[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
AUGUST 20, 2008
No. 07-13207 THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 06-01690-CV-T-17MAP
JAMES RIVER INSURANCE COMPANY,
a foreign corporation,
Plaintiff-Appellant,
versus
GROUND DOWN ENGINEERING, INC.,
a Florida Corporation,
LAUREL A. HALL, individually,
PRIORITY DEVELOPMENT, L.P.,
a foreign limited partnership,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(August 20, 2008)
Before EDMONDSON, Chief Judge, PRYOR and KRAVITCH, Circuit Judges.
KRAVITCH, Circuit Judge:
James River Insurance Company appeals the district court’s dismissal of its
claim seeking a declaratory judgment that it is not obligated to provide a legal
defense to Ground Down Engineering under the insurance policy Ground Down
purchased from James River. James River also appeals the denial of its summary
judgment motion. James River argues that the “pollution exclusion” in the policy
excuses it from the obligation to defend Ground Down and Ground Down’s
engineer, Laurel Hall, in a suit filed by Priority Development for negligently
failing to discover construction debris and fuel tanks during an environmental site
assessment. For the following reasons, we conclude that the district court erred in
holding that the pollution exclusion does not apply. We, therefore, vacate the
district court’s dismissal and remand with instructions for the district court to enter
an order granting summary judgment to James River.
BACKGROUND
Priority Development’s predecessor in interest hired Ground Down to
conduct a “Phase I Site Assessment” of real property it was considering
purchasing. According to the report generated by Ground Down’s engineer, the
purpose of this assessment was to satisfy one of the requirements for Priority to
qualify for the “innocent landowner defense” under the Comprehensive
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Environmental Response, Compensation, and Liability Act (known as CERCLA or
Superfund). The assessment report stated that it was also intended to identify
“Recognized Environmental Conditions” which referred to “the presence or likely
presence of any Hazardous Substances or Petroleum Products on a property under
conditions that indicate an existing release, a past release, or a material threat of a
release of any Hazardous Substances or Petroleum Products.”
Ground Down completed its assessment and reported that no recognized
environmental conditions had been found. Priority then purchased the property.
After Priority began developing the site, it found “a significant amount of
construction debris,” several 55-gallon drums, and half of an underground storage
tank. Priority filed suit against Ground Down and Laurel Hall for breach of
contract, negligent misrepresentation, and negligence for failing to properly
complete the Phase I Site Assessment. In its complaint, Priority alleged that
testing revealed the drums and the underground storage tank previously contained
petroleum, and that Priority, therefore, had to remove the drums and the
surrounding soil and dispose of them at a special waste facility. Priority also
alleged that the construction debris caused an elevation in the level of methane gas
on the property which also required expensive environmental remediation.
Ground Down submitted a claim to its insurance company, James River,
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requesting provision of a legal defense in the suit with Priority and payment of any
resulting damages under its professional liability insurance policy. James River
began providing a defense under a reservation of rights but also filed suit in federal
court seeking a declaratory judgment that it was not required to provide coverage
owing to the “pollution exclusion” contained in the policy.
The policy provides coverage for wrongful acts in Ground Down’s
performance of or failure to perform professional services. The covered
“professional services” are services that Ground Down is qualified to perform in its
“capacity as an architect, engineer, landscape architect, land surveyor or planner.”
The policy includes a “pollution exclusion” provision excluding from
coverage “[a]ll liability and expense arising out of or related to any form of
pollution, whether intentional or otherwise.” The pollution exclusion states that
the policy does not cover “any damages, claim, or suit arising out of the actual,
alleged or threatened discharge, dispersal, seepage, migration, release or escape of
‘pollutants.’” This includes
Any loss, cost, expense, fines and/or penalties arising out of any
(1) request, demand, order, governmental authority or directive or that
any private party or citizen action that any insured, or others, test for,
monitor, clean up, remove, contain, treat, detoxify or neutralize or in
any way respond to, or assess same, the effects of pollutants,
environmental impairments, contaminants, or (2) any litigation or
administrative procedure in which any insured or others may be
involved as a party as a result of actual alleged or threatened
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discharge, dispersal, seepage, migration, release, escape or placement
of pollutants, environmental impairments, or contaminants into or
upon land, premises, buildings, the atmosphere, any water course,
body of water, aquifer or ground water, whether sudden, accidental or
gradual in nature or not, and regardless of when.
