PUBLISH

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________________

No. 96-8362 

________________________________

D.C. Docket No. CV193-033-DHB

BOARDMAN PETROLEUM, INC. d.b.a

Red & Jack Oil Company,

Plaintiff,

Counter-Defendant,

Appellee,

versus

FEDERATED MUTUAL INSURANCE

COMPANY,

Defendant,

Counter-Claimant,

Appellant.

_________________________________________________________________ 

Appeal from the United States District Court 

for the Southern District of Georgia _________________________________________________________________

(July 29, 1997)

Before HATCHETT, Chief Judge, ANDERSON, Circuit Judge, and LAY*

, Senior Circuit Judge.

PER CURIAM:

____________________________

*

 Honorable Donald P. Lay, Senior U.S. Circuit Judge for the

Eighth Circuit, sitting by designation. 
 1

 Customarily, we request the parties to submit a proposed

statement of facts and certificate of issues for decision before

certifying a case. In view of the substantial agreement between

the parties as to the issues to be decided in this case, we depart

from the usual practice and certify based on the materials

currently before us.

2

PER CURIAM: 

CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR

THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF GEORGIA PURSUANT TO

ARTICLE VI, SECTION VI, PARAGRAPH IV OF THE GEORGIA CONSTITUTION.

TO THE SUPREME COURT OF GEORGIA AND ITS HONORABLE JUSTICES:

It appears to the United States Court of Appeals for the

Eleventh Circuit that this case involves questions of Georgia law

that will determine the outcome of the case for the parties. It

also appears to this court and the parties that no controlling

precedent of the Supreme Court of Georgia or any other Georgia

court answers these questions, and that the answers are

intertwined with important matters of Georgia public policy. We

therefore certify the following questions to Georgia’s highest

court for resolution. See O.C.G.A. § 15-2-9 (1990); Ga. Sup. Ct.

R. 37.1

FACTS

This case arises out of a dispute over whether an insurer is

contractually liable for clean-up costs and defense expenses

incurred as a result of underground petroleum contamination at an

Augusta, Georgia gas station.

From 1955 to 1986, the appellee, Boardman Petroleum, Inc.

(Boardman), leased and operated a gas station (the Smile Station)

in the Daniel Village Shopping Center located in Augusta,
 2

 Boardman also notified another insurer, but that insurer’s

liability is not at issue in this case.

3

Georgia. During the years the station operated, Boardman used

underground storage tank systems to store and dispense petroleum

products. When Boardman closed the Smile Station in 1986, it had

the underground storage tanks removed from the site. At that

time it does not appear that the tanks were leaking or had

compromised integrity. In 1988, however, an environmental

consultant discovered petroleum contamination at the Smile

Station site during an assessment on behalf of a potential site

buyer. The discovery of contamination eventually led to a

lawsuit (the PGC Associates lawsuit) against Boardman in late

1990. The PGC Associates lawsuit alleged, among other things,

that one of the Smile Station tanks leaked petroleum products and

other hazardous chemicals that contaminated the site, groundwater

and possible surrounding third-party owned property.

In February 1991, Boardman presented the PGC Associates

lawsuit to its insurer, Federated Mutual Insurance Company

(Federated), the appellant in this case.2 In April 1991,

Federated accepted defense of the PGC Associates lawsuit under a

reservation of rights. Federated then filed a declaratory

judgment action in the United States District Court for the

Southern District of Georgia to determine if coverage existed for

the claim arising from the PGC Associates lawsuit. Federated

ultimately dismissed its declaratory judgment action without
4

prejudice in December 1992, following the dismissal without

prejudice of the PGC Associates lawsuit.

During the pendency of the PGC Associates lawsuit, Boardman

and its insurers performed extensive environmental testing at the

Smile Station site. This testing indicated that significant

groundwater contamination existed in and around the tank bed that

formerly housed Boardman’s underground storage tanks. In

accordance with Georgia law, in October 1992, Boardman notified

the Georgia Department of Natural Resources (DNR) about the

results of the testing. In response, DNR wrote Boardman on

February 3, 1993, and ordered Boardman to begin corrective action

measures to remove the petroleum contamination from the Smile

Station site, and to submit additional information regarding the

potential impact on surrounding properties. Boardman promptly

notified Federated and sought defense and indemnification, but

Federated refused to agree. Federated then added the insurance

coverage dispute surrounding the Smile Station to a declaratory

judgment action pending between the parties regarding another gas

station site. Boardman and Federated ultimately settled the

pending claims regarding the other site, leaving for litigation

only issues relating to the extent of Boardman’s coverage under

general liability and umbrella insurance policies for the Smile

Station site. 

Federated issued the general liability policies in dispute

between 1977 and 1985, to cover the Smile Station in cases

involving property damage to third parties. In addition to the
5

third-party policies, Federated issued first-party policies to

Boardman as part of a special “Petro-Pac Special Multi-Peril”

coverage option. Federated also issued umbrella policies to

Boardman, providing excess third-party coverage above the PetroPac third-party policy limits. The Petro-Pac third-party

policies contained the following coverage provisions:

The Company will pay on behalf of the insured all sums

which the insured shall become legally obligated to pay

as damages because of:

 A. bodily injury or

B. property damage

to which this insurance applies, caused by an 

occurrence . . . .

