American Star Ins. Co. v. Grice
| Citation | 121 Wn.2d 869,854 P.2d 622 |
| Decision Date | 08 July 1993 |
| Docket Number | No. 59189-0,59189-0 |
| Court | United States State Supreme Court of Washington |
| Parties | AMERICAN STAR INSURANCE COMPANY, successor in interest to Classified Insurance Corporation, a foreign corporation, Respondent, v. Earnest L. GRICE and Hattie Arlean Grice, individually and husband and wife; Earnest L. Grice & Sons, Inc.; and Northwest General Services, Defendants, Margaret Ann King; Gloria R. Jean; Neal E. Padur and Linnea R. Padur, an individual; Linnea R. Padur, as guardian ad litem for Carla R. Padur, a minor; Ralph Holmes and Mary L. Holmes, husband and wife; Robert J. Morgan and Mary L. Morgan, husband and wife; James W. Denney and Beverly A. Denney, husband and wife; Clarence W. Mosier and Margaret L. Mosier, husband and wife; Kathryn D. Swenson, an individual; Ronald E. Wilson and Terry L. Wilson, husband and wife, Ronald E. Wilson, as guardian ad litem for Joshua R. Wilson and Jacob E. Wilson, minors; Dan D. Krenelka and Fern A. Krenelka, husband and wife; Donald E. Boyle and Sharon D. Boyle, husband and wife; and the City of Tacoma, Appellants, Great American Insurance Company, Respondent, Emert Alfred Moore, an underwriter at Lloyds of London, Defendant. En Banc |
J. Patrick Duffy, Jr., and Virginia L. DeCosta, Tacoma, WA, for appellant King.
John Francis Kennedy, Tacoma, WA, for appellant Tacoma.
Keller & Rohrback, Kirk S. Portmann, Seattle, WA, for respondent American Star Ins. Co.
Lee, Smart, Cook, Martin & Patterson, P.S., Inc., Duncan K. Fobes, Seattle, WA, for respondent Great American Ins. Co.
At issue in this case is construction of the pollution exclusion clauses in two liability insurance policies. 1 The insurers 2 brought a declaratory judgment action seeking declarations of noncoverage. A summary judgment was entered by the trial court denying coverage, and the insureds 3 appeal. The Court of Appeals certified the appeal to this court. We accepted the certification and hereby reverse and remand the case to the trial court for determination of such issues as remain in the case.
Over a period of time, the insureds demolished buildings and deposited the waste materials therefrom on a 5-acre parcel of land they owned. They began using the property as a dumping ground in the early 1970's. Wood, concrete, wallboard, old tires, creosoted timbers, and other debris from 50 to 60 houses, a large mill and several service stations were ultimately deposited on the property. In addition, others also paid to dump materials on the property. Insureds deny ever depositing any hazardous materials on the property.
In early 1987, a fire started on the property. It burned intermittently for a period of time and proved very difficult to extinguish. There is no allegation or evidence that the fire was intentionally started. The parties appear to agree, at least for purposes of this appeal, that the fire was a hostile fire as that term is defined in the insurance policies.
Neighbors sued the insured and the City of Tacoma alleging that the fire released heavy, noxious, chemical-laden smoke and other debris from the landfill onto their property causing damage to health and property. The neighbors' complaint alleged negligence and that the insureds' conduct constituted nuisance and trespass. One of the insurers 4 filed this declaratory judgment action and a motion for summary judgment seeking an adjudication that its insurance policy did not provide coverage for any of the claims asserted by the neighbors. The second insurer 5 joined in the action and the motion seeking a declaration of noncoverage. Lloyds of London, which apparently had also issued a policy to the insureds, did not join in the motion for summary judgment.
The trial court granted the insurers' motions. Relying on the pollution exclusions in both policies, it concluded that there was no coverage for bodily injury caused by smoke from the fire and that the policies excluded coverage for property damage. The trial court also rejected the argument that smoke "wrongfully entered" the plaintiffs' property and so found no coverage under the personal injury coverage of the policies.
One issue is determinative of this appeal.
Do the pollution exclusion clauses in the liability insurance policies in this case exclude coverage for damages caused by smoke from a hostile fire on the insureds' property used for waste disposal?
