UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2059
ROSS DEVELOPMENT CORPORATION,
Plaintiff,
and
FIREMAN’S FUND INSURANCE COMPANY; UNITED STATES FIRE
INSURANCE COMPANY,
Defendants - Appellees,
v.
PCS NITROGEN INCORPORATED,
Defendant and 3rd-Party Plaintiff - Appellant.
No. 12-2454
ROSS DEVELOPMENT CORPORATION,
Plaintiff - Appellant,
v.
FIREMAN’S FUND INSURANCE COMPANY; UNITED STATES FIRE
INSURANCE COMPANY,
Defendants - Appellees,
and
PCS NITROGEN INCORPORATED,
Defendant and 3rd-Party Plaintiff.
Appeals from the United States District Court for the District
of South Carolina, at Charleston. Margaret B. Seymour, Senior
District Judge. (2:08-cv-03672-MBS)
Argued: May 15, 2013 Decided: June 6, 2013
Before WILKINSON, MOTZ, and SHEDD, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Daniel S. McQueeney, Jr., PRATT-THOMAS WALKER, PA,
Charleston, South Carolina; Michael Howard Ginsberg, JONES DAY,
Pittsburgh, Pennsylvania, for Appellants. Michael Anthony
Kotula, RIVKIN RADLER, LLP, Uniondale, New York; Jay Russell
Sever, PHELPS DUNBAR, New Orleans, Louisiana, for Appellees. ON
BRIEF: G. Trenholm Walker, PRATT-THOMAS WALKER, PA, Charleston,
South Carolina, for Ross Development Corporation. Amy K. Pohl,
JONES DAY, Pittsburg, Pennsylvania; Kirby D. Shealy, III, ELLIS,
LAWHORNE & SIMS, P.A., Columbia, South Carolina; Sandra
Kaczmarczyk, ALTON ASSOCIATES PLLC, Washington, D.C., for PCS
Nitrogen, Incorporated. H. Michael Bowers, SMITH MOORE
LEATHERWOOD LLP, Charleston, South Carolina, for Fireman’s Fund
Insurance Company; Steven W. Ouzts, TURNER PADGET GRAHAM &
LANEY, P.A., Columbia, South Carolina, Jonathan B. Womack,
PHELPS DUNBAR LLP, New Orleans, Louisiana, for United States
Fire Insurance Company.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Ross Development Corporation brought this action seeking a
declaratory judgment that its insurers had duties to defend and
indemnify Ross, its shareholders, and former directors in
lawsuits arising out of the cleanup of environmental
contamination from a site formerly owned by Ross. The district
court granted the insurers’ motions for summary judgment,
holding that they had no duty to defend or indemnify. Ross and
its judgment creditor from one of the underlying cases, PCS
Nitrogen, Inc., appeal. We affirm.
I.
This dispute concerns insurers’ asserted duties arising out
of the cleanup of environmental contamination from a site that
Ross had formerly owned. See PCS Nitrogen Inc. v. Ashley II of
Charleston LLC, 714 F.3d 161 (4th Cir. 2013). The following
facts are undisputed.
Beginning in 1906, Planters Fertilizer and Phosphate
Company (now Ross) operated a phosphate fertilizer manufacturing
facility at a forty-three-acre site in Charleston, South
Carolina. Planters manufactured fertilizers by burning pyrite
ore as fuel and reacting sulfuric acid with phosphate rock. The
process generated a pyrite slag byproduct containing high
concentrations of arsenic and lead. Over the years, Planters
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used this slag byproduct on the site as fill material and to
stabilize roads. In 1963, a fire destroyed a large portion of
Planters’ acid plant. After constructing a modernized acid
plant and resuming fertilizer production, Planters sold the site
and its equipment in 1966.
Years after selling the site, Ross bought the insurance
policies at issue in this appeal. Ross purchased primary
insurance coverage from Fireman’s Fund Insurance Company
(“FFIC”) for the period from 1973 through 1992, and excess
coverage from United States Fire Insurance Company (“USFIC”) for
the period from 1979 through 1984. As relevant to this appeal,
each policy provides basic coverage for liability for unexpected
and unintentional damages to third-party property, including
those damages arising out of past activities on Ross’s then-
owned, now-alienated properties, like the Charleston site. The
policies, however, can be divided into two groups based on the
extent to which they exclude from coverage liability arising out
of damages caused by pollution.
