Title: Hardwick Recycling & Salvage, Inc. v Acadia Insurance Co.

State: vermont

Issuer: Vermont Supreme Court

Document:

Hardwick Recycling & Salvage, Inc. v. Acadia Insurance Co. (2003-317); 
177 Vt. 421; 869 A.2d 82

2004 VT 124

[Filed 17-Dec-2004]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                                 2004 VT 124

                                No. 2003-317

  Hardwick Recycling & Salvage, Inc. 	         Supreme Court
  f/k/a Green Mountain Sanitation, Inc.,
  and Richard F. Towns
                                                 On Appeal from
       v.	                                 Chittenden Superior Court

  Acadia Insurance Company	April Term, 2004

  Matthew I. Katz, J.

  John L. Franco, Jr., Burlington, for Plaintiffs-Appellants.

  Thomas M. Higgins of Pierson Wadhams Quinn Yates & Coffrin, Burlington, for 
    Defendant-Appellee.

  PRESENT:  Dooley, Johnson, Skoglund and Reiber, JJ., and Gibson, J. (Ret.),
            Specially Assigned

        
       ¶  1.  JOHNSON, J.  Plaintiffs sued for coverage under the pollution
  coverage included in their comprehensive general liability insurance policy
  issued by defendant Acadia Insurance Company.  Plaintiffs appeal from the
  trial court's order denying their partial summary judgment motion seeking a
  declaration that Acadia owes them a defense against a pending environmental
  enforcement action brought by the State in 2000; the court entered judgment
  for Acadia instead.  Plaintiffs contend that the trial court erred in
  holding that the State's 1995 claims against them for environmental site
  investigation and remediation planning because of contamination on their
  property were not claims for "damages" covered by the policy, and thus did
  not trigger Acadia's duty to defend against the enforcement action.  We
  conclude that the trial court incorrectly interpreted the policy term
  "damages."  Therefore we reverse one ground upon which the trial court
  based its opinion, and we remand for additional proceedings necessary to
  resolve outstanding issues in the case. 

       ¶  2.  Plaintiffs Hardwick Recycling & Salvage, Inc., (Hardwick
  Recycling), Green Mountain Sanitation, Inc. (GMS), and Richard Towns are
  all named insureds under a liability insurance policy issued by Acadia. 
  The policy coverage commenced in September 1994 and was renewed annually
  through September 2001, although the parties limited the coverage over
  time.  During the years in question, Richard Towns was the president and
  principal owner of GMS. Hardwick Recycling is a subsidiary of GMS.  

       ¶  3.  The relevant portions of plaintiffs' policy provide that Acadia
  "will pay those sums that the insured becomes legally obligated to pay as
  damages because of 'bodily injury' or 'property damage' included within the
  'pollution liability hazard' to which this insurance applies."  The
  definition of "property damage" includes "[p]hysical injury to tangible
  property, including all resulting loss of use of that property." 
  "[P]ollution liability hazard" is defined as "property damage" resulting
  from "pollutants" at or from property owned by the insured.  "Pollutants"
  include "any solid, liquid, [or] gaseous . . . irritant . . . including . .
  . chemicals and waste.  Waste includes materials to be recycled. . . ."
  (Emphasis added.)

       ¶  4.  The pollution coverage under the policy was provided on a
  "claims made" basis.  Specifically, the policy provides:
   
    (1) The "bodily injury" or "property damage" is caused by an
    "occurrence" that takes place in the "coverage territory";
    (2)  The "bodily injury" or "property damage" occurs during the
    policy period; and
    (3) A claim for damages because of the "bodily injury" or
    "property damage" is first made against any insured, in accordance
    with paragraph c. below, during the policy period. 

          . . . .

    (c) A claim by a person or organization seeking damages will be
    deemed to have been made at the earlier of the following times :

    (1) When notice of such claim is received and recorded by any
    insured or by us, whichever comes first . . . .  (Emphasis added.) 

       ¶  5.  In 1995, the State, through the Secretary of the Agency of
  Natural Resources (ANR), initiated a series of enforcement actions in
  connection with plaintiffs' alleged pollution-related violations of
  environmental and waste management laws.  First, in March 1995, the State
  filed an "Application for Emergency Order" in the Vermont Environmental
  Court.  Among other things, the application alleged "[o]peration of the
  [Hardwick Recycling] transfer station is an immediate threat to the health,
  safety and welfare of the citizens of Vermont as a result of the discharge
  of solid waste leachate into the floodplain and waters of the Lamoille
  River."  The Environmental Court denied the State's application without
  prejudice because it concluded that the application alleged violations of
  plaintiffs' Act 250 permit, and the court was empowered to enforce only
  emergency orders involving unpermitted activity. 
   
       ¶  6.  In May 1995, the State, through an Environmental Enforcement
  Officer, requested and received an Access Order from the Caledonia District
  Court.  In its application supported by five affidavits attesting to
  environmental contamination, the State alleged that "reasonable grounds
  exist to suspect violations of Vermont Environmental Laws, and Vermont
  Solid Waste Management Regulations."  The court granted the State's
  request, and ordered that plaintiffs provide "full access" to the State for
  investigation of the alleged pollution on the premises.  

