Court Opinion

ID: 185543
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:33:14+00
Date Added: 2024-06-11T17:26:16.660936
License: Public Domain

270 F.3d 948 (D.C. Cir. 2001)
Nationwide Mutual Insurance Company, Appelleev.Antoinette Richardson, Appellant
No. 00-7203
United States Court of Appeals  FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 10, 2001Filed November 2, 2001

[Copyrighted Material Omitted]
Appeal from the United States District Court  for the District of Columbia (No. 99cv01322)
David P. Sutton argued the cause for appellant.  With him  on the brief was Robert J. Pleshaw.
Catherine M. Colinvaux argued the cause for appellee. With her on the brief was David P. Durbin.
Before:  Ginsburg, Chief Judge, Edwards and Sentelle,  Circuit Judges.
Opinion for the Court filed by Circuit Judge Edwards.
CERTIFICATION OF QUESTION OF LAW by the United States Court of Appeals for the District of Columbia Circuit to  the District of Columbia Court of Appeals pursuant to D.C. Code § 11-723 (2001)
Harry T. Edwards, Circuit Judge:

1
The disposition of this appeal  depends upon the proper application of District of Columbia  law to resolve a dispute over the scope of a pollution exclusion clause in a liability insurance policy.  The contested  provision, which is common in commercial comprehensive  general liability insurance policies, excludes liability coverage  for injuries or damage arising out of events involving the  release or escape of "pollutants."  Courts around the country  have divided in construing the scope of the pollution exclusion  clause.  Some courts read the clause expansively and thereby  give broad reach to the exclusion, and others find the clause  ambiguous and construe it narrowly in favor of insured  parties seeking coverage.

2
The District of Columbia Court of Appeals has yet to  consider the scope of the pollution exclusion clause under  District of Columbia law.  We are mindful that a "federal  court ... should normally decline to speculate on ... a  question of local doctrine."  East v. Graphic Arts Indus.  Joint Pension Trust, 107 F.3d 911, 911 (D.C. Cir. 1997)  (quoting Delahanty v. Hinckley, 845 F.2d 1069, 1070 (D.C.  Cir. 1988)).  In deciding whether to certify such a question to  the District of Columbia Court of Appeals, we ask whether  District of Columbia law is "genuinely uncertain" with respect  to the dispositive question, Dial A Car, Inc. v. Transp., Inc.,  132 F.3d 743, 746 (D.C. Cir. 1998) (citing Tidler v. Eli Lilly &  Co., 851 F.2d 418, 426 (D.C. Cir. 1988)), and whether the case  "is one of extreme public importance," id. (citing Joy v. Bell  Helicopter Textron, Inc., 999 F.2d 549, 563-64 (D.C. Cir.  1993)).  Where there is a "discernable path for the court to  follow," we do not avoid deciding the question.  Id.  District  of Columbia law presents no such path in this case, and, while  the scope of the pollution exclusion clause has been the  subject of extensive litigation in other jurisdictions, we can  find no common ground of opinion among the courts that have  construed the clause.  Finally, the question is one of significant import to the public.  Because the pollution exclusion  clause appears in the standard commercial comprehensive  general liability policy, it potentially affects the insurance  coverage of most businesses in the District of Columbia.  See,  e.g., Doerr v. Mobil Oil Corp., 774 So. 2d 119, 123 n.1 (La.  2000) ("Some form of this pollution exclusion is part of the  standard [commercial general liability] policy purchased by  almost all large and small businesses since the mid-1980s.")  (citation omitted).

3
Given the extreme public importance of the question, the  likelihood of its recurrence in future cases, and the absence of  a discernable answer within local law, we certify the following  question of law to the District of Columbia Court of Appeals  pursuant to D.C. Code § 11-723:

4
In light of the facts set forth below, does the pollution exclusion clause apply toinjuries arising from alleged carbon monoxide poisoning?

