# FILED Jan. 24, 1996 Cecil Crowson, Jr . Appellate Court Clerk A. J. HALL, I

NC., ) ) Plaintiff /Appella nt, )

) Wilson Chancery ) No. 8981 VS. ) ) Appeal No. ) 01-A-01-9508-CH-00369 FEDERAT

ED MUTUA

L I NSURANCE ) COMPANY, ) ) Defendant/Appellee. )

IN THE COURT OF APPEALS OF TENNESSEE MIDD LE S EC TION AT N AS HVILLE
APPEAL FROM THE CHANCERY COURT OF WI LSON COUNTY AT LEBANON, TE

NNESSEE
HONORABLE C. K. SMI TH, CHANCELLOR John Thomas Feeney Gina L. Zy

lstra LEI TNER, WARNE

R, MOFFI

TT, WI LL IAMS DOOLEY, CARPENTER & NAPOL ITAN Suite 2300 First American Center 315 Deaderick Street Nashville, Tennessee 37238 ATTORNEYS FOR PLAI NTIFF/APPEL

LANT
Laura J. Hanson Robert L. Graff MEAGHER & GEER 4200 Multifoods Tower 33 South Sixth Street Minneapolis, Minnesota 55402 Pamela King NEA L & HA RW ELL 2000 Dominion Tower 150 Four th Avenue , North Nashville, Tennessee 37219-2498 ATTORNEYS FOR DEFENDANT/APPEL LEE AFFIRMED AND

REMANDED HENRY F. TODD

PRESIDING

JUDGE, MIDDL

E SECTION CONCUR: SAMUEL L . LEWIS, JUDGE BEN H. CANTRELL , JUDGE-2-

A. J. HALL, I

NC., ) ) Plaintiff /Appella nt, )

) Wilson Chancery ) No. 8981 VS. ) ) Appeal No. ) 01-A-01-9508-CH-00369 FEDERAT

ED MUTUA

L I NSURANCE ) COMPANY, ) ) Defendant/Appellee. )
O P I N I O N The plain tiff, A. J. H all, I

nc., hasappealed from the summary dismissal o f a part

of its suit aga inst the de

fendant , Feder

ated Mutu al In surance

Company . The Tri al Court e xpressly directed the entry

of final partial judgment as permitted by T.R.C.P. Rule 54.02.

Plaintiff is a distri butor of p etroleu

m product s and owne

r of a se rvice sta tion wher e its productsare stor

ed and so ld at reta

il.
Defendant issued to plaintiff a policy of insurance upon the service station for the period April 22, 1987, through April 22, 1988. The policy included certain pollution coverage which will be detailed late r.
On Septem

ber 15, 1 987, plain

tiff wasnotified b y Te

nnessee Departm ent of He alth and Environment of a possible leak in the facilities of the service station, and of the statutory obligation of plaintiff to investigate the matter and take a ppropriate action.

The notic e was co nveyed to def endant w hich dete rmined tha

t a "pollu tion incide

nt" had occurred during the term of the policy and that defe

ndant would perform its obligation under "Insuring

Agreement 2" of the policy which provided: 2. In suring Agreem

ent - Reim

burseme nt of Mand ated Off

-Site "Clean- Up" Costs :"-3- a. We will pay for " clean-up costs" that the insured becomes legally

obligated to pay

because of "environmental damage" to which this insurance applies. The amount we will pay for such "clea n-up cost s" is limited as desc ribed in Section II I - L imits of Insurance. b. This insurance applies only to " environmental damage" caused by

a "pollution incident" that commenc es on or a

fter the Retroac tive Date shown in the Declarations. The "pollution incident" must be from an "insured site" or "waste facility " in the "coverage territory." The insur ed's ob ligation

to pay "clea n-up cost s" because of the"environmental damage" must be asserted under statutory

authority of the government of the United States of America, Canada or any

political subdivision of the United States or Canada. Notice asserting such obligation must be first received by you during the policy period. We have the right but not the duty to investigate, settle, contest or appeal, at our expense, any obligation asserted against an insured to pay "clean-up costs."

. . . . 3. "Clean-up costs" means expenses for the re moval or neutralization of c ontamina nts, irrit ants or po llutants.