The first group of policies -- FFIC’s primary coverage
policies issued for the period from 1973 through 1987 and all of
USFIC’s excess coverage policies -- include a “qualified
pollution exclusion.” This provision excludes from coverage, in
pertinent part, liability “arising out of the discharge . . . of
. . . waste materials or . . . pollutants into the land.” The
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exclusion is “qualified” because it does not apply if the
“discharge . . . is sudden and accidental.”
The second group of policies -- those issued by FFIC for
the period from 1987 through 1990 -- include an “absolute
pollution exclusion.” This provision excludes from coverage
liability for property damage “arising out of the actual,
alleged or threatened discharge, dispersal, release or escape of
pollutants,” including waste, with a defined connection to the
insured. This exclusion does not contain an exception for
“sudden and accidental” discharges, but does except all
liability for third-property damage arising out of an otherwise-
excluded pollutant discharge if that discharge is “caused by
heat, smoke or fumes from a hostile fire.” 1
In the 2000s, Ashley II of Charleston, the current owner of
a large portion of the site, began to remediate environmental
contamination at the site. The district court summarized the
site’s present conditions as follows:
There are four conditions at the Site that the
remediation seeks to correct: arsenic contamination,
lead contamination, low pH, and carcinogenic
polyaromatic hydrocarbon (“cPAH”) contamination.
Arsenic and lead contamination are found across the
entire Site. There are two “hot spots” for cPAHs on
the Site. . . . The source of the cPAH contamination
was a fire that destroyed a major portion of the acid
plant in 1963. The cost of remediation is directly
1
Although FFIC continued insuring Ross beyond 1990, those
policies are not at issue in this appeal.
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related to the volume of contaminated soil on the
Site. The predominant factors contributing to the
costs of the clean-up are the amount of hazardous
materials and the spread of these hazardous materials
throughout the Site. . . . Ross, formerly known as
Planters, is the only known Site owner that burned
pyrite ore and generated pyrite slag. Pyrite slag is
the source of the vast majority of the arsenic and
much of the lead contamination at the Site.
Ross Dev. Corp. v. Fireman’s Fund Ins. Co., No. 2:08-3672-MBS, -
- F. Supp. 2d --, 2012 WL 5897245, at *2 (D.S.C. Nov. 15, 2012)
(internal citations omitted). No party disputes that Planters’
use of pyrite slag provides the source of most of the arsenic
and lead contamination at the site. The parties do debate,
however, how quickly arsenic and lead from the slag leached into
surrounding soils and when this contamination migrated to and
damaged surrounding third-party properties.
In September 2005, Ashley filed an action against PCS (a
successor-in-interest to a former owner of the site) seeking a
declaratory judgment that PCS was jointly and severally liable
for response costs incurred in remediating contamination at the
site under the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601–
9675 (2006). In January 2007, PCS filed third-party
contribution claims against other parties with past and present
connections to the site, including Ross. PCS’s third-party
complaint alleged that Ross was liable under CERCLA for
“environmental impacts . . . associated with [Ross’] phosphate
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fertilizer manufacturing facilities at the Charleston site
includ[ing] elevated levels of metals . . . in soil,
groundwater, and sediment.”
II.
In July 2007, Ross requested a defense of the CERCLA action
from FFIC and USFIC. In November 2007, FFIC agreed to defend
Ross in the CERCLA action, but reserved the right to withdraw
that defense. USFIC did not reply to Ross’s request for
defense.
In June 2008, FFIC notified Ross that it would be
withdrawing its defense under its view that the site was not an
“insured premises” under the policies because Ross did not own
it during any of the policy periods at issue. However, FFIC did
not formally withdraw its defense at that time. On October 13,
2008, Ross informed FFIC by e-mail of new information that “one
of the sources of contaminants [was] the fire in 1963 that
burned down . . . parts of the [acid] plant.” Ross concluded
that “[t]his fire would certainly come within the exception to
the [pollution] exclusion.” FFIC formally withdrew its defense
of Ross in the CERCLA action the next day.
