Opinion ID: 2318759
Heading Depth: 1
Heading Rank: 8

Heading: The 1963-1964 Pollution Exclusions Bar Coverage

Text: Policies sold to Hercules covering the period 1960-1964 and 1970-1980 contain pollution exclusions. The pollution exclusion in the 1970-1980 policies is known as NMA 1685. As more fully explained below, this exclusion bars coverage for pollution unless caused by a sudden, unexpected and unintended happening. Because the jury did not find that the property damage for which Hercules was found liable was the result of a sudden or abrupt event, coverage was barred for those years. [56] The pollution exclusion in the 1963-1964 policies is known as NMA 1333 and is not identical to NMA 1685. [57] The trial court ruled on summary judgment, however, that NMA 1333 is functionally equivalent to NMA 1685, [58] thus barring Hercules from attempting to prove coverage for those years on a separate basis. Hercules argues that the trial court erred in not instructing the jury that the NMA 1333 exclusion could provide coverage in instances where the NMA 1685 exclusion does not. Thus, Hercules argues that it was erroneously deprived of potential coverage for the years 1963-64. The analysis begins with NMA 1685, which this Court interpreted in E.I. du Pont de Nemours & Co. v. Allstate Ins. Co. ( Allstate II ). [59] NMA 1685 excludes coverage for property damage caused by seepage, pollution or contamination except: Where such seepage, pollution or contamination is caused by a sudden, unintended and unexpected happening during the period of Insurance. We held that the term happening refers to a causative event; in the terms of the exclusion, a sudden, unintended, and unexpected event causing seepage, pollution or contamination. [60] In essence, the term `happening' is the cause and the `seepage, pollution, or contamination' is the effect. [61] This defeats the argument, made by the insureds in Allstate II, that the migration of contaminants, and not DuPont's routine discharges into the environment, caused the contamination.... [62] Under NMA 1685 the insured cannot argue that seepage itself is a covered event, without showing that the migration of contaminants ( i.e., seepage) was caused by a sudden, unexpected and unintended happening. The holding in Allstate II was based on the unambiguous language of NMA 1685. [63] NMA 1333, like NMA 1685, excludes coverage for property damage caused by seepage, pollution or contamination... [u]nless such seepage, pollution, or contamination is caused by a sudden, unintended and unexpected happening during the period of this Insurance. But NMA 1333 goes on to provide: but this paragraph (3) shall not be construed as excluding any liability which would otherwise be covered under this Insurance for property damage caused by a sudden, unintended and unexpected happening during the period of this Insurance arising out of seepage, pollution or contamination. The first paragraph quoted above is identical to the exception to the exclusion found in NMA 1685. The issue in this case is the effect of the second clause, which the trial court referred to as the exception to the exception. We are not required to decide whether these differently worded exclusions provide identical coverage in all cases. [64] Hercules' assignment of error in this case is based on an untenable reading of NMA 1333 which could not lead to coverage on any theory it proposes. Therefore, we find no error in the trial court's treatment of the two exclusions as functional equivalents when it instructed the jury in this case. NMA 1333 begins by excluding coverage for damage caused by seepage, pollution, or contamination. Next, the first paragraph of NMA 1333 makes an exception to the exclusion where the seepage, pollution, or contamination is caused by a sudden, unintended, and unexpected happening. Therefore, just like NMA 1685, NMA 1333 unambiguously requires that the damage for which coverage is sought have been caused by a sudden, unintended, and unexpected happening. The plain language [65] of the exception to the exception then provides coverage for damage caused by a sudden, unintended, and unexpected happening if the happening itself is caused by seepage, pollution, or contamination. Hercules, however, advances an interpretation of the exception to the exception that does not comport with its plain language: That language surely should be read to mean that a happening, such as damage to groundwater that was caused by seepage, pollution or contamination at the site, is covered to the extent that the pollution damage to the groundwater is sudden, unintended, and unexpected. Such a scenario is completely different from the operation of the form NMA 1685, as construed by this Court in DuPont, when this Court required the cause of the pollution to be sudden, unintended and unexpected. Indeed, form NMA 1333 specifically provides for coverage of property damage when the cause is seepage, pollution or contamination. [66] This reading is untenable because, as stated explicitly in the last sentence of the above excerpt, it allows coverage for seepage, pollution, or contamination. It does so on the theory that the migration of a molecule of contaminant into groundwater is a happening that causes damage. Hercules argues: [T]he jury also reasonably could have found that when the pollution first came in contact with third-party property, such as groundwater, such a `happening' was abrupt. As explained above, however, the contact is not a happening. The migration of contaminants is seepage, and cannot be parsed out to be either a cause or an effect of seepage. Allowing coverage for the migration of contaminants on the theory proposed by Hercules would vitiate the entire exclusion and is inconsistent with the plain meaning of its provisions as interpreted by this Court. Therefore, the jury was properly instructed on the meaning of NMA 1685 and NMA 1333.