Boardman Petroleum, Inc. v. Federated Mutual Insurance

*332 CARLEY, Justice,

dissenting.

The majority opinion is based upon the erroneous premise that the liability policies issued to Boardman “specifically excluded coverage for underground contamination of property ‘owned or occupied by or rented to the insured.’ ” There is only a general exclusion in the liability policies for “damages” to Boardman’s “owned or rented property.” The question presented for resolution is whether this general exclusion should be construed as a specific exclusion of coverage for Boardman’s liability for underground contamination of its own property. I cannot agree with the majority that this general exclusion for “damages” bars the indemnification of the insured for the cost of a state-ordered contamination clean-up merely because the neighboring soil or groundwater has yet to be contaminated or imminently threatened. In my opinion, this court should answer the Eleventh Circuit’s second question in the negative and should, therefore, consider the very important first question as well.

1. Although Georgia appellate courts have not addressed the precise question of the scope of the “owned or rented property” exclusion in a liability policy, considerable groundwork in resolving that question has been laid. The majority concedes that any exclusion from coverage is strictly construed against the insurer as the drafter of the policy and that, where possible, insurance contracts should be read in accordance with the reasonable expectations of the insured. “Thus, if an insurance contract is capable of being construed two ways, it will be construed against the insurance company and in favor of the insured. [Cits.]” Claussen v. Aetna Cas. &c. Co., 259 Ga. 333, 334-335 (1) ( 380 SE2d 686 ) (1989). “Under Georgia law, the risk of any lack of clarity or ambiguity in an insurance contract must be borne by the insurer. [Cit.]” Claussen v. Aetna Cas. &c. Co., supra at 337 (3). Our Court of Appeals has observed that the Claussen court held that, without “a clear and unambiguous pollution exclusion clause, the EPA-mandated costs incurred by the owner of polluted property are within the coverage of a comprehensive general liability policy.” (Emphasis in original.) Atlantic Wood Indus. v. Lumbermen’s Underwriting Alliance, 196 Ga. App. 503, 505-506 (2) ( 396 SE2d 541 ) (1990). In Atlantic Wood Indus., the Court of Appeals, applying the principles set forth in Claussen , held that EPA-mandated clean-up costs constitute “damages” within the coverage of the affected insured’s liability policy. *333 Atlantic Wood Indus. v. Lumbermen’s Underwriting Alliance, supra at 506 (2). This rejection of a narrow construction of the type of costs covered as “damages” under a liability policy is consistent with the majority rule that the “owned or rented property” exclusion in a liability policy does not exclude coverage for the costs of cleaning up soil and groundwater contamination. Alabama Plating Co. v. U. S. Fidelity &c. Co., 690 S2d 331, 337 (I) (B) (Ala. 1996). A person who obtains insurance covering his liability for “damages,” would reasonably conclude that an exclusion for damage to his “owned or rented property” does not exclude indemnification for his liability for the expense of a state-ordered clean-up, regardless of whether the extent of that clean-up is limited to his own property.

*332 A layman, having insured himself against liability for “damages,” without further definition or limitation, would reasonably conclude that he is protected from financial loss without regard to the legal basis upon which his liability for his loss might technically be premised.

*333 There is no specific pollution exclusion clause in the liability policies issued to Boardman and, unlike the majority, I do not believe that the existence or wording of the first-party property insurance policy is dispositive. Boardman is not seeking to recover under that policy for any damage to its property but, rather, is seeking to recover under the third-party policies for the cost of liability imposed upon it by the Department of Natural Resources (DNR). Anderson Development Co. v. Travelers Indem. Co., 49 F3d 1128, 1134 (II) (C) (6th Cir. 1995); Patz v. St. Paul Fire &c. Ins. Co., 15 F3d 699, 705 (7th Cir. 1994). I believe that the reasoning of the Seventh Circuit Court of Appeals is applicable here:

[The insureds] are not attempting to obtain an insurance award for a reduction in the value of, or other damage to, their land. . . . It is a policy of liability insurance, not casualty insurance, on which they have sued. They seek to recover the cost of complying with a government order to clean up a nuisance. The fact that the clean up occurred on their land is irrelevant. For all we know, the damage to the land was much less than the cost of cleaning it up.

