                   United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 12-2215
                         ___________________________

                          Doe Run Resources Corporation

                         lllllllllllllllllllll Plaintiff - Appellant

                                             v.

                           Lexington Insurance Company

                        lllllllllllllllllllll Defendant - Appellee
                                       ____________

                      Appeal from United States District Court
                   for the Eastern District of Missouri - St. Louis
                                   ____________

                             Submitted: January 16, 2013
                                Filed: June 13, 2013
                                  ____________

Before LOKEN, MURPHY, and COLLOTON, Circuit Judges.
                           ____________

LOKEN, Circuit Judge.

       Doe Run Resources Corporation (“Doe Run”), the largest integrated lead
producer in the Western Hemisphere, operates the Sweetwater Mine and Mill near
Viburnum, Missouri. Doe Run extracts and crushes ore containing lead and other
metals at the mine, processes the crushed ore at a mill near the mine, and either sells
the resulting lead concentrate on the world market or transports it by truck to Doe
Run’s smelter for processing into ingots, bars, and other forms. In 2006, Nadist, LLC,
a neighboring landowner, sued Doe Run, alleging environmental property damage
resulting from the mine and mill operations (the “Nadist Lawsuit”).

       More than three years later, Doe Run tendered defense of the Nadist Lawsuit
to Lexington Insurance Company (“Lexington”) under Commercial General Liability
(CGL) policies Doe Run purchased between 1998 and 2006. When Lexington denied
coverage on numerous grounds, Doe Run commenced this declaratory judgment
action seeking to enforce Lexington’s contractual duty to defend Doe Run. The
district court1 granted summary judgment dismissing the complaint, concluding that
Lexington had no duty to defend because the policies’ absolute pollution exclusions
unambiguously bar coverage of all claims asserted in the Nadist Lawsuit. Doe Run
appeals. Missouri law governs the issues raised on appeal in this diversity case.
Reviewing the district court’s grant of summary judgment and interpretation of the
policies de novo, we affirm. See Royal Ins. Co. of Am. v. Kirksville Coll. of
Osteopathic Med., 191 F.3d 959, 961 (8th Cir. 1999) (standard of review).

                                          I.

       Nadist filed the Nadist Lawsuit in June 2006 and the operative First Amended
Complaint in February 2008. In October 2008, the State of Missouri intervened as
plaintiff, asserting the same claims for relief under state and federal environmental
laws. In September 2009, Doe Run gave Lexington notice of the Nadist Lawsuit and
demanded “full defense coverage” under enumerated CGL policies. Those policies
imposed two distinct contractual duties, the duty to indemnify Doe Run for covered
losses, and the duty to defend Doe Run in a lawsuit seeking damages for losses that
may be covered. In this lawsuit, Doe Run seeks only to enforce the duty to defend,
which is broader than the duty to indemnify. “The presence of some insured claims


      1
        The Honorable Audrey G. Fleissig, United States District Judge for the Eastern
District of Missouri.

                                         -2-
in the underlying suit gives rise to a duty to defend, even though uninsured claims or
claims beyond the coverage may also be present.” Lampert v. State Farm Fire & Cas.
Co., 85 S.W.3d 90, 93 (Mo. App. 2002).

        Under Missouri law, the duty to defend arises when there is potential liability
at the outset of the third party’s case. Normally, the duty “is determined by comparing
the language of the insurance policy with the allegations in the complaint.”
McCormack Baron Mgmt. Servs., Inc. v. Am. Guar. Liab. Ins. Co., 989 S.W.2d 168,
170 (Mo. 1999) (citation omitted). “But the insurer may not ignore ‘actual facts,’ that
is, ‘facts which were known, or should have been reasonably apparent at the
commencement of the [underlying lawsuit].’” Esicorp, Inc. v. Liberty Mut. Ins. Co.,
193 F.3d 966, 969 (8th Cir. 1999) (quotation omitted). Here, this standard is more
difficult to apply because Doe Run waited three years before tendering defense of the
Nadist Lawsuit to Lexington, when Doe Run had already incurred $2,700,000 in
defense costs. But as the district court recognized, our focus must still be on the
claims asserted in the Nadist Lawsuit’s First Amended Complaint. Lexington has no
duty to defend if the policies’ pollution exclusions barred coverage of all claims
asserted in the Nadist Lawsuit. Cas. Indem. Exch. v. City of Sparta, 997 S.W.2d 545,
553 (Mo. App. 1999). Where insurance policy terms unambiguously apply, including
coverage exclusions, they will be enforced as written. Krombach v. Mayflower Ins.
Co., 827 S.W.2d 208, 210 (Mo. 1992); Auto Club Family Ins. Co. v. Jacobsen, 19
S.W.3d 178, 183 (Mo. App. 2000).

