Lititz Mut. Ins. Co. v. Steely

• Decision Date: 30 November 2001
• Citation: 567 Pa. 98,785 A.2d 975
• Parties: LITITZ MUTUAL INSURANCE CO., Appellee, v. Clifford STEELY, Barbara Steely, Steven Brown, A Minor, by Ethel Brown, His Guardian, Jack Yeager and Shirley Yeager, Appellants (Two Cases).
• Court: Pennsylvania Supreme Court

785 A.2d 975

567 Pa. 98

LITITZ MUTUAL INSURANCE CO., Appellee, v. Clifford STEELY, Barbara Steely, Steven Brown, A Minor, by Ethel Brown, His Guardian, Jack Yeager and Shirley Yeager, Appellants (Two Cases).

Supreme Court of Pennsylvania.

Argued April 30, 2001.

Decided November 30, 2001.

Paul F. Lantieri, Philadelphia, for Jack Yeager.

Peter Russell Kohn, Philadelphia, for Steven Brown/Ethel Brown.

Rory Oliver Connaughton, Robert M. Frankhouser, Lancaster, for Clifford and Barbara Steely.

Matthew Hermann Haverstick, amicus curiae, New York, NY, for Federal Home Loan Mortgage Co.

Paul W. Kisslinger, Barry J. Fleishman, amicus curiae, Washington, DC, for Valspar Corp. & National Paint.

John Alexander MacDonald, amicus curiae, Philadelphia, for United Policy Holders.

James R. Segerdahl, amicus curiae, for PPG Industries, Inc.

Timothy J. Huber, Lebanon, for Lititz Mutual Co.

Guy A. Cellucci, Philadelphia, for Environmental Litigation Accoc.

Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.

OPINION

SAYLOR, Justice.

The issue to be decided is whether a pollution exclusion clause in a commercial general liability insurance policy precludes coverage for injuries allegedly caused by the ingestion and/or inhalation of lead-based paint.

For approximately five and one-half years between 1988 and 1993, Steven Brown ("Steven"), a minor, resided in a rental property owned by Clifford and Barbara Steely (the "Steelys"). Thereafter, Steven resided for two years in a rental property owned by Jack and Shirley Yeager (the "Yeagers"). In 1996, Steven's mother, Ethel Brown, commenced an action on his behalf against the Steelys and the Yeagers, alleging negligence, breach of implied warranty of habitability, and misrepresentation. The gravamen of the complaint was that, as a result of having ingested and inhaled lead-based paint, which had been present on the interior surfaces of the residences, Steven had sustained serious injury in the form of lead poisoning and consequent neurodevelopmental delay.

For virtually the entire period of Steven's residence on their premises, the Steelys were insured under successive commercial general liability ("CGL") policies issued by Lititz Mutual Insurance Company ("Lititz"). When the Steelys notified Lititz of the lawsuit, the insurer notified them of its intention to defend pursuant to a reservation of rights.¹ Lititz then commenced a declaratory judgment action, seeking a determination that coverage of claims arising from residential lead paint poisoning was precluded by the policy's "pollution exclusion."² This provision excluded coverage for:

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[.]

The policy provided further that

[p]ollutants 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.

Lititz filed a motion for summary judgment, which the trial court denied, finding that both the definition of pollutants and the prescribed methods of transmission were ambiguous when applied to the facts of the case. Since lead paint was not listed among or closely related to the examples of pollutants offered by the policy, the trial court reasoned, it was possible that the exclusion was not meant to, and did not, apply to residential lead paint poisoning claims. As for the methods of transmission, the trial court noted that numerous jurisdictions had determined that terms such as "discharge" and "dispersal" were terms of art intended to denote environmental pollution. In the court's view, that interpretation of the terms was entitled to as much weight as any other, and rendered the terms ambiguous with respect to residential pollution. Finally, the court noted, as a supporting although not decisive factor, the divided state of the law among other jurisdictions on this issue. Having concluded that the exclusion was ambiguous, the court, as required, see Standard Venetian Blind Co. v. American Empire Ins. Co., 503 Pa. 300, 304-05, 469 A.2d 563, 566 (1983), resolved the ambiguity in favor of the insured and denied the motion.³

The Steelys then filed their own motion for summary judgment, and were subsequently joined in that motion by the Yeagers and Steven Brown (collectively, "Appellants"). Attached to Steven Brown's joinder were the affidavits of Ellen K. Silbergeld, Ph.D., a toxicologist; James Shockley, a paint expert; and James E. Girard, Ph.D., a chemist.⁴ The experts' affidavits, which were largely consistent with each other, made the following points: The lead that is contained in lead-based paint is never discharged or released from the paint into the atmosphere. Instead, the paint, applied to the interior surfaces of a building, deteriorates over time, and through this process of surface degradation, small fragments, chips, and microscopic particles of the paint become available for inhalation or ingestion. Lead-based paint is the principal cause of childhood lead poisoning in the United States today, but it is paint, not lead in pure elemental form, that is being inhaled or ingested.

