Petition for Writ of Certiorari — Hybud Equipment Corp. v. Sphere Drake Insurance
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OFFICE 0
IN THE
Supreme Court of the United States
October Term, 1992
HYBUD EQUIPMENT CORPORATION,
INDUSTRIAL EXCESS LANDFILL,
INC., AND HYMAN BUDOFF,
Petitioners,
VS.
SPHERE DRAKE INSURANCE COMPANY, LTD.,
Respondent.
PETITION FOR WRIT OF CERTIORARI
TO THE SUPREME COURT OF OHIO
MATTHEW YACKSHAW
Counsel of Record
Day, KETTERER, RALEY,
WRIGHT & RYBOLT
800 William R. Day Building
121 Cleveland Avenue South
Canton, Ohio 44702-1921
(216) 455-0173
Attorney for Petitioners
THE GATES LEGAL PUBLISHING CO., CLEVELAND, OHIO—TEL.. (216) 621-5647
QUESTIONS PRESENTED FOR REVIEW
1. Are the Equal Protection and Due Process
Clauses of Amendment XIV of the U. S. Constitution
violated when the Supreme Court of Ohio interprets the
pollution exclusion of a standard form comprehensive
general liability insurance policy inconsistent with other
State Supreme Courts and U. S. Court of Appeals
opinions dealing with defense and coverage obligations
under identical policies for an underlying federal (i.e.,
Superfund) cause of action and other related civil
common-law actions?
29 Are the Due Process and Equal Protection
Clauses of Amendment XIV of the U. S. Constitution
violated when the Supreme Court of Ohio makes a
decision which inexplicably fails to apply and/or follow
its own long-standing precedent and rules of construction
for insurance policy interpretation?
3 Are the Due Process and Equal Protection
Clauses of Amendment XIV of the U. S. Constitution
violated when the Supreme Court of Ohio ignores and/or
fails to enforce insurance policy language in accord with
insurance company explanations accompanying policy
language submitted to the state insurance regulators for
review and approval?
4. Are the Due Process and Equal Protection
Clauses of Amendment XIV of the U. S. Constitution
violated when the Supreme Court of Ohio determines
from the pleadings alone that defense and coverage for
the underlying actions are barred by the pollution
exclusion?
5 Are Amendment VII and the Due Process and
Equal Protection Clauses of Amendment XIV of the
U. S. Constitution violated where Petitioners are denied
a jury trial in a case where a proper timely jury demand
had been made and not subsequently waived?
TABLE OF CONTENTS
QUESTIONS PRESENTED FOR REVIEW
TABLE OF CONTENTS 1]
TABLE OF AUTHORITIES. . vii
OPINIONS DELIVERED IN THE CASE BY THE
COURTS BELOW |
STATEMENT OF JURISDICTION 7 2
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED 3
STATEMENT OF THE CASE . 4
STATEMENT OF FACTS. ... tae 6
ARGUMENT FOR GRANTING THE WRIT.. 13
|. The Equal Protection And Due Process
Clauses Of Amendment XIV Of The U. 5
Constitution Are Violated When The
Supreme Court Of Ohio Interprets The
Pollution Exclusion Of The Standard Form
Comprehensive General Liability Insurance
Policy Inconsistent With Other State
Supreme Courts And U. S. Court Of
Appeals Opinions Dealing With Defense
And Coverage Obligations Under Identical
Policies For An Underlying Federal (v.e.,
Superfund) Cause Of Action And Other
Related Civil Common-Law Actions ......- 13
II. The Due Process And Equal Protection
Clauses Of Amendment XIV Of The U. 3.
Constitution Are Violated When The
Supreme Court Of Ohio Makes A Decision
Which Inexplicably Fails To Apply And/Or
iv.
Follow Its Own Long-Standing Precedent
And Rules Of Construction For Insurance
Policy Interpretation................... 18
III. The Due Process And Equal Protection
Clauses Of Amendment XIV Of The U. S.
Constitution Are Violated When The
Supreme Court Of Ohio Ignores And/Or
Fails To Enforce Policy Language In
Accord With Insurance Company
Explanations Accompanying Policy
Language Submitted To The State
Insurance Regulators For Review And
FIN x 5s 0 Senko IR eee oe 21
[V. The Due Process And Equal Protection
Clauses of Amendment XIV Of The U. S.
Constitution Are Violated When The
Supreme Court Of Ohio Determines From
The Pleadings Alone That Defense And
Coverage For The Underlying Actions Are
Barred By The Pollution Exclusion. ...... 24
V. Amendment VII And The Due Process And
Equal Protection Clauses Of Amendment
XIV Of The U.S. Constitution Were
Violated Because Petitioners Were Denied
A Jury Trial In A Case Where A Proper
Timely Jury Demand Had Been Made And
Not Subsequently Waived .............. 27
CAFC RPMI 8457s bk wa RARER cI 29
APPENDIX:
1. Hybud Equipment Corporation v. Sphere Drake
Insurance Company, Ltd., 64 Ohio St. 3d 657,
597 N.E.2d 1096 (1992). ...... 2. cece eee neees Al
a. Judgment Entry filed September 16, 1992 ... A2]
b. Rehearing Entry filed October 28, 1992...... A49
2. Hybud Equipment Corporation v. Sphere Drake
Insurance Company, Ltd., Case No. 14597
(Court of Appeals for Summit County, Ohio,
decided January 30, 1991) also reported at 1991
Ohio Appellate Lexis 362 (Summit County,
3. Hybud Equipment Corporation v. Sphere Drake
Insurance Company, Case No. CV88-8-2642
(Court of Common Pleas for Summit County,
ee ea ang etme iy eee ere a A37
a. Order filed June 30, 1989.................- A37
b. Findings, Decision and Judgment Entry
filed February 7, 1990 ...........22eeeeees A38
c. Judgment Entry filed April 30, 1990........ A43
d. Findings of Fact and Conclusions of
Law filed May 7, 1990............---ee00- A45
4. U.S. Const. Amend. VII ..............-.-+..- A50
U.S. Const. Amend. XIV .........--2--5e00- A50
42 U.S.C. §§9605, 9606 and 9607(a)....... A51-A62
O. Const. Art. I, Sec. 5 2... ccc cree ee eeees A63
O.R.C. §§3901.20, 3901.21 and 3937.03... .A64-A76
O. Civ. R. 38 and 39 .... 2... cece ccenee A77-A78
Vi.
Do. List of Cases Rejecting the Insurance
Industry's Construction of the Pollution
Exclusion A79
Vii.
TABLE OF AUTHORITIES
Cases
Buckeye Union Insurance Company v. Liberty
Solvents and Chemicals Co., 17 Ohio App. 3d 127,
477 N.E.2d 1227 (Summit Cty., 1984)......----- 25
Cincinnati Insurance Company v. Phillips, 52 Ohio
St. 3d 162, 166, 556 N.E.2d 1150, 1154 (1990). ... 19
City of Willoughby Hills v. Cincinnati Insurance
Co.. 9 Ohio St. 3d 177, 459 N.E.2d 555 (1984)... . 24,26
Claussen v. Aetna Casualty & Surety Co., 259 Ga.
333. 380 S.E.2d 686 (Supreme Court of Georgia
ha LAMAR MON SERA CREASES SER PS EE SS 15,23
Dimmitt Chevrolet, Inc. v. Southeastern Fidelity
Insurance Corporation, 1992 W.L. 212008 (decided
Sept. 3, 1992 by Supreme Court of Florida)...... 15,23
Erie Insurance Group v. Fisher, 15 Ohio St. 3d 380,
474 N.E.2d 320 (1984). . 0.2... eee e cree reece 27,28
Fuller v. German Motor Sales, Inc., 51 Ohio App. 3d
101 (Hamilton Cty., 1988)......---+eee eer eeees 27
George H. Olmsted & Co. v. Metropolitan Life
Insurance Co., 118 Ohio St. 421, 161 N.E. 276
A gg oaks keane ed ea SRO CCAS On NODES EO 18
Grant Southern Iron and Metal Company ». CNA
Insurance Co., 905 F.2d 954 (6th Cir., 1990)....-. 25
Harleysville Mutual Insurance Co. v. Santora, 3
Ohio App. 3d 257 (Cuyahoga Cty., 1982) ........ 27
Hecla Mining Company v. New Hampshire
Insurance Co., 811 P.2d 1083 (Supreme Court of
Claes TOUR). ow ies cs acces eee eens reeneenes 15
Viii.
Home Indemnity Company v. Village of Plymouth,
146 Ohio St. 96 (1945)........................ 19
Hutchinson v. J C Penney Casualty Insurance Co.,
17 Ohio St. 3d 195, 197, 478 N.E.2d 1000.
aise asic on, RE eee 19
Hybud Equipment Corporation v. Sphere Drake
Insurance Company, Ltd., 64 Ohio St. 3d 657, 597
N.E.2d 1096 (1992)......................... 1,19,20
Hybud Equipment Corporation uv. Sphere Drake
Insurance Company, Ltd., Case No. 14597 (Court
of Appeals for Summit County, Ohio, decided
January 30, 1991), also reported at 1991 Ohio
Appellate Lexis 362 (Summit County, 1991) ..... 1
Hybud Equipment Corporation v. Sphere Drake
Insurance Company, Case No. CV8-8-2642 (Court
of Common Pleas for Summit County, Ohio) ..... l
Joy Technologies, Inc. v. Liberty Mutual Ins. Co..,
1992 W.L. 172870 (decided June 11, 1992 by
Supreme Court of Appeals of West Virginia)... .. 15,23
Just v. Land Reclamation Ltd., 155 Wis. 2d 737, 456
N.W.2d 570 (Supreme Court of Wisconsin 1990),
modified on denial of reconsideration 157 Wis. 2d
907, 461 N.W.2d 447...................5..... 15
Kipin Industries v. American Universal Life
Insurance Co., 41 Ohio App. 3d 228 (Hamilton
Cty., 1987), motion to certify overruled 1-13-88 in
Case No. 87-1720 (Supreme Court of oe 25
Munchik v. Fidelity & Casualty Company of New
York, 2 Ohio St. 2d 303, 209 N.E.2d 167
(RUE Cs dS a ee ee ene eee 18,19,20
New Castle County v. Hartford Accident &
Indemnity Co., 933 F.2d 1162 (3d Cir. 1991) ..... 15
ix.
Olmstead v. Lumbermans Mutual Ins. Co., 22 Ohio
St. 2d 212, 218, 259 N.E.2d 123, 127 Oe = 19
Outboard Marine Corp. v. Liberty Mutual Ins. Co.,
1992 W.L. 356056 (decided Dec. 4, 1992 by
Supreme Court of Illinois) ......-----+++++++: 14,15
Socony Vacuum Oil Company v. Continental
Casualty Co., 144 Ohio St. 382, 59 N.E.2d 199
| re re ee eee eee ee ee 24
State Farm Fire & Casualty Co. v. Pildner, 40 Ohio
St. 2d 101, 321 N.E.2d 600 (1974) ......-------- 24
Toms v. Hartford Fire Insurance Co., 146 Ohio St.
39, 63 N.E.2d 909 (1945)... 2.2... ee eee eee ee eee 18
Constitutional Provisions, Statutes, Regulations and
Rules
Amendment VII of Constitution of United
PEEP CR eT Tere ee oy ef 3,27
Amendment XIV_ of Constitution of United
ee ee re er re a ee 3,13,18,21,24,27
42 United States Code §§9605, 9606 and
er yee ee ee Ste 3,9,10,12
Article I, Section 5, of Constitution of ere 3,27
Ohio Revised Code §§2721.10, 3901.20 3901.21
ee OP rrr ee se ee 3,21,27
Ohio Rules of Civil Procedure, Rules 38, 39......-. 27
Other Authorities
The National Law Journal, p. 20 (Feb. 24, 1992),
“Debate Rages Over Insurance Coverage” by
Stephen Jones ......... 0c cece cece eee ee eeees 14
Webster’s Third New International Dictionary
\ Sr rr arent per St re ee 20
Black’s Law Dictionary (6th Ed. 1990) ............ 20
Oxford English Dictionary ............-.-0++++55 20
No.
IN THE
Supreme Court of the United States
October Term, 1992
HYBUD EQUIPMENT CORPORATION,
INDUSTRIAL EXCESS LANDFILL,
INC., AND HYMAN BUDOFF,
Petitioners,
VS.
SPHERE DRAKE INSURANCE COMPANY, LTD.,
Respondent.
PETITION FOR WRIT OF CERTIORARI
To THE SUPREME CouRT OF OHIO
PETITION FOR WRIT OF CERTIORARI
OPINIONS DELIVERED IN THE CASE
BY THE COURTS BELOW
1. Hybud Equipment Corporation v. Sphere Drake
Insurance Company, Ltd., 64 Ohio State 3d 657, 597
N.E.2d 1096 (1992).
2. Hybud Equipment Corporation v. Sphere Drake
Insurance Company, Ltd., Case No. 14597 (Court of
Appeals for Summit County, Ohio, decided January 30,
1991), also reported at 1991 Ohio Appellate Lexis 362
(Summit County, 1991).
3. Hybud Equipment Corporation v. Sphere Drake
Insurance Company, Case No. CV88-8-2642 (Court of
Common Pleas for Summit County, Ohio).
a. Order filed June 30, 1989.
b. Findings, Decision and Judgment Entry filed
February 7, 1990.
c. Findings of Fact and Conclusions of Law filed
May 7, 1990.
d. Judgment Entry filed April 30, 1990.
All of the foregoing are included in the Appendix,
infra.
ee
2
STATEMENT OF THE GROUNDS ON WHICH THE
JURISDICTION OF THE COURT IS INVOKED
1. The opinion of the Supreme Court of Ohio in
Hybud v. Sphere Drake is dated September 16, 1992.
2. The Supreme Court of Ohio denied a rehearing in
Hybud v. Sphere Drake by Rehearing Entry filed
October 28, 1992.
3. Jurisdiction of this Court is invoked pursuant to
28 U.S.C. §1257(a).
3
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
1. Amendment VII of Constitution of United
States.
2. Amendment XIV of Constitution of United
States.
3. 42 United States Code §§9605, 9606 and 9607(a).
4. Article I, Section 5, of Constitution of Ohio.
5. Ohio Revised Code §§3901.20, 3901.21 and
3937.03.
All of the foregoing provisions are set forth in the
Appendix, infra.
(CC
4
STATEMENT OF THE CASE
This case arises out of the failure of respondent
Sphere Drake Insurance Company, Ltd. (‘‘Respondent’’)
to defend the petitioners Hybud Equipment Corporation,
Industrial Excess Landfill, Inc., and Hyman Budoff
(‘’Petitioners’’),' pursuant to standard form
comprehensive general liability insurance _ policies,
against three pollution-related claims asserted against
the Petitioners for damages and other relief under
various theories of recovery. Because of the
Respondent’s failure to defend Petitioners in the
underlying actions, Petitioners suffered significant
compensatory damages including, but not limited to, the
direct out-of-pocket costs of defending the underlying
cases and prosecuting the instant case.
In the courts below, Respondent denied any
obligations to Petitioners under the standard form
comprehensive general liability insurance policies for a
variety of reasons, including asserting that a pollution
exclusion applied.
After bench trials in the Court of Common Pleas for
Summit County, Ohio (‘the Trial Court’’), in July 1989
and April 1990, a judgment was entered in favor of
Petitioners on all declaratory judgment issues, declaring
that Respondent had a duty to defend Petitioners in the
three underlying cases and awarding a money judgment
against Respondent in the amount of $181,287, plus
additional defense costs and prosecution costs to be
incurred after March 31, 1990, in the ongoing litigation
‘In accordance with Rule 29.1 of the Revised Rules of the Supreme
Court of the United States, Petitioners state that Hybud Equipment
Corporation is a wholly-owned subsidiary of Hybud Waste Industries,
Inc. Industrial Excess Landfill, Inc. has no parent company or
subsidiaries.
5
(Appendix, pp. A43-A44). In accordance with all prior
Ohio state court precedent as well as a wealth of legal
authority from other courts, the Trial Court specifically
found that the pollution exclusion contained in the
standard form comprehensive general liability insurance
policies issued by Respondent to Petitioners did not
exclude defense and coverage obligations for the three
underlying cases.
Respondent filed an appeal with the Court of
Appeals for the Ninth Judicial District of Ohio (‘the
Court of Appeals’’). Petitioners’ cross-appealed on tort
liability and damages issues, including the denial of a
jury trial in the Trial Court. On January 30, 1991, the
Court of Appeals issued its Decision and Journal Entry
which affirmed the Trial Court’s determinations in all
respects (Appendix, pp. A23-A36).
The case was then appealed by both Petitioners and
Respondent to the Supreme Court of Ohio. On
September 16, 1992, the Supreme Court of Ohio issued
its decision reversing the lower courts and entering
judgment on behalf of Respondent on the grounds that
the pollution exclusion contained in the standard form
comprehensive general liability insurance policies barred
any defense and coverage obligations owed by
Respondent to Petitioners (Appendix, pp. Al-A22).
After denial of their motion for rehearing filed in the
Supreme Court of Ohio (Appendix, p. A49), Petitioners
hereby petition the Supreme Court of the United States
for a writ of certiorari to review the merits of the various
substantial constitutional and other important and
highly controversial questions of law raised by this case.
SSS
6
STATEMENT OF FACTS
Petitioner Hybud Equipment Corporation (““Hybud”)
is an Ohio corporation with its principal place of business
at 556 Beacon Street, Akron, Ohio. Hybud has been in
the solid waste business for approximately 35 years,
building and leasing solid waste equipment, compactors
and containers, as well as hauling solid waste for various
commercial, industrial and institutional organizations
within a 50-mile radius of Akron, Ohio. Hybud employs
30 to 35 local residents. Hybud is a union shop, having
entered into successive collective bargaining agreements
with its hourly work force with the Teamsters Union
since approximately 1973.