      Given this focus of the duty-to-defend inquiry, we will quote at some length
from the twenty-six-page First Amended Complaint in the Nadist Lawsuit. The
complaint began with general allegations regarding the Doe Run operations at issue:

             2. Through its mismanagement of the Mine and Mill, Doe Run
      has caused hazardous and toxic substances, primarily lead, zinc and lead
      tailings but also other substances including arsenic, cadmium, chromium,


                                         -3-
      copper, manganese, nickel, and thallium to contaminate the soil, air, and
      water around the Mine and Mill, including property owned by Nadist.

            3. According to sampling performed by the Missouri Department
      of Natural Resources (“MDNR”) and Nadist itself, the contamination
      Doe Run has caused is extreme both in breadth and in the danger it poses
      to human health and the environment.

             4. In addition, there is significant contamination in the
      Sweetwater and Adair Creeks downstream of likely discharge points . . .
      in the Mill area.

             6. . . . MDNR has documented a release from the tailings pond
      into the Ozark Aquifer, on information and belief creating a risk to
      domestic wells near the Mine and Mill.

             7. . . . The high concentrations of lead and other toxic substances
      are being detected at or near the surface with the highest concentrations
      closest to Doe Run’s Mill and the haul road, suggesting lead
      contamination emanates from the Mill and haul trucks that carry ore
      concentrate from the Mill.

             8. . . . Lead is a probable human carcinogen known to cause brain
      damage in humans . . . . Arsenic is a known human carcinogen that can
      cause death or nerve damage in humans and animals . . . . Thallium is
      another known human carcinogen . . . . Cadmium inhalation can lead to
      respiratory tract problems, renal failure, or liver and kidney damage.
      Chromium, nickel, manganese, and zinc also can cause serious injury to
      human health and/or the environment.

             11. . . . On information and belief, the dam holding back the Mine
      and Mill’s lead-contaminated tailings pond and tailings pile . . . has been
      in use almost thirty years. A dam failure would release a toxic stew that
      would likely cover thousands of acres with a poisonous sheen.

The complaint then asserted six statutory and common law tort causes of action, plus
two contract claims that are not here at issue:

                                         -4-
         COUNT I -- Violation of RCRA -- Hazardous Waste

      25. The Mill generates ore concentrate, which contain[s] toxic
substances including lead. The haul trucks then haul loads of the ore
concentrate from the Mill on the haul road.

       26. On information and belief, ore concentrate is released from
the Mill and haul trucks and contaminates the soil, air, and water at and
near the Mill. In many instances, Doe Run then abandons the released
ore concentrate where the contamination occurs.

       27. When ore concentrate is released from the Mill area and the
haul trucks and Doe Run leaves the released concentrate on Doe Run’s
and/or Nadist’s property, this constitutes the discarding, disposal, and/or
abandonment of a hazardous waste [in violation of 42 U.S.C. § 6923].

           COUNT II -- Violation of RCRA -- Solid Waste

      39. . . . Doe Run has allowed water and wind to carry toxic tailings
from the tailings pile and pond onto nearby property and into nearby
surface water [entitling Nadist to relief under 42 U.S.C. § 6972].

            COUNT III -- Violation of the Clean Water Act

       51. On information and belief, including the MDNR’s sampling,
toxic contaminants including lead, zinc, arsenic, and thallium are being
discharged from one or more unpermitted point sources into the
Sweetwater and Adair Creeks . . . . from the Mill area [which constitutes
the discharge of pollutants in violation of 33 U.S.C. § 1311(a)].

             COUNT IV -- Violation of the Clean Air Act

       59. . . . [L]ead and other materials are being released or are
emanating from the Mine and Mill site, including windborne lead from
haul trucks operated by Doe Run that access the site to remove lead ore
concentrate from the site [in violation of 42 U.S.C. § 7604].



                                   -5-
                                 COUNT V -- Trespass

              64. Without Nadist’s authorization, Doe Run has released toxic
       substances lead, zinc and lead tailings but also other substances
       including arsenic, cadmium, chromium, copper, manganese, nickel, and
       thallium, onto real property owned by Nadist.

             66. Doe Run has allowed the pollution of and trespass upon
       Nadist’s property to continue largely unabated, despite knowing the
       toxins emitted from Doe Run’s operations pose an imminent risk to
       human health and the environment.

