American States Ins. Co. v. Kiger
| Decision Date | 27 March 1996 |
| Docket Number | No. 32S05-9409-CV-836,32S05-9409-CV-836 |
| Citation | 662 N.E.2d 945 |
| Court | Indiana Supreme Court |
| Parties | AMERICAN STATES INSURANCE COMPANY, Appellant (Third-Party Defendant below), v. Vincent A. KIGER and Maria L. Kiger d/b/a Kiger's Sunoco, Appellees (Third-Party Plaintiffs below), v. COMMISSIONER, INDIANA DEPARTMENT OF ENVIRONMENTAL MANAGEMENT, (Plaintiff below). |
Appeal From The Hendricks Circuit Court, The Honorable Jeffrey V. Boles, Judge, Cause No. 32C01-9206-CP-184.
Barry C. Cope, American States Insurance Company, Tammy J. Meyer, Martha S. Hollingsworth, Bingham, Summers, Welsh & Spilman, Indianapolis, for Appellant.
James E. Rocap, Michael D. Ramsey, Rocap, Witchger & Threlkeld, John G. McAndrews, Dean J. Vigliano, Mendes & Mount, New York City, for amici curiae London Market Insurers.
Edward Zampino, Peter E. Mueller, Victor C. Harwood, III, Harwood Lloyd, Hackensack, NJ, Norman T. Funk, Hill, Fulwider, McDowell, Funk & Matthews, Indianapolis, for amici curiae The Aetna Casualty and Surety Company.
Lee B. McTurnan, Steven M. Badger, McTurnan & Turner, Indianapolis, Laura A. Foggan, Roberta B. Bell, William G. Miller, Wiley, Rein & Fielding, Washington, DC, for amici curiae the Insurance Environmental Litigation Association.
George Plews, Peter M. Racher, Jeffrey Claflin, Plews Shadley Racher & Braun, Indianapolis, for Appellees.
Anita Kimmell, Office of Attorney General, Indianapolis, for Appellee (Plaintiff Below), Indiana Department of Environmental Management.
Christopher G. Scanlon, Kevin M. Toner, Baker & Daniels, Indianapolis, for amici curiae Indiana Manufacturers Association.
Lawrence A. Vanore, Sommers & Barnard, P.C., Indianapolis, Eugene R. Anderson, Mayda Prego, Anderson Kill Olick & Oshinsky, P.C., New York City, for amici curiae Indiana Oil Marketers Association and the Indiana Chapter of the National Solid Wastes Management Association.
Richard M. Schumacher, Corporate Counsel, Northern Indiana Public Service Company, Merrillville, Lester O. Brown, Kenneth A. Remson, Jones, Day, Reavis & Pogue, Los Angeles, CA, for amici curiae the Indiana Gas and Electric Utilities.
Stephen R. Pennell, Stuart & Branigan, Lafayette, IN, for amici curiae Great Lakes Chemical Corp.
ON EMERGENCY PETITION TO TRANSFER
This case comes before the Court on emergency petition to transfer. Ind.Appellate Rule 4(A)(9). Appellant American States Insurance Company ("American States") appeals from a denial of its motion for summary judgment and a grant of Appellees Vincent and Maria Kiger's ("Kiger") cross-motion for summary judgment. The original claim for damages/reimbursement for clean-up costs was brought by appellee the Indiana Department of Environmental Management ("IDEM"). This Court granted transfer in order to address the following issues:
1) whether the pre-1987 insurance policies' clauses which require that the pollution be "sudden and accidental" preclude coverage for leakage from underground gasoline storage tanks; and
2) whether the pollution exclusion clauses of those policies issued in 1987 and after ("post-1987 policies"), which do not specifically list gasoline as a pollutant, preclude coverage for leakage from underground gasoline storage tanks.
On September 17, 1990, several residents of Danville complained to IDEM about petroleum vapors in their homes. At approximately the same time, the Town Manager of Danville informed IDEM that petroleum product had been detected in a portion of the Danville sanitary sewer. IDEM's Emergency Response Branch (ERB) investigated the complaints and determined that portions of Danville's sewer line exceeded safe levels of petroleum. ERB also determined that the source of this contamination was an underground storage tank at the Sunoco gas station belonging to Kiger. When Danville repaired a sanitary tile which ran from the tank pit to the sanitary sewer system, the release of gasoline into the sewer system stopped.
Unfortunately, Danville continued to experience problems with petroleum contamination throughout 1991 and 1992. The contamination was invariably traced back to Kiger, and IDEM spent in excess of $400,000.00 attempting to clean up the gasoline. Finally, in March 1992, a major leak was discovered at Kiger Sunoco and a sump was installed to recover the petroleum product that was being released into the environment.
