Case Summary
Appellant-plaintiff, Great Lakes Chemical Company ("Great Lakes"), appeals the trial court's grant of summary judgment in favor of appellees-defendants, International Surplus Lines Insurance Company ("ISLIC") and First State Insurance Company ("First State"). We reverse and remand.
Issues
Great Lakes presents three issues for our review:
I. Whether the "pollution exelusion" clauses contained in the excess lability policies issued by ISLIC and First State excluded coverage for the claims in the underlying lawsuits filed аgainst Great Lakes;
II. Whether ISLIC had a duty to defend Great Lakes in the underlying lawsuits; and
III. Whether the ISLIC and First State insurance policies covered the damage alleged in the underlying lawsuit by the City of Fresno.
Facts and Procedural History
Great Lakes brought this action for declaratory judgment seeking a determination that ISLIC and First State 1 had a duty to defend and indemnify Great Lakes in thirteen underlying lawsuits filed against Great Lakes.
In the mid 1960's, Great Lakes began manufacturing and selling pesticide products cоntaining ethylene dibromide (EDB). These products were required to be, and were, registered with both federal and state governments before their sale and application. The EDB products were intended to be used as a soil fumigant pesticide to control nematodes and other pests. The pesticides were applied by injecting them directly into the ground using a tractor driven applicator.
In 1983, the United States Environmental Protection Agеncy banned the use of EDB as a soil fumigant pesticide. Subsequently, various persons and communities brought actions for damages against Great Lakes claiming soil and groundwater contamination caused by EDB. Great Lakes sought indemnity and defense costs against ISLIC and First State under various policies of excess liability insurance that had been issued from 1971 to 1979. ISLIC and First State denied coverage under the policies. Great Lakes then brought an action for declaratory judgment seeking a determination of rights under the policies. Both sides moved for summary judgment. The trial court granted summary judgment in favor of ISLIC and First State finding as a matter of law that there was no duty to defend or indemnify Great Lakes in any of the underlying lawsuits. Great Lakes appeals.
Discussion and Decision
Standard of Review
On appeal from a grant of summary judgment, we consider the same issues and apply the same legal standard as the trial court. Campbell v. Criterion Group (1993), Ind.App.,
1.
Great Lakes contends that the trial court erroneously determined ISLIC and First Stаte had no duty to indemnify under the policies. The trial court determined, as a matter of law, that the pollution exelusion clauses of the policies encompassed the claims brought against Great Lakes in the underlying lawsuits, thereby excluding coverage 2 The pollution exclusion clause contained in the First State and certain ISLIC policies excludes coverage for:
Bodily injury or property damage arising out of the discharge, disрersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste material 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.
The pollution exelusion clause contained in the remainder of the ISLIC policies provides:
It is agreed this policy shall not apply to liability for contamination or pollution of land, water, air or real or personal property or any injuries or damages resulting therefrom caused by an occurrence.
The provisions of an insurance contract are subject to the same rules of construction as other contracts, and construction of a written contrаct is a question of law for which summary judgment is particularly appropriate. Selleck v. Westfield Ins. (1993), Ind.App.,
When interpreting an exclusionary clause of an insurance policy, the clause must clearly and unmistakably bring within its scope the particular act or omission that will bring the exclusion into play in order to exclude coverage. Asbury v. Indiana Union Mut. Ins. Co. (1982), Ind.App.,
*851
The only Indiana case to interpret one of the pollution exelusion clauses applicable here is Barmet of Indiana, Inc. v. Security Ins. Group (1981), Ind.App.,
Great Lakes claims that if the pollution exclusion clauses operate to bar coverage, then in this case the insurance coverage would be illusory. ISLIC and First State argue that the pollution exclusion clauses clearly apply to the facts here. ISLIC and First State assert that EDB is a "pollutant" within the meaning of the clauses, citing the EPA report banning its use as a soil fumigant pesticide. They additionally contend that EDB falls within other categories of excluded materials: "toxic chemicals," "liquids," "irritants," "contaminants." They also assert that the application of EDB was a "release," and that it was done so directly upon "land." Thus, ISLIC and First State contend that the language of the pollution exclusion clauses is clear and unambiguous, and when applied to the claims in the underlying lawsuits against Great Lakes, excludes coverage.
While a literal reading of the pollution exclusion clauses may appear to apply to the underlying EDB claims, we decline to hold that the clauses exclude coverage in this case. Great Lakes is in the business of manufacturing and selling chemical compounds. The chemical at issue here, EDB, was a soil fumigant pesticide, intended to be applied directly into and upon land. The EDB products claimed to have contaminated the soil and groundwater were used, at the time of application, exactly in the manner intended by Great Lakes and approved by the state and federal governments. Their use and application at that time were entirely legal. EDB was neither a manufacturing byproduct or a waste product of Great Lakes. EDB was the actual end-product of the manufacturing process.
