Court Opinion

ID: 1013914
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:08:34.350685+00
Date Added: 2024-06-11T09:40:28.827172
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
               FOR THE FOURTH CIRCUIT

AUTO-OWNERS INSURANCE COMPANY,        
                Plaintiff-Appellee,
                v.
DEBRA J. POTTER; ROBERT F. POTTER;
NICHOLAS E. PIGGOTT; KARIN
PIGGOTT; EDWARD F. FITZGERALD;
KAREN L. FITZGERALD; SUSAN
WILLIAMS; BRIAN EASON; JANET
EASON; CHARLES N. REGISTER;
NANCY P. REGISTER; DOUGLAS
BAREFOOT; ANGELA BAREFOOT; JOHN
JOSEPH BIANCHINO; KAREN MARIE
BIANCHINO; DANIEL BLACKMAN;
HOLLY BLACKMAN; RONALD E. BRAY;
SUSAN M. BRAY; CLYDE CORSON;             No. 03-1457
MARY CORSON; RICHARD AL COX;
BARBARA S. BOOB; JAMES W.
DELUCA; MARY H. DELUCA; KENNETH
DEMOSS; REGINA DEMOSS; DAVID R.
DIETZ; HELEN L. DIETZ; DIANE
DILLON; JESSE M. DINGLE; LYNN K.
DINGLE; DAVID M. GOODWYN;
VALERIE C. WASHINGTON; JOYCE
GRIFFIN-KEENE; SABOOR HAKEM;
WENDY D. HAKEM; JOHNNY M.
HUMPHREY; SUSAN V. HUMPHREY;
DWAUN A. HUMPHRIES; KRISTY G.
HUMPHRIES; GREGORY J. JONES;
KYMBERLY A. JONES; MILTON WAYNE
KING, SR.; JOYCE S. KING;
                                      
2              AUTO-OWNERS INSURANCE CO v. POTTER

DAVID SAMUEL LEINFELDER; SANDRA        
IVESTER LEINFELDER; STEPHANIE
EDWARDS MASSENGALE; MICHAEL R.
MCKAY; JILL L. MCKAY; ROBERT
WILLIAM MOORES; VICTORIA MORGAN
MOORES; ROBERT P. NENNO; CARINE
M. NENNO; STEVEN D. PARKER;
KAREN D. PARKER; JOSEPH J. RACHIS;
SUSAN T. RACHIS; MARK T. RADER;
SUE N. RADER; RAMIRO ROBLES, JR.;
PATRICIA BEATRICE ROBLES; JIHAD A.
SHAWWA; HOWAYDA SHAWWA; JOHN
F. STEHMAN; MICHELLE A. STEHMAN;
AMANDA TALLEY; STEPHEN TURNER;
LOLITA FIELDS; SHAWN M. WAGNER;
JODI A. WAGNER; CATHY WHITE;
DALE S. WIGGINS; MARY WIGGINS;
                                       
ANJANETTE IRENE WOOTEN,
             Defendants-Appellants,
                and
WHITEWOOD PROPERTIES,
INCORPORATED, d/b/a Neuse Crossing
Utilities Company, d/b/a Neuse
Crossing Utilities Company
Properties; JAMES D. ADAMS, JR.,
                         Defendants,
                and
THE HARLEYSVILLE INSURANCE
COMPANIES,
            Third party Defendant.
                                       
               AUTO-OWNERS INSURANCE CO v. POTTER          3

AUTO-OWNERS INSURANCE COMPANY,         
                Plaintiff-Appellee,
                 v.
WHITEWOOD PROPERTIES,
INCORPORATED, d/b/a Neuse Crossing
Utilities Company, d/b/a Neuse
Crossing Utilities Company
Properties; JAMES D. ADAMS, JR.,
              Defendants-Appellants,
                and
DEBRA J. POTTER; ROBERT F. POTTER;
NICHOLAS E. PIGGOTT; KARIN
PIGGOTT; EDWARD F. FITZGERALD;
KAREN L. FITZGERALD; SUSAN
WILLIAMS; BRIAN EASON; JANET
EASON; CHARLES N. REGISTER;
NANCY P. REGISTER; DOUGLAS
                                            No. 03-1543

BAREFOOT; ANGELA BAREFOOT; JOHN
JOSEPH BIANCHINO; KAREN MARIE
BIANCHINO; DANIEL BLACKMAN;
HOLLY BLACKMAN; RONALD E. BRAY;
SUSAN M. BRAY; CLYDE CORSON;
MARY CORSON; RICHARD AL COX;
BARBARA S. BOOB; JAMES W.
DELUCA; MARY H. DELUCA; KENNETH
DEMOSS; REGINA DEMOSS; DAVID R.
DIETZ; HELEN L. DIETZ; DIANE
DILLON; JESSE M. DINGLE; LYNN K.
DINGLE; DAVID M. GOODWYN;
VALERIE C. WASHINGTON; JOYCE
GRIFFIN-KEENE; SABOOR HAKEM;
WENDY D. HAKEM; JOHNNY M.
HUMPHREY; SUSAN V. HUMPHREY;
                                       
4             AUTO-OWNERS INSURANCE CO v. POTTER

DWAUN A. HUMPHRIES; KRISTY G.         
HUMPHRIES; GREGORY J. JONES;
KYMBERLY A. JONES; MILTON WAYNE
KING, SR.; JOYCE S. KING; DAVID
SAMUEL LEINFELDER; SANDRA IVESTER
LEINFELDER; STEPHANIE EDWARDS
MASSENGALE; MICHAEL R. MCKAY;
JILL L. MCKAY; ROBERT WILLIAM
MOORES; VICTORIA MORGAN MOORES;
ROBERT P. NENNO; CARINE M.
NENNO; STEVEN D. PARKER; KAREN
D. PARKER; JOSEPH J. RACHIS; SUSAN
T. RACHIS; MARK T. RADER; SUE N.
RADER; RAMIRO ROBLES, JR.;
PATRICIA BEATRICE ROBLES; JIHAD A.    
SHAWWA; HOWAYDA SHAWWA; JOHN
F. STEHMAN; MICHELLE A. STEHMAN;
AMANDA TALLEY; STEPHEN TURNER;
LOLITA FIELDS; SHAWN M. WAGNER;
JODI A. WAGNER; CATHY WHITE;
DALE S. WIGGINS; MARY WIGGINS;
ANJANETTE IRENE WOOTEN,
                        Defendants,
               and
THE HARLEYSVILLE INSURANCE
COMPANIES,
            Third party Defendant.
                                      
          Appeals from the United States District Court
      for the Eastern District of North Carolina, at Raleigh.
               W. Earl Britt, Senior District Judge.
                       (CA-01-819-5-BR)

                     Argued: February 26, 2004

                      Decided: July 27, 2004
                AUTO-OWNERS INSURANCE CO v. POTTER                    5
  Before LUTTIG, WILLIAMS, and GREGORY, Circuit Judges.