Pollutants are defined as “any solid, liquid, gaseous, fuel, lubricant, thermal,
acoustic, electrical, or magnetic irritant or contaminant, including but not limited to
smoke, vapor, soot, fumes, fibers, radiation, acid, alkalis, petroleums, chemicals or
‘waste.’ ‘Waste’ includes medical waste, biological infectants, and all other
materials to be disposed of, recycled, stored, reconditioned or reclaimed.”
The policy states that this exclusion applies “regardless of whether . . . an
alleged cause for the injury or damage is the Insured’s negligent hiring, placement,
training, supervision, retention, or, wrongful act.”
The district court determined that the claim by Priority fell outside of the
pollution exclusion, because Priority’s claim arose out of the failure to carry out
professional responsibilities, not out of pollution. The court also held that it would
be “unconscionable at best” to interpret the policy as excluding from coverage
claims relating to “any form of pollution, regardless of causation.” Because
Ground Down had not caused the pollution, the district court found that the
exclusion should not apply. The district court thus concluded that James River was
obligated to provide a defense for Ground Down, and dismissed its complaint. The
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court then denied James River’s motion for summary judgment as moot.
STANDARD OF REVIEW
We review an order granting a motion to dismiss de novo, taking as true the
facts alleged in the complaint. Doe v. Pryor, 344 F.3d 1282, 1284 (11th Cir.
2003). To survive dismissal, “the complaint’s allegations must plausibly suggest
that the plaintiff has a right to relief, raising that possibility above a ‘speculative
level’; if they do not, the plaintiff’s complaint should be dismissed.” See Bell Atl.
Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007) (retiring the often-criticized “no
set of facts” language previously used to describe the motion to dismiss standard).
The interpretation of provisions in an insurance contract is a question of law
reviewed de novo. Technical Coating Applicators, Inc. v. United States Fid. &
Guar. Co., 157 F.3d 843, 844 (11th Cir. 1998).
We review de novo a district court’s denial of summary judgment. Huff v.
DeKalb County, Ga., 516 F.3d 1273, 1277 (11th Cir. 2008). Summary judgment is
appropriate when the evidence, viewed in the light most favorable to the
nonmoving party, presents no genuine issue of material fact and compels judgment
as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
DISCUSSION
James River argues that Priority’s claims against Ground Down for the
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alleged failure to discover petroleum holding tanks and construction debris during
the site assessment are claims “arising out of pollution” covered by the pollution
exclusion. James River contends that Priority’s request for compensation due to
environmental remediation and delay due to contamination establishes that
Priority’s lawsuit “arises out of pollution.”
Appellees, Ground Down and Priority, argue that there is no connection
between the service performed negligently by Ground Down and the pollution
found on the property. Appellees argue that the negligence at issue in the claim
relates to improper performance of the environmental site assessment rather than
negligently causing pollution. They assert that Ground Down’s liability to Priority,
therefore, depends on negligence in the duty to conduct the assessment rather than
on the existence of pollutants. Appellees also argue that the construction debris at
issue is not a pollutant within the meaning of the policy exclusion.
Does Priority’s Claim “Arise Out Of” Pollution?
In interpreting insurance contracts, the Florida Supreme Court1 has made
clear that “the language of the policy is the most important factor.” Taurus
Holdings, Inc. v. United States Fid. and Guar. Co., 913 So.2d 528, 537 (Fla. 2005).
“Under Florida law, insurance contracts are construed according to their plain
1
In this diversity action initiated in Florida, we apply the substantive law of the forum
state. See Insurance Co. of N. Am. v. Lexow, 937 F.2d 569, 571 (11th Cir. 1991).
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meaning.” Taurus, 913 So.2d at 532. Ambiguities in policy language “are
construed against the insurer” in favor of coverage. Deni Assocs. of Fla. v. State
Farm Fire & Cas. Ins. Co., 711 So.2d 1135, 1140 (Fla. 1998). A contract provision
is considered ambiguous if the “relevant policy language is susceptible to more
than one reasonable interpretation, one providing coverage and the other limited
coverage.” Taurus, 913 So.2d at 532 (alterations and citations omitted). However,
“to allow for such a construction the provision must actually be ambiguous . . .
[and] courts may not rewrite contracts, add meaning that is not present, or
otherwise reach results contrary to the intentions of the parties.” Id. (citations
omitted).
