PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________________
No. 96-8362
________________________________
D.C. Docket No. CV193-033-DHB
BOARDMAN PETROLEUM, INC. d.b.a
Red & Jack Oil Company,
Plaintiff,
Counter-Defendant,
Appellee,
versus
FEDERATED MUTUAL INSURANCE
COMPANY,
Defendant,
Counter-Claimant,
Appellant.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Georgia
_________________________________________________________________
(July 29, 1997)
Before HATCHETT, Chief Judge, ANDERSON, Circuit Judge, and LAY*,
Senior Circuit Judge.
PER CURIAM:
____________________________
*
Honorable Donald P. Lay, Senior U.S. Circuit Judge for the
Eighth Circuit, sitting by designation.
PER CURIAM:
CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR
THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF GEORGIA PURSUANT TO
ARTICLE VI, SECTION VI, PARAGRAPH IV OF THE GEORGIA CONSTITUTION.
TO THE SUPREME COURT OF GEORGIA AND ITS HONORABLE JUSTICES:
It appears to the United States Court of Appeals for the
Eleventh Circuit that this case involves questions of Georgia law
that will determine the outcome of the case for the parties. It
also appears to this court and the parties that no controlling
precedent of the Supreme Court of Georgia or any other Georgia
court answers these questions, and that the answers are
intertwined with important matters of Georgia public policy. We
therefore certify the following questions to Georgia’s highest
court for resolution. See O.C.G.A. § 15-2-9 (1990); Ga. Sup. Ct.
R. 37.1
FACTS
This case arises out of a dispute over whether an insurer is
contractually liable for clean-up costs and defense expenses
incurred as a result of underground petroleum contamination at an
Augusta, Georgia gas station.
From 1955 to 1986, the appellee, Boardman Petroleum, Inc.
(Boardman), leased and operated a gas station (the Smile Station)
in the Daniel Village Shopping Center located in Augusta,
1
Customarily, we request the parties to submit a proposed
statement of facts and certificate of issues for decision before
certifying a case. In view of the substantial agreement between
the parties as to the issues to be decided in this case, we depart
from the usual practice and certify based on the materials
currently before us.
2
Georgia. During the years the station operated, Boardman used
underground storage tank systems to store and dispense petroleum
products. When Boardman closed the Smile Station in 1986, it had
the underground storage tanks removed from the site. At that
time it does not appear that the tanks were leaking or had
compromised integrity. In 1988, however, an environmental
consultant discovered petroleum contamination at the Smile
Station site during an assessment on behalf of a potential site
buyer. The discovery of contamination eventually led to a
lawsuit (the PGC Associates lawsuit) against Boardman in late
1990. The PGC Associates lawsuit alleged, among other things,
that one of the Smile Station tanks leaked petroleum products and
other hazardous chemicals that contaminated the site, groundwater
and possible surrounding third-party owned property.
In February 1991, Boardman presented the PGC Associates
lawsuit to its insurer, Federated Mutual Insurance Company
(Federated), the appellant in this case.2 In April 1991,
Federated accepted defense of the PGC Associates lawsuit under a
reservation of rights. Federated then filed a declaratory
judgment action in the United States District Court for the
Southern District of Georgia to determine if coverage existed for
the claim arising from the PGC Associates lawsuit. Federated
ultimately dismissed its declaratory judgment action without
2
Boardman also notified another insurer, but that insurer’s
liability is not at issue in this case.
3
prejudice in December 1992, following the dismissal without
prejudice of the PGC Associates lawsuit.
During the pendency of the PGC Associates lawsuit, Boardman
and its insurers performed extensive environmental testing at the
Smile Station site. This testing indicated that significant
groundwater contamination existed in and around the tank bed that
formerly housed Boardman’s underground storage tanks. In
accordance with Georgia law, in October 1992, Boardman notified
the Georgia Department of Natural Resources (DNR) about the
results of the testing. In response, DNR wrote Boardman on
February 3, 1993, and ordered Boardman to begin corrective action
measures to remove the petroleum contamination from the Smile
Station site, and to submit additional information regarding the
potential impact on surrounding properties. Boardman promptly
notified Federated and sought defense and indemnification, but
Federated refused to agree. Federated then added the insurance
coverage dispute surrounding the Smile Station to a declaratory
judgment action pending between the parties regarding another gas
station site. Boardman and Federated ultimately settled the
pending claims regarding the other site, leaving for litigation
only issues relating to the extent of Boardman’s coverage under
general liability and umbrella insurance policies for the Smile
Station site.
Federated issued the general liability policies in dispute
between 1977 and 1985, to cover the Smile Station in cases
involving property damage to third parties. In addition to the
4
third-party policies, Federated issued first-party policies to
Boardman as part of a special “Petro-Pac Special Multi-Peril”
coverage option. Federated also issued umbrella policies to
Boardman, providing excess third-party coverage above the Petro-
Pac third-party policy limits. The Petro-Pac third-party
policies contained the following coverage provisions:
The Company will pay on behalf of the insured all sums
which the insured shall become legally obligated to pay
as damages because of:
A. bodily injury or
B. property damage
to which this insurance applies, caused by an
occurrence . . . .