Vacated and remanded by unpublished opinion. Judge Gregory wrote
the opinion, in which Judge Luttig and Judge Williams joined.

                             COUNSEL

ARGUED: Jonathan Drew Sasser, ELLIS & WINTERS, L.L.P.,
Raleigh, North Carolina, for Appellants. Walter Edgar Brock, Jr.,
YOUNG, MOORE & HENDERSON, P.A., Raleigh, North Carolina,
for Appellee. ON BRIEF: Kurt J. Olson, Tyler L. Randolph,
MAUPIN TAYLOR, P.A., Raleigh, North Carolina; Reed J. Hol-
lander, NELSON, MULLINS, RILEY & SCARBOROUGH, L.L.P.,
Raleigh, North Carolina, for Appellants. John A. Yeager, WIL-
LINGHAM & COTÉ, P.C., East Lansing, Michigan, for Appellee.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                              OPINION

GREGORY, Circuit Judge:

   Debra J. Potter and other residents (hereinafter "Potter Appellants")
in the Neuse Crossing subdivision in Wake County, North Carolina,
brought suit in state court against the housing developer, Whitewood
Properties, Inc., d/b/a/ Neuse Crossing Utilities Company, its presi-
dent and others (collectively "Whitewood") to recover for damage to
their homes and persons caused by water allegedly containing con-
taminants. Appellee Auto-Owners Insurance Company ("Auto-
Owners"), Whitewood’s insurer, filed an action in federal district
court seeking a declaratory judgment that it had no obligation to
defend or indemnify Whitewood because of various exclusions in the
6                 AUTO-OWNERS INSURANCE CO v. POTTER
insurance policy at issue. The district court granted summary judg-
ment for Auto-Owners, holding that the insurance policy’s pollution
exclusion clause barred coverage and all duties to defend Whitewood.

   The Potter Appellants appeal the grant of summary judgment, con-
tending that the district court incorrectly applied governing North
Carolina law, W. Am. Ins. Co. v. Tufco Flooring E., Inc., 409 S.E.2d
692 (N.C. Ct. App. 1991). While we conclude that the district court
correctly applied three of Tufco’s "four independent" holdings, we
find that it erred in failing to properly apply the fourth holding. There-
fore, we vacate the district court’s grant of summary judgment for
Auto-Owners, and we hold that the pollution exclusion clause does
not serve as a complete bar to insurance coverage for the Potter
Appellants’ state court claims. Accordingly, we remand to the district
court so that it may consider the scope of the pollution exclusion
clause as well as the other exclusions which Auto-Owners argued are
applicable in its declaratory judgment action.

                                    I.

   Whitewood began developing the Neuse Crossing subdivision in
1987, and formed the utilities company implicated here to provide
water and sewer for the development. In March 2001, the Potter
Appellants filed suit in state court against Whitewood, alleging that
Whitewood provided contaminated water from its four wells, causing
the Potter Appellants bodily injury and property damage. According
to the Potter Appellants, the water contained excessive concentrations
of manganese, iron, calcium, arsenic, barium, chloride, hard water
constituents, and total dissolved solids, and such contaminants caused
skin problems, adverse health effects, damage to household goods,
and diminution of property values. In their state court First Amended
Complaint, the Potter Appellants asserted claims for fraudulent and
negligent misrepresentation, breach of implied warranty of habitabil-
ity, trespass, nuisance, negligence, negligence per se, negligent inflic-
tion of emotional distress, civil conspiracy, unfair and deceptive trade
practices, and medical monitoring.

  Whitewood demanded coverage from its insurers, Auto-Owners
and the Harleysville Insurance Companies,1 who had issued White-
    1
     Harleysville has been dismissed from the action by stipulation.
               AUTO-OWNERS INSURANCE CO v. POTTER                   7
wood commercial general liability ("CGL") policies for the years in
question. Auto-Owners issued a series of nearly identical one-year
policies from December 8, 1997 to December 8, 2000. The Auto-
Owners policy requires the insurer to pay those sums Whitewood is
legally obligated to pay as a result of "bodily injury" or "property
damage" caused by an "occurrence" within the scope of the policy’s
coverage. J.A. 97, 164, 231 (1997-98, 1998-99, 1999-2000 coverage
forms, respectively). The "occurrence" at issue is Whitewood’s distri-
bution of allegedly contaminated water.

   The policy includes two aggregate limits for coverage, a general
aggregate limit and a limit for "Products-Completed Operations."
"Products-completed operations" are not coverages separate from the
CGL; rather, they delineate the CGL’s scope of coverage, making
clear that insurance coverage continues to apply to work that has been
completed. Section V ("Definitions") of the CGL coverage form pro-
vides:

    a. "Products-completed operations hazard" includes all
    "bodily injury" and "property damage" occurring away from
    premises you own or rent and arising out of "your product"
    or "your work" except:

         (1) Products that are still in your physical posses-
         sion; or

         (2) Work that has not yet been completed or aban-
         doned.

    b. "Your work" will be deemed completed at the earliest of
    the following times: . . .

         (3) When that part of the work done at a job site
         has been put to its intended use by a person or
         organization other than another contractor or sub-
         contractor working on the same project.

