St. Paul v. Warwick ( 1994 )

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 93-1721
ST. PAUL FIRE AND MARINE INSURANCE COMPANY,
Plaintiff-Appellee,
v.
WARWICK DYEING CORPORATION,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ronald R. Lagueux, U.S. District Judge]
Before
Torruella, Cyr and Boudin,
Circuit Judges.
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, Assistant Attorney General and Environmental
Advocate, Office of the Attorney General, and Jeffrey B. Pine,
Attorney General 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.
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Laura A. Foggan, Lon A. Berk, Celiza P. Braganca and Wiley,
Rein & Fielding on brief for Insurance Environmental Litigation
Association, amicus curiae.
June 22, 1994
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TORRUELLA, Circuit Judge. 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.
I. BACKGROUND
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.
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A. The Claims
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. 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. 9604, 9606(a) &
9607(a).
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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 (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 104(e) & 106(a) of CERCLA, 42 U.S.C.
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
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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
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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.
B. The Insurance Contract
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
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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 exception to the exclusion.
The district court initially issued an order on March 18, 1993,
adopting this recommendation. On the same day, Warwick moved for
reconsideration in light of "newly discovered evidence" regarding
representations made to state insurance regulatory authorities
about the meaning of the pollution exclusion clause. The
district court responded by recalling its order and vacating the
judgment. After additional briefing, however, the court again
adopted the magistrate's recommendation and, on June 4, 1993,
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entered a judgment for St. Paul.
II. CONSTRUCTION OF THE INSURANCE CONTRACT
We review the district court's interpretation of St.
Paul's insurance contract de novo, LaSorsa v. Unum Life Ins. Co.,
955 F.2d 140, 146 (1st Cir. 1992); CPC Int'l, Inc. v. Northbrook
Excess & Surplus Ins. Co., 962 F.2d 77, 91 (1st Cir. 1992), to
determine if Warwick's claims are excluded from coverage as a
matter of law.
Rhode Island law governs the construction of the
insurance policy in this case. To interpret contested terms of
an insurance policy under Rhode Island law, the "policy must be
examined in its entirety and the words used must be given their
plain everyday meaning." McGowan v. Connecticut Gen. Life Ins.
Co., 289 A.2d 428, 429 (R.I. 1972); see also Textron, Inc. v.
Aetna Casualty and Surety Co., 638 A.2d 537, 539 (R.I. 1994);
Malo v. Aetna Casualty and Surety Co., 459 A.2d 954, 956 (R.I.
1983). "[W]hen the terms of an insurance policy are found to be
clear and unambiguous, judicial construction is at an end. The
contract terms must be applied as written and the parties bound
by them." Amica Mut. Ins. Co. v. Streicker, 583 A.2d 550, 551
(R.I. 1990) (citing Malo, 459 A.2d at 956); Hughes v. American
Universal Ins. Co., 423 A.2d 1171, 1173 (R.I. 1980). Language
that is found to be ambiguous or capable of more than one
reasonable interpretation will be construed liberally in favor of
the insured and strictly against the insurer. Bartlett v. Amica
Mut. Ins. Co., 593 A.2d 45, 47 (R.I. 1991) (citing Streicker, 583
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A.2d at 552); Pressman v. Aetna Casualty and Surety Co., 574 A.2d
757, 759-60 (R.I. 1990). However, a "policy is not to be
described as ambiguous because a word is viewed in isolation or a
phrase is taken out of context. A court should not, through an
effort to seek out ambiguity when there is no ambiguity, make an
insurer assume a liability not imposed by the policy." McGowan,
289 A.2d at 429; see also Textron, 638 A.2d at 539, 541;
Bartlett, 593 A.2d at 47; Streicker, 583 A.2d at 552.
To our knowledge, no Rhode Island court has interpreted
or discussed the pollution exclusion clause at issue in this
case. We therefore decide this case according to the
aforementioned principles of contract construction under Rhode
Island law with guidance from the collected wisdom of other
courts applying similar principles of insurance contract
interpretation.
