Apana v. Tig Ins. Co.

• Decision Date: 15 July 2009
• Docket Number: No. 08-15550.,No. 08-15369.,08-15369.,08-15550.
• Citation: 574 F.3d 679
• Parties: Bill H. APANA, Personal Representative of the Estate of Corrine Apana; Corrine Apana, executor, Plaintiffs-Appellants, v. TIG INSURANCE COMPANY; John Does 1-10; Jane Does 1-10; Doe Corporations 1-10, Defendants-Appellees. Bill H. Apana, Personal Representative of the Estate of Corrine Apana; Corrine Apana, executor, Plaintiffs-Appellees, v. Tig Insurance Company, Defendant-Appellant. and John Does 1-10; Jane Does 1-10; Doe Corporations 1-10, Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

574 F.3d 679

Bill H. APANA, Personal Representative of the Estate of Corrine Apana; Corrine Apana, executor, Plaintiffs-Appellants, v. TIG INSURANCE COMPANY; John Does 1-10; Jane Does 1-10; Doe Corporations 1-10, Defendants-Appellees.

Bill H. Apana, Personal Representative of the Estate of Corrine Apana; Corrine Apana, executor, Plaintiffs-Appellees, v. Tig Insurance Company, Defendant-Appellant. and John Does 1-10; Jane Does 1-10; Doe Corporations 1-10, Defendants.

No. 08-15369.

No. 08-15550.

United States Court of Appeals, Ninth Circuit.

July 15, 2009.

Joe P. Moss, Esquire, Lihue, HI, for Plaintiffs-Appellees.

James Patrick Gallagher, Esquire, Leah M. Reyes, Esquire Henderson Gallagher & Kane, Honolulu, HI, for Defendant-Appellant.

D.C. Nos. CV-06-00653-JMS/LEK, 1:06-CV-00653-JMS-LEK, District of Hawai'i Honolulu.

Before: ALEX KOZINSKI, Chief Judge, JAY S. BYBEE and CONSUELO M. CALLAHAN, Circuit Judges.

ORDER CERTIFIED QUESTION TO HAWAI'I SUPREME COURT

ALEX KOZINSKI, Chief Judge.

The present case involves the application of a provision in the standard commercial general liability policy known as the "total pollution exclusion." The scope of this exclusion has been described as "one of the most hotly litigated insurance coverage questions" to arise over the past three decades. See Madison Const. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 735 A.2d 100, 106 (Pa.1999) (internal quotation marks omitted). Indeed "[r]arely has any issue spawned as many [court decisions], and as variant in rationales and results, ... as has the pollution-exclusion clause." Porterfield v. Audubon Indem. Co., 856 So.2d 789, 800 (Ala.2002). To date, Hawai'i courts have not expressed a position on the scope of this exclusion. Accordingly, we respectfully ask the Hawai'i Supreme Court to exercise its discretion to accept and decide the certified question below.¹

I. STATEMENT OF FACTS

A. Underlying Dispute in Hawai`i State Court

On July 2, 2003, Corrine Apana and her husband Bill filed suit against Dennis Marugame and H. Marugame Plumbers, Inc. ("HMP") in Hawai'i Circuit Court. The complaint alleged that on March 21, 2002, Dennis Marugame, a plumber employed by HMP, went to Walmart to service a clogged floor drain. He allegedly poured an "extremely strong drain cleaner" down the drain, which generated "noxious fumes" within the store. Corrine, a Walmart employee who was working nearby, breathed in these fumes and left the store bleeding from her nose and mouth. The Apanas sought damages for lost wages, pain and suffering, and loss of consortium.²

On August 10, 2003, HMP tendered a claim for defense to TIG Insurance Company ("TIG") under a commercial general liability policy of insurance that TIG had issued to HMP on February 7, 2002 ("the Policy"). On August 13, TIG rejected any obligation to indemnify or defend HMP based on the Policy's "Total Pollution Exclusion."

The Apanas, Marugame, and HMP entered into arbitration proceedings, which ultimately resulted in a judgment against Marugame and HMP in the amount of $87,770.27. The Apanas have apparently not collected on this judgment, but did obtain an assignment from Marugame and HMP for their rights against TIG under the Policy.

B. TIG's Insurance Policy

The Policy issued by TIG to HMP provides the following coverage:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.

The Policy also contains a "Total Pollution Exclusion" which provides:

This insurance policy does not apply to:

f. Pollution

(1) "Bodily injury" or "property damage" which would not have occurred in whole or part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants" at any time.

The Policy defines "pollutants" as follows:

"Pollutants" mean 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.

Combining these various provisions, the Policy excludes coverage for any bodily injury resulting from the "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."

II. PRIOR PROCEEDINGS

On November 13, 2006, the Apanas filed suit against TIG in Hawai'i Circuit Court alleging TIG had breached its contract by failing to defend or indemnify Marugame and HMP in the underlying action. TIG removed the case to federal district court and then filed a motion for summary judgment based on the Total Pollution Exclusion. On August 16, 2007, the district court granted in part and denied in part TIG's motion. Apana v. TIG Ins. Co., 504 F.Supp.2d 998 (D.Haw.2007). The court held that TIG had no duty to indemnify but did have a duty to defend. Id. at 1007-08.

On August 22, 2007, the Apanas moved for partial summary judgment on TIG's duty to defend. The district court, following the logic of its August 16 order, granted the motion. The Apanas filed a timely appeal regarding TIG's duty to indemnify and TIG filed a timely cross-appeal regarding its duty to defend.

III. LEGAL CIRCUMSTANCES

On appeal to the Ninth Circuit, the Apanas have asserted that the district court erred in finding that TIG did not owe a duty to indemnify. The Apanas argue that the Hawai'i Supreme Court would not apply the Total Pollution Exclusion to situations, such as this, that are not commonly thought of as environmental pollution. TIG argues that the language of the Total Pollution Exclusion is clear and the Hawai'i Supreme Court would apply its terms literally.

