United States Court of Appeals,
Eleventh Circuit.
No. 94-9278.
BITUMINOUS CASUALTY CORPORATION, Plaintiff-Counter-Defendant,
Appellant,
v.
ADVANCED ADHESIVE TECHNOLOGY, INC., Defendant-Counter-Claimant,
Appellee,
Georgia Pad, Inc., Defendant-Appellee.
Jan. 23, 1996.
Appeal from the United States District Court for the Northern
District of Georgia. (No. 4:94-CV-010-HLM), Harold L. Murphy,
Judge.
Before HATCHETT, DUBINA and BLACK, Circuit Judges.
HATCHETT, Circuit Judge:
Following Georgia law in this diversity case, we hold that a
pollution exclusion provision in a commercial liability insurance
policy is ambiguous and must be construed against the insurer. We
affirm the district court.
BACKGROUND
Appellee Advanced Adhesive Technology, Inc. (Advanced)
manufactures and sells adhesive products. Appellant Bituminous
Casualty Corporation (Bituminous) sold Advanced a general
commercial liability insurance policy (GCL policy) effective from
January 1, 1993, to January 1, 1994. Bituminous also issued an
umbrella insurance policy to Advanced effective from July 9, 1993,
to April 1, 1994.
The GCL policy contains, through an endorsement, a "POLLUTION
EXCLUSION" that precludes coverage for:
(1) Bodily injury or property damage arising out of the actual,
alleged or threatened discharge, dispersal, release or escape
of pollutants.
(2) Any loss, cost or expense arising out of any governmental
direction or request that the named insured test for, monitor,
clean up, remove, contain, treat, detoxify or neutralize
pollutants.
Subparagraph (1) above does not apply to bodily injury or
property damage caused by heat, smoke or fumes from a hostile
fire. As used in this exclusion, a hostile fire means one
which becomes uncontrollable, or breaks out from where it was
intended to be.
Pollutants means any solid, liquid, gaseous or thermal
irritant or contaminant, including smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste. Waste includes materials
to be recycled, reconditioned or reclaimed.
The GCL policy interprets "bodily injury" to include death. The
umbrella policy contains a similar pollution exclusion and defines
"bodily injury" in the same manner.
On May 12, 1993, E. Lee Bazini died while allegedly installing
carpet on his boat using an Advanced product, AAT-1108 Headliner
and Boat Adhesive (AAT-1108). On August 30, 1993, Bazini's estate
(the estate) made a claim against Advanced alleging that Bazini
died from inhaling the dichloromethane fumes of AAT-1108 and that
the labels on the AAT-1108 container possessed insufficient
1
warnings as to the proper use of the product. Thereafter,
Advanced sought coverage from Bituminous in the form of a legal
defense and indemnification. In January 1994, Bituminous filed
this lawsuit in the Northern District of Georgia, seeking a
declaration that the GCL policy "does not afford coverage for the
Bazini claims by operation of the ... [pollution] exclusion."
1
Bituminous's reply brief states that the estate filed a
lawsuit against Advanced in January 1995. The record in this
case does not contain a copy of the estate's complaint.
Advanced asserted a counterclaim contending that Bituminous "will
deny coverage under the Umbrella Policy for the Bazini claim for
the exact reason that [Bituminous] has denied coverage under the
[GCL] policy." Both parties filed motions for summary judgment.
In an order dated October 24, 1994, the district court first
concluded that AAT-1108's vapors constituted "pollutants." The
court went on to hold, however, that
(1) Plaintiff's failure to include the word "emission" within
the pollution exclusion, (2) the tenuousness of the use of
"discharge, dispersal, release or escape" to describe the
chemical process at issue, and (3) the factual distinctions
which separate this case from all others ... lead the court to
conclude that the pollution exclusion, as applied in this
instance, is ambiguous. The clause must, therefore, be
construed against Plaintiff.
Accordingly, the court granted Advanced's motion for summary
judgment, denied Bituminous's motion for summary judgment, and
dismissed the case. This appeal followed.2
CONTENTIONS
Bituminous contends that the pollution exclusion is
unambiguous and clearly applies to permit the insurance company to
deny coverage to Advanced on the estate's claim. Thus, Bituminous
asserts that the district court erred in granting Advanced's motion
for summary judgment and in denying its motion for summary
judgment.
