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Bell Lumber & Pole Co. v. U.S. Fire Ins. Co.

ELR Citation: 24 ELR 21401
Nos. No. 4-89-931, 847 F. Supp. 738/(D. Minn., 03/21/1994)

The court holds that under Minnesota law, an insured wood treatment company's deliberate disposal of pentachlorophenol (penta) sludge on the ground is not an "occurrence" within the meaning of primary comprehensive general liability or umbrella excess liability policies. Also, the court holds that the policies' pollution exclusion clause bar coverage for damage from penta that was released gradually into the soil as a result of ongoing business practices. The court first holds that there is sufficient evidence of the existence and terms of a lost comprehensive general liability policy to survive a motion for summary judgment. The court next holds that the pollution exclusion clause in the missing policy is enforceable because the insurer offered evidence to show that the pollution exclusion clause in the umbrella excess liability policy was properly filed with and approved by the relevant state regulatory body.

The court holds that the company's deliberate disposal of penta sludge on wood shavings spread directly on the ground over the course of two decades does not constitute an "occurrence" within the meaning of the policies. Thus, the policies do not cover cleanup costs for the disposal area. The wood treatment company knowingly released penta sludge by routine dumping on its site and knew or should have known that dumping the sludge would likely cause property and environmental damage.

The court then holds the soil and subsoil contamination under the company's process area resulted from spills and leaks that a jury could find were neither expected nor intended and therefore could be covered "occurrences" under the policies. The court holds, however, that the policies' pollution exclusion clauses bar coverage because this is a "typical" pollution case in which the company engaged in damaging conduct in the regular course of business over a number of years. The court holds that the sudden and accidental exception to the pollution exclusion clauses does not apply because the release of penta occurred gradually and cannot reasonably be construed as sudden. Finally, the court holds that the policies do not cover cleanup costs due to alleged significant contamination resulting from the activities of a neighboring wood treatment facility. Even though the adjacent facility probably caused some of the contamination under the insured company's property, there is no evidence that the release of contaminants from the neighbor's property was sudden.

Counsel for Plaintiff
Thomas C. Mielenhausen, Steven A. Mogck
Popham, Haik, Schnobrich & Kaufman
3300 Piper Jaffray Tower
222 S. 9th St., Minneapolis MN 55402
(612) 333-4800

Counsel for Defendants
Robert E. Salmon, Stacy A. Broman
Meagher & Geer
4200 Multifoods Tower
33 S. 6th St., Minneapolis MN 55402
(612) 338-0661