666 N.E.2d 1163 | Ohio Ct. App. | 1995
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *655
In its cross-appeal, Morton's solitary assignment of error contends that the trial court erred by failing to grant Morton its prosecution costs for its action to establish its rights under Aetna's policy. For the reasons that follow we affirm in part and reverse in part the trial court's judgment.
The facts can be summarized as follows. Morton seeks insurance coverage for property damage, bodily injury, and personal injury resulting from hazardous waste generated by it or its predecessors and transported to Western Processing Company's ("Western") hazardous waste site, where it subsequently caused environmental damage to both Western's property and the adjoining property owned by Standard Equipment Company ("Standard"). The environmental damage occurred in Kent, Washington. Consequently, Morton and Thiokol Corporation sought, among other relief, a declaration that Aetna was liable for *657 unreimbursed defense costs and indemnification for monies paid in settlement of the claims.
On remand, the trial court granted Morton's motion for a ruling that the law of Washington be applied to the claims. On July 29, 1993, Morton moved the trial court to grant final summary judgment against Aetna as to the claims. On April 29, 1994, the trial court granted Morton's motion for summary judgment and ruled, inter alia, that Aetna must pay Morton $859,958.24, including interest in the amount of $310,058.05 as a result of Morton's settlement of the claims, and that Aetna must reimburse Morton for any future reasonable defense costs in connection with the Western claims and any future amounts Morton may pay under the previous settlement of these claims. The court's final judgment entry was filed May 20, 1994. Therein the court also determined, as a matter of law, that Morton was not entitled to attorney fees and prosecution costs. It further stated that the parties had not presented evidence of bad faith and, thus, those allegations were not addressed in its entry.
The policy also contains a personal injury liability ("PIL") endorsement which requires Aetna to "pay on behalf of the insured all sums which the insured shall *658 become legally obligated to pay as damages because of injury (herein called `personal injury') sustained by any person or organization and arising out of one or more of the following offenses committed in the conduct of the named insured's business: * * * Group C — wrongful entry or eviction, or other invasion of the right of private occupancy * * *." The endorsement also imposed on Aetna the "duty to defend any suit against the insured seeking damages on account of such personal injury even if any of the allegations of the suit are groundless, false or fraudulent * * *." The PIL endorsement is subject to all of the provisions of the policy not expressly modified by the endorsement and is thus subject to the "pollution exclusion" provision.
The "pollution exclusion" provision excludes from coverage:
"(f) * * * bodily injury or property damage [or personal injury] 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 * * *."
The exclusion also contains an exception, "if such discharge, dispersal, release or escape is sudden and accidental * * *." Under the policy Aetna had a duty to defend and indemnify its insured against an action for damages for personal injury, bodily injury or property damage resulting from an "occurrence," as defined in the policy, but had no duty to defend or indemnify against an action for damages resulting from pollution, unless the event giving rise to the damages was "sudden and accidental."
In Morton I we set forth in detail the correct analysis to be applied in resolving choice-of-law problems where the parties have failed to include a choice-of-law provision in their contract, relying on the principles set forth in 1 Restatement of *659 the Law 2d, Conflict of Laws (1971), Section 188. Section 188 states in pertinent part:
"(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.
"(2) In the absence of an effective choice of law * * *, the contacts to be taken into account * * * include:
"(a) the place of contracting,
"(b) the place of negotiation of the contract,
"(c) the place of performance,
"(d) the location of the subject matter of the contract, and
"(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.
"These contacts are to be evaluated according to their relative importance with respect to the particular issue."
In Morton I, this court determined that the record disclosed the following facts pertinent to Section 188:
"[P]laintiff Thiokol Corporation is a Delaware Corporation with its principal place of business in Utah. Thiokol Corporation was the successor in interest to Thiokol-Virginia, and plaintiff-appellee Morton International, Inc., with its principal place of business in Pennsylvania, is the successor by assignment of certain rights of Thiokol Corporation and Thiokol-Virginia. Ventron, which was acquired by Thiokol-Virginia in 1976, was subsequently named as a defendant in the Western Processing and Standard Equipment actions instituted in Washington. With respect to those actions, Morton-Thiokol sought indemnification and a defense under a policy of insurance issued to Thiokol-Virginia by Aetna. Aetna is a Connecticut corporation with its principal place of business in Connecticut. Negotiations for the Aetna insurance policies issued to Morton-Thiokol and its predecessors were conducted annually in Pennsylvania and Connecticut, and the policies were delivered to Morton-Thiokol in Pennsylvania."