J.A. 106, 173, 240 (1997-98, 1998-99, 1999-2000 coverage forms,
respectively). In this case, Whitewood’s product was water and its
operations consisted of providing water to the Potter Appellants.
8               AUTO-OWNERS INSURANCE CO v. POTTER
   When Whitewood sought insurance coverage for the damage
caused by the alleged contamination, both insurers initially denied
coverage. Auto-Owners later agreed to defend Whitewood under a
reservation of rights. Subsequent to that agreement, however, Auto-
Owners brought this diversity action in federal court, pursuant to 28
U.S.C. § 2201 and Fed. R. Civ. P. 57, seeking a declaration that it was
not required to indemnify or defend Whitewood under the CGL poli-
cies. In its declaratory judgment action, Auto-Owners asserted seven
counts as to why the policy did not provide the coverage sought by
Whitewood. The Potter Appellants filed a motion to dismiss the
declaratory judgment complaint. The district court converted the Pot-
ter Appellants’ motion to dismiss into one for summary judgment,
and denied that motion. However, the court granted summary judg-
ment on Auto-Owners’ declaratory judgment claim, holding that the
pollution exclusion clause in Auto-Owners’ policies precluded the
coverage sought by Whitewood. In so holding, the court did not reach
the applicability of any other proffered exclusion.

  The CGL’s pollution exclusion clause upon which the district court
based its holding excludes from CGL coverage:

    (f)(1) "Bodily injury" or "property damage" arising out of
    the actual, alleged, or threatened discharge, dispersal, seep-
    age, migration, release or escape of pollutants:

         (a) At or from any premises, site or location which
         is or was at any time owned or occupied by, or
         rented or loaned to, any insured;

         (b) At or from any premises, site or location which
         is or was at any time used by or for any insured or
         others for the handling, storage, disposal, process-
         ing or treatment of waste . . . . or

         (d) At or from any premises, site or location on
         which any insured . . . [is] performing operations:
         ...

            (i) if the pollutants are brought on or to the
            premises, site or location in connection with
            such operations . . . or
                AUTO-OWNERS INSURANCE CO v. POTTER                     9
            (ii) if the operations are to test for, monitor,
            clean up, remove, contain, treat, detoxify or
            neutralize, or in any way respond to or assess
            the effects of pollutants.

J.A. 97-98, 165, 232 (1997-98, 1998-99, 1999-2000 coverage forms,
respectively). The court found the pollution exclusion clause unam-
biguously applied to the events at issue, and barred coverage as well
as any duty to defend on the part of the insurer. After the grant of
summary judgment, Auto-Owners terminated coverage and ceased its
defense under the reservation of rights. The Potter Appellants appeal
from the district court’s grant of summary judgment, while their
action against Whitewood remains pending in state court.

                                   II.

   We review the district court’s grant of summary judgment de novo.
Xoom, Inc. v. Imageline, Inc., 323 F.3d 279, 282 (4th Cir. 2003).
Issues of law in dispute are reviewed de novo. Id.

   In this appeal, we must interpret the terms of an insurance policy
as a matter of North Carolina law. The goal of construction of insur-
ance policies, like with all contracts, is to arrive at the intent of the
parties when the policy was issued. Gaston County Dyeing Mach. Co.
v. Northfield Ins. Co., 524 S.E.2d 558, 563 (N.C. 2000) (citations
omitted). The terms of the policy are to be given their ordinary mean-
ing, unless the context indicates a different meaning was intended. Id.
Furthermore, the terms are to be harmoniously construed and every
provision is to be given effect if possible. Id.

   The meaning of language used in the policy is a question of law.
Wachovia Bank & Trust Co. v. Westchester Fire Ins. Co., 172 S.E.2d
518, 522 (N.C. 1970). If there are doubts or ambiguities in the policy,
they must be resolved in favor of the insured. Pa. Nat’l Mut. Cas. Ins.
Co. v. Associated Scaffolders & Equip. Co., 579 S.E.2d 404, 406
(N.C. Ct. App. 2003) (citation omitted); see also Waste Mgmt. of Car-
olinas, Inc. v. Peerless Ins. Co., 340 S.E.2d 374, 378 (N.C. 1986);
accord Gaston County Dyeing. The insured bears the initial burden
of establishing that a loss comes within the scope of a policy’s cover-
age, however, the insurer bears the burden of proving that an exclu-
10               AUTO-OWNERS INSURANCE CO v. POTTER
sion is applicable. Nationwide Mut. Ins. Co. v. McAbee, 150 S.E.2d
496, 497-98 (N.C. 1966).

                                   III.

                                    A.

    The Potter Appellants argue that the district court erred in interpret-
ing state law on pollution exclusion clauses by failing to apply the
four independent holdings of the North Carolina Court of Appeals in
W. Am. Ins. Co. v. Tufco Flooring E., Inc., 409 S.E.2d 692 (N.C. Ct.
App. 1991), review allowed, 413 S.E.2d 555 (N.C. 1992), and review
denied as improvidently granted, 420 S.E.2d 826 (N.C. 1992), and
overruled on other grounds by Gaston County Dyeing, 524 S.E.2d
558. We find, as both parties largely acknowledge, that there is no
clearly controlling precedent from the North Carolina Supreme Court
that resolves the instant case, thus "our judicial chore is to determine
the rule that the North Carolina Supreme Court would probably fol-
low, not fashion a rule which we, as an independent federal court,
might consider best." Kline v. Wheels by Kinney, Inc., 464 F.2d 184,
187 (4th Cir. 1972) (internal quotation marks and citation omitted).
In doing so, where Tufco is directly on point, we are obliged to follow
it. See, e.g., West v. Am. Tel. & Tel. Co., 311 U.S. 223, 236-37 (1940)
("[A] federal court is not free to reject the state rule merely because
it has not received the sanction of the highest state court, even though
it thinks the rule is unsound in principle or that another is prefera-
ble."); Assicurazioni Generali, S.p.A. v. Neil, 160 F.3d 997, 1002-03
(4th Cir. 1998) (stating "only if the decision of a state’s intermediate
court cannot be reconciled with state statutes, or decisions of the
state’s highest court, or both, may a federal court sitting in diversity
refuse to follow it") (citations omitted).