Following oral argument, and for the reasons cited in its previous decision denying Lititz's motion for summary judgment, the trial court granted Appellants' motion for summary judgment to the extent of finding that Lititz had a duty to defend the Steelys. Explaining that resolution of the question of Lititz's duty to indemnify would be premature, the court dismissed without prejudice the parties' request for a ruling on that issue. Both parties appealed to the Superior Court.

The Superior Court reversed, citing as controlling precedent our recent decision in Madison Constr. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 735 A.2d 100 (1999). See Lititz Mut. Ins. Co. v. Steely, 746 A.2d 607 (Pa.Super.1999). Madison concerned a pollution exclusion clause that was almost identical to that in the Lititz policy.⁵ The issue was whether such a clause served to relieve Harleysville of the obligation to defend its insured, Madison, in a personal injury action brought by an individual who had been overcome by fumes emanating from Euco Floor Coat, a curing agent that Madison had applied to newly poured concrete trenches. This Court began by emphasizing that the goal of interpreting an insurance policy, like the goal of interpreting any other contract, is to determine the intent of the parties as manifested by the language of the policy, see Madison, 557 Pa. at 606, 735 A.2d at 106 (quoting Gene & Harvey Builders v. Pennsylvania Mfrs. Ass'n, 512 Pa. 420, 426, 517 A.2d 910, 913 (1986)), explaining that a court is required to give effect to such language, if unambiguous, but to interpret it in favor of the insured, if otherwise. See id. (quoting same). Ambiguity exists if the language at issue could reasonably be construed in more than one way. See id. (citing Hutchison v. Sunbeam Coal Corp., 513 Pa. 192, 201, 519 A.2d 385, 390 (1986)). Whether ambiguity exists cannot be resolved in a vacuum, we noted, but must instead be considered in reference to a specific set of facts. See id.

Applying this analytical framework, Madison considered first whether the policy's definition of "pollutant" applied unambiguously to the product at issue. This question was answered affirmatively on the basis of the record: a manufacturer's report referred to the irritating effects of Euco Floor Coat and noted that its constituents included chemicals known to be toxic. See id. at 606-08, 735 A.2d at 107-08. The Court turned then to the more difficult question of whether the exclusion's requirement of an "actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape" of a pollutant was similarly unambiguous when judged against the facts of the case. Noting that the policy did not define those terms, we proceeded to determine their natural, plain, and ordinary meanings, and drew from those meanings the conclusion that the exclusionary language had been intended "to comprehend all such types and degrees of movement." Id. at 608-09, 735 A.2d at 108. In reaching this conclusion, the Court specifically rejected the argument, made by Madison and accepted by the trial court, that the words at issue were terms of art in environmental law and, as such, implied a discharge or dispersal "into the environment." Such argument, Madison explained, did not comport with the principles of contract interpretation previously cited: the trial court, in striving to discern the considerations underlying the policy language, had failed to acknowledge and apply its plain meaning. See id. at 609-610, 735 A.2d at 108. Finally, this Court considered but rejected Madison's claim that the injured party's complaint alleged acts of negligence that did not "arise out of" the use of Euco Floor Coat. All of the plaintiff's claims of negligence, we reasoned, rested upon the fundamental averment that, while attempting to set up an exhaust fan to dissipate the fumes emanating from the curing agent, the plaintiff was suddenly overcome by those fumes. See id. at 611, 735 A.2d at 109. Accordingly, we concluded that all of the plaintiff's alleged injuries "arose out of" the release of fumes from the curing agent, and, therefore, that the pollution exclusion clause precluded coverage for those injuries. See id. at 612, 735 A.2d at 110.⁶

In applying Madison's reasoning to the present case, the Superior Court concluded that the trial court had erred in finding that Lititz had an obligation to defend the Steelys. First, the Superior Court rejected the argument of Appellants (there, the appellees) that the exclusion was ambiguous because, if applied as written, it would render every substance in...