I. Background
A. Procedural and Factual Background

5
The parties to this litigation have included Antoinette Richardson, an intervenor before the District Court and now the  appellant;  REO Management, Inc. ("REO"), the defendant  before the District Court;  and Nationwide Mutual Insurance  Co. ("Nationwide"), the plaintiff before the District Court and  now the appellee.

6
The facts in this case are largely undisputed.  Ms. Richardson worked in the District of Columbia as a security guard in  an apartment complex managed by REO Management.  REO  is organized under the laws of the District of Columbia, where  it has its principal place of business.  At the time of the  events in question, REO held a comprehensive general liability insurance policy (Policy No. 52PR-147-539-0001M) ("the  policy"), which it had purchased from Nationwide, an Ohio  corporation.  The policy provided liability protection for the  apartment complex where Ms. Richardson worked.

7
In February, 1995, a gas furnace or furnaces in the apartment complex where Ms. Richardson worked allegedly began  to leak carbon monoxide.  Ms. Richardson and another person in the apartment complex claimed to have been overcome  and disabled by carbon monoxide fumes.  Ms. Richardson  sued REO and two other defendants in District of Columbia  Superior Court, alleging negligent maintenance of the furnaces and failure to supervise and train properly the people  who worked on them.  In her complaint, she stated that she  was at all relevant times a resident of Maryland.

8
In May, 1999, Nationwide filed an action for a declaratory  judgment in the United States District Court for the District  of Columbia seeking a declaration that it was not obligated to  defend or indemnify REO in Ms. Richardson's underlying  Superior Court lawsuit.  Nationwide asserted that the pollution exclusion clause in REO's insurance policy barred coverage for damages arising out of Ms. Richardson's claims.  The  policy provides, in relevant part:

9
This insurance does not apply to:  ...  f. Pollution (1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants....  Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.

10
Nationwide moved for summary judgment based, in part,  on the pollution exclusion clause.  In December 1999, Ms.  Richardson filed a motion to intervene in the declaratory  judgment action in the District Court.  She alleged, inter  alia, that the defendant REO was a "shell corporation,"  lacking any assets except the insurance policy.  She further  alleged that her interests could not adequately be represented by REO, because her negligence suit in Superior Court  against REO gave rise to a conflict of interest.

11
The District Court issued an Order and Memorandum  Opinion denying Ms. Richardson's motion to intervene as of  right pursuant to Federal Rule of Civil Procedure 24(a) on  the grounds that she lacked a sufficient interest relating to the subject of the action, because she had yet to receive an  enforceable judgment in her underlying Superior Court suit. Instead, the District Court allowed her to intervene permissively pursuant to Rule 24(b), on the condition that she  advance only those arguments that the defendant REO had  failed to make.  At the same time, the District Court granted  Nationwide's motion for summary judgment, holding that the  pollution exclusion clause "clearly and unambiguously" barred  coverage for Ms. Richardson's alleged injuries.  The District  Court determined that District of Columbia law governed the  case and that no court in the District of Columbia had  interpreted the relevant language.  While it acknowledged  that courts in other jurisdictions have taken different approaches to interpreting pollution exclusion clauses, the District Court held that to find the clause ambiguous in this case  "would be to seek out ambiguities in the contract where none  exist."  Ms. Richardson appealed.

12
B. History of the Pollution Exclusion Clause.

13
The pollution exclusion clause that appears in REO's insurance policy is part of a standard form commercial comprehensive general liability policy.  The clause's history is wellknown.  Before 1966, the standard comprehensive general  liability form provided coverage for property damage and  bodily injury caused by "accident."  Jeffrey W. Stempel,  Interpretation of Insurance Contracts § T1.1, at 826 (1994). Courts often interpreted the standard policy to cover injuries  related to environmental pollution.  Am. States Ins. Co. v.  Koloms, 687 N.E.2d 72, 79 (Ill. 1997) (detailing the history of  the pollution exclusion clause).  The insurance industry responded by changing the policy to cover "occurrences" and  attempting to define occurrences to exclude long-term environmental pollution.  See id. at 79-80.  Courts nonetheless  continued to interpret the policy to cover damages resulting  from such pollution.  Id. at 80 (citing New Castle County v.  Hartford Accident & Indem. Co., 933 F.2d 1162, 1197 (3d Cir.  1991)).