In ruling that it would apply the law of the state of Washington to the cause sub judice, the trial court reasoned that Washington was the state where each environmental site was located and, thus, Washington had the most significant relationship with the insurance coverage issue of the action. In support of this decision, the trial court relied on the Restatement of Law relied on in Morton I and on this court's decision in Morton Internatl., Inc. v. Harbor Ins. Co. (1992),
"With respect to the Summit claims, Ohio is the place of performance and the situs of the subject matter of the Harbor policy. Under the principles set forth in Section 188, Ohio may fairly be said to bear the most significant relationship to the policy. Compare Morton Internatl., Inc. v. Aetna Cas. Sur. Co. (Oct. 2, 1991), Hamilton App. No. C-900283, unreported, 1991 WL 201651. * * *"
Our review of the record in this case, which also involves whether an insurer is responsible for the cost of cleaning up a disposal site, convinces us that the state of Washington, which is the "place of performance and the situs of the subject matter" of Aetna's policy, bears the most significant relationship to the Aetna policy issued to Morton's predecessor. Based upon our determination in Morton Internatl., Inc. v.Harbor, supra, and 1 Restatement of the Law 2d, Conflict of Laws (1971), Section 188, we hold that the trial court did not err by applying the law of the state of Washington in its analysis of this action.
We also note that Aetna, in a parallel action in New Jersey, won an injunction restraining Thiokol from prosecuting its action in Ohio by arguing, in part, that the "vast majority" of the sites were located in New Jersey, as were the vast majority of witnesses and evidence, and that "New Jersey has the most significant contacts with the parties, and the greatest interest in resolving the insurance coverage issues." To support that statement it pointed out that the dumping of hazardous waste in New Jersey creates a great societal problem in New Jersey, that a number of the sites are located in New Jersey, and that the citizens of New Jersey have been affected by the waste disposal. Although this argument was presented in the context of jurisdiction and not choice of law, we believe that estoppel precludes Aetna from now denying that the state where the hazardous waste sites are located has the most significant contacts with the insurance contracts. See, e.g., Claxton v.Simons (1963),
While Aetna may disagree with the trial court's order, it has presented no evidence in the record to support its argument that the trial court did not correctly apply Washington law in its analysis of the interpretation of Aetna's *662 policy. The trial court's order granting Morton summary judgment stated as a conclusion of law that a court may consider extrinsic evidence in interpreting a written contract and that an ambiguity exists where there is more than one reasonable interpretation of the language of the contract or the extrinsic evidence. It also indicated that it examined extrinsic evidence such as affidavits, admissions, deposition transcripts, and authenticated documents of the record. Absent any showing of an irregularity, we must presume the regularity of the trial court's actions. Therefore, Aetna's first argument fails.