Finally, although the parties agree that insurance
companies bear the burden of proving that a policy exclusion bars
coverage of a claim, the parties disagree over who bears the
burden of proving whether or not an exception to the exclusion,
such as the "sudden and accidental" exception at issue here,
affords coverage in a particular case. Warwick argues that
because the exception is part of the exclusionary clause, St.
Paul must prove that the exception applies as well. See New
Castle County v. Hartford Accident & Indemnity Co, 933 F.2d 1162,
1182 (3d Cir. 1991) (finding that the burden of proof is on the
insurer under Delaware law), cert. denied, 113 S. Ct. 1846-10-
(1993). The last time we considered this issue, we stated that
the insured bears the burden of establishing that an exception to
a pollution exclusion provision has been satisfied. A. Johnson &
Co. v. Aetna Casualty & Surety Co., 933 F.2d 66, 76 n.14 (1st
Cir. 1991) (citing 19 G. Couch, Couch on Insurance 79: 385 (2d
ed. 1983)) (applying Maine law).
We think that the Supreme Court of Rhode Island would
agree with our position in A. Johnson. Once the insurer has
established that the pollution exclusion applies, coverage
depends on the applicability of the exception. Because the
insured bears the burden of establishing coverage under an
insurance policy, it makes sense that the insured must also prove
that the exception affords coverage after an exclusion is
triggered. Northern Insurance Co. v. Aardvark Assocs., Inc., 942
F.2d 189, 194-95 (3d Cir. 1991); Fireman's Fund Ins. Cos. v. Ex-
Cell-O Corp., 702 F. Supp. 1317, 1328-29 (E.D.Mich. 1988); Borg-
Warner Corp. v. Insurance Co. of N. Am., 577 N.Y.S.2d 953, 957
(N.Y. App. Div. 1992). We find, therefore, that Warwick bears
the burden of establishing that the discharge of its waste was
"sudden and accidental" under the exception to the pollution
exclusion.
III. THE POLLUTION EXCLUSION
The pollution exclusion clause of the St. Paul-Warwick
insurance policies bars coverage for "property damage arising out
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of the discharge, dispersal, release or escape"1 of pollutants
of waste materials unless the discharge is "sudden and
accidental" (emphasis added). The issue before us is whether the
district court erred in finding that the discharge of Warwick's
wastes at the L&RR landfill was neither sudden nor accidental and
thus not covered under the policies.
State and federal courts are fairly evenly divided over
the meaning and application of the "sudden and accidental"
exception to the pollution exclusion clause. See, e.g., CPC
Int'l, Inc. v. Northbrook Excess & Surplus Ins. Co., 962 F.2d 77,
92 (1st Cir. 1992) (reprinting two footnotes from New Castle, 933
F.2d at 1195, listing 24 cases holding that the pollution clause
bars coverage and 26 cases holding the opposite).2 Most courts
part company on the issue of whether the term "sudden" is
ambiguous -- in which case the policy is construed in the
insured's favor to provide coverage -- or unambiguous, in which
case insurance coverage is usually barred. Because most cases
involve some kind of gradual release of pollutants into the
environment over an extended period of time, courts finding a bar
to coverage under the exclusion have construed "sudden" as
1 We hereinafter employ the term "discharge" to refer to the
phrase, "discharge, dispersal, release or escape" in the
pollution exclusion.
2 Amicus for St. Paul, Insurance Environmental Litigation
Association, provides a list of 74 state and federal cases
holding that the term "sudden" in the pollution exclusion clause
clearly has a temporal meaning that favors insurers. We do not
doubt for a minute that there are another 74 cases holding that
the term is ambiguous, which favors the insureds.
