Court Opinion

ID: 9396561
Source: CourtListenerOpinion
Date Created: 2023-05-23 00:00:25.496027+00
Date Added: 2024-06-11T17:19:17.786602
License: Public Domain

Case: 22-60247      Document: 00516758752         Page: 1    Date Filed: 05/22/2023

           United States Court of Appeals
                for the Fifth Circuit
                                                                        United States Court of Appeals
                                                                                 Fifth Circuit

                                 ____________                                  FILED
                                                                           May 22, 2023
                                  No. 22-60247                            Lyle W. Cayce
                                 ____________                                  Clerk

   Gold Coast Commodities, Incorporated,

                                                            Plaintiff—Appellant,

                                       versus

   Crum & Forster Specialty Insurance Company,

                                            Defendant—Appellee.
                  ______________________________

                  Appeal from the United States District Court
                    for the Southern District of Mississippi
                            USDC No. 3:18-CV-793
                  ______________________________

   Before Clement, Oldham, and Wilson, Circuit Judges.
   Edith Brown Clement, Circuit Judge:
          A Mississippi city alleges that an animal foodstuff maker intentionally
   dumped hot, greasy wastewater into its sewer system. Because those
   allegations control our review, we AFFIRM.
                                          I
          Gold Coast Commodities, Inc. makes animal feed—using saponified
   poultry and plant fats—at its facility in Rankin County, Mississippi. Because
   its production process involves, among other things, old restaurant grease
   and sulfuric acid, Gold Coast is left with about 6,000 gallons of oily, “highly
Case: 22-60247        Document: 00516758752             Page: 2      Date Filed: 05/22/2023

                                        No. 22-60247

   acidic,” and “extremely hot” wastewater each week. So, what does Gold
   Coast do with its wastewater? Seven years ago, the City of Brandon,
   Mississippi told a state agency that it believed Gold Coast was
   “discharg[ing]” that “oily, low-pH wastewater” into the public sewers. 1 As
   a result, the Mississippi Department of Environmental Quality launched an
   investigation.
           In response, Gold Coast assured the Department that it “did not
   know” where the wastewater came from. But, to the City, things weren’t
   adding up. Shortly after the Department visited Gold Coast, “truckloads” of
   its “foam[y],” “dark brown” wastewater began regularly appearing at a
   rarely used dump site in Pelahatchie, Mississippi. When asked about it, Gold
   Coast said the company typically re-uses its wastewater, but plainly admitted
   that—in violation of its Pelahatchie dumping arrangement—it wasn’t
   recording the waste’s pH levels or volume.
           Suspecting foul play, the City started digging around, too. It collected
   sewage samples from discharge sites near Gold Coast’s facility. From that,
   the City concluded that “Gold Coast was [] clearly dumping significant
   amounts of high-temperature, corrosive, low-pH wastewater” into the public
   sewers. Specifically, the City found solidified grease in the pipes
   “immediately downstream” of Gold Coast, and chemical analyses of the
   waste samples revealed discrepancies between collection points. The
   upstream samples had temperatures of about 81 degrees with pH levels
   ranging between 3.89 and 6.79. But, at “the Gold Coast point of discharge
   and in downstream sewer pipes,” the waste was about 120 degrees with pH

           _____________________
           1
            The facts that follow are from a complaint filed by the City against Gold Coast.
   As noted later, we take those allegations as they are.

                                              2
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                                         No. 22-60247

