Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd.

Decision Date16 September 1992
Docket NumberNo. 91-641,91-641
Citation597 N.E.2d 1096,64 Ohio St.3d 657
Parties, 36 ERC 1297, 61 USLW 2188 HYBUD EQUIPMENT CORP. et al., Appellants and Cross-Appellees, v. SPHERE DRAKE INSURANCE COMPANY, LTD., Appellee and Cross-Appellant.
CourtOhio Supreme Court

Industrial Excess Landfill, Inc. ("IEL") is a corporation that, before 1978, owned and operated the Industrial Excess Landfill, a licensed landfill in Uniontown, Ohio. IEL still owns the site of the landfill; however, the landfill no longer accepts any waste.

Hybud Equipment Corporation ("Hybud") is a corporation with its principal place of business in Akron, Ohio. In addition to building and leasing equipment, compactors, and containers for solid waste, Hybud owns a number of vehicles. These vehicles are employed to collect and transport the waste material of various local commercial and industrial entities. Hybud has taken waste to the Industrial Excess Landfill and the Montville Landfill. The latter landfill is located in Medina County, Ohio.

Hyman Budoff is an officer and director of both IEL and Hybud. Over the years, IEL and Hybud have purchased insurance coverage from a number of companies. From July 30, 1985 until June 30, 1987, IEL, Hybud and Budoff were each covered under two policies issued by the Sphere Drake Insurance Company, Ltd. Sphere Drake is authorized to transact business in Ohio through the Ostrov Corporation, an independent insurance agency.

Under the comprehensive general liability insurance provisions of both policies, Sphere Drake agreed to pay on behalf of IEL, Hybud and Budoff any sums which they would become legally obligated to pay as a result of bodily injury or property damage caused by an "occurrence." These provisions also stated that Sphere Drake "shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent * * *."

Each policy then listed a number of exclusions to the foregoing coverage, including the so-called "Standard Pollution Exclusion." In the second policy, which covered the period from June 30, 1986 until June 30, 1987, this exclusion was set forth as exclusion (f):

"This insurance does not apply:

" * * *

"(f) to 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 materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or other water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental[.]" (Emphasis added.)

The relevant exclusion in the first policy, which covered the period from July 30, 1985 until July 30, 1986, was worded in virtually the same manner.

After the second policy expired, three environmental lawsuits were brought, each involving one or more of the three insureds. In two of these actions, IEL, Hybud, and Budoff were named as defendants. In the third, Hybud was named as a third-party defendant in an action involving the Montville Landfill.

The first action that involved each of the three insureds was initiated in November 1987 in an Ohio federal district court. In that complaint, the plaintiff, Linda Putinski, alleged that she had suffered bodily injury and property damage as a result of the leakage of certain pollutants from the Industrial Excess Landfill. Specifically, she alleged that as a result of damage to storage containers, various chemicals had escaped into the air, soil, and groundwater over a fourteen-year period.

The second action against each of the three insureds also involved the Industrial Excess Landfill. This action was brought by the United States in October 1989 in the same Ohio federal district court. The complaint was predicated on an administrative order issued by the Environmental Protection Agency in December 1987, and then superseded in January 1988.

In the order, the agency found that the landfill had accepted various waste materials over a twelve-year period, even though IEL had failed to install an impermeable liner to halt any leakage of waste. Consequently, certain contaminants had migrated into residential water wells near the landfill. Based upon this, the complaint alleged that IEL, Hybud and Budoff, along with other named defendants, were jointly and severally liable for any costs incurred by the United States in remedial actions.

The third action was originally filed by the state of Ohio in the Medina County Court of Common Pleas. There, the state sought the cleanup of the Montville Landfill. The complaint alleged that as a result of the manner in which the waste had been handled, a leachate had been generated and was seeping into the local ground and surface waters along with other hazardous waste. The complaint further alleged that this had been occurring since the late 1970s.

In April 1989, Hybud was brought into that action as a third-party defendant. The third-party complaint alleged that even though Hybud knew or should have known that the Montville Landfill was not licensed to accept such waste, Hybud had transported hazardous waste to the landfill over a period of years.

After receiving service in each of the aforementioned actions, the three insureds notified Sphere Drake of each action, and asked the company to defend them in the litigation. In each instance, Sphere Drake refused.