Advanced responds that the district court (1) properly found
that ambiguity exists as to whether the pollution exclusion applies
to prevent coverage on the estate's claim, and (2) correctly
2
Georgia Pad, Inc. was dismissed from this action by
stipulation of the parties and is not involved in this appeal.
construed that ambiguity against Bituminous.3
DISCUSSION
The district court did not use extrinsic evidence in
interpreting the insurance policies at issue; therefore, we review
the district court using the de novo standard. See United Benefit
Life Ins. Co. v. United States Life Ins. Co., 36 F.3d 1063, 1065
(11th Cir.1994).
In diversity cases, the choice-of-law rules of the forum
state determine which state's substantive law applies.
Federal jurisdiction in this case is based on diversity, and
Georgia was the forum state. Under Georgia choice-of-law
rules, interpretation of insurance contracts is governed by
the law of the place of making. Insurance contracts are
considered made at the place where the contract is delivered.
American Family Life Assur. Co. v. United States Fire Co., 885 F.2d
826, 830 (11th Cir.1989) (citations omitted). The insurance
contracts in this case were delivered in Georgia; thus, Georgia
substantive law controls.
In Georgia, ordinary rules of contract construction govern
the interpretation of insurance policies. United States Fidelity
3
The parties also press arguments regarding the district
court's treatment of coverage under the umbrella policy.
Bituminous contends that the court erred in finding coverage
under the policy. Advanced argues that the court failed to
address the question of umbrella policy coverage, and thus the
issue is not properly before this court. Both contentions are
misguided. The district court's order held that the pollution
exclusion does not relieve Bituminous from providing insurance
coverage to Advanced in the form of a legal defense and
indemnification. Restated, the court found that, notwithstanding
the pollution exclusion, Bituminous must indemnify Advanced and
provide the company with a legal defense. The issue the parties
now raise—whether the umbrella policy applies at all to the
estate's claim—only affects the amount Bituminous will have to
indemnify Advanced when the estate receives a judgment or
settlement on its claim. The record does not reveal that the
estate has secured a judgment or settlement, however. Thus, the
question of the applicability of the umbrella policy was not
properly before the district court.
& Guar. Co. v. Park 'N Go of Ga., Inc., 66 F.3d 273, 276 (11th
Cir.1995) (certification to Georgia Supreme Court). "The rules of
contract interpretation are statutory, and construction of a
contract is a question of law for the court." Park 'N Go, 66 F.3d
at 276; see also O.C.G.A. §§ 13-2-1 through 13-2-4 (1982).
Moreover,
[u]nder Georgia rules of contract interpretation, words in a
contract generally bear their usual and common meaning. OCGA
§ 13-3-2(2). However, "if the construction is doubtful, that
which goes most strongly against the party executing the
instrument or undertaking the obligation is generally to be
preferred." OCGA § 13-2-2(5). Georgia courts have long
acknowledged that insurance policies are prepared and proposed
by insurers. Thus, if an insurance contract is capable of
being construed two ways, it will be construed against the
insurance company and in favor of the insured.
Claussen v. Aetna Casualty & Sur. Co., 259 Ga. 333, 380 S.E.2d 686,
687-88 (1989). We apply these principles in assessing whether the
terms "discharge," "dispersal," "release," or "escape" precisely
describe the process that produced the vapors that allegedly killed
Bazini.
In support of its motion for summary judgment, Advanced
submitted an affidavit from its president, Benny Wood. In that
affidavit, Wood attested that "[a]ll adhesive products, including
AAT-1108, by their nature, emit vapors in the process of adhesion."
The district court relied on this unrefuted evidence to determine
that "the chemical reaction which create[d] these vapors is most
accurately described by the term "emission.' " We agree with the
district court's finding that the production of vapors from AAT-
1108 constituted an "emission."
A "discharge" is defined as, inter alia, "3: the act of
discharging: removal of a load: UNLOADING ... 5: a firing off:
expulsion of a charge: EXPLOSION ... 6a: a flowing or issuing out
... EMISSION, VENT ... b: something that is emitted or
evacuated...." Webster's Third New International Dictionary 644
(1976) (emphasis added); see also Funk and Wagnalls Standard
College Dictionary 378-79 (1974). Therefore, one of the
definitions of "discharge" accurately describes the process in
controversy; other common meanings of the word, however, do not.
In Claussen, the Georgia Supreme Court addressed a similar
situation when interpreting a pollution exclusion clause. The
clause at issue there provided that the pollution exclusion did not
apply when "such discharge, dispersal, release or escape is sudden
and accidental." Claussen, 380 S.E.2d at 687. In deciding the
meaning of "sudden," the court reasoned:
What is the meaning of the word "sudden" as it is used in
the insurance policy? Claussen argues that it means
"unexpected"; Aetna asserts that the only possible meaning is
"abrupt." ...
