Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-94-03245/USCOURTS-ca10-94-03245-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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PUBLISH FILED 

UNITED STATES COURT OF APPEAlS UDJted States Court of Appu.!3 Tenth Circuit 

TENTH CIRa.JIT 

FEDERATED MUTUAL INSURANCE CClv'IPANY I 

a Minnesota corporation, and GRAIN 

DEALERS MUTUAL INSURANCE CClv'IPANY I 

v. 

Plaintiffs-Counter-ClaimDefendants- Appellees, 

BOTKIN GRAIN CO. , A Kansas 

corporation, 

Defendant-CounterClaimant- Appellant, 

INSURAI.\JCE ENVIRONMENTAL LITIGATION 

ASSOCIATION and AETNA CASUALTY AND 

AND SURETY CQ\1PANY I 

Amici Curiae. 

AUG 1 7 1995 

PATRICK FISHER 

Clerk 

No. 94-3245 

APPEAL FRQVI THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. No. 91-1223-MLB) 

Charles E. Millsap, Fleeson, Gooing, Coulson & Kitch, L.L.C., 

Wichita, Kansas, for Appellant. 

Timothy Finnerty, McDonald, Tinker, Skaer, Quinn & Herrington, 

P.A., Wichita, Kansas, for Appellee, Federated Mutual Insurance 

Company. 

Chris Cole (Lee Woodard and Michael M Walker with him on the 

brief), Woodard, Blaylock, Hernandez, Roth & Day, Wichita, Kansas, 

for Appellee, Grain Dealers Mutual Insurance Company. 

Thomas W. Brunner, John E. Barry, Dennis A Tosh, of Wiley, Rein & 

Fielding, Washington, D. C., attorneys for Amicus Curiae Insurance 

Environmental Litigation Association. 

Edward Zampino, Peter E. Mueller, Victor C. Harwood, III., of 

Appellate Case: 94-3245 Document: 01019279618 Date Filed: 08/17/1995 Page: 1 
Harwood Lloyd, Hackensack, NJ and Dennis Brown of Long & Jaudon, 

Denver, Co. , atto:rneys for Amicus CUriae Aetna Casualty and Surety 

Company. 

Before Henry and Logan, Circuit Judges, and Ellison,* 

District Judge. 

ELLISON, District Judge. 

Statement of the Case 

Senior 

Insurers Federated and Grain Dealers brought this action 

seeking a declaratory judgment that their comprehensive general 

liability and umbrella policies did not provide coverage for a 

state ordered cleanup of petroleum groundwater at a fuel depot 

owned by Botkin. The parties filed cross motions for summary 

judgment, and the district judge entered summary judgment in favor 

of the insurers, holding that the phrase 11 Sudden and accidental 11 

was unambiguous and possessed an objective temporal meaning; that 

there was no evidence that a 11 sudden and accidental 11 discharge 

occurred, and therefore the insurance companies met their burden of 

proving that the loss at issue was not sudden and accidental; and 

that the clarification of the Federated policy did not change the 

finding of no coverage. Botkin filed a motion to alter or amend, 

which was granted only to deci~e the duty to defend issue. On that 

* The Honorable James 0. Ellison, Senior United States 

District Judge for the Northe:rn District of Oklahoma, sitting by 

designation. 

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Appellate Case: 94-3245 Document: 01019279618 Date Filed: 08/17/1995 Page: 2 
issue, the district court also granted summary judgment to the 

insurers. 

Facts 

At issue here is the Argonia Bulk Fuel Plant owned and 

operated by Botkin from April of 1978 through the latter part of 

1989. The plant, which included five above ground fuel storage 

tanks for gasoline and diesel fuel, was operated by Mobil Oil 

Company from 1957 to the time of its sale to Botkin. 

In 1989, a homeowner residing near the plant complained that 

he had gasoline in his water well. The Kansas Department of Health 

and Environment (KDHE) was contacted, and mandated a remediation 

plan to clean up the site. Botkin asserts that it is entitled to 

its response costs from the insurers under the terms of the 

policies. 

Federated insured Botkin from 1978 to 1986 with both liability 

and umbrella policies. The liability policies are standard 

comprehensive general liability (CGL) 1 policies wherein the 

companies would "pay on behalf of the insured all sums which the 

insured shall become legally obligated to pay as damages because of 

bodily injury or property damage to which this insurance applies, 

caused by an occurrence. 11 An occurrence is defined in the policies 

as "an accident, including continuous or repeated exposure to 

conditions, which results in personal injury, property damage or 

1 There is some indication in the record that some of these 

policies were special multi-peril policies instead of CGL policies. There, however is no indication that the language of either the 

insuring agreement or the pollution exclusion would have been any different for these two types of policies. 