. . . .
'Occurrence' means an accident, including continuous or
repeated exposure to conditions, which results in
bodily injury or property damage neither expected nor
intended from the standpoint of the insured.
. . . .
'Property Damage' means (1) physical injury to or
destruction of tangible property which occurs during
the policy period, including the loss or use thereof at
any time resulting therefrom, or (2) loss of use of
tangible property which has not been physically injured
or destroyed provided such loss of use is caused by an
occurrence during the policy period.
Boardman interprets these provisions to mean that coverage
is triggered when property damage occurs within the policy period
even if the property damage is not discovered within the policy
period. Federated interprets these provisions to mean that
coverage is triggered only when property damage occurs and is
discovered within the policy period. Boardman calls its
5
interpretation an “exposure” trigger of coverage rule. Federated
calls its interpretation a “manifestation” trigger of coverage
rule. Both parties agree that the interpretation issue is
subject to Georgia law canons of contract interpretation.
The third-party policies also contain provisions indicating
that insurance coverage does not apply “to property damage to . .
. (1) property owned or occupied by or rented to the insured[.]”
As discussed below, the parties differ markedly on the relevance
of the so-called “owned or rented” coverage exclusion provision
in this case: Boardman contends the coverage exclusion provision
does not apply, Federated contends it does. Again, both parties
agree that the interpretation of the coverage exclusion provision
turns on Georgia law.
In any event, Boardman eventually arranged to remove 300
gallons of free product gasoline and 440 gallons of gasoline
contaminated water from the subsurface groundwater at the Smile
Station site. Based upon the fact that the contamination was
removed and no longer appeared to threaten migration onto other
property, DNR issued a “no further action” letter on February 17,
1996. DNR’s letter stated in part:
Based on the current requirements of the Georgia
Underground Storage Tank Act and the Georgia Rules for
Underground Storage Tank Management (GUST Rules) and on
the final Certification of Completion, the Georgia
Environmental Protection Division (EPD) has determined
that no further corrective action is required for free
product removal and that no additional groundwater
monitoring is necessary for the subject site, at this
time.
However, this site could be subject to further
corrective action in the future if mandated through
6
more stringent state or federal statutory or regulatory
changes, or if drinking water systems are identified or
installed within three miles of the site, or if surface
water bodies are impacted by the dissolved contaminant
plume, or if additional soil contamination and/or free
product on groundwater are identified as originating
from this site.
On cross-motions for summary judgment, the United States
District Court for the Southern District of Georgia adopted
Boardman’s view on both the trigger of coverage issue and the
“owned or rented” coverage exclusion issue. See Boardman
Petroleum, Inc. v. Federated Mutual Insurance Co., 926 F. Supp.
1566 (S.D. Ga. 1995). The district court noted that the trigger
of coverage issue presents “an important matter of a state’s
public policy” and noted that the Supreme Court of Georgia could
not accept certification from a district court. 926 F. Supp. at
1577 n.2. The district court then proceeded to apply Georgia
principles of contract construction and found that an “exposure”
trigger applied, i.e., that coverage is triggered when property
damage occurs within the policy period even if not discovered
within the policy period. 926 F. Supp. at 1578.
Turning to the “owned or rented” coverage exclusion issue,
the district court concluded that the coverage exclusion
provision did not apply, based on reasoning it applied in
Claussen v. Aetna Cas. & Sur. Co., 754 F. Supp. 1576 (S.D. Ga.
1990), a case interpreting a similar coverage exclusion provision
under Florida law. Following the entry of the district court’s
final order, Federated filed this timely appeal.
CONTENTIONS
7
Federated contends that the only trigger of coverage rule
that comports with a common sense understanding of the policies
at issue here and gives effect to all policy terms is a
“manifestation” trigger of coverage rule. Federated maintains
that an “exposure” trigger of coverage rule provides no workable
principle for determining when liability under a policy arises.
More particularly, Federated contends that the “exposure” trigger
of coverage rule will lead to a factual and scientific morass as
parties litigate to determine when exposure actually happened.
Federated argues that the alternative, “manifestation” trigger of
coverage rule is workable because it imposes occurrence-based
liability only at the time the complaining party suffers tangible
damage due to discovery of contamination. In addition, Federated
contends that the only Georgia case on point -- a trial court
decision -- chose the “manifestation” trigger of coverage rule,
and urges the court to follow the Fourth Circuit’s decision in
Mraz v. Canadian Universal Ins. Co. Ltd., 804 F.2d 1325 (4th Cir.
1986), in applying a “manifestation” trigger of coverage rule to
the type of policy involved in this case.
