When are Intentional Acts Also Accidental? When Herbicides Destroy Crops Litigation Follows

Insurance policies are said to give everything in large print and take it away in fine print. That canard is no longer true since all modern policies are written in common language and each part of the policy is written in the same size print with headings even larger. However, insurance policies provide coverage for every possible risk of loss except those specifically excluded. Some exclusions are written broadly and then give back cover- age for certain types of risks of loss so that what looks like an exclusion is actually a grant of limited coverage. This method of writing insurance policies causes confusion and often leads to litigation with each side reading the same language differently.

In  National Union Fire Ins. Co. of Pittsburgh, PA v. Florida Crystals Corp ., Slip Copy, 2015 WL 2195092 (S.D.Fla., 5/11/15) the U.S. District Court for the Southern District of Florida was called upon to resolve such a dispute.

BACKGROUND

This case involves a dispute over insur- ance coverage in a related state-court action. Plaintiff National Union Fire Insurance Company of Pittsburgh, PA (“National Union”)   issued an insurance policy (the “Policy”) to a third party, Fanjul Corp. Defendants Florida Crystals Corporation (“Florida Crystals”) and Sugar Farms Co-op (“Sugar Farms”) are insured under the Policy.

On October 24, 2013, Date Palm Wholesalers, Inc. (“Date Palm”), sued Defendants in state court (the “Date Palm Action”). Date Palm operates a commercial nursery in Palm Beach County.   Florida Crystals and Sugar Farms own and main- tain nearby sugar-cane growing and pro- cessing operations.

Defendants contract with a company specializing in the aerial application of chemicals, Roma Air Corp. (“Roma”), to apply herbicide at their operations. The Complaint in the Date Palm Action alleges that in March 2013, Defendants directed Roma to spray a powerful herbicide on a large area of land (“Date Palm Complaint”). This area included not only Defendants’ operations, but also Date Palm’s nursery. The herbicide damaged many of Date Palm’s trees. Date Palm thus sued Defendants and Roma for negligence, strict liability, and trespass.

National Union subsequently com- menced the instant lawsuit, seeking a dec- laration that the Policy imposes no duty to defend Florida Crystals or Sugar Farms in the Date Palm Action. National Union’s Complaint advances numerous theories as to why the claims in the Date Palm Action fall outside the Policy’s scope.

DISCUSSION

National Union contends that the Date Palm Complaint alleges no accident that could give rise to coverage under the Policy, and that the claims in the Date Palm Action come within the scope of the Policy’s various exclusions.

National Union first contends that it owes no duty to defend because the Date Palm Complaint does not rest upon an acci- dent. The Policy covers damage caused by an “occurrence” arising out of the use of certain aircraft. The Policy defines an occur- rence as “an accident during the policy peri- od….” National Union argues that the Date Palm Complaint alleges only intentional wrongdoing, thus there is no accident that could give rise to a covered occurrence.

The Date Palm Complaint contains alle- gations of accidental injury to their prop- erty. Paragraph 21(h) of the Date Palm Complaint states that the spraying of Date Palm’s property arose from a failure to investigate the ownership of the property. Though not pled with exacting clarity, this allegation can plausibly be read as attribut- ing the failure of investigation to Defendants, in addition to Roma. Date Palm premises its negligence claims in part upon the resulting mistaken designation of its property among the land to be sprayed with herbicide. In other words, Date Palm alleges not only that negligence was involved in the act of spraying its property with herbicide, but also that the designation of its property for spraying was an accident.

In the Date Palm Action, Defendants allegedly failed to investigate the owner- ship of Date Palm’s property, resulting in the mistaken designation of the property for the application of herbicide. This alle- gation plausibly alleges a mistake giving rise to damage to property of a third party that Defendants neither expected nor intended. Therefore the Date Palm Complaint pleads an “accident.” That Roma intentionally sprayed herbicide on the mistakenly designated property does not require a different outcome.

National Union next argues that the language of Endorsements Seven and Thirteen of the Policy exclude the claims in the Date Palm Action from coverage. Endorsement Seven provides that the Policy “does not cover claims directly or indirectly occasioned by, happening through or in consequence of … pollution and contamination of any kind whatsoev- er.” To “contaminate” means, among other things, “to soil, stain, corrupt, or infect by contact or association.”

Endorsement Thirteen extends Coverage B to include the aerial applica- tion of chemicals “of benefit to or of direct use in the business of ” Defendants. This explicit addition of coverage for the aerial application of chemicals in the course of Defendants’ business conflicts with Coverage B’s exclusion of claims for dam- age resulting from services performed on Defendants’ behalf. Where an endorse- ment conflicts with the body of an insur- ance policy, the endorsement controls. Because Endorsement Thirteen appears to create coverage for a portion of the claims in the Date Palm Action, the Policy’s exclu- sion for services performed on Defendants’ behalf does not relieve National Union of a duty to defend.

CONCLUSION

In sum, National Union has not shown its entitlement to summary judgment on the absence of a duty to defend in the Date Palm Action. The Date Palm Complaint alleges accidental harms that could qualify as an “occurrence” giving rise to coverage under the Policy.

Although a number of the Policy’s exclusions might have applied to claims in the Date Palm Action, Endorsement Thirteen restores coverage at least for parts of those claims. The Court rejected National Union’s argument that Defendants necessarily exercised “control” over Date Palm’s property when Roma sprayed herbicide on it from above.

ZALMA OPINION

To read, understand and properly apply an insurance policy it is necessary to read the entire policy, each and every endorse- ment, and all of the words that make up the promises of the insurer to defend and indemnify its insured. Then, a thorough investigation of the facts of the claimed loss must be completed with the facts applied to the wording of the policy. The District Court did what was necessary and found that the policy wording was sufficient to allow the potential for coverage.