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Gulf Metals Industries Inc. v. Chicago Insurance Co.5/13/1999
Appellants Gulf Metals Industries, Inc., Gulf Reduction Corporation, and Gulf Reduction Corporation as a successor to Southern Zinc Company appeal the district court's grant of summary judgment in favor of appellees, all of whom at one time or another issued policies of insurance to Gulf Metals. Gulf Metals claims that the district court erred in ruling that, as a matter of law, the qualified polluter's exclusion clause contained in the policies of insurance issued by CIC to Gulf Metals is unambiguous and thus precludes coverage for environmental cleanup costs resulting from Gulf Metals' sale of zinc materials. We will affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The background facts are essentially undisputed. Gulf Metals, a Houston-based corporation, has been in the business of buying, selling, recycling, and processing scrap metals since 1951. From approximately 1977 until 1988, Southern Zinc sold zinc materials and by-products to Gulf Metals Industries. During this same period, both Southern Zinc and Gulf Metals Industries sold zinc materials and by-products to the Stoller Chemical Company, located in South Carolina, where Stoller manufactured and sold agricultural fertilizer supplements. In 1995, Gulf Reduction Corporation merged with Southern Zinc and absorbed Southern Zinc's assets and liabilities.
It does not appear from the record that Gulf Metals Industries, Gulf Reduction Corporation, or Southern Zinc knew, or had any reason to know, that Stoller's fertilizer-manufacturing operations would have serious adverse effects on the environment. Throughout the time of the sales, fertilizer-manufacturing operations involving zinc were not thought to have serious environmental ramifications to neighboring property and groundwater. However, the soil and groundwater at the Stoller Site were later found to be contaminated. In 1994, the United States Environmental Protection Agency (the "EPA") issued an administrative order requiring Gulf Metals to participate in the cleanup of the Stoller Site and reimburse the EPA for existing cleanup costs. South Carolina's state environmental agency issued a similar order to Gulf Metals in 1997.
Since 1958, Gulf Metals has purchased comprehensive general liability insurance policies from numerous insurance companies including appellees. These policies provide, in relevant part, that the insurer will pay "all sums which the insured shall become legally liable to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence . . . ." The policies define "occurrence" as: "an accident, including injurious exposure to conditions, which results in bodily injury or property damage during the policy period neither expected nor intended from the standpoint of the insured." In 1970, the liability insurance policies added the qualified polluter's exclusion, which provides:
"This insurance does not apply to bodily injury or property damage arising out of the discharge, dispersal, release, or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental." (Emphasis added). Thus, this added provision provides that damage caused by contaminants or pollutants is excluded from policy coverage unless their introduction is "sudden and accidental." In such event, the damage comes within policy coverage as an exception to the exclusion.
All of the liability insurance policies sold to Gulf Metals after it starte
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