as requiring coverage in one case when coverage has already been excluded for what appears to be the same alleged occurrence in a seemingly identical case.
The analysis, however, is not as simple as the carriers suggest. The court rejects the carriers' argument that the Second Circuit rulings in the State action have preclusive effect on the federal action. The doctrine of issue preclusion, also known as collateral estoppel, applies to bar a party from litigating only those issues that have been previously adjudicated. E.g. ITT Corp. v. United States, 963 F.2d 561, 563-64 (2d Cir. 1992). For the doctrine to take effect, there must be an "identity of issue" between the prior action and the present action and the common issue must necessarily have been decided in the prior action. Id.; accord, e.g., Owens v. New York City Housing Auth., 934 F.2d 405, 409 (2d Cir.), cert. denied, 116 L. Ed. 2d 451, 112 S. Ct. 431 (1991); Wilder v. Thomas, 854 F.2d 605, 616 (2d Cir. 1988), cert. denied sub nom., Wilder v. New York State Urban Dev. Corp., 489 U.S. 1053, 103 L. Ed. 2d 583, 109 S. Ct. 1314 (1989) (citations omitted).
In this instance, there is no identity of issues between the State and federal actions. As discussed above, the determinative issue in each action is whether the particular complaint alleges contamination that is covered by the pollution exclusion clauses. See discussion supra p. 10; Avondale Indus., Inc., 887 F.2d at 1204; EAD Metallurgical, Inc., 905 F.2d at 11. Whether the State of New York's complaint in the State action alleges covered occurrences has no bearing on whether the United States's complaint in the federal action alleges covered occurrences. Furthermore, it is conceivable that the complaint in the State action does not allege sudden and accidental contamination-- this court has already ruled that it does not-- while the complaint in the federal action does allege sudden and accidental contamination. This court must make an independent inquiry in the federal action to determine whether its underlying complaint alleges contamination that is sudden and accidental and therefore covered by the respective policies. Since this federal action requires such an inquiry, the doctrine of issue preclusion simply does not apply.
On the other hand, a comparison of the federal complaint and the State complaint reveals astonishing similarities. The federal complaint sets forth the operative allegations in three paragraphs:
13. AT used, inter alia, the chemical solvent tetrachloroethylene in its manufacturing operations at the site to clean and remove grease from thermostat parts and components. Tetrachloroethylene is a "hazardous substance" as defined in Section 101(14) of CERCLA, 42 U.S.C. § 9601(14).
14. Upon information and belief, from the mid-1950s through at least 1981, AT disposed of, inter alia, waste tetrachloroethylene in several locations at the site.
15. The disposal activities referred to in paragraph 14, above, resulted in the contamination of, inter alia, soil at the site and groundwater underneath and near the site.
Compare allegations in complaint of State action, supra p.11. Significantly, all of the allegations relating to the cause of the contamination are presented in these three paragraphs; the complaint is silent as to any other cause of the contamination.
The most notable similarity between the federal allegations and those set forth in the State complaint is the nearly identical allegation that AT disposed of tetrachloroethylene from the 1950s until at least 1981. This allegation actually carries two components: first, that AT "disposed of" hazardous waste, and second, that the disposal occurred during a course of more than twenty years. When considered together, these two components nearly mirror the factors upon which the Second Circuit relied in the State action to find that the alleged contamination was neither sudden nor accidental. With respect to the allegation that the contamination occurred over a period of more than twenty years, the Second Circuit relied upon this fact to rule that the complaint cannot reasonably be interpreted as alleging a "sudden" release. Amro Realty Corp., 936 F.2d at 1428. Indeed, New York courts have consistently held that "for a release or discharge to be sudden, it must 'occur over a short period of time.'" Technicon Elecs. Corp. v American Home Assur. Co., 141 A.D.2d 124, 533 N.Y.S.2d 91, 99 (2d Dep't 1988), aff'd, 74 N.Y.2d 66, 544 N.Y.S.2d 531, 542 N.E.2d 1048 (Ct. App. 1989) (citation omitted); accord Ogden Corp. v. Travelers Indem. Co., 924 F.2d 39, 42 (2d Cir. 1991). Since the contamination here is alleged to have occurred over a period exceeding two decades, one cannot seriously contend that the complaint alleges sudden contamination.
