BOARD OF REGENTS OF the UNIVERSITY OF MINNESOTA, et al., Respondents,
v.
ROYAL INSURANCE COMPANY OF AMERICA, Appellant (C1-93-24), Defendant (C8-93-36, C5-93-186),
Great American Insurance Company, Defendant (C1-93-24, C8-93-36), Appellant (C5-93-186),
North River Insurance Company, et al., Defendants (C1-93-24, C8-93-186), Appellants (C8-93-36).
Court of Appeals of Minnesota.
*488 Michael R. Strom, Sieben, Polk, LaVerdiere, Jones & Hawn, P.A., Hastings, for Board of Regents of the University of Minnesota, et al.
Austin D. Ditzler, Minneapolis, for Royal Ins. Co. of America.
Stephen J. Foley, Foley & Mansfield, Minneapolis, for Great American Ins. Co.
Andrew W. Horstman, Robins, Kaplan, Miller & Ciresi, Minneapolis, for North River Ins. Co., et al.
Considered and decided by RANDALL, P.J., and SHORT and AMUNDSON, JJ.
OPINION
RANDALL, Judge.
The Board of Regents of the University of Minnesota (the regents) commenced an action against Asbestospray Corporation seeking damages associated with the abatement of asbestos-containing insulation in various buildings in the University of Minnesota and State University System. The complaint was subsequently amended to name H & A Construction, formerly known as Spraycraft Corporation, as a defendant. Before trial of the matter was completed, the parties entered into a Miller-Shugart settlement.
The regents then brought the present action to enforce the settlement against the insurance companies who denied coverage on several grounds. On cross-motions for summary judgment, the trial court granted the regents summary judgment, and the insurers have appealed. We affirm in part and reverse in part.
FACTS
Asbestos Products Manufacturing Corporation (APM) was incorporated in New York in 1946. Asbestospray Corporation, incorporated in New York in 1948, distributed the products manufactured by APM. These products included sprayable asbestos fireproofing and insulation materials.
In 1972, H & A Construction Corporation, formerly known as Spraycraft Corporation, purchased the assets and assumed the liabilities of Asbestospray Corporation. Spraycraft and H & A were both New York corporations.
*489 Between 1970 and 1972, insulation that contained asbestos was installed in various buildings at the University of Minnesota-Twin Cities campus, the University of Minnesota-Morris campus, and Bemidji State University. In March 1985, the regents commenced a product liability action against numerous asbestos product manufacturers, contractors, and miners. The cost of cleanup and changeover is enormous. Asbestospray was one of the defendants in the action. Subsequently, the complaint was amended to name H & A Construction as a defendant.
Trial of the regents' action commenced in February 1989. Before completion of the trial, Asbestospray and H & A settled the claims against them on a Miller-Shugart[1] basis. The regents then commenced the present action, seeking to recover the available insurance proceeds pursuant to the Miller-Shugart judgment.
The parties brought cross-motions for summary judgment. In moving for summary judgment, the insurers asserted New York law, rather than Minnesota law, should be applied.
The trial court granted summary judgment to the regents, finding the policies at issue provided coverage for the claims brought by the regents. The trial court declared the insurers liable to the regents, jointly and severally, for the full amount of the Miller-Shugart settlement. The insurers have filed three separate appeals, which have been consolidated.[2]
ISSUES
1. Did the trial court err by granting summary judgment as to the existence of the Royal policy?
2. Did the trial court err by finding successor liability on the part of Spraycraft and H & A Construction?
3. Did the trial court err by concluding coverage was not barred by any of the named exclusions?
4. Did the trial court err by finding an occurrence resulting in property damage during the relevant policy periods?
5. Did the trial court err by applying Minnesota law?
6. Did the trial court err by finding the Miller-Shugart settlement reasonable?
7. Did the trial court err by finding the settlement did not render coverage void?
ANALYSIS
The trial court granted the regents' motion for summary judgment on all grounds. Summary judgment is appropriate when there is no genuine issue as to any material fact and a party is entitled to a judgment as a matter of law. Minn. R.Civ.P. 56.03. On review of a summary judgment, this court must determine whether there are any genuine issues of material fact and whether the trial court correctly applied the law. Offerdahl v. University of Minn. Hosps. & Clinics,
In their appeals, the insurers have raised numerous issues and sub-issues; these have been condensed in this opinion. The parties have thoroughly briefed each issue raised. We conclude that under Minnesota law, the pollution exclusion clause is dispositive. Therefore, we address only that clause[3] and choice of law.
*490 Choice of Law
The insurers contend the trial court erred in applying Minnesota, rather than New York, law. In analyzing a choice of law issue, the court must first determine whether there are sufficient contacts with the State of Minnesota to make application of Minnesota's law consistent with the requirements of due process. See Hime v. State Farm Fire & Cas. Co.,
To resolve a choice-of-law issue, the court must apply the five factors set forth in Milkovich v. Saari,
Before applying the five factors of Milkovich, the court must first determine whether the choice of one state's law will be "outcome determinative," that is, whether there is an actual conflict. Myers v. Government Employees Ins. Co.,
A. Predictability of Result
This case involves the interpretation of insurance policies issued to New York corporations and obtained in New York through a New York agent. However, the companies did business in all 50 states, a fact of which the insurers must have been aware. See Hague v. Allstate Ins. Co.,
B. Maintenance of Interstate Order
This consideration requires that the state whose laws are ultimately applied have sufficient contacts with the litigation to meet the requirements of due process. Allstate Ins. Co. v. Hague,
C. Simplification of the Judicial Task
Most courts that have considered this factor have treated it summarily, stating that they are perfectly able to apply the law of either proposed jurisdiction. See Goodyear,
D. Advancement of the Forum's Governmental Interest
This factor is intended to assure that Minnesota courts are not called upon *491 to apply rules of law inconsistent with Minnesota's concept of fairness and equity. Hime,
E. Better Rule of Law
This factor applies only when the first four factors do not clearly resolve the choice of law issue. Myers,
The Pollution Exclusions
Insurers began to put pollution exclusion clauses in commercial general liability policies in the early 1970s, in an attempt to limit coverage of pollution-related losses. E. Joshua Rosenkranz, Note, The Pollution Exclusion Clause through the Looking Glass, 74 Geo.L.J. 1237, 1251 (1986).