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Appellate Case: 94-3245 Document: 01019279618 Date Filed: 08/17/1995 Page: 3 
advertising liability neither expected nor intended from the 

standpoint of the insured." Property damage is defined as: 

(1) physical injury to or destruction of tangible 

property which occurs during the policy period, including 

tne loss of use thereof at any time resulting therefrom, 

or (2) loss of use of tangib~e property which has not 

been physically injured or destroyed provided such loss 

of use is caused by an occurrence during the policy 

period. 

The CGL policies also contained the following pollution exclusion: 

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. 

The OGL policies from 1983 to 1986 contained a clarification of the 

pollution exclusion, which provides: 

It is agreed that the unintentional discharge, dispersal, release or escape of any liquid from a liquid 

storage tank or from any underground piping or 

connections leading to or from a liquid storage tank 

shall be deemed sudden and accidental with respect to 

exclusion (f) [the pollution exclusion] . 

Federated also issued to Botkin umbrella policies from May 

1978 to May 1986. The umbrella policies have insuring agreements 

which state: 

The Company hereby agrees, subject to the limitations, 

terms and conditions, hereinafter mentioned, to pay all 

sums which the Insured shall be obligated to pay. . . caused by or arising out of each occurrence hafPening anywhere in the world, dU!ing the policy period. 

2 One umbrella policy has slightly different language. 

However, it does require an occurrence during the policy period in 

order for there to be coverage. 

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Appellate Case: 94-3245 Document: 01019279618 Date Filed: 08/17/1995 Page: 4 
Grain Dealers issued a CGL policy to Botkin which was in 

effect from April 1987 to April 1988. 

follows: 

The policy provided as 

The company will pay on behalf of the insured all sums 

which the insured shall become. legally obligated to pay 

as damages because of bodily injury; or 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, and may make such investigation and 

settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim 

or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by 

payment of judgments or settlements. 

The Grain Dealers' policies also include the following pollution 

exclusion: 

This insurance does not apply: ... (f) to bodily injury 

or property damage ar~s~ng 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 

p.:>llutants 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. 

The definitions of occurrence and property damage are substantially 

the same as the definitions contained in the Federated policies. 

Archie LaGrant Watts, who operated the plant for Mobil, 

recalled no fuel tank leaks during his operations. He recalled a 

fuel line leak which had a minimal effect due to the immediate 

closing of a shut off valve. He also recalled occasional spills of 

fuel onto the ground when filling deli very trucks, and small spills 

from faulty seals on trucks delivering fuel to the depot. He also 

testified to fuel shortages as indicated by audits, but did not 

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Appellate Case: 94-3245 Document: 01019279618 Date Filed: 08/17/1995 Page: 5 
know the cause of the shortages. He did not have any idea where 

the gasoline which contaminated the ground water came from. He 

admitted that, when the tanks were removed, there was a 

discoloration under one tank which would indicate a leak of some 

sort. 

Similarly, Mr. Botkin was not aware of any leaks or spills 

during the time Botkin operated the facility, and specifically was 

unaware of any event where a large amount of fuel was leaked onto 

the ground. He also did not know when or how the contamination 

occurred. An employee of the KDHE, however, opined that it would 

be possible for several small spills over a long period to cause 

the contamination. 

Analysis 

Standard of Review 

When deciding an appeal from a grant or denial of summary 

judgment, an appellate court reviews the record below and decides 

the case de novo, applying the same legal standard used by the 

district court. Quaker State Minit-Lube, Inc. v. Fireman's Fund 

Insurance Comgany, 52 F.3d 1522, 1526-27, (lOth Cir. 1995). 

Summary judgment is proper only if "the pleadings, depositions, 

answers to interrogatories, and admissions on file, together with 

the affidavits, if any, show that there is no genuine issue as to 

any material fact and that the moving party is entitled to a 

judgment as a matter of law." · Fed.R.Civ.P. 56 (c). 

