*1
440
AMERICAN BUMPER AND MANUFACTURING COMPANYv
HARTFORD FIRE INSURANCE COMPANY Docket Nos. dar No. 101808, 101809, 6). Decided July 16, 101817-101822. 1996. Rehearing Argued March denied 453 Mich 7, (Calen- 1204. American had been because rence” the insurers insurers Environmental that, Fitzgerald ity, curiam, finding disposition investigating bility insurers, seeking reimbursement American it was a with et under Hartford Fire Insurance seq. Bumper appeal. they completed, Anodco, Inc., brought respect for the insurers. The Court of and D. A. potentially responsible party The would owe a formal Environmental Protection their failed to Response, Compensation that certain court, and to certain wastewater respective policies and remanded the Manufacturing Company, doing Roberson, clearly Charles W. a duty (Docket insurers establish the absence of an “occur- an Company JJ., Simon, action reversed for defense may until the case discharge Nos. under the Appeals, in the & and its other Jr., J., owe Liability Act, determine which of Ionia Circuit Court plaintiffs a granted summary costs incurred at Sawyer, an duty Comprehensive Agency charge its Ionia 154355). opinion per business as general to defend P.J., 42 USC defense facil- The and lia- opinion joined In an Justice by Chief Justice Mallett, and Cavanagh, Justices and the Brickley, Levin, Boyle, Weaver, Supreme Court held: Appeals properly may Court of The concluded that the insurers duty owe a to defend. Certain site costs after incurred response may epa and in to the claim be recoverable defense costs expended scope if were to defeat or limit the ordinary doing were not cost business. potentially responsible party plain- 1. The letter received policy. duty tiff from the was a suit under the duty indemnify. allegations to defend broader than If the party arguably of a coverage, third even come within provide defense, regardless allega- insurer must of whether the may groundless Regarding be tions or frivolous. environmental claims, there is a to defend until it be can determined what pollution discharge caused and whether the sudden v Hartford arguably then, allegations must be seen as accidental. Until case, liability policy. comprehensive the cause In this within the Thus, *2 any possible was uncertain. contamination of and source pollu- duty ground escape on the their to defend insurers cannot Further, and source of the cause clauses. because tion-exclusion plaintiffs pollution any possible defense unclear until remained complete, that an “occurrence” the defendants cannot claim periods. respective policy place have taken within could not during investiga- investigation a remedial costs incurred 2. Site study costs, tion/feasibility rather than indemnification are defense disprove costs, they expended of liabil- limit the if were to represent ity cleanup and if do not under the cercla for investigation expended ordinary doing The site cost of business. response charge plaintiff the definition and in meet epa nor the Court of neither the trial court are recoverable. Because costs, proper Appeals were defense determined which costs required which costs were to determine to the trial court is remand share, liable, proper and in what for and which defendants are costs.
Affirmed and remanded.
epa request-
dissenting,
from the
stated that a letter
Justice Riley,
responsible party
potentially
ing a
remedial
any sup-
provide
equated
did not
with a suit. The
should not be
port
documented the release or
letter for the claim that it had
its
from the site
release of hazardous substances
threatened
question.
suit, this case should be
the same as a
Even if such a letter were
directly
Appeals
when the
address
the Court of
remanded to
analysis
Nothing
triggered.
of the Court of
in the
defend is
Appeals
that there was no
trial court’s conclusion
contradicts the
periods.
during
property damage
manifestation
App 60;
(1994) affirmed.
Rhoades, McKee, Boer, Insurance Hartford Fire for ory dimmer) G. Company. 452 Mich
Opinion Court Willingham (by Yeager & Colé, P.C. John A. and Hadley), R. Curtis for Farm Bureau Mutual Insur- Company Michigan. ance Phillips, (by Lichtenstein Provizer, & P.C. Deborah Molitz), Washington for Providence Insurance Company. (by Reynolds
Cholette, Perkins & Buchanan A. Brander) Riley Appeals (by Research & Rob- Riley) Employers Casualty ert J. Company. for Mutual Amici Curiae: (by
Roberts, & Bloss, Betz P.C. David Bloss J. Ralph Reisinger), Michigan M. Association of Companies. Insurance *3 Casey
Kelley, (by Stephen Kelley & Clarke, P.C. M. Timothy Wiley, Clarke), Fielding, and J. and Rein & (by Foggan, of counsel Laura A. A. Elizabeth East- Christopher Hardee), wood, and N. for Insurance Litigation Environmental Association. appeal InJ. this we must determine
Mallett, general liability whether and to what extent insurance required carriers are their defend insured from an Agency Environmental Protection claim in which the investigation ultimately showed no need for remedia- tion and resulted in a “no action” record of decision for the site. Because we find that the Court of Appeals, specific under the circumstances this properly may case, duty concluded that the insurers owe Additionally, defend, we affirm. we hold that certain site incurred costs after and in response may to the claim be recoverable defense Bumper American v Hartford expended if were in order to defeat or
costs ordinary limit the and were not doing business. cost of
i
FACTS Manufacturing Company, doing Anodco, Inc., cleans, business as American parts brightens, anodizes,1 and seals aluminum for the industry. automotive until From 1962 Anodco discharged manufacturing pro- wastewater used in its facility large seepage lagoon cess into a at its Ionia pursuant Department to a of Natural Resources groundwater permit, discharge termed an order of large determination. This wastewater included along amounts of clean water with rinse water con- phosphoric taining acid, sulfuric nitric acid, acid, acetate, nickel certain metals, trace amounts of including aluminum and iron. began scrutinizing 1970s,
In the the dnr Anodco’s Ionia site because it was concerned that certain lagoon might chemicals in the have been in excess of quality early water standards. These concerns did not result in dnr action.2 Language: Unabridged Edition, “Anodize” is defined in The Random House as follows: Dictionary English metal, aluminum, protec- esp. magnesium coat a with a [T]o electrolytic
tive film chemical or
means.
