Dimmitt Chevrolet v. Southeastern Fidelity

Supreme Court of Florida
636 So. 2d 700 (1993)

ELI5:

Rule of Law:

The term 'sudden and accidental' in a standard pollution exclusion clause of a comprehensive general liability insurance policy is unambiguous. The word 'sudden' possesses a temporal quality, meaning abrupt or immediate, and is not merely a synonym for 'unexpected' or 'unintended'.

Facts:

From 1974 through 1979, Dimmitt Chevrolet, Inc. (Dimmitt), an automobile dealership, sold its used crankcase oil to Peak Oil Company (Peak).
Peak recycled the oil at its plant in Hillsborough County, Florida, from 1954 to 1979.
Over many years, Peak's operations resulted in extensive soil and groundwater pollution at and around its plant site.
The pollution was primarily caused by Peak's practice of placing waste oil sludge into unlined storage ponds, from which chemicals gradually leached into the ground.
Some pollution also resulted from regular oil spills, leaks during daily business, and a 1978 incident where a dike collapsed, releasing oily wastewater from a holding pond.
In 1987, the Environmental Protection Agency (EPA) notified Dimmitt that it was a potentially responsible party for the costs of cleaning up the Peak site under the CERCLA statute.

Procedural Posture:

Southeastern Fidelity Insurance Corporation (Southeastern) filed a declaratory judgment action against Dimmitt Chevrolet, Inc. (Dimmitt) in the U.S. District Court for the Middle District of Florida.
Southeastern sought a declaration that it had no duty to defend or indemnify Dimmitt for environmental cleanup costs.
Dimmitt filed a counterclaim seeking a declaration that the costs were covered by its policy.
The district court granted summary judgment in favor of Southeastern, holding that the word 'sudden' has a temporal meaning and the pollution was not sudden.
Dimmitt, as appellant, appealed the district court's decision to the U.S. Court of Appeals for the Eleventh Circuit.
The U.S. Court of Appeals for the Eleventh Circuit certified a question of law to the Supreme Court of Florida to determine how the pollution exclusion clause should be interpreted under Florida law.

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Issue:

Does the pollution exclusion clause contained in a comprehensive general liability insurance policy, which provides an exception for a 'sudden and accidental' discharge, preclude coverage for liability arising from environmental contamination that occurred gradually over many years?

Opinions:

Majority - Per Curiam

Yes. The pollution exclusion clause precludes coverage for liability from gradual environmental contamination because the term 'sudden' in the 'sudden and accidental' exception unambiguously includes a temporal element of immediacy or abruptness. To interpret 'sudden' as merely 'unexpected' would render it redundant with the term 'accidental,' which already means unexpected or unintended. The phrase 'sudden and accidental' establishes two separate requirements: the discharge must be unexpected and it must be abrupt. The pollution at the Peak site, which occurred over many years from gradual leaching and recurring spills, cannot be classified as sudden. Therefore, the exception to the pollution exclusion does not apply, and the policy does not cover the cleanup liability.

Concurring - Grimes, J.

Yes. Although initially inclined to agree with the dissent, adherence to the basic rule of interpretation requires giving language its plain and ordinary meaning. The words 'sudden and accidental' cannot be interpreted to mean 'gradual and accidental,' which would be necessary to find coverage in this case.

Dissenting - Overton, J.

No. The pollution exclusion clause should not preclude coverage because the term 'sudden and accidental' is ambiguous and should be interpreted to mean 'unexpected and unintended.' The term's ambiguity is demonstrated by its varying dictionary definitions and its different interpretation in other types of insurance policies, such as boiler and machinery policies. Furthermore, the drafting history of the clause reveals that the insurance industry represented to state regulators that the exclusion was merely a clarification intended to deny coverage for intentional polluters, not to reduce coverage for unexpected pollution events. The majority's decision allows the insurance industry to benefit from these past misrepresentations and ignores the reasonable expectations of the insured.

Analysis:

This decision established a significant precedent in Florida insurance law by aligning the state with the majority of jurisdictions that give the word 'sudden' in pollution exclusion clauses a literal, temporal meaning. By rejecting the 'unexpected and unintended' interpretation, the court severely limited the availability of insurance coverage for the widespread and costly liabilities associated with gradual environmental contamination under statutes like CERCLA. This ruling shifted a massive financial burden for historical pollution from the insurance industry to policyholders, impacting countless businesses facing cleanup costs for events that occurred over long periods. The decision solidifies that in Florida, gradual pollution is generally uninsurable under these standard policies.

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