MADISON CONSTRUCTION COMPANY, Appellant, v. The HARLEYSVILLE MUTUAL INSURANCE COMPANY, Nicholas Ezzi, Brian Murtaugh, Kelran Associates, Inc., and Euclid Chemical Company, Appellees.
111 M.D. Appeal Docket 1996
Supreme Court of Pennsylvania.
July 27, 1999.
Reargument Denied Oct. 8, 1999.
735 A.2d 100 | 557 Pa. 595
Lee M. Epstein, Philadelphia, for Amicus-Betz Laboratories, Inc.
William T. Salzer, Philadelphia, for Harleysville Mut. Ins. Co.
Steven R. Waxman, Philadelphia, for Elucid Chemical Co.
Alfred V. Altopiedi, Philadelphia, for Nicholas Ezzi.
Edward M. Dunham, Jr., Philadelphia, for Amicus-Aetna Cas. and Sur. Co.
David E. Sandel, Jr., Philadelphia, for Amicus-Ins. Environmental Law Ass‘n.
Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.
OPINION
SAYLOR, Justice.
The issue in this declaratory judgment action is whether a pollution exclusion clause in a policy of commercial general liability insurance issued to Appellant, Madison Construction Company (“Madison“), by Appellee, Harleysville Mutual Insurance Company (“Harleysville“), relieves Harleysville of its obligation to defend Madison in an underlying personal injury action. We conclude, as did the en banc Superior Court, 451 Pa.Super. 136, 678 A.2d 802, that the pollution exclusion clause operates to bar coverage in the present case, and therefore affirm.
The events giving rise to this litigation are as follows: In 1991, Madison was engaged in pouring and curing concrete utility trenches at the Boeing/Vertol Helicopters Facility. To cure the concrete, Madison applied a compound known as Euco Floor Coat or Eucocure. While this was being done, the construction area was enclosed in an “envelope” of polyethylene sheeting. According to his subsequently filed complaint, Nicholas Ezzi, a Boeing employee, was summoned to the construction area to investigate a strong odor. Ezzi alleges that as he attempted to set up an exhaust fan for the fumes emanating from the curing agent, he was overcome by the fumes, lost consciousness, and fell into an excavation site, sustaining severe and permanent injuries.
Ezzi filed a negligence action, naming as defendants Madison, a subcontractor; Kelran Associates, Inc., the general contractor; and Brian Murtaugh, a Kelran project superinten
Madison was insured under a commercial general liability policy issued by Harleysville. The policy contained a clause requiring Harleysville to defend Madison in any lawsuit that fell within the parameters of coverage. Madison informed Harleysville of the accident shortly after it occurred. Harleysville denied coverage and refused to defend on the basis of the policy‘s pollution exclusion clause,1 which reads as follows:
2. Exclusions.
This insurance does not apply to:
...
f.(1) “Bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:
(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured;
...
(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured‘s behalf are performing operations:
(i) if the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor....
The policy defines “pollutants” as
any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals
and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
Harleysville maintained that Euco Floor Coat was a pollutant within the meaning of the policy. Madison then filed the present declaratory judgment action to resolve the issue of whether Harleysville was contractually obligated to provide coverage. Both parties moved for summary judgment.
The trial court denied Harleysville‘s motion for summary judgment and entered summary judgment in favor of Madison. In the opinion in support of its order, the trial court considered first the meaning of the term “pollutant” in the context of a pollution exclusion clause. After noting that the appellate courts of the Commonwealth had not yet addressed the issue, the trial court chose to adopt the interpretation set forth by the intermediate appellate court of North Carolina in West American Ins. Co. v. Tufco Flooring, 104 N.C.App. 312, 409 S.E.2d 692, appeal dismissed as improvidently granted, 332 N.C. 479, 420 S.E.2d 826 (1992).
In that case, Tufco, a floor resurfacing business, used a styrene monomer resin in the course of resurfacing the floors in certain areas of a Perdue chicken processing plant. Vapors or fumes from the resin allegedly contaminated chicken stored in a nearby cooler. Relying on a pollution exclusion clause similar to the one at issue here, the insurer, West American, refused to provide coverage for Perdue‘s claim against Tufco. The trial court granted summary judgment to Tufco and Perdue in their declaratory judgment action against West American. The Court of Appeals affirmed, reasoning, in pertinent part, that
Tufco did not bring the vapors or fumes which invaded the chicken to the Perdue plant. Rather, Tufco brought an unadulterated, pure raw material, styrene monomer resin, in one-gallon metal cans with screw-on caps. When this raw material was brought onto the site, it was neither an “irritant [nor a] contaminant.” It was a raw material used by Tufco in its normal business activity of resurfacing floors. Yet, to be a “pollutant” under the exclusion, a substance
brought onto the site must be precisely that, an “irritant or contaminant.”