A. Two Sides of the National Debate

The scope of the total pollution exclusion has been repeatedly litigated, spawning conflicting judicial decisions throughout the country. See Porterfield, 856 So.2d at 800 ("[T]here exists not just a split of authority, but an absolute fragmentation of authority."). Most State courts fall roughly into one of two broad camps. See MacKinnon v. Truck Ins. Exch., 31 Cal.4th 635, 3 Cal.Rptr.3d 228, 73 P.3d 1205, 1208-09 (2003) (explaining the division of authority).

Some courts apply the exclusion literally because they find the terms to be clear and unambiguous. See Whittier Props., Inc. v. Ala. Nat. Ins. Co., 185 P.3d 84, 89-92 (Alaska 2008); TerraMatrix, Inc. v. U.S. Fire Ins. Co., 939 P.2d 483, 487-88 (Colo.Ct.App.1997); Heyman Assocs. No. 1 v. Ins. Co. of State of Pa., 231 Conn. 756, 653 A.2d 122, 129-33 (Conn.1995); Deni Assocs. of Fla., Inc. v. State Farm Fire & Cas. Ins. Co., 711 So.2d 1135, 1137-41 (Fla.1998); Reed v. Auto-Owners Ins. Co., 284 Ga. 286, 667 S.E.2d 90, 92 (Ga.2008); Bituminous Cas. Corp. v. Sand Livestock Sys., Inc., 728 N.W.2d 216, 220-22 (Iowa 2007); McKusick v. Travelers Indem. Co., 246 Mich.App. 329, 632 N.W.2d 525, 529-32 (2001); Auto-Owners Ins. Co. v. Hanson, 588 N.W.2d 777, 779-81 (Minn.Ct.App. 1999); Heringer v. Am. Family Mut. Ins. Co., 140 S.W.3d 100, 102-06 (Mo.Ct.App. 2004); Sokoloski v. Am. W. Ins. Co., 294 Mont. 210, 980 P.2d 1043, 1044-45 (1999); Cincinnati Ins. Co. v. Becker Warehouse, Inc., 262 Neb. 746, 635 N.W.2d 112, 118-21 (2001); Bituminous Cas. Corp. v. Cowen Constr., Inc., 55 P.3d 1030, 1033-35 (Okla. 2002); Madison Const. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 735 A.2d 100, 106-08 (1999); S.D. State Cement Plant Comm'n v. Wausau Underwriters Ins. Co., 616 N.W.2d 397, 405-07 (S.D.2000); Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517, 521-22 (Tex.1995); City of Chesapeake v. States Self-Insurers Risk Retention Group, Inc., 271 Va. 574, 628 S.E.2d 539, 541 (2006); Peace ex rel. Lerner v. Nw. Nat'l Ins. Co., 228 Wis.2d 106, 596 N.W.2d 429, 438-46 (Wis.1999).

Other courts have limited the exclusion to situations involving traditional environmental pollution, either because they find the terms of the exclusion to be ambiguous or because they find that the exclusion contradicts policyholders' reasonable expectations. See Porterfield v. Audubon Indem. Co., 856 So.2d 789, 805-07 (Ala. 2002); Keggi v. Northbrook Prop. & Cas. Ins. Co., 199 Ariz. 43, 13 P.3d 785, 790-92 (Ariz.Ct.App.2000); Minerva Enters., Inc. v. Bituminous Cas. Corp., 312 Ark. 128, 851 S.W.2d 403, 404-06 (1993); MacKinnon v. Truck Ins. Exch., 31 Cal.4th 635, 3 Cal.Rptr.3d 228, 73 P.3d 1205, 1208-18 (2003); Danbury Ins. Co. v. Novella, 45 Conn.Supp. 551, 727 A.2d 279, 281-83 (1998) (distinguishing Heyman Assocs. No. 1 v. Ins. Co. of State of Pa., 231 Conn. 756, 653 A.2d 122 (1995), listed above); Am. States Ins. Co. v. Koloms, 111 Ill.2d 473, 227 Ill.Dec. 149, 687 N.E.2d 72, 75-82 (1997); Am. States Ins. Co. v. Kiger, 662 N.E.2d 945, 948-49 (Ind.1996); Motorists Mut. Ins. Co. v. RSJ, Inc., 926 S.W.2d 679, 680-82 (Ky.Ct.App.1996); Doerr v. Mobil Oil Corp., 774 So.2d 119, 125-28, 134-36 (2000); Sullins v. Allstate Ins. Co., 340 Md. 503, 667 A.2d 617, 620-24 (1995); W. Alliance Ins. Co. v. Gill, 426 Mass. 115, 686 N.E.2d 997, 999-1001 (1997); W. Am. Ins. Co. v. Tufco Flooring E., Inc., 104 N.C.App. 312, 409 S.E.2d 692, 697-98 (1991), overruled on other grounds by Gaston County Dyeing Mach. Co. v. Northfield Ins. Co., 351 N.C. 293, 524 S.E.2d 558, 565 (2000); Weaver v. Royal Ins. Co. of Am., 140 N.H. 780, 674 A.2d 975, 977-78 (1996); Nav-Its, Inc. v. Selective Ins. Co. of Am., 183 N.J. 110, 869 A.2d 929, 932-39 (2005); Belt Painting Corp. v. TIG Ins. Co., 100 N.Y.2d 377, 763 N.Y.S.2d 790, 795 N.E.2d 15, 18-21 (2003); Andersen v. Highland House Co., 93 Ohio St.3d 547, 757 N.E.2d 329,...