With respect to the allegation of "disposal," the Court reasoned that "'disposing' connotes a deliberate and intentional activity" that would preclude a finding that the complaint alleged accidental contamination. Amro Realty Corp., 936 F.2d at 1428 (citing EAD Metallurgical, Inc., 905 F.2d at 11). To the extent that the underlying federal complaint alleges that the contamination was caused by the insureds' "disposal" of hazardous substances and attributes no other cause to the contamination, the court, guided by principles of stare decisis, must conclude that the complaint does not allege that the contamination was accidental.
The insureds unpersuasively insist that the federal complaint is distinguishable from the state complaint in three critical respects. First, they point out that the federal complaint, unlike the State complaint, does not allege that the disposal "continued over the period" from the 1950s through 1981. Instead, the federal complaint merely alleges that AT disposed of the waste "from the mid-1950s through at least 1981." The insureds argue that since the federal complaint failed to allege that the contamination "continued" during the thirty year time period, one could reasonably construe this allegation as possibly asserting contamination over a short period of time, i.e. sudden contamination. In sum, the insureds essentially take issue with the federal complaint's use of the words "from" and "through" instead of "continued."
The insureds' distinction is unreasonable. In fact, the Second Circuit refuted a similar argument in EAD Metallurgical, Inc., 905 F.2d at 11. The circumstances giving rise to EAD Metallurgical were similar to those presented in the instant case: an insured who was sued for damages caused by environmental contamination sought coverage from its insurance carrier which, in turn, denied coverage based upon a pollution exclusion clause. The underlying complaint alleged that the defendant caused contamination "throughout its operation from March, 1977 through 1983 . . . ." Id. The Second Circuit viewed this allegation (along with one other allegation relating to intent) and concluded, "reading these allegations in the light most favorable to appellants, there is no question that, unlike the defendants in Avondale, appellants are alleged to have "continuously and intentionally polluted." Id.
This court is unable to discern any material difference between the complaint in EAD Metallurgical and the complaint in the present case with respect to the allegations of contamination that might be covered by the pollution exclusion clauses. The complaint in EAD Metallurgical alleged that the contamination occurred "throughout [the insured's] operation," from 1977 through 1983. This sole distinction, in this court's view, is not sufficient to require a result that is completely opposite to that drawn by the Second Circuit. The Second Circuit's construction of the EAD Metallurgical complaint as alleging continuous contamination within the meaning of the pollution exclusion clause severely undercuts the insured's position that the United States's complaint, which carries nearly identical language, does not necessarily allege such continuous contamination.
Significantly, this court would draw the same conclusion even without the benefit of the Second Circuit's instruction in EAD Metallurgical. This result would be compelled by the established rule that the court may only attribute a reasonable interpretation to the complaint. E.g. Ogden Corp., 924 F.2d at 42. By any common meaning, an allegation that an event transpired from one time through another connotes that the event occurred for the duration of that time period: the operative words are "from" and, more importantly, "through." Webster's Dictionary defines "through" as meaning, inter alia, "during the entire period of," or "from the beginning to the end of". Webster's Ninth New Collegiate Dictionary 1230 (1991). By asserting that the contamination occurred "from" the 1950s "through" at least 1981, the United States has alleged continuity by its ordinary meaning, at least sufficient to defeat any claim that the disposal was sudden. If no reasonable trier of fact could find that "continued" contamination occurred suddenly, see Amro Realty Corp., 936 F.2d at 1428, then neither could a reasonable trier of fact could find that contamination that occurred "from the 1950s through 1980" occurred suddenly. In sum, the distinction between the two complaints in this regard is in wording only; the substance of the allegations are the same.