On May 27, 2011, after a bench trial, the district court
found Ross liable to PCS for forty-five percent of the
environmental response costs at the site, see Ashley II of
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Charleston, LLC v. PCS Nitrogen, Inc., 791 F. Supp. 2d 431
(D.S.C. 2011), and we affirmed, see PCS Nitrogen Inc., 714 F.3d
161.
In the meantime, PCS had brought two additional actions to
recover money it believed Ross would owe from the underlying
CERCLA case. First, in September 2008, PCS filed a shareholder
action in state court seeking contribution from thirty-two
former Ross shareholders who received distribution of assets
during Ross’s winding up of its affairs between 1997 and 2006.
Second, in December 2009, PCS filed a fraudulent conveyance
action in federal court against six individuals that acted as
Ross’s directors between 1992 and 2006. Ross sought FFIC’s and
USFIC’s defense of its former shareholders and directors, but
the insurers denied this request.
Before the district court in this case was Ross’s twice-
amended action seeking a declaration that the FFIC and USFIC
insurance policies provided coverage for liabilities from the
underlying CERCLA action, as well as the related shareholder and
fraudulent conveyance suits. Ross also sought a declaration
that FFIC and USFIC had breached their duties to defend Ross,
its shareholders, and its directors in the three underlying
suits. In August 2011, after becoming Ross’s judgment creditor
in the underlying CERCLA action, PCS filed cross-claims against
FFIC and USFIC, also seeking to establish coverage under the
8
policies for liabilities arising out of the three underlying
actions.
The district court granted summary judgment to the
insurers, holding that the absolute and qualified pollution
exclusion provisions excluded any coverage for liability arising
out of the underlying CERCLA action and, by relation, the
shareholder and fraudulent conveyance suits. The court further
held that the complaints in the underlying actions did not
trigger the insurers’ duties to defend Ross. Ross, and PCS as
its judgment creditor, (“Appellants”) timely appeal.
III.
We review a grant of summary judgment de novo. Henry v.
Purnell, 652 F.3d 524, 531 (4th Cir. 2011) (en banc). “Summary
judgment is appropriate only if taking the evidence and all
reasonable inferences drawn therefrom in the light most
favorable to the nonmoving party, no material facts are disputed
and the moving party is entitled to judgment as a matter of
law.” Id. (internal quotation marks omitted).
Under South Carolina law, “[c]ourts interpret insurance
policy language in accordance with its plain, ordinary, and
popular meaning, except with technical language or where the
context requires another meaning.” M & M Corp. of S.C. v. Auto-
Owners Ins. Co., 701 S.E.2d 33, 35 (S.C. 2010). “Policies are
9
construed in favor of coverage, and exclusions in an insurance
policy are construed against the insurer.” Id. However, an
insured party bears the burden of proving an exception to an
exclusion. Helena Chem. Co. v. Allianz Underwriters Ins. Co.,
594 S.E.2d 455, 460 n.5 (S.C. 2004).
An insurer owes its insured two inter-related duties -- the
duty to indemnify (i.e., provide coverage) and the duty to
defend. While an insurer’s duty to indemnify its insured is
determined by applying the facts of an underlying judgment to
the policy language, an insurer’s duty to defend generally is
determined by the underlying complaint. City of Hartsville v.
S.C. Mun. Ins. & Risk Fin. Fund, 677 S.E.2d 574, 578 (S.C.
2009). Thus, “[i]f the underlying complaint creates a
possibility of coverage under an insurance policy, the insurer
is obligated to defend.” Id.
After carefully considering the record, the briefs, and the
applicable law, and having the benefit of oral argument from the
parties, we affirm the judgment in favor of the insurers for the
reasons well-stated by the district court. Given the clear and
detailed analysis of the district court, we need only address
certain principles that Appellants appear to misunderstand.
First, it is clear that the underlying CERCLA action (and,
by relation, the shareholder and fraudulent conveyance actions)
initially triggered the policies at issue by imposing liability
10
on Ross for environmental damages to third-party property,
namely groundwater and tidal marshlands around its former site.
See Helena Chem. Co., 594 S.E.2d at 457 (holding “environmental
cleanup costs” constitute “property damages”). However, it is
equally clear that the qualified or absolute pollution
exclusions in each policy exclude this liability from coverage.
