Opinion ID: 155188
Heading Depth: 2
Heading Rank: 1

Heading: bodily injury or

Text: 11 B. property damageto 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. 12 (Aplt.App. at 51). 13 Second, each policy contained a standard clause known as a pollution exclusion clause, which read as follows: 14 This insurance does not apply: ... (f) 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 the 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. 15 (Aplt.App. at 51). 16 Third, each policy contained a supplementary oil exclusion, which reads as follows: 17 It is agreed that, if with respect to operations described in this endorsement there is a discharge, dispersal, release or escape of oil or other petroleum substance or derivative (including any oil refuse or oil mixed with wastes) into or upon any watercourse, body of water, bog, marsh, swamp or wetland, the insurance does not apply to bodily injury or property damage arising out of such discharge, dispersal, release or escape whether or not sudden and accidental. 18 (Aplt.App. at 59). 19 INA denied Mesa's request for coverage, claiming that under the pollution exclusion and the supplementary exclusion it was not obligated either to provide coverage or to defend Mesa against the EPA and PRP Committee actions. INA recited evidence that discharges at the Ekotek site were gradual and continuous over many years, and that the pollution was the result of continuing business practices of Ekotek and others at that site. The record does not reflect that Mesa disputed these factual representations, although it did challenge the legal conclusion that the pollution exclusion and the supplementary exclusion applied to its claims. Mesa filed a complaint in New Mexico state court seeking coverage for the EPA settlement and a defense to the PRP Committee suit. INA, along with several other defendants who were then involved in the case, removed the action to the United States District Court for the District of New Mexico on the basis of diversity. The defendants then filed a motion pursuant to 28 U.S.C. § 1404(a) to transfer the case to the District of Utah, which the New Mexico District Court granted. 20 INA then filed a motion for summary judgment, claiming that the pollution exclusion and supplementary exclusion precluded coverage for liability arising out of the Ekotek cleanup because the soil and groundwater contamination caused by Ekotek was not sudden and accidental within the meaning of those provisions, but rather was long-term, gradual and caused by the reckless and intentional activities of Ekotek. 21 The district court granted INA's motion for summary judgment in a decision rendered from the bench without a written opinion. The court found that while no New Mexico court had interpreted the pollution exclusion, the pollution clause was unambiguous and applicable to the facts of this case. The court concluded that a reasonable insured would not believe that it would be covered in a situation such as the one at hand. The court also concluded that INA had no duty to defend against the PRP Committee suit. The court did not address either the applicability of the supplementary exclusion or Mesa's contention that the oil it sold should not be considered pollution within the meaning of the general exclusion. Mesa now appeals. We have jurisdiction under 28 U.S.C. § 1291. 4 DISCUSSION