   levels between 1.43 and 1.62. 2 Also, the downstream waste had abnormally
   high concentrations of arsenic, lead, cadmium, chromium, and mercury.
   Armed with this data, the City sued Gold Coast for “consistently and
   surreptitiously discharg[ing] [] high-temperature corrosive waste into the
   City’s sewer system for an unknown number of years leading up to 2014.” 3
   In its complaint, the City—raising claims of negligence—insists that Gold
   Coast did so “recklessly, wantonly, and intentionally.” Because the affected
   pipes were “severely corroded,” the City had to expend “significant funds”
   repairing its sewer system.
           Two months before the Department’s investigation, Gold Coast
   purchased a pollution liability policy from Crum & Forster Specialty
   Insurance Company. After the City filed suit, Gold Coast—seeking coverage
   under the provisions of its Policy—notified the insurer of its potential
   liability. But, Crum & Forster refused to defend Gold Coast. The insurer
   insisted that, because the Policy only covers accidents, the City’s suit—
   which Crum & Forster determined was based on intentional conduct—
   wasn’t covered. In response, Gold Coast brought this lawsuit asking the
   district court to “declar[e] that the Policy requires Crum & Forster to defend
   and otherwise provide coverage” for Gold Coast. On a motion to dismiss, the
   district court agreed with Crum & Forster—that the City wasn’t alleging an
   accident—and tossed Gold Coast’s lawsuit. Gold Coast appeals.

           _____________________
           2
            In terms of acidity, that’s somewhere between sulfuric acid and vinegar.
   United         States        Geological            Survey,         pH    Scale,
   https://www.usgs.gov/media/images/ph-scale (last visited May 19, 2023).
           3
            According to the City, Gold Coast did this to other municipalities, too. After the
   Department’s investigation began, Gold Coast started shipping its wastewater to the City
   of Jackson. But, Gold Coast allegedly disposed of that waste “without proper treatment”
   and “via an unauthorized connection” in violation of state environmental regulations.
   Consequently, the Department sent Gold Coast a cease and desist order.

                                               3
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                                         No. 22-60247

                                               II
            We review the grant or denial of a Rule 12(b)(6) motion de novo. Doe
   v. MySpace, Inc., 528 F.3d 413, 418 (5th Cir. 2008). And, we look at
   “questions of law concerning the interpretation of [an] insurance contract[]”
   de novo. Liberty Mut. Fire Ins. Co. v. Canal Ins. Co., 177 F.3d 326, 331 (5th Cir.
   1999).
            Here, the Policy is governed by Mississippi law. In Mississippi,
   whether an insurer has a duty to defend against a third-party lawsuit
   “depends upon the language of the policy.” U.S. Fid. & Guar. Co. v.
   Omnibank, 812 So. 2d 196, 200 (Miss. 2002). We—confining ourselves to the
   words of the third-party—read a policy’s terms alongside the “allegations of
   the complaint.” Farmland Mut. Ins. Co. v. Scruggs, 886 So. 2d 714, 719 (Miss.
   2004). An insurer “has an absolute duty to defend [against] a [third-party]
   complaint which contains allegations covered by the language of the policy,
   but it has absolutely no duty to defend those claims which fall outside the
   coverage of the policy.” 4 Id. (citation omitted). When comparing the words
   of the complaint to those of the policy, “‘we look not to the particular legal
   theories’ pursued by [a third party], ‘but to the allegedly tortious conduct
   underlying’ the suit.” Ingalls Shipbuilding v. Fed. Ins. Co., 410 F.3d 214, 225
   (5th Cir. 2005) (citations omitted). That’s all “well settled” law. See 1906
   Co., 273 F.3d at 610; State Farm Mut. Auto. Ins. Co. v. Taylor, 233 So. 2d 805,
   808 (Miss. 1970) (recognizing Mississippi’s longstanding “traditional test”).
            Turning to the Policy, it only covers an “occurrence,” or “an
   accident, including continuous or repeated exposure to substantially the

            _____________________
            4
             If “any ground” raised against the insured “arguably” falls under the terms of
   the policy, then the insurer must provide a defense. Am. Guarantee & Liab. Ins. Co. v. 1906
   Co., 273 F.3d 605, 610–11 (5th Cir. 2001).