                                COUNT VI -- Nuisance

             70. Without Nadist’s authorization, Doe Run has released and on
       a regular or semi-regular basis is releasing toxic substances including
       lead onto real property owned by Nadist. Such releases impede Nadist’s
       operations and endanger Nadist’s employees and others on its property.

                                            II.

        Lexington’s CGL policies broadly insured Doe Run against liability to third
parties for bodily injury or property damage caused by an “occurrence.” For purposes
of this appeal, it is agreed that the tort claims asserted in the Nadist Lawsuit fell within
these insuring provisions. However, all eight policies included what is known as an
“absolute” pollution exclusion. In the policies issued between 1998 and November
2004, this provision excluded -


       bodily injury or property damage . . . caused by, contributed to or arising
       out of the actual or threatened discharge, dispersal, release, or escape of
       smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or
       gases, waste materials or other irritants, pollutants or contaminants into
       or upon the land, the atmosphere or any course or body of water, whether
       above or below ground . . . whether or not such is sudden or gradual, and


                                            -6-
      whether or not such is accidental, intended, foreseeable, expected,
      fortuitous or inevitable, and wherever such occurs . . . .

In the policies issued to Doe Run from November 2004 through 2006, this provision
excluded -


      “Bodily injury” or “property damage” which would not have occurred
      in whole or part but for the actual, alleged or threatened discharge,
      dispersal, seepage, migration, release or escape of pollutants at any
      time. . . . Pollutants means any solid, liquid, gaseous, or thermal irritant
      or contaminate including smoke, vapor, soot, fumes, acid, alkalis,
      chemicals and waste. Waste includes material to be recycled,
      reconditioned or reclaimed.

     In the September 2009 letter tendering defense of the Nadist Lawsuit to
Lexington, Doe Run’s counsel asserted:

      The environmental allegations are not limited to “pollutants.” Rather,
      they include allegations concerning metals and other commercial
      materials that have been used, generated or stored at the Sweetwater
      Mine and Mill, or that have been hauled to and from the Mine and Mill,
      and that do not qualify as “pollutants.” . . . The law makes clear that
      materials a company uses or sells, and which are in the industrial
      environment where the company routinely works, are not “pollutants.”

In a lengthy letter dated November 30, 2009, explaining why Lexington was denying
coverage and the duty to defend, Lexington’s Account Specialist handling these
claims, after quoting this assertion, responded:

      The “commercial material” that is the subject of the above allegations is
      ore concentrate. Based on our investigation, the court [in the Nadist
      Lawsuit] has already determined that ore concentrate is a hazardous
      waste subject to RCRA regulation. . . . Doe Run argued that Nadist could
      not state a RCRA Subchapter III claim against it because ore concentrate

                                          -7-
      was either virgin material, or, if it was a waste, it was not a hazardous
      waste subject to Subchapter III regulations. The court rejected Doe
      Run’s assertions . . . .

      The court’s order clarifies that for purposes of this suit Nadist has pled
      that ore concentrate is hazardous waste. The pollution exclusion bars
      coverage for property damage . . . caused by, contributed to or arising
      out of the actual or threatened discharge, dispersal, release, or escape of
      waste materials into or upon the land, the atmosphere or any course or
      body of water . . . Therefore, the allegations citing to Doe Run’s
      operation of haul trucks carrying ore concentrate from the Mill as a
      source of liability are precluded from coverage under the pollution
      exclusion of [the enumerated] Lexington policies . . . .

                                 *   *     *   *    *

      Lexington’s coverage position is based on the information presently
      available to us. . . . Should you have any additional information that you
      feel would either cause us to review our position or would assist us in
      our investigation or determination, we ask that you advise us as soon as
      possible.

        The district court concluded that the allegations in Nadist’s First Amended
Complaint “all fit squarely within the language of the pollution exclusions in the
policies.” We agree. The general fact allegations in Nadist’s pleading reflect a
prototypical complaint for relief from environmental property damage. More
importantly, each of Nadist’s six tort causes of action, including the common law
trespass and nuisance claims, were entirely premised on allegations that Doe Run is
liable to Nadist for causing the “release” or “discharge” of “hazardous wastes,” “toxic
substances,” and “contaminants,” mirroring the language of Lexington’s absolute
pollution exclusions. It is hard to imagine a more perfect overlap between the
allegations in a third party’s underlying complaint and the operative language of a
pollution exclusion. Compare City of Sparta, 997 S.W.2d at 552 (“To hold the
Absolute Pollution Exclusion does not bar coverage for damage caused by toxic

                                         -8-
substances from sludge removed from sewage by Sparta’s wastewater treatment
facility would leave one wondering what kind of activity would be excluded.”).

