Hastings Mut. Ins. v. Safety King, Inc.

• Decision Date: 24 November 2009
• Docket Number: Docket No. 286601.,Docket No. 286392.
• Citation: 778 N.W.2d 275,286 Mich. App. 287
• Parties: HASTINGS MUTUAL INSURANCE COMPANY v. SAFETY KING, INC.
• Court: Court of Appeal of Michigan — District of US

778 N.W.2d 275

286 Mich. App. 287

HASTINGS MUTUAL INSURANCE COMPANY v. SAFETY KING, INC.

Docket No. 286392.

Docket No. 286601.

Court of Appeals of Michigan.

Submitted November 9, 2009, at Detroit.

Decided November 24, 2009, at 9:15 a.m.

Kallas & Henk PC (by Constantine N. Kallas and Michele L. Riker-Semon), Bloomfield Hills, for Hastings Mutual Insurance Company.

Mantese and Rossman, P.C. (by Gerard V. Mantese and Ian M. Williamson), Troy, for Safety King, Inc.

Paluda Smolek, P.C. (by Andrew J. Paluda and Jeffrey A. Smolek), Troy, for the Mastrogiovanni defendants.

Before: STEPHENS, P.J., and MARK J. CAVANAGH and OWENS, JJ.

MARK J. CAVANAGH, J.

Defendant Safety King, Inc. (Safety King), and defendants Deborah and Michael Mastrogiovanni, individually, and Deborah Mastrogiovanni, as next friend of Michael Mastrogiovanni, a minor (the Mastrogiovanni defendants), appeal as of right an order granting summary disposition in favor of plaintiff Hastings Mutual Insurance Company (Hastings) in this insurance dispute. We reverse.

Safety King was insured under a commercial general liability policy issued by Hastings when the Mastrogiovanni defendants sued Safety King for damages allegedly resulting from Safety King's use of a sanitizing agent during air duct cleaning services performed in their home. Hastings initially defended Safety King under a reservation of rights, but then filed this action for a declaratory judgment. Hastings alleged that, because of the policy's pollution exclusion provision, it owed no duty to defend and indemnify Safety King with respect to the Mastrogiovanni defendants' claims. In response to the declaratory judgment action, Safety King brought a counterclaim against Hastings requesting declaratory relief and asserting claims of breach of contract, fraudulent inducement, negligent misrepresentation, and innocent misrepresentation.

Hastings filed motions for summary disposition under MCR 2.116(C)(10) with regard to both actions. Hastings argued that the Mastrogiovanni defendants' claims arose from Safety King's application of a sanitizing agent to their ductwork. The active ingredient of the sanitizing agent used is triclosan, a pesticide. Hastings argued that because pesticides qualify as "pollutants" under pollution exclusion provisions, coverage under the policy was precluded and Hastings was entitled to summary disposition of its declaratory judgment action. Further, Hastings argued, because neither fraud nor misrepresentations were involved in the issuance of the insurance policy, it was also entitled to summary dismissal of Safety King's counterclaim.

Safety King and the Mastrogiovanni defendants opposed Hastings' motion for summary disposition of the declaratory judgment action, arguing that a "pollutant" was not involved in the underlying lawsuit but, if a pollutant were involved, it was not used in the manner proscribed by the policy and, further, an exception to the pollution exclusion clause applied under the facts of this case. Safety King also opposed Hastings' motion for summary dismissal of its counterclaim, arguing that it was premised on Hastings' failure to provide comparable insurance coverage as requested and promised. Thus, defendants argued, Hastings was not entitled to summary dismissal of either action.

Following oral arguments, the trial court agreed with Hastings and granted the motions. In a clarifying order, the trial court quoted the policy's definition of "pollutant" and held:

There can be no dispute that the damages alleged in the underlying action are alleged to have been caused by a pollutant as defined by the terms of the policy. Thus, coverage is excluded by the terms of the policy, and Plaintiff's motion for summary disposition is properly granted.

Both Safety King and the Mastrogiovanni defendants appealed and the appeals were consolidated pursuant to an unpublished order of the Court of Appeals, entered July 30, 2008 (Docket Nos. 286392, 286601).

On appeal, Safety King and the Mastrogiovanni defendants argue that a "pollutant" did not cause the damages claimed by the Mastrogiovanni defendants in the underlying lawsuit; thus, Hastings had a duty to defend and indemnify Safety King in that matter and the trial court's holding to the contrary was erroneous. We agree.