In its second argument Aetna contends that the mutual intention of both it and Morton was that the pollution exclusion endorsement, which is referred to as the "qualified pollution exclusion" by Washington courts, would operate outside the parameters of the occurrence provision and bar coverage for gradual pollution claims. The relevant extrinsic evidence, however, fails to demonstrate that the endorsement was a negotiated provision such that mutual intent would be helpful in its interpretation. In beginning our discussion it is important to set forth the analysis required to interpret insurance contracts as set forth by Washington law. In Washington Pub.Util. Dists. Util. Sys. v. Pub. Util. Dist. No. 1 (1989),
"Insurance policies are to be construed as contracts, and interpretation is a matter of law. State Farm Gen. Ins. Co. v.Emerson,
"The court will determine the parties' intent by viewing the contract as a whole, examining its purpose, objective, and subject matter, the circumstances of its making, the subsequent conduct of the parties, and the reasonableness of their respective interpretations. Greer [109 Wn.2d], at 200 [
The Supreme Court of Washington has further explained that:
"Undefined terms should be given their plain, ordinary, and popular meaning. Boeing Co. v. Aetna Cas. Sur. Co.,
While ambiguity in a contract need not exist before evidence of the circumstances surrounding the making of the contract may be admitted, such evidence is substantially limited in purpose and use. Lynott v. Natl. Union Fire Ins. Co. (1994),
"[`][P]arol evidence is admissible to show the situation of the parties and the circumstances under which a written instrument was executed, for the purpose of ascertaining the intention of the parties and properly construing the writing. Such evidence, however, is admitted, not for the purpose of importing into a writing an intention not expressed therein, but with the view of elucidating the meaning of the words employed. Evidence of this character is admitted for the purpose of aiding in the interpretation of what is in the instrument, and not for the purpose of showing intention independent of the instrument. It is the duty of the court to declare the meaning of what is written, and not what was intended to be written. If the evidence goes no further than to show the situation of the parties and the circumstances under which the instrument was executed, then it is admissible.[']" Berg v. Hudesman (1990),
"Unilateral or subjective purposes and intentions about the meaning of what is written do not constitute evidence of the parties' intentions." Lynott,
The record discloses that Aetna and Thiokol, through George Floyd, a former Thiokol employee in charge of procuring insurance coverage for Thiokol, negotiated the terms of the insurance policies on a yearly basis. Floyd declared in his May 17, 1988 affidavit that "in all of its insurance contracts with Thiokol, Aetna *664 never deviated from the standard language for the pollution exclusion or any other provisions contained in the basic insuring agreements, including the definitions of `occurrence' and `property damage' and the PIL coverage endorsement." Floyd testified in his deposition that Morton asked Aetna to deviate from the standard language of the pollution exclusion, but Aetna refused to do so.
In Queen City Farms, supra, the Supreme Court of Washington discussed extrinsic evidence as to the mutual intent of the parties to a nonnegotiated term of an insurance policy and observed that "while evidence of the parties' mutual intent may be helpful in some contexts, we have recognized that sometimes language in standard policies does not involve mutual negotiations between the insurers and the insureds. * * * Similarly, as the New Jersey Supreme Court noted, the qualified pollution exclusion was drafted by the insurance industry; there was no participation by insureds in the drafting of the clause."Id.,
The language of the endorsement in the instant case is identical to the standard form qualified pollution exclusion set forth in Queen City. Because there is no evidence that the terms of the endorsement were negotiated, the mutual intent of the parties is not helpful in interpreting the terms.
Furthermore, the evidence in the record fails to demonstrate an "objectively manifested mutual intent" as to what, if any, coverage was affected by the policy's pollution exclusion endorsement. Floyd testified that during the first renewal period in which the pollution exclusion was discussed, he believed that, according to statements by Aetna employee Ed Thompson, the exclusion was taking coverage away from Thiokol and there was no buy-back available. He also testified that it was his understanding based on what Aetna had told him that neither Aetna nor Thiokol was "very clear on what the full impact of the pollution exclusion would be." When he asked Aetna representatives what coverage was being taken away the answer was "we're not sure of the full extent of the endorsement either." The representatives could not give examples and relied purely on the words of the endorsement.
Floyd testified that in view of the "sudden and accidental" language, he believed some coverage remained for pollution claims. From his impression, he did not believe Aetna understood the endorsement to eliminate coverage for all pollution claims. He believed Aetna's policy provided off-site coverage and that Aetna would have covered a situation in which Thiokol contracted with a third party to dispose of its waste off-site. The first time Aetna indicated that the endorsement applied to off-site plants was in the early 1980s via a declination letter. *665
There was no discussion as to the meaning of sudden or accidental, but Floyd believed "sudden" meant unexpected or unintended and "accidental" meant a fortuitous event. He stated that he was paraphrasing and not interpreting the endorsement when he wrote in a memorandum:
"Effective January 1, 1971, our Comprehensive General Liability Insurance policy will be endorsed to eliminate coverage for claims for bodily injury or property damage arising out of or caused by pollution or contamination unless such pollution or contamination is sudden and accidental."
