The opinion
FILED
A. J. HALL, INC., ) Jan. 24, 1996
)
Plaintiff/Appellant, ) Cecil Crowson, Jr.
Appellate Court Clerk
) Wilson Chancery
) No. 8981
VS. )
) Appeal No.
) 01-A-01-9508-CH-00369
FEDERATED MUTUAL INSURANCE )
COMPANY, )
)
Defendant/Appellee. )
IN THE COURT OF APPEALS OF TENNESSEE
MIDDLE SECTION AT NASHVILLE
APPEAL FROM THE CHANCERY COURT OF WILSON COUNTY
AT LEBANON, TENNESSEE
HONORABLE C. K. SMITH, CHANCELLOR
John Thomas Feeney
Gina L. Zylstra
LEITNER, WARNER, MOFFITT, WILLIAMS
DOOLEY, CARPENTER & NAPOLITAN
Suite 2300 First American Center
315 Deaderick Street
Nashville, Tennessee 37238
ATTORNEYS FOR PLAINTIFF/APPELLANT
Laura J. Hanson
Robert L. Graff
MEAGHER & GEER
4200 Multifoods Tower
33 South Sixth Street
Minneapolis, Minnesota 55402
Pamela King
NEAL & HARWELL
2000 Dominion Tower
150 Fourth Avenue, North
Nashville, Tennessee 37219-2498
ATTORNEYS FOR DEFENDANT/APPELLEE
AFFIRMED AND REMANDED
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
SAMUEL L. LEWIS, JUDGE
BEN H. CANTRELL, JUDGE
A. J. HALL, INC., )
)
Plaintiff/Appellant, )
) Wilson Chancery
) No. 8981
VS. )
) Appeal No.
) 01-A-01-9508-CH-00369
FEDERATED MUTUAL INSURANCE )
COMPANY, )
)
Defendant/Appellee. )
OPINION
The plaintiff, A. J. Hall, Inc., has appealed from the summary dismissal of a part of its
suit against the defendant, Federated Mutual Insurance Company. The Trial Court expressly
directed the entry of final partial judgment as permitted by T.R.C.P. Rule 54.02.
Plaintiff is a distributor of petroleum products and owner of a service station where its
products are stored and sold at retail.
Defendant issued to plaintiff a policy of insurance upon the service station for the
period April 22, 1987, through April 22, 1988. The policy included certain pollution
coverage which will be detailed later.
On September 15, 1987, plaintiff was notified by Tennessee Department of Health
and Environment of a possible leak in the facilities of the service station, and of the statutory
obligation of plaintiff to investigate the matter and take appropriate action.
The notice was conveyed to defendant which determined that a "pollution incident"
had occurred during the term of the policy and that defendant would perform its obligation
under "Insuring Agreement 2" of the policy which provided:
2. Insuring Agreement - Reimbursement of Mandated Off-Site
"Clean-Up" Costs:"
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a. We will pay for "clean-up costs" that the insured
becomes legally obligated to pay because of
"environmental damage" to which this insurance
applies. The amount we will pay for such
"clean-up costs" is limited as described in
Section III - Limits of Insurance.
b. This insurance applies only to "environmental
damage" caused by a "pollution incident" that
commences on or after the Retroactive Date
shown in the Declarations. The "pollution
incident" must be from an "insured site" or
"waste facility" in the "coverage territory."
The insured's obligation to pay "clean-up costs"
because of the"environmental damage" must be
asserted under statutory authority of the
government of the United States of America,
Canada or any political subdivision of the
United States or Canada. Notice asserting such
obligation must be first received by you during
the policy period.
We have the right but not the duty to investigate,
settle, contest or appeal, at our expense, any
obligation asserted against an insured to pay
"clean-up costs."
....
3. "Clean-up costs" means expenses for the removal or
neutralization of contaminants, irritants or pollutants.
....
12. "Suit" means civil proceeding in which damages because
of "bodily injury" or "property damage" to which this insurance
applies are alleged. "Suit" includes an arbitration proceeding
alleging such damages to which you must submit or submit
with our consent.
