7th Cir. / Pollution Exclusionshoke2013
Expert’s Testimony Too Speculative to Satisfy Policyholder’s “Sudden and Accidental” Burden
The Seventh Circuit panel of Judge Barrett, Judge Sykes and Judge St. Eve, in an opinion written by Judge Barrett, upheld the district court’s decision to strike expert testimony. The Seventh Circuit held that without the expert testimony, the insured had no evidence to support its position that a “sudden and accidental” exception to the pollution exclusion applied. Thus, the Seventh Circuit affirmed the district court’s grant of summary judgment in favor of the insurer.
Varlen Corporation (“Varlen”) owned and operated two industrial sites related to railroad operations where significant amounts of groundwater contamination was found. Varlen spent millions of dollars in damages and remediation expenses related to the clean-up of the sites. Varlen sought indemnification from its insurer, Liberty Mutual Insurance Company (“Liberty Mutual”). Liberty Mutual denied coverage because its policy had an exclusion for any property damage arising out of chemical leaks or discharges.
Varlen sued Liberty Mutual. To overcome the pollution exclusion, it pointed to a policy provision stating that, despite the exclusion, Liberty Mutual would cover chemical leaks or discharges that were “sudden and accidental.” Under either New York or Illinois law, it was Varlen’s burden of proving that the exception to the pollution exclusion applied. Varlen did not have direct evidence as to how the damage occurred so it sought to use the testimony of geologist Daniel Rogers to prove that the contamination occurred suddenly and accidentally. As to one site, Rogers opined that the contaminants were released because the concrete sump leaked, and the releases were “sudden and accidental” because they were not intended and occurred in sudden spurts each time that the sump failed. As to the other site, Rogers asserted that the contamination at the diesel refueling area was too large to have occurred by minor leakage and was instead “consistent with overfills of diesel locomotives.” He also said that the value of the fuel made the release likely to be an accident. Rogers surmised that the contamination at the chlorinated solvent storing area, was “indicative of a drum overturning and suddenly leaking out rather than from operations.” He based his opinion in part on the fact that the contamination was found around where solvent was stored, not where it was used.
Both parties moved for summary judgment. Liberty Mutual also moved to strike Rogers’ testimony. The district court granted the motion to strike, holding that Rogers’ opinions were unreliable and speculative under Federal Rule of Evidence 702. It then granted Liberty Mutual’s motion for summary judgment. Varlen appealed.
Rogers’ testimony was the only evidence that Varlen offered as to whether the contamination occurred in a sudden and accidental manner. However, before Rogers’ testimony could be admitted, the district court needed to decide that the witness is “qualified as an expert by knowledge, skill, experience, training, or education”; the testimony will “help the trier of fact to understand the evidence or to determine a fact in issue”; “the testimony is based on sufficient facts or data” and “reliable principles and methods”; and the expert has “reliably applied the principles and methods to the facts of the case.” The Seventh Circuit found no abuse of discretion in the district court’s finding that Rogers’ testimony was not based on reliable methods or principles. Rogers failed to show how his experience or expertise led to his conclusions. He “looked at the size and the scope of the contamination and worked backwards to surmise how it must have occurred.” Rogers offered no methodology to explain how he drew his conclusions. “Rogers failed to demonstrate that his conclusions were anything more than guesses.” Without Rogers’ testimony there was no issue of material fact as to whether the contamination occurred suddenly and accidentally. Thus, the Seventh Circuit upheld the ruling of summary judgment in favor of Liberty Mutual. Varlen Corp. v. Liberty Mut. Ins. Co., No. 17-3212 (7th Cir. May 16, 2019).