CONCLUSION. The pollution exclusion clauses, read together with the hostile fire exceptions to those clauses, are ambiguous under the facts presented. Since the extrinsic evidence does not clearly indicate that coverage is excluded, we construe the ambiguity in favor of the insureds and reverse the summary judgment in favor of the insurers.
The pertinent general rules regarding construction of insurance policies are well settled. Interpretation of insurance policies is a question of law and the policy is construed as a whole with the court giving force and effect to each clause in the policy. 6 The language of insurance policies is to be interpreted in accordance with the way it would be understood by the average person, rather than in a technical sense. 7
If policy language is clear and unambiguous, the court may not modify the contract or create an ambiguity. 8 An ambiguity exists if the language is fairly susceptible to two different reasonable interpretations. If an ambiguity exists, then the court may attempt to determine the parties' intent by examining extrinsic evidence. 9 If a policy remains ambiguous even after resort to extrinsic evidence then this court will apply the rule that ambiguities in insurance contracts are construed against the insurer. 10 The rule strictly construing ambiguities in favor of the insured applies with added force to exclusionary clauses which seek to limit policy coverage. 11 Exclusions of coverage will not be extended beyond their "clear and unequivocal" meaning. 12 When an insured establishes a prima facie case giving rise to coverage under the insuring provisions of a policy, the burden is then on the insurer to prove that a loss is not covered because of an exclusionary provision in the policy. 13
An insurer which has reserved the right and duty to defend is obliged to defend any suit alleging facts which, if proved, would render the insurer liable. However, where alleged claims are clearly not covered by the policy, an insurer is relieved of its duty to defend. 14
The question then is whether an average person would have understood that the pollution exclusion clauses in the insurance policies unambiguously denied coverage for damages caused by a hostile fire on land owned by the insureds and used for waste disposal.
For purposes of the summary judgment motions before us, the only issue is whether the pollution exclusion clauses exclude liability coverage otherwise available under the policies.
The pollution exclusion clause in one policy 15 states: This insurance does not apply to:
(1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants:
(a) At or from premises you own, rent or occupy;
(b) At or from any site or location used by or for you or others for the handling, storage, disposal, processing or treatment of waste;
(c) Which are at any time transported, handled, stored, treated, disposed of, or processed as waste by or for you or any person or organization for whom you may be legally responsible; or
(d) At or from any site or location on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations:
(i) if the pollutants are brought on or to the site or location in connection with such operations; or
(ii) if the operations are to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize the pollutants.
(2) Any loss, cost, or expense arising out of any governmental direction or request that you test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants.
Pollutants means 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.
An endorsement to the policy entitled "Amendment of Pollution Exclusion" adds a hostile fire exception to the pollution exclusion clause:
The following is added to exclusion f of COVERAGE A (Section 1):
Subparagraphs (a) and (d)(i) of paragraph (1) of this exclusion do not apply to "bodily injury" or "property damage" caused by heat, smoke or fumes from a hostile fire. As used in this exclusion, a hostile fire means one which becomes uncontrollable or breaks out from where it was intended to be.
For all practical purposes, the pollution exclusion endorsement (which also includes a hostile fire exception) in the other policy 16 is almost identical.
The insurers argue that this new "absolute" pollution exclusion (as contrasted with the older "qualified" pollution exclusions construed in United Pac. Ins. Co. v. Van's Westlake Union, Inc., 34 Wash.App. 708, 664 P.2d 1262,review denied, 100 Wash.2d 1018 (1983) and Queen City Farms, Inc. v. Central Nat'l Ins. Co., 64 Wash.App. 838, 827 P.2d 1024 (1992), review granted, 120 Wash.2d 1025, 847 P.2d 481 (1993)) has been repeatedly held to be unambiguous and to deny coverage for pollution damages. While it is true that there are many cases which have so held, none of those cases involved interpretation of the hostile fire exception to the pollution exclusion and hence do not aid in resolution of the issue before us in this case. The ability of the pollution exclusion to limit coverage is itself limited by the hostile fire clause which provides an exception to that exclusion.
The dispositive issue here, then, is whether the hostile fire...
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