Floyd testified that from 1970 he attempted to have the endorsement eliminated or to get coverage in its place. In fact, the endorsement was discussed at almost every renewal meeting, formally or informally. He stated that during the years of the renewal meetings with Aetna it was never made clear to him what was being eliminated and what coverage remained. Floyd, meanwhile, attempted to buy back coverage because, although he did not know what coverage had been deleted, he felt something had been taken away without a reduction in premiums. He saw the coverage he sought as an alternative suggestion to the coverage he had, not as a replacement for what the exclusion took away. Because Floyd could not determine what the gaps in coverage were, he could not correctly evaluate alternative coverage. He was looking for a buy-back of coverage for unknown slow leaks because it was one incident he could think of that was probably excluded by the endorsement.
Jeffrey Sandburg, Morton's risk manager who purchased environmental impairment liability ("EIL") insurance in the 1980s, testified that he did not understand at the time he purchased the EIL coverage the meaning of "sudden and accidental" as used in an insurance policy. He explained that had the insurance industry not been trying to differentiate between gradual as opposed to sudden and accidental, Morton would have been comfortable with the comprehensive general liability coverage it had. He did not agree with the industry interpretation, but he did not know how the courts would determine the policy language; thus he purchased EIL coverage for protection in case the legal interpretation of "sudden and accidental" confirmed the industry's. He personally believed the comprehensive general liability policy covered third-party-liability situations where Morton no longer had "control" of the material which then caused pollution off-site, or when Morton had done "state-of-the-art things" and contamination emanated from its premises.
A letter written by Gerald M. Brown, Aetna's superintendent of special commercial accounts, informed Thiokol's broker that the endorsement was to be placed in the policy. This letter was sent by the broker to Floyd and contains the statement: *666
"We subscribe to the philosophy that injury or damage due to pollution can be avoided. We believe that bodily injury or property damage arising from uncontrolled or inadequately controlled emissions is essentially a business risk because control or lack of control over the regular emission of pollutants results primarily from a decision of management.
"Coverage for pollution or contamination is not provided in most cases, under present policies because the bodily injury or property damage can be said to be expected or intended and thus excluded by the definition of occurrence. The attached exclusion is meant to clarify this situation in order to avoid any future questions of intent. Coverage, as you will note, is still provided for bodily injury or property damage caused by pollution or contamination when the pollution or contamination results from an accident."
Other Aetna memoranda indicate that the endorsement was not intended to cover gradual pollution. A December 11, 1981 memorandum which was contained in Thiokol's broker's file states, however:
"* * * Although the standard CGL policy covers `sudden and accidental pollution' (excluded oil and gas), such policies do not cover gradual (nonsudden) and accidental pollution."
We cannot say that the evidence showed an objectively manifested mutual intent that the pollution exclusion endorsement bar coverage for claims that arose from gradual pollution discharges. If anything, the evidence demonstrates that neither party was clear as to what the language of the endorsement covered and what it excluded. Aetna's second argument is without merit.
In Queen City Farms the court held that "`sudden' means `unexpected' in the context of CGL policies containing the qualified pollution exclusion. Thus `sudden and accidental' means `unexpected and unintended.' Both terms are given meaningful effect. Reading the occurrence clause and the exclusion together, pollution damage resulting from an accident, including continuous or repeated exposure to conditions, which is neither intended nor expected is covered under the occurrence clause. The exclusionary language of the qualified pollution exclusion precludes coverage for damage resulting from the listed *667
polluting events. The polluting event may be the discharge, dispersal, release, or escape of materials from a place of containment into the environment where they cause damage. Coverage is re-triggered, however, under the exception to the exclusion, where the discharge, dispersal, release, or escape is sudden and accidental, i.e., unexpected or unintended. Therefore, if the damage results from the dispersal of materials into the groundwater from a place of containment where the insured believed they would remain or from which they would be safely filtered, and that dispersal was unexpected and unintended, then coverage is provided under the policies."Id.,
Aetna's third issue has no merit as it applies to the ambiguity of the pollution exclusion.
