CINCINNATI INS. v. BECKER WAREHOUSE

• Decision Date: 02 November 2001
• Docket Number: No. S-00-767.,S-00-767.
• Citation: CINCINNATI INS. v. BECKER WAREHOUSE, 635 N.W.2d 112, 262 Neb. 746 (Neb. 2001)
• Parties: The CINCINNATI INSURANCE COMPANY, Appellee, v. BECKER WAREHOUSE, INC., and Becker Transportation, Inc., Appellants.
• Court: Nebraska Supreme Court

635 N.W.2d 112

262 Neb. 746

The CINCINNATI INSURANCE COMPANY, Appellee, v.BECKER WAREHOUSE, INC., and Becker Transportation, Inc., Appellants.

No. S-00-767.

Supreme Court of Nebraska.

November 2, 2001.

Eugene P. Welch and Francie C. Riedmann, of Gross & Welch, P.C., Omaha, for appellants.

Robert T. Grimit and Jarrod S. Boitnott, of Baylor, Evnen, Curtiss, Grimit & Witt, Lincoln, for appellee.

HENDRY, C.J., WRIGHT, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

GERRARD, J.

NATURE OF CASE

Becker Warehouse, Inc., and Becker Transportation, Inc.(collectively Becker), own a warehouse where food products owned by various entities are stored.While constructing an addition to Becker's warehouse, Stoetzel & Son, Inc., applied a sealant called Kure-N-Seal to the concrete floor.The owners of the food products filed lawsuits against Becker alleging that xylene fumes from the Kure-N-Seal contaminated their food products.Becker sought indemnity and defense from its insurer, the appellee, The Cincinnati Insurance Company(Cincinnati).Cincinnati filed a petition for declaratory judgment in the district court, seeking a declaration that Becker's insurance policy does not provide coverage for the alleged contamination and that Cincinnati has no obligation to defend Becker.Both parties filed motions for summary judgment; the district court sustained Cincinnati's motion and overruled Becker's.Because Cincinnati's insurance policy is not ambiguous and excludes coverage for Becker's claim, we affirm the district court's judgment in favor of Cincinnati.

FACTUAL BACKGROUND

In 1997, Becker and Stoetzel & Son entered into a contract under which Stoetzel & Son was to build an addition to Becker's warehouse in Hastings, Nebraska.Becker used the warehouse to store food products and ingredients owned by various entities, including Swift-Eckrich, Inc., doing business as Armour Swift Eckrich(Armour); Newly Weds Foods, Inc.; and J.M. Swank Company, a division of ConAgra, Inc.(Swank).While constructing the warehouse addition, Stoetzel & Son applied a concrete sealant called Kure-N-Seal.

Kure-N-Seal's material safety data sheet indicates that it contains xylene, poses an immediate and chronic health hazard, and should be used with proper respiratory protection when applied in poorly ventilated areas.The federal Clean Air Act, 42 U.S.C. § 7412(b)(1994), lists xylene as a hazardous air pollutant.The Kure-N-Seal label and advertisement state that "[i]f Kure-N-Seal is applied in or near areas containing foodstuffs, they should be removed before application and until Kure-N-Seal has fully dried and all solvent vapors have dissipated."The label and advertisement also state:

Heating Ventilation Air Conditioning (HVAC) units may draw [Kure-N-Seal] solvent vapors into occupied building interiors.Solvent vapors can be irritating to people unaccustomed to the odor; do not apply Kure-N-Seal in or around buildings occupied by nonconstruction personnel without consulting building management.Use only with adequate ventilation and with a minimum of 6 air changes per hour.

According to Becker, Stoetzel & Son failed to properly ventilate the warehouse while applying the Kure-N-Seal.Scott Stoetzel, an employee who applied the Kure-N-Seal, testified in a deposition that he wore a respirator during application of the Kure-N-Seal because he applied it in an enclosed building that needed ventilation.

