Clendenin v. U.S. Fire

• Decision Date: 06 January 2006
• Docket Number: Misc. No. 2, September Term 2005.
• Parties: CLENDENIN BROTHERS, INC., et al. v. UNITED STATES FIRE INSURANCE COMPANY.
• Court: Court of Special Appeals of Maryland

889 A.2d 387

390 Md. 449

CLENDENIN BROTHERS, INC., et al. v. UNITED STATES FIRE INSURANCE COMPANY.

Misc. No. 2, September Term 2005.

Court of Appeals of Maryland.

January 6, 2006.

Katherine J. Henry (Dickstein Shapiro Morin & Oshinsky, L.L.P., Washington, DC; Philip B. Barnes of Whiteford, Taylor & Preston, L.L.P., Towson; Richard W. Fields, Elizabeth A. Sherwin and Andrew N. Bourne of Dickstein Shapiro Morin & Oshinsky, New York City, of counsel), all on brief, for Appellants.

Matthew J. Fader, Kirkpatrick & Lockhart Nicholson Graham, L.L.P., Pittsburgh, PA; Kenneth M. Argentieri, Christopher C. French, Paul K. Stockman, of

counsel, brief of Amicus Curiae, the ESAB Group, Inc.

Katherine J. Henry, Dickstein Shapiro Morin & Oshinsky, L.L.P., Washington, DC; Richard W. Fields, Elizabeth A. Sherwin and Andrew N. Bourne of Dickstein Shapiro Morin & Oshinsky, New York City, of counsel, brief of the Gases and Welding Distributors Ass'n as Amicus Curiae in Support of Petitioners.

Robert R. Lawrence (Richard Hammer of Hunton & Williams, L.L.P., McLean, VA; John Charles Thomas, Benjamin L. Hatch of Hunton & Williams, L.L.P., Richmond, VA), all on brief, for Appellee.

Laura A. Foggin, John C. Yang, W. Clifton Holmes, Wiley Rein & Fielding, L.L.P., Washington, DC, brief of Amicus Curiae Complex Ins. Claims Litigation Ass'n in support of Respondent.

Argued before BELL, C.J., RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA and GREENE, JJ.

HARRELL, Judge.

Pursuant to the Maryland Uniform Certification of Questions of Law Act, Maryland Code (1974, 2002 Repl.Vol., 2005 Cum.Supp.), Courts and Judicial Proceedings Article, §§ 12-601 though 12-613, and Maryland Rule 8-305, the United States District Court for the District of Maryland (Garbis, J.) certified the following question for our consideration:

Whether an insurance company has a duty to defend and/or indemnify its insured in underlying actions alleging injury from exposure to localized welding fumes

a) Where the insurance policy contains a total pollution exclusion that denies coverage for "`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,"

b) Where pollutants are defined as "any solid, liquid, gaseous, or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste," and

c) Where waste is defined as "materials to be recycled, reconditioned or reclaimed."

We respond in the affirmative to the certified question.

I.

The District Court supplied the following factual background in its Certification Order:

The instant case is a suit for declaratory relief pursuant to 28 U.S.C. § 2201 brought by United States Fire Insurance Company ("U.S. Fire" or "Insurer") against Clendenin Brothers, Inc., et. al. ("Clendenin" or "Insureds"). U.S. Fire issued the Insureds a primary general liability policy as well as an umbrella policy for the period of July 1, 1995 to July 1, 1996 to provide coverage for claims brought against the Insureds alleging injuries sustained by use of the Insureds' welding products. Insureds presently seek insurance coverage under these policies for both the defense and indemnification of certain lawsuits that have been brought against them which allege bodily injury related to fumes caused by welding activity. [The District Court elaborated in a footnote: "The plaintiffs in the underlying suits are individuals who allege that proper use of the Insureds' welding products produced harmful localized fumes containing manganese which caused bodily harm and neurological damage."] U.S. Fire presently seeks a declaration from this Court that it has no duty to defend or indemnify the Insureds in these welding related suits as the conditions and exclusions of the policies (specifically the total pollution exclusions) exclude such claims. Additionally, U.S. Fire seeks a determination that it has no duty to defend or indemnify the Insureds with respect to similar lawsuits filed in the future against the Insureds.

The relevant provisions of the pollution exclusion in question, which U.S. Fire asserts relieves it of its duty to defend and duty to indemnify the Insureds against the welding related claims made against the Insureds, state as follows:¹

TOTAL POLLUTION EXCLUSION

* * *

This Insurance does not apply to:

f. (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.

