , 21 Envtl. L. Rep. 21,044 WESTERN WORLD INSURANCE COMPANY, Plaintiff-Appellee, v. STACK OIL, INC., Defendant-Appellant. ocket 90-7534.
• Court: U.S. Court of Appeals — Second Circuit

Page 118

922 F.2d 118

32 ERC 1709, 21 Envtl. L. Rep. 21,044

WESTERN WORLD INSURANCE COMPANY, Plaintiff-Appellee, v. STACK OIL, INC., Defendant-Appellant.

No. 626, Docket 90-7534.

United States Court of Appeals Second Circuit.

Argued Nov. 28, 1990.

Decided Dec. 26, 1990.

Jonathan J. Einhorn, New Haven, Conn. (Jonathan J. Einhorn, P.C., New Haven, Conn.) for appellant.

Robert G. Oliver, New Haven, Conn. (Mulvey, Oliver, Gould & Riccio, New Haven, Conn., of counsel) for appellee.

Before OAKES, CARDAMONE and McLAUGHLIN, Circuit Judges.

McLAUGHLIN, Circuit Judge:

Defendant-appellant Stack Oil, Inc. ("Stack") appeals from a summary judgment entered in the United States District Court for the District of Connecticut (Ellen Bree Burns, Chief Judge ) in favor of plaintiff-appellee Western World Insurance Company ("Western World"). Western World, the insurer, sought a declaration that it was not obligated by the insurance policy it issued to indemnify Stack, the insured, for losses sustained when vandals caused fuel oil to escape from one of Stack's holding tanks. Stack counterclaimed for a declaration that Western World was obligated to indemnify it. The district court held that a "Total Pollution Exclusion" endorsement to the policy totally excluded coverage for Stack's clean-up expenses and related costs. We agree with the district court and affirm the judgment.

BACKGROUND

Stack sells fuel oil. On September 26, 1985, Western World issued to Stack a Manufacturer's and Contractor's Liability Insurance Policy (the "policy"). The policy was effective for one year from September 26, 1985. One month later, on October 22, 1985, vandals entered Stack's property and opened a storage tank valve, causing approximately 70,000-80,000 gallons of fuel oil to flow into nearby waterways. Stack incurred massive clean-up costs, and demanded that Western World cover approximately $240,000 of these expenditures. In the belief that the act of vandalism was "sudden and accidental," Stack based its demand upon the following clause in the policy:

This 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 water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

(emphasis added).

Western World denied coverage, citing an endorsement to the policy entitled "Total Pollution Exclusion." The endorsement, dated the same day as the oil spill, October 22, 1985, but effective retroactive to September 26, 1985, provides:

This insurance does not apply to bodily injury, personal injury, or property damage arising out of pollution or contamination caused by the discharge or escape of any pollutants or contaminants.

Thus, the endorsement, if effective, excludes all pollution damage, whether accidental or otherwise.

Stack disclaims all knowledge of the Total Pollution Exclusion endorsement and argues that it is simply not part of the policy. Accordingly, the facts surrounding the procurement of the policy with Western World are crucial.

Stack had previously placed its insurance with Security Insurance Company ("Security"), but its policy with Security had been cancelled effective August 20, 1985. Stack then directed William Guerrera, its insurance agent, to get the same coverage with some other company as soon as possible.

Guerrera contacted Continental Insurance Agency of Connecticut ("Continental"), which had authority to bind coverage on behalf of Western World, to discuss Western World's willingness to issue Stack the required insurance. Denise Borrelli, a Continental employee, discussed with Guerrera the terms of Western World's policy, including the fact that the policy did not afford coverage for pollution. Guerrera admitted at his deposition that he informed a principal at Stack that Western World's policy "contained no pollution [coverage]."

Anxious to remedy its uninsured status but unable to obtain insurance elsewhere, Stack authorized Guerrera to secure the policy from Western World. On or about September 26, 1985, Guerrera contacted Continental and agreed to take the coverage provided by Western World. Guerrera was admittedly not an agent of Western World, yet for reasons not entirely clear from the record, Guerrera issued to Stack a certificate of insurance, which did not contain the Total Pollution Exclusion endorsement. When Continental learned this, it reissued the certificate of insurance containing the Total Pollution Exclusion endorsement. As fate would have it, the endorsement was dated the very day of the oil spill.

Western World commenced this action for declaratory relief to determine its liability under the policy. The district court granted Western World's motion for summary judgment, finding that the Total Pollution Exclusion endorsement was intended to be part of the policy Western World issued, that the exclusion precluded coverage, and that Stack, through its authorized agent Guerrera, was aware of this from the beginning. This appeal followed.

DISCUSSION

Upon a motion for summary judgment, "the court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Insurance Co., 804 F.2d 9, 11 (2d Cir.1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987). When the movant demonstrates through competent evidence that no material facts are genuinely in dispute, the non-movant "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The non-movant cannot "escape summary judgment merely by vaguely asserting the existence of some unspecified disputed material facts," Borthwick v. First Georgetown Securities, Inc., 892 F.2d 178, 181 (2d Cir.1989), or defeat the motion through "mere speculation or conjecture." Knight, supra, 804 F.2d at 12 (citing Quarles v. General Motors Corp., 758 F.2d 839, 840 (2d Cir.1985) (per curiam)). Finally, the existence of disputed facts that are immaterial to the issues at hand is no impediment to summary judgment. See id. at 11-12.

Stack claims that the district court, in granting Western World's motion for summary judgment, impermissibly resolved disputed factual issues. Specifically, Stack argues that there is a genuine issue as to whether the Total Pollution Exclusion endorsement was part of the policy and whether Stack knew that there was no coverage for losses caused by pollution.

Under Connecticut law, the rules of contract construction govern the interpretation of an insurance policy. See Cunninghame v. Equitable Life Assurance Society, 652 F.2d 306, 308 (2d Cir.1981) (citing Simses v. North American Co. for Life and Health Insurance, 175 Conn. 77, 84, 394 A.2d 710 (1978); Roy v. Allstate Insurance Co., 34 Conn.Supp. 650, 383 A.2d 637 (Super.Ct.1978)). When the terms of an insurance policy are clear and unambiguous, they must be accorded their ordinary meaning. See id. "[T]he meaning of particular language found in insurance policies should be examined 'in light of the business purposes sought to be achieved by the parties and the plain meaning of the words chosen by them to effect those purposes.' " Newmont Mines Ltd. v. Hanover Insurance Co., 784 F.2d 127, 135 (2d Cir.1986) (quoting Champion International Corp. v. Continental Casualty Co., 546 F.2d 502, 505 (2d Cir.1976), cert. denied, 434 U.S. 819, 98 S.Ct. 59, 54 L.Ed.2d 75 (1977)).

Where recovery under a policy turns on the interpretation of an exclusionary clause, the insurer bears the burden of demonstrating that the loss is excluded under the express terms of the policy. See M.H. Lipiner & Son, Inc. v. Hanover Insurance Co., 869 F.2d 685, 687 (2d Cir.1989). If the exclusionary clause is ambiguous, the court must construe it in the manner most favorable to the insured. See id.

The interpretation of an insurance policy must extend to any endorsements thereto. See Schultz v. Hartford Fire Insurance Co., 213 Conn. 696, 705, 569 A.2d...