                                               4
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                                       No. 22-60247

   same general harmful conditions.” Per Mississippi case law, we look to the
   alleged “actions of the insured, not the resulting damages, to decide whether
   there was an accident.” Nat’l Builders & Contractors Ins. Co. v. Slocum Const.,
   L.L.C., 428 F. App’x 430, 432 (5th Cir. 2011) (citation omitted). An accident
   is an “unanticipated” action that “takes place without the insured’s
   foresight.” Allstate Ins. Co. v. Moulton, 464 So. 2d 507, 509 (Miss. 1985)
   (citation omitted). Put simply, it’s “an inadvertent act.” Architex Ass’n, Inc.
   v. Scottsdale Ins. Co., 27 So. 3d 1148, 1161 (Miss. 2010); Slocum, 428 F. App’x
   at 432. On the other hand, a deliberate act (i.e., a non-accident) follows when
   the insured “intended the underlying action.” ACS Const. Co. of Miss. v.
   CGU, 332 F.3d 885, 888 (5th Cir. 2003). So, for intentionality, the focus isn’t
   on the “consequences” or “damages [that] flow[] from [the insured’s] act,”
   but instead the alleged tortious act. Omnibank, 812 So. 2d at 201.
          Reading its complaint, the City alleges—at multiple points—that
   Gold Coast intentionally dumped its wastewater into the public sewers. For
   example, in the “Facts” section, the City maintains that Gold Coast
   “consistently and surreptitiously discharged” or “dump[ed]” its wastewater
   into the sewer system. And, under “Count I: Negligence,” the City says that
   “Gold Coast breached its duty to the City by recklessly, wantonly, and
   intentionally disposing of its corrosive, low-pH wastewater into the City’s sewer
   system on a consistent basis . . . .” And, in its prayer for relief, the City asks for
   damages to cover “Gold Coast’s reckless, wanton, willful, and knowing
   acts . . . .” Facially-speaking, Gold Coast’s alleged wrongdoings clearly
   sound intentional, not accidental.
          For its part, Gold Coast points to the City’s assertion that it was
   “negligent,” and that “Count I of the City’s Complaint specifically sought
   to recover [under] . . . negligence.” In short, Gold Coast maintains that,
   because the City advances claims of negligence, the alleged wrongdoings are
   arguably accidental in nature. We aren’t convinced.

                                             5
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                                         No. 22-60247

           As noted, we look only to the “allegedly tortious conduct underlying”
   the City’s lawsuit, “not to the particular legal theories” raised in it. Ingalls,
   410 F.3d at 225. In doing so, we ignore any legal “characterization[s]” made
   by the parties. See Acadia Ins. Co. v. Hinds Cnty. Sch. Dist., 582 F. App’x 384,
   392 (5th Cir. 2014). Here, the word negligence only appears a few times in
   the body of the complaint, and each time it takes the form of a legal theory
   (e.g., “Gold Coast is liable to the City for negligence”). But, that makes
   sense: “Negligence is not a factual allegation . . . .” Acadia, 582 F. App’x at
   395 (Clement, J., concurring in part and dissenting in part) (quotation marks
   and citation omitted). Instead, it’s “a legal conclusion” and, as such,
   “cannot itself bring a complaint within the scope of an insurance policy’s
   coverage” in Mississippi. Id. (citation omitted). Drive-by or “conclusory
   use[s] of the word ‘negligence’” don’t “transform the character of the
   factual allegations of intentional conduct against [the insured] into allegations
   of accidental conduct constituting an ‘occurrence.’” Id. Like any other
   theory of recovery, a negligence claim must be supported by factual
   allegations. Turning to the City’s allegations—and away from its legal
   theories as Mississippi law requires—it’s clear that the complaint charges
   Gold Coast with intentional conduct. According to the City, Gold Coast
   deliberately dumped its wastewater into the public sewers for several years.
   And, per the City, those discharges damaged its sewer system. 5
           Besides, labels aren’t binding. For example, in Omnibank a third-party
   complaint alleged that a defendant-insurer acted “negligently and/or
   intentionally” when it charged an excessive premium against a group of

           _____________________
           5
             To determine whether there was an occurrence, the “only relevant consideration
   is whether”—on the face of the complaint—“the chain of events leading to the injuries”
   stem from a “course consciously devised and controlled by the insured . . . .” Architex, 27
   So. 3d at 1153–54 (alterations adopted) (citation and emphasis omitted).