Over the years, Hybud has transported solid waste
to a variety of licensed landfills, including one formerly
operated at 12646 Cleveland Avenue, N.W., Uniontown,
Ohio, and known as the Industrial Excess Landfill, as
well as one located in Montville Township, Medina
County, Ohio, and known as the Montville Landfill.
Hybud has never owned or operated either site. Hybud
has never hauled any hazardous waste. Hybud is
independently owned and operated; it is not affiliated in
any way with a large publicly owned waste handling
company.
Petitioner Industrial Excess Landfill, Inc. (“IEL’’) is
an Ohio corporation which owns the Industrial Excess
Landfill site in Uniontown, Ohio, upon which a duly
authorized and licensed landfill was formerly operated
from 1968 to 1978. While IEL continues to own the site,
IEL does not engage in any business since the Ohio EPA
approved closure of the site which was completed in
1980. IEL is not affiliated in any way with the large
publicly-owned landfill companies.
a iia canal
7
Petitioner Hyman Budoff is a life-long Summit
County resident and U. S. citizen, who resides at 374
North Pershing Avenue, Akron, Ohio. Hyman Budoff is
an officer and director of both Hybud and IEL. Hyman
Budoff owns 100% of the outstanding stock in IEL; he
also owns preferred stock in Hybud.
From the beginning of business operations,
Petitioners have always purchased and maintained
comprehensive general _ liability insurance policies,
naming each of them as insureds. Petitioners have
always understood that the comprehensive general
liability insurance policies covered a broad range of risks,
including the kinds of risks and claims such as the ones
that underlie the present case. In addition to the
coverage aspects of the policies, Petitioners always
expected and entrusted their general liability insurance
companies over the years with the obligation to defend
any liability claims that may be asserted against the
Petitioners by anyone that did or may pertain to each
insurance company’s period of coverage. Over the years,
Petitioners have been named insureds under general
liability insurance policies issued by different insurance
companies depending upon cost and availability of
necessary coverages.
Respondent Sphere Drake Insurance Company, Ltd.
is a huge international insurance company based in
London, England, and is related to Lloyd’s of London.
Respondent was represented in the issuance of the
comprehensive general liability insurance policies in issue
in this case by Ostrov Corporation, who acted as a
general underwriting agent for Respondent in Ohio.
The first comprehensive general liability insurance
policy issued to Petitioners by Respondent, Certificate
No. OS-1028SMP, insured the Petitioners for the period
a
8
July 30, 1985 through July 30, 1986, with bodily injury
and property damage limits of $500,000. The second
policy issued by Respondent, Certificate No. OS
1070SMP, insured Petitioners for the period June 30,
1986 through June 30, 1987, with bodily injury and
property damage limits of $300,000. With respect to the
issues raised by this case, each policy used the same
standard forms used by other insurance companies in
Ohio and throughout the United States.
The first pertinent part of the first insurance policy
reads as follows:
The Company will pay on behalf of the Insured all
sums which the Insured shall become legally
obligated to pay as damages because of
COVERAGE A. bodily injury or
COVERAGE B. property damage
to which this insurance applies, caused by an
occurrence, and the Company shall have the right
and duty to defend any suit against the insured
seeding (sic) damages on account of such bodily
injury or property damage, even if any of the
allegations of the suit are groundless, false or
fraudulent, and may make such investigation in
settlement of any claim or suit as it deems
expedient . . .. (Emphasis added.)
The second policy had virtually identical language
establishing the duty to defend and providing coverage
for liability claims.
Each policy also contained an identical exclusion
which is now the central controversy of this case:
This part does not insure:
* *«* * *& *
9
(f) bodily injury or property damaga (sic)
arising out of the discharge, dispersal, release or
escape of smoke, vapors, soot, fumes, acids, alkalis,
toxic chemicals, liquied (sic) or gases, waste
materials or other irritants, contaminants or
pollutants into or upon land, the atmosphere or any
water course or body of water; but this exclusion
does not apply if such discharge, dispersal, release or
escape is sudden and accidental; ... (Emphasis
added.)
This exclusion will be referred to throughout this petition
as “the pollution exclusion”’.
After both policies were paid for and issued, the
three different liability claims in issue in this case were
asserted against Petitioners. These claims will be
discussed in chronological order.
On November 18, 1987, Linda Putinski filed a civil
complaint in the United States District Court for the
Northern District of Ohio, Eastern Division, Case No.
C87-3011A, against Petitioners and others. In essence,
Linda Putinski’s complaint claimed Petitioners were
liable to her for compensatory damages arising out of
bodily injury and property damage under various
theories of liability, including negligence, strict liability,
nuisance, and negligent infliction of mental and
emotional distress, all attributable to alleged release(s) of
hazardous substances from the IEL site. Mrs. Putinski
also asserted a federal cause of action under 42 U.S.C.
§9607 “for the recovery of monies already expended and
to be expended for investigative activities, clean-up, and
other response activities” related to the IEL. site.
On December 9, 1987, the United States
Environmental Protection Agency (USEPA) issued an
administrative order, purportedly pursuant to 42 U.S.C.
§9606, requiring Petitioners Hybud and IEL and other
10
named respondents to ‘undertake [certain] remedial
design and remedial action’’ connected with the IEL site
in Uniontown, Ohio, in order ‘‘to abate an alleged
imminent and substantial endangerment arising from the
release or threatened release of hazardous substances
present at the site.’’ The order further provided that the
IEL site had been placed on the National Priorities List,
purportedly pursuant to 42 U.S.C. §9605, which made
the site a Superfund site. A second administrative order
issued January 28, 1988, superseded the previous order
but did not make any changes which are germane to this
case.
Petitioners notified Respondent of the Putinski
lawsuit and the two USEPA administrative orders, and
demanded that Respondent provide defense and coverage
for the orders and claims of the USEPA and Mrs.
Putinski as required by the policies of insurance issued
to Petitioners by Respondent. By letter dated March 28,
1988, Respondent said it refused to provide a legal
defense or coverage for either the Linda Putinski lawsuit
or the USEPA orders and claims for the sole reason that
in applying for insurance coverage, Petitioners had
‘‘withheld, concealed and/or misrepresented to the agents
of Sphere Drake Insurance Company, Ltd. facts which
would have been materially significant to its decision as
to whether to insure or not to insure [Petitioners]. No
assertion was made (or reserved) by Respondent that the
pollution exclusion barred defense or coverage for these
claims.
* At trial, Respondent's own agents admitted that there was no fraud,
concealment, misrepresentation or withholding of information as had
been claimed by Respondent. Moreover, Respondent's own trial
attorney admitted during the trial that Respondent had no evidence
whatsoever to support the sole grounds given in the denial letter.
Therefore, the Trial Court completely rejected that grounds of denial.
Respondent did not appeal the issue and it is no longer an issue in
this case.
11
On May 31, 1988, Petitioner Hybud was named as a
third-party defendant in an amended third-party
complaint filed in the Common Pleas Court for Medina
County, Ohio, Case No. 42595, arising out of activities at
a landfill located in Montville Township, Medina County,
Ohio known as the Montville landfill. The amended third-
party complaint alleged that Petitioner Hybud was liable
to the third-party plaintiffs for compensatory damages
under contribution and primary and secondary theories
of liability. Hybud notified Respondent of the amended
third-party complaint filed against it, and demanded that
Respondent provide a defense and coverage as required
under the policies of insurance. By letter dated June 20,
1988, Respondent said it refused to provide a defense to
the Montville Landfill lawsuit for the same reason that it
had denied its obligations for the USEPA and Putinski
matters.
In March of 1989, Petitioner IEL received a general
notice of potential liability from the USEPA of its
potential liability for the cost of all response activities to
date and to be undertaken in the future at the Industrial
Excess Landfill site in Uniontown, Ohio. By letters dated
May 26, 1989, Petitioners IEL and Hybud each received
a special notice of liability from the USEPA for the IEL
site.
On October 13, 1989, Petitioners and others were
named as defendants in a case filed by the United States
of America in the United States District Court for the
Northern District of Ohio, Eastern Division, Case No.
89CV-1988.* In this complaint, the United States claimed
that the Petitioners and others were liable to plaintiff for
‘On February 14 and 23, 1990, the United States filed amended
complaints against Petitioners and others. The amendments do not
affect the analysis of the issues in this case.
12
any and all response costs incurred or to be incurred in
connection with the study and remediation of the IEL
site, pursuant to 42 U.S.C. §9607. By letter dated
October 19, 1989, Petitioners notified Respondent of the
case filed by the United States and demanded that
Respondent provide a defense and coverage as required
under the policies of insurance issued to Petitioners. By
letter dated October 24, 1989, Respondent again refused
to defend Petitioners.
Petitioners have denied any and all liability for the
underlying claims. Petitioners’ position has so far been
vindicated. Both the Putinski and Montville Landfill
lawsuits have been concluded: one by dismissal and one
by settlement with payment of a nuisance sum of money.
Thus, the only underlying case to this case which
remains ongoing is the United States’ Superfund cost
recovery action related to the IEL site.
Because of Respondent’s position, Petitioners had to
undertake their own defense. While some other insurance
companies have made partial reimbursements of the
defense costs, the unreimbursed portion of defense costs
plus the costs of litigating with the insurance companies
over those issues have created serious financial distress
to Petitioners. Without relief in this case, Petitioners’
financial resources will inevitably fail with all employees
losing their jobs and the United States being stuck with
orphan shares of Superfund liability for any liability that
may be proven against Petitioners in the underlying
Superfund cost recovery action.
13
ARGUMENT FOR GRANTING THE WRIT
I. The Equal Protection And Due Process Clauses
Of Amendment XIV Of The U. S. Constitution Are
Violated When The Supreme Court Of Ohio Interprets
The Pollution Exclusion Of The Standard Form
Comprehensive General Liability Insurance Policy
Inconsistent With Other State Supreme Courts And
U. S. Court Of Appeals Opinions Dealing With Defense
And Coverage Obligations Under Identical Policies For
An Underlying Federal (.e., Superfund) Cause Of Action
And Other Related Civil Common-Law Actions.
The Court should grant certiorari to hear the merits
of this issue. The issue of whether there are defense and
coverage obligations for Superfund and related civil
claims owed by an insurance company to policyholders
under a standard form comprehensive general liability
insurance policy containing a pollution exclusion is one of
the most hotly contested and deeply divided issues
existing in present jurisprudence. Because the outcome
of this issue will directly impact the enforcement and
effectiveness of the Superfund laws, it is imperative that
this Court address the issue and resolve the disparate
treatment which presently exists on this issue in the
various state and federal courts. As will be shown in
greater detail below, policyholders in some jurisdictions
are entitled to defense and coverage for Superfund claims
whereas those located in other jurisdictions such as the
Petitioners in this case are accorded no defense or coverage
protection for the identical underlying causes of action.
This kind of disparate treatment with respect to federal
claims is exactly the kind of treatment which violates the
equal protection and due process clauses of Amendment
XIV of the U. S. Constitution. Accordingly, this Court
should elect to grant certiorari in this case and consider
14
whether insurance companies who issued the standard
form comprehensive general liability insurance policies
around the country ought to be required to provide
defense and coverage for underlying claims such as
Superfund claims which are pending throughout the
United States. Otherwise, insureds in such states as
Illinois, Wisconsin, West Virginia, Florida and Georgia
will be accorded defense and coverage while those in
states such as Ohio or Michigan will have no such
protections under the identical insurance policies for the
identical kind of federal claims. This kind of result is not
only unjust but unconstitutional. The Court should take
this case and eliminate this unfair disparate treatment.
The majority of state supreme courts that have
interpreted the pollution exclusion contained in standard
form comprehensive general liability insurance policies
have determined said exclusion to be ambiguous and
have construed it in favor of defense and coverage
obligations for the policyholders. See Stephen Jones,
‘Debate Rages Over Insurance Coverage’, The National
Law Journal, p. 20 (Feb. 24, 1992) (“The apparent
majority rule is that the term [sudden] is ambiguous and
... must be interpreted against the insurance company.”
p. 22 (Emphasis added.))
Moreover, there have been six recent state supreme
court cases decided in favor of the policyholders on this
very issue within the last three years. In each case, the
respective state supreme courts held that the word
“sudden” can also mean unexpected and unintended and,
thus, was ambiguous and had to be construed against
the insurance company. As a result coverage and defense
obligations were enforced against the insurance
companies involved in each case. See Outboard Marine
Corp. v. Liberty Mutual Ins. Co., 1992 W.L. 356056
15
(decided Dec. 4, 1992 by Supreme Court of Illinois);
Dimmitt Chevrolet, Inc. v. Southeastern Fidelity Insurance
Corporation, 1992 W.L. 212008 (decided Sept. 3, 1992 by
Supreme Court of Florida); Joy Technologies, Inc. v.
Liberty Mutual Ins. Co., 1992 W.L. 172870 (decided June
11, 1992 by Supreme Court of Appeals of West Virginia);
Hecla Mining Company v. New Hampshire Insurance
Co., 811 P.2d 1083 (Supreme Court of Colorado 1991);
Just v. Land Reclamation Ltd., 155 Wis. 2d 737, 456
N.W.2d 570 (Supreme Court of Wisconsin 1990),
modified on denial of reconsideration 157 Wis. 2d 507,
461 N.W.2d 447; and Claussen v. Aetna Casualty &
Surety Co., 259 Ga. 333, 380 S.E.2d 686 (Supreme Court
of Georgia 1989). In addition to these cases, there are
dozens of other cases decided by other courts in favor of
policyholders on this very issue throughout the country.
See list of cases in the Appendix, infra pp. A79-A84.
As has been noted by the Third Circuit U. S. Court of
Appeals in New Castle County v. Hartford Accident &
Indemnity Co., 933 F.2d 1162 (3d Cir. 1991), there are
still deep divisions of court opinions being issued on this
very issue.
In light of the developing majority rule and the deep
division of decisions on the proper interpretation to be
given to the pollution exclusion contained in standard
form comprehensive general liability insurance policies
and its critical impact upon the practical enforcement
and collectibility of claims made under the Superfund
Act, it is imperative for this Court to accept this case
and decide the issue.
At present, the situation exists that Superfund
claims concerning alleged hazardous waste sites in some
states where policyholders may be entitled to defense
and coverage while in other states no similar benefits are
ee ee
tii,
16
afforded even though the nature of the claims is
completely identical. In some instances, some
policyholders at a site may have defense and coverage
and others may not with respect to the same policies and
claims. This creates the anomalous result that policies
issued to policyholders will provide coverage and defense
in some states but not in others for the identical claims.
This is a classic violation of equal protection and due
process.
Moreover, the decision of the Supreme Court of Ohio,
if undisturbed, will have a catastrophic impact upon the
practical enforcement of the Superfund Law in the State
of Ohio. Small policyholders of meager resources such as
the plaintiffs here cannot afford to defend themselves
from the Superfund claims nor can they afford to pay
any claims. This will mean that the U. S. Government,
the State of Ohio (because of its 10% match requirement)
and taxpayers will have to foot the bill for Superfund
cleanups in Ohio (but not in states having interpretations
in favor of the policyholders). This also leads to the
anomalous result that responsible companies who made
provisions for comprehensive general liability insurance
coverage are stripped of that benefit when claims are
made. It is particularly disingenuous that a landfill
owner such as IEL is to be accorded no benefits under
its comprehensive general liability insurance policies for
any unintended or unexpected pollution that may be
occurring at its site. One must ask what the Petitioners
have been paying for all these years when they were
paying their substantial premiums on these standard
form comprehensive general liability insurance policies.
aE
17
Clearly, this case raises important issues which will
have a dramatic impact upon the practical enforcement
of federal statutes in Ohio and elsewhere as well as raises
the important constitutional issues that must be
resolved. The number of amicus participants in the
Supreme Court of Ohio on this issue as well as the
plethora of conflicting judicial interpretations of the
pollution exclusion being decided all over the United
States makes it critical that this Court grant certiorari in
this case and resolve these important issues to apply
uniformity of treatment of insurance coverage for
Superfund claims.
18
Il. The Due Process And Equal Protection Clauses
Of Amendment XIV Of The U. S. Constitution Are
Violated When The Supreme Court Of Ohio Makes A
Decision Which Inexplicably Fails To Apply And/Or
Follow Its Own Long-Standing Precedent And Rules Of
Construction For Insurance Policy Interpretation.
There is a long-standing rule of law in the State of
Ohio that the existence of conflicting decisions
concerning the meaning of a term in an insurance policy
demonstrates the fundamental ambiguity of that term.
The syllabus in George H. Olmsted & Co. v. Metropolitan
Life Insurance Co. 118 Ohio St. 421, 161 N.E. 276
(1928), reads:
1. Where the language of a clause used in an
insurance contract is such that courts of numerous
jurisdictions have found it necessary to construe it
and in such construction have arrived at conflicting
conclusions as to the correct meaning, intent and
effect thereof, the question whether such clause is
ambiguous ceases to be an open one.
The plethora of litigation over the interpretation of
the pollution exclusion demonstrates under the Olmsted
rule the doubtfulness, uncertainty and ambiguity of the
exclusion. In such circumstance, then the rules which
apply to ambiguous terms must be followed.
In Ohio, an insurance policy is to be strictly
construed against the insurer and in favor of the insured
where the language used is doubtful, uncertain or
ambiguous. Munchik v. Fidelity & Casualty Company of
New York, 2 Ohio St. 2d 303, 209 N.E.2d 167 (1965);
Toms v. Hartford Fire Insurance Co., 146 Ohio St. 39, 63
N.E.2d 909 (1945). In particular, policy provisions which
exclude coverage are to be strictly construed against the
insurer where the language is ambiguous. Munchik v.
