Opinion ID: 1277337
Heading Depth: 1
Heading Rank: 6

Heading: Qualified Pollution Exclusion

Text: We first address the qualified pollution exclusion clause found in Dutton's policies with USF&G and Empire. USF&G and Empire assert that under the undisputed facts of the case, the qualified pollution exclusion released them from any liability to defend or indemnify Dutton for expenses relating to the EPA investigation and consent judgments against it. Dutton, in contrast, argues that the sudden and accidental exception to the pollution exclusion applies so as to make such exclusion inapplicable. The district court determined that because it was undisputed that the discharge occurred over a long period of time, there was no material issue of fact and as a matter of law, the pollution in question was neither sudden nor accidental, and that the exception to the exclusion did not apply. Inherent to this determination was the district court's interpretation of the phrase sudden and accidental. [3] Courts that have considered the qualified pollution exclusion here presented have generally held that while the burden rests with the insurer to establish the initial applicability of the pollution exclusion by showing the discharge or release of a pollutant into the environment, the burden then shifts to the insured to show that the sudden and accidental exception to that exclusion is applicable. See, Employers Ins. of Wausau v. Petroleum Specialties, Inc., 69 F.3d 98 (6th Cir. 1995); Aeroquip Corp. v. Aetna Cas. and Sur. Co., Inc., 26 F.3d 893 (9th Cir. 1994); American Mut. Liability Ins. Co. v. Beatrice Companies, Inc., 924 F. Supp. 861 (N.D. Ill. 1996); Quaker State Minit-Lube, Inc. v. Fireman's Fund Ins. Co., 868 F. Supp. 1278 (D. Utah 1994); Hudson Ins. Co. v. Double D Management Co., Inc., 768 F. Supp. 1549 (M.D. Fla. 1991); Cooper Dev. Co. v. Employers Ins. of Wausau, 765 F. Supp. 1429 (N.D. Cal. 1991); A. Johnson & Co. v. Aetna Cas. and Sur. Co., 741 F. Supp. 298 (D. Mass. 1990); E.I. du Pont de Nemours v. Allstate Ins., 693 A.2d 1059 (Del. 1997); SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305 (Minn. 1995); Northville Industries v. Nat. Union Ins., 89 N.Y.2d 621, 679 N.E.2d 1044, 657 N.Y.S.2d 564 (1997); U.S. Industries v. Ins. Co. of N. Am., 110 Ohio App. 3d 361, 674 N.E.2d 414 (1996). But see Remington Arms Co. v. Liberty Mut. Ins. Co., 810 F. Supp. 1406 (D. Del. 1992). [4,5] The party moving for summary judgment has the burden to show that no genuine issue of material fact exists and must produce sufficient evidence to demonstrate that the moving party is entitled to judgment as a matter of law. Cerny v. Longley, 270 Neb. 706, 708 N.W.2d 219 (2005). A movant for summary judgment makes a prima facie case by producing enough evidence to demonstrate that the movant is entitled to a judgment if the evidence were uncontroverted at trial. At that point, the burden of producing evidence shifts to the party opposing the motion. Id. It is undisputed that the initial applicability of the pollution exclusion found in the USF&G and Empire policies has been established. Thus, USF&G and Empire made their prima facie case for summary judgment on the basis of such exclusion. Dutton argues, however, that it presented a material issue of fact as to whether the exception to the pollution exclusion applies. In order to determine whether such a material issue of fact exists, we must first determine the meaning of the phrase. The sudden and accidental exception to the standard pollution exclusion clause has been the subject of copious litigation. See, generally, e.g., Annot., 89 A.L.R.5th 1 (2001). However, it presents an issue of first impression for our court. [6] Since the sudden and accidental exception to the pollution exclusion clause is expressed in the conjunctive, both requirements must be met for the exception to become operative. See Technicon v. American Home, 74 N.Y.2d 66, 542 N.E.2d 1048, 544 N.Y.S.2d 531 (1989). We ultimately conclude that the discharges leading to the pollution in issue in this case were not sudden. We, therefore, affirm summary judgment as to USF&G and Empire on that basis, and need not address the meaning of the term accidental, or any other alternative basis for summary judgment presented to the district court. Courts have disagreed as to whether sudden refers to something temporally abrupt from an objective standpoint, something unexpected from the subjective standpoint of the insured, or whether the term is ambiguous. In considering the meaning of the term sudden, several courts have noted that recognized dictionaries differ as to its meaning. See, e.g., Just v. Land Reclamation, Ltd., 155 Wis. 2d 737, 456 N.W.2d 570 (1990); Hecla Min. Co. v. New Hampshire Ins. Co., 811 P.2d 1083 (Colo. 1991); Claussen v. Aetna Cas. &c. Co., 259 Ga. 333, 380 S.E.2d 686 (1989). In Webster's Third New International Dictionary of the English Language, Unabridged 2284 (1993), the primary definition of the term sudden is happening without previous notice or with very brief notice: coming or occurring unexpectedly: not foreseen or prepared for. Webster's also lists synonyms for sudden that include prompt and immediate. Similarly, Black's Law Dictionary 1432 (6th ed. 1990) defines sudden as [h]appening without previous notice