                                               6
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                                         No. 22-60247

   plaintiffs. 812 So. 2d at 200. Per the complaint, the defendant “engaged in a
   course of conduct which constituted a negligent disregard” for the plaintiffs’
   rights. Id. Despite that claim, the Mississippi Supreme Court found there
   wasn’t an occurrence. Id. at 201–02. Specifically, the court emphasized that
   “[e]ven if an insured acts in a negligent manner, [the underlying] action must
   still be accidental and unintended” to “implicate policy coverage.” Id. at 197.
   In Omnibank, the defendant didn’t “intend to overcharge the plaintiffs, but
   it did intend to charge them some amount.” Slocum, 428 F. App’x at 433
   (emphasis added). So, because the insured’s underlying conduct was
   deliberate—regardless of any unintentional or so-called negligent results—
   there wasn’t an occurrence. 6 See Omnibank, 812 So. 2d at 202 (holding that
   an “insurer’s duty to defend . . . does not extend to negligent actions that are
   intentionally caused by the insured.”). As for Gold Coast, it purportedly
   discharged harmful wastewater into the City’s sewers on purpose. Even if it
   didn’t intend the consequences, Gold Coast’s alleged underlying conduct
   was done deliberately. The resulting damage to the sewer’s infrastructure is
   simply “the unintended result of [Gold Coast’s] intentional actions.”
   Slocum, 428 F. App’x at 433.
           The district court found that the “overarching” theme of the City’s
   complaint, regardless of the accompanying “legal labels,” is that Gold Coast
   deliberately dumped wastewater into the public sewers. We agree. Because

           _____________________
           6
              Consider two other examples. In Slocum, we found that the mistaken placement
   of a home on the wrong property wasn’t an accident. 428 F. App’x at 432. We emphasized
   that a “mistake” is not an “accident” because “the insured intended the action underlying
   the mistake, even if he did not intend the results or if he based his action on erroneous
   information.” Id. And, in Moulton, the Mississippi Supreme Court found that a charge of
   malicious prosecution didn’t rise to an occurrence because, although the insured “did not
   intend [for the third-party] to suffer humiliation or embarrassment, she did intend for him
   to [be] arrested.” Omnibank, 812 So. 2d at 196 (citing Moulton, 464 So. 2d at 509).

                                               7
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                                   No. 22-60247

   no occurrence was alleged in the City’s complaint, Gold Coast isn’t entitled
   to a defense from Crum & Forster. We AFFIRM.

                                        8
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                                     No. 22-60247

   Andrew S. Oldham, Circuit Judge, concurring in the judgment:
            While I agree with the majority’s conclusion, I respectfully disagree
   with its reasoning. The City of Brandon’s complaint does not allege that Gold
   Coast Commodities, Inc. (“Gold Coast”) committed an intentional tort. At
   best, the complaint is ambiguous, which would require Crum & Forster
   Specialty Insurance Company (“Crum & Forster”) to defend Gold Coast.
   See ACS Constr. Co., Inc. of Miss. v. CGU, 332 F.3d 885, 888 (5th Cir.
   2003).
            I would affirm for a different reason: Crum & Forster does not have a
   duty to defend because Gold Coast’s tortious conduct allegedly commenced
   before the policy’s effective date. “A liability insurance company has an
   absolute duty to defend a complaint which contains allegations covered by
   the language of the policy, but it has absolutely no duty to defend those claims
   which fall outside the coverage of the policy.” Farmland Mut. Ins. Co. v.
   Scruggs, 886 So. 2d 714, 719 (Miss. 2004). Here, the policy’s effective date
   was August 25, 2016, and the policy did not cover pollution events that
   started before the effective date. The City of Brandon’s complaint in the
   underlying litigation states the relevant pollution events began before the
   policy’s effective date: “Gold Coast consistently and surreptitiously
   discharged its high-temperature, corrosive waste into the City’s sewer
   system for an unknown number of years leading up to 2014.” The complaint
   also states that “in the first ten (10) months of 2016, Gold Coast . . .
   continued to illegally discharge its wastewater into the City sewer system.”
   Crum & Forster therefore does not have a duty to defend.

                                          9