On June 30, 1992, IDEM filed a complaint against Kiger to recover funds expended in responding to the gasoline contamination in and around the gasoline station operated by Kiger, Kiger Sunoco. The complaint also sought to require Kiger to perform certain acts to clean up the gasoline contamination in the area.
Kiger filed an answer on July 23, 1992, denying liability for the damage. Kiger also filed a third-party complaint, alleging that American States was obligated to defend and indemnify Kiger against IDEM's claims. American States filed its answer on December 4, 1992, asserting twenty-six separate affirmative defenses. American States denied that Kiger was entitled to any coverage and disputed the existence of policies issued to Kiger prior to 1980.
On June 16, 1993, American States filed its motion for summary judgment based on the pollution exclusions in the policies issued to Kiger. After several extensions of time, Kiger responded on November 1, 1993, with a cross-motion for summary judgment which designated certain factual issues which would preclude granting American States motion for summary judgment. IDEM also filed a brief in opposition to American States motion for summary judgment.
On January 13, 1994, the trial court held a hearing where American States, Kiger, and IDEM offered oral argument. On March 1, 1994, after post-hearing briefs were filed, the trial court filed its judgment and order. It decided that American States owed Kiger coverage for both the pre- and post-1987 liability and had a duty to defend Kiger. American States appealed. Kiger and IDEM petitioned for emergency transfer. Since this case involved "a substantial question of law of great public importance" which requires speedy resolution, we granted transfer September 2, 1995. App.R. 4(A)(9).
American States claims that the phrase "sudden and accidental" in the insurance contract limits coverage for pollution related damage to those harms which occurred both abruptly and unintentionally. Kiger responds that "sudden" does not require a temporal element and that the phrase "sudden and accidental" should be understood as meaning unexpected and unintended.
The interpretation of insurance policies is not a new task for this Court. See, e.g., Glens Falls Ins. Co. v. Michael, 167 Ind. 659, 74 N.E. 964 (1905). Where there is ambiguity, insurance policies are to be construed strictly against the insurer. Fidelity and Deposit Co. of Maryland v. Pettis Dry Goods Co., 207 Ind. 38, 190 N.E. 63 (1934). This is particularly true where a policy excludes coverage. See Asbury v. Indiana Union Mut. Ins. Co., 441 N.E.2d 232, 242 (Ind.Ct.App.1982). This strict construal against the insurer is driven by the fact that the insurer drafts the policy and foists its terms upon the customer. "The insurance companies write the policies; we buy their forms or we do not buy insurance." American Economy Ins. Co. v. Liggett, 426 N.E.2d 136, 142 (Ind.Ct.App.1981).
This Court is well aware of the seriousness of this dispute. This case raises important issues of environmental protection, liability, and contract interpretation. This Court, however, needs to address only the last of these. The pre-1987 "pollution exclusion" reads as follows:
This insurance does not apply to:
* * * * * *
8. Bodily injury or property damage caused by the dumping, discharge or escape of irritants, pollutants or contaminants. This exclusion does not apply if the discharge is sudden and accidental.
Generally, in the absence of any ambiguity, words will be given their ordinary meaning when interpreting contracts. See Holtzclaw v. Bankers Mut. Ins. Co. (1983), Ind.App., 448 N.E.2d 55, 59, transfer denied. If one considers the insurance industry's own interpretation of the contractual language, it becomes clear that there exists a lack of clarity. 1 The ambiguous phrase "sudden and accidental" was first added to insurance policies in the early 1970's, in response to a plethora of claims for damage caused by polluting industries. The industry claimed that its addition was a mere clarification. The drafters said that
coverage for pollution may not be provided in most cases under present policies because the damages could be said to be expected and intended and thus would be excluded by the definition of occurrence, and, therefore, the adoption of an exclusion could be said to be a clarification, but a necessary one in order to avoid any question of intent.
Minutes of the Industrial Rating Board General Liability Governing Committee (March 17, 1970) (emphasis added) (quoted in Harwood et al., The "Frivolity" of Policyholder Gradual Pollution Discharge Claims, 5 Mealey's Ins.Lit.Rpts. No. 40 (August 1991)). In other words, the adding of the "sudden and accidental" language is nothing more than a "clarification" which made explicit the fact that the insurance did not cover those acts which are expected or intended.
Thus, the insurance industry's own understanding of this language indicates that "sudden" can be understood to mean "unexpected." 2 We are not adopting this understanding under a doctrine of "regulatory estoppel" or any other theory. That this interpretation was advanced simply demonstrates the presence of the ambiguity that requires this Court to construe the insurance policy in favor of the insured and against the insurer who drafted it. When the insurance industry itself has offered differing interpretations of the same language, we must assume that the insured understood the coverage in the more expansive way. See Eli Lilly and Co. v. Home...
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