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unambiguously meaning "abrupt" or "immediate." E.g., Hartford
Accident & Indem. Co. v. U.S. Fidelity & Guar. Co., 962 F.2d
1484, 1487-90 (10th Cir.), cert. denied, 113 S. Ct. 411 (1992);
Aetna Casualty & Surety Co. v. General Dynamics Corp., 968 F.2d
707, 710 (8th Cir. 1992); A. Johnson, 933 F.2d at 72-74;
Aardvark, 942 F.2d at 191-94; Ogden Corp. v. Travelers Indemnity
Co., 924 F.2d 39, 42 (2d Cir. 1991); FL Aerospace v. Aetna
Casualty & Surety Co., 897 F.2d 214, 219 (6th Cir.), cert.
denied, 498 U.S. 911 (1990); Dimmitt Chevrolet, Inc. v.
Southeastern Fidelity Ins. Corp., No. 78293, 1993 WL 241520, at
*1-5 (Fla. July 1, 1993); Hybud Equip. Corp. v. Sphere Drake Ins.
Co., 597 N.E.2d 1096, 1100-03 (Ohio 1992), cert. denied, 113 S.
Ct. 1585 (1993); Upjohn Co. v. New Hampshire Ins. Co., 476 N.W.2d
392 (Mich. 1991); Lumbermens Mutual Casualty Co. v. Belleville
Industries, Inc., 555 N.E.2d 568, 572-73 (Mass. 1990); Waste
Management of Carolinas, Inc. v. Peerless Ins. Co., 340 S.E.2d
374, 381-83 (N.C. 1986); Borg-Warner, 577 N.Y.S.2d at 957; Mays
v. Transamerica Ins. Co., 799 P.2d 653, 657 (Or. App. 1990).
Courts construing the exception to the exclusion as affording
coverage for gradual discharges of pollutants have found that
"sudden" could reasonably mean "unintended and unexpected."
E.g., New Castle, 933 F.2d at 1193-1203; Morton Int'l, Inc. v.
General Accident Ins. Co., 629 A.2d 831, 847-876 (N.J. 1993);
Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204,
1210, 1217-21 (Ill. 1992); Hecla Mining Co. v. New Hampshire Ins.
Co., 811 P.2d 1083, 1091-92 (Colo. 1991); Claussen v. Aetna
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Casualty & Surety Co., 380 S.E.2d 686, 688-89 (Ga. 1989). Even
this Circuit has split over the meaning of "sudden and
accidental" in the application of different state laws. Compare
CPC Int'l, 962 F.2d at 91-98 (finding "sudden" ambiguous), with
Lumbermens Mut. Casualty Co. v. Belleville Indus., Inc., 938 F.2d
1423, 1429-30 (1st Cir. 1991) (finding "sudden" unambiguous),
cert. denied, 112 S. Ct. 969 (1992); A. Johnson, 933 F.2d at 72-
74 (same); Great Lakes Container Corp. v. National Union Fire
Ins. Co., 727 F.2d 30, 33-34 (1st Cir. 1984) (same).
This case, however, can be decided without determining
whether "sudden" is ambiguous or unambiguous. Despite the deep
divisions in their holdings, almost all courts agree, and the
parties to this case agree as well, that the term "sudden and
accidental," means, at the very least, "unintended and
unexpected." E.g., CPC Int'l, 962 F.2d at 91-98; Hartford, 962
F.2d at 1488; New Castle, 933 F.2d at 1192-99; Upjohn, 476 N.W.2d
at 392; Hecla, 811 P.2d at 1091-92. In other words, intentional
and expected discharges of pollutants are not covered under
policies with the standard pollution exclusion. Because we agree
with the district court that the discharge of pollutants was not
unintended and unexpected in this case, we uphold the summary
judgment order on that ground without reaching the issue of
whether the term "sudden," as used in the policy, is ambiguous.
Certain facts of this case are not in dispute. Warwick
purposefully arranged to have its waste materials collected and
hauled off its property. Those materials were disposed of in the
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L&RR landfill. At the same time, Warwick presumed that its
wastes were disposed of lawfully and properly. It neither
expected nor intended that contamination of the environment would
result from the disposal of its wastes.