Id. at 322, 409 S.E.2d at 698.
Similarly, the trial court declared in the present case, what Madison brought to the work site was not vapors or fumes but a pure raw material, Euco Floor Coat, which was contained in covered, one-gallon cans. Far from being an unwanted “irritant” or “contaminant,” the court reasoned, Euco Floor Coat was a necessary tool of Madison‘s trade; in fact, Madison‘s contract with Kelran required it to use such a curing compound. Therefore, the trial court concluded that the policy‘s definition of “pollutants” was clear and unambiguous and did not extend to the substance at issue, Euco Floor Coat.
Although the trial court could have rested its decision that the exclusion did not apply upon that conclusion alone, it also considered whether there had been a discharge, dispersal, or similar action of the allegedly polluting substance for the purposes of the exclusion. Again the trial court turned to Tufco for guidance. According to the North Carolina court,
[t]he operative policy terms of the pollution exclusion clause imply that there must be a discharge into the environment before coverage can be properly denied. The operative terms in the version of the pollution exclusion clause at issue in this case are “discharge,” “dispersal,” “release,” and “escape.” While they are not defined in the policy, the terms “discharge” and “release” are terms of art in environmental law and include “escape” by definition and “dispersal” by concept.
Id. at 324, 409 S.E.2d at 699 (footnote excluded). Although the absolute version of the pollution exclusion clause, unlike its predecessor, did not include language specifying a discharge of pollutants “into or upon land, the atmosphere or any water course or body of water ...,” the court was convinced by its review of the exclusion‘s history that the omission was of no moment. Thus, the court reasoned “that any ‘discharge, dispersal, release, or escape’ of a pollutant must be into the environment in order to trigger the pollution exclusion clause
A divided panel of the Superior Court (Olszewski, J.; Cavanaugh, J., concurring in the result; and Wieand, J., dissenting without opinion) affirmed the trial court‘s entry of summary judgment in favor of Madison, but on a different ground.2 The lead opinion by Judge Olszewski rejected the trial court‘s conclusion that the vapors emanating from the floor covering were not pollution.
While the floor-covering material itself was a necessary instrument of Madison‘s work, the vapors, however unavoidable, were not. They were an unwanted irritating waste product of the floor covering, and thus could be construed to fit within the policy‘s definition of pollution.
Op. at 145, 678 A.2d 802. Judge Olszewski concluded, however, that the pollution exclusion was ambiguous in light of the existence of two contrary schools of thought concerning its interpretation. According to one school of thought, the exclusion did not apply where the pollution in question was not environmental or industrial in nature; according to the other, the exclusion was indeed absolute and applied to any set of facts that came within the literal meaning of its terms.3
Relying on the Superior Court‘s decision in Cohen v. Erie Indemnity Co., 288 Pa.Super. 445, 432 A.2d 596 (1981), Judge Olszewski reasoned that “[t]he mere fact that several appellate courts have ruled in favor of a construction denying coverage, and several others have reached directly contrary conclusions, viewing almost identical policy provisions, itself creates the inescapable conclusion that the provision in issue is susceptible to more than one interpretation.” Op. at 451, 432 A.2d 596 (quoting Cohen, 288 Pa.Super. at 451, 432 A.2d at 599). Accordingly, he concluded, the pollution exclusion clause was ambiguous and therefore to be construed in favor of the insured.
The Superior Court granted reargument en banc. The en banc court reversed the trial court, concluding that the pollution exclusion clause clearly and unambiguously applied to relieve Harleysville of its obligation to defend Madison. The court found no language in the exclusion that limited its application, implicitly or explicitly, to instances in which a pollutant had escaped “into the environment.” As for the substance at issue, the court reasoned as follows:
This court simply cannot construe the policy language any way other than by finding that the fumes in the instant case were pollutants. First, the language of the exclusion provision clearly states that “fumes” are regarded as a “pollutant.” Second, when canisters of a liquid or other compound are brought onto a premises, opened, and the material, upon exposure to the air or after application to a surface, causes noxious fumes to emanate and make persons dizzy, the fumes are clearly pollutants.
Madison Constr. Co. v. Harleysville Mut. Ins. Co., 451 Pa.Super. 136, 145, 678 A.2d 802, 806 (1996) (footnote omitted). Accordingly, the Superior Court remanded for the entry of summary judgment in favor of Harleysville.