Upon receipt of said notice, defendant engaged Delta Environmental Consultants,
Inc., (hereafter "Delta") to investigate the allegation of pollution. Delta reported that a
leakage had occurred in plaintiff's facilities and proposed a plan to "alleviate the
contamination" which was accepted and authorized by defendant. Defendant notified
plaintiff that it had "assumed the handling of the pollution clean-up at the site."
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The "clean-up" proceeded by Delta at the expense of defendant until March 6, 1992,
when defendant notified plaintiff that it would no longer furnish the "clean up," but would
assume the expense of continuation under the direction of plaintiff. Defendant explained this
change by a fear that, under environmental law, defendant might incur liability in excess of
its contractual policy obligations by assuming control of the polluted premises.
On March 3, 1993, plaintiffs filed their first complaint in the present suit in which the
foregoing facts were stated and the following relief was demanded:
2. That Federated be required to complete the contamination
remediation at the site of Gregory's Exxon and that the total
cost of remediation, inclusive of any local, state or federal
penalties which have been incurred or will be incurred, be
borne entirely by Federated, and that this Court issue a
mandatory injunction requiring Federated to undertake all
necessary steps to complete the remediation without further
delay;
3. In the alternative, that this Court enter a judgment in favor
of Hall for Hall's total damages sustained as a result of the
tortious and unlawful conduct of Federated in an amount
established at trial;
4. That this Court find the award of punitive damages
appropriate as the result of Federated's bad faith refusal to
complete the remediation, in an amount to be determined at
trial.
Defendant answered, admitting issuance of a "commercial package policy of
insurance which was effective from April 22, 1987, to April 22, 1988, and which contained a
separate pollution liability coverage part," furnishing coverage of $1,000,000 with a $10,000
deductible. The answer also admitted liability for expense of "clean up" within the policy
limits, but denied an obligation to actually perform the "clean up."
On August 5, 1994, plaintiff filed its "First Amended Complaint" asserting that
owners of an adjoining tract had filed suit against plaintiffs for property damage resulting
from the leak on plaintiff's premises, that defendant was obligated to defend said suit and had
failed and refused to do so.
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Defendant responded that plaintiff's "Commercial Package Policy" in effect from
April 22, 1987, to April 22, 1988, did not obligate defendant to defend the suit of the
adjoining property owners.
On September 10, 1994, the Trial Court entered an eight page opinion and order
concluding as follows:
For the reasons set forth above, Federated's motion for
summary judgment that it has no obligation under the policy at
issue to provide "claim handling services" to the insured or,
provide coverage in excess of its policy limits is hereby
granted.
Judgment shall, therefore, be entered in favor of defendant,
Federal Mutual Insurance Company and against plaintiff, A. J.
Hall, Inc. with respect to the entirety of plaintiff's original
complaint. This order does not dismiss any of the allegations
and demands of the first amended complaint filed 8/5/94.
There being no just reason for delay, let judgment be entered
accordingly.
On February 1, 1995, defendant moved to dismiss the first amended complaint for
failure to state a claim for which relief can be granted. Affidavits were filed in support of
said motion which renders it a motion for summary judgment.
On April 6, 1995, plaintiff filed a "Motion to Amend or Make Additional Findings of
Fact and to Alter and Amend the Judgment."
On April 1, 1995, the Trial Court entered an order containing the following:
The above-entitled matter came on hearing before the
Honorable C. K. Smith on March 6, 1995 upon defendant
Federated Mutual Insurance Company's ("Federated") summary
judgment motion to dismiss plaintiff's A. J. Hall, Inc.'s ("A. J.
Hall," "insured" or "plaintiff") first amended complaint
pursuant to Rule 56.03 of the Tennessee Rules of Civil
Procedure. . . .
....
For the reasons set forth above, Federated's motion for
summary judgment that it has no obligation under the policy to
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provide a defense or indemnity to A. J. Hall with respect to the
Bell suit is hereby granted.
Judgment shall, therefore, be entered in favor of defendant
Federated Mutual Insurance Company and against plaintiff A.
J. Hall, Inc. with respect to the amended complaint. Plaintiff's
complaint is thus dismissed in its entirety and the Court
declares that Federated Mutual Insurance Company has no
obligation to provide insurance coverage to A. J. Hall for the
Bell suit.