. . . . 12. "Suit" means ci vil proceeding in which da mages b ecause of "bodily injury " or "property damage" to which this insurance applies are alleged. "Suit" inc ludes an arbitration proceeding alleging such

damage s to which y

ou must subm

it or submit with our c onsent. Upon rec eipt of sa

id notice , defend ant eng aged D elta Envi ronmenta l Consultan

ts, Inc ., (here after " Delta" ) to inves tigate the alleg ation of p ollution. D elta rep orted tha t a leakage had occurr

ed in plaintiff's facilities and proposed a plan to "a lleviate the contamination" which was accepted and a uthorized by defenda

nt. Defendant notified plaintiff that it had "assumed the handling of the pollution clean-up at the site."-4- The "clean-up" proceeded by De lta at the expense of defendant until March 6, 1992, when def endant notified pla

intiff tha t it would no

longer furnish th

e "cle an up," but would assume the expense

of contin uation und

er the di rection of plainti ff. Def

endant e xplained th

is change by

a fear that, under environmental law, def endant might incur liability in excess of its contra ctual policy

obligat ions by assuming

control o f the pollu

ted prem ises.
On March 3, 1993, plaintiffs filed their first complaint in the present suit in which the foregoing facts we

re stated and the following relief was de manded: 2. That Federated be require d to complete the contamination remediation at the site of Gregory 's Exxon and that the total cost of remediation, inclusive of any local, state or federal penalties which have been incurred or will be incurred, be borne entirely

by Fede rated, and that this Court issue a mandator y in junction r equiring Feder ated to undertake

all necessary steps to complete the remediation without further de la y; 3. In the alternative, that this Court enter a judgment in favor of Hall for Hall's total damages sustained a s a result of the tortious and unlawful conduct of Federated in an a mount establish ed at tria l; 4. That this Court find the award of punitive damages appropr iate as th e result o f Fede

rated' s bad faith refus al to complete the remediation, in an amount to be determined at trial. Defendant answered, admitting issuance of a "commercial packag e policy of insurance which was effective f rom April 22, 1987, to April 22, 1988, and which contained a separate pollution liability covera ge part," furnishing c overage of $1,000,000 with a $10,000 deductible. The answer also admitted liability for expense of "clean up" within the policy limits, but denied an obligation to actually per form the "clean up."
On August 5, 1994, plaintiff filed its "First Amended Complaint" asserting that owners of an adjoining tract had filed suit ag ainst plaintiffs for property damage resulting from the leak on plaintiff's premises, that defenda nt was obligated to defend said suit and had failed and refused to do so.-5- Defendant responded that plaintiff's " Commercial Package Policy " in effect from April 22, 1987, to April 22, 1988, did not obligate defendant to defend the suit of the adjoining propert y owners.
On September 10, 1994, the Trial Court entered an eig ht page opinion and order concluding as fo llows:

For the reasons set forth above, Fe derated's motion for summary judgme

nt that it has no obligation under the policy at issue to provide "claim handling services" to the insured or, provide coverage in excess of its policy limits is hereby granted. Judgment s hall, the

refore , be ente

red in fa vor of defendant , Fed era l Mu tua l I nsu rance C omp any

and ag ain st p lai ntif

f, A . J. Hall, Inc. with respect to the e ntirety of plaintiff' s original complaint. This order does not dismiss any of the a llegations and demands of the first amended complaint filed 8/5/94. There being no just reason for delay , let judgment be entered ac co rd in gl y. On February

1, 1995, defendant moved to dismiss the first amended complaint for failure to state a claim for which relief ca n be granted. Affidavits were f iled in support of said motion

which re nders it a motion for

summary judgmen t.
On April 6, 1995, plaintiff filed a "Motion to Amend or Make Additional Findings of Fact and to Alter and Amend the Judgment."
On Apr il 1, 1995, the Tr ial C ourt e ntered an ord er cont ainin g the fo llow ing: The above-entitled matter came on hear ing before the Honorable C. K. Smith on March 6, 1995 upon defendant Federated Mutual I

nsurance Company 's ("Federated") summary jud gme nt motion to d ismi ss p lai ntif

f' s A. J. Ha

ll, I nc. 's ( "A. J. Hall," "insured" or "pla

intiff") first amended complaint pursuant to Rule 56. 03 of the Tennesse e Rules of Civil Procedure. . . .

. . . . For the reasons set forth above, Federated's motion for summary judgmen t that it ha s no oblig ation unde r the policy to-6- provide a defense or indemnity to A. J. Hall with respect to the Bell suit is hereby g

ranted. Judgment shall, therefore, be entered in favor of defendant Federated Mutual I

nsurance Company

and against plaintiff A. J. Ha ll, Inc. with respec t to t he amen ded co mplai nt. P laint iff's complaint is thus dismissed in its entirety and the Court declares that Federated Mutual I nsurance Company

has no obligation to provide insurance coverag e to A. J. Hall for the Bell suit. On May 23, 1995, def

endant filed a response to plaintiff's April 6, 1995, motion.
On June 20, 1995, the Trial Court overruled plaintiff's April 6, 1995, motion.
On July 11, 1995, plaintiff filed notice of appea l from the June 20, 1995, order.