. . . .

'Occurrence' means 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.

. . . .

'Property Damage' means (1) physical injury to or

destruction of tangible property which occurs during

the policy period, including the loss or use thereof at

any time resulting therefrom, or (2) loss of use of

tangible property which has not been physically injured

or destroyed provided such loss of use is caused by an

occurrence during the policy period.

Boardman interprets these provisions to mean that coverage

is triggered when property damage occurs within the policy period

even if the property damage is not discovered within the policy

period. Federated interprets these provisions to mean that

coverage is triggered only when property damage occurs and is

discovered within the policy period. Boardman calls its
6

interpretation an “exposure” trigger of coverage rule. Federated

calls its interpretation a “manifestation” trigger of coverage

rule. Both parties agree that the interpretation issue is

subject to Georgia law canons of contract interpretation.

The third-party policies also contain provisions indicating

that insurance coverage does not apply “to property damage to . .

. (1) property owned or occupied by or rented to the insured[.]” 

As discussed below, the parties differ markedly on the relevance

of the so-called “owned or rented” coverage exclusion provision

in this case: Boardman contends the coverage exclusion provision

does not apply, Federated contends it does. Again, both parties

agree that the interpretation of the coverage exclusion provision

turns on Georgia law.

In any event, Boardman eventually arranged to remove 300

gallons of free product gasoline and 440 gallons of gasoline

contaminated water from the subsurface groundwater at the Smile

Station site. Based upon the fact that the contamination was

removed and no longer appeared to threaten migration onto other

property, DNR issued a “no further action” letter on February 17,

1996. DNR’s letter stated in part:

Based on the current requirements of the Georgia

Underground Storage Tank Act and the Georgia Rules for

Underground Storage Tank Management (GUST Rules) and on

the final Certification of Completion, the Georgia

Environmental Protection Division (EPD) has determined

that no further corrective action is required for free

product removal and that no additional groundwater

monitoring is necessary for the subject site, at this

time.

However, this site could be subject to further

corrective action in the future if mandated through
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more stringent state or federal statutory or regulatory

changes, or if drinking water systems are identified or

installed within three miles of the site, or if surface 

water bodies are impacted by the dissolved contaminant

plume, or if additional soil contamination and/or free

product on groundwater are identified as originating

from this site.

On cross-motions for summary judgment, the United States

District Court for the Southern District of Georgia adopted

Boardman’s view on both the trigger of coverage issue and the

“owned or rented” coverage exclusion issue. See Boardman

Petroleum, Inc. v. Federated Mutual Insurance Co., 926 F. Supp.

1566 (S.D. Ga. 1995). The district court noted that the trigger

of coverage issue presents “an important matter of a state’s

public policy” and noted that the Supreme Court of Georgia could

not accept certification from a district court. 926 F. Supp. at

1577 n.2. The district court then proceeded to apply Georgia

principles of contract construction and found that an “exposure”

trigger applied, i.e., that coverage is triggered when property

damage occurs within the policy period even if not discovered

within the policy period. 926 F. Supp. at 1578.

Turning to the “owned or rented” coverage exclusion issue,

the district court concluded that the coverage exclusion

provision did not apply, based on reasoning it applied in

Claussen v. Aetna Cas. & Sur. Co., 754 F. Supp. 1576 (S.D. Ga.

1990), a case interpreting a similar coverage exclusion provision

under Florida law. Following the entry of the district court’s

final order, Federated filed this timely appeal.

CONTENTIONS
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Federated contends that the only trigger of coverage rule

that comports with a common sense understanding of the policies

at issue here and gives effect to all policy terms is a

“manifestation” trigger of coverage rule. Federated maintains

that an “exposure” trigger of coverage rule provides no workable

principle for determining when liability under a policy arises. 

More particularly, Federated contends that the “exposure” trigger

of coverage rule will lead to a factual and scientific morass as

parties litigate to determine when exposure actually happened. 

Federated argues that the alternative, “manifestation” trigger of

coverage rule is workable because it imposes occurrence-based

liability only at the time the complaining party suffers tangible

damage due to discovery of contamination. In addition, Federated

contends that the only Georgia case on point -- a trial court

decision -- chose the “manifestation” trigger of coverage rule,

and urges the court to follow the Fourth Circuit’s decision in

Mraz v. Canadian Universal Ins. Co. Ltd., 804 F.2d 1325 (4th Cir.

1986), in applying a “manifestation” trigger of coverage rule to

the type of policy involved in this case.

