## Facts

- Alabama Plating Company operated a metal-finishing/electroplating facility that generated hazardous byproducts and wastewater.
- The company designed and operated a wastewater-treatment system approved by state and local authorities, including the Alabama Department of Environmental Management (ADEM).
- Over time, contaminants from the facility migrated into surrounding soil and groundwater, causing environmental contamination.
- ADEM issued directives requiring investigation and remediation of the facility and surrounding property, creating remediation expenses and future obligations.
- Alabama Plating sought coverage under occurrence-based CGL policies issued by USF&G and under excess policies, asserting the remediation obligations were covered “damages” because of “property damage” caused by an “occurrence.”
- The CGL policies defined an “occurrence” as an accident, including continuous or repeated exposure to conditions, resulting in property damage “neither expected nor intended from the standpoint of the insured.”
- The policies contained a pollution exclusion for damage arising from release of pollutants, with an exception restoring coverage if the discharge was “sudden and accidental.”
- Insurers denied coverage, arguing “sudden and accidental” requires temporally abrupt discharges and thus does not apply to gradual contamination.
- Alabama Plating contended it neither expected nor intended the contamination and argued “sudden” is ambiguous and reasonably means “unexpected,” allowing the exception to apply even to gradual releases.

## Issues

1. Whether “sudden and accidental” in the qualified pollution exclusion is ambiguous and reasonably construed to mean “unexpected and unintended,” rather than only temporally abrupt discharges.
2. Whether ADEM-mandated investigation and remediation obligations constitute covered “damages” because of “property damage” caused by an “occurrence,” absent a controlling exclusion.
3. Whether summary judgment was properly entered for the insurance broker (HRH) on Alabama Plating’s claims arising from procurement/advice concerning coverage.

## Decision

- The court held that “sudden” in “sudden and accidental” is ambiguous and may reasonably be read as “unexpected,” not solely “abrupt.”
- Applying Alabama rules of policy construction, the ambiguity was construed against the insurers and in favor of coverage.
- Because Alabama Plating presented substantial evidence that it did not subjectively expect or intend the property damage, a genuine issue of material fact existed as to whether the exception applied.
- The summary judgments for USF&G and the excess insurers were reversed and the case was remanded for further proceedings on coverage.
- The summary judgment for the broker (HRH) was affirmed due to insufficient evidence supporting the broker-liability claims.
- Disposition: affirmed in part, reversed in part, and remanded.

## Legal Principles

- In occurrence-based CGL coverage, whether property damage was “expected or intended from the standpoint of the insured” is determined under a subjective standard.
- The qualified pollution exclusion does not bar coverage when the pollutant discharge is “sudden and accidental”; where “sudden” is ambiguous, it is construed against the insurer.
- “Sudden and accidental” may be interpreted to mean “unexpected and unintended,” which can encompass gradual pollution if the insured did not expect or intend the resulting damage.
- Summary judgment is improper where substantial evidence creates a genuine dispute on whether discharges and resulting property damage were unexpected and unintended from the insured’s standpoint.
- Government-mandated environmental investigation and remediation obligations may constitute “damages” because of “property damage,” if other coverage requirements are met and no exclusion applies.
- Claims against an insurance broker require substantial evidence of the alleged procurement/advice breach; absent such evidence, summary judgment for the broker is proper.

## Conclusion

The Alabama Supreme Court interpreted “sudden and accidental” in the qualified pollution exclusion as ambiguous and construed it to allow potential coverage for unintended and unexpected pollution damage, even if the contamination developed gradually, thereby reversing summary judgment for the insurers while affirming summary judgment for the insurance broker.


Alabama Plating Co. v. U.S. Fid. & Guar. Co., 690 So. 2d 331 (Ala. 1996)