I. Interpretation of "Sudden and Accidental" 

Botkin urges that the Pollution Exclusion is ambiguous, and 

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Appellate Case: 94-3245 Document: 01019279618 Date Filed: 08/17/1995 Page: 6 
that in the alternative, the temporal quality ascribed to the word 

"sudden" should be applied to the inception rather than the 

duration of the pollution. We have held, however, in United States 

Fidelity & Guaranty Company v. Morrison Grain Company, Inc., 999 

F.2d 489, 493 (lOth Cir. 1993) (Morrison II), that, under Kansas 

law, the term "sudden and accidental" is unambiguous and has an 

objective terrporal meaning referring to the both the inception and 

duration of the pollution. Botkin asserts that we should reverse 

U.S.F. & G. v. Morrison Grain, but provides us no basis for doing 

so. See Anaconda Minerals Co. v. Stoller Chemical Co., 990 F.2d 

1175, 1178 n.4 (lOth Cir. 1993). We decline to reverse, and find 

that the trial court was correct in determining that the language 

of the pollution exclusion is unambiguous and has an objective 

temporal meaning referring to both the inception and duration of 

the pollution. 

II. Estoppel and Certification 

Botkin also argues that the district court erred in granting 

summary judgment to the insurers in that they should be estopped 

from asserting an interpretation of sudden and accidental which 

differs from the representations that the insurers made to the 

Kansas Insurance Corranissioner. Botkin has suggested that this 

estoppel argument is grounds for reversal. In the alternative, 

Botkin suggests that this question of Kansas Public Policy should 

be certified to state court. 

Botkin contends that the phrase "sudden and accidental" should 

be interpreted as a clarification of the "occurrence" definition. 

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The insurers contend that a "sudden and accidental" event must be 

brief or short in duration and not intended, expected or 

anticipated. Botkin argues that, because the insurers represented 

to the Kansas Insurance Conunissioner, when seeking approval of the 

pollution exclusion in 1970, that it was merely a clarification, 

they should be estopped from taking any other position now. Botkin 

relies on the following explanation provided to the Insurance 

Conunissioner: 

Coverage for pollution or contamination is not provided 

in most cases under the present policies because the 

damages can be said to be expected or intended and thus 

are excluded by the definition of occurrence. The above 

exclusion [the pollution exclusion] clarifies this 

situation so as to avoid any question of intent. 

Coverage is continued for pollution or contamination 

caused injuries when the pollution or contamination 

results from an accident. 

The Commissioner, in approving the exclusion, replied: 

In closing, although we are in agreement that pollution 

and contamination need some type of outlines established, 

it should be recognized by the [insurance] industry that 

th.ere can be purely accidental pollution and there should 

be coverage provided for the insured that is not at 

fault. 

In advancing this argument, Botkin urges the court to adopt 

the reasoning of the court in Morton Intern. , Inc. v. General 

Accident Insurance Co. of America, 134 N.J. 1, 629 A.2d 831 (N.J. 

1993) . That court held that insurance companies should be estopped 

from asserting an effect of the pollution exclusion beyond that 

represented to state regulate~ authorities. 

We find that the position urged by Botkin conflicts with 

Kansas law on the interpretation of insurance policies and the 

application of the doctrine of estoppel. First, under Kansas law, 

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Appellate Case: 94-3245 Document: 01019279618 Date Filed: 08/17/1995 Page: 8 
if policy language is clear and unambiguous, the policy "nmst be 

enforced according to the plain, common and popular meaning of its 

terms. 11 Morrison II, 999 F. 2d at 492. See also Coleman Col'JIDany, 

Inc. v. California Union Insurance Company, 960 F.2d 1529, 1536 

(lOth Cir 1992} (Kansas :rules for interpreting insurance policies do 

not include consideration of extrinsic evidence} . As noted above, 

the pollution exclusion is clear and unambiguous, therefore we nmst 

ascertain the intent of the parties according to the plain language 

of the policy and ca~ot consider the extrinsic evidence of the 

representations made to the Kansas Insurance Commissioner. 

The doctrine of estoppel does not change the result mandated 

by the :rules of contract construction. "Waiver and estoppel may be 

invoked to forestall the forfeiture of an insurance contract, but 

they cannot be used to expand its coverage." Western Food Products 

Company, Inc. v. United States Fire Insurance Company, 10 

Kan.App.2d 375, 699 P.2d 579 (Kan. 1985); Topeka Tent and Awning 

Co. v. Glen Falls Insurance Company, 13 Kan.App.2d 553, 774 P.2d 

984 (Kan. 1989). 

We additionally note that the Kansas Court of Appeals has 

recently rejected a similar estoppel argument in Crescent Oil 

Company, Inc. v. Federated Mutual Insurance Company, 20 Kan. App. 2d 

428, 888 P. 2d 869 (Kan. App. 1995) . In distinguishing the 

circumstances in Crescent from the facts of a Louisiana case, the 

Crescent court noted: "Thus the [Louisiana] court looked at the 

original purpose of the insurance industry in creating the 

exclusion. In Kansas, we look to the wording of the policy and 

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Appellate Case: 94-3245 Document: 01019279618 Date Filed: 08/17/1995 Page: 9 
apply it as it is clearly written." The court went on to state: 

Crescent argues that we should follow these decisions and 

hold that the pollution exclusion applies only to active 

intentional industrial pollution. Such an interpretation might be proper elsewhere, but in Kansas, the meaning of 

the clause must come from the language contained in the 

policy. 