Great Lakes, like most manufacturers, purchased liability insurance to protect itself from damage caused by its products. Here, because of the nature of the product and its intended use, the damage caused by EDB was environmental pollution. However, simply because the damage alleged in the underlying lawsuits is environmental damage does not mean that the pollution exclusion clauses should automatically apply to exelude coverage. In this case, the underlying claims against Great Lakes are not in the nature of intentional or negligent environmental pollution; they are essentially product lability claims. To hold that the pollution exelusion clauses bar coverage to Great Lakes fоr the EDB claims would render the insurance coverage purchased by Great Lakes illusory. We hold that under the facts of this case, the EDB claims against Great Lakes are not excluded by the policies' pollution exclusion clauses 3
The trial court's entry of summary judgment on this issue is reversed and summary judgment is ordered entered for Great Lakes.
IL.
Great Lakes contends that the trial court erroneously determined ISLIC had no
*852
duty to defend Great Lakes in thе underlying lawsuits. An insurer's duty to defend, being contractual, is determined by the language in the policies. Drake Ins. Co. of New York v. Carroll County Sheriff's Dep't (1981), Ind. App.,
ISLIC Policies XL1084, XL1089, XL1094, and XL1114
Great Lakes does not contend that any language in the body of these poli-cles imposes a duty on ISLIC to defend. However, Great Lakes argues that an endorsement 4 attached to the policies provided for the payment of defense costs. That endorsement provided:
It is hereby undеrstood and agreed that in the event of a claim made under this policy, this company shall pay no greater proportion of claim expenses including investigation costs, attorney fees and adjuster fees than the amount of claim this company is called upon to pay bears to the total amount of claim{,] judgment and/or settlement.
Great Lakes contends that the endorse, ment is unambiguous and imposed a duty upon ISLIC to reimburse defense costs in the proportion that those costs bear to the claim as a whole. ISLIC contends that the endorsement must be read in conjunction with a provision in the body of the policy to determine its meaning. That provision stated:
Notice of an occurrence which appears likely to involve this policy shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable. The company at its own option may, but is not required to, participate in the investigation, settlement or defense of any claim or suit against the insured.
ISLIC contends that when these two provisions are read together, the endorsement obligates ISLIC to pay proportional defense cost only after ISLIC has decided to participate in the investigation, settlement or defense of the claim. However, we disagree that the endorsement was only meant to obligate ISLIC for defense cost after ISLIC decided to participate in the defense. When the endorsement is read in conjunction with the entire policy, we believe that it was intended to supersede those parts of the policy which expressly state ISLIC had no duty to defend. The policies defined "loss" to mean:
sums paid as damages in settlement of a claim or in satisfaction of a judgment fоr which the insured is legally lable, "Loss" does not include investigation, adjustment, defense or appeal costs and expenses ...
The policies definitions of "loss," which excludes defense costs, and the endorsement which obligates ISLIC to pay only its proportional share of defense costs, are inconsistent. Where a policy contains inconsistent and contradictory provisions, that provision most favorable to the insured will be adopted. Northwestern Mut. Life Ins. Co. v. Hazelett (1886),
Summary judgment in favor of ISLIC is reversed and summary judgment is ordered entered for Great Lakes.
ISLIC Policy GP262L,
The disputed language under this policy is as follows:
Defense, Settlement and Supplementary Payments
The company shall have the right and opportunity to associated [sic] with the insured in the defense and control or [sic] any claim or proceeding arising out of an cecurrence reasonably likely to involve the *853 company. In such event, the insured and the company shall cooperate fully.
Should any occurrence appear likely to exceed the retained limit, no loss expenses or legal expesnes [sic] shall be incurred on behalf of the company without its prior consent. Such consent shall not be unreasonably withheld.
Great Lakes contends the policy provided that when a retained limit has been exhausted, Great Lаkes was not obligated to obtain ISLIC's consent before incurring defense costs. Great Lakes' argument seems to be that ISLIC's consent is only required where a claim "appears likely" to exceed the retained limit. In this case, goes the argument, the claim did not "appear likely" to exceed the retained limit because the retained limit had been paid out; therefore, the claim was "certainly" to exceed the retained limit, mаking consent unnecessary.
We disagree with this construction of the consent provision. A natural reading of the provision simply requires that when Great Lakes learns of a claim against itself which may be covered under the insurance policy, and the nature of the claim makes it appear likely to exceed the retained limit of the primary insurer, Great Lakes is to notify ISLIC of the claim before it incurs any defense costs.
Even though we disagree with Great Lakes' construction of the consent provision, we are unable to say that ISLIC does not have a duty to defend Great Lakes as a matter of law. The issues of whether and when Great Lakes notified ISLIC of the underlying claims, whether ISLIC declined to defend those claims, and whether ISLIC waived its right to consent to the incurrence of defense costs are genuine issues of material fact not appropriate for resolution on a motion for summary judgment. Under this policy of insurance, summary judgment in favor of ISLIC is reversed.
