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B & L Trucking & Construction Co. v. Northern Insurance Co.

filed: May 17, 1996.


Superior Court of Pierce County. Superior Court Docket No. 90-2-01715-5. Date Filed in Superior Court: February 19, 1993. Superior Court Judge Signing: J. Arnold.

Written By: Bridgewater, J., Concurred IN By: Houghton, A.c.j., Dissenting: Wiggins, J.p.t.

Author: Bridgewater

BRIDGEWATER J. -- Northern Insurance Company of New York appeals from a judgment requiring it to provide coverage under its policies with William Fjetland for the damage done by pollution from dumpings by Fjetland-owned entities into a landfill where a combination of slag and woodwaste had unexpectedly produced arsenic as a contaminate. We hold that the policy provisions of "occurrence" and the "pollution exclusion" have been met; and that because of ambiguity in policy language there should be no apportionment of damages even though Fjetland was insured only during a portion of the polluting period.

In 1974, Fjetland began hauling slag from ASARCO, a copper smelter in greater Tacoma, to log yard operators in the Tideflats where it was used as fill. Though this rock/metal by-product of smelting operations was once thought to be inert (i.e. non-contaminating), experts belatedly determined that it leaches when in comes in contact with water. As slag contains the metallic by-products of the smelting operation (including arsenic and lead), slag leachate can contain high levels of these, and other, contaminants.

After 1974, Fjetland, through two of his corporations (B & L Trucking & Construction Co., Inc. and Eagle Trucking Inc.), began hauling woodwaste/slag to various landfills. Woodwaste is not normally harmful. It is simply the naturally occurring by-product of decaying wood which, unless it is found in high concentrations, can be beneficial by supplying needed nutrients to micro-organisms."

In 1978, Fjetland purchased property which, after the Tacoma-Pierce County Health Department approved a permit, he used as a landfill, "hauling . . . bark, dirt, rocks and whatever slag" needed to be removed from the log yards. Though the landfill was operated by Eagle Trucking, as there were no buildings at the landfill, its operations were conducted from B & L's nearby business office on Marine View Drive.

In January 1981, the federal government classified the landfill as a wetland area. As a result, the Health Department issued a cease-and-desist order to Fjetland. However, through 1982, it allowed him to continue to bring material into the landfill for the limited purpose of "contouring" the land. Soon thereafter, with the Health Department's approval, Fjetland began a woodwaste recycling operation at the landfill. All operations in the landfill stopped in July 1984 when Pierce County found it was being operated in violation of the zoning regulations.

Over the years, Fjetland purchased general liability insurance policies from a variety of insurers, including American National Fire Insurance (American National) and Northern Insurance Company of New York (Northern). At issue here is an annual policy issued August 15, 1978 (Policy 78-79), annual policies issued from August 11, 1980, to August 10, 1983 (Policy 80-83), and an annual policy issued August 11, 1983 (Policy 83-84). Under these policies (with relevant differences discussed below), Northern agreed to insure Fjetland and his corporations for damages "caused by an occurrence and arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the named insured conducted at or from the insured premises." An "occurrence" was defined as: "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. (Emphasis added.) Furthermore, these policies contained a "pollution clause" which excluded coverage for "discharge, dispersal, release or escape" of "waste materials or other irritants, contaminants or pollutants into or upon land," unless "such discharge, dispersal, release or escape is sudden and accidental."

In 1980, high levels of arsenic and other contaminants were discovered around the Commencement Bay area. By the mid-1980s, testing established Fjetland's landfill was contaminated by arsenic. In February 1989, Fjetland and his corporations were named as third-party defendants in a federal CERCLA action.*fn1 In March, 1991, the federal court held as to Fjetland's landfill: (1) slag, rather than woodwaste, caused the contamination; (2) B & L was not responsible for any of the clean-up costs; (3) ASARCO was wholly liable for clean-up costs prior to 1981; and (4) Fjetland and Eagle Trucking were both 7% liable for the post-1981 clean-up costs.

In February, 1990, American National filed this declaratory judgment action against Fjetland and his corporations. American National asserted Fjetland "expected" contamination at his landfill and the "pollution" of his landfill was not "sudden" or accidental," and thus it was not required to provide coverage for damages relating to the landfill contamination. In the same action, American National sought contribution/indemnity from Northern.

Northern brought a cross-claim for declaratory judgment against Fjetland based upon the similar language of its own policies. Fjetland brought cross-claims against all of his insurers seeking a declaration of coverage for any damages relating to the landfill contamination. Fjetland also requested reasonable attorney's fees.

Prior to trial, Northern moved for summary judgment on a number of issues. Northern sought a ruling it was not obligated to provide coverage for the landfill as that property was not listed as part of Fjetland's "insured premises." Noting Policy 78-79 and Policy 80-83 included language covering "business . . . conducted at or from the insured premises," but that Policy 83-84 did not, the trial court denied the motion as to Policy 78-79 and 80-83, but granted it as to Policy 83-84.

Northern also sought a ruling that Fjetland was not entitled to coverage because under the "pollution clause" had "intentionally" discharged "log yard waste" at the landfill. Finding that the policy was ambiguous and there was a question of fact as to whether Fjetland had knowledge that he was discharging "waste materials," the trial court denied the motion.