With respect to the “owned or rented” coverage exclusion

issue, Federated contends the third-party coverage at issue here

contains a clear exclusion for damage to property which Boardman

owned or rented, and Boardman purchased first-party coverage in

recognition of this exclusion. Federated argues that the

contamination in this case was limited to the soil and

groundwater under the Smile Station -- both Boardman’s property
9

under Georgia law -- and that no contamination ever left the

Smile Station and affected neighboring third-party property, or

posed a genuine threat to third-party property. As a result,

Federated contends, the coverage exclusion provision applied in

this case based on the factors set forth in the Claussen

decision. In addition, Federated questions whether the Claussen

factors should be relied upon at all to determine the

applicability of an “owned or rented” coverage exclusion

provision. 

Boardman contends the district court properly adopted the

“exposure” trigger of coverage rule, as the policies at issue

only require that damage “occur” during the policy period. 

Boardman argues that the district court’s ruling comports with

the plain meaning of the policy terms and that the restrictive

trigger of coverage position Federated urges turns an occurrencebased policy into a claims made or discovery-based policy. 

Boardman also contends that the district court ruled correctly

even if the policy terms are “vague,” as Georgia law requires

that ambiguity be interpreted in favor of the insured. In

addition, Boardman contends the district court’s decision is in

accordance with Eleventh Circuit decisions applying the law of

Georgia, Florida and Alabama, all of which have rejected the

“manifestation” trigger of coverage rule for comprehensive

general liabilities policies. Boardman argues that the

“manifestation” trigger of coverage rule is based on a “withering

theory” that the overwhelming majority of courts have rejected. 
10

Finally, Boardman also maintains that Federated’s reliance on a

one paragraph conclusory order from a Georgia trial court, is

misplaced, as the “manifestation” trigger of coverage rule

adopted in that case did not preclude coverage to the insured.

With respect to the “owned or rented” coverage exclusion,

Boardman contends the district court’s ruling is correct because

Boardman is not seeking to collect for damage to its own

property, but is seeking indemnification for the cost of the DNR

ordered clean-up to prevent the spread of contamination. 

Boardman points to cases from the Sixth and Seventh Circuits

holding that “owned or rented” coverage exclusion provisions do

not apply in such contexts. See Anderson Development Co. v.

Traveler’s Indemnity Co., 49 F.3d 1128 (6th Cir. 1995); Patz v.

St. Paul Fire & Marine Ins. Co., 15 F.3d 699 (7th Cir. 1994). 

Boardman also notes that under Georgia law, Federated, not

Boardman, has the burden of showing that the factual situation at

issue here falls within the exclusion. See Welch v. Prof’l Ins.

Corp., 231 S.E.2d 103 (Ga. 1976). Boardman further notes that

exclusions are to be strictly construed against the insurer. 

Boardman also argues that Federated failed to meet its

burden here for several reasons in addition to the one cited

above. First, Boardman contends that Federated distorts the

scope of Boardman’s first-party coverage, using it as both a

sword and a shield: suggesting in its brief that the first partycoverage regulates the property damage involved here, but

maintaining in correspondence to Boardman that the coverage does
11

not extend to the type of damage involved here. Second, Boardman

contends that Federated presented no evidence to support its

contention that the petroleum contamination at issue here did not

threaten damage to third-party property.

Finally, Boardman implicitly argues that Claussen delineates

the appropriate factors to consider when evaluating an “owned or

rented” coverage exclusion.

QUESTIONS TO BE CERTIFIED

We certify the following questions:

1. WHAT IS THE APPROPRIATE TRIGGER OF COVERAGE

UNDER GENERAL LIABILITY POLICIES SUCH AS THE

ONES AT ISSUE IN THIS CASE?

2. DOES AN “OWNED OR RENTED” COVERAGE EXCLUSION

IN GENERAL LIABILITY POLICIES SUCH AS THE

ONES AT ISSUE BAR COVERAGE OF ALL OR A

PORTION OF AN INSURED’S CLAIMS FOR

INDEMNIFICATION FOR THE COST OF A STATE

ORDERED CONTAMINATION CLEAN-UP WHEN THAT

CLEAN-UP INVOLVES SOIL AND GROUNDWATER

CONTAMINATION WHICH HAS NOT YET DAMAGED

SURROUNDING SOIL AND/OR GROUNDWATER?

Our statement of the questions is intended as a guide and is

not meant to restrict the inquiry of the Supreme Court of

Georgia. 

 The particular phrasing used in the certified question

is not to restrict the Supreme Court’s consideration of

the problems involved and the issues as the Supreme

Court perceives them to be in its analysis of the

record certified in this case. This latitude extends

to the Supreme Court’s restatement of the issue or

issues and the manner in which the answers are to be

given, whether as a comprehensive whole or in

subordinate or even contingent parts.

Martinez v. Rodriguez, 394 F.2d 156, 159 n.6 (5th Cir. 1968). 

The clerk of this court shall transmit this certificate, as well
12

as the briefs and record filed with the court, to the Supreme

Court of Georgia. In addition, the clerk shall transmit copies

of the certificate to the attorneys for the parties.

QUESTIONS CERTIFIED.