Under Washington law, both the "occurrence" definition and the qualified pollution exclusion are viewed under a subjective standard. Queen City Farms, supra. Moreover, we note that the burden of proof is on the insured to establish that the injury or damage under the "occurrence" definition was neither expected nor intended. Id. We believe, relying on the court's analysis inQueen City Farms, supra, that, in part because the insured is better able to demonstrate its subjective expectation and intention, it must bear the same burden of proof of its expectation and intention under the "occurrence" definition which it also bears the burden of proving under the pollution exclusion. In the instant case, Aetna raises the issue of whether summary judgment is appropriate on the factual questions of whether Morton expected or intended the property damage, and whether the escape of the polluting materials from the Western site was sudden and accidental, i.e., unexpected and unintended. *668
The record reveals that during the period from 1975 to 1977, Ventron, a predecessor of Morton, was disposing of its boron sludge waste at the Western site in the state of Washington. Robert Holman testified during his deposition that he has been the technical manager at Ventron's Washington plant since 1975. In that capacity he is in charge of maintenance and engineering at the plant. In 1975, Ventron began to ship its boron waste via a third-party carrier to the Western Processing site.3 According to Holman, the Washington Department of Ecology recommended Western. Further, Holman established that Western had obtained a discharge permit4 from the Department of Ecology for disposing of the boron waste which Western personnel represented would be neutralized in order to produce fertilizer and recycle the oil that was contained within. Holman also stated that he knew the Western site was located in a floodplain.
Holman acknowledged that he did not personally visit the Western site until approximately two years after Ventron ceased the disposal of its waste there.5 He described the site as "sloppy" and containing rusting drums of waste.
John Durrell, the manager of Ventron's Washington plant since 1975, acknowledged that the boron sludge, if not properly contained, could cause environmental damage. He further testified, inter alia, that Holman visited the Western site sometime in 1979. Holman's report to Durrell concerning the condition of the site entered into Ventron's decision to cease using Western to dispose of its waste.6
The record also reveals that two Ventron employees, Dick Jump and Grant Miller, transported waste in fifty-five-gallon drums from the Ventron plant to the Western site. They described the latter location as "muddy and dirty" with diked areas that were overflowing.7
Ventron's employees were aware of the fact that the boron sludge, if not contained, could harm the environment. Ventron's employees also knew that Western did not possess a license to store the boron sludge. Moreover, Ventron *669 sent its waste to Western without first viewing the site. Accordingly, we conclude that because reasonable minds could reach different conclusions as to whether Morton or its predecessors subjectively expected or intended the migration of pollutants from the Western site or the resulting environmental damage, summary judgment is inappropriate. Therefore, we reverse this case and remand to the trial court for a final determination of this issue.
The PIL endorsement provides:
"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury (herein called `personal injury') sustained by any person or organization and arising out of one or more of the following offenses committed in the conduct of the namedinsured's business:
"Group A — False arrest, detention or imprisonment, or malicious prosecution;
"Group B — the publication or utterance of a libel or slander or of other defamatory or disparaging material, or a publication or utterance in violation of an individual's right of privacy; except publications or utterances in the course of or related to advertising, broadcasting or telecasting activities conducted by or on behalf of the named insured;
"Group C — wrongful entry or eviction, or other invasion of the right of private occupancy * * *."
The Standard claims alleged that Western's mishandling of wastes contaminated Standard's soil and underground water, making it unfit for business or development and rendering it valueless. Consequently, Standard incurred expenses in evaluating the nature and extent of the pollution and in having the property cleaned. In its complaint Standard also included allegations of trespass and nuisance. Morton asserts that the trespassing and nuisance allegations in the underlying complaints clearly assert a "wrongful entry" and "an invasion of the right of private occupancy."