The district court found that Warwick's arrangement for
ACME to dispose of its waste in the regular course of business
was sufficient to establish that the relevant discharge was
"intentional and expected" and thus not "accidental." On appeal,
Warwick argues that the district court erred in attributing
Warwick's act of generating the waste and arranging for its
disposal with ACME's act of discharging the waste at the L&RR
Site. Additionally, Warwick contends that the court erred in
finding the relevant discharge to be the disposal of waste at the
landfill instead of the subsequent escape of pollutants from the
landfill into the surrounding environment. We reject both
arguments.
A. Arranging for discharge versus making the discharge
Warwick maintains that the pollution exclusion does not
apply when the discharges are made by a third party, such as a
waste hauler like ACME. Rather, Warwick argues, the relevant
discharge must be one by the insured itself. Because ACME, and
not Warwick, discharged this waste in this case, Warwick
concludes that no discharge has occurred that would trigger the
pollution exclusion to begin with. This argument has previously
been rejected by a number of courts. See Aardvark, 942 F.2d at
194; United States Fidelity & Guar. Co. v. George W. Whitesides
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Co., 932 F.2d 1169, 1170-71 (6th Cir. 1991); Polaroid Corp. v.
Travelers Indem. Co., 610 N.E.2d 912, 916 (Mass. 1993); Powers
Chemco, Inc. v. Federal Ins. Co., 548 N.E.2d 1301, 1302 (N.Y.
1989); Borg-Warner, 577 N.Y.S.2d at 958; see also A. Johnson, 933
F.2d at 72 n.9 (noting that the pollution exclusion "does not by
its terms take account of an insured's status as a passive
polluter").
While it is true that the act of arranging for a third
party to haul away one's waste is not in and of itself any kind
of discharge upon land, that fact is irrelevant to the question
of whether the discharge from which the pollution damage arose
was expected or intended. The plain and unambiguous language of
the pollution exclusion concerns "property damage arising out of
the discharge," not "its discharge" or "the insured's discharge."
We thus see nothing in the policy to indicate that the exclusion
is limited to discharges by the insured. See, e.g., Park-Ohio
Indus., Inc. v. Home Indemnity Co., 975 F.2d 1215, 1222 (6th Cir.
1992); Aardvark, 942 F.2d at 194; Borg-Warner, 577 N.Y.S.2d at
958.
Contrary to Warwick's assertions, there is no
meaningful distinction in this case between arranging for waste
to be hauled off for disposal and actually disposing of the waste
in a landfill. For purposes of the exclusion, neither action was
unexpected or unintended by Warwick.3 Although Warwick did not
3 There is strong disagreement among the parties and, not
surprisingly, among the courts, over the issue of whether the
discharge must be unintended and unexpected from the standpoint
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know the particular site where its waste would be disposed, and,
indeed, the record does not reveal whether Warwick actually knew
that its waste would be deposited in a landfill to begin with
(presumably, Warwick intended and expected that its wastes were
being "taken care of" without knowing any specific details of
their disposal),4 we think this case provides every indication
that the disposal of waste in the L&RR landfill was, at the very
least, not unexpected or unintended.
The relevant inquiry is not confined to whether Warwick
actually knew or planned that the discharge would occur.
Instead, the relevant inquiry, according to the language of the
exception to the pollution exclusion -- "this exclusion does not
of the insured or from the standpoint of some other party who is
more closely connected to the actual discharge of the waste. As
this issue does not affect our holding, we proceed under the
assumption that the relevant point of view is that of the
insured, Warwick. We do not decide, however, whether this is in
fact the proper construction of the contract.
4 In a September 14, 1988, letter to the EPA, Warwick's
President stated: "It was believed by the writer that the liquid
waste was to be carried to a waster-water [sic] sewage treatment
facility since the waste was acceptable to the West Warwick Sewer
System." The language of this statement indicates that Warwick
never bothered to find out, or even to inquire about, where its
waste was going. It does not indicate that Warwick was told that
ACME would bring its waste to a sewage treatment facility or that
disposing of its waste in a landfill was against Warwick's
intentions. Moreover, this statement indicates that Warwick did
not intend for its waste to be handled in any particular fashion
beyond merely dumping it down the sewer. Notations on the L&RR
manifests, recording ACME's disposal of Warwick's waste at the
landfill, state that, "this product normally goes to [the] sewer.