IIL.
Great Lakes contends that the trial court erroneously determined that. ISLIC and First State had no duty to defend or indemnify Great Lakes in the underlying lawsuit filed by the City of Fresno. The City of Fresno complaint alleged that pesticides containing EDB were used by local farmers and other consumers from 1955 until 1982, and that the EDB had migrated from the soil into the groundwater supply. The complaint alsо stated that on February 25, 1989, the California Department of Health Services adopted regulations which lowered the permissible concentrations of EDB in drinking water. The City of Fresno filed its action for damages in May of 1990 against Great Lakes and others for the costs of cleaning up the EDB contaminated groundwater.
ISLIC and First State had issued exeess liability policies to Great Lakes covering the period from August 24, 1971 thru October 1, 1979. The trial court granted summary judgment for ISLIC and First State, finding that no damage had occurred during the policy period because the City of Fresno complaint alleged that the City was damaged only after the new groundwater regulations became effective in February of 1989. Great Lakes argues that the trial court erroneously determined that the policies did not provide coverage for groundwater contamination which occurred during the policy periоd.
The insurance policies provide that ISLIC and First State:
will indemnify the insured for ultimate net loss in excess of the retained limit hereinafter stated which the insured shall become legally obligated to pay by reason of liability imposed by law, or lability assumed by contract, insofar as the named insured may legally do so, for damages because of:
A. Bodily Injury or
B. Property Damage or
C. Personal Injury
to which this policy applies, cause by an occurrence.
"Occurrence" means an accident, or event including continuous or repeated exposure to conditions, which results in bodily injury or property damagе neither expected nor intended from the standpoint of the insured.
*854 "Property Damage" means ... physical injury to or destruction of tangible property which occurs during the policy period,
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Great Lakes contends that the language of the polices is clear; the policies provided coverage for physical injury to property which occurs during the policy period. We agree. The City of Fresno complaint allеges that groundwater was contaminated by the EDB pesticides which were applied to the local soil from 1955 to 1982. ISLIC and First State argue that no damage to the City occurred until 1989, long after the policies had expired, when the groundwater regulation was changed. ISLIC and First State, however, confuse damage to the City and damage to the groundwater. The policies provide coverage for damage to property, as long as thаt damage occurs during the policy period. Here, the damage was contamination of the groundwater by application of EDB to the soil. When the City incurred "damages," Le. the cost of cleanup or of other measures to replenish the contaminated groundwater, is not relevant to when damage to property occurred for purposes of determining coverage under the policies.
ISLIC and First State cite United States Fidelity & Guar. v. American Ins. Co. for thе general rule that "the time of the occurrence of an accident within the meaning of an indemnity policy is not the time the wrongful act was committed but the time when the complaining party was actually damaged." (1976),
When applied to the City of Fresno case, the general rule simply holds that the time when the EDB pesticides were manufactured is not the time of the occurrence which triggers coverage, but the trigger for coverage is the time when the complaining party was damaged. Here, the City was damaged when the EDB pesticides were applied to the soil and contaminated the groundwater. The general rule does not hold that the time the City incurred "damages" is the time of the occurrence which triggers coverage under the ISLIC and First State policies.
The trial court's entry of summary judgment on this issue is reversed and summary judgment is ordered entered for Great Lakes.
Reversed and remanded.
Notes
. A total of fourteen insurers were finally named as defendants in Great Lakes' last amended complaint in this action. Great Lakes dismissed twelve of those insurers prior to appeal, leaving only ISLIC and First State.
. The trial court preliminarily determined that the EDB claims in the underlying lawsuits sufficiently alleged an "accident" or an "occurrence," as those terms were defined in the policies, to invoke coverage under the policies' basic insuring clauses. This finding is not challenged on appeal.
. The parties and the four amicus who filed briefs in this appeal expend considerable discussiоn on the issue of whether or not the phrase "sudden and accidental," as used within one of the pollution exclusion clauses, is ambiguous. Because we hold that in this case the exclusions themselves do not apply to exclude coverage, we leave the resolution of that issue for another day.
. ISLIC argues in its Appellee's Brief that because the trial court did not consider the endorsement when ruling on the cross-motions for summary judgment, Great Lakes contention to this court that the endorsement provides for the payment of defense costs is an allegation of newly discovered evidence, which should be rejected. While it is not clear from the trial court's order that the endorsement was considered when granting summary judgment for ISLIC, a review of the record shows that Great Lakes designated the endorsement to the trial court in its motion for summary judgment. Therefore, it may be considered on appeal.
. The issue came down to whether the insurer providing coverage when the bricks first began spalling (failing) was entirely liable for the damage to the structure, or whether all insurers after the first instances of spalling were liable in proportion to the number of bricks that spalled during their respective policy period. The court held that the damage to the structure occurred upon the spalling of the first bricks, and that the insurance coverage in effect at that time was entirely liable for the damage.