Plaintiff 's "Sta tement of the I ssues" i s worded

as follow s: A. The po llution lia

bility policy issued by Feder ated to Ha

ll required Federated to defe nd and indemnify Hall as a result of the Bell litigation. B. Federated's pollution liability policy does not contain a definition of the term "claim" thereby rendering the languag e of the polic y a

mbiguous
. C. Feder ated hasfailed to

recog nize the c overag e for a " suit" under its policy of insuranc e. D. A genuine issue of material fact e xisted as to whether or not Hall made a claim under its policy of insurance with Federated. The insurance policy

issued to plaintiff contained three separate insuring a greements. The original complaint, which is not involved in this appeal, was based upon I nsuring Agreement 2, quoted above, which re lates to cost of "clean up" of the polluted are a.
The ag reemen t to defe nd suits by

third par ties was Agreem

ent 1, whi ch read

in pertine nt part a s follows: 1. Insuring Ag

reement - Bodily

Injury and Property Da

mage.-7- a. We will pay those sums that the insured becomes legally

obligated to pay

as compensa tory damage s becaus e of "bo dily injury " or "p

roperty damage " to which this insurance applies. We will have the right and duty to defend any

"suit" s eeking

those damage s. But: (1) The a mount we w ill pay

for dama ges is limited as described in Section II I-L imits of Insurance: (2) We may investig ate and settle any claim or "suit" at our discretion; and (3) Our right and duty

to defend end when we have use d up the ap

plicable limit of insu

rance in the payment of judg

ments, settlements or "clean-up costs." b. Th is in su ra nc e a pp li es on ly t o " bo di ly i nj ur y" and "property

damage" caused by

a "pollution incident" that commences on or after the Retroactive Date [April 22, 1986] shown in the Declarations. The "pollution incident" must be from an "insured site" or "wa ste facility" in the "coverage ter

ritory." The insured's responsibility to pay damag es because of the " bodily

injury " or "p

roperty damage" must be determined in a " suit" on the merits in the "coverage ter ritory" or in a settlement we agree to.
c. This insurance applies to "bodily injury" and "property damage" only

if a claim for damages because of the " bodily

injury " or "p

roperty damages" is first made in writing a gainst any insured during the policy

period. [Emphasis supplied.] (1) A claim by a

person or organization seeking damages will be deemed to have bee n made when written notice of such claim is received by any insured o r by us, which

ever co mes first
. (2) All c laims for

damage s becaus e of "bo dily injury " to the s ame per son, inclu ding da mages, claimed by any

person or organization for care, loss of se rvice or death re sulting a

t any time from the "bodily injury " will be deemed to have been mad e at the time the fir st of those claims is made against any

insured. (3) All c laims for

damage s becaus e of "pr

operty damage" causing

loss to the same person or-8- organ ization as a

result of a "pollu tion incide

nt" will be de emed to ha

ve been made at th

e time the first of those claims is made against any insured.

. . . . The policy also conta

ins the following provision: Notice of a "pollu tion incide

nt" is not notice of

a claim.
Defend ant conc edes tha

t it rece ived timel

y notice of a

"pollutio n inciden

t" and th at it is liable for the expense of the "clean up" of the pollution within the monetary limits of the policy . As state d, this asp ect of the contro versy is not a pa

rt of this a

ppeal.
Defendant denies that it is obligated to defend or pay the claim of the adjoining property owne

rs, which appears to be for incidental damag es other than the cost of "clean up." Defendant 's gr

ound for d

eny ing liab ility

is that the

claim of t

he adjoin ing prop erty
owners w as not:

made in writing during the policy period as required by paragraph (a) of I

nsuring Agreement 2 of the policy , quoted above. It is undisputed that no claim was made by the adjoining property

owners to any one in any form during

the policy period, Apr

il 22, 1987, to April 22, 1988.
Nevertheless, plaintiff insists that notice of a pollution incident was notice of a possible claim. Plaintiff argues that, since the policy contains no definition of the word, "claim," the policy

is ambiguous, and thereby admits the interpretation that a report of need for cle an up of p ollution is n otice to th e insure r that ad joining l andowne

rs are ma king a c laim for incidental damages in addition to the cost of clean up.