This is the sludge that collects on the bottom [of Warwick's
waste pit]." The disposal of the waste into a landfill was
consistent with Warwick's normal treatment of the waste -- a
general disposal into the normal sanitation infrastructure. In
light of this fact, ACME's discharge of Warwick's waste into the
landfill could not be viewed as unexpected or unintended.
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apply if such discharge . . . is sudden and accidental" -- is
whether the discharge is "accidental," meaning "unexpected or
unintended." Coverage is only afforded if the discharge is
neither expected nor intended. "The courts are practically
agreed that the words 'accident' and 'accidental' mean that which
happens by chance or fortuitously, without intention or design,
and which is unexpected, unusual and unforeseen." Aetna Casualty
& Surety Co. v. General Dynamics Corp., 968 F.2d 707, 710 (8th
Cir. 1992) (quoting St. Paul Fire & Marine Ins. Co. v. Northern
Grain Co., 365 F.2d 361, 364 (8th Cir. 1966)).
We think it would strain common sense to find that
ACME's disposal of Warwick's waste in a landfill was unexpected
or unintended by Warwick. A landfill is a sufficiently common,
if not likely, destination for the disposal of waste. We see no
error in presuming that a party arranging to have its waste
disposed of by a licensed hauler would not find it fortuitous,
unforeseen, unusual, or otherwise contrary to its expectations
that its waste was disposed of at a landfill. This is not a case
where ACME did something surprising or out of the ordinary with
the waste after collecting it from Warwick. ACME did not dump
the waste in a river or at an illegal dumping ground. Despite
the affidavit from an ACME driver stating that waste was poured
directly onto the ground, the EPA and private party suits against
Warwick allege no wrongdoing or improper dumping at the Site.
The essence of the EPA's letter and order is that the property
damage at the Site arose as a result of hazardous substances
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being placed in the landfill to begin with; there is no
intermediate event of discharge that Warwick can point to as
being unexpected or unintended from its standpoint.
B. The Relevant Discharge at the L&RR Landfill
Warwick argues that even if the disposal of its wastes
at the L&RR Site was intended and expected, this was not the
relevant discharge under the pollution exclusion clause. Warwick
claims that after the disposal of its waste, some subsequent
unexpected and unintended release of hazardous substances at the
Site occurred which led to the damage in this case. The issue of
whether the proper object of Warwick's intentions and
expectations is the disposal of waste materials at the Site or
some other discharge of pollutants is resolved by reference to
the contract. The language of the pollution exclusion is clear
that coverage does not exist for "property damage arising out of
the discharge" of waste materials or other pollutants "into or
upon land" unless "such discharge . . . is sudden and
accidental." Clearly, the occurrence that must be sudden and
accidental -- or, for our purposes, unintentional and unexpected
-- is the discharge of pollutants "into or upon land" from which
the property damage arose.
It is well established that whether the damages were
intended or expected is irrelevant; the pollution exclusion
plainly refers to the discharge and not to the environmental
damages themselves. A. Johnson, 933 F.2d at 72 (1st Cir. 1991);
Patz v. St. Paul Fire & Marine Ins. Co., No. 93-2135, 1994 WL
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27280 (7th Cir. Feb. 2, 1994); Anaconda Minerals Co. v. Stoller
Chemical Co., 990 F.2d 1175, 1179 (10th Cir. 1993); Liberty
Mutual Ins. Co. v. Triangle Industries, Inc., 957 F.2d 1153,
1157-58 (4th Cir.), cert. denied, 113 S. Ct. 78 (1992); Broderick
Investment Co. v. Hartford Accident & Indem. Co., 954 F.2d 601,
606-07 (10th Cir.), cert. denied, 113 S. Ct. 189 (1992); New
Castle, 933 F.2d at 1169, 1199-1202 & n.68; Morton Int'l, Inc. v.