The primary dictionary definition of the word is
"happening without previous notice or with very brief notice;
coming or occurring unexpectedly; not foreseen or prepared
for." Webster's Third New International Dictionary, at 2284
(1986). See also, Funk and Wagnalls Standard Dictionary, at
808 (1980); Black's Law Dictionary, at 1284 (1979). The
definition of the word "sudden" as "abrupt" is also recognized
in several dictionaries and is common in the vernacular.
Perhaps, the secondary meaning is so common in the vernacular
that it is, indeed, difficult to think of "sudden" without a
temporal connotation: a sudden flash, a sudden burst of
speed, a sudden bang. But, on reflection one realizes that,
even in its popular usage, "sudden" does not usually describe
the duration of an event, but rather its unexpectedness: a
sudden storm, a sudden turn in the road, sudden death. Even
when used to describe the onset of an event, the word has an
elastic temporal connotation that varies with expectations:
Suddenly, it's spring. See also, Oxford English Dictionary,
at 96 (1933) (giving usage examples dating back to 1340, e.g.,
"She heard a sudden step behind her"; and, "A sudden little
river crossed my path As unexpected as a serpent comes.")
Thus, it appears that "sudden" has more than one reasonable
meaning. And, under the pertinent rule of construction the
meaning favoring the insured must be applied, that is,
"unexpected."
Claussen, 380 S.E.2d at 688 (footnote omitted) (final emphasis
added). Because "discharge" also has more than one reasonable
meaning, we must apply the meaning favoring Advanced. As a result,
we find that "discharge" does not unambiguously describe the
"emission" at issue.
Moreover, none of the remaining terms of the pollution
exclusion clause precisely describe the chemical process in
controversy. "Dispersal" is defined as "the act or result of
dispersing ... dispersion, distribution." "Release" means "the act
of liberating or freeing ... discharge from restraint." "Escape"
is defined as the "evasion of or deliverance from what confines,
limits, or holds." Webster's Third New International Dictionary
653, 1917, 774 (1976). Under Georgia law, "[a]ny exclusion sought
to be invoked by the insurer is to be liberally construed against
the insurer unless it is clear and unequivocal." Park 'N Go, 66
F.3d at 278; see also Alley v. Great Am. Ins. Co., 160 Ga.App.
597, 287 S.E.2d 613, 616 (1981) (" "[E]xclusions to insuring
agreements require a narrow construction on the theory that the
insurer, having affirmatively expressed coverage through broad
promises, assumes a duty to define any limitations on that coverage
in clear and explicit terms.' ") (quoting Krug v. Millers' Mut.
Ins. Ass'n of Ill., 209 Kan. 111, 495 P.2d 949, 954 (1972)).
Consequently, we hold that the pollution exclusion in the GCL and
umbrella policies does not apply to permit Bituminous to deny
coverage to Advanced on the estate's claim.4
We believe this holding most accurately reflects the intention
of the parties to the insurance contract. See O.C.G.A. § 13-2-3
(1982) ("The cardinal rule of construction is to ascertain the
intention of the parties."). The pollution exclusion clearly
contemplates shielding Bituminous from liabilities associated with
environmental contamination. Bituminous's contrary position—that
the clause excludes coverage for a consumer's claim for damages
arising out of the intended use of the insured's product—is a
strained one. See Perkins Hardwood Lumber Co. v. Bituminous
Casualty Corp., 190 Ga.App. 231, 378 S.E.2d 407, 409 (1989) (an
insurance contract's "language should receive a reasonable
construction and not be extended beyond what is fairly within its
plain terms"); Gulf Ins. Co. v. Mathis, 183 Ga.App. 323, 358
S.E.2d 850, 851 (1987) ("In construing an insurance contract the
test is not what the insurer intended its words to mean, but rather
what a reasonable person in the insured's position would understand
them to mean.").
Finally, we note that the parties submitted the drafting
history of pollution exclusion clauses to support their positions
in this case. "Extrinsic evidence to explain ambiguity in a
contract becomes admissible only when a contract remains ambiguous
after the pertinent rules of statutory construction have been
applied." Claussen, 380 S.E.2d at 687. After applying the rules
of statutory construction, as did the district court, we have
4
We express no opinion as to whether the vapors at issue
constitute "pollutants" under the exclusion.
resolved the ambiguity and hold that the pollution exclusion does
not apply to exclude coverage to Advanced. Thus, the proposed
extrinsic evidence is inadmissible.
CONCLUSION
For the foregoing reasons, we affirm the judgment of the
district court.
AFFIRMED.