Evanston Insurance Company v. Sandersville Railroad Company

• Court: Court of Appeals for the Eleventh Circuit
• Decided: February 8, 2019
• Docket: 17-14487
• Status: Unpublished

Opinion

Case: 17-14487 Date Filed: 02/08/2019 Page: 1 of 12

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT __________________________

No. 17-14487 __________________________

D.C. Docket No. 5:15-cv-00247-MTT

EVANSTON INSURANCE COMPANY,

Plaintiff - Appellee,

versus

SANDERSVILLE RAILROAD COMPANY,

Defendant - Appellant.

__________________________

Appeal from the United States District Court for the Middle District of Georgia __________________________

(February 8, 2019)

Before WILSON and JORDAN, Circuit Judges, and GRAHAM, * District Judge.

GRAHAM, District Judge:

* Honorable James L. Graham, Senior United States District Judge for the Southern District of Ohio, sitting by designation. Case: 17-14487 Date Filed: 02/08/2019 Page: 2 of 12

Sandersville Railroad Company was sued by an employee who developed an

occupational disease known as welder’s lung. Sandersville in turn notified

Evanston Insurance Company of a claim under its Commercial General Liability

Policy. Evanston then filed suit, seeking declaratory judgment that a pollution

exclusion clause to the Policy excluded coverage of the welder’s lung claim. The

district court granted summary judgment to Evanston on the coverage issue. After

review and with the benefit of oral argument, we affirm.

I.

Sandersville operates a short line railroad in Georgia. Employee John

Flowers worked as a rail carman for twenty-two years, maintaining a fleet of rail

cars and spending much of his time welding. In 2012 doctors diagnosed Flowers

with a lung disease called siderosis, or welder’s lung. Flowers made a claim to

Sandersville in January 2013 and later brought suit under the Federal Employers’

Liability Act, 45 U.S.C. § 51, et seq. He alleged that his disease was caused by

occupational exposure to welding fumes containing iron—an allegation that neither

Sandersville nor Evanston dispute.

Evanston issued the Commercial General Liability Policy to Sandersville for

the period of September 1, 2012 to September 1, 2013.1 The Policy contains

numerous forms and endorsements, including a Premier Railroad Liability

1 The original insurer was Essex Insurance Company, which merged into Evanston in 2016. 2 Case: 17-14487 Date Filed: 02/08/2019 Page: 3 of 12

Coverage Form. The Form has an “Insuring Agreement” under which Evanston

agreed to cover “sums that the insured becomes legally obligated to pay as

damages because of ‘bodily injury’ or ‘property damage’ to which this insurance

applies.” The Form defines “bodily injury” as “bodily injury, sickness or disease

sustained by a person, including death . . . .”

The Form contains a list of exclusions. One is for “Employer’s Liability,”

which excludes coverage for bodily injury to an employee of the insured “arising

out of and in the course of [e]mployment by the insured.” But the exclusion “does

not apply to . . . liability imposed on [the insured] by the Federal Employers’

Liability Act.” The Form defines its reference to FELA as regarding “injury to

‘employees’ in the course of their employment, including occupational disease.”

Another exclusion is for “Pollution.” It excludes coverage for bodily injury

“arising out of the actual, alleged or threatened discharge, dispersal, seepage,

migration, release or escape of ‘pollutants.’” The terms “discharge, dispersal,

seepage, migration, release or escape” are not defined. The term “pollutants” is

defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including

smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”

When notified of the Flowers claim, Evanston issued a reservation of the

right to decline coverage based on the pollution exclusion. After Sandersville later

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settled the Flowers claim without contribution from Evanston, Evanston filed this

diversity action seeking a declaratory judgment.

The district court held that the pollution exclusion barred coverage. The

court interpreted Georgia case law as broadly applying similar pollution exclusion

clauses beyond traditional environmental pollution claims. The court found as a

matter of law that siderosis resulting from the inhalation of welding fumes

qualified as an injury arising out of the release, escape or dispersal of a pollutant.

II.

Sandersville appeals the district court’s interpretation of the Policy. The

district court determined the meaning of the Policy based on the contract language

alone and did not look to extrinsic evidence or make factual findings. We thus

review the district court’s interpretation of the insurance contract de novo, applying

the same summary judgment standards as the district court. United Benefit Life

Ins. Co. v. U.S. Life Ins. Co., 36 F.3d 1063, 1065 (11th Cir. 1994); Blake v. Am.

Airlines, Inc., 245 F.3d 1213, 1215 (11th Cir. 2001).

III.

Georgia law governs our interpretation of the Policy. See Employers Mut.

Cas. Co. v. Mallard, 309 F.3d 1305, 1307 (11th Cir. 2002). We look “first to the

text of the policy itself” and give words “their ‘usual and common’ meaning.”