Id. at 872 (errphasis ours) . We are persuaded by this analysis and 

statement of Kansas law, and note that it is consistent with our 

own analysis. 

In that Kansas law on contract interpretation and estoppel is 

clear, we see no reason to certify this question to state court. 

III. Application of the Exclusion 

Botkin also argues that the Court erred in granting summary 

judgment to the insurers on the pollution exclusion based on their 

assertion that Botkin can not identify any sudden discharge of the 

gasoline. Botkin argues that the insurers have the burden of 

proving an exception to an exclusion (~, "sudden and 

accidental), and that they don't meet that burden by arguing that 

Botkin has not identified any sudden discharge of the fuel. Botkin 

relies on the following language for its assertion that the 

insurers have the burden of proof on this issue: 

Kansas courts generally have allocated the respective burdens of proof to the insured and insurer consistent 

with the basic distinction between coverage clauses and 

exclusionary clauses. In other words, the insured has 

the burden of proving a loss of the type included in the 

general coverage provisions, and the insurer has (the] 

b.rrden of proving the apJ2licability of an exclusionary clause. Since the "sudden and accidental" exception 

appears within the pollution exclusion, the Kansas case 

law would require the insurer to prove both damage from 

pollution and facts which disqualify the exception. Consequently, plaintiffs have the burden of proving the 

facts which show the discharge or release was not sudden 

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Appellate Case: 94-3245 Document: 01019279618 Date Filed: 08/17/1995 Page: 10 
and accidental. 

United States Fidelity & Guaranty Company v. Morrison Grain 

Company, Inc., 734 F.Supp 437, 443 {D. Kan. 1990), aff'd, 999 F.2d 

489 (lOth Cir. 1993) (Morrison I) (citations omitted) . Assuming-3 

that this is a correct statement of Kansas law, we see no error in 

the district court's analysis of this issue. 

Construing the evidence in the light most favorable to Botkin 

Grain (and assuming the gasoline came from the fuel depot) there 

are two possible "sources" of the gasoline found in the 

groundwater. First, Mobil employee Watts testified as to several 

small spills over an extended period of time, and the KDHE takes 

the position that these small spills could cause the contamination. 

Second, there is some evidence as to ground discoloration under 

tank five, indicating an escape over time. Neither of these 

potential causes of the contamination is sudden or accidental. The 

trial court properly granted su.rranary judgment on this issue. 

This, however, does not resolve the issue regarding the 

policies with the "clarification." The "clarification" provides as 

follows: 

It is agreed that the unintentional discharge, dispersal, release or escape of any liquid from a liquid storage tank or from 

any underground piping or connections leading to or from a liquid 

storage tank shall be deemed sudden and accidental with respect to 

exclusion (f) [the pollution exclusion] . 

In this case, there is some evidence of a leak in a liquid storage 

3 The insurers argue that the holding in Morrison I with 

regard to this issue is incorrect, and not supported by Kansas law. 

We do not reach this argument, however, because we find that the 

insurers met their burden of proof on this issue. 

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tank. Thus, summary judgment on the exclusion, as modified by the 

clarification, is inappropriate. 

We note that the trial court first held that summary judgment 

was appropriate on the policies with the clarification because 

there was no evidence that the contcirnination came from a discharge 

from a storage tank or underground piping. In its Order on the 

motion for reconsideration, the trial court acknowledged the 

evidence that the contamination came from the storage tank, but 

held that there was no evidence of an occurrence during the policy 

period. We have reviewed the entire record on appeal, including 

the extensive briefs on summary judgment, and find that the issue 

of evidence of occurrence was not addressed by the parties. Thus 

summary judgment could not rest on the insuring language of the 

policy. See Celotex Co:r::p. v. catrett, 106 S.Ct. 2548, 2544 

(1986) (district courts have power to enter summary judgment sua 

sponte, "so long as the losing party was on notice that she had to 

come forward with all of her evidence"). 

With respect to the duty to defend, we affirm the trial court 

on all policies except for the Federated policies containing the 

clarification. We decline to address the remaining issues on 

appeal given that they were not ruled on by the trial court. The 

judgment of the trial court is affirmed in part, reversed in part, 

and remanded for proceedings consistent with this opinion. 

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