Guilford Industries Inc. v. Liberty Mut. Ins. Co.

• Decision Date: 25 July 1988
• Docket Number: Civ. No. 87-0225-B.
• Citation: 688 F. Supp. 792
• Parties: GUILFORD INDUSTRIES INC., Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Maine

688 F. Supp. 792

GUILFORD INDUSTRIES INC., Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant.

Civ. No. 87-0225-B.

United States District Court, D. Maine.

July 25, 1988.

John J. O'Leary, Jr., Catherine R. Connors, Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, Me., for plaintiff.

John S. Whitman, William W. McCandless Jr., Richardson & Troubh, Portland, Me., Martha J. Koster, Lee H. Glickenhaus, Gaston Snow & Ely Bartlett, Boston, Mass., for defendant.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

GENE CARTER, District Judge.

On April 1, 1987, the Piscataquis River flooded, rupturing the piping for oil tanks at Plaintiff's textile mill. Oil flowed downstream, causing property damage. The Maine Department of Environmental Protection told Plaintiff that, under 38 M.R.S. A. §§ 548, 551, and 552, it would be held responsible for cleanup of the oil as well as for damage claims brought by downstream property owners. Defendant denied coverage for the damage.

Plaintiff in this action seeks a declaratory judgment that the damage to the downstream property caused by Plaintiff's oil is covered under its insurance policies with Defendant. It also seeks a declaration that Defendant is estopped to deny coverage under the policy because Defendant allegedly delayed in informing Plaintiff that it would not grant coverage. The parties have filed cross motions for summary judgment, Defendant seeking judgment on both counts and Plaintiff on Count I only.

Pollution Exclusion

The insurance contract at issue comprises the comprehensive general liability policies which provide coverage as follows:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A. bodily injury or

Coverage B. property damage

to which this policy applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage....

Following the general statement of coverage in the contract is a section entitled "Exclusions." This includes a pollution exclusion which provides:

This policy does not apply:

(1) 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; ...

(2) to any loss, cost or expense arising out of any governmental direction or request that the named insured test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants.

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.

Defendant argues that it is entitled to summary judgment because the insurance policies are not ambiguous and fuel oil is a pollutant within the meaning of the pollution exclusion. The Court agrees.

Under Maine law, insurance contracts are to be interpreted against the insurer.

The language used in the policy should be viewed from the standpoint of the average ordinary person who is untrained in either the law or the insurance field "in light of what a more than casual reading of the policy would reveal to an ordinarily intelligent insured."

Baybutt Construction Corp. v. Commercial Union Insurance, 455 A.2d 914, 921 (Me.1983). As in Baybutt,

the question in this case is whether an ordinary person in the shoes of the plaintiff ... would understand that the policy did not cover claims such as those pressed against it.... The objectively reasonable expectations of an insured will be honored even though painstaking study of the policy provisions would have negated those expectations.

Id.

Here, the exclusion is clear and unambiguous. Examination of the policy and the Complaint establish lack of coverage. See Horace Mann Insurance Co. v. Maine Teachers Association, 449 A.2d 358 (Me. 1982); Travelers Indemnity Co. v. Dingwell, 414 A.2d 220 (Me.1980) (dealing with pollution exclusion).

According to the Complaint, Plaintiff operates a textile mill along the banks of the Piscataquis River. Upon flooding of the river, pipes for two 10,000 gallon storage tanks ruptured causing fuel oil to flow downstream and to cause damage to downstream property owners. Maine has determined that the escape of oil and related products from storage poses a threat of damage from pollution to the environment. 38 M.R.S.A. § 541. The state has, therefore, prohibited the discharge of oil into rivers and other bodies of water, id., § 543, and has mandated its cleanup. See id., §§ 548, 551, and 552. Plaintiff has been charged with such cleanup by the Maine Department of Environmental Protection.