Fidelity & Casualty Company of New York, supra.
I iain emncanearenmnmeremeneneinnice ce
19
Finally, that which is not excluded from the
operation of an insurance contract is included in the
operation thereof. Home Indemnity Company uv. Village
of Plymouth, 146 Ohio St. 96 (1945). Where, as here, an
exclusion is reasonably susceptible of more than one
meaning, it should have been construed in favor of the
insured and strictly against the insurer. Hutchinson v.
J C Penney Casualty Insurance Co., 17 Ohio St. 3d 195,
197, 478 N.E.2d 1000, 1003 (1985).
In Ohio, a Court may not rewrite an insurance policy
to define coverage, nor may it rewrite a policy to deny
coverage and to protect the insurer from its own
drafting. Cincinnati Insurance Company v. Phillips, 52
Ohio St. 3d 162, 166, 556 N.E.2d 1150, 1154 (1990). It is
clear from an examination of the opinion issued by the
Supreme Court of Ohio that it improperly goes beyond
the evidence of record and rewrites the policies at issue
to deny coverage for the insureds. The opinion holds that
if the term ‘“‘sudden’’ does not have a temporal element,
then the pollution exclusion would be surplusage in light
of the “‘typical’’ definition of ‘‘occurrence.’’ 64 Ohio St. 3d
at 666. The opinion acknowledges that the policies at
issue do not define occurrence. Jd. at 661 Note 1.
Nonetheless, the opinion, by repeatedly relying on the
“typical” definitions of “occurrence,” a definition not of
record, rewrites the policies at issue in order to construe
the pollution exclusion in violation of the above rule.
The Supreme Court of Ohio also failed to follow its
well-established practice of referring to dictionaries in
determining the meaning of a term im an insurance
policy. See Olmstead v. Lumbermans Mutual Ins. Co., 22
Ohio St. 2d 212, 218, 259 N.E.2d 123, 127 (1970); Home
Indemnity Company v. Plymouth, supra; and Munchik v.
EEE
20
Fidelity & Casualty Co., supra. That Court’s opinion
inexplicably departs from this practice when it
concludes:
As it is most commonly used, ‘sudden’ means
happening quickly, abruptly, or without prior notice.
This is the plain and ordinary meaning of the word.
... Supra at page 666.
That Court provides no support for this factual
conclusion about word usage.
Had the Supreme Court of Ohio surveyed commonly
used dictionaries, as it is obligated to do under past
precedent, such a conclusion could not have been reached
because there are various and numerous dictionary
definitions of the word “sudden” that are consistent with
Petitioners’ position in this case. Webster’s Third New
International Dictionary (1986), consulted by the
Supreme Court of Ohio in Munchik, gives as the first
meaning of ‘‘sudden”: “happening without previous
notice or with very brief notice: coming or occurring
unexpectedly: not foreseen or prepared for’ (p. 2284).
The definition in Black’s Law Dictionary (6th Ed. 1990)
excludes any temporal component. It defines ‘‘sudden”
to mean: “happening without previous notice or with
very brief notice; coming or occurring unexpectedly;
unforeseen; unprepared for’ (p. 1432). The Oxford
English Dictionary defines “sudden” as “happening or
coming without warning or premonition; taking place or
appearing all at once. In some contexts the implication is
rather ‘unexpected, unforeseen, unlooked for’; or ‘not
prepared or provided for.’ ”’ Jd. at 115 (2d Ed. 1989).
It is fundamentally unjust and unconstitutional for
the Supreme Court of Ohio to fail to apply and/or follow
the foregoing long-standing principles of law when
making its decision in this case.
21
III. The Due Process And Equal Protection Clauses
Of Amendment XIV Of The U. S. Constitution Are
Violated When The Supreme Court Of Ohio Ignores
And/Or Fails To Enforce Policy Language In Accord
With Insurance Company Explanations Accompanying
Policy Language Submitted To The State Insurance
Regulators For Review And Approval.
Ohio law imposes significant regulations on
insurance companies that sell insurance to Ohio
policyholders. Every insurer doing business in the State
of Ohio is required to file with the Superintendent of
Insurance every form of a policy, endorsement, rider,
etc., which it proposes to use. Ohio Revised Code
§3937.03(A). Such filings may be made on behalf of
insurers by licensed rating organizations. O.R.C.
§3937.03(B). No insurer is permitted to make or issue a
contract or policy except in accordance with the filings
which are in effect. O.R.C. §3937.03(H). Moreover, O.R.C.
§3901.20 prohibits any person (including insurance
companies) from engaging in any unfair or deceptive
acts, which includes the making or issuing of any
statement misrepresenting the terms of any policy
(O.R.C. §3901.21(A)).
The general use of the pollution exclusion in issue in
this case commenced in June 1970 as a result of filings
made by the Insurance Rating Board with the Director
of Insurance for the Ohio Insurance Department. In the
“Explanation” of the meaning of the pollution exclusion,
the Insurance Rating Board told the Ohio Insurance
Department that ‘‘coverage is continued for pollution or
contamination-caused injuries when the pollution or
contamination results from an accident.’’ (Emphasis
added.) The “Explanation” also stated that the exclusion
“clarifies” the situation of coverage for pollution or
~~
22
contamination to avoid any question of intent. There is
no indication in the filing that the insurance industry
intended to eliminate or reduce coverage when the
alleged property damage took place gradually, as
opposed to abruptly.
The meaning of the pollution exclusion advocated by
the insurance companies in this case, and accepted by
the Supreme Court of Ohio, is at complete odds with the
original filings associated with the pollution exclusion.
The Ohio Revised Code forbids any insurance company
(including Sphere Drake) from making or issuing a policy
except in accordance with the filings that are made with
the Department of Insurance. The Supreme Court of
Ohio’s acceptance of the insurance companies’ self-
serving revision of the pollution exclusion explanation
will effectively eliminate this restriction and permit a
patent violation of law. It will essentially make insurance
companies in Ohio unaccountable for the explanations
they provide to the State when they introduce new policy
provisions. It can hardly be argued that this is
consistent with the purposes of insurance regulation in
the State of Ohio. More importantly to this Court, such
blatant side-stepping of applicable law constitutes a
denial of equal protection and due process. It is not fair
to Ohio policyholders that their insurers can blithely
deny coverage that they have already said exists. These
policyholders have paid for such coverage, and they
should be allowed to have the benefits related thereto.
It is essential that this Court acknowledge that the
U. S. Constitution requires that statutes be fully and
fairly enforced, including that the insurance industry be
bound by its legally required affirmative representations
to regulatory bodies. As the highest court of West
Virginia held just a few months ago:
23
The public policy of the State of West Virginia is
that the law of the State should be administered in
such a way as to insure that corporations which
seek to do business in West Virginia act in a manner
consistent with their studied, unambiguous, official,
affirmative representations to the State, its
subdivisions, or its regulatory bodies. Joy
Technologies, supra at page 1, syllabus {2 and 10.*
See also Dimmitt Chevrolet, supra at 6; Claussen, supra
at 688. This Court is required to see that the same
protection is afforded to Ohio policyholders as are
provided to policyholders in other states for identical
policies and federal claims and that the laws governing
insurance are fully and fairly enforced.
‘The insurance industry representations made to the West Virginia
Insurance Commissioner are materially identical to those made to the
Ohio Insurance Department.
ee
24
IV. The Due Process And Equal Protection Clauses
Of Amendment XIV Of The U. S. Constitution Are
Violated When The Supreme Court Of Ohio Determines
From The Pleadings Alone That Defense And Coverage
For The Underlying Actions Are Barred By The
Pollution Exclusion.
The well-established test under Ohio law for
determining whether an insurer has a duty to defend a
case is whether the potential for liability within the
coverage of the insurance policy appears from the
allegations in the underlying complaint. State Farm Fire
& Casualty Co. v. Pildner, 40 Ohio St. 2d 101, 321
N.E.2d 600 (1974); Socony Vacuum Oil Company v.
Continental Casualty Co., 144 Ohio St. 382, 59 N.E.2d
199 (1945). [t is well-established that where the
allegations in an action against the insured state a claim
which is “potentially or arguably within the policy
coverage or there is some doubt as to whether a theory
of recovery within the policy coverage has been pleaded,
the insurer must accept the defense of the claim.” City of
Willoughby Hills v. Cincinnati Insurance Co., 9 Ohio St.
3d 177, 459 N.E.2d 555 (1984). The inquiry is not
restricted to the specific allegations of the complaint but
may require inquiry as to whether the underlying
allegations arguably or potentially fall within the scope
of coverage. City of Willoughby Hills v. Cincinnati
Insurance Co., supra at 180.
After determining that the sudden and accidental
exception to the pollution exclusion means that the
incident must have happened quickly, abruptly, or
without prior notice, the Supreme Court of Ohio then
applies this holding to the pleadings of the underlying
cases in Part IV of its opinion. There the Supreme Court
of Ohio noted that their review of the complaint shows
25
that there was no allegation that the release or discharge
of the waste happened abruptly or instantaneously.
Accordingly, the Supreme Court of Ohio determined that
the exception to the exclusion was not invoked by the
complaints.
In making this determination, the Supreme Court of
Ohio made two substantial errors. The first is that it
ignored all prior precedent decided by that Court which
said that where there is ambiguity in the underlying
complaint such that it does not state facts sufficiently
clear to bring the case within or without coverage, then
there is an obligation to defend. The second major
mistake in this part of the Supreme Court of Ohio's
analysis is that Court’s failure to remand the case to the
Trial Court so that further discovery, motion practice
and trial proceedings may occur so as to flush out the
allegations and evidence related to the underlying
complaints. See, for example, Grant Southern Iron and
Metal Company v. CNA Insurance Co., 905 F.2d 954 (6th
Cir., 1990) (even under Michigan’s definition of
“sudden’’, there remain genuine issues of fact as to
whether the insured’s polluting was the result of a few
discrete polluting events, each of which was short in
duration and accidental in nature.) When this case moved
through the Trial Court and the Appeals Court, that
exercise was not necessary because of the prior favorable
precedent that then existed. See Buckeye Union
Insurance Company v. Liberty Solvents and Chemicais
Co., 17 Ohio App. 3d 127, 477 N.E.2d 1227 (Summit
Cty., 1984); and Kipin Industries v. American Universal
Life Insurance Co., 41 Ohio App. 3d 228 (Hamilton Cty.,
1987), motion to certify overruled 1-13-88 in Case No. 87-
1720 (Supreme Court of Ohio). The Supreme Court of
Ohio has followed this practice in the past such as in the
26
City of Willoughby Hills v. Cincinnati Insurance Co.
case. It is fundamentally unfair and unconstitutional to
preclude the insureds from attempting to make a
showing that some part or all of the underlying cases
may fit within the definition of “sudden” as it has been
newly defined for courts in the State of Ohio.
27
V. Amendment VII And The Due Process And
Equal Protection Clauses Of Amendment XIV Of The
U. S. Constitution Were Violated Because Petitioners
Were Denied A Jury Trial In A Case Where A Proper
Timely Jury Demand Had Been Made And Not
Subsequently Waived.
Petitioners made a timely demand for a jury trial in
this case as to all issues in all of their complaints filed
with the Trial Court. Despite the timely jury demands,
the Trial Court refused to allow a jury to hear the issues
and instead those issues were tried solely to the judge.
This was a clear violation of the Constitution of
the United States (Amendments V ana XIV), the
Constitution of Ohio (Article I, Section 5) and the Ohio
Rules of Civil Procedure, Rules 38 and 39, all of such
authorities guaranteeing the right to trial by jury.
The case law clearly favors Petitioners’ position on
this matter. See Fuller v. German Motor Sales, Inc., 51
Ohio App. 3d 101 (Hamilton Cty., 1988), which states in
headnote 2:
A party who makes a timely demand for a jury trial
in a declaratory judgment action is ordinarily
entitled to have a jury resolve any material factual
questions.
See also, Harleysville Mutual Insurance Co. v. Santora, 3
Ohio App. 3d 257 (Cuyahoga Cty., 1982); Ohio Revised
Code §2721.10.
The Trial Court, Covrt of Appeals and Supreme
Court of Ohio failed to follow the Ohio Supreme Court
precedent established in Erie Insurance Group v. Fisher,
15 Ohio St. 3d 380, 474 N.E.2d 320 (1984). In Erie
Insurance Group v. Fisher, the Supreme Court of Ohio
clearly held that a right to trial by jury does exist in a
sa hitiieciasiaiiii ea
28
declaratory judgment action between an insurer and its
insured which seeks the recovery of money. The Court in
Erie, supra at 382, said:
The right to trial by jury does exist in a declaratory
judgment action which is between an insurer and
the insured or the injured party, and which is for the
recovery of money. See, Ohio Farmers Indemnity
Company v. Chames (1959), 170 Ohio St. 209;
Travelers Indemnity Company v. Cochrane, [155
Ohio St. 301 (1951)); Schaefer v. First National Bank
(1938), 134 Ohio St. 511; Harleysville Mutual
Insurance Company v. Santora (1982), 3 Ohio
App.3d 257; R. C. 2721.10 and 2311.04. The courts
of other states which have also enacted the Uniform
Declaratory Judgment Act have consistently held
that a right to jury trial exists in such an action.
See, Annotation 1950 13 ALR 2d 777.
In the case presently before the Court, it is quite
clear that a money judgment was being sought and
indeed was granted and that, therefore, the case was one
which required a jury trial if one was demanded by a
party. By failing to permit one in this case, the
Constitution, statutes and procedural rules were clearly
violated.
29
CONCLUSION
For all the foregoing reasons, Petitioners respectfully
request that the petition for a writ of certiorari be
granted and this case be accepted for a review of the
merits of all of the foregoing issues.
Respectfully submitted,
MATTHEW YACKSHAW
Counsel of Record
Day, KETTERER, RALEY,
WRIGHT & RYBOLT
800 William R. Day Building
121 Cleveland Avenue South
Canton, Ohio 44702-1921
(216) 455-0173
Attorney for Petitioners
See LE LE Ree aii
—A
/
:
Al
APPENDIX
OPINION OF THE SUPREME COURT OF OHIO
(Decided September 16, 1992)
No. 91-641
THE SUPREME COURT OF OHIO
HYBUD EQUIPMENT CORP., et ai,
Appellants and Cross-Appellees,
Vv.
SPHERE DRAKE INSURANCE COMPANY, LTD.,
Appellee and Cross-Appellant.
[657] [Cite as Hybud Equip. Corp. v. Sphere
Drake Ins. Co., Ltd. (1992), 64 Ohio
St.3d 657.]
Insurance—Exclusion in lability insurance policy for
damage caused by pollution except pollution by a
“sudden and accidental’ discharge—‘‘Sudden”’ is
not synonymous with “unexpected” in the typical
definition of “‘occurrence.”’
APPEAL and Cross-Appea from the Court of
Appeals for Summit County, No. 14597.
Industrial Excess Landfill, Inc. (“IEL’’) is a
corporation that, before 1978, owned and operated the
Industrial Excess Landfill, a licensed landfill in
Uniontown, Ohio. IEL still owns the site of the landfill;
however, the landfill no longer accepts any waste.
A2
Hybud Equipment Corporation (““Hybud’’) is a
corporation with its principal place of business in Akron,
Ohio. In addition to building and leasing equipment,
compactors, and containers for solid waste, Hybud owns
a number of vehicles. These vehicles are employed to
collect and transport the waste materia! of various local
commercial and industrial entities. Hybud has té&ken
waste to the Industrial Excess Landfill and the
Montville Landfill. The latter landfill is located in
Medina County, Ohio.
Hyman Budoff is an officer and director of both IEL
and Hybud. Over the years, IEL and Hybud have
purchased insurance coverage from a number of
companies. From July 30, 1985 until June 30, 1987, IEL,
Hybud and Budoff were each covered under two policies
issued by the Sphere Drake Insurance Company, Ltd.
Sphere Drake is authorized to transact business in Ohio
through the Ostrov Corporation, an independent
insurance agency.
Under the comprehensive general liability insurance
provisions of both policies, Sphere Drake agreed to pay
on behalf of IEL, Hybud and Budoff any sums which
they would become legally obligated to pay as a result of
bodily injury or property damage caused by an
“occurrence.” These provisions also stated that Sphere
Drake ‘‘shall have the right and duty to defend any suit
against the insured seeking damages on account of such
bodily injury or property damage, even if any of the
allegations of the suit are groundless, false or
fraudulent***.”’
[658] Each policy then listed a number of exclusions
to the foregoing coverage, including the so-called
“Standard Pollution Exclusion.’’ In the second policy,
A3
which covered the period from June 30, 1986 until June
30, 1987, this exclusion was set forth as exclusion (f):
‘This insurance does not apply:
‘ke
‘(f) 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 other water course or body
of water; but this exclusion does not apply if such
discharge, dispersal, release or escape is sudden and
accidental[.]’’ (Emphasis added.)
The relevant exclusion in the first policy, which
covered the period from July 30, 1985 until July 30,
1986, was worded in virtually the same manner.
After the second policy expired, three environmental
lawsuits were brought, each involving one or more of the
three insureds. In two of these actions, IEL, Hybud and
Budoff were named as defendants. In the third, Hybud
was named as a third-party defendant in an action
involving the Montville Landfill.
The first action that involved each of the three
insureds was initiated in November 1987 in an Ohio
federal district court. In that complaint, the plaintiff,
Linda Putinski, alleged that she had suffered bodily
injury and property damage as a result of the leakage of
certain pollutants from the Industrial Excess Landfill.
Specifically, she alleged that as a result of damage to
storage containers, various chemicals had escaped into
the air, soil, and groundwater over a fourteen-year
period.