   The Potter Appellants argue that Tufco clearly controls this case
and its four independent holdings dictate that North Carolina law pre-
cludes application of the pollution exclusion provision in this
instance. See Br. of Appellants at 18 ("Even if one assumes that the
products/completed coverage is subject to the pollution exclusion
clause, the District Court fails to address the other three independent
reasons adopted Tufco [sic] for concluding that the pollution exclu-
sion clause did not apply."). Auto-Owners contends that the district
                AUTO-OWNERS INSURANCE CO v. POTTER                    11
court properly applied governing state law, and that Tufco is factually
distinguishable. We briefly review Tufco before addressing the par-
ties’ contentions.

   In Tufco, the North Carolina Court of Appeals considered whether
a pollution exclusion clause, with wording substantially similar to that
at issue here — although having a different scope of applicability —
excluded property damage resulting from the use of a floor resurfac-
ing product. See 409 S.E.2d at 695-700. The insured, a flooring com-
pany, resurfaced the floor of a Perdue chicken plant. During the
resurfacing, some chicken, which had been stored in a cooler adjacent
to one of the areas undergoing treatment, became spoiled. Apparently
unaware of the adulteration, Perdue sent the chicken to its distribu-
tors, but upon receipt the customers notified Perdue that the chicken
was unfit for consumption. After disposing of $500,000 in chicken,
Perdue sued the insured for its loss, asserting that the chicken was
damaged as a result of fumes released by the chemicals used in resur-
facing. Id. at 693. The flooring company sought insurance coverage
for Perdue’s claims, but the insurer asserted that the CGL’s pollution
exclusion clause barred coverage for the loss.

   The Tufco trial court rejected the insurer’s contention, and the
Court of Appeals affirmed, holding that the pollution exclusion clause
was inapplicable on "four independent grounds." Id. at 695. First, the
court held that the clause was "expressly inapplicable to and overrid-
den by the ‘completed operations’ coverage in the policy." Id. Sec-
ond, it held that the policy applied to the claim was ambiguous and
had to be construed against the drafter/insurer. Id. Third, it held that
the flooring material did not constitute a "pollutant" under the clause.
Id. Finally, it held that the pollution exclusion clause "applies only to
discharges into the environment, and none occurred here." Id.

   Appellants maintain that all four grounds constitute controlling
North Carolina law, and the district court erred by refusing to apply
that precedent. We first note that although Appellants argue that
"[t]he District Court failed to apply North Carolina law," Br. at 7
(emphasis removed), and that "the District Court refused to follow the
controlling state precedent of Tufco," id. at 18 (emphasis removed),
the district court devoted considerable attention to Tufco in its opin-
ion. See Dist. Ct. slip op. at 12-20 (discussing Tufco) (J.A. 527-35).
12               AUTO-OWNERS INSURANCE CO v. POTTER
Furthermore, we find that the district court’s analysis of Tufco’s first
three holdings was substantially correct. However, we conclude that
the district court erred in failing to properly consider Tufco’s fourth
independent ground, and for that reason we must vacate and remand.
We discuss the district court’s application of Tufco’s "four indepen-
dent grounds" in turn.

                                    1.

   Based on Tufco’s first ground, Appellants argue that the products-
completed operations coverage in the Auto-Owners policy overrides
the pollution exclusion clause. We need not linger long on this argu-
ment, however, because the policy in the instant case is clearly distin-
guishable. See Erie Ins. Exch. v. St. Stephen’s Episcopal Church, 570
S.E.2d 763, 766 (N.C. Ct. App. 2002) (noting that "[c]ase law inter-
preting and applying insurance coverage exclusions is varied and
heavily dependent upon individual factual circumstances"). As the
district court recognized, while products-completed operations cover-
age was triggered because Whitewood had started supplying water to
the homes, the policy’s plain terms demonstrate that the products-
completed operations coverage does not trump the pollution exclusion
clause.

   The pollution exclusion clause in the Tufco policy applied only to
work in progress. Here, the district court rightly held that the CGL
was not so limited. The Tufco policy included a "Broadening of Cov-
erage" flyer, wherein the insurer "expressed its intention not to subject
the completed operations coverage to the pollution exclusion clause."
Tufco, 409 S.E.2d at 697. Here, however, the policy had no such pro-
vision extending the completed operations coverage. By contrast,
Appellee provides examples of other policies which do indeed contain
such an exception to the pollution exclusion clause, though Auto-
Owners never issued Whitewood such a policy. See Br. of Appellee
at 36-37. Thus, we conclude that the district court correctly deter-
mined that Tufco’s first holding is inapplicable to the policy at issue
in this case.2
  2
    Furthermore, even if the Auto-Owners policy was more comparable
to that at issue here, it is questionable whether Tufco’s first holding has
                 AUTO-OWNERS INSURANCE CO v. POTTER                      13
                                     2.

   Appellants argue that the application of the pollution exclusion
clause would create an inherent ambiguity in the CGL policy, there-
fore the policy must be interpreted to provide coverage. In Tufco, the
North Carolina Court of Appeals found that the "pollution exclusion"
clause at issue did not exclude coverage because the CGL policy was
inherently ambiguous. 409 S.E.2d at 697. It noted that when an insur-
ance policy provides coverage for a particular activity, but that activ-
ity is later excluded, an improper ambiguity arises which must be
construed against the insurer. See id. The court stated:

      Tufco is in the business of installing industrial flooring, and
      Tufco purchased a commercial liability policy to protect it
      from liabilities arising from the very type of activity at issue
      here. . . . West American was aware of the type of activity
      in which Tufco was engaged. . . . To allow West American
      to deny coverage for claims arising out of Tufco’s central
      business activity would render the policy virtually useless to
      Tufco.