Georgia Farm Bureau Mut. Ins. Co. v. Smith, 298 Ga. 716, 784 S.E.2d 422, 424

4 Case: 17-14487 Date Filed: 02/08/2019 Page: 5 of 12

(2016) (quoting O.C.G.A. § 13-2-2(2)). “Where the contractual language

unambiguously governs the factual scenario before the court, the court’s job is

simply to apply the terms of the contract as written, regardless of whether doing so

benefits the carrier or the insured.” Reed v. Auto-Owners Ins. Co., 284 Ga. 286,

667 S.E.2d 90, 92 (2008) (footnote omitted). But when “a policy provision is

susceptible to more than one meaning, . . . [it] will be construed strictly against the

insurer/drafter and in favor of the insured.” Georgia Farm Bureau, 784 S.E.2d at

424–25.

Applying the Georgia Supreme Court’s decisions in Reed and Georgia Farm

Bureau to the case at hand, we find that the Policy’s pollution exclusion clause

unambiguously excludes coverage of the Flowers welder’s lung claim. In Reed, a

tenant had sued her landlord “for carbon monoxide poisoning allegedly caused by

the landlord’s failure to keep the rental house in good repair.” 667 S.E.2d at 91.

The landlord’s commercial general liability policy contained a pollution exclusion

clause with language identical to the one here. The Georgia Supreme Court

rejected the argument that the clause applied only to traditional environmental

pollution—“Nothing in the text of the pollution exclusion clause supports such a

reading.” Id. at 92. The Court held that exposure to carbon monoxide fell within

the pollution exclusion because the gas was an “‘irritant or contaminant,’ including

‘fumes’” under the policy. Id. (quoting policy language).

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In Georgia Farm Bureau, the Georgia Supreme Court again considered a

commercial general liability policy with a pollution exclusion identical to the one

here. The case stemmed from a tenant’s claim against a landlord for injuries

caused by exposure to deteriorating lead-based paint. The Court described the

pollution exclusion as “absolute,” covering exposure to “any pollutant” and not

limited in any way to “industrial,” “environmental” or “toxic” forms of pollution.

784 S.E.2d at 425 (emphasis in original). It then held that “lead present in paint

unambiguously qualifies as a pollutant”; thus, injuries arising from the inhalation

or ingestion of lead-based paint were excluded. Id. at 426.

We find no basis on which to distinguish the Flowers claim from the ones in

Reed and Georgia Farm Bureau. Flowers alleged that his injury arose from

inhaling welding fumes, which contained iron particles. Under the Policy’s

absolute pollution exclusion, welding fumes unambiguously qualify as an “irritant

or contaminant, including . . . fumes.”

Sandersville argues that the Georgia Supreme Court’s approach ignores the

policies’ movement terms. That is, even if welding fumes, carbon monoxide and

lead-based paint are pollutants, Sandersville contends that the exclusion clauses are

not satisfied unless the pollutants led to injury through their discharge, dispersal,

seepage, migration, release or escape.

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In support, Sandersville relies on this Court’s decision in Bituminous

Casualty Corp. v. Advanced Adhesive Technology, Inc., 73 F.3d 335 (11th Cir.

1996). There, an individual allegedly died from fumes he inhaled while using an

adhesive product to install carpet. The commercial general liability policy at issue

contained a pollution exclusion that is nearly the same as the one here, minus the

“seepage” and “migration” terms. The Court held that the emission of vapors from

the adhesive did not satisfy the meaning of either a discharge (which the Court

defined as an “unloading”), dispersal (a “distribution”), release (a “liberating” from

restraint) or escape (an “evasion of or deliverance from what confines”). Id. at

338. The Court thus concluded that the pollution exclusion did not apply to deny

coverage of the claim. Id. at 338–39.

The legal landscape has changed since Bituminous. The Court’s reasoning

reflected a traditional view of the scope of pollution exclusion clauses. See id. at

339 (stating that the exclusion clause contemplated “environmental

contamination,” and rejecting a broader application to consumer claims). And the

Court was guided by the rule of resolving ambiguities in favor of the insured. See

id. at 338 (citing Claussen v. Aetna Casualty & Sur. Co., 259 Ga. 333, 380 S.E.2d

686, 688 (1989) in selecting “unloading” over “emission” as the operative

definition of “discharge”).

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The Georgia Supreme Court in Reed expressly rejected a limited view of

pollution exclusion clauses. It did so over a dissent arguing that extending those

clauses to situations “no reasonable insured would have envisioned” ran afoul of

the rule of construing insurance policies in favor of coverage. Reed, 667 S.E.2d at

92, 92–93 (Hunstein, P.J., dissenting). The Court reaffirmed its approach in

Georgia Farm Bureau and held that a clause identical to the one here is

unambiguous. Canons of interpretations used to resolve an ambiguity simply do

not apply.

In Reed and Georgia Farm Bureau, the injured parties alleged that their

injuries resulted respectively from the release of carbon monoxide and from the

inhalation and ingestion of lead paint. The Court in both instances held that the

pollution exclusion clauses unambiguously applied to the factual scenarios being

presented. We must follow suit, as the factual scenario here—lung disease caused

by the inhalation of fumes released by welding—falls within the terms of the

pollution exclusion. See also Nat’l Elec. Mfrs. Ass’n v. Gulf Underwriters Ins.