In the present appeal, Madison argues that the trial court correctly determined that the terms of the pollution exclusion clause are clear and unambiguous and do not apply to the situation at issue in this case. Under the clear and unambiguous language of the clause, Madison contends, the product that it brought to the work site, Euco Floor Coat, was not a pollutant, nor was there a release or discharge of the product. Alternatively, Madison argues that the pollution exclusion clause is ambiguous, as Judge Olszewski concluded, and therefore must be interpreted in Appellant‘s favor. As a second alternative, Appellant maintains that the dissenting en banc opinion was correct in finding that the claims asserted in the underlying action are based on acts of negligence such as failure to warn, not on the use or release of pollutants.4
While the Superior Court has had the opportunity to address various aspects of the pollution exclusion clause,5 no
Where an insurer relies on a policy exclusion as the basis for its denial of coverage and refusal to defend, the insurer has asserted an affirmative defense and, accordingly, bears the burden of proving such defense. Erie Ins. Exch. v. Transamerica Ins. Co., 516 Pa. 574, 580, 533 A.2d 1363, 1366 (1987) (citing Miller v. Boston Ins. Co., 420 Pa. 566, 570, 218 A.2d 275, 277 (1966)); see also Armon v. Aetna Cas. & Surety Co., 369 Pa. 465, 469, 87 A.2d 302, 304 (1952). To determine whether Harleysville has met its burden of proof, we rely on well-settled principles of contract interpretation.
The polestar of our inquiry, therefore, is the language of the insurance policy. Inserting the policy‘s definition of the term “pollutant” into the body of the exclusion, we understand the exclusion to apply to “the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ... any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste[, ... a]t or from any premises, site or location ... occupied by ... [the] insured[.]”
We determine first whether the policy‘s definition of “pollutant” applies unambiguously to the floor sealant or curing compound known as Euco Floor Coat. The pertinent inquiry is not, as Madison contends, whether the policy‘s
Included in the record is the Material Safety Data report prepared by Euclid Chemical Company for the product or products known by the trade names Floor Coat, Super Floor Coat, Rez-Seal, Super Rez-Seal, Pilocure, Super Pilocure, and Eucocure. The report notes that “[t]hese products may contain approximately 3-4% Xylene...; 2-3% Cumene...; 40% Trimethylbenze [sic]..., which are considered toxic chemicals and 0.2 to 0.3% Styrene ..., which is a suspected carcinogen.” Xylene, cumene, and styrene have been classified as hazardous air pollutants by the federal government.
Thus, the specific product at issue is not innocuous; its harmful effects are well known. According to the report supplied by its manufacturer, Euco Floor Coat or Eucocure is an irritant, and persons using the product should guard against inhaling or allowing the skin to come into direct contact with it. Indeed, as the Superior Court noted in this case, the fumes from the product “were so strong as to overcome a healthy adult, making him dizzy enough to fall into a trench....” Madison, 451 Pa.Super. at 146, 678 A.2d at 807. The definition of pollutant in the Harleysville policy, including as it does “any ... irritant,” clearly and unambigu
We find no merit in Madison‘s claim that the pollutant in this case consisted solely of the fumes released by the application of Euco Floor Coat to the cement, and that what Madison “brought on ... to the premises” within the meaning of subsection f(1)(d)(i) was not the pollutant (that is, the fumes themselves) but a non-polluting substance (Euco Floor Coat) in sealed containers. As Harleysville points out, while the form of the substance may have changed, its chemical composition did not. Given that fact, as well as the all-encompassing language of the definition, Madison avers a distinction without a difference.6
Having determined that the exclusion‘s definition of pollutant clearly and unambiguously encompasses the substance known as Euco Floor Coat, we consider whether the exclusion‘s requirement of an “actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants” is, with reference to the facts of the present case, similarly unambiguous.
The Harleysville policy does not define the terms in question. Words of common usage in an insurance policy are to be construed in their natural, plain, and ordinary sense, Easton v. Washington County Ins. Co., 391 Pa. 28, 33, 137 A.2d 332, 335 (1957); Blue Anchor Overall Co. v. Pennsylvania Lumbermens Mut. Ins. Co., 385 Pa. 394, 397, 123 A.2d 413, 415 (1956), and we may inform our understanding of these terms by considering their dictionary definitions.