On May 23, 1995, defendant filed a response to plaintiff's April 6, 1995, motion.
On June 20, 1995, the Trial Court overruled plaintiff's April 6, 1995, motion.
On July 11, 1995, plaintiff filed notice of appeal from the June 20, 1995, order.
Plaintiff's "Statement of the Issues" is worded as follows:
A. The pollution liability policy issued by Federated to Hall
required Federated to defend and indemnify Hall as a result of
the Bell litigation.
B. Federated's pollution liability policy does not contain a
definition of the term "claim" thereby rendering the language of
the policy ambiguous.
C. Federated has failed to recognize the coverage for a "suit"
under its policy of insurance.
D. A genuine issue of material fact existed as to whether or not
Hall made a claim under its policy of insurance with Federated.
The insurance policy issued to plaintiff contained three separate insuring agreements.
The original complaint, which is not involved in this appeal, was based upon Insuring
Agreement 2, quoted above, which relates to cost of "clean up" of the polluted area.
The agreement to defend suits by third parties was Agreement 1, which read in
pertinent part as follows:
1. Insuring Agreement - Bodily Injury and Property Damage.
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a. We will pay those sums that the insured
becomes legally obligated to pay as
compensatory damages because of "bodily
injury" or "property damage" to which this
insurance applies. We will have the right and
duty to defend any "suit" seeking those
damages. But:
(1) The amount we will pay for damages is
limited as described in Section III-Limits of
Insurance:
(2) We may investigate and settle any claim or
"suit" at our discretion; and
(3) Our right and duty to defend end when we
have used up the applicable limit of insurance in
the payment of judgments, settlements or
"clean-up costs."
b. This insurance applies only to "bodily injury"
and "property damage" caused by a "pollution
incident" that commences on or after the
Retroactive Date [April 22, 1986] shown in the
Declarations. The "pollution incident" must be
from an "insured site" or "waste facility" in the
"coverage territory."
The insured's responsibility to pay damages
because of the "bodily injury" or "property
damage" must be determined in a "suit" on the
merits in the "coverage territory" or in a
settlement we agree to.
c. This insurance applies to "bodily injury" and
"property damage" only if a claim for damages
because of the "bodily injury" or "property
damages" is first made in writing against any
insured during the policy period. [Emphasis
supplied.]
(1) A claim by a person or organization seeking
damages will be deemed to have been made
when written notice of such claim is received by
any insured or by us, whichever comes first.
(2) All claims for damages because of "bodily
injury" to the same person, including damages,
claimed by any person or organization for care,
loss of service or death resulting at any time
from the "bodily injury" will be deemed to have
been made at the time the first of those claims is
made against any insured.
(3) All claims for damages because of "property
damage" causing loss to the same person or
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organization as a result of a "pollution incident"
will be deemed to have been made at the time
the first of those claims is made against any
insured.
....
The policy also contains the following provision:
Notice of a "pollution incident" is not notice of a claim.
Defendant concedes that it received timely notice of a "pollution incident" and that it
is liable for the expense of the "clean up" of the pollution within the monetary limits of the
policy. As stated, this aspect of the controversy is not a part of this appeal.
Defendant denies that it is obligated to defend or pay the claim of the adjoining
property owners, which appears to be for incidental damages other than the cost of "clean
up." Defendant's ground for denying liability is that the claim of the adjoining property
owners was not:
made in writing during the policy period as required by
paragraph (a) of Insuring Agreement 2 of the policy, quoted
above.
It is undisputed that no claim was made by the adjoining property owners to any one
in any form during the policy period, April 22, 1987, to April 22, 1988.
Nevertheless, plaintiff insists that notice of a pollution incident was notice of a
possible claim. Plaintiff argues that, since the policy contains no definition of the word,
"claim," the policy is ambiguous, and thereby admits the interpretation that a report of need
for clean up of pollution is notice to the insurer that adjoining landowners are making a claim
for incidental damages in addition to the cost of clean up.
There is no ambiguity in the word, "claim," when examined in the light of the whole
instrument and the circumstances of the case. Blue Diamond Coal Co. v. Holland American
Insurance Co., Tenn. 1984, 671 S.W.2d 829.