This is so because Ross’s liability for third-party property
damages in the CERCLA action “arises out of” its “discharge” --
use as fill material -- of “waste” or a “waste material” -- the
pyrite slag byproduct -- on the site. Thus, the only question
as to the insurers’ duties to indemnify is whether any exception
to the pollution exclusions apply.
Appellants first argue that 1972-87 policies provide
coverage notwithstanding the qualified pollution exclusion
because the pollution damages to third-party property were both
“sudden” -- meaning unexpected -- and “accidental.” See
Greenville Cnty. v. Ins. Reserve Fund, 443 S.E.2d 552, 553 (S.C.
1994) (interpreting “sudden” within the “sudden and accidental”
exception to mean “unexpected”). This argument rests on a
fundamentally flawed reading of the “sudden and accidental”
exception. The exception’s plain language requires that the
discharge, not the pollution damages, be “sudden and
accidental.” See, e.g., JA 159 (“[T]his exclusion does not
11
apply if such discharge . . . is sudden and accidental.”
(emphasis added)).
The contrary interpretation offered by Appellants would
render the qualified pollution exclusion clause completely
superfluous. See Liberty Mut. Ins. Co. v. Triangle Indus.,
Inc., 957 F.2d 1153, 1157 (4th Cir. 1992). This is so because
the policies at issue provide coverage only for “an accident
. . . which results in . . . property damage neither expected
nor intended from the viewpoint of the insured.” Appellants’
interpretation of the qualified pollution exclusion as excluding
“from th[is] basic coverage all releases of pollution except
those which cause [unexpected and] unintended damages simply
restates th[is] basic coverage and writes the pollution
exclusion completely out of the contract.” Id. Accordingly,
because no party disputes the fact that Ross intentionally used
pyrite slag as fill material (i.e., discharged waste) on the
site, the “sudden and accidental” exception to the qualified
pollution exclusion does not apply. Accord id. at 1158.
Appellants’ argument that damages caused by the 1963 acid
plant fire are excepted from the policies’ pollution exclusions
similarly fails. Appellants are correct that if the 1963 fire
resulted in third-party property damages during the policy
periods at issue here, Ross’s resulting liability would be
covered both under those policies with qualified pollution
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exclusions (because the fire was “unexpected” and “accidental)
and under those policies with absolute pollution exclusions
(because the fire was “hostile”). However, Appellants failed to
proffer any evidence that the exceptions actually apply here.
See Helena Chem. Co., 594 S.E.2d at 460 n.5. In particular,
they failed to point to any evidence that the 1963 acid plant
fire actually caused any third-party property damage, much less
damage during the policy periods at issue in this case.
Accordingly, the district court did not err in holding that no
policy before it affords coverage for Ross’s underlying CERCLA
liability, or the potential liabilities of Ross’s former
shareholders and directors in the two related actions.
For similar reasons, the district court did not err in
holding that the insurers did not have a duty to defend Ross,
its shareholders, or its directors in the underlying actions.
The complaints in the underlying CERCLA action clearly alleged
third-party property damages arising out of the discharge of
pollutants or waste materials, triggering each policy’s
respective qualified or absolute pollution exclusion. Further,
the complaints raised no possibility that the discharge was
“sudden and accidental,” or, indeed, anything other than
intentional or part of Ross’s ordinary course of business. As
South Carolina courts have made clear, “an insurer has no duty
to defend an insured where the damage was caused for a reason
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unambiguously excluded under the policy.” USAA Prop. & Cas.
Ins. Co. v. Clegg, 661 S.E.2d 791, 797 (S.C. 2008). 2 Thus, the
district court did not err in holding that neither insurer had a
duty to defend Ross in the underlying CERCLA action, or Ross’s
former shareholders and directors in the two related cases.
IV.
For these reasons, and for the reasons stated more fully by
the district court, the judgment of the district court is
AFFIRMED.
2
Nor did Ross’s notice to FFIC that that 1963 acid plant
fire was a source of contamination at the site trigger its duty
to defend. The notice provided no factual indication that the
fire caused any third-party property damages during the relevant
policy periods.
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