The Florida Supreme Court held that the phrase “arising out of” is not
ambiguous and should be interpreted broadly. Id. at 539. The court declared that
“the term ‘arising out of’ is broader in meaning than the term ‘caused by’ and
means ‘originating from,’ ‘having its origin in,’ ‘growing out of,’ ‘flowing from,’
‘incident to’ or ‘having a connection with.’” Id. To have arisen out of something,
there must be “some causal connection, or relationship” that is “more than a mere
coincidence” but proximate cause is not required. Id. “[T]he phrase ‘arising out
of’ contemplates a more attenuated link than the phrase ‘because of.’” Garcia v.
Federal Ins. Co., 969 So.2d 288, 293 (Fla. 2007).
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Questions of whether a clear “pollution exclusion” applies to a certain set of
facts do not signify an ambiguity under Florida law. Deni, 711 So.2d at 1140. In
Deni, the Florida Supreme Court rejected the idea that a “latent ambiguity” exists
because the parties disagreed as to whether the pollution exclusions at issue barred
coverage for (1) an accident that occurred while moving equipment which resulted
in spilled ammonia or (2) an accidental spraying of two men with chemical
insecticide. Id. at 1138-40.
“The duty to defend depends solely on the facts and legal theories alleged in
the pleadings and claims against the insured.” Nova Casualty Co. v. Waserstein,
424 F. Supp. 2d 1325, 1332 (S.D. Fla. 2006). To determine whether the claims
brought by Priority arose out of pollution such that they are covered by the
pollution exclusion, we therefore look to the allegations in Priority’s complaint
against Ground Down in the underlying litigation.
A thorough reading of the policy in this case shows the intended breadth of
the exclusion and reveals that the exclusion covers the claim brought by Priority.
Assuming for a moment that all materials found by Priority are in fact pollutants,
the claim clearly arises out of pollution. The exclusion states that the insurance
does not apply to any “damages, claim, or suit” arising out of pollution including
damages for devaluation of property and requests that any insured or others
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“monitor, clean up, remove, contain, treat, detoxify or neutralize or in any way
respond to . . . the effects of pollutants, environmental impairments, contaminants.”
Priority’s complaint requests compensation from Ground Down as a result
of lost profits, lost property value, and the need for environmental remediation.
The complaint lists this injury under the heading “environmental contamination”
and states that, as a result of Ground Down’s negligence, Priority “engaged several
environmental engineering companies to test, monitor and remediate the
environmental conditions.” Priority also stated that the drums previously
contained petroleum which had leaked into the soil, thus requiring it to “(i) expend
large financial sums to remove the Drums and the surrounding soils, both of which
had to be disposed of at a special waste facility; and (ii) monitor the groundwater
[for contamination].” Regarding the construction debris, Priority’s complaint
states that the debris caused “slightly elevated levels of methane gas” which
required the expenditure of “substantial sums to remove the debris and monitor the
Property for methane gas to confirm that the Property had been properly and
adequately remediated.” These claims for damages arise directly out of the alleged
discovered pollution, and are covered explicitly by the exclusion. Although the
alleged conduct was negligence in performing the site assessment, Priority’s claim
depends upon the existence of the environmental contamination. See Technical
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Coating, 157 F.3d at 846 (holding that a pollution exclusion applied to a claim
against the insured for negligently exposing individuals to toxic vapors from
roofing materials regardless of whether the roofing products were used properly or
negligently because the policy excluded coverage for injuries sustained by
breathing the vapors).
Additionally, the language of the exclusion contemplates that negligence by
Ground Down will be the basis of a claim and clearly states that this type of claim
is excluded. It would be a strange interpretation of the policy to say that although
“negligent hiring, placement, training, supervision, retention, or, wrongful act” are
covered by the exclusion, negligent performance of a site assessment is not.
Furthermore, the policy specified that damages related to pollution are excluded, in
addition to causes of action directly referring to pollution.
Appellees rely heavily on Evanston v. Treister, a district court case from the
U.S. Virgin Islands, in their argument that the negligence and breach of contract
claims against Ground Down are too removed from the pollution to “arise out of”
the contamination. In that case, the court found that the pollution exclusion did not
apply. 794 F.Supp. 560, 571-72 (D. V.I. 1992). However, Evanston actually
supports Appellant’s position by illustrating what it means to have a claim truly
separated from the pollution involved. In Evanston, the insured was an architect
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who designed and supervised the construction of sewer and water pipes. Id. at 563.