Anodco,
Anodco, however,
taminants above the
indicate that
the DNR in these letters and maintains that some of the
were from another
*4
These concerns
dated
samples
May 13, 1974,
contests
are
lagoon,
amounts
showed that Anodco was
expressed
June
not
permitted by
accuracy
22,
1976, May 18,
lagoon
three letters
of
and
the information relied on
the order of determination.
located on its
discharging
from the DNR to
1978. The letters
sample
levels of con
property.
results
by
Because the dnr wanted additional studies, Anodco consulting Consulting hired another firm, Keck Ser performed vices, Inc. Keck the additional studies requested by provided report supple the dnr menting report. report the William& Works The Keck ground also concluded that most chemicals in the exception phosphates, water, with were at background levels. spite findings
In of the studies’ that there was no significant approximately contamination, in June application ground- 1986, while its for renewal of its discharge permit pending, water was Anodco learned the Williams & Works and Keck fertilizer term is defined Although that the mon ion from the DNR alleged or the Water order Plaintiff’s Anodco did not violation of its order of determination. lagoon determination, occurring naturally that, the defendants cite these letters in expert, Resources to his September 22, 1967, the CERCLA. operated always operate knowledge, Dr. we note that Anodco was never cited Edward Commission in full groundwater. reports, is not a “hazardous substance” as that Iüeppinger, its compliance. and December lagoon any described He further stated that it is a in his affidavit support Further, formal in full phosphate compliance proceeding of their contention earlier memoranda 13, 1968, summarizing as a com indicated the DNR with the *5 Bumper v Hartford Opinion of the Court proposed by
that its Ionia site was the Environmental priori- Agency Protection inclusion on the national ties list of contaminated sites in the United States response, under the CERCLA.4 In Anodco abandoned its gave efforts to renew its order of determination general notice to its various demand- insurers ing that assume Anodco’s defense epa claims. early 1987,
In Anodco transferred its wastewater newly discharge city to the constructed Ionia sewer system stopped using seepage lagoon. its It then disposed sludge removed and of the that had accumu- lagoon. According lated on the bottom of the to anything Anodco, this was not done because in the sludge was but hazardous, its consultants because costly dispose advised that it would be less perform sludge sludge than to the tests on the required would be if the site was added to epa priorities the national list. epa formally charged
In June
Anodco as a
potentially responsible party (PRP) under the CERCLA demanding
perform
a letter
that Anodco
a remedial
investigation/feasibility study
Septem-
On
(ri/fs).
30, 1987,
ber
with the advice
counsel,
Anodco
perform
entered into a consent order with the
epa
purpose
at
the site. Plaintiff states that the
ri/fs
existing sampling
the ri/fs was to confirm
data that
had shown no contamination. Anodco hired a third
Company,
perform
consultant, E.C. Jordan
Sampling
part
done in 1988 as
of the ri/fs con-
ri/fs.
groundwater
studies;
firmed the earlier
there was no
Act,
[4]
Comprehensive
42 USC 9601 et
Environmental
seq.
Response, Compensation
&
Liability
In of this recommendation, the and the testing dnr demanded additional because of concern organic compounds about arsenic and volatile (vocs) present that had been in trace amounts earlier sam- ples.5 groundwater testing Further showed arsenic in *6 quantities, safety trace well below the levels and con- firmed the absence of arsenic or vocs contamination. Finally, September in 1993, the issued a “no action” record of decision for the site. general
Meanwhile, Anodco’svarious liabil- ity insurers, all of whom are here, defendants filed summary disposition, claiming they motions for that duty indemnify had no to defend or Anodco in rela- tion to the EPA claim. Anodco also filed a motion for partial summary disposition against two of its insur- agreed portion ers that had to assume at least a of granted summary defense costs.6 The circuit court disposition grounds for all the defendants on various partial summary and denied Anodco’s motion for disposition.7
triggered
Providence
Mich
Underwriters
but who
granting summary disposition
defense costs.