Scott Stoetzel testified that Kure-N-Seal might have been safely applied without a mask, but he"wouldn't want to try it."Scott Stoetzel and another Stoetzel & Son employee opened doors, installed fans, and hung plastic sheeting to ventilate the area treated with Kure-N-Seal and to prevent the fumes from spreading.Several days after the Kure-N-Seal application, both Scott Stoetzel and Brian Becker, the warehouse company's owner and chief executive officer, noticed an odor of the Kure-N-Seal in the warehouse area where food products were stored.Subsequently, Scott Stoetzel and Brian Becker attempted to better ventilate the warehouse until the odor dissipated.

Armour and Swank filed lawsuits against Becker, alleging that xylene fumes from the Kure-N-Seal damaged their food products stored in Becker's warehouse at the time of the Kure-N-Seal application.Subsequently, Becker filed insurance claims with Cincinnati, seeking indemnity and defense against Armour and Swank's allegations.Cincinnati denied Becker's claims and refused to defend Becker in the pending lawsuits.

Cincinnati filed a petition for declaratory judgment in district court, seeking a declaration that its policy does not cover matters arising out of Stoetzel & Son's use of Kure-N-Seal in the Becker warehouse and that it has no obligation to defend actions filed by others against Becker.Becker filed a counter/cross-claim, alleging that Cincinnati has a duty to indemnify Becker's damages from the use of Kure-N-Seal and to provide a defense to the pending litigation against Becker.Becker also alleged that Kure-N-Seal is not a pollutant within the meaning of the insurance policy issued by Cincinnati.

The commercial general liability (CGL) insurance policy issued to Becker by Cincinnati excludes from coverage, in pertinent part:

f. Pollutant

(1)"Bodily injury" or "property damage" arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:

(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured.

....

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations:

(i) If the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor....

....

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.Pollutants include but are not limited to substances which are generally recognized in industry or government to be harmful or toxic to persons, property or the environment.

....

j. Damage to Property

"Property damage" to:

....

(4) Personal property in the care, custody or control of an insured.

The building and personal property coverage form of the commercial property coverage part of the insurance policy issued to Becker by Cincinnati states, in pertinent part:

A.COVERAGE

We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.

1.Covered Property

Covered Property, as used in this Coverage Part, means the following types of property for which a Limit of Insurance is shown in the Declarations:

....

b. Your Business Personal Property and Personal Property of Others in your care, custody and control located in or on the building described in the Declarations....

The causes of loss—special form as shown in the declarations and referred to above provides the following relevant exclusion for the commercial property coverage part:

B.EXCLUSIONS

....

2.We will not pay for loss or damage caused by or resulting from any of the following:

....

1.Discharge, dispersal, seepage, migration, release or escape of "pollutants" unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the "specified causes of loss."But if loss or damage by the "specified causes of loss" results, we will pay for the resulting damage caused by the "specified causes of loss."

The policy defines "Specified Causes of Loss" as "Fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage."

Becker and Cincinnati both moved for summary judgment in the district court.The district court found that the insurance policy in question contained an absolute pollution exclusion which, as a matter of law, was not ambiguous and should be construed under its plain meaning.The district court also found that the xylene fumes emitted in Becker's warehouse constituted a pollutant within the meaning of the policy, creating damage arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants.Further, the court determined that damage to Swank's and Armour's property in the care, custody, and control of Becker was excluded from coverage by the pollution exclusion in the policy.Therefore, the district court concluded that Becker's damages were excluded from coverage under the insurance policy and that Cincinnati had no duty to defend.The district court sustained Cincinnati's motion for summary judgment and denied Becker's motion for summary judgment.Becker appealed, and we moved the case to our docket pursuant to our authority to regulate the dockets of the appellate courts.

ASSIGNMENTS OF ERROR

Becker assigns, restated, that the district court erred in (1) finding that the pollution exclusion contained in the insurance policy issued by Cincinnati is not ambiguous; (2) finding that the pollution exclusion applied to the claims filed against Becker and not just to environmental claims; (3) finding that xylene was a pollutant within the language of the policy; (4) finding that the chemicals contained in the floor sealant were "discharged, dispersed, migrated or released"; (5) finding that the conflicting provisions regarding the "care, custody and control" provision in the policy were not ambiguous; (6) finding that the claims against Becker are excluded by the "care, custody and control" provision contained...