Common to all of these terms is, obviously, the element of movement. The listing of numerous similar terms such as “discharge” and “dispersal,” preceded by the phrase “actual, alleged or threatened,” indicates an intent to comprehend all such types and degrees of movement. When thus read, the exclusion applies to the incident at issue: a pollutant, Euco Floor Coat, was applied to the surface of the concrete utility trenches, and it dispersed into the air above and around the trenches (thus the need for the polyethylene envelope, so that the pollutant did not disperse even further).
The trial court found that there had been no discharge, dispersal, or similar movement of the Euco Floor Coat within the meaning of the policy because the vapors did not leave the enclosed area. Relying on the history of the pollution exclusion clause as set forth in Tufco, the trial court concluded that “the policy terms still require that the discharge be ‘into the environment’ in order for the pollutant exclusion to be triggered.”
The trial court‘s approach does not comport with the settled principles of contract interpretation. In striving to discern the considerations underlying the policy language, the trial court failed to acknowledge and to apply the plain meaning of such language. If the pollution exclusion clause, by its express terms, does not require that a discharge or dispersal be “into the environment” or “into the atmosphere,” then the
Moreover, as Harleysville points out, the pollution exclusion clause applies to any discharge, dispersal, or similar movement of a pollutant “[a]t or from any premises, site or location on which any insured ... [is] performing operations.” If the exclusion spoke only of discharges from a work site, it could reasonably be argued that the words in question were environmental terms of art, applicable only to those instances in which a pollutant traveled beyond the work site and into the atmosphere, water, or ground. The plain language of the exclusion belies such limited applicability, however; by its very terms the exclusion encompasses discharges that do not leave the work site. Therefore, the exclusion is unambiguous, and it encompasses the discharge or dispersal of Euco Floor Coat at Madison‘s work site. See generally Reliance Ins. Co. v. Moessner, 121 F.3d 895 (3d Cir.1997) (finding that exclusion, by its terms, clearly and unambiguously barred coverage for claims based on carbon monoxide poisoning).
In its final argument,8 Madison asserts that the complaint in the underlying lawsuit states claims for acts of
An insurer‘s duty to defend is determined by the allegations in the underlying complaint. General Accident Ins. Co. of Am. v. Allen, 547 Pa. 693, 704, 692 A.2d 1089, 1094 (1997) (quoting Wilson v. Maryland Cas. Co., 377 Pa. 588, 595, 105 A.2d 304, 307 (1954)); Erie Ins. Exchange v. Claypoole, 449 Pa.Super. 142, 156, 673 A.2d 348, 355 (1996) (en banc ). Therefore, if the claims of negligence were truly independent of Madison‘s use of a pollutant, Madison‘s argument would have merit.
All of the plaintiff‘s claims of negligence, however, rest upon the fundamental averment that “while Mr. Ezzi attempted to set up an exhaust fan for the fumes emanating from the curing agent, he was overcome by the fumes, causing him to become dizzy and pass-out [sic]....”9
The order of the Superior Court is affirmed.
Justice CAPPY files a dissenting opinion.
Justice NIGRO files a dissenting opinion.
Justice NEWMAN files a dissenting opinion.
CAPPY, Justice, dissenting.
I respectfully dissent. The term “arising out of” in the context of the absolute pollution exclusion is ambiguous, and therefore should be construed in favor of the insured. Moreover, I am concerned that the majority‘s “plain meaning” approach in interpreting the pollution exclusion establishes a dangerous precedent which will yield absurd results.
We have long-recognized that “[w]here the provision of the policy is ambiguous, the policy provision is construed in favor of the insured and against the insurer, the drafter of the instrument.” Bateman v. Motorists Mut. Ins. Co., 527 Pa. 241, 590 A.2d 281, 283 (1991). In construing the term “arising out of” in the context of the pollution exclusion, it is questionable whether the phrase requires merely a causal relationship
Relying on McCabe v. Old Republic Ins. Co., 425 Pa. 221, 228 A.2d 901, 903 (1967), the majority finds that Mr. Ezzi‘s injuries “arose out of the release of irritating fumes at the construction site.” However, McCabe does not control the instant case, as there we were not construing the term “arising out of” in the context of a pollution exclusion. In fact, we recognized that the determining factor is “the context in which the words were employed.” Id.