Company.
assume Anodco’s defense under a reservation of
did not come from its business.
arsenic or VOCs
[7]
[6]
[5]
The
There is
Farm
App
occurrence-manifestation
settled before resolution of this
only
Bureau Mutual Insurance
See
55;
Washington
nothing
Insurance
when
Anodco consolidating the in favor of defendants. After Appeals appeals, the reversed the decision of Court may finding court, circuit that the various insurers duty had failed to owe a to defend because clearly the absence of an “occurrence” establish respective policies under their until Anodco’s defense already completed. had The Court remanded for been determination of which of the several defendants App 60; would owe a to defend. 207 Mich appealed in NW2d Defendants this Court. (1994). We now affirm.
n
background The issue in this is case not whether defendants indemnify cleanup expended must Anodco for costs finding aas result of the EPA contamination. No con- tamination was found. Instead, issue whether pay defendants must Anodco, under the terms of their respective comprehensive poli- general (cgl) *7 by cies, for defense costs incurred Anodco responding to the claim. A review of the standard provisions policies, and this Court’s decisions cgl interpreting context, them in the environmental appropriate juncture. at this relationships,
Unlike most contractual
where the
parties
negotiate contract
terms,
terms of
insurance contracts are standardized and are drafted
industry. Policyholders
the insurance
have little or
provided
summary disposition
ground
Farm
Bureau’s contract
its favor.
448
452 Mich no
power
bargaining
change
to
terms.8 Consequently,
in construing
any
insurance contracts,
ambiguities are
strictly construed against
the insurer
to maximize
coverage. Arco Industries Corp v American Motor-
ists
Co,
The standard policy cgl pertinent terms to an envi- ronmental claim are the coverage clause and pol- lution-exclusion clause. The standard CGL cov- erage clause provides: company pay will on behalf of the insured all sums
which the legally insured shall obligated pay become as damages because of
Coverage Bodily injury or A— Coverage Property damage B— applies, which this insurance occurrence, caused company and the right shall have the to defend any suit seeking damages the insured on account of bodily injury property such damage, even if allegations groundless, of the suit are false or fraudulent!.] [(Emphasis added); note, Paying see the costs hazardous pollution: Why waste industry is the raising insurance note, Paying pollution: See Why the costs hazardous waste is the industry raising stink?, insurance such a 1991 U Ill L R 203. *8 Bumper v Hartford 449 Opinion Court stink?, 173, 203; Ill L R see also Arco Indus
such a 1991 U tries, supra at 403.][9] by scope of afforded this clause is
The which by “occurrence,” limited the definition of an is as follows: generally accident, repeated exposure including continuous or [A]n bodily injury conditions, property which or results standpoint
damage expected neither nor intended from the note, supra 204; U Ill L R 1991 Arco insured[.] [See Industries, supra at 404.][10! pollution
The other relevant standard clause is clause, typically which states: exclusion apply bodily injury ... This insurance does not or property damage dispersal, arising discharge, out of the escape smoke, vapors, soot, fumes, acids, release or alkalis, chemicals, liquids gases, toxic waste or materials or irritants, pollutants upon other contaminants or into or land, atmosphere body water; watercourse or apply discharge, disper- but this exclusion does not such if sal, escape note, release or is sudden and accidental[.\ [See supra (emphasis added).] at n 358 provisions, Under these standard the insurer agrees by policyholder to cover losses incurred because Property by of an “occurrence.” damage pollu- caused Hartford Fire Insurance sequently, sions. occurrence and Company Company [9] [10] policies Again, Any policies all contain contain when slight as if will policies analyzing coverage variance in issued substantially consequently substantially similar, were one and the same. issued Company, Providence wording similar be treated all under these and Farm Bureau Mutual Insurance language but insignificant Washington if not Employers as one identical, coverage provi provisions, their definitions of and the to our Insurance Mutual analysis. same. we will treat Company, Insurance Con Mich *9 tion is excluded from the definition of an occurrence unless it is sudden and accidental. separate,
The
clause sets forth two
but
duty
related, duties of the insurer. The first is the
to
indemnify
policyholder
policyholder
the
for sums the
legally obligated
pay
bodily injury
because of
or
property
by
damage
policyholder
caused
the
where
damage
scope
pol-
such
is otherwise within the
of the
icy’s coverage.
duty
any
The second is the
to “defend
against
seeking damages
suit
the insured
on account
bodily injury
resulting
prop-
[an
of
erty
occurrence
any
damage],
allegations
even if
of the
of the suit
groundless,
are
false or fraudulent.”
Michigan
Plating
In
Millers Mut Ins Co v Bronson
(1994),
Co,
558;
445 Mich
against
arguably
even
come within
policy coverage,
provide
the insurer must
America,
defense. Polkow v Citizens Ins Co
174, 178, 180;
Mich
“An insurer has a
theories of lia
bility
any
asserted
insured which are not covered
policy,
recovery
under the
if there are
theories of
policy.
fall within the
Co,
Dochod v Central Mutual
App 63;
(1978).
Mich
tions. As stated in 44 Am Jur
at 420-[4]21
(1969):
duty
depend upon
liability
“The
to defend does not
the insurer’s
pay,
duty
to
however since the insurer’s
to defend stems from its
obligation
insured,
own contractual
to the
while its ultimate liabil-
ity
pay
depends upon
negli-
to
on behalf of the insured
the law of
gence,
provisions requiring
and since the usual
the insurer to
impose
duty only
defend cannot be construed to
such a
in the case
Accordingly,
of successful suits
the insured.
the insurer
may
obligated
although
pay.
be
to defend
not held hable to
In other
words,
may
obligated
‘ground-
the insurer
be
to defend so-called
namely,
allegations
bring
less’
suits the
of which
them
suits—
policy,
coverage
within the
of the
are
in favor of
but which
decided
the insured.”
pol-
duty
liability
clause in a
insurance
[Comment:
defend
icy:
pleading
replaced?,
Should the exclusive
test be
36 U Miami
235, 236-237,
(1982).]
n
LR
3
452 Mich 440
duty
party’s
The insurer has the
to look behind the third
analyze
allegations
possible.
