Great Lakes Chemical Corp. v. International Surplus Lines Ins. Co.

Decision Date11 August 1994
Docket NumberNo. 23A04-9301-CV-12,23A04-9301-CV-12
Citation638 N.E.2d 847
PartiesGREAT LAKES CHEMICAL CORPORATION, Appellant-Plaintiff, v. INTERNATIONAL SURPLUS LINES INSURANCE COMPANY, and First State Insurance Company, Appellees-Defendants.
CourtIndiana Appellate Court

Russell H. Hart, Stephen R. Pennell, Laura L. Bowker, Stuart & Branigin, Lafayette, for appellant.

Edward O. Roberts, Indianapolis, George M. Plews, Jeffrey D. Claflin, Plews & Shadley Lawrence A. Vanore, Sommers & Barnard, P.C., Indianapolis, Eugene R. Anderson, Mayda Prego, Anderson Kill Olick & Oshinsky, P.C., New York City, amicus curiae for appellant.

Ann Marie Forte, Siff Rosen & Parker, New York City, Steven S. Lovern, Schreckengast Lovern & Helm, Indianapolis, for appellees.

Victor C. Harwood, III, Edward Zampino, Peter E. Mueller, Harwood Lloyd, Hackensack, NJ, Norman T. Funk, Hill Fulwider McDowell Funk & Matthews, Lee B. McTurnan, Steven M. Badger, McTurnan & Turner, Indianapolis, Laura A. Foggan, John E. Barry, Steven D. Silverman, Wiley Rein & Fielding, Washington, DC amicus curiae for appellees.

CHEZEM, Judge.

Case Summary

Appellant-plaintiff, Great Lakes Chemical Company ("Great Lakes"), appeals the trial court's grant of summary judgment in favor of appellees-defendants, International Surplus Lines Insurance Company ("ISLIC") and First State Insurance Company ("First State"). We reverse and remand.

Issues

Great Lakes presents three issues for our review:

I. Whether the "pollution exclusion" clauses contained in the excess liability policies issued by ISLIC and First State excluded coverage for the claims in the underlying lawsuits filed against Great Lakes;

II. Whether ISLIC had a duty to defend Great Lakes in the underlying lawsuits; and

III. Whether the ISLIC and First State insurance policies covered the damage alleged in the underlying lawsuit by the City of Fresno.

Facts and Procedural History

Great Lakes brought this action for declaratory judgment seeking a determination that ISLIC and First State 1 had a duty to defend and indemnify Great Lakes in thirteen underlying lawsuits filed against Great Lakes.

In the mid 1960's, Great Lakes began manufacturing and selling pesticide products containing ethylene dibromide (EDB). These products were required to be, and were, registered with both federal and state governments before their sale and application. The EDB products were intended to be used as a soil fumigant pesticide to control nematodes and other pests. The pesticides were applied by injecting them directly into the ground using a tractor driven applicator.

In 1983, the United States Environmental Protection Agency banned the use of EDB as a soil fumigant pesticide. Subsequently, various persons and communities brought actions for damages against Great Lakes claiming soil and groundwater contamination caused by EDB. Great Lakes sought indemnity and defense costs against ISLIC and First State under various policies of excess liability insurance that had been issued from 1971 to 1979. ISLIC and First State denied coverage under the policies. Great Lakes then brought an action for declaratory judgment seeking a determination of rights under the policies. Both sides moved for summary judgment. The trial court granted summary judgment in favor of ISLIC and First State finding as a matter of law that there was no duty to defend or indemnify Great Lakes in any of the underlying lawsuits. Great Lakes appeals.

Discussion and Decision
Standard of Review

On appeal from a grant of summary judgment, we consider the same issues and apply the same legal standard as the trial court. Campbell v. Criterion Group (1993), Ind.App., 621 N.E.2d 342, on reh'g. That is, summary judgment is appropriate only if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Perry v. Stitzer Buick, GMC, Inc. (1992), Ind.App., 604 N.E.2d 613, aff'd in part, vacated in part, (1994), Ind., 637 N.E.2d 1282. On review, we may not search the entire record to support the judgment, but may consider only that evidence which had been specifically designated to the trial court. Keating v. Burton (1993), Ind.App., 617 N.E.2d 588, reh'g denied, trans. denied.

I.