Id.

any continued viability. Initially, the North Carolina Supreme Court
granted review of the Court of Appeals’ decision, see W. Am. Ins. Co.
v. Tufco Flooring E., Inc., 415 S.E.2d 555 (N.C. 1992), but the court ulti-
mately did not review the case, finding that its discretionary review had
been improvidently granted. See W. Am. Ins. Co. v. Tufco Flooring E.,
420 S.E.2d 826 (N.C. 1992). However, in Gaston County Dyeing, the
North Carolina Supreme Court overruled Tufco’s analysis of North Caro-
lina law concerning the "date of discovery" rule, holding that the Court
of Appeals incorrectly held that "‘for insurance purposes property dam-
age "occurs" when it is first discovered of manifested.’" 524 S.E.2d at
565 (quoting Tufco, 409 S.E.2d at 696). Tufco’s "date of discovery" hold-
ing had been essential to the Court of Appeals’ determination that the
completed operations coverage was triggered in the first instance.
Indeed, the district court in the instant case recognized that had the North
Carolina Court of Appeals applied the Gaston rule in Tufco, "it is
unlikely that the court would have found the completed operations haz-
ard applicable . . . ." Dist. Ct. slip op. at 12-13 n.6 (J.A. 527-28).
14              AUTO-OWNERS INSURANCE CO v. POTTER
    Here, the Potter Appellants argue that the Auto-Owners policy is
equally ambiguous. They contend that Whitewood was in the business
of providing water, and insurance coverage is provided for those
operations, thus if the policy were read — on the basis of the pollu-
tion exclusion clause — to exclude coverage for claims arising from
Whitewood’s central business activity, the policy would be meaning-
less. Applying Tufco’s second independent holding in this instance,
it is, of course, correct that when an ambiguity arises in an insurance
policy, the policy must be given the interpretation most favorable to
the insured. Grant v. Emmco Ins. Co., 243 S.E.2d 894, 897 (N.C.
1978). However, "if the meaning of the policy is clear and only one
reasonable interpretation exists, the courts must enforce the contract
as written." Gaston County Dyeing, 524 S.E.2d at 563 (internal quota-
tion marks and citations omitted). Here, we find that on the face of
the policy, the pollution exclusion clause and its interplay with
"completed-operations" coverage are not ambiguous. Indeed, the
structure of the policy evidences no tension between the two provi-
sions.

    As noted above, the CGL coverage forms specify that they provide
coverage for "bodily injury" and "property damage," J.A. 97, 164,
231, however, the coverage forms contain several explicit exclusions.
Notably, the pollution exclusion clause excludes CGL coverage for
injury or damage arising from "actual, alleged or threatened discharge
dispersal, seepage, migration release or escape of pollutants . . . ."
J.A. 98, 165, 232.3 There is, however, no explicit or structural indica-
tion otherwise that the pollution exclusion does not apply to products-
completed operations coverage. In fact, as the district court recog-
nized, the policy contains other exclusions in which products-
completed operations coverage is specifically mentioned. See Dist.
Ct. slip op. at 20 (J.A. 535) (citing CGL Coverage A, ¶ j.). Paragraph
j. excludes from coverage various types of property damage, however,
it also details situations in which the exclusion does not apply, includ-
  3
   Additionally, the policies contain a separate "Pollution Exclusion
Endorsement," which specifies that under the CGL coverage pertaining
to "Personal and Advertising Injury Liability," "personal injury" arising
from "actual, alleged or threatened discharge, dispersal, seepage, migra-
tion, release or escape of pollutants" is not covered under the policies.
J.A. 107, 174, 241.
                AUTO-OWNERS INSURANCE CO v. POTTER                    15
ing products-completed operations: "Paragraph (6) of this exclusion
does not apply to ‘property damage’ included in the ‘products-
completed operations hazard.’" J.A. 99, 166, 233.

    Furthermore, other policy exclusions apply only to products-
completed operations coverage, demonstrating that such coverage is
subject to more, not fewer exclusions than the general coverage, thus
belying Appellants’ arguments that products completed operations
coverage is somehow broader than the CGL coverage overall. See
J.A. 97-99, 164-66, 231-33 (Coverage A. Bodily Injury and Property
Damage Liability, Exclusion ¶ l.) ("This insurance does not apply to:
. . . ‘Property damage’ to ‘your work’ arising out of it or any part of
it and including in the ‘products-completed operations hazard’"); id.
at 100, 167, 234 (Coverage C. Medical Payments, Exclusion ¶ f.)
("We will not pay expenses for ‘bodily injury’ . . . [i]ncluded within
the ‘products-completed operations hazard’.").

   Accordingly, we conclude that the plain terms of the pollution
exclusion clause as well as the structure of the CGL policy demon-
strate that if the pollution exclusion was not intended to apply to the
products-completed operation coverage, the policy would have so
stated. Because we find that no ambiguity existed in the interplay
between these contractual terms, see Nationwide Mut. Ins. Co. v.
Mabe, 467 S.E.2d 34, 40 (N.C. 1996) (holding where policy is not
ambiguous, the court must enforce the policy as written and may not
remake the policy under the guise of interpreting an ambiguous provi-
sion), we need not further entertain Appellants’ argument that the
CGL is ambiguous because it purportedly does not provide coverage
for claims arising out of Whitewood’s central business activity. See
Br. of Appellants at 30-33 (arguing that the policy must be interpreted
in light of the "reasonable expectations" of the insured, and that
"Whitewood reasonably expected coverage for claims arising out of
its central business activity, the distribution of water to the residents
of Neuse Crossing"); Tufco, 409 S.E.2d at 697 ("To allow [insurer]
to deny coverage for claims arising out of Tufco’s central business
activity would render the policy virtually useless to Tufco."); but see
Br. of Appellee at 36 (arguing that the policy does give effect to the
coverage sought by the insured in that it protects against numerous
types of risk that exist for Whitewood’s central business activities,
including "flooding, premises liability . . . ruptured water lines, dam-
16              AUTO-OWNERS INSURANCE CO v. POTTER
ages from accidents during construction"); id. (noting that the bulk of
the insurance premium paid by Whitewood was for commercial prop-
erty coverage, not liability coverage).

                                   3.