Northern also sought a ruling that "remediation [costs] shall be allocated pro rata between [Fjetland] and its insurers based on the insured and uninsured periods of property damage at the landfill." Fjetland responded with his own motion on this issue, arguing all of his insurers were jointly and severally liable regardless of the period of their coverages. The trial court agreed with Northern there should be such an allocation, but left the length of the allocation period undecided.

Fjetland died on June 8, 1991. In the federal CERCLA action, in which Northern was not a participant, he had been deposed. In this case, he had also been deposed and one of the insurers asked him "do you adopt the testimony that you gave in the [CERCLA] proceeding." Fjetland stated he did and the CERCLA deposition was made an exhibit to the deposition. Northern moved to exclude the introduction of statements from the CERCLA deposition. The trial court denied the motion, holding the CERCLA deposition had been "incorporated" and Northern had "waived" any objection.

Fjetland moved in limine to prevent admission of evidence of the existence of the "pollution clause." Finding that the factual issues under the "pollution clause" were similar to the factual issues under the "occurrence" clause, the trial court granted the motion.

At trial, the issue was what Fjetland knew and when he knew it. Testimony was given by officials from the Washington State Department of Ecology (WDOE) and the Tacoma-Pierce County Health Department. There was testimony of an occasional woodwaste "leachate breakout" from the landfill, but none of these breakouts caused any environmental damage.

By deposition testimony, Fjetland denied ever knowing about the contamination problems of slag and stated he only learned of the contamination problems at his landfill around 1982, after testing had occurred. Louis Miller, Jr., manager of a log yard, testified Fjetland never expressed any concern about contamination from slag in that time period.

The evidence adduced at trial demonstrated that, although the arsenic began to leach as soon as the slag was dumped into the landfill, the contamination was not related to the woodwaste. Furthermore, the evidence demonstrated that had only woodwaste been placed in the landfill, there would not have been any arsenic contamination or resulting necessity for a clean-up.

The jury found Fjetland had expected property damage in "June 1982." On February 19, 1993, after Fjetland's attorney presented an affidavit detailing $181,445.70 in attorney's fees and costs, the trial court entered partial declaratory judgment and final judgment pursuant to CR 54(b) in favor of Fjetland and awarded him $133,911.99 in attorney's fees.

On February 26, 1993, the trial court held a hearing to determine the apportionment period. After hearing argument, the court picked April 29, 1987, as the final date of that period. The trial court noted that was the date the WDOE issued an order requiring clean-up of the landfill. In its order, the trial court found:

remediation costs will be apportioned equally on a pro-rata/per year basis between all insured and uninsured periods between January 1, 1981 and April 29, 1987 Uninsured periods include those years following the month and year in which the jury determined the insureds expected property damage at the landfill.

As Northern had been found liable on two of its policies with Fjetland (i.e. the policies with effective dates of August 11, 1980 to August 10, 1981, and August 11, 1981 to August 10, 1982), Northern was found liable for two-sevenths of the eventual clean-up costs.

Both Northern and Fjetland appeal from various rulings of the trial court. At the outset, we note a few of the basic rules of insurance contract interpretation which guide our analysis. The interpretation of insurance policies is a question of law and the policy language is to be interpreted as an average insurance purchaser would understand it giving undefined terms their "plain, ordinary, and popular" meaning.*fn2 If the language is clear and unambiguous, the court must enforce it as written and may not modify it or create ambiguity where none exists.*fn3 However, if a policy provision is ambiguous (i.e. fairly susceptible to two different but reasonable interpretations), and the court cannot resolve the ambiguity by resort to extrinsic evidence, the interpretation most favorable to the insured applies.*fn4 This rule applies with "added force to exclusionary clauses which seek to limit policy coverage."*fn5

We also note a recent decision of the Washington Supreme Court which guides our analysis. In Queen City Farms, the court was faced with conflicting interpretations of the "occurrence" and "pollution" clauses of insurance polices similar to those involved herein. There, the "occurrence" clause covered incidents which "unexpectedly and unintentionally" resulted in damage.*fn6 There, the "pollution clause" excluded coverage unless "discharge, dispersal, release or escape is sudden and accidental."*fn7

The court determined numerous issues relevant here. As to the "occurrence" clause, the court held "the burden of proof [is] on the insured to establish that subjective injury or damage was neither expected nor intended."*fn8 As to the "pollution clause," which the court found to be ambiguous, the court held:

"sudden" means "unexpected" . . . Thus "sudden and accidental" means "unexpected and unintended". Both terms are given meaningful effect. Reading the occurrence clause and the exclusion together, pollution damage resulting from an accident, including continuous or repeated exposure to conditions, which is neither intended nor expected is covered under the occurrence clause. The exclusionary language of the qualified pollution exclusion precludes coverage for damage resulting from the listed polluting events. The polluting event may be the discharge, dispersal, release, or escape of materials from a place of containment into the environment where they cause damage. Coverage is re-triggered, however, under the exception to the exclusion, where the discharge, dispersal, release, or escape is sudden and accidental, i.e., unexpected and unintended. Therefore, if the damage results from the dispersal of material into the groundwater from a place of containment where the insured believed they would remain or from which they would be safely filtered, and that dispersal was unexpected and unintended, then coverage is provided under the policies.*fn9

With this guidance in mind, we turn to the particular issues raised by the parties.


The trial court held that Policy 80-83 insured the landfill, but that Policy 83-84 did not. As to Policy 80-83, there is conflicting policy language. One clause notes Northern agreed to

pay on behalf of the insured all sums which the insured shall become legally obligated to ...

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