Opinion ID: 2634716
Heading Depth: 2
Heading Rank: 2

Heading: The Court of Appeals' Interpretation

Text: The court of appeals relied on our previous interpretations of sudden and accidental and discharge, dispersal, release, or escape to conclude that the insurers did not owe Cotter duties to defend or indemnify. First, the court of appeals examined our interpretations of sudden and accidental and concluded that qualified pollution exclusion clauses only restore coverage for unexpected and unintended discharges and not for unexpected and unintended damage. Next, the court of appeals determined that Cotter expected a discharge, dispersal, release, or escape because it intended that contaminants would filter through the soil beneath the tailings ponds. For these reasons, the court of appeals concluded that the qualified pollution exclusion clauses excluded coverage and thus did not require the primary insurers to defend, or any of the insurers to indemnify, Cotter. The court of appeals first rejected Cotter's contention that the clauses provided coverage for intended discharges that unintentionally harmed the environment. Cotter had argued that coverage existed under the qualified pollution exclusion clauses if an unexpected and unintended harm to the environment had occurred. Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 64 P.3d 886, 889 (Colo. App.2002). Cotter further contended that a polluting event was a discharge that is harmful to the environment. Id. Hence, Cotter reasoned, it must have expected or intended to harm the environment to trigger the pollution exclusion clause and . . . any de minimis discharge of contaminants should not be considered a `polluting event.' Id. The court of appeals disagreed with Cotter, however, reasoning that unexpected and unintended refers to the discharge of pollutants and not to the resulting harm. To reach this conclusion, the court of appeals looked both to our prior interpretations of qualified pollution exclusion clauses and the plain language of the clauses themselves. First, the court of appeals relied on language in Compass Insurance Co. v. City of Littleton , in which we characterized the relevant polluting event for purposes of qualified pollution exclusion clauses as the release of pollutants from a containment area. 64 P.3d at 890 (Colo.App.2002) (citing Compass, 984 P.2d at 617). Second, the court of appeals pointed to the language of a qualified pollution clause, which stated, this exclusion does not apply if such discharge, dispersal, release or escape is sudden or accidental. Id. The court of appeals reasoned that the phrases sudden and accidental and sudden, unintended and unexpected refer to the discharge of a pollutant and not to the resulting damage. Thus, the court of appeals concluded, the relevant inquiry is whether the discharge, dispersal, release or escape was expected or intended and the relevant polluting event is the intended or expected release of contaminants from a containment area. Id. Having disposed of Cotter's contention that the qualified pollution exclusion clauses restore coverage for unexpected and unintended damage, the court of appeals applied the clauses to determine coverage, looking no further than Cotter's expectation of seepage. It held that the clauses precluded coverage for Cotter because Cotter expected seepage from the ponds into the underlying soil. The court of appeals first cited various statements by Cotter that it intended that contaminants would seep into the soil beneath the ponds. Cotter, 64 P.3d at 891. The court of appeals then reasoned that these statements demonstrated that Cotter intended and expected contaminants to leach from the tailings ponds. Id. at 892. Applying the rule that the relevant polluting event is the release of contaminants from a containment area, the court of appeals concluded that Cotter expected a discharge, dispersal, release, or escape from the tailings pond. See id. Therefore, the court of appeals concluded that the qualified pollution exclusion clauses excluded coverage and that neither the primary insurers owed a duty to defend, nor any of the insurers owed a duty to indemnify, Cotter. Id.