This Court reviews de novo a trial court's decision on a motion for summary disposition. Spiek v. Dep't of Transportation, 456 Mich. 331, 337, 572 N.W.2d 201 (1998). A motion for summary disposition under MCR 2.116(C)(10) is properly granted if no factual dispute exists, thus entitling the moving party to judgment as a matter of law. Rice v. Auto Club Ins. Ass'n, 252 Mich.App. 25, 30-31, 651 N.W.2d 188 (2002). In deciding a motion brought under subrule (C)(10), a court considers all the evidence, affidavits, pleadings, and admissions in the light most favorable to the nonmoving party. Id. We also review de novo issues of contract interpretation. Rory v. Continental Ins. Co., 473 Mich. 457, 464, 703 N.W.2d 23 (2005).

"Interpretation of an insurance policy ultimately requires a two-step inquiry: first, a determination of coverage according to the general insurance agreement and, second, a decision regarding whether an exclusion applies to negate coverage." Auto-Owners Ins. Co. v. Harrington, 455 Mich. 377, 382, 565 N.W.2d 839 (1997). The issue in this case involves the second step of the inquiry: whether the pollution exclusion clause applied to negate coverage otherwise provided with regard to the damage claims made by the Mastrogiovanni defendants against Safety King. For the exclusion to apply, a "pollutant" must be involved. The insurance policy defines "pollutants" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste."

The same contract construction principles apply to insurance policies as to any other type of contract because it is an agreement between the parties. Rory, supra at 461, 703 N.W.2d 23; Auto-Owners Ins. Co. v. Churchman, 440 Mich. 560, 566, 489 N.W.2d 431 (1992). Thus an insurance policy must be read as a whole to determine and effectuate the parties' intent. McKusick v. Travelers Indemnity Co., 246 Mich.App. 329, 332, 632 N.W.2d 525 (2001). The terms of the contract are accorded their plain and ordinary meaning. Rory, supra at 464, 703 N.W.2d 23. If the contractual language is unambiguous, courts must interpret and enforce the contract as written because an unambiguous contract reflects the parties' intent as a matter of law. In re Smith Trust, 480 Mich. 19, 24, 745 N.W.2d 754 (2008). Clear and specific exclusionary provisions must be given effect, but are strictly construed against the insurer and in favor of the insured. Churchman, supra at 567, 489 N.W.2d 431.

The record evidence shows that Safety King was in the business of providing air duct cleaning services and provided such services to the Mastrogiovanni defendants. During the course of performing those services, Safety King applied a sanitizing agent, Aeris-Guard Advanced Duct and Surface Treatment, to the Mastrogiovanni defendants' ductwork. The active ingredient in Aeris-Guard Advanced Duct and Surface Treatment is triclosan, which is an antimicrobial pesticide. In support of its motions for summary disposition, Hastings argued, as it does here, that our Supreme Court, in Protective Nat'l Ins. Co. of Omaha v. Woodhaven, 438 Mich. 154, 476 N.W.2d 374 (1991), "determined that pesticides qualify as a pollutant under the pollution exclusion provisions." Without any other discussion or explanation regarding why triclosan should be considered a "pollutant," Hastings claims that "[t]here is no question that the duct sanitizing by Safety King falls under the pollution exclusion." Apparently, because triclosan is considered a "pesticide," Hastings' position is that it is then also unquestionably a "pollutant" under the terms of its insurance policy.

Safety King and the Mastrogiovanni defendants argue, however, that triclosan is not a substance to which the pollution exclusion clause applies because it is not a "pollutant." They argue that triclosan is a ubiquitous antimicrobial agent found in a variety of cosmetic and personal hygiene products. Triclosan targets bacteria and dental plaque and is used in various products including, for example, soaps, skin cleaning agents, deodorants, shaving gel, toothpaste, mouthwash, dental cement, surgical sutures, cosmetics, and air duct treatments. They argue that, because triclosan is commonly used in products that are applied directly to human skin and, in many cases, within the mouth, Safety King's use of a triclosan-containing product did not implicate the pollution exclusion. It simply is not a "pollutant."

The trial court without analysis, and after merely quoting the definition of "pollution" contained in the policy, agreed with Hastings, holding: "There can be no dispute that the damages alleged in the underlying action are alleged to have been caused by a pollutant as defined by the terms of the policy." We cannot agree that the issue is that basic or the answer that obvious. The definition of "pollutant" does not include "pesticide." Instead, the defining characteristic of a "pollutant" under this policy is that it is an "irritant" or "contaminant." Illustrative examples of potential types of irritants and contaminants are set forth as including "smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste" without further qualification or limitation.¹

The terms "irritant" and "contaminant," however, are not defined by the policy. We turn to their dictionary definitions to ascertain the plain and ordinary meaning of these terms as they would appear to a reader of the contract. See Rory, supra at 464, 703 N.W.2d 23; Coates v. Bastian Bros., Inc., 276 Mich. App. 498, 504, 741 N.W.2d 539 (2007). An "irritant" is defined as "tending to cause irritation," and "a...