Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd. v. Farmland Mut. Ins. Co.

• Decision Date: 17 September 1997
• Docket Number: No. 96-512,96-512
• Citation: 568 N.W.2d 815
• Parties: IOWA COMPREHENSIVE PETROLEUM UNDERGROUND STORAGE TANK FUND BOARD, Appellant, v. FARMLAND MUTUAL INSURANCE COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 815

568 N.W.2d 815

45 ERC 1797

IOWA COMPREHENSIVE PETROLEUM UNDERGROUND STORAGE TANK FUND BOARD, Appellant, v. FARMLAND MUTUAL INSURANCE COMPANY, Appellee.

No. 96-512.

Supreme Court of Iowa.

Sept. 17, 1997.

John R. Perkins and Thomas S. Stewart of Shearer, Templer & Pingel, West Des Moines, for appellant.

Douglas A. Haag of Patterson, Lorentzen, Duffield, Timmons, Irish, Becker & Ordway, L.L.P., Des Moines, for appellee.

Eugene R. Anderson and John A. MacDonald of Anderson Kill & Olick, P.C., New York City, NY, John C. Hendricks of Stanley, Lande & Hunter, Davenport, and Amy Bach of United Policyholders, San Francisco, CA, for amicus curiae United Policyholders.

Mark McCormick and Roger Stetson of Belin Harris Lamson McCormick, P.C., Des Moines, Lester O. Brown of Jones, Day, Reavis & Pogue, Los Angeles, CA, and Donna C. Peavler and Britt K. Latham of Jones, Day, Reavis & Pogue, Dallas, TX, for amicus curiae IES Utilities, Inc.

Laura A. Foggan, Robert B. Bell, and Luis de la Torre of Wiley, Rein & Fielding, Washington, DC, Fred M. Haskins, Iowa Insurance Institute, Des Moines, and Frank J. Stork of Law Offices of Frank J. Stork, Des Moines, for amici curiae Insurance Environmental Litigation Association, Iowa Insurance Institute, and American Insurance Association.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, CARTER, and SNELL, JJ.

LARSON, Justice.

This appeal involves our interpretation of the word "sudden" in a pollution-exclusion provision of a comprehensive general liability insurance policy. The issue is whether "sudden" requires that the pollution occur abruptly, as a "boom event," as argued by the insurer, or whether it is sufficient that the event be merely unforeseen or unexpected, as argued by the insured. We agree with the district court's interpretation of the word sudden as including a temporal aspect requiring an abrupt event. We therefore affirm the summary judgment.

I. Facts.

The following facts are undisputed. The pollution site is the former Hancock County Cooperative (Coop) retail gasoline station in Ventura, Iowa. Gasoline contamination to the soil and groundwater has occurred at the site, seeping from steel underground storage tanks located on the property. The property has been owned and operated as a retail gas station by the cooperative since the 1930s. The leaking underground tanks were removed in 1988, but the gasoline contamination to soil and groundwater at the site was not discovered until May 1990.

The storage tanks began to release gasoline into the soil and groundwater because of corrosion to the tank walls at least ten years prior to their removal in 1988. The storage tanks were releasing gasoline into the environment during one or more of the policy years during which Farmland Mutual Insurance Company's comprehensive general liability policies were in force.

All of the insurance policies issued to the Coop by Farmland contained the following standard pollution exclusion:

(b) Exclusions

This insurance does not apply to:

....

(6) 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 any 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 Iowa Comprehensive Underground Storage Tank Fund Board (the board) took remedial action at the contamination site and, as the Coop's assignee, made demands on Farmland for its costs. The board filed a declaratory judgment action, asking the court to interpret the "sudden and accidental" language in the policy.

II. Scope of Review.

We review a summary judgment ruling for error. Summary judgment may be entered if the record shows "no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Iowa R. Civ. P. 237(c). Thus, "we examine the record before the district court to decide whether a genuine issue of material fact exists and whether the court correctly applied the law." In doing so, we view the facts in the light most favorable to the party opposing the motion for summary judgment.

Anderson v. Miller, 559 N.W.2d 29, 31 (Iowa 1997) (citations omitted) (quoting Gerst v. Marshall, 549 N.W.2d 810, 811-12 (Iowa 1996) (quoting Benavides v. J.C. Penney Life Ins. Co., 539 N.W.2d 352, 354 (Iowa 1995))).