A4
The second action against each of the three insureds
also involved the Industrial Excess Landfill. This action
was brought by the United States in October 1989 in the
same Ohio federal district court. The complaint was
predicated on an administrative order issued by the
Environmental Protection Agency in December 1987,
and then superseded in January 1988.
In the order, the agency found that the landfill had
accepted various waste materials over a twelve-year
period, even though IEL had failed to install an
impermeable liner to halt any leakage of waste.
Consequently, certain contaminants had migrated into
residential water weils near the landfill. Based upon this,
the complaint alleged that IEL, Hybud and Budoff,
along with other named defendants, were jointly and
severally liable for any costs incurred by the United
States in remedial actions.
The third action was originally filed by the state of
Ohio in the Medina County Court of Common Pleas.
There, the state sought the cleanup of the [659]
Montville Landfill. The complaint alleged that as a result
of the manner in which the waste had been handled, a
leachate had been generated and was seeping into the
local ground and surface waters along with other
hazardous waste. The complaint further alleged that this
had been occurring since the late 1970s.
In April 1989, Hybud was brought into that action
as a third-party defendant. The third-party complaint
alleged that even though Hybud knew or should have
known that the Montville Landfill was not licensed to
accept such waste, Hybud had transported hazardous
waste to the landfill over a period of years.
A5
After receiving service in each of the aforementioned
actions, the three insureds notified Sphere Drake of each
action, and asked the company to defend them in the
litigation. In each instance, Sphere Drake refused.
Accordingly, the three insureds initiated the instant
declaratory judgment action in the Summit County
Court of Common Pleas. For relief, the insureds
requested that the trial court declare that under the
terms of the two policies, Sphere Drake was required to
defend them in each of the foregoing cases. The insureds
also claimed damages covering the costs they had
incurred as a result of having to defend themselves. In
response, Sphere Drake argued, inter alia, that it did not
have a duty to defend in any of the actions because
coverage was excluded by the pollution exclusion clause
in both policies.
The issues of liability and damages were separated
for purposes of hearing. After a bench trial, the trial
court rendered its first judgment, holding that Sphere
Drake was required by the policies to provide a defense
to the actions and indemnify the insureds from liability.
Then, after a further hearing on the issue of damages,
the court issued its second judgment, ordering Sphere
Drake to pay the insureds $181,287 as damages for
failing to represent them. The court further ordered
Sphere Drake to assume the defense of the insureds in
the two actions still pending, and to pay future costs
incurred in the pending suits.
Both sides appealed. As to the issue of liability, the
Ninth Appellate District affirmed the judgment of the
trial court. Relying upon its earlier decision in Buckeye
Union Ins. Co. v. Liberty Solvents & Chemicals Co.
(1984), 17 Ohio App.3d 127, 17 OBR 225, 477 N.E.2d
1227, the appellate court rejected Sphere Drake's
MGC rem ,
A6
contention that coverage was barred by the pollution
exclusion. As to the issue of damages, the appellate
court affirmed the trial court’s assessment of damages,
holding that there was no right to a jury trial.
Both sides appealed to this court. In July 1991, this
court granted the motion and cross-motion to certify the
record.
[660] Day, Ketterer, Raley, Wright & Ryboit and
Matthew Yackshaw, for appellants and cross-appellees.
Reminger & Reminger Co., L.P.A., David Ross and
Clifford C. Masch; Arter & Hadden and Louis Gerber, for
appellee and cross-appellant.
George Pappas Co., L.P.A., and Dennis J. Bartek;
Lord, Bissell & Brook, John B. Haarlow, Michael P.
Comiskey, Daniel I. Schlessinger and Diane I. Jennings,
urging reversal and in support of the cross-appeal, on
behalf of amicus curiae John Richard Ludbrook Yovell.
Wiley, Rein @& Fielding, Thomas W. Brunner,
Christopher D. Cerf and Kirk J. Nahra; Montgomery,
Rennie & Jonson and Frederick M. Morgan, Jr., urging
reversal and in support of the cross-appeal, on behalf of
amict curiae Insurance Environmental Litigation
Association et al.
Brouse & McDowell, Frank E. Quirk, Paul A. Rose
and Keven D. Eiber; Anderson, Kill, Olick & Oshinsky,
Eugene R. Anderson, Thomas H. Sear and Thomas G.
Rozinski, urging affirmance and in opposition to the
cross-appeal on behalf of amici curiae city of Akron et al.
Graydon, Head & Ritchey and John C Greiner;
Covington & Burling, William H. Allen, William F.
Greaney and Adam M. Cole, urging affirmance and in
Opposition to the cross-appeal, on behalf of amici curiae
Ohio Manufacturers’ Association et al.
A7
Jones, Day Reavis & Pogue, Steven E. Sigalow,
Kathleen B. Burke, Joseph C. Weinstein and Charles D.
Hassell, urging affirmance and in opposition to the cross-
appeal, on behalf of amici curiae Ohio Township
Association et al.
Squire, Sanders & Dempsey, John R. Gall, David W.
Alexander, Karen A. Winters and Philomena M. Dane,
urging affirmance and in opposition to the cross-appeal,
on behalf of amici curiae Danis Environmental
Management Co. et al.
Lee I. Fisher, Attorney General, Beverly Yale
Pfeiffer and Ellen B. Leidner, urging affirmance and in
opposition to the cross-appeal on behalf of amicus curiae
Lee I. Fisher.
CuRISTLEY, J. In their appeal before this court, the
three insureds, IEL, Hybud and Budoff, have raised four
issues concerning their right to a jury trial and the
sufficiency of the damages award. In its cross-appeal,
Sphere Drake has also raised a number of issues, the
majority of which pertain to the proper interpretation of
the language in the two policies.
[661] For the reasons which follow, this court finds
that it is not necessary for us to address the majority of
these issues, since the determination of the following
single issue will control the outcome in this case.
Specifically, we conclude that Sphere Drake was not
under an obligation to defend the insureds in the three
underlying actions because the claims in those actions
were excluded from coverage by the pollution exclusion
in each of the two policies. Accordingly, the judgments
of both the trial and appellate courts are reversed.
A8
I
As previously noted, in rejecting Sphere Drake's
argument as to the application of the pollution exclusion
in this case, the appellate court relied heavily upon its
prior decision in Buckeye Union, supra. In that case,
Liberty Solvents, the insured, was named as a defendant
in an action involving the cleanup of a hazardous waste
facility. The complaint in the underlying lawsuit alleged
that Liberty Solvents had contracted with Chem-Dyne to
dispose of its waste, and that this waste had escaped
from containers and filtered into the surface water, soil,
and groundwater of the surrounding area.
As in the instant case, Liberty Solvents requested
that its insurer, Buckeye Union, defend it in the lawsuit.
In response, Buckeye Union initiated a declaratory
judgment action, seeking a determination that it was not
obligated to defend under the policy.
In reversing the summary judgment in favor of
Buckeye Union, the Ninth Appellate District first held
that the release of pollutants and the resultant damages
constituted an “occurrence” to which the policy applied.
In the Buckeye Union policy, the term “occurrence’’ was
defined in the following manner:
‘““« “(Olcecurrence’’ means an accident, including
continuous or repeated exposure to conditions,
which results in *** property damage neither
‘In the case at bar, the policies at issue do not define the term
“occurrence” as it is used in the comprehensive general liability
provisions. For the purposes of this discussion, it is not necessary for
us to define this term, as one analysis will focus upon the meaning of
the phrase ‘‘sudden and accidental” in the exception to the pollution
exclusion. In addition, the parties have not raised the question of the
proper interpretation of “occurrence.”
However, we note that a review of the multitude of decisions on
this subject shows that the policies usually define the term, and do so
in the same manner as does the Buckeye Union policy.
A9
expected nor intended from the standpoint of the
insured[.]’”’ Jd., 17 Ohio App.3d at 131, 17 OBR at.
230, 477 N.E.2d at 1232.
[662] Notwithstanding the exact language of the
definition, the court concluded that the term
“occurrence” encompassed more than accidents, and was
synonymous with the word “event.”” The court also
emphasized that even if the release of the pollutants was
intentional, the actions of the insured could still be an
“occurrence” if the resulting damages were not intended
or expected.
The Buckeye Union court then turned its attention
to the pollution exclusion in the policy. The language of
that provision was virtually identical to the exclusion in
the policy now before this court. Essentially, the
exclusion stated that the coverage did not apply to any
bodily harm or property damages resulting from the
release or escape of pollutants into or upon land, air or
water. The final clause in the exclusion then stated that
the exclusion did not apply if the release or escape is
“sudden and accidental.”’
in analyzing the exception to the exclusion, the court
began by concluding that the phrase “‘sudden and
accidental’ was ambiguous, and accordingly had to be
construed against the insurer. The court then quoted
from other decisions which had determined that the word
“sudden’’ should not be interpreted as being limited to
an instantaneous happening, but should cover any
release or escape which was unexpected by the insured.
By following this interpretation, the court read “sudden
and accidental’’ as having the same meaning as the
phrase “neither expected nor intended”’ in the definition
of occurrence:
Al0
“When viewed in light of the case law cited,
the clause can be interpreted «as simply a
restatement of the definition of ‘‘occurrence’’—that
is, that the policy will cover claims where the injury
was “neither expected nor intended.” It is a
reaffirmation of the principle that coverage will not
be provided for intended results of intentional acts,
but will be provided for the unintended results of an
intentional act.’ Jd. at 133, 17 OBR at 232, 477
N.E.2d at 1234, quoting Jackson Twp. Mun. Util.
Auth. v. Hartford Acc. & Indemn. Co. (1982), 186
N.J.Super. 156, 164, 451 A.2d 990, 994.
Applying this logic to the facts of that case, the
Buckeye Union court held that the exception to the
pollution exclusion applied, since the release of pollutants
had been unexpected and unintended by the insured.
Accordingly, that court found that the insured was
entitled to a defense and indemnity in the underlying
lawsuit. (The court also found an obligation to indemnify,
but that issue was not argued on appeal.)
il
During its discussion of the pollution exclusion, the
Buckeye Union court stated that the ‘overwhelming
authority from other jurisdictions” supported [663] its
interpretation of the “sudden and accidental” phrase. Jd.,
17 Ohio App.3d at 132, 17 OBR at 231, 477 N.E.2d at
1234. While this may have been true in 1984, recent
decisions have rejected the holding of Buckeye Union.
A prime example of this recent trend is the decision
of the North Carolina Supreme Court in Waste Mgt. of
Carolinas, Inc. v. Peerless Ins. Co. (1986), 315 N.C. 688,
340 S.E.2d 374. There, the insured was engaged in the
business of hauling waste materials and disposing of
them in a local landfill. When the owners of the landfill
All
were sued by the United States, the insured was added
as a third-party defendant. As in the instant case, when
its insurer refused to defend it, the insured brought a
declaratory judgment action.
Upon reviewing the language of the pollution
exclusion and the definition of ‘‘occurrence,’’ the
Supreme Court of North Carolina held that the
provisions were not ambiguous because the language
could reasonably be interpreted in only one manner:
‘We do not perceive these provisions to be
either ambiguous or, except for the repeated
appearance of ‘accident,’ redundant. In our view,
this is an instance where nontechnical words (except
for ‘occurrence,’ which is defined in the policy) can
be given the same meaning they usually receive in
ordinary speech. Nor does their context require us to
do otherwise.” (Footnote omitted.) Jd. at 694, 340
S.E.2d at 379.
The North Carolina court then went on to conclude
that the word ‘‘sudden”’ had to be interpreted as having
a temporal aspect, and that it could not be read to
include releases which occur over a long period of time:
“The exception also describes the event—not only in
terms of its being unexpected, but in terms of its
happening instantaneously or precipitantly.” Jd. at 699,
340 S.E.2d at 382.
Turning to the specific facts before it, the Waste
Mgt. court first held that while the actual dumping of
the waste could not be considered an “occurrence” as
defined in the policy because it had been done
intentionally, the leakage of the waste did constitute an
“occurrence” because it had been both unexpected and
unintended. However, the insured was still not entitled
to a defense because the pollution exclusion was
Al2
certainly applicable to the leakage of the waste.
Moreover, the court held that the exception to the
exclusion did not apply because the underlying complaint
never stated or implied that the release of the waste had
occurred suddenly.
Other state supreme courts have also held that the
word ‘“‘sudden”’ in the exception must be interpreted as
having a temporal aspect. See, e.g., Upjohn Co. v. New
Hampshire Ins. Co. (1991), 438 Mich. 197, 476 N.W.2d
392: Lumbermens Mut. Cas. Co. v. Belleville Indus., Inc.
(1990), 407 Mass. 675, 555 N.E.2d 568.
[664] In addition to the plain and ordinary meaning of
the word, some courts have placed heavy emphasis upon
the fact that “sudden” would not have any meaning in
the exception if it were not interpreted to also mean
“quick” or “abrupt.” These courts have recognized that
the word ‘“‘accidental’’ also means unexpected:
“For the word ‘sudden’ to have any significant
purpose, and not to be surplusage when used
generally in conjunction with the word ‘accidental,’
it must have a temporal aspect to its meaning, and
not just the sense of something unexpected. We
hold. therefore, that when used in describing a
release of pollutants, ‘sudden’ in conjunction with
‘accidental’ has a temporal element. The issue is
whether the release was sudden. The alternative is
that it was gradual. If the release was abrupt and
also accidental, there is coverage for an occurrence
arising out of the discharge of pollutants.”” Jd., 407
Mass. at 680, 555 N.E.2d at 572.
In addition to state courts, many federal courts have
rejected the Buckeye Union interpretation of the word
‘‘sudden.’’ Of particular interest is a series of decisions of
the Sixth Circuit Court of Appeals. In applying state
principles of contract interpretation, the circuit court has
consistently interpreted the word in the same manner as
Al3
in Waste Mgt., supra. See Grant-Southern Iron & Metal
Co. v. CNA Ins. Co. (C.A.6, 1990), 905 F.2d 954; FL
Aerospace v. Aetna Cas. & Sur. Co. (C.A.6 1990), 897
F.2d 214; United States Fid. & Guar. Co. v. Star Fire
Coals, Inc. (C.A.6, 1988), 856 F.2d 31.
In the latter decision, the circuit court specifically
rejected the argument that the pollution exclusion was
ambiguous. To emphasize this point, the court quoted
Am. Motorist Ins. Co. v. Gen. Host Corp. (D.Kan. 1987),
667 F.Supp. 1423, 1429: “We fully agree with the
conclusion that this ‘language is clear and _ plain,
something only a lawyer’s ingenuity could make
ambiguous.’ Star Fire Coals, supra, at 34. As to the
proper definition of the word ‘‘sudden,’’ the court then
stated:
“We believe the everyday meaning of the term
‘sudden’ is exactly what this clause means. We do
not believe that it is possible to define ‘sudden’
without reference to a temporal element that joins
together conceptually the immediate and _ the
unexpected.” Jd.
Besides the Sixth Circuit, other federal appellate
courts have followed this interpretation of the word
““sudden.”’ See, e.g., A. Johnson & Co., Inc. v. Aetna Cas.
& Sur. Co. (C.A.1 1991), 933 F.2d 66; New York v. Amro
Realty Co. (C.A.2, 1991), 936 F.2d 1420.
Finally, at least one court has predicted that this
court would not follow Buckeye Union. In Borden, Inc. v.
Affiliated FM Ins. Co. (S.D.Ohio 1987), 682 F.Supp. 927,
the court reviewed our previous pronouncements
concerning [665] the proper manner of interpreting
insurance contracts, and then rejected the Buckeye
Union analysis on the ground that the exclusion was
unambiguous. The court went on to conclude that in its
common usage, ‘“sudden’’ means “happening without
previous notice or with very brief notice.’’ Jd. at 930.
Al4
Ill
As the Borden court correctly noted, this court has
consistently held that insurance contracts must be
construed in accordance with the same rules as other
written contracts. Universal Underwriters Ins. Co. uv.
Shuff (1981), 67 Ohio St.2d 172, 21 0.0.3d 108, 423
N.E.2d 417; Rhoades v. Equitable Life Assur. Soc. of the
United States (1978), 54 Ohio St.2d 45, 8 0.0.3d 39, 374
N.E.2d 643.
In applying these rules, we have stated that the
most critical rule is that which stops this court from
rewriting the contract when the intent of the parties is
evident, i.e., if the language of the policy’s provisions is
clear and unambiguous, this court may not “resort to
construction of that language.’”’ Karabin v. State Auto.
Mut. Ins. Co. (1984), 10 Ohio St.3d 163, 167, 10 OBR
497, 499, 462 N.E.2d 403, 406. In Tomlinson v. Skolnik
(1989), 44 Ohio St.3d 11, 12, 540 N.E.2d 716, 717-718,
this court expounded upon this rule further:
“*** Thus, in reviewing an insurance policy,
words and phrases used therein ‘must be given their
natural and commonly accepted meaning, where
they in fact possess such meaning, to the end that a
reasonable interpretation of the insurance contract
consistent with the apparent object and plain intent
of the parties may be determined.’’’ (Quoting
Gomolka v. State Auto. Mut. Ins. Co. [1982], 70
Ohio St.2d 166, 167-168, 24 0.0.3d 274, 275-276,
436 N.E.2d 1347, 1348.)
In reaching its decision, the Buckeye Union court
aptly noted that under the case law of this state, an
exclusion in an insurance policy will be interpreted as
applying only to that which is clearly intended to be
excluded. See, e.g., Moorman v. Prudential Ins. Co.
(1983), 4 Ohio St.3d 20, 21, 4 OBR 17, 19, 445 N.E.2d
Ald
1122, 1124. However, the rule of strict construction does
not permit a court to change the obvious -intent of a
provision just to impose coverage.