Patz v. St. Paul Fire &c. Ins. Co., supra at 705.

Federated does not and could not argue that the third-party policies insured only against liability to pay damages awarded in a lawsuit against Boardman. Atlantic Wood Indus. v. Lumbermen’s Underwriting Alliance, supra at 504 (2). Of course, “the mere desire of an insured to voluntarily reduce potential future liability could very well be barred by the owned property exclusion.” (Emphasis in original.) Anderson Development Co. v. Travelers Indem. Co., supra at 1134 (II) (C). Here, however, while Boardman did cooperate voluntarily, “it was under a government mandate to conduct the environmental clean-up.” Anderson Development Co. v. Travelers Indem. Co., supra at 1134 (II) (C). Boardman’s decision to cooperate, rather than to *334 force the DNR to “bring a coercive suit, does not change the bottom line that a legal obligation exists.” Anderson Development Co. v. Travelers Indem. Co., supra at 1133 (II) (B). Thus, consistent with Claussen v. Aetna Cas. &c. Co., supra, and Atlantic Wood Indus. v. Lumbermen’s Underwriting Alliance, supra, “there was indeed liability to a third party,” that being the DNR. Anderson Development Co. v. Travelers Indem. Co., supra at 1134 (II) (C). Accordingly, it is irrelevant whether Boardman owns the groundwater beneath its property or whether there was an imminent threat of off-site contamination. Patz v. St. Paul Fire &c. Ins. Co., supra at 705.

As the majority opinion indicates, some courts have construed the general “owned or rented property” exclusion in a liability policy broadly in favor of the insurer, so as to exclude coverage for the costs of cleaning up soil and groundwater contamination. However, that construction of the exclusion is the minority rule. The majority of jurisdictions which have addressed the issue construe the general “owned or rented property” exclusion narrowly in favor of the insured, so as not to exclude coverage for the clean-up costs. See Alabama Plating Co. v. U. S. Fidelity &c. Co., supra at 337 (I) (B), fn. 11. Moreover, a narrow construction of the general exclusion is entirely consistent with, if not compelled by, Atlantic Wood Indus. v. Lumbermen’s Underwriting Alliance, supra. Atlantic Wood Indus. is a Georgia decision which the majority neither distinguishes nor expressly overrules, even though that case indicates that a clear and unambiguous pollution exclusion, rather than a mere general exclusion, would be necessary to exclude liability coverage for government-mandated pollution clean-up costs. Thus, by giving the general “owned or rented property” exclusion a broad construction, the majority opinion places this state in the minority camp, notwithstanding Georgia authority which supports adoption of the majority rule whereby that general exclusion is construed narrowly in favor of the insured. Because I believe that the majority rule is better-reasoned and is supported by persuasive Georgia authority, I submit that the “owned or rented property” exclusion does not bar indemnification of Boardman for the state-ordered contamination clean-up.

2. The first certified question relates to the appropriate “trigger of coverage” under general liability policies such as those issued to Boardman. Federated contends that a “manifestation” trigger of coverage is appropriate, whereby “coverage is triggered only when property damage occurs and is discovered within the policy period.” (Emphasis in original.) Boardman Petroleum v. Federated Mut. Ins. Co., 119 F3d 883, 885 (11th Cir. 1997). In my opinion, “such a theory is incompatible with the language” of the policies at issue here. Trizec Properties v. Biltmore Constr. Co., 767 F2d 810, 813, fn. 6 (11th Cir. 1985). The policies issued by Federated provide that the “potential *335 for coverage is triggered when an ‘occurrence’ results in ‘property damage.’ ” Trizec Properties v. Biltmore Constr. Co., supra at 813.

Nothing in the language of the policies requires that the claimed property damage be discovered or manifested during the policy period. . . . Indeed, the very nature of an “occurrence” as opposed to a “claims-made” policy is to provide coverage for property damage that occurred during the policy period whenever that liability is imposed. [Cit.]