The pipes were improperly placed together rather than separated and the water line
was incorrectly placed below the sewer line. Id. at 566. These errors led to
contamination of sewage into the water supply and caused a typhoid outbreak. Id.
at 563. The residents who became sick sued the government, and the government
filed a cross-claim against the architect. Id. The suit against the architect was not,
however, a suit for damages relating to the contamination. Id. Instead, the suit
sought recovery for the cost to replace the water and sewer lines, i.e., to redo the
work that the architect had been hired to do and had done negligently. Id. Based
on this distinction, the court found that the claim against the architect sought
damages “not as a result of the pollution, but as a result of the unusable condition
of the water and sewer lines.” Id. at 572. Therefore, the pollution exclusion did not
apply because the underlying complaint “allege[d] damages to which the pollution
exclusion does not apply.” In contrast, the damages in this case are directly related
to the contamination of the property and the resulting environmental remediation.
The district court incorrectly concluded that “it would be unconscionable at
best” to interpret the pollution exclusion as covering Priority’s claim against
Ground Down “in light of uncontested facts that [Ground Down] in no way caused
the pollution.” (emphasis in original). We disagree. Various courts have read
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pollution exclusions to exclude coverage for claims against insureds who were not
themselves the polluters. See Northern Ins. Co. of New York v. Aardvark
Associates, Inc., 942 F.2d 189, 194 (3d Cir. 1991); see also United States Fidelity
& Guaranty Co. v. Korman Corp., 693 F. Supp. 253, 258 (E.D. Pa. 1988) (holding
that the policy excluded coverage for the developer’s failure to disclose the
proximity of a former landfill to his housing development). Furthermore, we are
bound by the plain language of the policy which states that the pollution exclusion
applies regardless of whether the “cause for the injury or damage is the Insured’s
negligent hiring, [etc.] . . . or wrongful act.” This language implies the exclusion
applies regardless of whether the pollution results from conduct by the insured.
In discussing unconscionability, the district court stated that the “Policy
would fail of its essential purpose altogether” if it was interpreted as excluding
coverage here. A full review of the policy shows this to be incorrect as numerous
professional services would still be covered. The policy covers Ground Down in
its “capacity as an architect, engineer, landscape architect, land surveyor or
planner.” These capacities encompass more than environmental assessments. See
Technical Coating, 157 F.3d at 846 (holding that a pollution exclusion does not
nullify a general liability policy where the policy continues to provide coverage for
“a wide variety of accidents and mishaps”).
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Does the Construction Debris Fall within the Policy Exclusion?
Appellees also argue that the construction debris is not a covered “pollutant”
and, therefore, is not covered by the exclusion. The exclusion defines a pollutant
as an “irritant or contaminant” and Appellees argue that the debris is neither. This
is important because under Florida law, if a complaint alleges multiple grounds for
liability and at least one claim is within the insurance coverage, even if other
claims are not, the insurer is obligated to defend the entire suit. Nova Casualty,
424 F.Supp.2d at 1332-33 (citing Baron Oil Co. v. Nationwide Mutual Fire Ins.,
470 So.2d 810, 813-14 (Fla. Dist. Ct. App. 1985)). We are, as stated above, bound
by the plain language of the policy. See Admiral Ins. Co. v. Feit Management Co.,
321 F.3d 1326, 1328-29 (11th Cir. 2003).
Appellees argument fails for two reasons. First, Priority’s complaint states
that the damages associated with the construction debris come from the elevated
levels of methane gas caused by the debris and lists the debris under the heading
“environmental contamination.” Second, the pollution exclusion is not actually
limited to irritants or contaminants. The definition for pollutants states that
“irritants or contaminants” covers “waste” which includes “all . . . materials to be
disposed of, recycled, stored, reconditioned, or reclaimed.” Only a strained
reading of this language would exclude construction debris causing elevated levels
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of methane gas from this definition. Finally, the first sentence of the exclusion
states that “Pollution / environmental impairment / contamination is not covered
under this policy.” The construction debris described in Priority’s complaint, even
without the methane gas, would be considered an environmental impairment.
CONCLUSION
Because we find that the pollution exclusion clearly covers the claims
asserted by Priority against Ground Down and Laurel Hall, we VACATE the
district court’s dismissal of James River’s complaint and REMAND with
instructions for the court to enter an order granting summary judgment for James
River.
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