Appeal by defendant Hoechst Celanese Corporation from order entered 21 November 1996 by Judge Marvin K. Gray in Mecklenburg County Superior Court.
Eagles, Judge. Judges Wynn and Martin, Mark D., concur.
The opinion of the court was delivered by: Eagles
This appeal involves insurance coverage for contamination claims under primary and excess general liability policies issued to the insured, Hoechst Celanese Corporation ("HCC") by 25 insurance carriers. Because the property in question is located in North Carolina, the appellees contend that G.S. 58-3-1 requires that North Carolina law applies. For purposes of this appeal which concerns only North Carolina sites, HCC does not contest that North Carolina law applies.
HCC has owned and operated a polyester manufacturing plant in Salisbury, North Carolina, since 1966. Pollutants generated in the normal course of operation have included glycol and Dowtherm. Glycol was disposed of at an on-site treatment plant from 1969 through 1974. HCC has also operated an on-site wastewater treatment plant since 1966. From 1966 through April 1990, the Salisbury plant also disposed of its waste at a nearby off-site landfill known as the Needmore Road landfill.
HCC's manufacturing operations at the Salisbury plant and disposal of waste at the Needmore Road landfill caused degradation of soil and groundwater. Glycol and Dowtherm were among the constituent contaminants identified in the groundwater. On 28 April 1988, the State of North Carolina issued two notices of non-compliance to HCC concerning the contamination of groundwater beneath the Salisbury Plant and the Needmore Road landfill. On 6 April 1990, the United States Environmental Protection Agency ("EPA") issued an administrative order directing further cleanup and investigation of the Salisbury Plant site. HCC has also been operating under a state mandate to clean up the contamination at the Needmore Road landfill. HCC seeks to recover the costs of environmental investigation, remediation and cleanup, aggregating over $30 million for expenses at the Salisbury Plant and over $15 million for expenses at the Needmore Road landfill.
HCC filed suit in New Jersey on seeking a determination that primary insurance policies issued to HCC cover the claims. On 9 March 1989, Home Indemnity Company ("Home"), one of the defendants in the New Jersey action, filed this action in North Carolina seeking a declaratory judgment on the same insurance policies and claims. Home named HCC as defendants, as well as all of HCC's primary and excess liability insurance carriers. In August 1989, this case was stayed to allow the New Jersey case to proceed, but that stay was lifted in December 1992.
On 15 March 1996, Home moved for partial summary judgment concerning claims arising from the site in Salisbury, North Carolina, which consists of the HCC plant in Salisbury and the Needmore Road landfill. Home argued that: (1) policies in effect from 1972 through 1976 are not triggered by claims arising from property damage that occurred during those years because the contamination was not discovered until after the policies expired; and (2) pollution exclusions with exceptions for sudden and accidental releases bar coverage for claims arising from the Salisbury site. On 29 March 1996, defendants Lloyds London and Certain London Market Insurance Companies ("Lloyds") moved for partial summary judgment concerning the Salisbury site. Their motion was based on "absolute pollution exclusions" contained in certain Lloyds' policies. Following a hearing on 22 and 23 July 1996, partial summary judgment was entered in favor of both Home and Lloyds on 28 August 1996. The trial court certified the issues raised by the motions for immediate appeal pursuant to G.S. 1A-1, Rule 54(b). HCC appealed here as well as in 96-1408 and 96-1435. Those appeals are determined in opinions filed today.
In August and September 1996, the 25 insurance company defendants here moved to join in the partial summary judgment motions filed by Home and Lloyds. On 21 November 1996, the trial court granted partial summary judgment for the parties joining in the Home and Lloyds' motions. The trial court certified these issues for immediate appeal. HCC appealed on 19 December 1996. Motions to bypass this court were denied by the Supreme Court.
We first consider whether the trial court erred in granting partial summary judgment on the grounds that coverage under the policies was not triggered by claims arising from property damage that occurred during the years in which the policies were in effect because the contamination was not discovered until after the policies expired.
In our companion opinion (96-1435) we have reaffirmed that West American Ins. Co. v. Tufco Flooring East, Inc., 104 N.C. App. 312, 409 S.E.2d 692 (1991), review allowed, 330 N.C. 853, 413 S.E.2d 555, review denied as improvidently granted, 332 N.C. 479, 420 S.E.2d 826 (1992), in which this court applied the discovery rule to a property damage case, is the law of North Carolina in this factual situation. The discovery rule mandates that "for insurance purposes, property damage 'occurs' when it is manifested or discovered." Id. at 317, 409 S.E.2d at 695 (quoting Mraz v. Canadian Universal Ins. Co., 804 F.2d 1325, 1328 (4th Cir. 1986). For a more detailed Discussion of the arguments presented and this court's reaffirmation of the Tufco rule, see our opinion in The Home Indemnity Co., et al., v. Hoechst Celanese Corp., et al., slip op. (96-1435).
By HCC's own responses to interrogatories, it is undisputed that the contamination was first discovered in 1980. Accordingly, based on the Tufco rule, it is clear that there can be no coverage for environmental contamination claims under policies that expired prior to 1980. In accordance with Tufco, we conclude that summary judgment was properly granted here for the following policies:
Aetna Casualty & Surety Company policy nos. 01XN171, 01XN707, 01XN867, 01XN868, 01XN1288, 01XN1576 and 01XN1682; American Home Assurance Company policy nos. CE2692030, CE2692031, CE2749507, CE2749508, CE355391, CE355392 and 8065544; American Motorists Insurance Company policy nos. 4ZM549159, 1CP-60143, 1CP-60435 and 3SB-005287; Centennial Insurance Company policy no. 462-01-31-57; Century Indemnity Company, Successor-in-Interest to CCI Insurance Company, Successor to Insurance Company of North America policy nos. XCP3753 and XBC042141; Certain Underwriters at Lloyd's, London and Certain London Market Insurance Companies policy nos. 89022, 89023, 89024, 89025, 50046, 52160, 52161, 52164, 52165, 53760, 55240, 55330, 55331, 55332, 55333, 55334, NF0860, NF0861, NF0864, NC4720 and NC5082; Commercial Union Insurance Company policy nos. 131LC2, 131LC3, 131LC4, 131LC10, 131LC11, CY-9500-002, CY-9500-034 and EY-9500-044; all Crum & Forster Insurance Company policies; Employers Mutual Casualty Company policy no. MMO 70027; Federal Insurance Company policy nos. 77378655 and FXL77378655; Fireman's Fund Insurance Company policy nos. XLX1202840 and XLX1269429; First State Insurance Company policy nos. 920298, 922376, 925974, 928017, 920878, 921283 and 923489; Hartford Accident & Indemnity Company policy no. 10XS100583; Insurance Company of the State of Pennsylvania policy nos. 41735440 and 41735441; International Surplus Lines Insurance Company policy nos. XSI1522 and XSI1523; Lexington Insurance Company policy nos. ...