Courts which have considered whether the PIL endorsement applies to pollution claims have reached inconsistent conclusions. See Legarra v. Federated Mut. Ins. Co. (1995),
The PIL language in Aetna's policy contains language almost identical to the PIL endorsement discussed in Columbia Cty.,supra, and like that case, the controversy herein also focuses on the clause "wrongful entry or eviction or other invasion of the right of private occupancy." The Court of Appeals of New York explained, as follows, why the PIL endorsement does not apply to property damage caused by pollution:
"It is clear that the personal injury endorsement does not provide coverage for the claims in the underlying complaint. * * * These allegations of continuing *671 nuisance, continuing trespass and invasion are not among the enumerated offenses covered by the personal injury endorsement. Nor do those offenses constitute the enumerated offense of `wrongful entry or eviction or other invasion of the right of private occupancy.'
"We agree with the Appellate Division that the coverage under the personal injury endorsement provision in question was intended to reach only purposeful acts undertaken by the insured or its agents. Evidence that only purposeful acts were to fall within the purview of the personal injury endorsement is provided, in part, by examining the types of torts enumerated in the endorsement in addition to wrongful entry, eviction and invasion: false arrest, detention, imprisonment, malicious prosecution, defamation and invasion of privacy by publication. Read in the context of these other enumerated torts, the provision here could not have been intended to cover the kind of indirect and incremental harm that results to property interests from pollution." Id. at 627-628,
The court also concluded that coverage for property damage was provided to the insured through "broad form comprehensive general liability insurance policies, all of which contain[ed] pollution exclusions. Under the construction of the policies urged by plaintiff, those pollution-related claims that are eliminated from coverage by the pollution exclusion would nevertheless be included in the personal injury endorsement. * * * It would be illogical to conclude that the claims fail because of the pollution exclusion while also concluding that the insurer wrote a personal injury endorsement to cover the same eventuality." Id. at 628,
We find this reasoning applicable to the instant case in light of the fact that Standard's complaint fails to raise an allegation consistent with those defined risks enumerated in the PIL provision, and we agree with the court in Spokane Cty. v.Am. Re-Ins. Co. (May 12, 1993), E.D.Wash., No. CS-90-256-WFN, unreported, that private property damage due to pollution is not personal injury.
In conclusion, we sustain Aetna's second assignment of error to the extent that (1) genuine issues of material fact remain as to whether Morton or its predecessors subjectively expected or intended the pollution damage at issue in the underlying claims, and (2) the PIL endorsement is inapplicable to the Standard Equipment claims.
Accordingly, the judgment of the Hamilton County Court of Common Pleas is affirmed in part and reversed in part. We remand this matter to the trial court for further proceedings in accordance with this opinion and law.
Judgment accordingly.
DOAN, P.J., and SUNDERMANN, J., concur.
The court being fully advised in the premises finds that said motion to certify is not well taken and that the same ought to be and hereby is overruled; however, the court finds that the application for reconsideration is well taken and is granted for the reason that this court, in overruling Morton's assignment of error in its cross-appeal, based its determination on this court's decision in Motorists Mut. Ins. Co. v. Brandenburg
(Sept. 1, 1993), Hamilton App. Nos. C-920346 and C-920347, unreported, 1993 WL 332292, which was reversed by the Ohio Supreme Court in Motorists Mut. Ins. Co. v. Brandenburg (1995),
Wherefore, it is the order of this court that Section VI of the opinion dealing with the cross-appeal of Morton concerning whether the trial court erred in denying Morton's motion for attorney fees is vacated, held for naught and is amended as set forth below.
Morton's single assignment of error is overruled at this time as being premature because until it is determined that Morton or its predecessors did not subjectively expect or intend the migration of pollutants or the resulting environmental damage at issue in the underlying claims, a genuine issue of material fact to be determined as set forth in the opinion, the trial court should defer a decision as to whether Morton is entitled to attorney fees. If it is determined, however, that Morton did not subjectively expect or intend the migration of pollutants or the resulting environmental damage at issue in the underlying claims and that appellant and cross-appellee Aetna Casualty Surety Company is liable for coverage of such claims, then it shall also be determined whether attorney fees sought by Morton are "necessary or proper" pursuant to R.C.
DOAN, P.J., and HILDEBRANDT and SUNDERMANN, JJ., concur.