   Appellants also assert that the district court failed to address
Tufco’s third independent holding. Under Tufco’s third ground, the
court held that the pollution exclusion clause was inapplicable
because the flooring material’s vapors were not a "pollutant" because
when the raw material came onto the site, it was not an "irritant or
contaminant." 409 S.E.2d at 609. The court concluded that when
Tufco purchased its insurance, it understood "‘pollutant’ . . . as an
unwanted impurity, not as the raw materials which Tufco purchased
to do its job." Id.

   In this vein, Appellants argue that Auto-Owners’ denial of cover-
age for the "water operations and product on the incongruous basis
that it constitutes a ‘pollutant’ (because it contained substances other
than pure H2O molecules, which any drinking water does) flies in the
face of logic and directly contradicts the terms of the policy and the
parties’ intent as manifested by those terms." Br. at 30; see also id.
at 40 ("The policies’ definitions of ‘pollutants’ [citations] is so over-
broad . . . as to make the pollution exclusion clause ambiguous."); id.
at 40-41 ("Water is a ‘liquid’ and would constitute an ‘irritant’ any
time it was involved in an unwanted or undesired event or a ‘contami-
nant’ any time it contained anything other than pure H20 molecules.").
We need not analyze whether under the policy, the definition of "pol-
lutants" is overbroad, nor do we find Tufco’s third holding applicable,
because the language of the Potter Appellants’ state court complaint
makes clear that the materials complained of were "pollutants." The
pollution exclusion clause states: "Pollutants means any solid, liquid,
gaseous or thermal irritant or contaminant, including smoke, vapor,
soot, fumes, acids, alkalis, chemical and waste." J.A. 107 (emphasis
added). Here, the Potter Appellants’ complaint makes clear that,
unlike the substances in Tufco, the manganese, iron, sediment, cal-
cium, "‘hard water’ constituents" and other contaminants were never
wanted in their homes or on their land. See, e.g., Compl. ¶ 1 ("This
is a lawsuit brought by residents . . . to recover for contamination of
their homes and persons.") (emphasis added); id. ¶ 3 (referring to
                AUTO-OWNERS INSURANCE CO v. POTTER                     17
"contamination"); id. ¶ 77 (alleging that defendants did not "correct
the contamination, warn Plaintiffs of the contamination, remediate the
contamination"); id. ¶ 113 (stating "high levels of other contaminants
were found"); id. ¶¶ 136-37 (alleging "excessive levels of contami-
nants in the water" caused injury and property damage). Therefore,
we reject Appellants’ claims that Tufco’s third independent ground is
inapplicable to this case, because the materials which the Potter
Appellants repeatedly refer to as "contaminants" were "something
creating impurity, something objectionable and unwanted," rather
than "raw materials which [Whitewood] purchased to do its job."
Tufco, 409 S.E.2d at 698.

                                    4.

   The pollution exclusion clause at issue excludes coverage for bod-
ily injury or property damage "arising out of the actual, alleged or
threatened discharge, dispersal, seepage, migration, release or
escape of pollutants." J.A. 98, 165, 232 (emphasis added). In inter-
preting this language, the district court explicitly "reject[ed] the argu-
ment that any discharge must have been into the environment to come
within the meaning of the pollution exclusion clause. The language
of the policy does not support such an interpretation." Dist. Ct. slip.
op. at 13-14 n.8 (J.A. 528-29).

   Appellants argue that such determination is flatly contrary to North
Carolina law as expressed in Tufco’s fourth independent holding, "the
pollution exclusion does not deny coverage to Tufco for Perdue’s
claims . . . because the pollution exclusion applies only to discharges
into the environment." Tufco, 409 S.E.2d at 699 (emphasis added). In
Tufco, the North Carolina Court of Appeals considered the operative
terms of the pollution exclusion clause — e.g., "discharge," "dis-
persal," "release," and "escape" — and determined that they are "envi-
ronmental terms of art," thus the pollution exclusion clause was
inapplicable to the non-environmental damage at the Perdue plant. Id.
at 699-700. Auto-Owners counters, arguing that Appellants’ argu-
ments as to the district court’s erroneous application of Tufco are
flawed in two main respects: (1) Tufco is an incorrect statement of
North Carolina law, and the pollution exclusion clause should not be
interpreted using technical terms; and (2) under either the plain or
technical terms of the pollution exclusion clause, a "discharge, dis-
18              AUTO-OWNERS INSURANCE CO v. POTTER
persal, seepage, migration, release or escape of pollutants" has, in
fact, occurred.

                                   a.

   As a general rule in North Carolina, "the terms of an insurance con-
tract must be given their plain ordinary, and accepted meanings unless
they have acquired a technical meaning in the field of insurance or
unless it is apparent that another meaning was intended." Cherokee
Ins. Co. v. Aetna Cas. & Sure. Co., 264 S.E.2d 913, 915 (N.C. Ct.
App. 1980) (citing Grant, 243 S.E.2d 894); accord N.C. Ins. Guar.
Ass’n v. State Farm Mut. Auto. Ins. Co., 446 S.E.2d 364, 367 (N.C.
Ct. App. 1994). Auto-Owners argues that the Tufco court erroneously
failed to give the terms of the pollution exclusion clause their ordi-
nary meaning, and the district court in this case rightly "rejected the
Tufco reasoning." Br. of Appellee at 18. Yet Appellants argue that
Tufco’s use of the environmental terms of art in interpreting the pollu-
tion exclusion clause is a clear statement of North Carolina law which
the district court was bound to follow.