Accordingly, the three insureds initiated the instant declaratory judgment action in the Summit County Court of Common Pleas. For relief, the insureds requested that the trial court declare that under the terms of the two policies, Sphere Drake was required to defend them in each of the foregoing cases. The insureds also claimed damages covering the costs they had incurred as a result of having to defend themselves. In response, Sphere Drake argued, inter alia, that it did not have a duty to defend in any of the actions because coverage was excluded by the pollution exclusion clause in both policies.

The issues of liability and damages were separated for purposes of hearing. After a bench trial, the trial court rendered its first judgment, holding that Sphere Drake was required by the policies to provide a defense to the actions and indemnify the insureds from liability. Then, after a further hearing on the issue of damages, the court issued its second judgment, ordering Sphere Drake to pay the insureds $181,287 as damages for failing to represent them. The court further ordered Sphere Drake to assume the defense of the insureds in the two actions still pending, and to pay future costs incurred in the pending suits.

Both sides appealed. As to the issue of liability, the Ninth Appellate District affirmed the judgment of the trial court. Relying upon its earlier decision in Buckeye Union Ins. Co. v. Liberty Solvents & Chemicals Co. (1984), 17 Ohio App.3d 127, 17 OBR 225, 477 N.E.2d 1227, the appellate court rejected Sphere Drake's contention that coverage was barred by the pollution exclusion. As to the issue of damages, the appellate court affirmed the trial court's assessment of damages, holding that there was no right to a jury trial.

Both sides appealed to this court. In July 1991, this court granted the motion and cross-motion to certify the record.

Day, Ketterer, Raley, Wright & Rybolt, and Matthew Yackshaw, Canton, for appellants and cross-appellees.

Reminger & Reminger Co., L.P.A., David Ross and Clifford C. Masch, Cleveland, Arter & Hadden, and Louis Gerber, Columbus, for appellee and cross-appellant.

George Pappas Co., L.P.A., and Dennis J. Bartek, Akron, Lord, Bissell & Brook, John B. Haarlow, Michael P. Comiskey, Daniel I. Schlessinger and Diane I. Jennings, Chicago, Ill., urging reversal and in support of the cross-appeal, on behalf of amicus curiae John Richard Ludbrook Yovell.

Wiley, Rein & Fielding, Thomas W. Brunner, Christopher D. Cerf and Kirk J. Nahra, Washington, D.C., Montgomery, Rennie & Jonson and Frederick M. Morgan, Jr., Cincinnati, urging reversal and in support of the cross-appeal, on behalf of amici curiae Insurance Environmental Litigation Ass'n et al.

Brouse & McDowell, Frank E. Quirk, Paul A. Rose and Keven D. Eiber, Akron, Anderson, Kill, Olick & Oshinsky, Eugene R. Anderson, Thomas H. Sear and Thomas G. Rozinski, New York City, urging affirmance and in opposition to the cross-appeal, on behalf of amici curiae city of Akron et al.

Graydon, Head & Ritchey and John C. Greiner, Cincinnati, Covington & Burling, William H. Allen, William F. Greaney and Adam M. Cole, Washington, D.C., urging affirmance and in opposition to the cross-appeal, on behalf of amici curiae Ohio Mfrs. Ass'n et al.

Jones, Day, Reavis & Pogue, Steven E. Sigalow, Kathleen B. Burke, Joseph C. Weinstein and Charles D. Hassell, Cleveland, urging affirmance and in opposition to the cross-appeal, on behalf of amici curiae Ohio Tp. Ass'n et al.

Squire, Sanders & Dempsey, John R. Gall, David W. Alexander, Karen A. Winters and Philomena M. Dane, Columbus, urging affirmance and in opposition to the cross-appeal, on behalf of amici curiae Danis Environmental Management Co. et al.

Lee I. Fisher, Atty. Gen., Beverly Yale Pfeiffer and Ellen B. Leidner, Columbus, urging affirmance and in opposition to the cross-appeal on behalf of amicus curiae Lee I. Fisher.

CHRISTLEY, Justice.

In their appeal before this court, the three insureds, IEL, Hybud and Budoff, have raised four issues concerning their right to a jury trial and the sufficiency of the damages award. In its cross-appeal, Sphere Drake has also raised a number of issues, the majority of which pertain to the proper interpretation of the language in the two policies.

For the reasons which follow, this court finds that it is not necessary for us to address the majority of these...

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