14
Beginning in 1970, insurers began adding an endorsement  to the standard-form policy excluding coverage for damage

15
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 land, the atmosphere or any  water course or body of water."  Stempel, supra, § T1.1, at  826-27 (citation omitted).  The clause contained an exception  for discharges that were "sudden and accidental."  Id. at 826. The clause was incorporated into the standard comprehensive  general liability policy itself in 1973.  Koloms, 687 N.E.2d at  80.  Much litigation ensued over the meaning of the "sudden  and accidental" exception.  See generally Stempel, supra,  § T1.2 (describing the litigation).

16
Insurance companies responded to the litigation by adopting a new version of the exclusion in the mid-1980s, known as  the "absolute" or "total" pollution exclusion clause.  See Koloms, 687 N.E.2d at 81.  This version is virtually identical to  the one that appears in the REO insurance policy.  The new  version eliminated the "sudden and accidental" exception and  the requirement that the discharge be "into or upon land, the  atmosphere or any water course."  Stempel, supra, §§ T1.1,  T1.3, at 826, 828-29 (quoting both versions).  The amended  clause was intended by the insurance industry to bar coverage for the costs of environmental cleanups.  See W. Am. Ins.  Co. v. Tufco Flooring E., Inc., 409 S.E.2d 692, 699 (N.C. Ct.  App. 1991), overruled on other grounds by Gaston County  Dyeing Mach. Co. v. Northfield Ins. Co., 524 S.E.2d 558, 565  (N.C. 2000);  see also Essex Ins. Co. v. Tri-Town Corp., 863 F. Supp. 38, 39-40 (D. Mass. 1994) ("[T]he insurance industry  reacted with lightning speed to the possibility that ... it  could find itself indemnifying industries facing the staggering  retroactive pollution clean-up costs imposed by the 1980  enactment of the Comprehensive Environmental Response  Compensation and Liability Act [citation omitted].").

II. Analysis
A. Intervention

17
On appeal, Ms. Richardson argues that the District Court  erred in denying her the opportunity to intervene as of right and without conditions.  However, before this court, Nationwide does not oppose Ms. Richardson's request that she be  permitted to argue all issues on appeal that were raised below  concerning the scope of the pollution exclusion clause.  Ms.  Richardson has therefore not claimed that she was prejudiced  in her appeal before this Court by the District Court's ruling  on her motion to intervene.

18
If the District of Columbia Court of Appeals determines  that the pollution exclusion clause does not foreclose liability  coverage of a claim of the sort raised by Ms. Richardson, it  may be necessary for this court to remand the case to the  District Court for further proceedings.  In that event, it will  be up to the District Court to determine in the first instance  whether Ms. Richardson may develop facts in support of the  argument that the clause is inapplicable to the carbon monoxide leak that allegedly caused her injuries.  It is unnecessary  for us to decide at this point whether, if the case is remanded,  the District Court will be required to permit Ms. Richardson  to present arguments outside the scope of the conditions set  forth by the District Court in its Memorandum Opinion and  Order.  Instead, we merely find that since Ms. Richardson  was not prejudiced in her appearance before this court, we  need not now resolve her claim that she should have been  allowed to intervene as of right.