   In resolving this issue, we first recognize that courts nationwide are
divided over whether the terms of pollution exclusion clauses apply
only to traditional environmental damage, or whether they apply to
non-environmental damage as well. Compare Tufco, 409 S.E.2d 699-
700; Belt Painting Corp. v. TIG Ins. Co., 763 N.Y.S.2d 790, 795-96
(N.Y. 2003) (applying Tufco’s limitations on scope of pollution
exclusion clause); Am. States Ins. Co. v. Koloms, 687 N.E.2d 72, 81-
82 (Ill. 1997) (holding that pollution exclusion clause did not extend
beyond the traditional environmental arena), and Atl. Mut. Ins. Co. v.
McFadden, 595 N.E.2d 762, 764 (Mass. 1992) (holding terms of the
exclusion clause were environmental terms of art), with Cincinnati
Ins. Co. v. Becker Warehouse, Inc., 635 N.W.2d 112, 122 (Neb. 2001)
(rejecting Tufco’s holding that discharge must be into the environ-
ment); McKusick v. Travelers Indem. Co., 632 N.W.2d 525, 531-32
(Mich. Ct. App. 2001) (refusing to "engraft" environmental limitation
onto the terms); Peace ex rel. Lerner v. Northwestern Nat. Ins. Co.,
596 N.W.2d 429, 444-46 (Wis. 1999) (rejecting view that terms like
"discharge" are environmental terms of art); Mid-Continent Cas. v.
U.S. Fire Ins. Co., 1 S.W.3d 251, 253 (Tex. Ct. App. 1999) (holding
polluted or contaminated drinking water fell within the pollution
                AUTO-OWNERS INSURANCE CO v. POTTER                     19
exclusion clause), and Nat’l Union Fire Ins. Co. of Pittsburgh v. CBI
Indus., Inc., 907 S.W.2d 517, 522 & n.8 (Tex. Ct. App. 1995) (stating
that most courts have found the pollution exclusion clause to be abso-
lute).

   To determine whether "discharge" and the other terms at issue are
to be accorded their plain meaning, or treated as terms of art, our task
is to apply the law as we believe the Supreme Court of North Carolina
would. Kinney, supra. Having recognized that courts are divided con-
cerning the construction of the pollution exclusion clause and the
meanings of terms like "discharge," we note that "[u]nder North Caro-
lina law, if an insurance contract term is capable of one or more inter-
pretations, the one most favorable to the insured applies." Haw River
Land & Timber Co. v. Lawyers Title Ins. Co., 152 F.3d 275, 283 (4th
Cir. 1998) (citing Mills v. State Life & Health Ins. Co., 135 S.E.2d
586, 590 (N.C. 1964)); see also Wachovia Bank & Trust Co., 172
S.E.2d at 522 ("If such a word has more than one meaning in its ordi-
nary usage and if the context does not indicate clearly the one
intended, it is to be given the meaning most favorable to the policy
holder, or beneficiary, since the insurance company selected the word
for use.") (internal citations omitted). Further, in conducting this anal-
ysis, we are to follow the precedent of the North Carolina intermedi-
ate appellate court unless it conflicts with North Carolina Supreme
Court precedent or statute. Neil, supra.

   In this instance, we conclude we are bound to follow Tufco’s deter-
mination that the clause at issue constitutes a series of terms of art.
See 409 S.E.2d at 699-700 ("[T]he terms ‘discharge’ and ‘release’ are
terms of art in environmental law . . . . Consequently, we find that any
‘discharge, dispersal, release, or escape’ of a pollutant must be into
the environment in order to trigger the pollution exclusion clause and
deny coverage to the insured."). First, we conclude as much because
Tufco’s holding is not directly contradicted by North Carolina state
law, and the other North Carolina state cases applying the pollution
exclusion clause have done so within the context of traditional envi-
ronmental pollution. See Waste Management, 340 S.E.2d at 380-81;
Home Indem. Co. v. Hoechst Celanese Corp., 494 S.E.2d 774 (N.C.
Ct. App. 1998); but see Whiteville Oil Co. v. Federated Mut. Ins. Co.,
889 F. Supp. 241, 246 (E.D.N.C. 1995) (Britt, J.) (holding that pollu-
tion clause was unambiguous and barred coverage where gas station
20               AUTO-OWNERS INSURANCE CO v. POTTER
fumes permeated a restaurant). Additionally, because the terms "dis-
charge, dispersal," etc. are not defined in the policy, "[i]n the absence
of such definition, nontechnical words are to be given a meaning con-
sistent with the sense in which they are used in ordinary speech,
unless the context clearly requires otherwise." Wachovia Bank &
Trust Co., 172 S.E.2d at 522 (emphasis added) (internal citations
omitted). Here, the North Carolina Supreme Court’s holding in Waste
Management demonstrates that the context requires otherwise, and
the North Carolina Supreme Court’s language is in accord with the
Tufco holding. In Waste Management, the court reasoned that the pur-
pose of the pollution exclusion is to avoid "the yawning extent of
potential liability arising from . . . discharge of hazardous substances
into the environment," and provided no indication that the pollution
exclusion clause has acquired a different purpose or meaning. 340
S.E.2d at 381 (emphasis added); accord Tufco, 409 S.E.2d at 699; see
also MacKinnon v. Truck Ins. Exch., 73 P.3d 1205, 1216 (Cal. 2003)
("[T]hese terms [such as ‘discharge,’ ‘dispersal,’ etc.] used in con-
junction with ‘pollutant,’ commonly refer to the sort [of] conventional
environmental pollution at which the pollution exclusion was primar-
ily targeted."); id. ("[T]here appears to be little dispute that the pollu-
tion exclusion was adopted to address the enormous potential liability
resulting from anti-pollution laws enacted between 1966 and 1980.").
Accordingly, we hold that the district court erred by failing to give
"discharge, dispersal, seepage, migration, release or escape"4 their
technical meanings as environmental terms of art, and we must exam-
ine the materiality of such error.

  4
   We reject Auto-Owners’ factual argument that because the pollution
exclusion clause here at issue contained the additional terms "seepage"
and "migration" it is distinguishable from that in Tufco. Other courts
which have joined Tufco in holding the pollution exclusion clause is
comprised of terms of art have done so even where the clause contains
the additional terms. See, e.g., Belt Painting Corp., 763 N.Y.S.2d at 795-
96; Gainsco Ins. Co. v. Amoco Prod. Co., 53 P.3d 1051, 1065 (Wyo.
2002); see also United States v. Shell Oil Co., 841 F. Supp. 962, 969
(C.D. Cal. 1993) (discussing use of terms "seepage" and "migration"
within the CERCLA context); Vermont v. Staco, Inc., 684 F. Supp. 822,
832-33 (D. Vt. 1988) (same).
                AUTO-OWNERS INSURANCE CO v. POTTER                    21
                                   b.

