Certain Underwriters at Lloyd's, London v. Abundance Coal, Inc.
2011 Ky. App. LEXIS 116
| Ky. Ct. App. | 2011Background
- Abundance Coal was sued by three residents (Sparkmans) in 2007 for dust-trespass damages to their land.
- Certain Underwriters at Lloyd's, London (Lloyd's) insured Abundance and filed a 2009 declaratory judgment action seeking no coverage for Sparkman claims.
- Circuit Court granted Abundance's CR 12.02 motion to dismiss, ruling Lloyd's must provide coverage despite exclusions.
- Lloyd's appealed, arguing the court applied an improper standard and misread pollution and punitive-damages exclusions.
- Court of Appeals analyzed de novo whether the pleadings show entitlement to relief and whether exclusions are ambiguous or controlling.
- Court concluded the pollution exclusions are potentially ambiguous and that punitive-damages exclusion is clear; remanded on coverage scope for pollution claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper standard for dismissal | Lloyd's: CR 12.02 standard met; circuit court erred by treating as summary judgment. | Abundance: pleadings show no relief under any facts; dismissal proper. | Dismissal standard treated; de novo review appropriate; order validly reviewed as dismissal. |
| Ambiguity of pollution exclusions | Dust/pollutants may be pollution; exclusions should bar coverage. | Exclusions are clear and absolute; no coverage for pollution. | Exclusions may be ambiguous under RSJ factors; not determinative without factual record on Sparkman claims. |
| Punitive damages exclusion | Policy excludes punitive damages; no coverage for such claims. | Exclusion applies; no coverage for punitive damages. | Punitive-damages exclusion applies; circuit court's blanket coverage ruling reversed to the extent it covers punitive damages. |
| Scope of coverage for Sparkman claims | Dust entry constitutes pollution triggering coverage under the policy. | Dust may or may not be pollution depending on facts; ambiguity requires further proceedings. | Dust may not be pollution as defined; ambiguity requires remand for additional proceedings consistent with opinion. |
Key Cases Cited
- LKS Pizza, Inc. v. Com. ex rel. Rudolph, 169 S.W.3d 46 (Ky.App. 2005) (ambiguity in contract terms; state-law interpretation)
- RSJ, Inc. v. Motorists Mut. Ins. Co., 926 S.W.2d 679 (Ky.App. 1996) (ambiguity in absolute pollution exclusions; factors for interpretation)
- Ex parte Walker's Executor, 68 S.W.2d 745 (Ky. 1933) (clear and unambiguous contract terms require no construction)
- Weller v. McCauley, 383 S.W.2d 356 (Ky.1964) (12.02 standard; dismissal as matter of law)
- James v. Wilson, 95 S.W.3d 875 (Ky.App. 2002) (de novo review of dismissals; purely legal question)
- Star Fire Coals, Inc. v. United States Fidelity & Guar. Co., 856 F.2d 31 (6th Cir. 1988) (pollution exclusion language is clear; coal-dust pollution interpretation)