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Blackhawk-Central City Sanitation Dist. v. American Guarantee & Liab. Ins. Co.

Citation: 30 ELR 20449
No. No. 98-1075, 208 F.3d 1246/(10th Cir., 04/11/2000)

The court, applying Colorado law, reverses a district court decision holding that the pollution exclusion clause in one of two insurance policies held by a Colorado sanitation district precluded an insurer from having to defend the district against a Clean Water Act citizen suit arising from the district's discharges to a creek. The court first holds that the district court did not err in finding that the sewage and effluent the district is alleged to have discharged constitute pollutants within the meaning of the insurance policies' exclusions. Under Colorado law, the only relevant inquiry is how the complaint characterized the materials and whether the characterization fits within the terms of the policy. Here, the materials cited in the complaint constitute waste material and contaminants within the policies' broad definition of pollutants. The court next holds that the district court did not err in holding that the absolute pollution exclusion contained in an endorsement to the first policy overrides that policy's standard pollution exclusion clause. Because the endorsement reconciled its absolute pollution exclusion provision with the body of the policy by making clear it was a replacement to the pollution exclusion clause in the policy, there is not inherent conflict between the endorsement and the policy. Thus, the district court correctly concluded that the insurer does not have a duty to defend the district under the first policy.

The court, however, then holds that the district court erred in finding that the insurer did not have a duty to defend under the second policy. Colorado courts would find the phrase sudden accident in the policy's pollution exclusion clause to be ambiguous. The insurer cannot show that its temporal interpretation of sudden accident is the only reasonable interpretation of its exclusion clause. Moreover, the claims in the underlying complaint arguably fall within the policy's coverage. Damages arising from negligence may constitute an accident under Colorado law, and the underlying complaint alleges both intentional conduct and negligence. Further, there is a factual and legal possibility under Colorado law that the discharges were a sudden accident, that is, that the district was not prepared for and did not expect or intend to discharge pollutants during the time frame covered by the second policy.

The full text of this opinion is available from ELR (11 pp., ELR Order No. L-200).

Counsel for Plaintiff
Timothy J. Flanagan, Katherine T. Eubank
Fowler, Schimberg & Flanagan
1900 Wazee St., Denver CO 80202
(303) 298-8603

Counsel for Defendant
Richard B. Caschette
Kennedy & Christopher
1660 Wynkoop St., Denver CO 80202
(303) 825-2700