Shep-
whether
Maryland Casualty Co,
ard Marine Construction Co v
App 62;
(1976).
Mich
Regarding claims, environmental this Court Polkow explained: further requires duty
Fairness that there be a to defend at least development until there is sufficient factual to determine pollution what caused the so that a determination can be regarding discharge made whether the was sudden and time, allegations accidental. Until that must be seen as “arguably” comprehensive liability policy, within the result- duty ing in a to defend. at [Id. 180.]
DUTY TO DEFEND part In A, we will begin analysis our whether may defendants have had a defend determining whether, during period of Anodco’s defense, it was at least arguable that there had been an “occurrence” for purposes of triggering duty. In *11 parts B we will discuss issues pertaining to C, duty whether a to defend is foreclosed because either the insurer discontinued the risk covering before the time the occurrence manifested itself or because the insurer began covering risk at a time when already loss was in progress. v Hartford Ins
a OCCURRENCE having policies pol- containing Those defendants they argue lution-exclusion clause that do not owe a duty epa’s to defend because the claims pursuant Anodco, letter, to the came within their PRP respective pollution-exclusion They argue clauses.13 epa’s that because the focus of the concern was dumping Anodco’s intentional of wastewater into its seepage lagoon, any possible environmental contami- nation caused Anodco could not have been sudden argue and accidental. Therefore, these defendants, do not owe a to defend because the claims arguably do not even come within the of cover- age policies. under their argument during
Defendants’
fails because
the Rl/FS
period until issuance of the
determination,
no-action
it was unclear whether an “occurrence” had taken
place
yet
because it had not
been established whether
any property damage
Anodco had caused
that
it
expected
neither
nor intended. See
Further,
Polkow.
assuming
property
even
at the time of the Rl/FS damage might
found,
be
it could not have been deter-
mined at that time whether the cause was sudden and
pollution
ford claims that the second
that the first
erage
disposition
exclusion clause. The
“sudden and accidental.”
on the
Hartford Fire
disputed by
Farm Bureau’s
from 1968 to
ground
or the
was entered for this defendant on the basis of its
policy
Anodco.
aof
actually
discharge
pollution
policy
did not contain a
pollution
Summary disposition
issued two
and the other from 1971 to 1974. It is
contains a
of waste materials unless the
exclusion.
exclusion excludes
did contain the
separate policies,
pollution-exclusion
pollution-exclusion provision.
was not
exclusion, although
liability arising
granted
one
clause.
providing
discharge
for Hartford
undisputed
pollution-
Summary
out of
Hart-
cov-
this
*12
Opinion of the Court pollution gradual accidental instead of the and inten- dumping lagoon. tional of wastewater into the Appeals explained: As the Court of What makes this ultimately case difficult is the fact that contamination, there was no or at least not in sufficient action, amounts to warrant which we could examine the facts and determine the existence of an event trigger coverage policy. would is, under the That had con- found, tamination been we would have learned the cause of that contamination and be able to determine whether that contamination was the result of an accident and was “sud- den and accidental” meaning pollution- within the of the exclusion clauses. We could then with some confidence be able to coverage provided conclude whether was under the policies. App Mich [207 65-66.] The record reveals that the cause and source of possible contamination was uncertain. For instance, important progressed, we think it that as the ri/fs the epa shifted its focus from substances that were indis- putably part intentionally dumped of the wastewater to arsenic and the vocs. Plaintiff maintains that these compounds part production process were never of its discharge. or its wastewater shift in focus to epa’s intentionally dumped by contaminants not Anodco is suggestive possible at least of a “sudden and acciden- discharge. regard, majority opinion tal” In this the in controlling. Polkow is There, here, as there were regarding unresolved factual issues the source of con- tamination. There, as here, the found pollutants produced by that were not used in or the policyholder’s operations.14 business 14Uncertainty regarding pollution apply whether the exclusion would greater Polkow, i.e., possibility even coverage here than in greater uncertainty majority here than in that case. The cited v Hartford explained earlier,
As insurers owe to defend policyholder until the claims are confined scope to those theories outside the under policy. Uncertainty regarding at 180. Polkow allegation whether an comes within policyholder’s must be resolved favor. *13 uncertainty regarding Id. Because existed here requiring cleanup whether there was contamination possible and what the cause and source of contami- escape duty nation was, the insurers cannot their to grounds pollution-exclusion defend on their clauses. hindsight,
With the benefit of know we that there poli- was never an “occurrence” as defined under the pollution, cies never because there was sudden or resulting property damage required accidental, in that cleanup. a This was not established, however, until the no-action determination was issued Anodco’s completed. successfully By defense had been that complain time, it was too late for the insurers to that they duty did not a owe to defend. The defense had fully exonerating course, run its Anodco of the epa’s claims. analysis
Although our
has so far focused on those
policies containing
pollution-exclusion
a
clause, it
applies equally,
poli-
force,
if not with
more
those
pollution-exclusion
cies that did not contain a
merely
Here,
cause,
Polkow
involved
source of contamination.