   Auto-Owners argues that even if the pollution exclusion clause is
interpreted as a set of environmental terms of art, there has nonethe-
less been a "discharge, dispersal, seepage, migration, release or
escape of pollutants" which bars coverage in this case. We find that
the occurrence and the resulting personal injury and property damage
allegedly suffered by the Potter Appellants are certainly not the proto-
typical environmental harms that a pollution exclusion clause is gen-
erally intended to protect against — e.g., a traditional response
scenario where the insured is remediating a spill or toxic release, or
monitoring such work — but seem more akin to an instance in which
an adulterated product has been supplied to consumers. However, the
Potter Appellants’ inartful pleading lends Auto-Owners’ position
some viability, because some — but not all — portions of the com-
plaint appear to fall within the ambit of the pollution exclusion clause.
See Waste Management, 340 S.E.2d at 377 (stating that to determine
whether insurance coverage is available, court must construe policy,
its exclusions and exceptions, and determine "whether events as
alleged in the pleadings and papers before the court are covered by
the policies"); Doe v. Jenkins, 547 S.E.2d 124, 127 (N.C. Ct. App.
2001) (comparing allegations of plaintiff’s complaint to language of
insurance policy exclusions to determine that insured was not indem-
nified).

   For example, Tufco’s holding that traditional environmental dam-
age was not at issue rested on the fact that the discharges were not
"into or upon land, the atmosphere or any water course or body of
water," 409 S.E.2d at 699 (internal quotation marks and citations
omitted), but were "confined to a cooler within a chicken processing
plant." Id. at 700. Here, however, the Potter Appellants’ complaint
contains allegations which expressly sound as claims of traditional
environmental discharge. See, e.g., Am. Compl. ¶ 199 (alleging the
insured caused "physical invasion and trespass onto Plaintiffs’ prop-
erty of substances including sediments and contaminants in Plaintiffs’
domestic water supply"); id. ¶ 202 (alleging "entry of mineral con-
taminants onto the surface of their property"); id. ¶ 225(d) ("[c]ausing
or allowing to be caused the discharge of iron, manganese, calcium
and other contaminants from the water supply into the homes and
onto the property of Plaintiffs") (emphasis added). Furthermore, the
22              AUTO-OWNERS INSURANCE CO v. POTTER
Potter Appellants’ negligence per se count alleges violations of state
and federal environmental law. Id. ¶ 221(a)-(b) (alleging violations of
the North Carolina Department of Environment and Natural
Resources, Environmental Health section of the code pertaining to
water quality standards for concentrations of iron and manganese); id.
¶ 221(c)-(e) (alleging violations of the state environmental code’s
groundwater quality standards); id. ¶ 221(f)-(g) (alleging levels of
contaminants in public water systems violative of EPA’s regulations
on drinking water). Thus, insofar as the Potter Appellants pled claims
of traditional environmental discharge, the pollution exclusion clause
bars insurance coverage.

   By contrast, where the Potter Appellants allege that they suffered
property damage and personal injury as a result of Whitewood’s dis-
tribution of an adulterated product and the insured’s attendant negli-
gence and breach of warranties, the pollution exclusion clause is not
likely to serve as a bar. See, e.g., Am. Compl. ¶ 215(a) (asserting
Whitewood operated a defective water supply system); id. ¶ 215(b)
(alleging Whitewood allowed the water supply system to become
overloaded); id. ¶ 215(c) (alleging a failure to repair defects in the
water supply system); id. ¶ 216 ("Defendants’ negligence was the
proximate cause of damages"); see also id. ¶ 236(b)-(e) (alleging fail-
ures to disclose); compare J.A. 240 (insurance contract provides that
for the purposes of the "products-completed operations hazard," "your
product" includes "[w]arranties or representations made . . . with
respect to the fitness, quality, durability, performance or use of ‘your
product’"). Considering these claims within the amended complaint
under North Carolina’s "comparison" test, see Waste Management,
340 S.E.2d at 377, whereby we take the contents and allegations of
the controlling pleading as true and compare them to the insurance
policy provisions to establish whether any of the allegations would
give rise to coverage, we conclude that such claims — if not other-
wise barred by separate exclusions, infra — provide a sufficient basis
upon which Whitewood can invoke Auto-Owners’ duty to defend.
Under North Carolina law, the duty to defend is broader than the duty
to indemnify. Pa. Nat’l Mut. Cas. Ins. Co., 579 S.E.2d at 406 (cita-
tions omitted). An insurer has a duty to defend when the pleadings
state facts demonstrating that the alleged injury is covered by the pol-
icy. Id. at 407. As here, the mere possibility that the insured is liable
                AUTO-OWNERS INSURANCE CO v. POTTER                   23
and that the potential liability is covered may suffice to impose the
duty to defend. Waste Management, 340 S.E.2d at 377.

   While Whitewood’s duty to defend is implicated by such allega-
tions, the record on appeal does not allow us to conclusively deter-
mine precisely which of the Potter Appellants’ claims against
Whitewood Auto-Owners would be required to indemnify, and those
to which the pollution exclusion clause and other exclusions would
serve as a bar. Accordingly, in vacating the district court’s entry of
summary judgment, we remand to the district court for further consid-
eration of these issues and determination of the applicability of the
CGL exclusions. Specifically, the district court must determine: (1)
whether other exclusions upon which the district court has never ruled
might bar coverage and foreclose the duty to defend, notwithstanding
this court’s decision regarding the pollution exclusion clause issue,
and (2) assuming the duty to defend attaches, which of the Potter
Appellants’ claims Auto-Owners would ultimately be required to
indemnify.

                                  IV.

   For the reasons stated above, we vacate the district court’s grant of
summary judgment and remand for further proceedings not inconsis-
tent with this opinion.

                                        VACATED AND REMANDED