B. The Pollution Exclusion Clause

19
1. District of Columbia Law Governs the Policy's Interpretation The District Court correctly determined that District of  Columbia law governs the interpretation of the insurance  policy.  The District Court sat in diversity because the  amount in controversy exceeded $75,000 and the parties were  completely diverse.  "A federal court sitting in diversity  jurisdiction applies the choice of law rules of the forum state  (or district or territory)...."  Liberty Mut. Ins. Co. v. Travelers Indem. Co., 78 F.3d 639, 642 (D.C. Cir. 1996) (citing  Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496  (1941)).  District of Columbia courts apply the law of the  state with the more substantial interest in the matter.  Blair v. Prudential Ins. Co. of Am., 472 F.2d 1356, 1359 (D.C. Cir.  1972) (citing Fowler v. A & A Co., 262 A.2d 344, 348 (D.C.  1970)).  In this case, the District of Columbia has the most  substantial interest, since it is both the location where the  underlying events occurred and the place of the insured's  headquarters.  See Greycoat Hanover F St. Ltd. P'ship v.  Liberty Mut. Ins. Co., 657 A.2d 764, 768 (D.C. 1995);  Potomac Elec. Power Co. v. Cal. Union Ins. Co., 777 F. Supp. 968,  973 (D.D.C. 1991).  Thus, the insurance policy must be interpreted in accordance with District of Columbia law.

20
2. Legal Approaches to the Pollution Exclusion Clause The District of Columbia Court of Appeals has never  directly addressed the scope of the pollution exclusion clause  as applied to an event, such as residential carbon monoxide  poisoning, that does not involve typical forms of environmental pollution.  Under District of Columbia law, an insurance  policy is a contract whose construction is based on its language.  Cameron v. USAA Prop. &Cas. Ins. Co., 733 A.2d 965, 968 (D.C. 1999).  The burden is on the insurer to spell  out in "terms understandable to the man in the street" any  provisions that would exclude coverage.  Id. (quoting Holt v.  George Washington Life Ins. Co., 123 A.2d 619, 621 (D.C.  1956)).  Unless the language of such a provision is unambiguous, doubts are to be resolved in favor of the insured.  Id.  (citations omitted).  This is because insurers draft the contracts, with the help of experts and lawyers.  Id. (citing  Hayes v. Home Life Ins. Co., 168 F.2d 152, 154 (D.C. Cir.  1948)).  The doctrine of contra preferentum, however, does  not permit "forced constructions" or otherwise strained readings in order to create obligations against insurers.  See id.  (citing Boggs v. Motors Ins. Corp., 139 A.2d 733, 735 (D.C.  1958)).  Nor does mere disagreement among parties as to the  meaning of a term constitute ambiguity.  Byrd v. Allstate  Ins. Co., 622 A.2d 691, 693-94 (D.C. 1993) (citations omitted).

21
Under District of Columbia law, where a provision in an  insurance policy is unambiguous, it must be enforced as  written unless contrary to public policy.  See Smalls v. State  Farm Mut. Auto. Ins. Co., 678 A.2d 32, 35 (D.C. 1996).  Only when a provision's meaning is ambiguous is it interpreted in a  manner consistent with the "reasonable expectations" of the  insured.  See id.  This rule stands in contrast to the law in  some other states, in which courts apply the doctrine of the  insured's "reasonable expectations" to construe even unambiguous provisions in favor of the insured.  See, e.g., Reg'l  Bank of Colo., N.A. v. St. Paul Fire & Marine Ins. Co., 35 F.3d 494, 497 (10th Cir. 1994) (stating that, under Colorado  law, even if an insurance policy is unambiguous, it is construed in light of the reasonable expectations of the ordinary  policyholder).

22
The question, therefore, is whether the District of Columbia Court of Appeals would find the pollution exclusion clause  ambiguous as applied to the facts of this case.  In attempting  to determine how the District of Columbia Court of Appeals  would rule on this issue, the District Court gave some weight  to the fact that the Fourth Circuit applied District of Columbia law in finding the pollution exclusion clause unambiguous  when applied to the release of manganese fumes.  Nationwide Mut. Ins. Co. v. Nat'l REO Mgmt., Inc., Civ. Action No.  99-1322, Mem. Op. at 14 (D.D.C. July 26, 2000) (citing Nat'l  Elec. Mfrs. Ass'n v. Gulf Underwriters Ins. Co., 162 F.3d 821  (4th Cir. 1998)).  While we take the Fourth Circuit's efforts  to determine how the Court of Appeals would rule into  account, we do not find its conclusion decisive in this case. The Fourth Circuit found the pollution exclusion provision to  be unambiguous based on its plain language.  Nat'l Elec.  Mfrs. Ass'n, 162 F.3d at 825.  It then considered whether to  apply the "reasonable expectations" doctrine to restrict the  provision to environmental pollution.  Id.  The court correctly found that District of Columbia law forbids application of  the reasonable expectations doctrine to alter an otherwise  clear policy provision.  Id.  We remain uncertain, however,  whether the provision is, in fact, unambiguous under District  of Columbia law, and the Fourth Circuit's determination on  that point is not conclusive.