Applying these rules of construction to policy
language in this case, this court concludes that the
analysis of the exception to the pollution exclusion in
Buckeye Union is incorrect. Specifically, we hold that the
word “‘sudden”’ in the exception is not synonymous with
the word ‘unexpected’ in the typical definitions of
“occurrence”; instead, the word also has a temporal
aspect. We reach this conclusion for three reasons.
[666] First, and foremost, like the courts in Borden
and Waste Mgt. this court finds that the word
‘“‘sudden,”’ as well as the remainder of the exception, is
not ambiguous in the context of the entire exclusion. As
it is most commonly used, ‘“‘sudden’’ means happening
quickly, abruptly, or without prior notice. This is the
plain and ordinary meaning of the word, and the context
in which it is employed does not indicate that it should
be given any other meaning.
Second, we agree with the court in Belleville Indus.,
supra, that unless ‘“‘sudden”’ is interpreted to have a
temporal aspect, the word does not add anything to the
phrase “sudden and accidental.’’ In its common, ordinary
use, the word “‘accidental’’ means unexpected, as well as
unintended. Under the Buckeye Union interpretation,
‘“‘sudden”’ has the same meaning, and accordingly serves
no purpose in the phrase. However, “‘[iJn construing a
written instrument, effect should be given to all of its
words, if this can be done by any reasonable
interpretation.’’ Wadsworth Coal Co. v. Silver Creek
Mining & Ry. Co. (1884), 40 Ohio St. 559, paragraph one
of the syllabus.
Al6
Third, if ‘‘sudden’’ were interpreted to be
synonymous with ‘‘unexpected,”’ then the entire pollution
exclusion would not serve the purpose for which it was
clearly included. This is because, under Buckeye Union,
the pollution exclusion would exclude only bodily injury
or property damage that was already excluded by the
common definition of ‘“‘occurrence.”
As previously noted, the typical definition of
‘occurrence’ in an insurance policy is an accident that
results in injury or damage which the insured did not
intend or expect. That definition also states that an
accident includes continuous or repeated exposure to a
condition. Accordingly, under this definition, it does not
matter whether the accident happened quickly or
gradually; it would still be considered an “‘occurrence’’ if
it resulted in bodily injury or property damage.
From this broad coverage, the pollution exclusion
then excluded those injuries or damages which resulted
from pollution or contamination. In doing so, the
exclusion did not distinguish between damages caused
by a gradual release or discharge and those damages
caused by an abrupt release or discharge.
Under the definition of “sudden” now adopted by
this court in the present case, the exception to the
exclusion covers only those damages in the latter
category, i.e. those caused by an abrupt release.
However, if ‘‘sudden” were construed so that it could
also mean “unexpected” and the exception were
construed to be just a restatement of the definition of
“occurrence,” then the exception would cover both
categories, i.e., gradual and abrupt. Because such an
interpretation would render the entire exclusion
meaningless, it is neither acceptable nor desirable under
Al7
the normal rules of contract construction. [667] Farmers
Natl. Bank v. Delaware Ins. Co. (1911), 83 Ohio St. 309,
94 N.E. 834, paragraph six of the syllabus.
As an aside, we note that public policy also supports
our interpretation of the word “sudden.’’ Under the
Buckeye Union interpretation, only an_ intentional
polluter was excluded from coverage. Such an
interpretation might encourage the polluter to be less
than diligent, as merely negligent acts would be covered
under the policy. See Waste Mgt., supra, 315 N.C. at
697-698, 340 S.E.2d at 381. In contrast, today’s holding
encourages diligence by placing the financial burden for
gradual or long-term pollution upon the entity best able
to foresee and stop it.
However, we reiterate that the primary basis for our
holding is the lack of ambiguity in the wording of the
exception. The inclusion of the word ‘‘sudden”’ readily
indicates that the exception was not intended to apply to
a release that occurred over an extended time. As one
court has noted, the intent behind the ‘‘sudden and
accidental’’ exception was to limit coverage for pollution-
related damages to those events in which ‘‘damages are
caused by sudden pollution incidents’ involving
equipment malfunctions, explosions and the like.’
Claussen v. Aetna Cas. & Sur. Co. (S.D.Ga. 1987), 676
F.Supp. 1571, 1580. Any other interpretation conflicts
with the clear language and intent of the provision.
Al8
IV
The application of the foregoing holding to the facts
of this case is a relatively simple exercise. The first two
complaints related to the operation of the Industrial
Excess Landfill. Both complaints alleged that over an
extended period of time, the insureds had either disposed
of or accepted a variety of wastes in the landfill. The
third complaint, which applied only to Hybud, stated
that the insured had deposited various wastes into the
Montville Landfill over an extended period of time.
Clearly, each of the three complaints alleged that the
resulting injuries and damages had been caused by the
deposited waste. These allegations accordingly brought
the causes of action within the scope of the pollution
exclusion.
Moreover, a review of the complaints shows that
there was never any allegation that the release or
discharge of the waste happened abruptly or
instantaneously. Thus, the exception to the exclusion
was not invoked. Under these circumstances, the three
insureds were not entitled under the two policies to a
defense from Sphere Drake. Thus, the specific allegations
of the complaints precluded coverage for the resulting
damage.
Al9
[668] V
In addition to arguing in favor of the Buckeye Union
interpretation of the pollution exclusion, the insureds
contend that Sphere Drake should not have been
permitted to raise this issue at the trial level.
Specifically, the insureds argue that Sphere Drake
waived the exclusion by failing to raise it in its
prelitigation letter denying coverage under the policies.
As to this issue, this court notes that as a general
proposition, the doctrine of waiver cannot be employed
to expand the coverage of a policy. 16B Appleman,
Insurance Law and Practice (1981) 579, Section 9090.
This rule has been applied when coverage is expressly
excluded under the terms of the policy. Hartory v. State
Auto. Mut. Ins. Co. (1988), 50 Ohio App.3d 1, 552 N.E.2d
223.
As set forth in Appleman, supra, the doctrines of
waiver and estoppel have been applied to rights of the
insurer set forth in the policy. These rights may affect
whether coverage will be found in a particular situation
but can not define the basic scope of the coverage. An
example of this is the company’s right to timely
notification of a possible claim.
This latter rule is clearly based upon public policy
and equity considerations. It is the opinion of this court
that these considerations do not warrant the extension of
the waiver doctrine to exclusions in the policy. A
company should not be obligated to cover a risk for
which it did not contract. Therefore, Sphere Drake did
not waive its right to invoke the pollution exclusion by
not raising it in its denial letter.
A20
VI
For the foregoing reasons, Sphere Drake was not
obligated to provide a defense for the three insureds in
the underlying complaints. The judgment of the court of
appeals is reversed.
Judgment reversed.
Moyer, C.J., SWEENEY, DOUGLAS, WRIGHT, H. BROWN
and RESNICK, JJ., concur.
Jupitu A. Curist.ey, J., of the Eleventh Appellate
District, sitting for HOLMES, J.
A21
JUDGMENT ENTRY OF THE SUPREME
COURT OF OHIO
(Dated September 16, 1992)
Case No. 91-641
THE SUPREME COURT OF OHIO
HYBUD EQUIPMENT CORPORATION, et al,
Appellants/Cross-Appellees,
Vv.
SPHERE DRAKE INSURANCE COMPANY, INC.,
Appellee/Cross-Appellant.
APPEAL AND Cross-APPEAL FROM
THE COURT OF APPEALS
JUDGMENT ENTRY
This cause, here on appeal and cross-appeal from the
Court of Appeals for Summit County, was considered in
the manner prescribed by law. On consideration thereof,
the judgment of the court of appeals is reversed
consistent with the opinion rendered herein.
It is further ordered that the appellee/cross-appellant
recover from the appellants/cross-appellees its costs
herein expended; and that a mandate be sent to the
Court of Common Pleas for Summit County to carry this
judgment into execution; and that a copy of this entry
be certified to the Clerk of the Court of Appeals for
Summit County for entry.
COSTS:
Motion Fee, $40.00, paid by Day, Ketterer, Raley,
Wright & Rybolt.
Motion Fee, $40.00, paid by Reminger & Reminger.
(Court of Appeals No. 14597)
Jo 9 EM a bee URE?
/s/ THOMAS J. MOYER
Chief Justice
SILI IRE as « ow
A23
DECISION AND JOURNAL ENTRY OF THE
COURT OF APPEALS NINTH JUDICIAL
DISTRICT, SUMMIT COUNTY, OHIO
(Dated January 30, 1991)
C.A. No. 14597
IN THE COURT OF APPEALS
NINTH JUDICIAL DISTRICT
STATE OF OHIO
) ss:
COUNTY OF SUMMIT )
HYBUD EQUIPMENT CORP., et al.,
Plaintiffs-Appellees,
Vv.
SPHERE DRAKE INS. CoO.,
Defendant-Appellont.
APPEAL FROM JUDGMENT ENTERED IN
THE COMMON PLEAS CouRT
COUNTY OF SUMMIT, OHIO
CASE No. CV 88 8 2642
DECISION AND JOURNAL ENTRY
This cause was heard upon the record in the trial
court. Each error assigned has been reviewed and the
following disposition is made:
A24
Cacroppo, Jd. Plaintiffs-appellees-cross-appellants,
Hybud Equipment Company (Hybud), Industrial Excess
Landfill (IEL) and Hyman Budoff (collectively appellees),
contracted with Sphere Drake Insurance Company
(Sphere) for two comprehensive general _ liability
insurance policies. The first policy insured the appellees
from July 30, 1985 to July 30, 1986, while the second
policy covered the period from June 30, 1986 to June 30,
1987.
On or about November 18, 1987, Linda Putinski filed
suit in United States District Court, primarily alleging
that the appellees were liable to her for compensatory
and punitive damages arising out of bodily injury and
property damage resulting from the exposure and
threatened exposure to pollutants discharged from the
Industrial Excess Landfill site.
On December 9, 1987, the United States
Environmental Protection Agency (USEPA) issued an
administrative order requiring appellees to undertake
remedial design and remedial action at the Industrial
Excess Landfill site to abate dangers arising from the
release of substances from the site. Additional orders
were issued, requiring the appellees’ participation in
administrative hearings concerning liability and damages
for pollution.
In June of 1988, the Ohio Attorney General
commenced an action in Medina County Common Pleas
Court as a result of alleged hazardous waste releases at
the Montville Landfill. Hybud was named as a third-
party defendant in this case.
Upon becoming aware of the Putinski, USEPA and
Montville actions, appellees notified Sphere. Sphere
refused to indemnify and defend the appellees for the
eb cath. OR ts seit nai A 1A tM A i rt at tot
A25
costs and expenses of the actions. As a result, appellees
brought suit in Summit County Common Pleas Court
requesting monetary damages for the cost and expense
of defending the actions; a declaratory judgment that
Sphere had a duty to defend; an order requiring the
payment and indemnification of future defense costs
incurred in the actions; an award of damages for the
costs and expenses in the case at bar; and all other relief
the court found just and equitable. The trial court found
that Sphere had a duty to defend appellees and awarded
damages in the amount of $181,287.00
Assignments of Error
“I. The trial court erred in finding the
underlying claims presented in the Putinski,
USEPA and Montville actions involved occurrences
which took place during the course of the effective
dates of the Sphere Drake policies.
“II. The trial court erred in finding that the
underlying claims presented in the Putinski,
USEPA and Montville actions were not excluded
from coverage as being expected or intended from
the standpoint of the insured. ~
“III. The trial court erred in finding that the
claims alleged in the Putinski, USEPA, and
Montville actions were not excluded from coverage
pursuant to the terms of the standard pollution
exclusion contained in both policies.
“IV. The trial court erred in finding that the
claims presented in the Putinski, USEPA, and
Montville cases were not excluded from coverage
pursuant to the terms of the absolute pollution
exclusion contained in both policies.”’
As these assignments of error are interrelated, they
will be addressed together.
A26
In its first assignment of error, Sphere contends that
the circumstances underlying the Putinski, USEPA and
Montville actions were such that they did not constitute
“occurrences” within the meaning of the policies. In
Buckeye Union Ins. Co. v. Liberty Solvents & Chemicals
Co. (1984), 17 Ohio App. 3d 127, at 131, this court
interpreted the term ‘‘occurrence’’ to encompass a period
of time, rather than a sudden or momentary sense.
Under the interpretation adopted by the Liberty
Solvents court, occurrence has a much broader meaning
than the term accident in that accident refers to
something that came about or happened in a certain way,
while occurrence means something that happened or
came about in any way. Jd. Occurrence has also been
viewed as a synonym for event; applying to anything
that happens or occurs. Portaro v. American Guarantee
& Liability Ins. Co. (N.D. Ohio 1962), 210 F. Supp. 411,
415.
In light of the principles set forth in Liberty
Solvents, we find the appellant’s contentions in the first
assignment of error to be without merit. As in Liberty
Solvents, supra, at 132, the releases and threatened
releases of hazardous waste materials alleged in the
underlying actions are occurrences within the common
understanding of the term. The term occurrence is to be
broadly construed in favor of extending coverage to the
insured. Jd. While the releases and threatened releases
alleged in the underlying actions most likely occurred
over a period of time, appellant has failed to establish
that the releases in question were not occurrences
covered by the policy and to sufficiently distinguish the
case sub judice from Liberty Solvents. Thus, under the
broad interpretation of the term occurrence adopted by
this court, the trial court could properly conclude that
so Hae bondi
A27
the circumstances in the underlying actions constituted
occurrences covered by the policies, within the time
period the policies were in force. Accordingly, the first
assignment of error is overruled.
In Sphere’s second and third assignments of error, it
contends that coverage was excluded as the underlying
claims were expected or intended, and were not sudden
and accidental within the exception to the standard
pollution exclusion.
The phrase ‘sudden and accidental’’ can be
interpreted simply as a restatement of the definition of
occurrence, that is, that the policy will cover claims
where the injury was neither expected nor intended.
Liberty Solvents, supra, at 132. As_ such, the
determination of what is ‘‘sudden and accidental’
necessarily entails the same analysis as_ the
determination of whether something is expected or
intended.
The phrase ‘sudden and accidental’ is a
reaffirmation of the principle that coverage will not be
provided for intended results of intentional acts, but will
be provided for the unintended results of intentional
acts. Jd. at 133. As stated in Liberty Solvents, supra, at
134,
“*** Tf the inquiry is, as it should be, whether
the pleadings charged the insured with an act
resulting in unintended or unexpected damage, then
the act or acts are sudden and accidental regardless
of how many deposits or dispersals may have
occurred, and although the permeation of pollution
into the ground water may have been gradual rather
than sudden, the behavior of the pollutants as they
seeped into the aquifer is irrelevant if the
permeation was unexpected.***”’
A28
The term sudden should not be limited to an
instantaneous happening, and should be given a
construction most favorable to the insured. /d.
Regardless of the initial intent or lack thereof as it
relates to causation, or the period of time involved, if the
resulting damage could be viewed as unintended by the
factfinder, the total situation can be deemed an accident.
Id.
We have reviewed the record and conclude that there
was a sufficient basis upon which the trial court could
properly conclude that the underlying claims were
sudden and accidental and not expected or intended.
Under the framework provided by this court in Liberty
Solvents, the events in question could have properly been
found to be sudden and accidental and not expected or
intended, thus giving rise to a duty to defend.
Accordingly, the second and third assignments of error
are without merit and are overruled.
In its fourth assignment of error, Sphere contends
that coverage was excluded by an absolute pollution
exclusion contained in both policies. The trial court
found that the evidence as to the existence or non-
existence of the absolute exclusion endorsement was ‘‘in
equipoise’’.. The record supports this conclusion. A
defendant insurer has the burden to prove that a
limitation, exclusion or exception was a part of the
insurance policy or contract, Continental Ins. Co. v.
Louis Marx & Co. (1980), 64 Ohio St. 2d 399, syllabus;
Barnes v. Motorists Mut. Ins. Co. (1971), 29 Ohio App.
2d 167, and to do so by the preponderance of the
evidence. Barnes, supra, at 170. In the case at bar, the
record indicates that Sphere simply failed to carry this
burden. The fourth assignment of error is overruled.
:
$
A29
Assignment of Error V
“The court erred in finding that the claims
presented in the USEPA action were not excluded
from coverage, in whole or in part, to the Sphere
Drake policies.”
In this assignment of error, appellant contends that
coverage under the policies is excluded by a provision
which excludes coverage for property damage to
property owned or rented by the insured. From this
premise, appellant concludes that it does not have a duty
to defend and is not liable for damages in the USEPA
action.
A review of the administrative orders in the USEPA
action reveals that the investigation and action taken by
the USEPA was taken to “protect public health”
and ‘“‘to mitigate the imminent and_ substantial
endangerment posed by actual and threatened releases
into the environment of hazardous substances from the
facility... The USEPA documents indicate a general
intent on the part of the USEPA to protect those in the
vicinity from possible contamination from the Industrial
Access Landfill. As such, the trial court could properly
conclude that the USEPA action was not excluded by
the aforementioned exclusion.
The fifth assignment of error is overruled.
Cross-Appellant’s Assignment of Error I
“The trial court erred in refusing to allow a jury
to consider the damages issues in this case.
The complaint and amended complaints in the case
at bar requested a declaratory judgment establishing
Sphere’s duty to defend; damages for monies expended
by the appellees in conducting their own defense; an
order demanding the payment of future defense costs; an
A30
award of expenses incurred in the case at bar; and, other
relief that the trial court would deem proper and
equitable.
In Murello Constr. Co. v. Citizens Home Savings Co.
(1985), 29 Ohio App. 3d 333, 334, this court held that the
right to a jury trial is dependent upon whether the legal
cause of action is predominant. An action for a
declaratory judgment is sui generis in the sense that it is
neither strictly in equity nor at law, but, instead, a
purely procedural remedy wherein a court may apply the
principles of law or equity necessary to adjudicate the
issue presented. Gannon v. Perk (1976), 46 Ohio St. 2d
201.