dispute.
source
Further,
and even the
was in
existence
contamination
Polkow,
finding
in
requiring
there
conclusive
was a
of contamination
cleanup,
discovery
occurred,
dissent,
and extensive
had
as noted
summary disposition
Consequently,
the time that
issued.
there was
more
case
likelihood
that
that the
and cause could
source
be defini-
tively
here,
requiring
identified than
where there was no contamination
cleanup
discovery.
and less extensive
We find it difficult to believe that Anodco “expected apparently or intended” that its lawful use seepage lagoon property would result in dam- age requiring Further, remediation. at the time of the any possible pollution possi- cause of and its ri/fs, explained ble quently, uncertain, source was as earlier. Conse- pollution- those insurers that did not have escape exclusion clauses can no more their *14 by relying defend on the definition of “occurrence” policies pollution their than those insurers that had exclusions.16 more
by it immaterial. As we have Employers arguable ton, icy occurrence dence exclusions. While we was accident.” issued The and the first narrowly Washington at that the EPA claim was based on accidental analysis applicable policies least by Employers Mutual policies, recognize Employers construed than occurrence arguable issued policy provides coverage on the facts Hartford the difference in construction of accident and explained, during by Employer’s Mutual. Rather than that an accidental Mutual issued to the “occurrence” Fire argues by Hartford, presented here, applies equally Mutual and Providence that accident policies discharge period covering “occurrences,” did not contain property damage policies and that it is not even those differences are to the “accident” of Anodco’s pollution. policies issued pollution might have been by pollution Washing defense, “caused Provi pol Bumper v Hartford
B TRIGGER OF COVERAGE argument Another raised some of the defendants duty coverage is that there is no to defend because appropriately triggered applica- during was never policy period. Employers ble Defendants Mutual, Washington, argue Providence and Hartford Fire that duty property damage owe no to defend because during respec- did not occur or manifest itself their coverage periods. point tive These defendants to let- during ters and memorandum from the dnr to Anodco policy periods indicating compliance their full with They argue the order of determination. that the earli- possible trigger coverage est date that could May 13, 1974, the date of the first dnr letter to possible Anodco that indicated contamination. These essentially arguing defendants are for this Court to apply the occurrence-manifestation doctrine that coverage triggered holds that is not until the occur- property damage rence, in this case attributable to pollution, property manifests itself. Because no dam- age during respective policy manifested itself their periods, argue coverage these defendants that should apply. not argues
Plaintiff, on the other hand,
for a different
trigger
coverage.
argues
Anodco
that this Court
adopt “continuous-trigger theory.”
should
a
Under this
theory, property damage resulting from continuous or
pollution
progressive
occurring throughout successive
policy periods
policies
would be covered
all
possibility
have occurred. Because this
was not ruled
until
out
the no-
issued, Employers
escape
action determination
Mutual cannot
by arguing
defend
there can be no
because there was no
accident.
*15
452 Mich periods.
during
effect
those
See Montrose Chemical
Corp
Co,
v Admiral Ins
10 Cal 4th
of California
(1995).
675;
We decline to either of these theo- However, ries on the facts of this case. we do note duty here, that when the issue is that involved a defend a claim that later is demonstrated to be groundless, neither the occurrence-manifestation the- ory theory provides continuous-trigger nor the a workable test. This is because event sufficient to trigger policies indemnification under the property damage, never occurred. There was no no pollution occurrence, accident, no and no continuous resulting property damage cleanup. requiring How- duty groundless ever, because the to defend includes provide claims, frivolous and the insurer must recovery defense if there are theories of that even arguably policy, fall within the to defend is triggered when a claim is made the insured arguably policy’s period that even comes within the coverage. any possible pol- Because the cause and source of lution remained unclear until Anodco’s defense was complete, defendants cannot claim that an occur- place respec- rence could not have taken within their policy periods. During period, tive simply the ri/fs it was any possible pollution might
not clear when may have occurred, how it have occurred, or who might have caused it.
c LOSS-IN-PROGRESS DOCTRINE loss-in-progress Under the doctrine, an insurer is already progress not liable if the loss was before *16 v Hartford 459 Opinion of the Court policy’s coverage took effect. The doctrine is based on the rationale that policies insurance cover fortuitous events or risks loss, not losses that are certain to occur. Once a loss has happened, or once it is in progress, the event is no longer fortuitous and the risk already has been realized.
While Michigan recognizes
completed
that a
loss is
not covered
an after-acquired
under
pol-
insurance
icy,17this
yet
apply
Court has
to
the loss-in-progress
doctrine in the context of an environmental dispute.18
Like the
Appeals,
Court of
we decline to evaluate the
merits of the doctrine on the facts before us because,
pursuant
analysis
to our
under the
issue,19
occurrence
we find it unnecessary to do so.