Although there are others, we find the following two pollution exclusions dispositive.[4] The primary policies exclude coverage for:
Bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.
(Emphasis added.)
This court has held that the "sudden and accidental" exception to the pollution exclusion is unambiguous and that "sudden" has a temporal connotation. Sylvester Bros. Dev. Co. v. Great Cent. Ins. Co.,
The regents contend the primary policies' pollution exclusion is inapplicable to this case, relying on Grinnell Mut. Reins. Co. v. Wasmuth,
The [insured] contends our decision in [Grinnell] requires a finding that the "sudden and accidental" exception is ambiguous. We disagree. The principal basis for our decision in Grinnell was the "reasonable expectations" doctrine. This court repeatedly emphasized the unique facts in Grinnell as being the basis for its conclusion. Rather than support a finding of ambiguity, Grinnell supports our conclusion that "sudden and accidental" is unambiguous because this is precisely the type of "typical" pollution case in which Grinnell found the scope of the pollution exclusion clause to be unambiguous.
Sylvester Bros.,
For the same reason Grinnell did not control Sylvester Brothers, it is not applicable here. The insured in Grinnell was a small business (a home insulation contractor) *492 that was sued when foam insulation, deteriorating because of improper installation, released formaldehyde inside a home. Grinnell,
This case, by comparison, involves a manufacturer and distributor of a hazardous product, a typical case. The insureds were large corporations doing business throughout the country, and no part of the setting for this lawsuit is unique.
The pollution exclusion clause is not limited to the classic polluter, heavy industry's smokestacks, runoffs et cetera. By its plain terms, the clause covers "irritants, contaminants or pollutants." Whether something is a pollutant may depend on whether it is where it is not supposed to be. See Weber v. IMT Ins. Co.,
The regents also argue release of asbestos inside a building is not a discharge into the "atmosphere,"[5] and therefore their claim is not barred by policy exclusion. We disagree. A claimed distinction between air inside a building and "atmosphere" is artificial. Buildings have doors, windows, vents, and are not vacuum sealed (particularly a state university with thousands of students and university personnel going in and out of the buildings daily). Air inside a building comes in from the outside. Air inside a building mingles with and becomes part of the air outside. If it is improper to discharge, disperse, or release smoke, vapors, fumes, gases, contaminates, or pollutants into the air/atmosphere when the incinerator/garbage burner has an outside chimney, it does not seem reasonable the problem can be cured by moving the source of release into a building and then starting the discharge. Smoke, vapors, fumes, et cetera, when released inside a building (absent quantities so minute that they can be captured or their release considered de minimis) get outside. In fact, the hazard to be guarded against, the discharge of these pollutants in the proximity of human beings, is apt to be as great inside a building as outside. Common sense tells us that the hazard from a waste dump emitting noxious smoke is not cured by lighting the fire inside a building. We cannot read into the policy exclusion at issue a footnote that states "this exclusion only applies to asbestos wrapped pipes that are not under a ceiling."
In addition to the primary policies' pollution exclusions, the excess policies issued by U.S. Fire and North River bar coverage
for contamination or pollution of land, water, air or real or personal property or any injuries or damages resulting therefrom caused by an occurrence.
(Emphasis added.) The policies define "occurrence" to mean
a continuous or repeated exposure to conditions which unexpectedly and unintentionally causes injury to persons or tangible property during the policy period.
These exclusions apply and unambiguously bar coverage for the claim that asbestos contamination has caused property damage to the buildings.
DECISION
The trial court correctly applied Minnesota law. Under Minnesota law, the pollution *493 exclusions of the Royal, North River and U.S. Fire policies bar coverage for the regents' claims.
Affirmed in part, reversed in part.
NOTES
Notes
[1] See Miller v. Shugart,
[2] In its appeal, Great American challenges only the trial court's holding that it is jointly and severally liable for the entire amount of the settlement judgment. Although the order for judgment states the insurers are jointly and severally liable, the trial court's memorandum states the insurers are liable only "up to the available limits of the affected insurance policies." The regents do not oppose clarification that the insurers are not obligated to pay any amounts beyond their policy limits.
[3] The various policies included the following clauses, which, if applicable, would bar coverage:
A. Pollution exclusion
B. Business risk exclusion
C. Sistership exclusion
D. Performance exclusion
E. Repair and replacement exclusion
[4] Great American did not challenge the trial court's holding that its pollution exclusion clause did not bar coverage; therefore, Great American is bound by the trial court's decision. See Lener v. St. Paul Fire & Marine Ins. Co.,
[5] This argument was accepted by the New York Court of Appeals in Rapid-American as one basis for finding the pollution exclusion clause inapplicable. The court in that case stated:
[T]he three places for discharge contemplated by the policy exclusion into or upon land, the atmosphere, or any water course or body of water read together support the conclusion that the clause was meant to deal with broadly dispersed environmental pollution * * * not the possibly confined environs of the present complaints. The crucial distinction, therefore, is * * * whether asbestos was placed into the environment.
Rapid-American,