In Erie Insurance Group v. Fisher (1984), 15 Ohio St.
3d 380, at 383, the Ohio Supreme Court held that:
‘‘*** [A] declaratory judgment action filed by an
insurer against an insured, the purpose of which is
to construe an insurance policy and determine the
insurer’s obligations to the insured, and is not for
the purpose of determining liability in an action for
the recovery of money, is properly triable to the
court.”
While Fisher dealt with an insurer bringing the action
rather than the insured we find its principles to be
applicable to the case at bar.
A review of the case at bar demonstrates that the
primary purpose of the action was to construe the
contracts of insurance in order to determine whether
Sphere had a duty to defend. Accordingly, under the
principles set forth by this court in Murello and the
Supreme Court of Ohio in Fisher, the entire case was
properly triable to the trial court.
We find the first cross assignment of error to lack
merit and it is hereby overruled.
Phir hae it CLI Ae aon Bel
A3l
Cross Assignments of Error II and III
“II. The trial court erred in failing to award
plaintiffs compensatory damages against defendant
other than the defense costs of the underlying cases
and the prosecution costs of the instant case when
the evidence clearly indicates that additional
substantial damages were suffered by the plaintiffs
in this case on account of defendant’s failure to
defend plaintiffs in the underlying cases.
“III. The trial court erred in failing to award
plaintiffs punitive damages against defendant when
the evidence clearly and indisputably showed that
defendant solely relied on a false statement for
denying their [sic] defense obligation to the plaintiffs
and other evidence justifies punishing the
defendant.”
In these cross-assignments of error, the appellees
contend that the trial court erred in failing to award
them additional compensatory and punitive damages. We
do not agree.
It is instructive to note that the second amended
complaint sought damages for the expenses incurred,
and to be incurred, in defending the underlying suits.
Appellees did not seek to amend their demand until
March 28, 1990, after the liability portion of the
bifurcated trial and the court’s entry establishing
liability. The amended demand preceded the damages
portion of the case, which began April 9, 1990. The
amended demand for judgment sought $1,000,000.00 in
compensatory damages and $3,000,000.00 in punitive
damages. Civ. R. 54(C) provides in part:
“*** o demand for judgment which seeks a
judgment for money shall limit the claimant to the
sum claimed in the demand unless he amends his
demand not later than seven days before the
commencement of the trial.***’’
A32
While the ainended demand in the case at bar preceded
the damages portion of the case, it clearly was not timely
in light of the interdependency between the issues
involved in the two portions of the trial. Accordingly, as
the amended demand has to be filed at least seven days
prior to the commencement of the portion of the trial
concerning liability, the appellees were limited to the
damages requested in the second amended complaint.
The second and third cross-assignments of error are
overruled.
Cross Assignment of Error IV
“The trial court erred in awarding defendant a
$60,896.51 credit for money paid by other insurance
companies towards the defense costs of the
underlying actions.”
The collateral source rule is defined as follows:
‘‘*** if an injured person receives compensation
for his injuries from a source wholly independent of
the tort-feasor, the payment should not be deducted
from the damages which he would otherwise collect
from the tort-feasor.*** In other words, a defendant
tortfeasor may not benefit from the fact that the
plaintiff has received money from other sources as a
result of the defendant’s tort, e.g. sickness and
health insurance.” Black’s Law Dictionary (5 Ed.
Rev. 1979) 238.
The case for the application of the collateral source rule
in contract cases is less compelling than in tort cases;
the rationale being that one should not profit more from
the breach of an obligation than from its full
performance. 22 American Jurisprudence 2d (1988) 641,
Damages, Section 570. The case at bar was based on
contract, rather than tort. While the case at bar was not
a breach of contract action, we find the aforementioned
A33
principles to be applicable under the facts and
circumstances of the case and do not believe that the
collateral source rule was applicable.
The fourth cross-assignment of error is overruled.
The judgment of the trial court is affirmed as to the
liability portion of the case. The trial court’s assessment
of damages is reversed and remanded for a determination
by a jury.
The Court finds that there were reasonable grounds
for this appeal.
We order that a special mandate issue out of this
court, directing the County of Summit Common Pleas
Court to carry this judgment into execution. A certified
copy of this journal entry shall constitute the mandate,
pursuant to App. R. 27.
Immediately upon the filing hereof, this document
shall constitute the journal entry of judgment, and it
shall be file stamped by the Clerk of the Court of
Appeals at which time the period for review shall begin
to run. App. R. 22(E).
Costs taxed to appellees.
Exceptions.
/s/) Mary CaAcioppo
For the Court
REECE, P. J.
BAIRD, J.
Concur
A34
Appearances:
MATTHEW YACKSHAW, Attorney at Law, 800 William R.
Day Bldg., 121 Cleveland Ave., S., Canton, OH 44702 for
Plaintiffs.
Davip Ross and CLirFrorD C. MAscu, Attorneys at Law,
113 St. Clair Bldg., Cleveland, OH 44114 for Defendant.
EUGENE R. ANDERSON, THOMAS H. SEAR, and THOMAS G.
RozINSKI, Attorneys at Law, 666 Third Ave., New York,
NY 10017 for Amicus Curiae.
FRANK E. Quirk, PAut A. RosE, and KEvin D. EIBER,
Attorneys at Law, 500 First Nat'l. Tower, Akron, OH
44308 for Amicus Curiae.
A35
: JOURNAL ENTRY OF THE COURT OF
| APPEALS, NINTH JUDICIAL DISTRICT,
SUMMIT COUNTY, OHIO
(Filed January 30, 1991)
C.A. No. 14597
IN THE COURT OF APPEALS
NINTH JUDICIAL DISTRICT
STATE OF OHIO )
) ss:
COUNTY OF SUMMIT )
HYBUD EQUIPMENT CORP., et al.,
Plaintiffs-Appellees,
Vv.
SPHERE DRAKE INS. CO.,
Defendant-Appellant.
JOURNAL ENTRY
The last sentence of the journal entry dated January
30, 1991 reversing and remanding the above case for a
determination of damages by a jury should be corrected
to read:
A36
Bote:
The trial court’s assessment of damages is affirmed.
Costs taxed to appellant. :
/si) Mary Cacioppo
Judge
JOHN W. REECE
Judge
WILLIAM R. BAIRD
Judge
cc:
MATTHEW YACKSHAW, Attorney at Law, 800 William R.
Day Bldg., 121 Cleveland Ave., S. Canton, OH 44702 for
Plaintiffs.
Davip Ross and CLirrorD C. MAscuH, Attorneys at Law,
113 St. Clair Bldg., Cleveland, OH 44114 for Defendant.
EUGENE P.. ANDERSON, THOMAS H SEAR, and THOMAS G.
Rozinski, Attorneys at Law, 666 Third Ave., New York,
NY 10017 for Amicus Curiae.
FRANK E. Quirk, Paut A. Rose, and Kevin D. EIBER,
Attorneys at Law, 500 First Nat’l. Tower, Akron, OH
44308 for Amicus Curiae.
A37
ORDER OF THE COURT OF COMMON PLEAS
(Filed June 30, 1989)
Case No. CV 88 8 2642
IN THE COURT OF COMMON PLEAS
COUNTY OF SUMMIT
HYBUD EQUIPMENT CORP., et al.
Plaintiffs,
Vv.
SPHERE-DRAKE INSURANCE COMPANY,
Defendant.
ORDER
JUDGE MORGAN
At the trial scheduled for July 6, 1989, the Court will
hear that portion of the Complaint which is the
Declaratory Judgment portion of the pleading and
determine the duty to defend under the policy. See Erie
Insurance Group v. Fisher (1984), 15 Ohio St. 3d 380.
Therea‘ter, if necessary, trial will be fixed at a later
date with respect to claims for a jury trial involving
money damages.
JUDGE GLEN B. MORGAN
cc:
ATTORNEY JOHN R. WERREN
ATTORNEY DAvipD Ross
A38
FINDINGS, DECISION AND JOURNAL ENTRY
OF THE COURT OF COMMON PLEAS
(Filed February 7, 1990)
Case No. CV 88 08 2642
IN THE COURT OF COMMON PLEAS
COUNTY OF SUMMIT
HYBUD EQUIPMENT CORPORATION, et ail.
Plaintiffs,
vs.
SPHERE DRAKE INSURANCE CO., LTD.,
Defendant.
JUDGE MORGAN
FINDINGS, DECISION AND
JUDGMENT ENTRY
This matter was heard by the Court without a jury
on July 6, 1989. The Plaintiffs, Hybud Equipment
Corporation and Industrial Excess Landfill, Inc., are
corporations in the state of Ohio. The evidence
establishes that they purchased policies of general
liability insurance for two consecutive years beginning
July 30, 1985 and ending July 30, 1986; for the period
June 30, 1986 to June 30, 1987.
Subsequently, on or about November 18, 1987, the
Plaintiffs were sued by Linda Putinski in Case No. C87-
3011A in the United States District Court, Northern
District of Ohio. That case was voluntarily dismissed
a
A39
after Plaintiffs incurred expenses of $13,568.80. The
Defendant Sphere Drake refused to indemnify or defend
the Plaintiffs in that lawsuit.
On December 9, 1987, the United States
Environmental Protection Agency issued an
administrative order under 42 U.S.C., Section 9606(a),
requiring Plaintiffs to undertake remedial design and
remedial action at the Industrial Excess Landfill cite [sic]
located in Uniontown, Ohio to abate an alleged imminent
and substantial endangerment arising from the release or
threat of a release of hazardous substances allegedly
present at the site.
Various other orders were issued by such agency in
1988 which required participation in administrative
proceedings by the Plaintiffs on the issue of liability and
damages for pollution. The Defendant has refused to
indemnify or defend Plaintiffs from such administrative
proceedings and costs and expenses have been incurred.
Subsequently, in June of 1988, the Plaintiffs were
sued in the Common Pleas Court for Medina County by
the Ohio Attorney General in Case Number 42595 on the
docket of said Court as a result of alleged hazardous
waste releases at the Montville Landfill.
Defendant refuses to indemnify and defend the
Plaintiffs from the costs and expenses in that lawsuit.
The Plaintiffs’ prayer requests monetary damages
for the cost and expense of defense in the above lawsuits
incurred to date; a declaratory judgment that Defendant
has a duty to defend Plaintiffs in the matters described
in the Second Amended Complaint; an order upon the
Defendant requiring the payment and indemnification of
all defense costs in the future; an award of damages for
the costs and expense incurred in the within lawsuit and,
all equitable relief to which Plaintiffs are entitled.
A40
The central issue in this case is whether or not at the
time issued, the two policies of liability insurance sold to
Plaintiff by Defendant had attached thereto an all
inclusive hazardous waste coverage exclusion.
Although each of the policies contain a general
exclusion wherein the policies do not apply to 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 the
land, the atmosphere or any water course or body of
water, unless such discharge, dispersal or release is
sudden and accidental, it was specifically held by the
Court of Appeals for the Ninth District in Buckeye
Union Ins. Co. v. Liberty Solvents & Chemical Co., Inc.
(1984), 17 Ohio App. 3d 127, that:
“*** the release of chemical pollutants which
cause the damage as alleged in the complaint is an
occurrence for which coverage may be afforded in
the policy.”
That policy had the identical exclusion as did the two
policies issued by Sphere Drake to the Plaintiffs Hybud
Equipment Corporation, et al. Thus, that general
exclusion in the body of these policies would not permit
Sphere Drake to escape liability for indemnification and
- defense as otherwise provided for in the liability policy.
Therefore, unless there is another exclusion by
endorsement in the policy applicable to the subject
litigation, Sphere Drake Insurance Company, Ltd. is
required to defend and indemnify the Plaintiffs from
liability for hazardous waste claims.
The Defendant argues that when the two polices [sic]
were issued respectively effective on July 30, 1985 and
June 30, 1986, it was understood and agreed between the
A4l
Plaintiffs and Ostrov Corporation and Sphere Drake
Insurance Company that these policies were not intended
to provide coverage or otherwise obligate Sphere Drake
to defend any environmental/pollution claim against
Hybud, et al.
The Defendant Sphere Drake Insurance Company
claims that such pollution claims were specifically
excluded from the two policies by an absolute pollution
exclusion endorsement which was attached to each of the
policies.
The evidence is in dispute as to whether or not a
written absolute pollution and/or contamination exclusion
endorsement was in fact attached to either of the
insurance policies which are a subject of this lawsuit.
The evidence is in dispute as to whether or not the
Plaintiffs had any notice whatsoever, be it written or
verbal notice, as to any such absolute pollution exclusion
endorsements.
The law casts upon the insurer the burden of proof
with respect to excepted risks and to limitations and
requires it to establish its defense in such respect. New
York Life Insurance Co. v. LaBoiteaux, 5 Ohio Dec.
Reprint 242.
Consequently, where there is a general provision
setting forth the obligation under a policy and then a
provision in the nature of an exception to such general
provision, the plaintiff is not required to traverse such
exception and to prove the negative, but the duty is
upon the defendant to plead such exception and to prove
facts necessary to bring the case within the exception.
Order of United Commercial Travelers v. Watkins, 38
Ohio App. 420; John Hancock Mutuai Life Ins. Co. v.
Hicks, 43 Ohio App. 242.
A42
The evidence as to whether or not the alleged written
absolute pollution or hazardous waste exclusion
endorsement was attached to the written policies issued
to Plaintiffs by Sphere Drake is in equipoise. Also,
Defendant had failed to establish by the preponderance
of the evidence that Defendant gave Plaintiffs verbal
notification that th2 policies excluded liability coverage
for liability arising out of hazardous waste pollution.
When an insurance company denies liability under an
insurance policy on the basis of an exclusion contained in
the policy, the insurance company must prove by the
preponderance of the evidence that the insured was given
notice of the exclusion. Kathryn Marshall, et al. v.
Motorists Insurance (C.A. 13333, Ninth District,
Unreported, 1988).
Wherefore, the Court determines and declares that
the Defendant Sphere Drake Insurance Company, Ltd.
has a duty to defend Plaintiffs in the matters described
in the Amended Complaint with respect to claims arising
during the policy period. The Court reserves judgment as
to whether or not there is any duty to indemnify and
defend with respect to claims arising by reason of acts
which occurred prior to July 30, 1985 or after June 30,
1987.
It is further the order of this Court that this case
shall be set down for hearing on the question of damages
with respect to indemnification and defense costs
incurred, and for such other relief which it may be
entitled to in the premises.
/si/ GLEN B. MORGAN
Judge
cc:
ATTORNEY DAvip Ross
ATTORNEY MATTHEW YACKSHAW
5
yer
A43
JUDGMENT ENTRY OF THE COURT
OF COMMON PLEAS
(Filed April 30, 1990)
Case No. CV 88 08 2642
IN THE COURT OF COMMON PLEAS
COUNTY OF SUMMIT
HYBUD EQUIPMENT CORPORATION, et al.
Plaintiffs,
v.
SPHERE DRAKE INSURANCE CO., LTD.,
Defendants.
JUDGE MORGAN
_ JUDGMENT ENTRY
This action came on for trial before the Court, and
the issues having been duly tried and a decision having
been duly rendered,
IT IS HEREBY ORDERED AND ADJUDGED
that the Plaintiffs Hybud Equipment Corporation,
Industrial Excess Landfill, Inc. and Hyman Budoff
recover of the Defendant Sphere Drake Insurance Co.,
Ltd. the sum of $181,287.00, with subsequent interest
thereon at the statutory rate.
IT IS FURTHER ORDERED AND ADJUDGED
that Defendant assume the defense of Plaintiffs with
respect to the USEPA claims, including the case styled
United States v. Industrial Excess Landfill, Inc., et al.,
Case No. 5:89CV1988 (USDC ND Ohio).
A44
IT IS FURTHER ORDERED AND ADJUDGED
that Defendant assume the defense of Plaintiff Hybud
Equipment Corporation in the case styled State of Ohio
v. William F. Campbell, et al., v. County of Medina et al.,
Case No. 42595 (Medina County Common Pleas Court).
IT IS FURTHER ORDERED AND ADJUDGED
that Defendant pay the prosecution costs in this case
incurred or to be incurred after March 31, 1990.
Dated at Akron, Ohio this 30th day of April, 1990.
/s) GLEN B. MorGAN
Judge, Court of Common Pleas
APPROVED:
/s) MATTHEW YACKSHAW
Attorney for Plaintiffs
DaviD Ross
Attorney for Defendant
JOURNALIZED this ___ day of April, 1990.
DIANA ZALESKI
Clerk of Court
By: , Deputy Clerk
ets
A45
FINDINGS OF FACT AND CONCLUSIONS OF
LAW OF THE COURT OF COMMON PLEAS
(Filed May 7, 1990)
Case No. CV 88 08 2642
IN THE COURT OF COMMON PLEAS
COUNTY OF SUMMIT
HYBUD EQUIPMENT CORPORATION, et al.,
Plaintiffs,
V.
SPHERE DRAKE INSURANCE CO., LTD.,
Defendants.
JUDGE MORGAN
FINDINGS OF FACT AND
CONCLUSIONS OF LAW
This matter was heard by the Court without a jury
on April 9, 1990 and April 11, 1990, pursuant to the
Findings, Decision and Judgment Entry filed on
February 7, 1990. [T]he Court makes the following
findings of fact and conclusions of law.
1. The Court finds in favor of Plaintiffs as to all
issues except as set forth herein.
2. The complaint filed by Linda Putinski in the
United States District Court for the Northern District of
Ohio, Eastern Division, Case No. C87-3011A, against
Plaintiffs alleges occurrences within time periods when
Plaintiffs were named insureds under the two general
liability insurance policies issued by Defendant.