The insureds' second and third distinctions are related in that they both concern the "accidental" component of the pollution exclusion clause. The insureds point out that the federal complaint, unlike the State complaint, does not state where or how AT disposed of the waste tetrachloroethylene. They further point out that the federal complaint, again unlike the State complaint, contains no allegation regarding the insureds' knowledge or intentions concerning the disposal of the waste tetrachloroethylene. Based upon these distinctions, the insureds contend that the federal complaint could "arguably or potentially" be interpreted as setting forth statements that allege accidental contamination, thereby creating the "reasonable possibility" that coverage exists. Cf. EAD Metallurgical, Inc., 905 F.2d at 11. Therefore, argue the insureds, they are entitled to receive from the carriers a defense to the United States's suit.
Of course, the court need not even review this argument because it has already concluded that the contamination was not sudden. As stated above, see supra p. 10, the exception to the pollution exclusion clause takes effect only when the contamination is sudden and accidental: the absence of either element precludes reliance upon the exception. Amro Realty Corp., 936 F.2d at 1427. Once the court established that the complaint does not allege sudden contamination, the insureds were ineligible to receive indemnification or a defense. Still, since the insureds' arguments in this respect might carry some initial appeal, the court will discuss why they must nonetheless be dismissed.
Once again, the Second Circuit's decision in the State action provides the basis for concluding that the insureds have drawn distinctions that make no material difference. In that decision, the Court indicated that the failure to designate the location of contamination does not, by itself, allow one to infer that the complaint alleges accidental disposal. The Court specifically explained, "that certain of the defendants may not have known . . . where the waste would end up, does not make the 'release into or upon land . . . or any watercourse' any more 'accidental'." Amro Realty Corp., 936 F.2d at 1428 (citing Technicon, 533 N.Y.S.2d at 95). With respect to the implications drawn from the absence in the federal complaint of a statement concerning the insureds' knowledge or intentions, one must return again to the complaint's allegation that the insureds "disposed of" the waste. According to the Second Circuit, "disposed of" is a term of intent, not mistake. Id. The complaint's use of "disposed of" instead of "spilled," for example, suggests that the contamination was allegedly caused by a conscious, deliberate act and was not accidental. In fact, the federal complaint may be even stronger in its allegation of willful contamination than the State complaint because it does not allege that the insureds "should have known" of the effects of their contamination. During the State proceeding, these same insureds unsuccessfully urged that the allegation "should have known" sounds in mere negligence (or accidental conduct), not willfulness. See id. By deleting from its complaint the allegation that the insureds "should have known" about their activities, the United States arguably removed any doubt as to whether the insureds acted in any manner other than willfully. This deletion is especially conspicuous when one considers that the federal complaint unambiguously retained the allegation that the insureds "disposed of" the waste.
In sum, while the Second Circuit's rulings in the State action do not technically have a preclusive effect on the instant case, the similarity between the State and federal complaints renders those rulings directly applicable. The federal complaint cannot reasonably be construed as alleging that the insureds' disposal of waste was "sudden," nor can the complaint reasonably be construed as alleging that the disposal was accidental. Therefore, the insureds cannot rely upon the "sudden and accidental" exception to escape the hardship of the pollution exclusion clauses contained in the carriers' policies. The insureds are not entitled to coverage pursuant to these policies for any liability that may arise from the federal action. Therefore, the carriers' motion for summary judgment based upon the pollution exclusion clauses is granted.
C. Timeliness of claim
Unigard alternatively moves for summary judgment on grounds that the insureds did not claim coverage in a timely manner as required by the governing policy. Since Unigard is among the carriers that is entitled to summary judgment due to the operation of the pollution exclusion clauses, the court need not address Unigard's more tenuous argument concerning the timeliness of the insureds' claim. See Amro Realty Corp., 936 F.2d at 1429 (same approach taken by Second Circuit in State action).
The motion by third-party defendants Atlantic Mutual Insurance Co., Unigard Security Insurance Co., Federal Insurance Co., and First State Insurance Co. for summary judgment of the third-party action is granted due to the application of the pollution exclusion clauses. Third-party defendant Home Insurance Co.'s motion for partial summary judgment is granted due to application of the pollution exclusion clause.
The third-party actions against Lumbermens Mutual Insurance Co. and Graphic Arts Mutual Insurance Co. are not affected by today's ruling and thus remain intact.
IT IS SO ORDERED.
DATED: Nov. 10, 1992
Syracuse, New York
Neal P. McCurn
Chief, U.S. District Judge