23
Courts across the nation are hopelessly divided over whether the clause is ambiguous as applied to carbon monoxide,  other fumes, and substances such as lead paint.  Because so many courts have addressed the issue, several approaches  have emerged.  A number of courts have found the provision  ambiguous and have construed it in favor of insured parties in  cases that do not involve typical forms of environmental  pollution.  Some have done so because the clause uses words,  such as "dispersal," "discharge," "irritant," and "contaminant," that are recognizable as terms of art in environmental  law.  See, e.g., Nautilus Ins. Co. v. Jabar, 188 F.3d 27, 30 (1st  Cir. 1999) (finding the provision ambiguous in a case involving  fumes from roofing products, because it uses terms of art and  because, if read literally, its scope would be "virtually boundless");  Kenyon v. Sec. Ins. Co. of Hartford (DPIC Cos.), 626 N.Y.S.2d 347, 350 (N.Y. Sup. Ct. 1993) (finding the provision  ambiguous in a case involving residential carbon monoxide  poisoning, because it uses words recognized as terms of art in  environmental law), aff'd, 616 N.Y.S.2d 133 (N.Y. App. Div.  1994).  Other courts have found that the clause's general  purpose shielding insurers from the costs of environmental  cleanups prevents it from barring coverage for everyday  industrial and residential accidents.  See, e.g., Stoney Run Co.  v. Prudential-LMI Commercial Ins. Co., 47 F.3d 34, 36-37  (2d Cir. 1995) (finding the provision ambiguous in a case  involving residential carbon monoxide poisoning, because it is  reasonable to interpret it as applying only to environmental  pollution in light of its general purpose);  Sullins v. Allstate  Ins. Co., 667 A.2d 617, 620 (Md. 1995) (finding a similar  version of the provision ambiguous as applied to lead paint  because it could reasonably be interpreted to apply only to  environmental pollution).  Some courts have reasoned that  the pollution exclusion clause must be ambiguous if so many  courts have given it conflicting interpretations.  See, e.g.,  Meridian Mut. Ins. Co. v. Kellman, 197 F.3d 1178, 1183 (6th  Cir. 1999) (finding the provision ambiguous in light of "the  disarray that characterize[s] this area of law");  Motorists  Mut. Ins. Co. v. RSJ, Inc., 926 S.W.2d 679, 681 (Ky. Ct. App.  1996) (finding the provision ambiguous as applied to carbon  monoxide poisoning because of its conflicting judicial interpretations and because of its use of "environmental law terms of  art").

24
Other courts have found that a strictly literal reading of the  provision could yield absurd results.  The Seventh Circuit, in  an oft-quoted case, analyzed the problem as follows:

25
The terms "irritant" and "contaminant," when viewed in isolation, are virtually boundless, for "there is virtually no substance or chemical in existence that would not irritate or damage some person or property."  Westchester Fire Ins. Co. v. City of Pittsburgh, 768 F. Supp. 1463, 1470 (D. Kan. 1991).  Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results.  To take but two simple examples, reading the clause broadly would bar coverage for bodily injuries suffered by one who slips and falls on the spilled contents of a bottle of Drano, and for bodily injury caused by an allergic reaction to chlorine in a public pool.  Although Drano and chlorine are both irritants or contaminants that cause, under certain conditions, bodily injury or property damage, one would not ordinarily characterize these events as pollution. Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co.,  976 F.2d 1037, 1043 (7th Cir. 1992).  The court noted that, to  avoid absurd results, many courts have taken a "common  sense approach" when determining the scope of pollution  exclusion clauses, holding that the clauses do not apply to  "injuries resulting from everyday activities gone slightly, but  not surprisingly, awry."  Id. at 1043-44 (citations omitted); see also Am. States Ins. Co. v. Kiger, 662 N.E.2d 945, 948  (Ind. 1996) ("Clearly, [the pollution exclusion] clause cannot  be read literally as it would negate virtually all coverage. For example, if a visitor slips on a grease spill then, since  grease is a 'chemical,' there would be no insurance coverage.  Accordingly, this clause requires interpretation.").