With respect to the “owned or rented” coverage exclusion
issue, Federated contends the third-party coverage at issue here
contains a clear exclusion for damage to property which Boardman
owned or rented, and Boardman purchased first-party coverage in
recognition of this exclusion. Federated argues that the
contamination in this case was limited to the soil and
groundwater under the Smile Station -- both Boardman’s property
8
under Georgia law -- and that no contamination ever left the
Smile Station and affected neighboring third-party property, or
posed a genuine threat to third-party property. As a result,
Federated contends, the coverage exclusion provision applied in
this case based on the factors set forth in the Claussen
decision. In addition, Federated questions whether the Claussen
factors should be relied upon at all to determine the
applicability of an “owned or rented” coverage exclusion
provision.
Boardman contends the district court properly adopted the
“exposure” trigger of coverage rule, as the policies at issue
only require that damage “occur” during the policy period.
Boardman argues that the district court’s ruling comports with
the plain meaning of the policy terms and that the restrictive
trigger of coverage position Federated urges turns an occurrence-
based policy into a claims made or discovery-based policy.
Boardman also contends that the district court ruled correctly
even if the policy terms are “vague,” as Georgia law requires
that ambiguity be interpreted in favor of the insured. In
addition, Boardman contends the district court’s decision is in
accordance with Eleventh Circuit decisions applying the law of
Georgia, Florida and Alabama, all of which have rejected the
“manifestation” trigger of coverage rule for comprehensive
general liabilities policies. Boardman argues that the
“manifestation” trigger of coverage rule is based on a “withering
theory” that the overwhelming majority of courts have rejected.
9
Finally, Boardman also maintains that Federated’s reliance on a
one paragraph conclusory order from a Georgia trial court, is
misplaced, as the “manifestation” trigger of coverage rule
adopted in that case did not preclude coverage to the insured.
With respect to the “owned or rented” coverage exclusion,
Boardman contends the district court’s ruling is correct because
Boardman is not seeking to collect for damage to its own
property, but is seeking indemnification for the cost of the DNR
ordered clean-up to prevent the spread of contamination.
Boardman points to cases from the Sixth and Seventh Circuits
holding that “owned or rented” coverage exclusion provisions do
not apply in such contexts. See Anderson Development Co. v.
Traveler’s Indemnity Co., 49 F.3d 1128 (6th Cir. 1995); Patz v.
St. Paul Fire & Marine Ins. Co., 15 F.3d 699 (7th Cir. 1994).
Boardman also notes that under Georgia law, Federated, not
Boardman, has the burden of showing that the factual situation at
issue here falls within the exclusion. See Welch v. Prof’l Ins.
Corp., 231 S.E.2d 103 (Ga. 1976). Boardman further notes that
exclusions are to be strictly construed against the insurer.
Boardman also argues that Federated failed to meet its
burden here for several reasons in addition to the one cited
above. First, Boardman contends that Federated distorts the
scope of Boardman’s first-party coverage, using it as both a
sword and a shield: suggesting in its brief that the first party-
coverage regulates the property damage involved here, but
maintaining in correspondence to Boardman that the coverage does
10
not extend to the type of damage involved here. Second, Boardman
contends that Federated presented no evidence to support its
contention that the petroleum contamination at issue here did not
threaten damage to third-party property.
Finally, Boardman implicitly argues that Claussen delineates
the appropriate factors to consider when evaluating an “owned or
rented” coverage exclusion.
QUESTIONS TO BE CERTIFIED
We certify the following questions:
1. WHAT IS THE APPROPRIATE TRIGGER OF COVERAGE
UNDER GENERAL LIABILITY POLICIES SUCH AS THE
ONES AT ISSUE IN THIS CASE?
2. DOES AN “OWNED OR RENTED” COVERAGE EXCLUSION
IN GENERAL LIABILITY POLICIES SUCH AS THE
ONES AT ISSUE BAR COVERAGE OF ALL OR A
PORTION OF AN INSURED’S CLAIMS FOR
INDEMNIFICATION FOR THE COST OF A STATE
ORDERED CONTAMINATION CLEAN-UP WHEN THAT
CLEAN-UP INVOLVES SOIL AND GROUNDWATER
CONTAMINATION WHICH HAS NOT YET DAMAGED
SURROUNDING SOIL AND/OR GROUNDWATER?
Our statement of the questions is intended as a guide and is
not meant to restrict the inquiry of the Supreme Court of
Georgia.
The particular phrasing used in the certified question
is not to restrict the Supreme Court’s consideration of
the problems involved and the issues as the Supreme
Court perceives them to be in its analysis of the
record certified in this case. This latitude extends
to the Supreme Court’s restatement of the issue or
issues and the manner in which the answers are to be
given, whether as a comprehensive whole or in
subordinate or even contingent parts.
Martinez v. Rodriguez, 394 F.2d 156, 159 n.6 (5th Cir. 1968).
The clerk of this court shall transmit this certificate, as well
11
as the briefs and record filed with the court, to the Supreme
Court of Georgia. In addition, the clerk shall transmit copies
of the certificate to the attorneys for the parties.
QUESTIONS CERTIFIED.
12