* * *

Pollutants means any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste includes material to be recycled, reconditioned or reclaimed.

Each party filed a Motion for Summary Judgment in the District Court. Insurer argued that the language of the exclusions in the insurance policy is unambiguous, as a matter of law, and bars explicitly coverage of the claims against the Insureds. Insureds asserted that the total pollution exclusion is ambiguous with regard to manganese welding fumes and thus does not bar coverage. Concurrently with its Motion for Summary Judgment, Insureds also filed the present Motion for Certification requesting the District Court to ask this Court to address, under Maryland law, the scope of the total pollution exclusion with regard to manganese welding fumes. Consideration of the cross-motions for summary judgment was stayed by the District Court pending a response from this Court regarding the certified question.

II.

We are presented here with an issue of first impression in Maryland (as well as other states): to determine whether a total pollution exclusion provision in an insurance policy relieves the policy issuer from its duty to defend and/or indemnify the policy's holder where the alleged harm was caused by localized, workplace manganese welding fumes. Maryland appellate courts, however, previously encountered somewhat similar issues.

In Bernhardt v. Hartford Fire Insurance Company, 102 Md.App. 45, 57, 648 A.2d 1047, 1052 (1994), the Court of Special Appeals held that "the absolute pollution exclusion clause is clear and unambiguous in th[e] context" of carbon monoxide fumes that escaped from the central heating system of a residential apartment building and, therefore, the insurer, Hartford Fire Insurance Company ("Hartford"), was not obligated to defend or indemnify the insured, the landlord of the building. The underlying claim was initiated by tenants in the building for personal injury and damages caused by carbon monoxide fumes emitted from the central heating system. Bernhardt, 102 Md.App. at 47, 648 A.2d at 1047. The insurer argued that it had no duty to defend or indemnify the insured as the exclusion applied "to 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 owned, rented or occupied by the named insured" where pollutants were defined as "any solid liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste." Bernhardt, 102 Md.App. at 48-49, 648 A.2d at 1048. Affirming the trial court's grant of Hartford's motion for summary judgment in the declaratory relief action concerning the insurer's duties under the insurance policy, the Court of Special Appeals determined that the pollution exclusion clause was dispositive and thus the insurer had no duty to defend or indemnify. Bernhardt, 102 Md.App. at 48, 57, 648 A.2d at 1048, 1052.²

The intermediate appellate court rejected the landlord's primary argument. Conceding that carbon monoxide is a pollutant within the plain language of the pollution exclusion clause, the insured argued that "notwithstanding the literal language of the exclusion, the parties intended that it apply only to persistent industrial pollution of the environment, and not to an accident of the kind generally covered by a comprehensive business liability policy." Bernhardt, 102 Md.App. at 50, 648 A.2d at 1049. After reviewing the historical development of the exclusion clause in the insurance industry, the intermediate appellate court focused on the landlord's assertion that the pollution exclusion was ambiguous when applied to the specific facts of the case. Bernhardt, 102 Md.App. at 53-54, 648 A.2d at 1050. As a result of the landlord's concession that carbon monoxide was included within the contractual definition of pollution, the court stated that "[t]he carbon monoxide gas in this case was a `gaseous. . . irritant or contaminant' and constituted `fumes' and `chemicals' within the clear language of the definition of `pollutant.'" Bernhardt, 102 Md.App. at 55, 648 A.2d at 1051. While the court noted that the "pollution exclusion" title of the provision by itself is ambiguous and would not provide an insured with an understanding of the "breadth" of the exclusion, it also noted that "[t]he language of the contract between the parties is, however, quite specific." Id. Thus, the court stated it was "unable to say a person of ordinary intelligence reading the language of this absolute pollution exclusion would conclude that it did not apply to the facts of this case." Id.

One year after Bernhardt, this Court decided Sullins v. Allstate Insurance Company, 340 Md. 503, 667 A.2d 617 (1995). Sullins also was a certified question case submitted by the United States District Court for the District of Maryland. Sullins, 340 Md. at 506, 667 A.2d at 618. We were asked there to decide whether Allstate Insurance Company ("Allstate"), the insurer, had a duty to defend and/or indemnify Reverend D. Paul Sullins and Patricia H. Sullins, the insureds/landlords, in an action brought by their tenants alleging injury from...