"Sudden And Accidental" Exception Not Ambiguous

General Liability	Contamination
Pollution Exclusion	Umbrella

An electrical service company periodically sent electrical transformers to a subcontractor for repair and temporary storage. The United States Environmental Protection Agency (EPA) determined that leaking oil-filled drums and transformers stored at the site caused the release of PCB-laden oil and dielectric fluid over twenty years. The company, along with numerous others, received a notice from EPA that PCB-contaminated soils had been found at the site and that it was considered potentially responsible for a portion of the response costs incurred.

The service company informed its liability insurer of its status as a "potentially responsible party." It claimed defense and indemnification under general liability and umbrella liability policies issued by the insurer. All of the policies contained an identical pollution exclusion clause for property damage arising from pollution unless the release of pollutants was "sudden and accidental."

The insurer rejected the claim based on the exclusion, asserting that the contamination at the site was not "sudden and accidental," and filed a motion for summary judgment with respect to its obligations. The trial court found the exception in the pollution exclusion clause "clear and unambiguous" and that there was no coverage for damage from PCB releases that occurred gradually over twenty years. The insured appealed.

The central issue on appeal was the meaning of "sudden and accidental." The insured argued that "sudden" was ambiguous and should be construed to mean simply "unexpected" or "unintended." The insurer contended that "sudden" must be interpreted as "abrupt" or "quick" and that something that occurred continually over twenty years could not be so classified.

The insured said that the term "sudden" was given numerous definitions in dictionaries and that it should have the benefit of those most beneficial to it, "unexpected" or "unintended." The court concluded that in the context of the pollution exclusion clause, "sudden" must be construed as meaning both "unexpected" and "abrupt."

The judgment of the trial court was affirmed in favor of the insurer and against the insured.

Editor's Note: The federal appeal court noted that the meaning of "sudden" as used in the pollution exclusion clause had not been addressed to date by the Indiana Supreme Court. (The contamination occurred in Indiana.) The federal court believed, however, that it would rule as was done in this case because it had construed the term similarly in the context of Indiana's Strict Product Liability Act.

CINCINNATI INS. CO., Plaintiff-Appellant v. FLANDERS ELECTRIC MOTOR SERVICE, INC., Defendant-Appellant. U.S. Court of Appeals for the Seventh Circuit. No. 93-3617. Nov. 7, 1994. CCH 1994 Fire and Casualty Cases, Paragraph 4984.