26
Another group of courts has found the pollution exclusion  clause not to preclude coverage for releases of carbon monoxide and other fumes, without finding the clause ambiguous. See, e.g., Reg'l Bank of Colo., N.A., 35 F.3d at 497 (finding  that a carbon monoxide exposure incident was not excluded from insurance coverage, regardless of whether the policy's  pollution exclusion clause was ambiguous);  W. Alliance Ins.  Co. v. Gill, 686 N.E.2d 997, 999 (Mass. 1997) (finding that the  clause did not bar coverage for carbon monoxide exposure  because its use of environmental law terms of art suggested  that it applied to industrial or environmental pollution and  holding that the exclusion must be interpreted "in a commonsense manner");  Thompson v. Temple, 580 So. 2d 1133, 1135  (La. Ct. App. 1991) (finding that a similar pollution exclusion  clause did not exclude coverage for injuries caused by a  leaking heater where the intent of the insurance industry was  to exclude coverage for entities that knowingly pollute the  environment).

27
On the other hand, a number of courts have found the  pollution exclusion provision to be unambiguous and to bar  coverage for incidents like the one underlying this suit.  At  least one court has specifically found that the clause's language does not reflect the specialized language of environmental law.  See Nat'l Elec. Mfrs. Ass'n, 162 F.3d at 825  (applying District of Columbia law and finding the provision  unambiguous as applied to welders exposed to manganese  fumes because it contains "neither technical terms nor terms  of art").  In other cases, courts have focused on the clause's  broad language, which does not explicitly exempt nonenvironmental damage.  See, e.g., Assicurazioni Generali,  S.p.A. v. Neil, 160 F.3d 997, 1000 (4th Cir. 1998) (finding that  a similar provision's expansive language applies to carbon  monoxide injuries);  Certain Underwriters at Lloyd's London  v. C.A. Turner Constr. Co., 112 F.3d 184, 188 (5th Cir. 1997)  (finding a similar provision unambiguous as applied to a  welding accident because its plain language does not limit its  application to environmental harm);  Reliance Ins. Co. v.  Moessner, 121 F.3d 895, 901, 903-04 (3rd Cir. 1997) (finding  the provision unambiguous in a case involving carbon monoxide poisoning because of its plain language, but finding that,  under Pennsylvania law, the insured's reasonable expectations could override the plain meaning);  Essex Ins. Co., 863 F. Supp. at 40-41 (finding the provision applicable to carbon  monoxide poisoning caused by a Zamboni machine in an ice rink because of its plain language);  Bernhardt v. Hartford  Fire Ins. Co., 648 A.2d 1047, 1050-51 (Md. Ct. Spec. App.  1994) (finding the provision unambiguous because its language is "quite specific" and people of ordinary intelligence  would not conclude that it was inapplicable to tenants' carbon  monoxide poisoning).

28
With so many courts coming to diametrically opposed conclusions about the clause's clarity and meaning, it is difficult  to know which line of cases the District of Columbia Court of  Appeals would follow.  Because the issue is important and  likely to recur, and because courts have taken conflicting  approaches to the clause's interpretation, we hereby certify  the question to the District of Columbia Court of Appeals in  accordance with D.C. Code § 11-723.  We append to this  certification the relevant portions of the District Court record.  In addition, the Clerk of the Court shall forward copies  of all or such portion of the record, including the parties'  briefs, that the Court of Appeals may require in order to  answer the certified question.  See D.C. Code § 11-723(d)  (2001).