       ¶  7.  As an apparent follow-up to investigations conducted pursuant
  to the May access order, the State, through the Hazardous Materials
  Management Division of ANR, issued a "Request for investigative activities
  at Green Mountain Sanitation, Hardwick (VT DEC Site #95-1792)," to
  plaintiffs' consultant, which was copied to plaintiffs' counsel and Richard
  Towns among others.  The letter stated that DEC personnel had discovered
  "(1) . . . surficial [sic] oil discharge; (2) a leaking drum which
  contained volatile organic compounds; (3) elevated levels of total
  petroleum hydrocarbons in the swale which discharges into the Lamoille
  River and; (4) buried solid waste material throughout the property."  The
  State concluded that additional work was necessary to determine if further
  "investigation, monitoring and /or remediation" was warranted and thus
  requested plaintiffs to undertake substantial on-site work.  Inexplicably,
  the State took no further enforcement action until October 2000.   

       ¶  8.  In October 2000, the State, through the Attorney General,
  initiated a civil suit against plaintiffs in Washington Superior Court.  In
  its complaint, the State alleged that, between 1992 and 1995, plaintiffs
  illegally buried solid waste on the Hardwick Recycling premises in
  violation of Vermont Solid Waste Management Rule 6-302(c), 10 V.S.A. §
  6605(a), and Act 250.  The State thus requested that the court find
  plaintiffs in violation of these laws, and:

    (4)  order the defendants to extract and properly dispose of any
    wastes illegally stored at or disposed of at the [Hardwick
    Recycling facility];

    (5) order the defendants to remediate the site to mitigate any
    hazard to human health or the environment; [and] 

    (6) order the defendants to pay civil penalties, costs, and
    reimbursement for the costs of enforcement, including legal fees,
    in accordance with 10 V.S.A. § 8221.

       ¶  9.  Shortly after the State filed its complaint, plaintiffs
  notified Acadia of the suit in a letter from plaintiffs' attorney.  The
  letter stated that the allegations in the State's complaint "were first
  brought to the attention of [plaintiffs] in May of 1995" and that "[f]or
  reasons unknown to us the State has elected to now prosecute this claim
  some 5 ½ years later."  Plaintiffs did not attach any of the 1995 documents
  to the claim letter, or otherwise explain the details of the 1995 claims,
  including the Environmental Court order issued in March 1995.

       ¶  10.  Even though plaintiffs sought coverage for a defense and, if
  needed, indemnification for costs associated with the State's 2000 suit,
  their letter identified policy CPA 001066-10, the policy that was in effect
  from 1994 to 1995, as the applicable source of coverage.  Plaintiffs'
  pollution liability coverage from Acadia was eliminated in 1997; however,
  the 1994-1995 policy provides that "[a]ll claims for injury or damage
  arising out of a discharge, release or escape of pollutants . . . shall be
  deemed to have been made at the time the first of those claims is made
  against any insured."  

       ¶  11.  In a reply letter sent by Acadia's Director of P&C Claims,
  Acadia informed plaintiffs' counsel that there was no coverage for the
  State's environmental claim because "[a]ll [t]he Acadia policies were
  written with applicable pollution exclusions" and "[i]n addition, there is
  no coverage for the allegations of illegal acts."  Defendant's reply letter
  also stated that, because of a "Consent to Rate Application,"  "[c]overage
  for pollution was eliminated from the Acadia policies."   
   
       ¶  12.       In response to Acadia's denial of coverage, plaintiffs
  sued Acadia in December 2001 seeking a declaratory judgment that it has a
  duty to defend plaintiffs in the suit brought against them by the State in
  2000, and that it owes plaintiffs their incurred defense costs to date. 
  Acadia answered interposing eighteen affirmative defenses.  Plaintiffs then
  moved for partial summary judgment on all but defendant's pollution
  exclusion defense because the above-quoted denial of coverage letter did
  not reserve Acadia's right to later deny coverage on other grounds.  Judge
  Teachout granted plaintiffs' motion.  

       ¶  13.  Plaintiffs next moved for partial summary judgment that
  defendant owed and owes plaintiffs a defense in the underlying lawsuit
  brought by the State in 2000.  Plaintiffs argued that the 1994-1995 policy
  provided coverage for the 2000 suit because it was based on "claims" that
  the State first made in 1995, even though their policy in effect in 2000
  did not include pollution coverage.  The trial court, Judge Katz presiding,
  agreed with defendant that the claims brought by the State in 1995 did not
  constitute claims for "damages," and thus did not trigger coverage during
  that policy term.  Though its conclusion on "damages" should have ended the
  entire case in defendant's favor, the court ruled that additional discovery
  could take place on defendant's late notice defense because it was a fact
  question.  Plaintiffs argued that the  trial court's order on the first
  partial summary judgment had ruled the defense of late notice out of the
  case.  Judge Katz apparently disagreed, but made only an oblique reference
  to the court's earlier order.  Judge Katz entered final judgment for
  defendant, and plaintiffs appealed.  

       ¶  14.  When reviewing the trial court's grant of summary judgment, we
  apply the same standard as the trial court.  We will affirm summary
  judgment if there are no genuine issues of material fact and the moving
  party is entitled to judgment as a matter of law.  White v. Quechee Lakes
  Landowners' Ass'n, 170 Vt. 25, 28,