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

Citation: 30 ELR 20633
No. No. 98-1075, 214 F.3d 1183/50 ERC 1517/(10th Cir., 05/31/2000) aff'd in part, modified in part

The court grants in part a petition to clarify an April 11, 2000, decision in which it applied Colorado law and reversed a district court holding that the pollution exclusion clause in one of two policies held by a sanitation district precluded an insurer's duty to defend the district against a Clean Water Act (CWA) citizen suit alleging violations of the district sewage treatment facility's permit. One policy, effective from 1983 to 1986, excludes any coverage for pollution discharges, but restores coverage for sudden accidents involving pollutants. The court first holds that the district court properly found that the district's effluent constituted a pollutant within the scope of the pollution exclusion provisions in the insurance policies. The court next holds that the endorsement in the second policy, effective from 1986 to 1987, overrides that policy's standard pollution exclusion clause and that the insurer does not have a duty to defend under that policy. The court further holds that the phrase sudden accident in the pollution exclusion clause in the first policy is ambiguous under Colorado law and should, therefore, be construed in favor of the district. Colorado courts would find the phrase sudden accident in the insurer's exclusion clause to be ambiguous. Colorado courts would also hold that the discharges alleged in the complaint could have been unexpected and unintended from the district's point of view and, therefore, the insurer is not excused from its duty to defend because the claims in the complaint arguably fall within the policy coverage. Where the underlying complaint leaves open the possibility that the insured did not expect or intend the release of pollutants, the insurer is not excused from its duty to defend under Colorado law. Here, the complaint leaves open the possibility that the district's conduct was only negligent and that the district did not expect or intend to release pollutants into the surrounding environment. On the face of the complaint, therefore, 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 first policy.

[A prior opinion in this litigation is published at 30 ELR 20449.]

The full text of this opinion is available from ELR (28 pp., ELR Order No. L-233).

Counsel for Plaintiff
Timothy J. Flanagan
Fowler, Schimberg & Flanagan
1640 Grant St., Ste. 300, Denver CO 80203
(303) 298-8603

Counsel for Defendant
Richard B. Caschette
Kennedy & Christopher
1660 Wynkoop St., Ste. 900, Denver CO 80202
(303) 825-2700