LaFarge Corp. v. Travelers Indem. Co.
Citation: 28 ELR 20032
No. 96-2469, 110 F.3d 1511/(11th Cir., 08/11/1997)
The court holds that three different pollution exclusion clauses in various insurance policies bar a corporation's claims that its insurers must defend and indemnify it against the U.S. Environmental Protection Agency's (EPA's) claims for investigation and cleanup costs at a contaminated dump site. The court first holds that in this diversity action the federal courts must apply the substantive law of the forum state, Florida. This principle extends to the forum state's conflicts of law principles. The court then notes that a panel of the court has concluded that in a case involving an insurance contract on real property, the Florida courts would follow the Restatement (Second) of Conflicts of Law and apply the "significant relationship" test and, thereby, the law of Florida. The court also holds that because it decides that the insurance company had no duty to defend the corporation, the court does not need to address the indemnification question. The court further holds that the burden of proving an exception to the pollution exclusion clause in this case is on the insured corporation.
The court next holds that the sudden and accidental pollution exclusion clause bars coverage for the claims at issue. The court rejects the corporation's argument that the critical event for determining the coverage of this and all the pollution exclusion clauses is not the initial deposit of wastes at the site but the subsequent release and threatened release of pollutants into the environment. In a prior case interpreting a similar provision under Florida law, the court held that it is the actual discharge, not the resulting damages or contamination, which must be sudden and accidental in order to fall within the exception to the pollution exclusion clause. The court notes, however, that the district court found that neither the initial deposit of the wastes nor the subsequent seepage of pollution from the site was sudden and accidental. The court also holds that the pollution exclusion clause in the policy is not ambiguous, and therefore, the regulatory history of the clause does not need to be considered. The court also rejects the corporation's argument that allowing the district court's decision to stand would create an absolute pollution exclusion. Even with these pollution exclusion clauses, the insurance policies would cover pollution resulting from a genuine accident at aninsured's plant or involving the insured's vehicle.
The court also holds that the policy excluding coverage for a discharge that was nonsudden or gradual bars the corporation's claims, since the corporation makes the same arguments for this policy as for the policies containing the sudden and accidental exclusion. The court further holds that the policies precluding relief if the pollution arose from a discharge of waste that was expected or intended bar coverage. The terms "accidental" and "unexpected or unintended" in these clauses have the same meaning, and they should be similarly construed since they were drafted to achieve the same result.
Counsel for Plaintiff
James E. Cousar
Thompson & Knight
98 San Jacinto Blvd., Austin TX 78701
Counsel for Defendants
Linda B. Secord, Ass't Attorney General
Attorney General's Office
P.O. Box 12548, Austin TX 78711
Before Edmondson, Kravitch, and Henderson, JJ.