General Accident Ins. Co., 629 A.2d 831, 847-48 (N.J. 1993);
Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc.,
555 N.E.2d 568, 571 (Mass. 1990); Technicon Electronics Corp. v.
American Home Assurance Co., 542 N.E.2d 1048, 1050-51 (N.Y.
1989).5 On the facts before us, the relevant discharge is the
disposal of the waste into the landfill, not some other
unspecified occurrence.
The EPA and the private complainants allege that
Warwick is liable for cleanup and other response costs at the
L&RR Site because Warwick arranged for the disposal of waste at
the Site. In essence, the EPA's order, as well as the subsequent
5 For the same reason, it is not relevant whether or not Warwick
actually knew that its waste materials contained hazardous
substances. Independent Petrochemical Corp. v. Aetna Casualty &
Surety Co., 781 F. Supp. 9, 16-17 (D.D.C. 1991), aff'd, 995 F.2d
305 (D.C. Cir. 1993), same finding on this issue in later
proceeding, 842 F. Supp. 575, 584-85 (D.D.C. 1994); Anaconda
Minerals Co. v. Stoller Chemical Co., 773 F. Supp. 1498, 1506
(D.Utah 1991), aff'd, 990 F.2d 1175 (10th Cir. 1993). The
exclusion bars coverage so long as the discharge of "waste
materials" was expected and intended and as long as the property
damage is "arising out of" this discharge. On this latter point,
the EPA's claim that Warwick's waste contained acids and volatile
organic compounds which contributed to the contamination of the
Site was sufficient to trigger the pollution exclusion.
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lawsuit based upon the EPA's actions, state that waste containing
hazardous substances was placed in the L&RR landfill and, as a
result, the environment surrounding the landfill was contaminated
and faced the risk of continued contamination unless remedial
measures were taken to shore up the landfill. No cause of the
contamination, other than the fact that hazardous substances were
placed in the landfill, is mentioned in the order or in the
complaint.
According to these facts, the "property damage" at
issue is the contamination of the environment at the L&RR Site as
well as the condition of the landfill itself, which threatens
future contamination. As a result, the relevant discharge from
which the damage arose is clearly the disposal of waste
containing hazardous substances into the landfill. There is no
intermediate discharge onto the land causing the damage to the
environment. This is not a case involving ruptured or exploding
tanks, leaking drums, or even some sort of improper dumping of
waste after its arrival at the Site. Although the record
contains an affidavit from one of ACME's drivers stating that he
dumped waste directly onto the ground, the EPA and the other
claimants make no allegation that any improper disposal of wastes
occurred at the L&RR Site that might have been unexpected or
unintended. In sum, because there is no evidence of any
intervening discharge between the disposal of waste on the
landfill and the actual damage that eventually resulted, the
initial disposal of waste at the Site was the relevant discharge
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which must be sudden and accidental for coverage to exist under
the exception to the pollution exclusion. See, e.g., Broderick,
954 F.2d at 607; Hartford, 962 F.2d at 1490-92; Aardvark, 942
F.2d at 194-96; A. Johnson, 933 F.2d at 72; Triangle Indus., 957
F.2d at 1157-58; Oklahoma Pub. Co. v. Kansas City Fire & Marine
Ins. Co., 805 F. Supp. 905, 910 (W.D.Okla. 1992); G. Heileman
Brewing Co. v. Royal Group, Inc., 779 F. Supp. 736, 740 (S.D.N.Y.
1991), aff'd, 969 F.2d 1042 (2d Cir. 1992); Hybud, 597 N.E.2d at
1103; Liberty Mutual Ins. Co. v. SCA Services, Inc., 588 N.E.2d
1346, 1350-51 (Mass. 1992); Borg-Warner, 577 N.Y.S.2d at 957-58;
Mays, 799 P.2d at 657.