                                         III.

      Rather than challenge this fact-intensive analysis, Doe Run argues on appeal
that Lexington’s pollution exclusions do not apply as a matter of law.

       A. Relying on Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d 510
(Mo. App. 1999), Doe Run first argues that Lexington’s pollution exclusions are
ambiguous as applied to the Nadist Lawsuit because Doe Run is in the business of
producing lead concentrate; therefore, in purchasing a CGL policy, Doe Run would
reasonably believe that its product is not an excluded “pollutant.” In Hocker Oil, the
insured, a gas station, was sued by neighboring land owners after a drain plug in its
underground gasoline storage tank failed and 2,000 gallons of gasoline were released
into the ground. Id. at 512. The insurer’s “garage policy” included an absolute
pollution exclusion containing the same definition of “pollutants” as the 2004-2006
Lexington policies. Id. at 512-13. Electing to follow the minority position of the
Supreme Court of Indiana in American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind.
1996), the Missouri Court of Appeals held that the exclusion was ambiguous as to
whether gasoline was a pollutant and therefore the insured was entitled to coverage:

             Hocker is in the business of transporting, selling and storing
      gasoline on a daily basis. Gasoline is not a pollutant in its eyes.
      Gasoline is the product it sells. . . . Hocker was entitled to characterize
      gasoline in a manner consistent with its daily activities absent specific
      policy language to the contrary. Ranger’s failure to identify “gasoline”
      as a pollutant in its pollution exclusion resulted in uncertainty and
      indistinctness. . . . Being ambiguous, the policy provision is construed
      against [the insurer]. 997 S.W.2d at 518.



                                         -9-
        Like the district court, we conclude that Hocker Oil does not mandate the
conclusion that Lexington’s pollution exclusions are ambiguous as applied to the
Nadist Lawsuit. First, the court in Hocker Oil expressly limited its holding to
gasoline, stating that cases involving other substances were “not particularly helpful”
to its analysis because “[c]lauses can, of course, be ambiguous in one context and not
another.” Id. at 516 (quotation omitted). Thus, Hocker Oil simply does not carry the
weight of controlling precedent that Doe Run ascribes to it.2

       Second, less than four months after the decision in Hocker Oil, a panel of the
same division of the Missouri Court of Appeals that included two of the three judges
who unanimously decided Hocker Oil unanimously decided City of Sparta. In that
case, the insured City provided wastewater treatment facility sludge to a farmer who
applied it as fertilizer, and toxic substances in the sludge migrated to a neighboring
dairy farm, allegedly damaging the neighbor’s herd. 997 S.W.2d at 546. Though the
sludge was obviously a commercially valuable byproduct of the City’s wastewater
treatment operations, the court held, without even citing Hocker, that a virtually
identical absolute pollution exclusion unambiguously barred coverage and the duty
to defend:




      2
        Doe Run argues that Hocker Oil is controlling precedent in this diversity action
because the Supreme Court of Missouri denied the insurer’s application to transfer the
case from the Court of Appeals. Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., No.
81818 (Mo. Aug. 24, 1999). This contention is without merit. Many Missouri cases
recognize that the denial of transfer does not denote Supreme Court approval of a
lower court decision. Thus, we follow intermediate appellate court decisions “when
they are the best evidence of Missouri law,” Washington v. Countrywide Home
Loans, Inc., 655 F.3d 869, 873 (8th Cir. 2011), but not when relevant precedent,
considered dicta, and other reliable data persuade us that the Supreme Court of
Missouri would not apply a decision in the manner urged. See Rashaw v. United
Consumers Credit Union, 685 F.3d 739, 743-44 (8th Cir. 2012), cert. denied, 133 S.
Ct. 1250 (2013).

                                         -10-
      Inasmuch as (1) the substance at issue in the instant case is sludge, (2)
      Rollers pled the sludge contained substances toxic to humans and
      animals, which caused Rollers’ damage, and (3) the Absolute Pollution
      Exclusion bars coverage for damage arising from exposure to toxic
      substances, this court holds the Absolute Pollution Exclusion is not
      ambiguous regarding whether Rollers’ damage is barred from coverage
      under [the policy]. Id. at 551.