Co., 162 F.3d 821, 824–25 (4th Cir. 1998) (holding that a nearly identical pollution

exclusion clause barred coverage for injury caused by the inhalation of manganese

fumes released by welding). To the extent Bituminous suggests a different result, it

must give way. See World Harvest Church, Inc. v. Guideone Mut. Ins. Co., 586

F.3d 950, 957 (11th Cir. 2009) (“[W]e follow the latest statement of state law by

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the state supreme court.”); United States v. Johnson, 528 F.3d 1318, 1320 (11th

Cir. 2008); Venn v. St. Paul Fire & Marine Ins. Co., 99 F.3d 1058, 1066 (11th Cir.

1996).

Sandersville contends that a broad construction of the pollution exclusion is

at odds with the FELA exception found in the exclusion for employer’s liability.

Sandersville purchased “premier” railroad coverage and believes it had reason to

expect that coverage for FELA liability was part of what it paid for.

The insured’s reasonable expectations come into play only when contractual

language is ambiguous. See Racetrac Petroleum, Inc. v. Ace Am. Ins. Co., 841 F.

Supp. 2d 1286, 1296 (N.D. Ga. 2011) (citing Georgia cases). The parties chose not

to place a FELA exception in the pollution exclusion clause, and the inclusion of a

FELA exception elsewhere does not create an ambiguity. The Policy contains no

language providing that when a claim for coverage survives one exclusion, it is

excused from examination under the rest. That the welder’s lung claim withstands

the employer’s liability exclusion does not entitle it to avoid scrutiny under the

pollution exclusion. See Cynergy, LLC v. First Am. Title Ins. Co., 706 F.3d 1321,

1327 (11th Cir. 2013) (“[T]hat is the nature of an exclusion—to exclude things that

otherwise would be covered, when certain conditions are met.”); Columbia Cas.

Co. v. Georgia & Florida Railnet, Inc., 542 F.3d 106, 113 (5th Cir. 2008)

(rejecting the argument that the existence of a FELA exception to other exclusions

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negated the application of a pollution exclusion to a railroad worker’s claim for

respiratory damage caused by his inhalation of exhaust and dust fumes).

IV.

The district court’s grant of summary judgment to Evanston on the issue of

coverage is therefore AFFIRMED.

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JORDAN, Circuit Judge, concurring in the judgment:

In my opinion, the Georgia Supreme Court’s decisions in Reed v. Auto-

Owners Ins. Co., 667 S.E.2d 90 (Ga. 2008), and Georgia Farm Bureau Mut. Ins. Co.

v. Smith, 784 S.E.2d 422 (Ga. 2016), did not completely abrogate our decision in

Bituminous Cas. Corp. v. Advanced Adhesive Technology, Inc., 73 F.3d 335 (11th

Cir. 1996). Nevertheless, I concur in the judgment.

It is true that Reed, 667 S.E.2d at 91-92, and Smith, 784 S.E.2d at 424-26, both

generally rejected a narrow reading of pollution exclusions, but they did so only in

the context of deciding whether the definition of “pollutant” in a given exclusion

was ambiguous and, if not, whether a certain substance constituted a “pollutant.”

See Reed, 667 S.E.2d at 92 (“As all parties recognize, the question thus narrows to

whether carbon monoxide gas is a ‘pollutant’—i.e., matter, in any state, acting as an

‘irritant or contaminant,’ including ‘fumes.’”); Smith, 784 S.E.2d at 426 (“Under the

broad definition contained in Chupp’s policy, we conclude that lead present in paint

unambiguously qualifies as a pollutant and that the plain language of the policy’s

pollution exclusion clause thus excludes Smith’s claims against Chupp from

coverage.”). One of our holdings in Advanced Adhesive was that the “emission” of

chemical vapors from the defendant’s product was not unambiguously excluded

from coverage under the relevant policy because the terms “discharge,” “dispersal,”

“release,” and “escape” were ambiguous. We explained that the term “discharge” 11 Case: 17-14487 Date Filed: 02/08/2019 Page: 12 of 12

had more than one reasonable meaning, and that the terms “dispersal,” “release,”

and “escape” did not “precisely describe the chemical process in controversy.” 73

F.3d at 338. That precise issue was not presented in Reed or Smith, and as a result

I disagree with the majority that those cases left Advanced Adhesive in the dust.

I would affirm the district court’s grant of summary judgment in favor of

Evanston Insurance Company on a narrower ground. The pollution exclusion in

Sandersville Railroad’s policy excludes injuries caused by the “discharge, dispersal,

seepage, migration, release, or escape” of “pollutants,” which are defined as “any

solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor,

soot, fumes, alkalis, chemicals and waste.” Because the term “migration,” as far as

I can tell, was not present in the exclusion addressed in Advanced Adhesive, that

case does not control here. In my view, welding fumes containing iron constitute a

“pollutant” (as that term is defined in the policy), and it is fair to say that such fumes

“migrated,” i.e., they “[m]ove[d] from one place to another.” 1 Shorter Oxford

English Dictionary 1774 (5th ed. 2002). That is, after all, what fumes normally do.