A46
3. The administrative orders, USEPA Docket No.
V-W-87-C-031, and Remedial Investigation and
Feasibility Study and notice letters issued by the
USEPA and the complaint filed by the United States of
America in the United States District Court for the
Northern District of Ohio, Eastern Division, Case No.
5:89CV1988 (‘USEPA claims’’) against Plaintiffs allege
occurrences within the time periods when Plaintiffs were
named insureds under the two general liability insurance
policies issued by Defendant.
4. The third-party complaint including attachments
filed by Aerosol Systems, Inc. and others against
Plaintiff Hybud in the case styled State of Ohio vs.
William L. Campbell, et al. vs. County of Medina, et al,
Case No. 42595 (Medina County Common Pleas Court)
(“Montville Landfill lawsuit’’), alleges occurrences within
the time periods when Plaintiffs were named insureds
under the two general liability insurance policies issued
by Defendant.
5. Under said policies Defendant had a duty to
provide a defense to Plaintiffs to the Linda Putinski
complaint, the USEPA claims, and the Montville Landfill
lawsuit.
6. Defendant failed to provide a defense to
Plaintiffs to the Linda Putinski complaint, the USEPA
claims, and the Montville Landfill lawsuit, and have
failed to pay any of the defense costs incurred to date
with respect to those matters.
7. Plaintiffs incurred total defense costs of
$13,568.80 in the defense of the Linda Putinski
complaint, of which $4,613.39 was paid by an insurance
company other than Defendant.
A47
8. Plaintiffs incurred total defense costs of
$159,487.71 through March 31, 1990, in the defense of
the USEPA claims, of which $47,728.77 was paid by four
insurance companies other than Defendant.
9. Plaintiffs incurred total defense costs of
$14,569.07 through March 31, 1990, in the defense of the
Montville Landfill lawsuit, of which $8,554.35 was paid
by two insurance companies other than Defendant.
10. Plaintiffs incurred total prosecution costs of
$36,926.10 through March 31, 1990, in the prosecution of
the above captioned case. None of said costs have been
paid by any insurance companies.
11. All of the defense costs and prosecution costs
through March 31, 1990 were reasonable and necessary.
12. Plaintiffs are entitled to prejudgment interest in
the total amount of $17,631.83.
13. Defendant is liable to Plaintiffs in the total
amount of $181,287.00 on account of defense costs
incurred by Plaintiffs in defending the Linda Putinski
complaint, the USEPA claims, and the Montville Landfill
lawsuit and prosecution costs of the above-captioned
case, through March 31, 1990.
14. Defendant is ordered to assume the defense of
the complaints against Plaintiffs which remain pending
filed by the United States and the third party plaintiffs
in the Montville Landfill lawsuit and further described
above.
15. Defendant is ordered to pay the prosecution
costs in this case incurred or to be incurred after March
31, 1990.
OX
A48
16. Plaintiffs are not entitled to any other damages
except as set forth above.
/s/ GLEN B. MORGAN
Judge
APPROVED:
/s/ MATTHEW YACKSHAW
Matthew Yackshaw
Attorney for Plaintiffs
Davip Ross
Attorney for Defendant
yes
eed eee See
ee Ee ee ee
A49
ORDER OF THE SUPREME COURT OF OHIO
DENYING PETITION FOR REHEARING
(Dated October 28, 1992)
Case No. 91-641
THE SUPREME COURT OF OHIO
HYBUD EQUIPMENT CORPORATION, et al.
Appellants/Cross-Appellees,
Vv.
SPHERE DRAKE INSURANCE COMPANY, LTD.,
Appellee/Cross-Appellant.
REHEARING ENTRY
(Summit County)
IT IS ORDERED by the Court that rehearing in this
case be, and the same is hereby, denied.
(Court of Appeals No. 14597)
/s/ THOMAS J. MOYER
Chief Justice
rr aaa
A50
CONSTITUTION OF UNITED STATES
Amendment VII
In Suits at common law, where the value in
controversy shall exceed twenty dollars, the right of trial
by jury shall be preserved, and no fact tried by a jury,
shall be otherwise reexamined in any Court of the United
States, than according to the rules of the common law.
(Effective 1791)
Amendment XIV
SECTION I. All persons born or naturalized in the
United States, and subject to the jurisdiction thereof, are
citizens of the United States and of the State wherein
they reside. No State shall make or enforce any law
which shall abridge the privileges or immunities of
citizens of the United States; nor shall any State deprive
any person of life, liberty, or property, without due
process of law; nor deny to any person within its
jurisdiction the equal protection of the laws.
A5l
42 UNITED STATES CODE
§9605. National contingency plan; preparation, contents,
etc.
(a) Revision and republication. Within one hundred and
eighty days after the enactment of this Act [enacted
Dec. 11, 1980], the President shall, after notice and
opportunity for public comments, revise and republish
the national contingency plan for the removal of oil and
hazardous substances, originally prepared and published
pursuant to section 311 of the Federal Water Pollution
Control Act [33 USCS §1321], to reflect and effectuate
the responsibilities and powers created by this Act, in
addition to those matters specified in section 311(c)(2) [33
USCS §$1321(c)(2)]. Such revision shall include a section
of the plan to be known as the national hazardous
substance response plan which shall establish procedures
and standards for responding to releases of hazardous
substances, pollutants, and contaminants, which shall
include at a minimum:
(1) methods for discovering and _ investigating
facilities at which hazardous substances have been
disposed of or otherwise come to be located;
(2) methods for evaluating, including analyses of
relative cost, and remedying any releases or threats
of releases from facilities which pose substantial
danger to the public health or the environment;
(3) methods and criteria for determining the
appropriate extent of removal, remedy, and other
measures authorized by this Act;
(4) appropriate roles and responsibilities for the
Federal, State, and local governments and for
interstate and nongovernmental entities in
effectuating the plan;
A52
(5) provision for identification, procurement,
maintenance, and storage of response equipment
and supplies;
(6) a method for and assignment of responsibility
for reporting the existence of such facilities which
may be located on federally owned or controlled
properties and any releases of hazardous substances
from such facilities;
(7) means of assuring that remedial action
measures are cost-effective over the period of
potential exposure to the hazardous substances or
contaminated materials;
(8(A) criteria for determining priorities among
releases or threatened releases throughout the
United States for the purpose of taking remedial
action and, to the extent practicable taking into
account the potential urgency of such action, for the
purpose of taking removal action. Criteria and
priorities under this paragraph shall be based upon
relative risk or danger to public health or welfare or
the environment, in the judgment of the President,
taking into account to the extent possible the
population at risk, the hazard potential of the
hazardous substances at such facilities, the potential
for contamination of drinking water supplies, the
potential for direct human contact, the potential for
destruction of sensitive ecosystems, the damage to
natural resources which may affect the human food
chain and which is associated with any release or
threatened release, the contamination or potential
contamination of the ambient air which is associated
with the release or threatened release, State
preparedness to assume State costs and
responsibilities, and other appropriate factors;
(B) based upon the criteria set forth in
subparagraph (A) of this paragraph, the President
shall list as part of the plan national priorities
among the known releases or threatened releases
throughout the United States and shall revise the
list no less often than annually. Within one year
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after the date of enactment of this Act [enacted Dec.
11, 1980], and annually thereafter, each State shall
establish and submit for consideration by the
President priorities for remedial action among
known releases and potential releases in that State
based upon the criteria set forth in subparagraph
(A) of this paragraph. In assembling or revising the
national list, the President shall consider any
priorities established by the States. To the extent
practicable, the highest priority facilities shall be
designated individually and shall be referred to as
the “top priority among known response targets’,
and, to the extent practicable, shall include among
the one hundred highest priority facilities one such
facility from each State which shall be the facility
designated by the State as presenting the greatest
danger to public health or welfare or the
environment among the known facilities in such
State. A State shall be allowed to designate its
highest priority facility only once. Other priority
facilities or incidents may be listed singly or
grouped for response priority purposes;
(9) specified roles for private organizations and
entities in preparation for response and in
responding to releases of hazardous substances,
including identification of appropriate qualifications
and capacity therefor and including consideration of
minority firms in accordance with subsection (f); and
(10) standards and testing procedures by which
alternative or innovative treatment technologies can
be determined to be appropriate for utilization in
response actions authorized by this Act.
The plan shall specify procedures, techniques, materials,
equipment, and methods to be employed in identifying,
removing, or remedying releases of hazardous substances
comparable to those required under section 311(c)(2)(F)
and (G) and (j)(1) of the Federal Water Pollution Control
Act [33 USCS §1321(c2)F), (G) and (j)(1)]. Following
A54
publication of the revised national contingency plan, the
response to and actions to minimize damage from
hazardous substances releases shall, to the greatest
extent possible, be in accordance with the provisions of
the plan. The President may, from time to time, revise
and republish the national contingency plan.
(b) Revision of plan. Not later than 18 months after the
enactment of the Superfund Amendments and
Reauthorization Act of 1986 [enacted Oct. 17, 1986], the
President shall revise the National Contingency Plan to
reflect the requirements of such amendments. The
portion of such Plan known as ‘‘the National Hazardous
Substance Response Plan’”’ shall be revised to provide
procedures and standards ffor remedial actions
undertaken pursuant to this Act which are consistent
with amendments made by the Superfund Amendments
and Reauthorization Act of 1986 relating to the selection
of remedial action.
(c) Hazard ranking system. (1) Revision. Not later than
18 months after the enactment of the Superfund
Amendments and Reauthorization Act of 1986
fenacted Oct. 17, 1986] and after publication of
notice and opportunity for submission of comments
in accordance with section 553 of title 5, United
States Code, the President shall by rule promulgate
amendments to the hazard ranking system in effect
on September 1, 1984. Such amendments shall
assure, to the maximum extent feasible, that the
hazard ranking system accurately assesses the
relative degree of risk to human health and the
environment posed by sites and facilities subject to
review. The President shall establish an effective
date for the amended hazard ranking system which
is not later than 24 months after enactment of the
Superfund Amendments and Reauthorization Act of
1986 [enacted Oct. 17, 1986]. Such amended hazard
ranking system shall be applied to any site or
A55
facility to be newly listed on the National Priorities
List after the effective date established by the
President. Until such effective date of the
regulations, the hazard ranking system in effect on
September 1, 1984, shall continue in full force and
effect.
(2) Health assessment of water contamination
- risks. In carrying out this subsection, the President
shall ensure that the human health risks associated
with the contamination or potential contamination
(either directly or as a result of the runoff of any
hazardous substance or pollutant or contaminant
from sites or facilities) of surface water are
appropriately assessed where such surface water is,
or can be, used for recreation or potable water
consumption. In making the assessment required
pursuant to the preceding sentence, the President
shall take into account the potential migration
of any hazardous substance or pollutant or
contaminant through such _ surface water to
downstream sources of drinking water.
(3) Reevaluation not required. The President shall
not be required to reevaluate, after the date of the
enactment of the Superfund Amendments and
Reauthorization Act of 1986 [enacted Oct. 17, 1986]
the hazard ranking of any facility which was
evaluated in accordance with the criteria under this
section before the effective date of the amendments
to the hazard ranking system under this subsection
and which was assigned a national priority under
the National Contingency Plan.
(4) New information. Nothing in paragraph (3) shall
preclude the President from taking new information
into account in undertaking response actions under
this Act.
(d) Petition for assessment of release. Any person who
is, or may be, affected by a release or threatened release
of a hazardous substance or pollutant or contaminant,
may petition the President to conduct a preliminary
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assessment of the hazards to public health and the
environment which are associated with such release or
threatened release. If the President has not previously
conducted a preliminary assessment of such release, the
President shall, within 12 months after the receipt of any
such petition, complete such assessment or provide an
explanation of why the assessment is not appropriate. If
the preliminary assessment indicates that the release or
threatened release concerned may pose a threat to
human health or the environment, the President shall
promptly evaluate such release or threatened release in
accordance with the hazard ranking system referred to in
paragraph (8)(A) of subsection (a) to determine the
national priority of such release or threatened release.
(e) Releases from earlier sites. Whenever there has been,
after January 1, 1985, a significant release of hazardous
substances or pollutants or contaminants from a site
which is listed by the President as a ‘“‘Site Cleaned Up
To Date” on the National Priorities List (revised edition,
December 1984) the site shall be restored to the National
Priorities List, without application of the hazard ranking
system.
(f) Minority contractors. In awarding contracts under
this Act, the President shall consider the availability of
qualified minority firms. The President shall describe, as
part of any annual report submitted to the Congress
under this Act, the participation of minority firms in
contracts carried out under this Act. Such report shall
contain a brief description of the contracts which have
been awarded to minority firms under this Act and of
the efforts made by the President to encourage the
participation of such firms in programs carried out under
this Act.
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(g) Special study wastes. (1) Application. This
subsection applies to facilities—
(A) which as of the date of enactment of the
Superfund Amendments and Reauthorization Act of
1986 fenacted Oct. 17, 1986] were not included
on, or proposed for inclusion on, the National
Priorities List; and
(B) at which special study wastes described in
paragraph (2), (3)(A)(ii) or (3)(A)(iii) of section 3001(b)
of the Solid Waste Disposal Act [42 USCS
§6921(b)(2), (3)A)(ii), or (3)(A){iii)] are present in
significant quantities, including any such facility
from which there has been a release of a special
study waste.
(2) Considerations in adding facilities to NPL. Pending
revision of the hazard ranking system under subsection
(c), the President shall consider each of the following
factors in adding facilities covered by this section to the
National Priorities List:
(A) The extent to which hazard ranking system
score for the facility is affected by the presence of
any special study waste at, or any release from, such
facility.
(B) Available information as to the quantity,
toxicity, and concentration of hazardous substances
that are constituents of any special study waste at,
or released from such facility, the extent of or
potential for release of such hazardous constituents,
the exposure or potential exposure to human
population and the environment, and the degree of
hazard to human health or the environment posed
by the release of such hazardous constituents at
such facility. This subparagraph refers only to
available information on actual concentrations of
hazardous substances and not on the total quantity
of special study waste at such facility.
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(3) Savings provisions. Nothing in this subsection shall
be construed to limit the authority of the President to
remove any facility which as of the date of enactment of
the Superfund Amendments and Reauthorization Act of
1986 [enacted Oct. 17, 1986] is included on the National
Priorities List from such List, or not to list any facility
which as of such date is proposed for inclusion on such
list.
(4) Information gathering and analysis. Nothing in this
Act shall be construed to preclude the expenditure of
monies from the Fund for gathering and analysis of
information which will enable the President to consider
the specific factors required by paragraph (2).
* * *
$9606. Abatement actions
(a) Maintenance, jurisdiction, etc. In addition to any
other action taken by a State or local government, when
the President determines that there may be an imminent
and substantial endangerment to the public health or
welfare or the environment because of an actual or
threatened release of a hazardous substance from a
facility, he may require the Attorney General of the
United States to secure such relief as may be necessary
to abate such danger or threat, and the district court of
the United States in the district in which the threat
occurs shall have jurisdiction to grant such relief as the
public interest and the equities of the case may require.
The President may also, after notice to the affected
State, take other action under this section including, but
not limited to, issuing such orders as may be necessary
to protect public health and welfare and_ the
environment.
A59
(b) Fines; reimbursement. (1) Any person who, without
sufficient cause, willfully violates, or fails or refuses
to comply with, any order of the President under
subsection (a) may, in an action brought in the
appropriate United States district court to enforce
such order, be fined not more than $25,000 for each
day in which such violation occurs or such failure to
comply continues.
(2A) Any person who receives and complies with
the terms of any order issued under subsection (a)
may, within 60 days after completion of the required
action, petition the President for reimbursement
from the Fund for the reasonable costs of such
action, plus interest. Any interest payable under
this paragraph shall accrue on the amounts
expended from the date of expenditure at the same
rate as specified for interest on investments of the
Hazardous Substance Superfund established under
subchapter A of chapter 98 of the Internal Revenue
Code of 1954 [26 USCS §$§9501 et seq.].
(B) If the President refuses to grant all or part of a
petition made under this paragraph, the petitioner
may within 30 days of receipt of such refusal file an
action against the President in the appropriate
United States district court seeking reimbursement
from the Fund.
(C) Except as provided in subparagraph (D), to
obtain reimbursement, the petitioner shall establish
by a preponderance of the evidence that it is not
liable for response costs under section 107(a) [42
USCS §9607(a)] and that costs for which it seeks
reimbursement are reasonable in light of the action
required by the relevant order.
(D) A petitioner who is liable for response costs
under section 107(a) [42 USCS §9607(a)] may also
recover its reasonable costs of response to the
extent that it can demonstrate, on the
administrative record, that the President’s decision
in selecting the response action ordered was
arbitrary and capricious or was otherwise not in
accordance with law. Reimbursement awarded under
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this subparagraph shall include all reasonable
response costs incurred by the petitioner pursuant
to the portions of the order found to be arbitrary
and capricious or otherwise not in accordance with
law.
(E) Reimbursement awarded by -a court under
subparagraph (C) or (D) may include appropriate
costs, fees, and other expenses in accordance with
subsections (a) and (d) of section 2412 of title 28 of
the United States Code.
