Kent County v. Home Ins. Co.

• Decision Date: 21 June 1996
• Docket Number: Docket No. 165248
• Citation: 217 Mich.App. 250,551 N.W.2d 424
• Parties: KENT COUNTY, Plaintiff-Appellant, v. HOME INSURANCE COMPANY and Great American Insurance Company, Defendants-Appellees, and American Surplus Lines Insurance, International Surplus Lines, National Surety Insurance Company, and International Insurance Company, Defendants, Insurance Environmental Litigation Association, Amicus Curiae.
• Court: Court of Appeal of Michigan — District of US

Page 424

551 N.W.2d 424

217 Mich.App. 250

KENT COUNTY, Plaintiff-Appellant, v. HOME INSURANCE COMPANY and Great American Insurance Company Defendants-Appellees and American Surplus Lines Insurance, International Surplus Lines, National Surety Insurance Company, and International Insurance Company, Defendants Insurance Environmental Litigation Association, Amicus Curiae.

Docket No. 165248.

Court of Appeals of Michigan.

Submitted Oct. 18, 1995, at Grand Rapids.

Decided June 21, 1996, at 9:00 a.m.

Released for Publication Aug. 12, 1996.

Varnum, Riddering, Schmidt & Howlett by Mark S. Allard, Grand Rapids, for Kent County.

Roberts, Betz & Bloss, P.C. by David Bloss and Ralph M. Reisinger, Grand Rapids, for Home Insurance Company.

Kluczynski, Girtz & Vogelzang by Richard Radke, Jr., and Ella S. Parker, Grand Rapids, for Great American Insurance Company.

Kelley, Casey & Clarke, P.C. by Stephen M. Kelley, Detroit, for Insurance Environmental Litigation Association.

Before HOLBROOK, P.J., and WHITE and SIMMONS, ^* JJ.

WHITE, Judge.

Plaintiff appeals as of right the circuit court's grant of summary disposition for defendants Home Insurance Company (Home) and Great American Insurance Company (Great American) pursuant to MCR 2.116(C)(10). ¹ The circuit court dismissed plaintiff's complaint for a declaratory judgment, which alleged that defendants had a duty to defend and indemnify it in connection with any action that might be taken by the Michigan Department of Natural Resources (DNR) pertinent to the cleanup of plaintiff's landfill. We affirm in part and reverse in part.

I

This case involves interpretation and application of pollution exclusion clauses and a personal injury endorsement in insurance policies plaintiff purchased applicable to its solid waste landfill in Sparta Township. Plaintiff operated the Sparta landfill from approximately 1972 until October 1978. It stopped burying waste at the landfill in June 1977, and from that time until October 1978 the site was used only as a transfer station.

Plaintiff filed an action for a declaratory judgment against Home in April 1985. Plaintiff alleged that on March 8, 1983, the DNR claimed plaintiff was in violation of 1929 PA 245 and required that remedial action be taken to halt the flow of contaminants from the Sparta landfill into the groundwater. ² Plaintiff further alleged that, although Home had defended it against claims by individual neighboring landowners and entered into settlements with those landowners for contamination of their groundwater aquifers, it acted in bad faith by waiting more than eighteen months to respond to and deny claims regarding the DNR action. Plaintiff alleged coverage under both the comprehensive general liability policies (primary policies) and excess liability policies issued by Home. Home's answer raised affirmative defenses, including defenses based on the pollution exclusion clauses contained in its policies.

Home's primary policies, which were in effect from January 24, 1975, to January 1, 1982, contained the following exclusion:

This policy does not apply:

* * * * * *

(j) to 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 neither expected nor intended by the Insured;

Home's excess liability policies, which were effective from January 15, 1976, to January 15, 1980, contained a different exclusion:

It is agreed that such insurance as is afforded by this policy does not apply to Personal 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.

Home's primary policies contained a personal injury liability endorsement providing in pertinent part:

This 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") arising out of one or more of the following offenses:

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; if such offense is committed during the policy period within the United States of America, its territories or possessions, or Canada, and this Company shall have the right and 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, and may make such investigation and settlement of any claim or suit as it deems expedient, but this Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of this Company's liability has been exhausted by payment of judgments or settlements.

Great American was added as a necessary party in January 1988 and was required to answer plaintiff's amended complaint. ³ Great American issued a general liability insurance policy to plaintiff covering from July 24, 1972, to July 24, 1975. Great American's affirmative defenses included reliance on its pollution exclusion clause, which stated:

It is agreed that the insurance does not apply to 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 and pollutants into or upon the land, the atmosphere, or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

In June 1992, Home moved for summary disposition pursuant to MCR 2.116(C)(10), arguing there was no issue of fact that the pollution exclusion clauses of its policies excluded coverage. Home argued the landfill was located in an area of highly permeable sand and gravel with the water table approximately ten feet below the surface. Home argued that there was no barrier between the soil and refuse, and that the municipal trash and some industrial sludge was deposited directly onto the land.

Great American moved for summary disposition, arguing its policies did not afford coverage because the contamination was not sudden and accidental and that its policy period ended before the "occurrence" in this case.

The facts viewed in a light most favorable to plaintiff ⁴ are that at the time the Sparta landfill began operating, it was a state of the art facility licensed to receive solid waste only. Operation of the landfill was part of a plan to eliminate twenty-nine open dumps in the county. Solid waste materials were deposited daily, covered throughout the day, and covered with six inches of dirt each night.

The landfill was not artificially lined. Rather, a seven-foot soil barrier separated the bottom of the landfill from groundwater. Plaintiff argued that at the time the landfill was engineered it was believed its design was sufficient to contain the solid waste and that it was "not an unlined pit or seepage lagoon," as asserted by Home.

When the landfill reached its capacity in 1977, it was closed. No complaints were received regarding the Sparta landfill during its operation. Approximately two years after the landfill closed, plaintiff began receiving complaints from neighbors of the landfill regarding their well water. ⁵

In response to Home's motion, plaintiff argued that before the applicability of the pollution exclusion clauses could be determined, two factual issues required resolution: whether plaintiff intended to contain the waste within the landfill and whether the landfill was in fact the contributing source of the contamination. Plaintiff argued that William Iverson, an employee of the DNR, testified in a deposition that he could not attribute the contamination just to the Sparta landfill. Plaintiff also argued that coverage should be afforded under Home's personal injury liability endorsement, quoted earlier.

Home's reply brief argued that plaintiff's "state of the art" and source of contamination arguments were irrelevant because the key factual inquiry was whether plaintiff expected and intended to initially discharge the waste into or upon the land. Home argued that the personal injury coverage did not apply to governmental site-remediation claims.

The trial court's opinion and order granting defendants' motions set forth a chronological account of the events pertinent to this case, which is not disputed:

In April of 1979 homeowners, directly across the street from the Sparta Landfill, filed a complaint with the Kent County Health Department regarding the quality of water from their private residential well. An employee of the Kent County Health Department visited the property on April 18, 1979, and recommended that the Andersons (the homeowners) contact the Michigan Department of Natural Resources. On May 25, 1979 the Andersons were advised not to drink their well water. In a memorandum dated May 30, 1979 the Michigan Department of Natural Resources identified the closed...