17See, e.g.,
Co,
504;
(1901)
Gauntlett v Sea Ins
127 Mich
policy’s inception). 18 Michigan Several recognized recent federal decisions have loss-in-progress See, e.g., doctrine in the environmental context. Central Quality Corp America, Services v Ins Co North 1989 US Dist LEXIS (ED Mich, 1989), (CA 6, 17368 1992) (there aff’d 977 F2d 580 was a pollutants known loss as of the date on which the insured knew that plant causing groundwater attributable to its had been released contami nation); Control, Inland. Co, Waters Pollution Inc v Nat’l Union Fire Ins (CA 6, 1993) (recognized loss-in-progress 997 F2d 172 principle as stemming fraud, summary from concerns for insurance but held that dis position inappropriate was concerning because factual issues remained pollution occurred). when had regard, agree Appeals analysis: In this we with the Court of question loss-in-progress We need not resolve the whether the recognized Michigan, however, doctrine should be inasmuch as summary disposition
we appropriate believe that would not be recognize even were we to that doctrine. respect, analysis In this we believe that the is akin to that set is, forth above under the occurrence issue. That were this a cover- age issue, pollution and there was a demonstrable incident of plaintiff obligated provide remedy and, which therefore, loss, there was an actual we could look at the causation of that Then, assuming loss and determine when it occurred. it came provisions applicable within the insurance 452 Mich
IV DEFENSE COSTS Finally, question we address the what costs responding incurred Anodco in to the let- prp epa’s Specifically, ter are covered defense costs. defendant argues Farm Bureau that certain site expenses part incurred as of the Rl/FS are not defense payment costs. Because of these costs is mandated the CERCLA20 and Anodco entered into a consent order pay with the EPA costs, these Farm Bureau main- solely indemnity. support tains that relate In position, *17 of its Farm Bureau cites Gelman Sciences, App Inc v Cos, Fireman’s Fund Ins 183Mich 445; 455 (1990). NW2d 328 Gelman, In the Court addressed expenses hooking up neighbors whether such as to city represented water lines indemnification or defense costs. The Court held that because the costs represented attempt potentially injured to make parties they whole, were indemnification, rather than defense costs. agree
We with the Gelman Court’s conclusion that expended during go costs an ri/fs that toward making potentially injured party remediation, or a policies, we could determine which insurer or insurers were lia- However, discharge ble. in the absence of a sufficient to have con- surrounding quantities taminated the area in would have war- that ordering plaintiff engage cleanup, ranted the EPA’s in a we are again problem apply principles left with of how to these to the duty to defend. believe, however, We the answer here is the same as it was above: defendants owe a to defend until such time as can contain the claims their insured to an event that does not period come within the or to a time that policy. App falls outside the Mich [207 70-71.] See 42 USC 9604(b)(1) et seq. v Hartford whole, indemnification, are rather than defense costs. appear It does not that this was the nature of the site by response costs incurred Anodco in appears letter, the PRP however. Rather, it from the majority record that of these costs were expended so that the and Anodco could deter- cleanup. mine whether Anodco was liable for agree argument We do not with Farm Bureau’s because a cost is mandated the CERCLA that it anis indemnification, rather than defense, cost. We see logical statutory liability no nexus between for inves- tigation costs and the distinction between defense Statutory liability simply and indemnification costs. bearing has no on the inherent nature of these costs. distinguished Other courts that have between defense indemnification costs in the context of the cercla have defined defense costs as costs liability incurred to defeat or limit the or to e.g., limit the cost of remediation. See, Fireman’s Corp, Supp Fund Ins Cos v Ex-Cell-O 790 F (ED 1992). Mich, Fireman’s Fund involved a declaratory judgment action an insurer who liability hydrogeological claimed it had no studies response governmental undertaken in demands. The court held that defense costs incíuded those rea necessary sonable and to defeat or limit or to *18 agree limit the cost of remediation. We with this defi generally requires nition. The to defend investigation insurer to conduct sufficient to adequate mount an defense. Inclusion of environmen investigation comports tal costs as defense costs with general this rule. Mfg Casualty
The court in Hi-Mill
Co v Aetna
&
Surety
Supp
(ED
1995),
Co, 884 F
Mich,
also
v
CONCLUSION correctly Appeals determined that The Court inappropriate summary disposition in this rather Ultimately, unique deter- environmental case. requiring no contamination mined that there was cleanup. Consequently, cause, known there is no point period to in source, of contamination conclusively whether defense determine order to insurance under the various claim is covered the policies. epa originally Additionally, although on focused seep- intentionally discharged into a materials waste discharge pursuant groundwater lagoon age a dnr 452 Mich Dissenting Opinion by Riley, J.