There isno ambig

uity in the wor

d, "cla im," whe n examined

in the lig ht of the w

hole instrument and the circumstances of the case. Blue Diamond Coal Co. v. Holland American Insurance Co., Tenn. 1984, 671 S.W.2d 829.-9- A "claim made" is not the fact that wrong -doing has occurred, but an asser tion that some discrete amount of money is due. MGIC Indemnity Corp. v. Home State Savings Association, 6th Cir. 1986, 797 F.2d 285.
Under a "claims made" policy limitation, an untimely claim will not be recognized even though the cause of the claim occ urred during the policy

period. Hoyt v. St. Paul Fire & Marine Ins. Co., 9th Cir. 197 9, 607 F.2 d 864; Atlas Underwriters Ltd. v. Meredith-Burda, Inc., Va. 1986, 343 S.E.2d 65; Lamberton v. Travellers Indemnity Co., Del. Super. 1974, 247 A.2d 104.
In view of the express provision of the policy , quoted above, this Court cannot agree that notice or knowledge of a "pollution incident" is notice that adjoining landowners have present ed a writ ten dema nd for inc idental d amage s.
Plaintiff argues that the pollution of the adjoining land was discovered by Delta, the firm hired by def

endant to investigate the nature and extent of the pollution. Such discovery occurred after the expiration of the policy . Even if the discovery occurred during the term of the policy, it would not serve as wr itten notice that the landowners were making a de mand for incident al damag es.
The polic y includes tw o separa te and dis tinct oblig ations: 1. Within the policy limits, the insurer is obligated to pay the expense of clean-up fr om an y "p ol lu ti on in ci de nt " w hi ch oc cu rs du ri ng th e p ol ic y pe ri od as or de re d b y a go ve rn me nt al au th or it y. 2. Wi th in th e p ol ic y li mi ts , t he in su re r i s o bl ig at ed to de fe nd ag ai ns t a nd sa ti sf y only those claims of third parties which are presented in writing to the insurer or insured during the policy period
.-10- The oblig ation of th

e first in suring a

greem ent (to de fend and satisfy claims) i s strictly limited to claims presented during the policy period. It does not cover c laims presented after th e po li cy pe rio d, e ven th oug h t he b asi s of th e cl aim s oc cur red dur in g th e po li cy pe rio d. If plaintiff desired full protection against claims of others, pre sented after expriation of the policy, it was nece ssary for it to demand a nd pay for f

ull coverage or to obtain other in su ra nc e t o p ro te ct ag ai ns t c la im s m ad e a ft er th e e xp ir at io n o f t he po li cy.

Plaintiff cites Walker v. Larson, Mon. 1986, 727 P.2d 1321. That case involved legal malpractice insurance which included a " claims made" provision not quoted in the opinion of the Court which held that the actions of the claimant were sufficie nt to show a "claim made" during t he policy period. I n the pre sent cas e, it is und isputed th at the ad

joining p roperty
owners a sserted

no claim in

any form to an

y one until af

ter the e xpiration of

the polic y te

rm.

Plaintiff also cite s J. G. Link & Company v. Continental Casualty Company, U.S.C.A. 9th Cir., 470 F.2d 1133 (1972) which involved an "errors and omissions policy " of an architect, which was ambiguous as to whether it was a "discovery

policy" or a

n "occurrence policy" a nd which was construed most favorably to the policyholder. I

n the present case, no such ambi guity

exists.

Plaintiff also arg ues that a genuine issue e

xists as to whether pl aintiffsgave timely notice to defendant of the fact that the adjoining landowners were making a claim of incidental damages. As theretofore sta ted, it is undisputed that no claim or demand was made to pl aintiff o

r defendant by

the adjoining landownerswithin the policy period. T

his undisputed fact is fatal to any claim for relief under Section 1 of the policy which is the subject o f this app eal.
No published Tennessee authority is found on the subject of "claims made" provisions in liability insurance policies. Howeve r, a majority of decisions from other jurisdictions have-11-

recognized and enforced suc h provisions. See Kenefick v. Hitchcock, Wis. App. 1994, 522 N.W.2d 261; Graman v. Continental Casualty Co., 87 Ill. App. 3rd 896; 409 N.E.2d 387 (1980); Livingston Parrish School Board v. Firemen's Fund Am. Ins. Co., La. 1973, 282 S.2d 478; Gereboff v. Home Indemnity Co., 119 R.I . 814, 383 A .2d 1024 ( 1978); Rotwein v. General Acc. Group, 103 N.J. Super. 406, 247 A.2d 370 (1968).
The judgment of the

Trial Cour

t is affir med. Costs o f this app eal are assesse d again st plaintiff . The ca use is re manded to

the Tria l Court for

any necessa ry further procee dings.

Affirmed and Remanded.

_______________________________________ HENRY F. TODD PRESIDING

JUDGE, MIDDL

E SECTION

CONCUR:

_____________________________________ SAMUEL L . LEWIS, JUDGE

_____________________________________ BEN H. CANTRELL , JUDGE