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Aetna Casualty & Sur. Co. v. General Dynamics Corp.

Citation: 23 ELR 20055
No. Nos. 91-2252, -2254, 968 F.2d 707/36 ERC 1311/(8th Cir., 07/06/1992)

The court holds that a district court erred when it interpreted pollution exclusion clauses in comprehensive general liability (CGL) insurance policies as not relieving an insurer of its duty to defend and reimburse an insured for its liability at hazardous waste sites. A defense industry manufacturer was served with lawsuits concerning environmental contamination at seven sites and with letters from federal and state environmental protection agencies or private parties demanding that the company clean up environmental wastes at nine other sites. The company forwarded notice of the lawsuits and letters to the insurer and demanded a defense and reimbursement of any costs incurred; the insurer sought declaratory judgment as to its obligation to defend and indemnify. The court first holds that the district court erred in interpreting the "sudden and accidental" phrase in the pollution exclusion clause in the CGL insurance policies as ambiguous, because assigning both words their plain meaning eliminates any perceived ambiguity. Although the district court interpreted the phrase to include unexpected events occurring over an extended period of time, which gives no effect to the word "sudden," the court finds that "sudden" means abrupt, which is the temporal element that joins together conceptually the immediate and the unexpected. The court also holds that the district court erred in holding that the insurer's action for declaratory judgment as to four of the 16 sites was not ripe for adjudication, because no suits had yet been filed, nor any settlement reached. The court finds that the insurer's clear demand for payment of defense and indemnity costs with respect to each of the four sites and its dispute of those demands creates, a live justiciable controversy sufficient to invoke the jurisdiction of the district court.

The court next holds that the insurer is not collaterally estopped from arguing that the Eighth Circuit's decision in Continental Insurance Co. v. Northeastern Pharmaceutical & Chemical Co. (NEPACCO), 15 ELR 20756, controls this case. Although the insured has satisfied the technical requirements for asserting collateral estoppel, allowing the insured to assert collateral estoppel offensively against the insurer to estop the insurer from denying that the term "damages" under Missouri law includes environmental response costs would be unfair. Moreover, to rule that the insured may offensively assert collateral estoppel would require the court to apply a principle of law that the court rejected in NEPACCO.

Turning to whether the interpretation of the term "damages" in the CGL policies is controlled by the court's NEPACCO decision, the court holds that no basis exists on which to hold that NEPACCO is contrary to Missouri law, either as proclaimed or as clearly predictable. First, the policy language in this case is the same as the language at issue in NEPACCO. Because NEPACCO's holding is not limited in application to a particular insurance contract, nor is the term "damages" ambiguous, extrinsic evidence may not be considered. Second, because these causes of action are essentially equitable actions for monetary relief in the form of restitution or reimbursement of costs, CGL coverage is precluded. Third, post-NEPACCO state court decisions provide no basis to hold that NEPACCO is contrary to Missouri law, either as proclaimed or as predictable. The cases do not constitute persuasive evidence that the law of Missouri is, or would be held to be by the Missouri Supreme Court, different from that expressed in NEPACCO.

The court further holds that the district court properly held that the environmental agency demand letters were not "suits" which triggered the insurer's duty to defend. The CGL policy language imposes on the insurer a duty to defend any suit seeking damages, and Missouri law requires that the terms of an insurance policy be given their plain and ordinary meaning. Because the demand letters in this case did not seek damages, but rather sought to have the insured negotiate and participate in the cleanup of the various sites, the letters did not constitute suits for damages within the meaning of Missouri law. Finally, the court holds that the district court did not err when it declined to enforce certain oral promises between the parties to rule that the insurer was bound to pay all investigation costs up to the time when the insurer decided not to provide coverage for those costs. The insurer was not responsible for defense or investigation costs based on the demand letters after it disclaimed coverage.

Counsel for Appellant
James E. Rocap
Miller, Cassidy, Laroca & Lewin
2555 M St. NW, Washington DC 20037
(202) 833-5124/293-6400

Counsel for Appellee
James T. Price
Spencer, Fane, Britt & Browne
1400 Commerce Bank Bldg., 1000 Walnut St., Kansas City, MO 64106
(816) 474-8100

Before WOLLMAN and BEAM, Circuit Judges, and VAN SICKLE,* Senior District Judge.