(c) Guidelines for using imminent hazard, enforcement,
and emergency response authorities; promulgation by
Administrator of EPA, scope, etc. Within one hundred
and eighty days after enactment of this Act [enacted
Dec. 11, 1980], the Administrator of the Environmental
Protection Agency shall, after consultation with the
Attorney General, establish and publish guidelines for
using the imminent hazard, enforcement, and emergency
response authorities of this section and other existing
statutes administered by the Administrator of the
Environmental Protection Agency to effectuate the
responsibilities and powers created by this Act. Such
guidelines shall to the extent practicable be consistent
with the national hazardous substance response plan,
and shall include, at a minimum, the assignment of
responsibility for coordinating response actions with the
issuance of administrative orders, enforcement of
standards and permits, the gathering of information, and
other imminent hazard and emergency powers authorized
by (1) sections 311(c)(2), 308, 309, and 504(a) of the
Federal Water Pollution Control Act [33 USCS
$$1321(c)(2), 1318, 1319, 1364(a)}, (2) sections 3007, 3008,
3013, and 7003 of the Solid Waste Disposal Act [42
USCS §§6927, 6928, 6934, and 6973], (3) sections 1445
and 1431 of the Safe Drinking Water Act [42 USCS
A6l
§§300j-4 and 300i], (4) sections 113, 114, and 303 of the
Clean Air Act [42 USCS §§7413, 7414, and 7603], and (5)
section 7 of the Toxic Substances Control Act [15 USCS
§2606].
§9607. Liability
(a) Covered persons; scope; recoverable costs and
damages; interest rate; ‘‘comparable maturity’ date.
Notwithstanding any other provision or rule of law, and
subject only to the defenses set forth in subsection (b) of
this section—
(1) the owner and operator of a vessel or a facility,
(2) any person who at the time of disposal of any
hazardous substance owned or operated any facility
at which such hazardous substances were disposed
of,
(3) any person who by contract, agreement, or
otherwise arranged for disposal or treatment, or
arranged with a transporter for transport for
disposal or treatment, of hazardous substances
owned or possessed by such person, by any other
party or entity, at any facility or incineration vessel
owned or operated by another party or entity and
containing such hazardous substances, and
(4) any person who accepts or accepted any
hazardous substances for transport to disposal or
treatment facilities, incineration vessels or sites
selected by such person, from which there is a
release, or a threatened release which causes the
incurrence of response costs, of a hazardous
substance, shall be liable for—
(A) all costs of removal or remedial action
incurred by the United States Government or a
State or an Indian tribe not inconsistent with the
national contingency plan;
A62
(B) any other necessary costs of response
incurred by any other person consistent with the
national contingency plan;
(C) damages for injury to, destruction of, or loss
of natural resources, including the reasonable
costs of assessing such injury, destruction, or loss
resulting from such a release; and
(D) the costs of any health assessment or health
effects study carried out under section 104(i) [42
USCS §9604(i)].
The amounts recoverable in an action under this section
shall include interest on the amounts recoverable under
subparagraphs (A) through (D). Such interest shall
accrue from the later of (i) the date payment of a
specified amount is demanded in writing, or (ii) the date
of the expenditure concerned. The rate of interest on the
outstanding unpaid balance of the amounts recoverable
under this section shall be the same rate as is specified
for interest on investments of the Hazardous Substance
Superfund established under subchapter A of chapter 98
of the Internal Revenue Code of 1954 [26 USCS §§9501
et seq.]. For purposes of applying such amendments to
interest under this subsection, the term ‘‘comparable
maturity’’shall be determined with reference to the date
on which interest accruing under this subsection
commences.
as
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CONSTITUTION OF OHIO
Article I, Section 5
§5 Trial by jury; reform in civil jury system.
The right of trial by jury shall be inviolate, except
that, in civil cases, laws may be passed to authorize the
rendering of a verdict by the concurrence of not less than
three-fourths of the jury. (As amended September 3,
1912.)
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OHIO REVISED CODE
3901.20 Unfair or deceptive acts prohibited;
applicability to unlicensed persons
No person shall engage in this state in any trade
practice which is defined in sections 3901.19 to 3901.23
of the Revised Code as, or determined pursuant to those
sections to be, an unfair or deceptive act or practice in
the business of insurance.
This section applies to any person, as defined in
section 3901.19 of the Revised Code, regardless of
whether the person is licensed or required to be licensed
by the superintendent of insurance.
3901.21 Unfair and deceptive acts defined
The following are hereby defined as unfair and
deceptive acts or practices in the business of insurance:
(A) Making, issuing, circulating, or causing or
permitting to be made, issued, or circulated, or preparing
with intent to so use, any estimate, illustration, circular,
or statement misrepresenting the terms of any policy
issued or to be issued or the benefits or advantages
promised thereby or the dividends or share of the
surplus to be received thereon, or making any false or
misleading statements as to the dividends or share of
surplus previously paid on similar policies, or making
any misleading representation or any misrepresentation
as to the financial condition of any insurer as shown by
the last preceding verified statement made by it to the
insurance department of this state, or as to the legal
reserve system upon which any life insurer operates, or
using any name or title of any policy or class of policies
nares
A65
misrepresenting the true nature thereof, or making any
misrepresentation or incomplete comparisons to any
person for tae purpose of inducing or tending to induce
such person to purchase, amend, lapse, forfeit, change, or
surrender insurance.
Any written statement concerning the premiums for
a policy which refers to the net cost after credit for an
assumed dividend, without an accurate written
statement of the gross premiums, cash values, and
dividends based on the insurer’s current dividend scale,
which are used to compute the net cost for such policy
and a prominent warning that the rate of dividend is not
guaranteed, is a misrepresentation for the purposes of
this division.
(B) Making, publishing, disseminating, circulating,
or placing before the public or causing, directly or
indirectly, to be made, published, disseminated,
circulated, or placed before the public, in a newspaper,
magazine, or other publication, or in the form of a notice,
circular, pamphlet, letter, or poster, or over any radio
station, or in any other way, or preparing with intent to
so use, an advertisement, announcement, or statement
containing any assertion, representation, or statement,
with respect to the business of insurance or with respect
to any person in the conduct of his insurance business,
which is untrue, deceptive, or misleading.
(C) Making, publishing, disseminating, or
circulating, directly or indirectly, or aiding, abetting, or
encouraging the making, publishing, disseminating, or
circulating, or preparing with intent to so use, any
statement, pamphlet, circular, article, or literature, which
is false as to the financial condition of an insurer and
which is calculated to injure any person engaged in the
business of insurance.
A66
(D) Filing with any supervisory or other public
official, or making, publishing, circulating, or delivering
to any person, or placing before the public, or causing
directly or indirectly to be made, published,
disseminated, circulated, delivered to any person, or
placed before the public, any false statement of financial
condition of an insurer.
Making any false entry in any book, report, or
statement of any insurer with intent to deceive any
agent or examiner lawfully appointed to examine into its
condition or into any of its affairs, or any public official
to whom such insurer is required by law to report, or
who has authority by law to examine into its condition
or into any of its affairs, or, with like intent, willfully
omitting to make a true entry of any material fact
pertaining to the business of such insurer in any book,
report, or statement of such insurer, or mutilating,
destroying, suppressing, withholding, or concealing any
of its records.
(E) Issuing or delivering or permitting agents,
officers, or employees to issue or deliver agency company
stock or other capital stock or benefit certificates or
shares in any common-law corporation or securities or
any special or advisory board contracts or other
contracts of any kind promising returns and profits as an
inducement to insurance.
(F) Making or permitting any unfair discrimination
among individuals of the same class and equal
expectation of life in the rates charged for any contract
of life insurance or of life annuity or in the dividends or
other benefits payable thereon, or in any other of the
terms and conditions of such contract.
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(G)\(1) Except as otherwise expressly provided by
law, knowingly permitting or offering to make or making
any contract of life insurance, life annuity or accident
and health insurance, or agreement as to such contract
other than as plainly expressed in the contract issued
thereon, or paying or allowing, or giving or offering to
pay, allow, or give, directly or indirectly, as inducement
to such insurance, or annuity, any rebate of premiums
payable on the contract or any special favor or
advantage in the dividends or other benefits thereon, or
any valuable consideration or inducement whatever not
specified in the contract; or giving, or selling, or
purchasing, or offering to give, sell, or purchase, as
inducement to such insurance or annuity or in connection
therewith, any stocks, bonds, or other securities, or other
obligations of any insurance company or other
corporation, association, or partnership, or any dividends
or profits accrued thereon, or anything of value
whatsoever not specified in the contract.
(2) Nothing in division (F) or division (G)(1) of this
section shall be construed as prohibiting any of the
following practices: (a) in the case of any contract of life
insurance or life annuity, paying bonuses to
policyholders or otherwise abating their premiums in
whole or in part out of surplus accumulated from
nonparticipating insurance, provided that any such
bonuses or abatement of premiums shall be fair and
equitable to policyholders and for the best interests of
the company and its policyholders; (b) in the case of life
insurance policies issued on the industrial debit plan,
making allowance to policyholders who have
continuously for a specified period made premium
payments directly to an office of the insurer in an
A68
amount which fairly represents the saving in collection
expenses; (c) readjustment of the rate of premium for a
group insurance policy based on the loss or expense
experience thereunder, at the end of the first or any
subsequent policy year of insurance thereunder, which
may be made retroactive only for such policy year.
(H) Making, issuing, circulating, or causing or
permitting to be made, issued, or circulated, or preparing
with intent to so use, any statement to the effect that a
policy of life insurance is, is the equivalent of, or
represents shares of capital stock or any rights or
options to subscribe for or otherwise acquire any such
shares in the life insurance company issuing that policy
or any other company.
(I) Making, issuing, circulating, or causing or
permitting to be made, issued or circulated, or preparing
with intent to so issue, any statement to the effect that
payments to a policyholder of the principal amounts of a
pure endowment are other than payments of a specific
benefit for which specific premiums have been paid.
(J) Making, issuing, circulating or causing or
permitting to be made, issued, or circulated, or preparing
with intent to so use, any statement to the effect that
any insurance company was required to change a policy
form or related material to comply with Title XXXIX of
the Revised Code or any regulation of the superintendent
of insurance, for the purpose of inducing or intending to
induce any policyholder or prospective policyholder to
purchase, amend, lapse, forfeit, change, or surrender
insurance.
(K) Aiding or abetting another to violate this
section.
A69
(L) Refusing to issue any policy of insurance, or
canceling or declining to renew such policy because of
the sex or marital status of the applicant, prospective
insured, insured, or policyholder.
(M) Making or permitting any unfair discrimination
between individuals of the same class and of essentially
the same hazard in the amount of premium, policy fees,
or rates charged for any policy or contract of insurance,
other than life insurance, or in the benefits payable
thereunder, or in underwriting standards and practices or
eligibility requirements, or in any of the terms or
conditions of such contract, or in any other manner
whatever.
(N) Refusing to make available disability income
insurance solely because the applicant’s principal
occupation is that of managing a household.
(O) Refusing, when offering maternity benefits
under any individual or group sickness and accident
insurance policy, to make maternity benefits available to
the policyholder for the individual or individuals to be
covered under any comparable policy to be issued for
delivery in this state, including family members if the
policy otherwise provides coverage for family members.
Nothing in this division shall be construed to prohibit an
insurer from imposing a reasonable waiting period for
such benefits, but in no event shall such waiting period
exceed two hundred seventy days.
(P) Using, or permitting to be used, a pattern
settlement as the basis of any offer of settlement. As
used in this division, “pattern settlement’’ means a
method by which liability is routinely imputed to a
claimant without an investigation of the particular
occurrence upon which the claim is based and by using a
A70
predetermined formula for the assignment of liability
arising out of occurrences of a similar nature. Nothing in
this division shall be construed to prohibit an insurer
from determining a claimant's liability by applying
formulas or guidelines to the facts and circumstances
disclosed by the insurer’s investigation of the particular
occurrence upon which a claim is based.
(Q) Refusing to insure, or refusing to continue to
insure, or limiting the amount, extent, or kind of life or
sickness and accident insurance or annuity coverage
available to an individual, or charging an individual a
different rate for the same coverage solely because of
blindness or partial blindness. With respect to all other
conditions, including the underlying cause of blindness or
partial blindness, persons who are blind or partially blind
shall be subject to the same standards of sound actuarial
principles or actual or reasonably anticipated actuarial
experience as are sighted persons. Refusal to insure
includes, but is not limited to, denial by an insurer of
disability insurance coverage on the grounds that the
policy defines “‘disability’’ as being presumed in the
event that the eyesight of the insured is lost. However,
an insurer may exclude from coverage disabilities
consisting solely of blindness or partial blindness when
such conditions existed at the time the policy was issued.
To the extent that the provisions of this division may
appear to conflict with any provision of section 3999.16
of the Revised Code, this division applies.
(R)(1) Directly or indirectly offering to sell, selling,
or delivering, issuing for delivery, renewing, or using or
otherwise marketing any policy of insurance or insurance
product in connection with or in any way related to the
grant of a student loan guaranteed in whole or in part by
an agency or commission of this state or the United
Te
a ae a amas we Nbr tne eect inh
A7l
States, except insurance that is required under federal or
state law as a condition for obtaining such a loan and the
premium for which is included in the fees and charges
applicable to the loan; or, in the case of an insurer or
insurance agent, knowingly permitting any lender
making such loans to engage in such acts or practices in
connection with the insurer’s or agent’s insurance
business.
(2) Except in the case of a violation of division (G)
of this section, division (R)(1) of this section does not
apply to either of the following:
(a) Acts or practices of an insurer, its agents,
representatives, or employees in connection with the
grant of a guaranteed student loan to its insured or the
insured’s spouse or dependent children where such acts
or practices take place more than ninety days after the
effective date of the insurance;
(b) Acts or practices of an insurer, its agents,
representatives, or employees in connection with the
solicitation, processing, or issuance of an insurance
policy or product covering the student loan borrower or
his spouse or dependent children, where such acts or
practices take place more than one hundred eighty days
after the date on which the borrower is notified that the
student loan was approved.
(S) Denying coverage, under any health insurance or
health care policy, contract, or plan providing family
coverage, to any natural or adopted child of the named
insured or subscriber solely on the basis that the child
does not reside in the household of the named insured or
subscriber.
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With respect to private passenger automobile
insurance, no insurer shall charge different premium
rates to persons residing within the limits of any
municipal corporation based solely on the location of the
residence of the insured within those limits.
The enumeration in sections 3901.19 to 3901.26 of
the Revised Code of specific unfair or deceptive acts or
practices in the business of insurance is not exclusive or
restrictive or intended to limit the powers of the
superintendent of insurance to adopt rules to implement
this section, or to take action under other sections of the
Revised Code.
This section does not prohibit the sale of shares of
any investment company registered under the
“Investment Company Act of 1940,” 54 Stat. 789, 15
U.S.C.A. 80a-1, as amended, or any policies, annuities, or
other contracts described in section 3907.15 of the
Revised Code.
As used in this section, “estimate,” ‘statement,’
“representation,” ‘‘misrepresentation,” ‘‘advertisement,”’
or ‘‘announcement”’ includes oral or written occurrences.
3937.03 Filing policies, endorsements, riders, and
rates; waiting period for filings affecting commercial
insurance market; special filings
(A) Every insurer shall file with the superintendent
of insurance every form of a policy, endorsement, rider,
manual of classifications, rules, and rates, every rating
plan, and every modification of any of them which it
proposes to use. Every such filing shall state any
proposed effective date and indicate the character and
extent of the coverage contemplated. When a filing is not
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accompanied by the information upon which the insurer
supports such filing, and the superintendent does not
have sufficient information to determine whether such
filing complies with sections 3937.01 to 3937.17 of the
Revised Code, he may require such insurer to furnish the
information upon which it supports such filing. Any filing
may be supported by the experience or judgment of the
insurer or rating organization making the filing, the
experience of other insurers or rating organizations, or
any other factors which the insurer or rating
organization considers relevant. A filing and any
supporting information shall be open to public inspection
after the filing becomes effective.
(B) An insurer may satisfy its obligation to make
such filings by becoming a member of, or a subscriber to,
a licensed rating organization which makes such filings,
and by authorizing the superintendent to accept such
filings on its behalf. Sections 3937.01 to 3937.17 of the
Revised Code do not require an insurer to become a
member of or a subscriber to any rating organization.
(C)(1) For purposes of this division:
(a) ‘Commercial insurance’’ means any commercial
casualty or commercial liability insurance except
sickness and accident, fidelity and surety, and
automobile insurance as defined in section 3937.30 of the
Revised Code.
(b) “Personal lines coverage” means any policy of
insurance issued to a natural person for personal or
family protection, including, but not limited to, personal
automobile, homeowner’s, tenant’s, and _ personal
umbrella liability coverages.
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(2) Except as provided in division (C)(3) of this
section, each filing shall become effective immediately
upon its filing and is deemed to comply with such
sections, unless disapproved by the superintendent as
provided in this section or section 3937.04 of the Revised
Code.
(3) Whenever the superintendent declares by rule
pursuant to Chapter 119 of the Revised Code that a
degree of competition that will assure that rates are not
excessive does not exist in the market for a line of
commercial insurance, or that the market is conducted in
a manner that may result in inadequate rates or be
destructive of competition or detrimental to solvency of
insurers, he shall provide that every filing that would
result in an increase or decrease of rates for any
coverages for that line of commercial insurance shall be
subject to this division. Such filing shall be on file for a
waiting period of thirty days before it becomes effective,
which period may be extended by the superintendent for
one additional period not to exceed fifteen days, if he
gives written notice within such initial waiting period to
the insurer or rating bureau that he needs such
additional time for the consideration of such filing. A
filing is deemed to comply with sections 3937.04 to
3937.17 of the Revised Code unless disapproved by the
superintendent within the waiting period or its
extension. Upon written application by such insurer or
rating bureau, the superintendent may authorize a filing
that he has reviewed to becorne effective before the
expiration of the initial waiting period or its extension.
If, during the initial waiting period or extension, the
superintendent finds the filing to which sections 3937.04
to 3937.17 of the Revised Code apply does not comply
with the sections, he shall disapprove the filing by
a
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sending written notice to the person who made the filing,
specifying therein the reasons the filing fails to comply
with the sections. Upon notice of disapproval, the person
who made such a filing may request a hearing pursuant
to section 39
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