Issues of Fact Warrant Trial on Application of Regulatory Estoppel to Meaning of "Sudden and Accidental" in Pollution Exclusion
In Simon Wrecking Co., Inc. v. AIU Ins. Co., (E.D.Pa. Jan. 10, 2008), a federal district court concludes that issues of fact regarding application of regulatory estoppel to the meaning of “sudden and accidental” in a pollution exclusion precludes summary judgment. The insured sought coverage for its alleged involvement in the Malvern TCE Superfund Site. At issue was the meaning of “sudden and accidental” in the pollution exclusion of standard CGL policies introduced in 1970.
The insurer claimed the phrase has a temporal meaning to require an abrupt event, while the insured claimed it is identical in meaning to the phrase “unexpected and unintended” and therefore does not require suddenness. On motions for summary judgment, the insured argued the language was ambiguous; was known in the insurance industry, prior to the filing of the 1970 pollution exclusion, to possess the same meaning as “unexpected and unintended;” and, was represented by the industry to the Pennsylvania Insurance Department to mean “unexpected and unintended,” and that regulatory estoppel therefore prevented the insurer from asserting a different meaning.
The court rejected the first two arguments, concluding that the policy language was not ambiguous, and that there was no issue of fact whether the phrase had a trade usage meaning of “unexpected and unintended.” The insured offered little evidence of this, and the insurer submitted affidavits of several industry officials who stated either that the term was unclear and had no trade usage, or that the term was commonly understood to require an abrupt event.
The court, however, concluded that issues of fact precluded summary judgment with respect to application of regulatory estoppel. The insured presented the affidavit of a Pennsylvania Insurance Department employee who stated the IRB represented to the department that the exclusion was merely a clarification and continued to cover pollution that was “unexpected and unintended,” and an explanation that accompanied the filing of the pollution exclusion which categorized the filing as a clarification of occurrence coverage rather than a major departure from it. The insurer submitted several affidavits of employees of the Pennsylvania Insurance Department who stated they were not misled by the filing of the pollution exclusion. The court reserved the matter for trial accordingly.
The insurer claimed the phrase has a temporal meaning to require an abrupt event, while the insured claimed it is identical in meaning to the phrase “unexpected and unintended” and therefore does not require suddenness. On motions for summary judgment, the insured argued the language was ambiguous; was known in the insurance industry, prior to the filing of the 1970 pollution exclusion, to possess the same meaning as “unexpected and unintended;” and, was represented by the industry to the Pennsylvania Insurance Department to mean “unexpected and unintended,” and that regulatory estoppel therefore prevented the insurer from asserting a different meaning.
The court rejected the first two arguments, concluding that the policy language was not ambiguous, and that there was no issue of fact whether the phrase had a trade usage meaning of “unexpected and unintended.” The insured offered little evidence of this, and the insurer submitted affidavits of several industry officials who stated either that the term was unclear and had no trade usage, or that the term was commonly understood to require an abrupt event.
The court, however, concluded that issues of fact precluded summary judgment with respect to application of regulatory estoppel. The insured presented the affidavit of a Pennsylvania Insurance Department employee who stated the IRB represented to the department that the exclusion was merely a clarification and continued to cover pollution that was “unexpected and unintended,” and an explanation that accompanied the filing of the pollution exclusion which categorized the filing as a clarification of occurrence coverage rather than a major departure from it. The insurer submitted several affidavits of employees of the Pennsylvania Insurance Department who stated they were not misled by the filing of the pollution exclusion. The court reserved the matter for trial accordingly.