Mr. Ezzi set forth several claims sounding in negligence, including failure to warn and protect others. He has not alleged that his injuries resulted from the “actual, alleged or threatened discharge, dispersal, seepage, migration release or escape of pollutants.” Where, as here, the claims sound in negligence, the pollution exclusion should not bar coverage. See, e.g., Calvert Ins. Co. v. S & L Realty Corp., 926 F.Supp. 44, 47 (S.D.N.Y.1996) (building employee injured due to exposure to fumes during application of floor cement; complaint alleged, inter alia, failure to inspect and failure to remedy a dangerous condition which was initially created by the fumes; court concluded that “injuries complained of may reasonably be found to have arisen from improper ventilation or the failure to provide proper protective devices.“); Schumann v. State of New York, 160 Misc.2d 802, 610 N.Y.S.2d 987, 989 (Ct.Cl.N.Y.1994) (contractor‘s worker injured by toxic fumes from cutting lead-paint-coated steel; worker alleged that he had not been provided with respiratory or other protective gear; court concluded that “the failure to provide claimant with an appropriate protective device gives rise to exposure-covered by the policy and not excluded by the pollution exclusion clause.“); Connor v. Farmer, 382 So.2d 1069, 1070 (La.Ct.App.1980) (worker contracted silicosis; court “view[ed] the worker‘s injury in such a case as arising not from the discharge of sandblasting matter into the atmosphere but from the failure to provide the appropriate protective masks and other apparel. Liability (if any) for the injury arises not from polluting the atmosphere but from obliging others to work with inadequate protection in an atmosphere known to be polluted.... We do not construe the exclusion as applicable when the pollution is only one of two or more liability-imposing circumstances out of which the injury arises.“). But see League of Minn. Cities Ins. Trust v. City of Coon Rapids, 446 N.W.2d 419 (Minn.Ct.App.1989) (injuries resulting from build-up of nitrogen dioxide from Zamboni machine fall within pollution exclusion, despite allegations that build-up was due to failure to maintain the Zamboni machine, to adequately ventilate and test the arena and to warn injured parties of the health dangers).
I am also concerned that the majority‘s strictly literal interpretation of the terms of the policy will yield results which were not intended by the parties to the insurance contract. As noted by the Court of Appeals for the Seventh Circuit:
Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results. To take but two simple examples, reading the clause broadly would bar coverage for bodily injuries suffered by one who slips and falls on the spilled contents of a bottle of Drano, and for bodily injury caused by an allergic reaction to chlorine in a public pool. Although Drano and chlorine are both irritants or contaminants that cause, under certain conditions, bodily injury or property damage, one would not ordinarily characterize these events as pollution.
Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1043 (7th Cir.1992).
I am persuaded by the reasoning of those cases which refuse to apply a literal interpretation of the pollution exclusion without regard to the circumstances of the alleged injury.
NIGRO, Justice, dissenting.
The Majority concludes that the pollution exclusion clause contained in the insurance policy issued to Madison relieves Harleysville of its obligation to defend Madison against Ezzi‘s personal injury action. Since I believe that the specific claims for relief pled by Ezzi in his personal injury action against Madison do not trigger the application of the pollution exclusion clause at issue, I must respectfully dissent.
As the Majority notes, the general liability insurance policy issued to Madison by Harleysville expressly excluded from its coverage any claims for compensation for bodily injury or property damage “arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants....” However, Ezzi‘s complaint against Madison does not allege that his injuries arose out of the dispersal of pollutants at the work site. Rather, Ezzi‘s complaint alleges that his injuries were caused by Madison‘s failure to warn and protect others from the hazardous situation, to properly ventilate the work site, and to cover the hole where he fell. (Complaint at 4-5.)
I respectfully dissent because I do not believe that the trial court developed a sufficient record upon which to determine the applicability of the pollution exclusion to the allegations set forth in Mr. Ezzi‘s Complaint. I am concerned that the trial court determined that Euco Floor Coat is not a pollutant without addressing the critical issue of the exact chemical composition of the product used at the Boeing/Vertol Helicopters facility and whether the fumes emitted from that product are a pollutant. As the Majority notes:
Included in the record is the Material Safety Data report prepared by Euclid Chemical Company for the product or products known by the trade names Floor Coat, Super Floor Coat, Rez-Seal, Pilocure, Super Pilocure and Eucocure. The report notes that “[t]hese products may contain approximately 3-4% Xylene...; 2-3% Cumene...; 40% Trimethylbenze [sic]... which are considered toxic chemicals, and 0.2 to 0.3% Styrene ..., which is a suspected carcinogen.”
Majority Opinion at 107 (emphasis added). Without a factual determination of the composition of the specific product at issue, I do not believe that the trial court could have reliably held that either the product or its fumes are pollutants. Accordingly, the grant of summary judgment in favor of Madison Construction based upon the physical properties of Euco Floor Coat is inappropriate. Therefore, I would vacate the Orders of the Superior Court and trial court, and remand with instructions to consider the issues set forth in this Opinion.