III. Analysis.

This dispute centers on the provision in the policy stating that "this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental." Farmland argues that the term "sudden" is unambiguous, that it has a temporal requirement, and that it is synonymous with the word "abrupt." The board, on the other hand, argues that "sudden" is ambiguous because it can also mean unforeseen or unexpected.

Well-established principles guide the construction and interpretation of insurance policies:

"Construction of an insurance policy--the process of determining its legal effect--is a question of law for the court. Interpretation--the process of determining the meaning of words used--is also a question of law for the court unless it depends on extrinsic evidence or a choice among reasonable inferences to be drawn."

Allied Mut. Ins. Co. v. Costello, 557 N.W.2d 284, 286 (Iowa 1996) (quoting A.Y. McDonald Indus., Inc. v. Insurance Co. of N. Am., 475 N.W.2d 607, 618 (Iowa 1991)).

If an insurance policy is ambiguous, requires interpretation, or is susceptible of two equally plausible constructions, we adopt the construction that is most favorable to the insured. This principle of construction is necessary because insurance policies are in the nature of adhesion contracts. Thus an insurer has a duty to define any limitations or exclusionary clauses in clear and explicit terms. The burden of establishing an exclusion rests upon the insurer.

Allied Mut., 557 N.W.2d at 286 (citations omitted) (citing West Bend Mut. Ins. Co. v. Iowa Iron Works, Inc., 503 N.W.2d 596, 598 (Iowa 1993)); see also Farm & City Ins. Co. v. Gilmore, 539 N.W.2d 154, 157 (Iowa 1995) (outlining the rules guiding the interpretation of exclusions).

The controlling consideration in interpreting insurance policies is the intent of the parties. Pierce v. Farm Bureau Mut. Ins. Co., 548 N.W.2d 551, 555 (Iowa 1996). We ordinarily determine that intent from the language of the policy itself unless the policy is ambiguous. Kibbee v. State Farm Fire & Cas. Co., 525 N.W.2d 866, 868 (Iowa 1994). When a policy term is not defined in the policy, as in this case, we give the term its ordinary meaning. Pierce, 548 N.W.2d at 555. In searching for that meaning, we often look to dictionaries. Id.

As with most words, "sudden" has more than one dictionary meaning. Webster's Third New International Dictionary 2284 (1986) provides these definitions:

1a: happening without previous notice or with very brief notice: coming or occurring unexpectedly: not foreseen or prepared for ... b: changing angle or character all at once ... c: come upon or met with unexpectedly ... 2 a: characterized by or manifesting hastiness ... b obs: characterized by swift action.

We have said that:

Ambiguity exists if, after the application of pertinent rules of interpretation to the policy, a genuine uncertainty results as to which one of two or more meanings is the proper one.

A.Y. McDonald Indus., Inc., 475 N.W.2d at 618. If the term is susceptible to two reasonable interpretations, the interpretation favoring the insured is adopted. See West Bend Mut. Ins. Co., 503 N.W.2d at 598-99; A.Y. McDonald Indus., Inc., 475 N.W.2d at 619.

The board concedes that a temporal element is a part of the definition of sudden, but it argues that the word is also defined as "unexpected" or "unforeseen," "neither of which has a temporal connotation." For this reason, the board argues, the term is ambiguous, and the board should get the benefit of the ambiguity. Compare Just v. Land Reclamation Ltd., 155 Wis.2d 737, 456 N.W.2d 570, 573 (1990) ("The very fact that recognized dictionaries differ on the primary definition of 'sudden' is evidence in and of itself that the term is ambiguous."), with New Castle County v. Hartford Accident & Indem. Co., 933 F.2d 1162, 1193 (3d Cir.1991) ("[T]he existence of more than one dictionary definition is not the sine qua non of ambiguity. If it were, few words would be unambiguous.").

The parties cite numerous cases on both sides of this frequently litigated issue. Lists of cases from other jurisdictions on both sides of the issue may easily be found. See, e.g., New Castle County, 933 F.2d at 1195 (providing lengthy list of cases from other jurisdictions falling on both sides of the issue).

Although we have not addressed this specific issue, we have discussed the meaning of the word "accidental," the tandem word in the "sudden and accidental" language of the pollution-exclusion clause. See Weber v. IMT Ins. Co., 462 N.W.2d 283 (Iowa 1990). Weber turned on whether a hog manure spill on a public road was a "sudden and accidental" occurrence under the terms of the pollution exclusion. We said:

We adopt the following definition of accidental for the purposes of this liability policy: an unexpected and unintended event. This definition is consistent with our own definition of accident, as well as the...