permit, proceeded, as the the focus part broadened to include materials that were not discharge. Consequently, during this intentional period, relevant defense there remained uncertainties *20 regarding any the source, cause, and time frame of possible contamination. possibility any
The remained that contamination might that found be would have a been covered might “occurrence” or “accident” because its cause discharge occurring have been an unintentional dur- ing policy’s coverage period. Additionally, it possible may that contamination that have been found could have had a cause, sudden and accidental pollution escaping present thus exclusions in policies. reasons, some For these the insurers escape liability by cannot for defense costs incurred responding in Anodco to the claim. epa Any coverage may policies exist under the by triggered would be the EPA’s letter. Recoverable prp expenses defense costs include those in incurred disprove order or limit the for cleanup long rep- under the cercla as as do not ordinary doing resent cost of business. Appeals
affirmWe the decision of the Court of and proceedings remand this case to the trial court for opinion. and determinations consistent with this C.J., and and Brickley, Levin, Cavanagh, Boyle, JJ., concurred with J. Weaver, Mallett, (dissenting). Riley, J. Because I continue to believe a that Agency letter from the Environmental Protection company perform
asking a a remedial feasibility study a does not consti- Michigan suit, tute a see Millers Mut Ins Co v Bron- v Hartford Dissenting Opinion Riley, J. Plating NW2d864 558, 576-597;519 Co, 445 Mich son joined dissenting, (1994) J., Brickley (Griffin, accepted respectfully JJ.), Even if I I dissent. Riley, majority reasoning Bronson, I would the Court of remand this case to nevertheless expressly Appeals, requiring the trial address it summary disposition grant decision to court’s Casualty Employers Mutual defendant insurers (1966- Washington 1962-66), (insurer Providence from (1968-74) 68), because the trial and Hartford Fire property damage no concluded that there was court periods during the in which these that manifested majority companies this resolves insured Anodco. part without the benefit of Court matter m(B) question. Appeals decision on the
i
inform-
In
sent Anodco a letter
June
*21
company
ing
“documented the release
the
that it had
pollu-
substances,
hazardous
or threatened release of
disposal site
and contaminants” at the Anodco
tants
pursuant
Comprehensive Environ-
that,
and
to the
Compensation
Liability
Response,
&
Act
mental
poten-
seq.,
a
9601 et
Anodco was
USC
(cercla),
possible
tially responsible party
hazardous
for the
per-
“voluntarily
that Anodco
release. The
asked
epa
required
abate
release or
the work
form
pollu-
substances,
hazardous
threatened release of
The letter also
tants, and contaminants from the site.”
implement
propose
a
and
remedial
Anodco to
asked
investigation
soil, air,
and sur-
to define the extent
feasibility
a
at the site and
face water contamination
study
possible
actions. The
epa
evaluate
remedial
explained
so,
to do
the
that if Anodco refused
prp made,” brought.” at and not “suit [Id. letter is a “claim 582-583.] analy Justice Griffin’s in this case confirm
The facts epa requesting a remedial a letter from sis that investigation as a “suit.” After enter not the same alleg ing with the Anodco a consent order into epa, August, edly spent $400,000between more than investigate whether there 31, 1991, to and December majority any groundwater As the contamination. was properly contamina was no hazardous notes, there despite the words, In other Ante at 447. tion found. investigation revealed that letter, the claim of the epa “occurrence,” as or never was “accident” there policies,2 the con because the insurers’ defined to human health or was not a threat tamination require remedial thus, did not and, environment order. Under the entered a “no action” action. The epa majority’s analysis, must bear the cost of the insurers defending regardless its merits.3 How “suit” this voluntarily into the consent entered ever, Anodco refused, If Anodco had order with the epa epa. proceeded “perform that it would have stated Agency,” utilizing public available to the funds ri/fs initially borne the would have and, therefore, demonstrating that there was of these costs burden repeated exposure if the “suit” ers expected added.) during “accident,” including property Defendant Each of the insurers guaranteed nor policy period, damage intended from the Employers “groundless to conditions” “caused injurious exposure guaranteed for “an occurrence” Mutual [or] bodily injury false.” [an] in Farm Bureau’s standpoint Casualty’s that it would accident,” to conditions contract of the insured. which was defined property damage whereas the other provide policy), provided coverage (“continuous a defense even which (Emphasis results, neither insur as an or *23 452 468 Mich 440 Dissenting Opinion J. Riley, no hazardous contamination. Because of the strict liability epa nature of under apparently the cercla, would have been able to recover Anodco with respect to its costs associated with investigating Anodco’s intentional of chemical discharge waste into under USC seepage lagoon (42 107 even 9607) § though the release of this not waste did create a haz 4 Yet, believe, ardous contamination.* I very at least, that the pollution-exclusion poli insurers with responsible cies would not have been for defending Anodco in an action related to these costs because, my opinion, purposeful discharge identified hazardous a wastes into seepage lagoon not a “sud den and accidental” discharge.5
Moreover, in 1989, presented June after Anodco its revised draft of investigation, the remedial epa “formally requested]” perform that Anodco a second round of tests for arsenic and for volatile organic compounds while (vocs), that the conceding hazard- ous chemicals that Anodco intentionally dis- 4 Aluminum, Corp, 252, See (CA United States v Alcan 964 F2d 259-261 3, 1992) (in order to establish that there was a release of a hazardous waste, require showing quantity the CERCLA not does a aof threshold substance). ed, Sullivan, that hazardous See also Environmental Law (Rockville, Institutes, Inc, ed, 1995), Handbook 8, pp Md: Government 13th ch Borden, Inc, 664, (CA 229-230.But see Amoco Oil Co v 889 F2d 670 5, 1989) (“[T]he argue[s] upon EPA that CERCLA attaches any quantity release of aof hazardous and that substance the extent of a only phase. However, release should be considered at the remedial we reject approach permit must this because adherence to that view would statutory purposes by holding parties CERCLA’s its reach to exceed hable posed any pubhc who have not threat to the or environment. . . . inquiry particular- relevant factual should [T]he focus on whether the haz justified any response [Emphasis original.]). ard actions.” pollution- Defendant Farm Bureau’s insurance included a clause; pol exclusion defendant Hartford Fire contended that its second icy, governing 1974, provision. from also included such a See J., ante at the text of the exclusion. Mallett, v Hartford Dissenting Opinion by Riley, J.
