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SnyderGeneral Corp. v. Continental Ins. Co.

ELR Citation: 28 ELR 20607
Nos. 96-10658, 133 F.3d 373/46 ERC 1284/(5th Cir., 02/02/1998)

The court holds that the pollution exclusion clauses contained in two insurance policies preclude coverage for a large trichloroethylene (TCE) spill at a heating and air conditioning equipment manufacturer's plant. The spill occurred after TCE in a degreasing tank overflowed and spilled into a drainage system that eventually emptied into dry wells and then leached into the surrounding environment. The court first holds that Minnesota law applies to one of the insurance policies, and Texas law applies to the other. The court next holds that under Minnesota law, the relevant release is the release from the dry wells. Whether the spill from the degreasing tanks occurred or not is unimportant. To determine whether a discharge is sudden and accidental, one must determine how the contaminants entered the groundwater. The Minnesota Supreme Court stated that "discharge" means the escape of waste from a particular place. Therefore, courts are to focus on the point at which the polluting waste escapes from its intended place of containment. Here, the record shows that the manufacturer intended to contain the TCE in the dry wells because the dry wells were designed to allow the TCE to make its way from the plant floor to the dry wells—the ultimate place of containment. Moreover, there is no genuine issue of material fact concerning whether the manufacturer intended to contain the pollutants in the dry wells. The record reveals that immediately after the large TCE spill, the manufacturer knew about the spill and could have taken steps to clean it up from the floor or to pump or dig it from the dry wells. Its failure to do so demonstrates that, even if the tank was the initial place of containment for largevolume TCE, the dry wells became the ultimate intended place of containment. Next, the court holds that under Minnesota law, the district court did not err in granting summary judgment in favor of the insurer. Under Minnesota law, accidental means unexpected. While the overflow of the TCE from the tank might have been unexpected, it is irrelevant. The relevant discharge is from the dry wells, and the record shows that the purpose of the dry wells was to leach liquid waste into the surrounding environment. And the manufacturer cannot characterize the discharge as unexpected, because the drain system acted exactly as it was designed to. Because the discharge was not accidental, the court does not determine whether it was sudden.

The court also holds that under Texas law, the relevant discharge is from the dry wells. Again, the purpose of the dry wells was to drain out the liquid from the floor drains. Therefore, the manufacturer expected the waste to discharge into the surrounding environment, and the discharge was not accidental. Thus, the court holds that the district court did not err in granting summary judgment in favor of the insurer under Texas law.

Counsel for Plaintiff
Michael L. Jones
Henry, Meier, Jones & Johnson
1700 Pacific Ave., Ste. 2700, Dallas TX 75201
(214) 954-9700

Counsel for Defendants
Kevin F. Risley
Gilpin, Paxson & Bersch
1900 W. Loop S., Ste. 2000, Houston TX 77027
(713) 623-8800

Before Jolly and Parker, JJ.