Warwick argues that the damage in this case arose from
the release of pollutants from the landfill into the surrounding
environment -- a discharge that was neither expected nor
intended. To put it another way, the relevant discharge for
purposes of the pollution exclusion was the escape of hazardous
substances from a state of containment at the L&RR landfill into
or upon the land outside the confines of the landfill. Warwick
highlights the EPA statement that "the landfill continues to
release Hazardous Substances to the environment." At the very
least, Warwick asserts, the language of the pollution exclusion
is ambiguous as to the meaning of "discharge" in this context
where several possible releases exist. See, e.g., Patz v. St.
Paul Fire & Marine Ins. Co., No. 93-2135, 1994 WL 27280, at *3-5
(7th Cir. Feb. 2, 1994); F.L. Aerospace v. Aetna Casualty &
Surety Co., 897 F.2d 214, 220 (6th Cir. 1990); Nestle Foods Corp.
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v. Aetna Casualty & Surety Co., 842 F. Supp. 125, 131-32 (D.N.J.
1993); Pepper's Steel & Alloys, Inc. v. United States Fidelity &
Guar. Co., 668 F. Supp. 1541, 1549 (S.D.Fla. 1987); Queen City
Farms, Inc. v. Central Nat'l Ins. Co., 827 P.2d 1024 (Wash. App.
1 Div. 1992); United States Fidelity & Guar. Co. v. Specialty
Coatings Co., 535 N.E.2d 1071, 1075-77 (Ill. App. 1 Dist. 1989).
We reject Warwick's argument as merely an attempt to
recast the damages in this case as a separate discharge. As
previously noted, the contract is clear that what must be sudden
and accidental is the discharge and not the resulting damages.
The damage in this case is the contamination of the environment
by hazardous substances disposed of in the landfill. This
environmental damage is essentially coterminous with the so-
called "release" of hazardous substances from the landfill to the
environment. To describe such releases as a separate event
constituting an independent discharge would eviscerate the
important distinction established between intentional and
expected damages and intentional and expected discharges. See
Broderick, 954 F.2d at 607 ("[The insured] tries to shift the
focus to the second discharge and attempts to graft an intent
requirement related to damages onto the unambiguous language of
the policy's exclusion clause. However, whether [the insured]
intended the waste to seep into groundwater and cause damage
after the initial discharges into the land is not relevant.")
(emphasis in original). Thus, the fact that Warwick did not
intend or expect the environmental damage at the L&RR Site is
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irrelevant. What matters is whether the initial discharge "into
or upon land" that led to the damage is expected or intended;
"only the initial release is relevant to the 'sudden and
accidental' inquiry." A. Johnson, 933 F.2d at 72 & n.9; see,
e.g., Hartford, 962 F.2d at 1491; Oklahoma Pub., 805 F. Supp. at
910; Heileman, 779 F. Supp. at 740.
Warwick and its amici insist that the landfill is some
type of container, like a storage tank, which did not discharge
its contents into the environment until some unforeseen,
unexpected releasing event occurred. Nothing in the record
supports this contention that the L&RR landfill was a containment
vessel such that discharges into it would not constitute a
discharge "into or upon land." The EPA did state that the
landfill "releases" hazardous substances "to the environment,"
but this simply describes the property damage resulting from the
discharge of waste into the landfill. There is no indication the
EPA considered the landfill to be a containment vessel from which
hazardous substances escaped. To the contrary, the object of the
EPA's concern in its 87 page order is the fact that hazardous
substances were placed in the L&RR landfill to begin with, not
the failure of the landfill to contain wastes or the failure of
some party to properly operate and maintain the landfill.