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A "claim made" is not the fact that wrong-doing has occurred, but an assertion that
some discrete amount of money is due. MGIC Indemnity Corp. v. Home State Savings
Association, 6th Cir. 1986, 797 F.2d 285.
Under a "claims made" policy limitation, an untimely claim will not be recognized
even though the cause of the claim occurred during the policy period. Hoyt v. St. Paul Fire &
Marine Ins. Co., 9th Cir. 1979, 607 F.2d 864; Atlas Underwriters Ltd. v. Meredith-Burda,
Inc., Va. 1986, 343 S.E.2d 65; Lamberton v. Travellers Indemnity Co., Del. Super. 1974, 247
A.2d 104.
In view of the express provision of the policy, quoted above, this Court cannot agree
that notice or knowledge of a "pollution incident" is notice that adjoining landowners have
presented a written demand for incidental damages.
Plaintiff argues that the pollution of the adjoining land was discovered by Delta, the
firm hired by defendant to investigate the nature and extent of the pollution. Such discovery
occurred after the expiration of the policy. Even if the discovery occurred during the term of
the policy, it would not serve as written notice that the landowners were making a demand for
incidental damages.
The policy includes two separate and distinct obligations:
1. Within the policy limits, the insurer is obligated to pay the expense of clean-up
from any "pollution incident" which occurs during the policy period as ordered by a
governmental authority.
2. Within the policy limits, the insurer is obligated to defend against and satisfy only
those claims of third parties which are presented in writing to the insurer or insured during
the policy period.
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The obligation of the first insuring agreement (to defend and satisfy claims) is strictly
limited to claims presented during the policy period. It does not cover claims presented after
the policy period, even though the basis of the claims occurred during the policy period. If
plaintiff desired full protection against claims of others, presented after expriation of the
policy, it was necessary for it to demand and pay for full coverage or to obtain other
insurance to protect against claims made after the expiration of the policy.
Plaintiff cites Walker v. Larson, Mon. 1986, 727 P.2d 1321. That case involved legal
malpractice insurance which included a "claims made" provision not quoted in the opinion of
the Court which held that the actions of the claimant were sufficient to show a "claim made"
during the policy period. In the present case, it is undisputed that the adjoining property
owners asserted no claim in any form to any one until after the expiration of the policy term.
Plaintiff also cites J. G. Link & Company v. Continental Casualty Company, U.S.C.A.
9th Cir., 470 F.2d 1133 (1972) which involved an "errors and omissions policy" of an
architect, which was ambiguous as to whether it was a "discovery policy" or an "occurrence
policy" and which was construed most favorably to the policyholder. In the present case, no
such ambiguity exists.
Plaintiff also argues that a genuine issue exists as to whether plaintiffs gave timely
notice to defendant of the fact that the adjoining landowners were making a claim of
incidental damages. As theretofore stated, it is undisputed that no claim or demand was
made to plaintiff or defendant by the adjoining landowners within the policy period. This
undisputed fact is fatal to any claim for relief under Section 1 of the policy which is the
subject of this appeal.
No published Tennessee authority is found on the subject of "claims made" provisions
in liability insurance policies. However, a majority of decisions from other jurisdictions have
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recognized and enforced such provisions. See Kenefick v. Hitchcock, Wis. App. 1994, 522
N.W.2d 261; Graman v. Continental Casualty Co., 87 Ill. App. 3rd 896; 409 N.E.2d 387
(1980); Livingston Parrish School Board v. Firemen's Fund Am. Ins. Co., La. 1973, 282 S.2d
478; Gereboff v. Home Indemnity Co., 119 R.I. 814, 383 A.2d 1024 (1978); Rotwein v.
General Acc. Group, 103 N.J. Super. 406, 247 A.2d 370 (1968).
The judgment of the Trial Court is affirmed. Costs of this appeal are assessed against
plaintiff. The cause is remanded to the Trial Court for any necessary further proceedings.
Affirmed and Remanded.
_______________________________________
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
_____________________________________
SAMUEL L. LEWIS, JUDGE
_____________________________________
BEN H. CANTRELL, JUDGE
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