At oral argument, Doe Run asserted that lead concentrate was its “primary product,”
like the gasoline in Hocker Oil and unlike the sludge in City of Sparta. But discarded
or abandoned lead concentrate and tailings are not products Doe Run intends to sell.
That its toxic or hazardous materials are valuable products if Doe Run properly
contains them does not make them any less “pollutants” when they are abandoned and
released into the environment. Accord United States v. Standard Oil Co., 384 U.S.
224, 229 (1966) (“The word ‘refuse’ . . . is satisfied by anything which has become
waste, however useful it may earlier have been.”); Pipefitters Welfare Educ. Fund v.
Westchester Fire Ins. Co., 976 F.2d 1037, 1044 (7th Cir. 1992) (“one could not
characterize the discharge onto land of 80 gallons of PCB-laden oil as anything but
pollution”). The Nadist complaint alleges property damage only by reason of Doe
Run’s releasing of abandoned hazardous wastes and toxic substances into the
environment.

       Finally, in construing the word “pollutant” in an absolute pollution exclusion,
Hocker Oil focused on whether gasoline was the insured’s product, rather than on its
toxic characteristics when accidentally released into the environment. That focus was
a minority position when adopted, has been almost uniformly rejected by appellate
courts in other jurisdictions, and has not since been cited or referred to favorably by
the Supreme Court of Missouri. See, e.g., Mont. Pet. Tank Release Comp. Bd. v.
Crumleys, Inc., 174 P.3d 948, 956-59 (Mont. 2008) (collecting cases and declining
to follow Hocker Oil). As one court concluded, correctly in our view, “even though
gasoline that is in [an underground storage tank] is a ‘product’ for purposes of other


                                         -11-
parts of the insurance policy, when the gasoline escapes or reaches a location where
it is no longer a useful product it is fairly considered a pollutant.” Whittier Props.,
Inc. v. Alaska Nat’l Ins. Co., 185 P.3d 84, 91 (Alaska 2008).

       The Supreme Court of Missouri has noted that courts may not “create an
ambiguity in order to distort the language of an unambiguous policy, or, in order to
enforce a particular construction which it might feel is more appropriate.” Rodriguez
v. Gen. Accident Ins. Co. of Am., 808 S.W.2d 379, 382 (Mo. 1991). Applying that
principle, we conclude the Supreme Court of Missouri would not interpret Hocker Oil
in the manner urged by Doe Run in this case, which involves a sophisticated insured
and the kind of underlying environmental liability claims that the exclusion was
primarily intended to exclude. See generally Apana v. TIG Ins. Co., 574 F.3d 679,
682-83 (9th Cir. 2009).

     B. Beginning in November 2004, the standard terms and conditions in
Lexington’s CGL policies added a specific lead exclusion which excluded:

      “Bodily Injury” or “Property Damage”, for past, present or future claims
      arising in whole or in part, either directly or indirectly, out of the
      manufacture, distribution, sale, resale, re-branding, installation, repair,
      removal, encapsulation, abatement, replacement or handling of, exposure
      to, ingestion of or testing for, lead whether or not the lead is or was at
      any time airborne as a particle, contained in a product, carried on
      clothing, inhaled, transmitted in any fashion or found in any form
      whatsoever . . . the cost of disposal of lead substances or the taking of
      such other action as may be necessary to temporarily or permanently
      prevent, minimize or mitigate damage to the public health or welfare or
      to the environment, which may otherwise result . . . .

As Doe Run was in the business of mining and processing lead and selling lead
products, this new exclusion was, understandably and necessarily, deleted “in its
entirety” by an endorsement to Doe Run’s 2004-2006 CGL policies.


                                         -12-
       Doe Run argues that the deletion of this broader lead exclusion created an
ambiguity that precludes application of the absolute pollution exclusion to liability
claims relating to lead-based substances. We disagree. Under Missouri law, an
exclusion “has no function to endow coverage.” Transp. Indem. Co. v. Teter, 575
S.W.2d 780, 784 (Mo. App. 1978); see Miller v. Home Ins. Co., 605 S.W.2d 778, 780
(Mo. 1980). Likewise, the absence of an exclusion, standing alone, does not imply
coverage; coverage must be provided in the remaining policy terms. This common
sense principle was well illustrated by Truck Ins. Exch. v. Heman, 800 S.W.2d 2, 4
(Mo. App. 1990), where the court held that the parties’ decision not to include an
optional additional exclusion in an insurance policy did not “suggest[] a modification
of the exclusions contained in the body of the policy.” Here, the more specific lead
exclusion, if included, would have overlapped the absolute pollution exclusion as it
applies to the release of lead “pollutants,” but the two exclusions would not have
conflicted. The parties’ deletion of the lead exclusion left the remainder of the CGL
policy in full force and effect, including its absolute pollution exclusion.

      The judgment of the district court is affirmed.
                     ______________________________




                                        -13-