The pollution exclusion applies to pollutants, defined, in part, as any liquid irritant or contaminant. As a company subject to Maine laws, Plaintiff is charged with knowing that oil is a pollutant and that its discharge of oil into Maine waters is prohibited because it pollutes and contaminates them.

Plaintiff, however, denies that that is the case. First, it argues that the Court should not find oil to be within the scope of the exclusion just because it is statutorily so defined by Maine, on the theory that the purpose of the statute and the purpose of the exclusion are at variance. The Court disagrees. The liability which the pollution exclusion seeks to disclaim often arises under statutes like Maine's environmental protection statutes. They are, therefore, an excellent source of information concerning what constitutes a pollutant.¹

Plaintiff also argues that the terms "contaminant," "irritant," and "chemicals," viewed broadly and in isolation, are meaningless. Such a construction cannot be sanctioned, it suggests, because any substance would meet the exclusion, eliminating insurance coverage in all situations. The language of the exclusion, while broad, is plainly not meant to be viewed in isolation. Plaintiff is correct that almost any substance might fall within the exclusion, but it can only do so in certain very precisely drawn circumstances: if it is an irritant or contaminant. The provision is, therefore, far from all-inclusive or meaningless.

Plaintiff also suggests that the Court should apply the doctrine of ejusdem generis to find that only by-products or waste products fall within the exclusion. Under the doctrine referred to by Plaintiff, if general words follow specific words in a list, the general words must be found to fall within the class or category established by the specific words. Thus, according to Plaintiff, since the introductory sentence of the exclusion refers to "smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants," the more general of those words should be understood to refer only to substances which have been used or are byproducts. Plaintiff overlooks, however, that the introductory sentence of the exclusion refers specifically to language that is to be replaced by the new exclusion. It cannot be used for construction purposes.

Moreover, the actual structure of the new exclusion does not list general items after specific ones. It defines pollutant quite clearly as any solid, liquid, gaseous or thermal irritant or contaminant and then gives examples. The doctrine of ejusdem generis does not apply when the context demonstrates a contrary intention, Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 88-89, 55 S.Ct. 50, 52, 79 L.Ed. 211 (1934), and the intention that damages caused by discharge of any irritant or contaminant be excluded is manifest. Moreover, even the listing of examples does not go from specific to vague, for the category Plaintiff seeks to have swallow the rest, waste, appears at the end of the list and the drafters did not choose to say "or other waste" indicating that all must be waste. Rather, the language specifically says "and waste."

Plaintiff also contends that case law supports its position that oil should not reasonably be construed to fit the pollution exclusion. Both cases cited by Plaintiff, however, have very different factual contexts and do not deal with an obvious polluting event like the discharge of oil into a river. See Moulton, Allen & Williams, Inc. v. St. Paul Fire and Marine Insurance Co., 347 So.2d 95 (Ala.1977); A-1 Sandblasting and Steamcleaning Co., Inc. v. Baiden, 53 Or.App. 890, 632 P.2d 1377 (1981). They also both deal with the old version of the pollution exclusion which has been specifically replaced by the exclusion at issue here.

Plaintiff would have the Court read into the pollution exclusion a requirement that the discharge or release of the pollutant excluded for coverage be either intentional or negligent. The language of the exclusion, which has been broadened from its previous form, is clear on its face and suggests no such construction.

Finally, Plaintiff contends that the pollution exclusion applies in this case because the proximate or efficient cause of the damage to property owners was the flood, not conduct by Plaintiff, and that the flood is an occurrence covered by the policies. As Defendant suggests, it is liable under the policies to pay only those claims Plaintiff is legally obligated to pay. Plaintiff's legal obligation arises under Maine's pollution statutes, and the documents before the Court demonstrate that it is specifically not liable for flood damage to the downstream property owners.

The policy language also demonstrates that the exclusion was meant to apply in situations like this. Assuming, without deciding, that floods are covered occurrences, sums which Plaintiff was legally obligated to pay for property damage caused by the flood would be covered except if the property damage also arises out of the...