charging lagoon seeping into the were into the envi- ronment at nonhazardous levels. Anodco contended discharge that it did not arsenic or vocs into the lagoon. expert, Klep- Anodco’s environmental Edward pinger, that there swore was no evidence to substanti- presence groundwater, ate the of vocs in the and he only claimed that there were trace elements of arse- Thus, nic at the site. it is not clear that the would have able been to establish that there was a “release” “substantial threat release,” such *24 104(a)(1)(A), § of these hazardous if substances it performed investigation had the remedial itself and brought recovery pursuant § then a cost action to 107 for the costs associated with its examination of the epa respect site with to arsenic and vocs.6If the were recovery unable to establish this element in a action, respon- Anodco and its insurers would not have been epa sible for the costs that the would have incurred for the second round of tests. way
Furthermore, there is another in which this epa fallacy equating case reveals the of letter with epa legal provide any support a suit. The did not in its June 1987letter for the claim that it had “documented recovery four elements”: “CERCLA action [6] The EPA demonstrates pursuant action under § imposed 104. § 107 if it Alcan, liability where n 4 establishes that [the EPA] supra a at 258. responsible establishes the it Thus, has party properly under following in a cost § taken (1) categories the defendant falls within one of the four
responsible parties 107(a)(l)-(4); § as defined in (2) disposed facility; the hazardous substances are at a (3) is a or there release threatened release hazardous sub- facility environment-, the into stances the from response (4) the release the incurrence of costs. at causes [Id. 258-259.] Mich Dissenting Opinion by Riley, J. the release or threatened release of hazardous sub- consequence stances” the site. As a from this epa ruling supra, however, in Bronson, Court’s the present complaint proof need not a with that there discharge triggering was a hazardous before the epa only insurer’s to defend need because the investigate ask the insured to in its matter letter potentially responsible identifying the insured aas party. Any error its own examination of sending the site before a such letter would be by the shouldered insured and its once insurers agreed per- insured a enter into consent order feasibility investigation study. form the remedial I would overrule Bronson and reverse the decision of Appeals.7 the Court of
n epa requesting Even if a letter from a remedial potentially responsible party were disagree majority’s suit, same as a I with the reso- part regarding lution in whether an accident or m(B) arguably transpired respec- during occurrence each policy period. majority tive insurer’s states that it adopt refuses to either the “occurrence-manifestation “continuous-trigger theory,” doctrine” ante at *25 ultimately 457-458,8 but decides that “the to triggered defend is claim when a is made the that, successive ance the case. ods. Ante at 457-458. The reasons expands [8] [7] This issue was not briefed coverage under the why majority on the Rather, periods it is an is not reasoning continuous-trigger explains it is a is covered error triggered majority to product that, equate until the occurrence “manifests by dissent under all refuses to theory, of policies parties my EPA in Bronson manifestation continuous independent letter with a suit. adopt in and effect it was not by either providing during pollution through research, doctrine, theory the those itself,” practical focus of because which insur peri Bumper v Hartford Ins Dissenting Opinion Riley, J. policy’s arguably comes within the
insured that even applying period coverage.” In of Id. at 458. majority that none of the standard, the concludes this may that an occurrence could not defendants “claim respective policy peri- place have taken within their application Id. I fail to see the distinction ods.” continuous-trigger the- between this standard and the party ory. provides with Each standard the insured prop- coverage even if there was no manifestation of erty policy period. damage during the insurer’s if I I remand the
Instead,
issue,
reached this
would
Appeals
case to the Court of
to enable it to address
question
directly.
trigger
The trial court
more
summary disposition
Employers
granted
Mutual
Casualty
Washington Insurance,
and Providence
as
relying
Insurance,
well as to Hartford Fire
on the
Appeals analysis in
Court of
Transamerica Ins Co of
Michigan
App
Co,
55, 56;
v
189 Mich
Safeco
(1991),9
NW2d 5
because there was no manifestation
policy period.
property damage
injury during
or
Despite
Appeals
conclusion,
this
the Court of
supra.
neglected
distinguish Transamerica,
Noth-
analysis
Appeals
ing in the
of the Court of
contradicts
the trial court’s conclusion that there was no manifes-
property
pol-
damage during
tation of
these insurers’
never occurred.”
“an event sufficient to
In
Transamerica,
Id. at 458.
supra,
trigger
the Court
indemnification
Appeals
coverage
held:
under
policies
We affirm to the extent the trial court found that
under
comprehensive
question
respective
liability policies
trig-
injury
damage resulting
gered by
from a
the manifestation
exposure
urea-formaldehyde gas,
but remand for a
claimant’s
underlying plaintiffs’ symptoms or
determination of when various
damages
[Emphasis
manifested themselves.
added.]
*26