Tufts University v. Commercial Ins. Co., 616 NE2d 68, 74 (3) (Mass. 1993). See also Sentinel Ins. Co. v. First Ins. Co., 875 P2d 894, 916 (c) (Hawaii 1994); Trizec Properties v. Biltmore Constr. Co., supra at 813; American Employer’s Ins. Co. v. Pinkard Constr. Co., 806 P2d 954, 955 (Colo. App. 1990). That the insurance industry itself understands the language employed in these policies as establishing a “non-manifestation” trigger is confirmed by its introduction of “claims made” policies into the area of comprehensive liability insurance. Montrose Chem. Corp. v. Admiral Ins. Co., 913 P2d 878 , 903 (II) (5) (Cal. 1995). “That understanding is clearly reflected in the higher premiums that must be paid for occurrence-based coverage to offset the increased exposure. ([Cit.])” Montrose Chem. Corp. v. Admiral Ins. Co., supra at 903 (II) (5).

Federated argues that a “manifestation” trigger of coverage is necessary to avoid “a factual and scientific morass as parties litigate to determine when exposure actually happened.” Boardman Petroleum v. Federated Mut. Ins. Co., supra at 886. However, all that is necessary to establish satisfaction of a “non-manifestation” trigger is evidence that the property damage more likely than not occurred during a period of coverage, which is an eight-year period here and usually is at least a one-year period. See Sentinel Ins. Co. v. First Ins. Co., supra at 917 (C). “Nevertheless, however potentially difficult the fact-finding task may be, we cannot rewrite the plain terms of the policy. [Cit.]” Sentinel Ins. Co. v. First Ins. Co., supra at 917 (C). To apply a “manifestation” trigger of coverage to the occurrence-based liability policies issued by Federated would be to rewrite them, transforming the broader and more expensive occurrence-based policies into “claims made” policies. Montrose Chem. Corp. v. Admiral Ins. Co., supra at 904 (II) (5).

Several triggers of coverage other than the “manifestation” trigger have been identified. Annot., 14 ALR5th 695. However, resolution of the first certified question is dependent only upon the conclusion that the “manifestation” trigger is inappropriate. Ray Indus. v. Liberty Mut. Ins. Co., 974 F2d 754, 765 (III) (6th Cir. 1992). This is true because Boardman would be covered under any of the other *336 “non-manifestation” trigger theories. Tufts University v. Commercial Union Ins. Co., supra at 75 (3). The only dates which can trigger occurrence-based coverage are those of exposure to injury-causing conditions or those of actual injury. See South Carolina Ins. Co. v. Coody, 813 FSupp. 1570, 1576 (I) (B) (1) (a) (M.D. Ga. 1993). If an insured can show that both of these dates occurred within the policy period, then coverage is triggered under every “non-manifestation” theory. See South Carolina Ins. Co. v. Coody, supra at 1576 (I) (B) (1) (a). The majority rule in cases involving environmental damage is that the actual injury, which in this case is the contamination of the soil and groundwater, occurred at the same time that the soil and groundwater were exposed to the petroleum leaks. Ray Indus. v. Liberty Mut. Ins. Co., supra at 766 (III); South Carolina Ins. Co. v. Coody, supra at 1575-1576 (I) (B). Since the exposure was simultaneous with the actual injury, it follows that Boardman is covered under any “non-manifestation” trigger of coverage. Thus, I believe that this Court should answer the Eleventh Circuit’s first question by holding that the “manifestation” trigger of coverage is not appropriate under general liability policies such as the ones at issue in this case. Because the majority incorrectly answers one certified question and refuses to answer the other, I respectfully dissent.

Decided February 23, 1998

Reconsideration denied April 2,1998.

Kilpatrick Stockton, Raymond G. Chadwick, Jr., Robert R Sentell III, for appellant.

Allgood, Childs, Mehrhof & Williams, Richard R. Mehrhof, Jr., for appellee.

Weissman, Nowack, Curry & Wilco, Linda B. Foster, amicus curiae.