State Automobile Mutual Insurance Co. v. Flexdar, Inc.
937 N.E.2d 1203
| Ind. Ct. App. | 2010Background
- Flexdar manufactured rubber stamps and printing plates in Indianapolis from 1994 to 2003 and used trichloroethylene (TCE) solvent in its processes.
- Spent TCE and other wastes were stored in 55-gallon drums and disposed of roughly quarterly during the policy period (1997–2002).
- In late 2003 IDEM ordered Flexdar to investigate groundwater and subsoil contamination and advised potential cleanup costs, prompting Flexdar to seek defense and indemnification from State Auto under its CGL policies.
- State Auto defended under a reservation of rights but later sought a declaratory judgment that the pollution exclusion barred coverage for the TCE leakage.
- The trial court granted summary judgment for Flexdar, finding the pollution exclusion ambiguous and unenforceable, and the endorsement did not cure the ambiguity.
- State Auto appeals, arguing the exclusion is unambiguous; Flexdar cross-appeals on admissibility of a 2004 endorsement identifying TCE as a pollutant.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of the 2004 endorsement | Flexdar: endorsement shows ambiguity and State Auto acknowledged need to clarify. | State Auto: Rule 407 bars admission of post-event remedial measures to interpret contracts. | Endorsement inadmissible; Rule 407 bars its use to interpret the contract. |
| Whether the pollution exclusion is ambiguous and precludes coverage | Flexdar: exclusion is ambiguous and unenforceable; must be construed in insured's favor. | State Auto: exclusion is clear and unambiguous, barring coverage for polluting leakage. | Absolute pollution exclusion is ambiguous; construed in insured's favor, not precluding coverage. |
| Effect of controlling Indiana precedent on exclusion interpretation | Flexdar: Kiger, Seymour, Summit, Freidline, and related cases require ambiguity in the exclusion. | State Auto: those cases do not mandate ambiguity in every absolute exclusion situation. | Precedent shows exclusion is ambiguous and must be construed in insured's favor. |
Key Cases Cited
- American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996) (absolute exclusion ambiguous; coverage may apply despite exclusion)
- Seymour Mfg. Co., Inc. v. Commercial Union Insurance Co., 665 N.E.2d 891 (Ind. 1996) (absolute exclusion not always preclusive of defense coverage)
- Travelers Indemnity Co. v. Summit Corp. of America, 715 N.E.2d 926 (Ind. Ct. App. 1999) (again held ambiguity; counseling against automatic exclusion)
- Freidline v. Shelby Insurance Co., 774 N.E.2d 37 (Ind. 2002) (reaffirmed ambiguity and insured-friendly interpretation)
- National Union Fire Ins. Co. of Pittsburgh, Pa. v. Standard Fusee Corp., 917 N.E.2d 170 (Ind. Ct. App. 2009) (continuation of ambiguity line; case before Supreme Court)