or with very brief notice; coming or occurring unexpectedly; unforeseen; unprepared for. In contrast, however, the Random House Dictionary of the English Language 1900 (2d ed. 1987) defines sudden in temporal terms as happening, coming, made, or done quickly. Accordingly, numerous courts have determined that the term sudden, as used in the sudden and accidental pollution exclusion exception, is ambiguous and should be interpreted in favor of the insured, as referring to something subjectively unexpected. See, e.g., Pepper's Steel & Alloys v. U.S. Fidelity & Guar., 668 F. Supp. 1541 (S.D. Fla. 1987); U.S. v. Conservation Chemical Co., 653 F. Supp. 152 (W.D. Mo. 1986); Ala. Plating v. U.S. Fidelity and Guar., 690 So. 2d 331 (Ala. 1996); Sauer v. Home Indem. Co., 841 P.2d 176 (Alaska 1992); Hecla Min. Co. v. New Hampshire Ins. Co., supra ; Claussen v. Aetna Cas. &c. Co., supra ; American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996); Morton Intern., Inc. v. General Acc. Ins. Co., 134 N.J. 1, 629 A.2d 831 (1993); Textron, Inc. v. Aetna Cas. and Sur. Co., 754 A.2d 742 (R.I. 2000); Greenville County v. Insurance Reserve Fund, 313 S.C. 546, 443 S.E.2d 552 (1994); Key Tronic Corporation v. Aetna, 124 Wash. 2d 618, 881 P.2d 201 (1994); Joy Technologies v. Liberty Mut. Ins., 187 W. Va. 742, 421 S.E.2d 493 (1992); Just v. Land Reclamation, Ltd., supra ; Compass Ins. Co. v. Cravens, Dargan & Co., 748 P.2d 724 (Wyo. 1988). See, also, MAPCO Alaska Petroleum v. Central Nat. Ins. Co., 795 F. Supp. 941 (D. Alaska 1991). However, other courts have decided that in its common, vernacular understanding, sudden is unambiguous and is to be understood as objectively, temporally abrupt. See, e.g., Bell Lumber and Pole Co. v. U.S. Fire Ins. Co., 60 F.3d 437 (8th Cir. 1995); Buell Industries v. Greater N.Y. Mut. Ins., 259 Conn. 527, 791 A.2d 489 (2002); E.I. du Pont de Nemours v. Allstate Ins., 693 A.2d 1059 (Del. 1997); Dimmitt Chevrolet v. Southeastern Fidelity, 636 So. 2d 700 (Fla. 1993); North Pacific Ins. Co. v. Mai, 130 Idaho 251, 939 P.2d 570 (1997); Board v. Farmland Mut. Ins., 568 N.W.2d 815 (Iowa 1997); Am. Motorists Ins. Co. v. ARTRA Group, Inc., 338 Md. 560, 659 A.2d 1295 (1995); Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc., 407 Mass. 675, 555 N.E.2d 568 (1990); Auto-Owners Ins v City of Clare, 446 Mich. 1, 521 N.W.2d 480 (1994); Board of Regents v. Royal Ins. Co., 517 N.W.2d 888 (Minn. 1994); Sokoloski v. American West Ins. Co., 294 Mont. 210, 980 P.2d 1043 (1999); Northville Industries v. Nat. Union Ins., 89 N.Y.2d 621, 679 N.E.2d 1044, 657 N.Y.S.2d 564, (1997); Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 340 S.E.2d 374 (1986); Kerr-McGee Corp. v. Admiral Ins. Co., 905 P.2d 760 (Okla. 1995); Sharon Steel v. Aetna Cas. and Sur., 931 P.2d 127 (Utah 1997); Sinclair Oil Corp. v. Republic Ins. Co., 929 P.2d 535 (Wyo. 1996). The court in Buell Industries v. Greater N.Y. Mut. Ins., supra , for instance, explained that '[t]he existence of more than one dictionary definition is not the sine qua non of ambiguity. If it were, few words would be unambiguous.' Id. at 546, 791 A.2d at 501, quoting New Castle County v. Hartford Acc. and Indem. Co., 933 F.2d 1162 (3d Cir. 1991). The court concluded that in the context of the sudden and accidental exception to the pollution exclusion, the term sudden was unambiguous and that under its plain meaning, only a temporally abrupt release of pollutants would be covered by the exclusion exception. The court found it was simply untenable to construe the term sudden as an event whose only requirement is that it be unexpected to the observer. 259 Conn. at 544, 791 A.2d at 500. It thus quoted the California Court of Appeals, stating, 'We cannot reasonably call sudden a process that occurs slowly and incrementally over a relatively long time, no matter how unexpected or unintended the process.' Id., quoting Shell Oil v. Winterthur Swiss Ins., 12 Cal. App. 4th 715, 15 Cal. Rptr. 2d 815 (1993). Similarly, the court stated, 'It seems incongruous . . . to think of a leakage or seepage that occurs over many years as happening suddenly.' Id. at 544, 791 A.2d at 501, quoting Board of Regents v. Royal Ins. Co., supra . [7,8] We conclude that under the terms of the policy at issue, an event occurring over a period of time is not sudden. The language of an insurance policy should be considered in accordance with what a reasonable person in the position of the insured would have understood it to mean. See Olson v. Le Mars Mut. Ins. Co., 269 Neb. 800, 696 N.W.2d 453 (2005). We conclude that a reasonable person in the position of the insured would understand the term sudden, as found in the context of the qualified pollution exclusion, to refer to the objectively temporally abrupt release of pollutants into the environment. The district court was correct in concluding that the fact that the discharges occurred over a period of time precluded Dutton's recovery against USF&G and Empire. We therefore affirm the summary judgment in favor of USF&G and Empire on that basis. However, because the policies with Continental and Northern did not contain the qualified pollution exclusion clause, we must consider other grounds submitted to the district court for summary judgment with regard to Continental and Northern.