We are not presented with a situation like the one
recently discussed by Judge Posner in Patz, where the insured
intended its disposal pit to serve as a containment vessel due to
its clay bottom. Patz, No. 93-2135, 1994 WL 27280, at *3-5. In
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that case, Judge Posner found cause to believe there may have
been a separate unexpected discharge of pollutants subsequent to
the placement of waste into the pit. The waste in this case,
however, was removed from its containers on Warwick's premises
and placed into the landfill -- literally onto the land -- where
it later caused contamination. We presume all parties involved
expected this to be an acceptable practice, but we see no
evidence that the landfill itself was expected to act as a
containment vessel. See Broderick, 954 F.2d at 607 n.5
(rejecting contention that "containment ponds" that may have been
lined with cement could serve as a container preventing the
discharge of waste into them from being a discharge "into or upon
land" such that the pollution exclusion applied only when
substances were subsequently released from the ponds into the
surrounding environment). We therefore reject Warwick's
contention that there exists some unexpected and unintended
discharge of its wastes triggering the exception to the pollution
exclusion. Instead, we agree with the district court to the
extent it found the pollution exclusion applicable because
Warwick's discharge of waste was expected and intended and thus
not "accidental."
IV. REGULATORY ESTOPPEL ARGUMENT ESTOPPED
Warwick argues that St. Paul should be estopped or
barred from applying the pollution exclusion to the facts of this
case because of alleged representations that were made by various
parties to state insurance regulatory authorities. See Morton
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Int'l, Inc. v. General Accident Ins. Co., 629 A.2d 831, 870-76
(N.J. 1993). This argument was never made before the district
court. "It has long been the rule of this circuit that arguments
not made initially to the district court cannot be raised on
appeal." Kale v. Combined Ins. Co., 861 F.2d 746, 755 (1st Cir.
1988); see, e.g., Vanhaaren v. State Farm Mut. Auto. Ins. Co.,
989 F.2d 1, 4-5 (1st Cir. 1993).
Warwick claims that it raised the estoppel issue when
it argued:
In short, the insurance industry was able
to obtain approval of the pollution
exclusion clause by labelling it merely a
"clarification" that would not change
coverage for pollution claims. This
Court should treat the clause
accordingly.
This statement hardly raises the issue of estoppel for the
district court's consideration. Warwick's statement was made in
conjunction with Warwick's submission to the court of various
materials relating to representations made before the state
insurance regulatory board. The submissions and motions all
related to the argument that the insurance contract was ambiguous
and should be interpreted in favor of Warwick. No claim of
estoppel was made at the time. Consequently, the issue is
waived.
We find no "egregious circumstances" or "miscarriages
of justice" that would allow us to transgress our rule against
raising issues for the first time on appeal. Kale, 861 F.2d at
755. Furthermore, this case presents no other special
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circumstances, such as an issue which "the district court
expressly and unequivocally addressed" or an "an ongoing
injunction, constraining part of a governmental program," that
might otherwise give us the authority to decide the issue.
Trailer Marine Transport Corp. v. Rivera V zquez, 977 F.2d 1, 6
(1st Cir. 1992).
V. MOTIONS DELAYED AND MOTIONS DENIED
Apparently unsatisfied with the argumentation presented
in their briefs and in the briefs of various amici, the parties
in this case have filed a huge batch of additional motions and
materials in this case. As a consequence, we received more
paperwork after the case was briefed and argued than we did
before argument. Because the majority of this deluge is either
superfluous, moot, or flaunts even a liberal application of our
rules concerning page limits and the proper subject matter for
motions and other filings, we deny most of the motions and strike
many of the other filings.
For the record, we deny the motion for certification
and grant St. Paul's motion to strike Warwick's supplemental
brief in support of certification. St. Paul's motions to strike
extrinsic materials or alternatively expand the record are moot
as we found no cause to consider the extrinsic materials.
Warwick's motion to strike St. Paul's effusive filing on the
Nestle case is granted. We deny St. Paul leave to file responses
and replies to various reply briefs and to Warwick's opposition
to St. Paul's motion to strike extrinsic evidence. In the
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alternative, we grant Warwick's motion to strike St. Paul's
responses and replies. Lest we neglect the amici, we deny amicus
Textron's motion to file a reply to several other amicus briefs
and we find that St. Paul's motion to strike material in
Textron's brief is moot. Finally, we deny Mid-America Legal
Foundation permission to file an amicus brief and we grant
Warwick's motion to strike Aetna's amicus brief.
We affirm the district court's order of summary
judgment and dispose of all other motions as described above.
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