Carova Corp. v. United States Fidelity & Guaranty Co.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
CAROVA CORPORATION; OCEAN SANDS 
CORPORATION,
Plaintiffs-Appellants,
v.  No. 00-1684
UNITED STATES FIDELITY &
GUARANTY COMPANY,
Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of Virginia, at Norfolk.
Jerome B. Friedman, District Judge.
(CA-99-1573-2)
Argued: January 23, 2001
Decided: March 23, 2001
Before NIEMEYER and MOTZ, Circuit Judges, and
David A. FABER, United States District Judge for the
Southern District of West Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Charles William Best, Jr., CHARLES W. BEST JR.,
P.C., Norfolk, Virginia, for Appellants. Frank Winston, Jr., SHAW
PITTMAN, Washington, D.C., for Appellee.
2 CAROVA CORP. v. U.S. FIDELITY & GUARANTY CO.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
This case requires us to decide whether United States Fidelity and
Guaranty Company ("USF&G") was obliged to defend its insured in
a lawsuit arising out of the insured’s maintenance of a trash dump.
Following a bench trial, the district court concluded that the policy
provided no coverage for the claims asserted against the insured, and
we affirm.
Carova Corporation and Ocean Sands Corporation, both Virginia
corporations, are joint venturers in Ocean Carova ("Carova"), which
owns real property located in Currituck County, North Carolina. Car-
ova operated a trash dump on its property and authorized motor vehi-
cles to use a pedestrian right-of-way for access to the dump. The
owner of a neighboring property, Swan Island Properties, Inc. ("Swan
Island"), which was developing its property for resale in lots, sued
Carova for damages to Swan Island’s property caused by the presence
of the dump and by trash blowing from the dump onto Swan Island’s
property. In its suit against Carova, Swan Island alleged: (1) that Car-
ova knowingly permitted use of its pedestrian easement for use by
motor vehicle traffic thereby damaging the easement; (2) that opera-
tion of a trash dump by Carova on its property near Swan Island’s
property line created a visual impairment that "unreasonably inter-
fered" with Swan Island’s ability to sell lots; and (3) that trash from
the dump had blown from Carova’s property onto Swan Island’s
property. Swan Island filed suits against Carova in both state and fed-
eral court.
Carova tendered the defense of these suits to its insurance com-
pany, USF&G, but USF&G denied coverage because the claims in the
suits did not assert "property damage," as defined by the policy, and
because a pollution exclusion applied, barring coverage. After Carova
defended the suits at its own expense, eventually settling with Swan
CAROVA CORP. v. U.S. FIDELITY & GUARANTY CO. 3
Island for $13,000, Carova instituted this action against USF&G for
a declaratory judgment that USF&G was obliged to provide a defense
and for a money judgment for reimbursement of its costs of defense
and settlement.
Following a bench trial, the district court ruled in favor of USF&G,
concluding:
From the evidence presented at trial and in the record before
the Court, it is clear to the Court that USF&G properly
found that the underlying complaints filed by Swan Island
do not allege "property damage" as defined by the policies.
Therefore, USF&G had no obligation to provide coverage to
Carova for the claims in the Swan Island complaints. It is
equally clear to the Court that even if there was "property
damage," USF&G correctly invoked the contract’s pollution
exemption when it denied Carova’s request for coverage.
This appeal followed.
The policy in question provides that USF&G "will pay those sums
that [Carova] becomes legally obligated to pay as damages because
of . . . ‘property damage’ to which this insurance applies. We will
have the right and duty to defend any ‘suit’ seeking those damages."
The policy defines "property damage" to "mean[ ] [p]hysical injury to
tangible property, including all resulting loss of that property . . . or
[l]oss of use of tangible property that is not physically injured. All
such loss of use shall be deemed to occur at the time of the ‘occur-
rence’ that caused it." An "occurrence" is defined as "an accident,
including continuous or repeated exposure to substantially the same
general harmful conditions."
USF&G directs us to two exclusions in the policy that may be
applicable. Under the first, the policy excludes coverage of property
damage that is "expected or intended from the standpoint of the
insured." And under the second, the policy excludes property damage
caused by pollution, specifically damage that "aris[es] out of the
actual, alleged or threatened discharge, dispersal, seepage, migration,
release or escape of pollutants [a]t or from any premises, site or loca-
tion which is or was at any time owned or occupied by . . . [Carova]."
4 CAROVA CORP. v. U.S. FIDELITY & GUARANTY CO.
A "pollutant" is defined by the policy as "any solid, liquid, gaseous
or thermal irritant or contaminant, including smoke, vapor, soot,
fumes, acids, alkalis, chemicals and waste. Waste includes materials
to be recycled, reconditioned or reclaimed."
Under Virginia law, which is applicable, the determination of
whether an insurance company has a duty to defend must be based on
"(1) the policy language to ascertain the terms of the coverage and (2)
the underlying complaint to determine whether any claims alleged
therein are covered by the policy." Fuisz v. Selective Ins. Co. of Amer-
ica, 61 F.3d 238, 242 (4th Cir. 1995).
The allegations of the complaints that Swan Island filed against
Carova may be grouped under three basic claims. First, Swan Island
contended that Carova permitted others to use the pedestrian walkway
easement located at the border of the Carova land for motor vehicular
traffic even though the easement had been dedicated for pedestrian
use only. The Swan Island complaint charged that Carova "knowingly
allowed" the pedestrian walkway easement to be used in this fashion,
thereby damaging the easement. Second, Swan Island claimed that
Carova’s maintenance of the dump on its property created a nuisance
that decreased the value of Swan Island’s property. And third, "house-
hold trash was blown from Carova land onto the Swan Island land,"
thereby impairing Swan Island’s ability to sell its lots.
The first two claims asserted by Swan Island are clearly based on
deliberate conduct. The allegation that Carova improperly allowed
vehicular traffic to use an easement was specifically alleged to have
been done "knowingly." And Carova’s operation of a dump, alleged
by Swan Island to create a nuisance, was obviously deliberate.
Accordingly, we believe that both of these claims are excluded from
coverage because each claimed damages that were "expected or
intended from the standpoint of the insured."
The third claim, that trash blew onto Swan Island’s property, is
also arguably based on an occurrence that was "expected" from Car-
ova’s standpoint. But even if this claim could be construed as falling
under Swan Island’s general allegations of negligence, there still
would be no coverage because the trash caused no property damage
as that term is defined by the policy. The policy defines property
CAROVA CORP. v. U.S. FIDELITY & GUARANTY CO. 5
damage as "physical injury to tangible property, including all result-
ing loss of that property." The allegations in the complaint concern
trash that could easily be removed, and no allegation suggests that it
damaged the underlying property. Moreover, the allegations fail to
indicate how the windblown trash caused damage to the property
based on the policy’s alternative definition of "loss of use of tangible
property that is not physically injured." Although Swan Island could
allege a decline in value resulting from the existence of the dump
itself on the adjacent property, it could not make a similar claim for
blown trash that could easily be removed.
Accordingly, without considering whether the pollution exclusion
applies, we agree with the district court that the policy did not cover
the risks described in Swan Island lawsuits.
The judgment of the district court is affirmed.
AFFIRMED