Great Lakes contends that the trial court erroneously determined ISLIC and First State had no duty to indemnify under the policies. The trial court determined, as a matter of law, that the pollution exclusion clauses of the policies encompassed the claims brought against Great Lakes in the underlying lawsuits, thereby excluding coverage. 2 The pollution exclusion clause contained in the First State and certain ISLIC policies excludes coverage for:

Bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste material or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

The pollution exclusion clause contained in the remainder of the ISLIC policies provides:

It is agreed this policy shall not apply to liability for contamination or pollution of land, water, air or real or personal property or any injuries or damages resulting therefrom caused by an occurrence.

The provisions of an insurance contract are subject to the same rules of construction as other contracts, and construction of a written contract is a question of law for which summary judgment is particularly appropriate. Selleck v. Westfield Ins. (1993), Ind.App., 617 N.E.2d 968, trans. denied. When interpreting an insurance policy, our goal is to ascertain and enforce the parties' intent as manifested in the insurance contract. American Family Mut. Ins. Co. v. National Ins. Ass'n (1991), Ind.App., 577 N.E.2d 969, reh'g denied. If the language of the policy is clear and unambiguous, it must be given its plain and ordinary meaning. Eli Lilly & Co. v. Home Ins. Co. (1985), Ind., 482 N.E.2d 467. If the language of the policy is ambiguous, though, the policy should be construed in favor of the insured to further the policy's basic purpose of indemnity. Id. An ambiguity exists if the policy is susceptible to more than one interpretation and reasonably intelligent persons would honestly differ as to its meaning. Property Owners Ins. Co. v. Hack (1990), Ind.App., 559 N.E.2d 396. An ambiguity does not exist simply because a controversy exists between parties, each favoring an interpretation contrary to the other. Landis v. American Interinsurance Exch. (1989), Ind.App., 542 N.E.2d 1351, trans. dismissed.

When interpreting an exclusionary clause of an insurance policy, the clause must clearly and unmistakably bring within its scope the particular act or omission that will bring the exclusion into play in order to exclude coverage. Asbury v. Indiana Union Mut. Ins. Co. (1982), Ind.App., 441 N.E.2d 232. Just as an ambiguous insurance policy is not to be construed to remove from coverage a risk against which an insured intended to protect himself, so too, an exclusionary clause is not to be read so loosely that it would effectively exclude coverage of all operations. American States Ins. Co. v. Aetna Life & Casualty Co. (1978), 177 Ind.App. 299, 379 N.E.2d 510. Even where clauses are unambiguous when read within the policy as a whole, but in effect provide only illusory coverage, the policy will be enforced to satisfy the reasonable expectations of the insured. Davidson v. Cincinnati Ins. Co. (1991), Ind.App., 572 N.E.2d 502, trans. denied.

The only Indiana case to interpret one of the pollution exclusion clauses applicable here is Barmet of Indiana, Inc. v. Security Ins. Group (1981), Ind.App., 425 N.E.2d 201. In that case, a wrongful death suit had been brought against Barmet alleging that the emissions from Barmet's aluminum recycling plant proximately caused the death by reducing visibility on a nearby highway. Barmet's insurer sought a declaratory judgment that coverage for the claim was excluded by the policy's pollution exclusion clause. Judgment was entered for the insurer. Barmet argued on appeal that the pollution exclusion clause was ambiguous and therefore should be construed in its favor. Upon review, this court declined to address whether the clause was ambiguous because the evidence supported the trial court's factual determination that the emissions were not "sudden and accidental." As the release of the emissions did not come within the "sudden and accidental" exception to the exclusion, the policy excluded coverage. Thus, Barmet does not provide any guidance for addressing the issue here because that decision did not construe the pollution exclusion clause.

Great Lakes claims that if the pollution exclusion clauses operate to bar coverage, then in this case the insurance coverage would be illusory. ISLIC and First State argue that the pollution exclusion clauses clearly apply to the facts here. ISLIC and First State assert that EDB is a "pollutant" within the meaning of the clauses, citing the EPA report banning its use as a soil fumigant pesticide. They additionally contend that EDB falls within other categories of excluded materials: "toxic chemicals," "liquids," "irritants," "contaminants." They also assert that the application of EDB was a "release," and that it was done so directly upon "land." Thus, ISLIC and First State contend that the language of the pollution exclusion clauses is clear and unambiguous, and when applied to the claims in the underlying lawsuits against Great Lakes, excludes coverage.

While a literal reading of the pollution exclusion clauses may appear to apply to the underlying EDB claims, we decline to hold that the clauses exclude coverage in this case. Great Lakes is in the business of manufacturing and selling...

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