Madison Const. v. Harleysville Mut. Ins.

• Decision Date: 27 July 1999
• Citation: 557 Pa. 595,735 A.2d 100
• Parties: MADISON CONSTRUCTION COMPANY, Appellant, v. The HARLEYSVILLE MUTUAL INSURANCE COMPANY, Nicholas Ezzi, Brian Murtaugh, Kelran Associates, Inc., and Euclid Chemical Company, Appellees.
• Court: Pennsylvania Supreme Court

557 Pa. 595

735 A.2d 100

MADISON CONSTRUCTION COMPANY, Appellant, v. The HARLEYSVILLE MUTUAL INSURANCE COMPANY, Nicholas Ezzi, Brian Murtaugh, Kelran Associates, Inc., and Euclid Chemical Company, Appellees.

Supreme Court of Pennsylvania.

Submitted January 13, 1998.

Decided July 27, 1999.

Reargument Denied October 8, 1999.

Alan Greenberg, Philadelphia, JoAnne Eskin Sutkin, Mount Laurel, for Madison Const. Co.

Lee M. Epstein, Philadelphia, for Amicus-Betz Laboratories, Inc.

William T. Salzer, Philadelphia, for Harleysville Mut. Ins. Co.

Steven R. Waxman, Philadelphia, for Elucid Chemical Co.

Alfred V. Altopiedi, Philadelphia, for Nicholas Ezzi. Andrew A. Borek, Philadelphia, for Brian Burtaugh and Kelran Associates, Inc.

Edward M. Dunham, Jr., Philadelphia, for Amicus-Aetna Cas. and Sur. Co.

David E. Sandel, Jr., Philadelphia, for Amicus-Ins. Environmental Law Ass'n.

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

OPINION

SAYLOR, Justice.

The issue in this declaratory judgment action is whether a pollution exclusion clause in a policy of commercial general liability insurance issued to Appellant, Madison Construction Company ("Madison"), by Appellee, Harleysville Mutual Insurance Company ("Harleysville"), relieves Harleysville of its obligation to defend Madison in an underlying personal injury action. We conclude, as did the en banc Superior Court, 451 Pa.Super. 136, 678 A.2d 802, that the pollution exclusion clause operates to bar coverage in the present case, and therefore affirm.

The events giving rise to this litigation are as follows: In 1991, Madison was engaged in pouring and curing concrete utility trenches at the Boeing/Vertol Helicopters Facility. To cure the concrete, Madison applied a compound known as Euco Floor Coat or Eucocure. While this was being done, the construction area was enclosed in an "envelope" of polyethylene sheeting. According to his subsequently filed complaint, Nicholas Ezzi, a Boeing employee, was summoned to the construction area to investigate a strong odor. Ezzi alleges that as he attempted to set up an exhaust fan for the fumes emanating from the curing agent, he was overcome by the fumes, lost consciousness, and fell into an excavation site, sustaining severe and permanent injuries.

Ezzi filed a negligence action, naming as defendants Madison, a subcontractor; Kelran Associates, Inc., the general contractor; and Brian Murtaugh, a Kelran project superintendent. Kelran and Murtaugh joined Euclid Chemical Company, the manufacturer of Euco Floor Coat, as an additional defendant.

Madison was insured under a commercial general liability policy issued by Harleysville. The policy contained a clause requiring Harleysville to defend Madison in any lawsuit that fell within the parameters of coverage. Madison informed Harleysville of the accident shortly after it occurred. Harleysville denied coverage and refused to defend on the basis of the policy's pollution exclusion clause,¹ which reads as follows

2. Exclusions.

This insurance does not apply to:

. . .

f.(1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:

(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured;

. . .

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured's behalf are performing operations:

(i) if the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor....

The policy defines "pollutants" as

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.

Harleysville maintained that Euco Floor Coat was a pollutant within the meaning of the policy. Madison then filed the present declaratory judgment action to resolve the issue of whether Harleysville was contractually obligated to provide coverage. Both parties moved for summary judgment.

The trial court denied Harleysville's motion for summary judgment and entered summary judgment in favor of Madison. In the opinion in support of its order, the trial court considered first the meaning of the term "pollutant" in the context of a pollution exclusion clause. After noting that the appellate courts of the Commonwealth had not yet addressed the issue, the trial court chose to adopt the interpretation set forth by the intermediate appellate court of North Carolina in West American Ins. Co. v. Tufco Flooring, 104 N.C.App. 312, 409 S.E.2d 692, appeal dismissed as improvidently granted, 332 N.C. 479, 420 S.E.2d 826 (1992)

.

In that case, Tufco, a floor resurfacing business, used a styrene monomer resin in the course of resurfacing the floors in certain areas of a Perdue chicken processing plant. Vapors or fumes from the resin allegedly contaminated chicken stored in a nearby cooler. Relying on a pollution exclusion clause similar to the one at issue here, the insurer, West American, refused to provide coverage for Perdue's claim against Tufco. The trial court granted summary judgment to Tufco and Perdue in their declaratory judgment action against West American. The Court of Appeals affirmed, reasoning, in pertinent part, that

Tufco did not bring the vapors or fumes which invaded the chicken to the Perdue plant. Rather, Tufco brought an unadulterated, pure raw material, styrene monomer resin, in one-gallon metal cans with screw-on caps. When this raw material was brought onto the site, it was neither an "irritant [nor a] contaminant." It was a raw material used by Tufco in its normal business activity of resurfacing floors. Yet, to be a "pollutant" under the exclusion, a substance brought onto the site must be precisely that, an "irritant or contaminant."

Id. at 322, 409 S.E.2d at 698.

Similarly, the trial court declared in the present case, what Madison brought to the work site was not vapors or fumes but a pure raw material, Euco Floor Coat, which was contained in covered, one-gallon cans. Far from being an unwanted "irritant" or "contaminant," the court reasoned, Euco Floor Coat was a necessary tool of Madison's trade; in fact, Madison's contract with Kelran required it to use such a curing compound. Therefore, the trial court concluded that the policy's definition of "pollutants" was clear and unambiguous and did not extend to the substance at issue, Euco Floor Coat.

Although the trial court could have rested its decision that the exclusion did not apply upon that conclusion alone, it also considered whether there had been a discharge, dispersal, or similar action of the allegedly polluting substance for the purposes of the exclusion. Again the trial court turned to Tufco for guidance. According to the North Carolina court,

[t]he operative policy terms of the pollution exclusion clause imply that there must be a discharge into the environment before coverage can be properly denied. The operative terms in the version of the pollution exclusion clause at issue in this case are "discharge," "dispersal," "release," and "escape." While they are not defined in the policy, the terms "discharge" and "release" are terms of art in environmental law and include "escape" by definition and "dispersal" by concept.

Id. at 324, 409 S.E.2d at 699 (footnote excluded). Although the absolute version of the pollution exclusion clause, unlike its predecessor, did not include language specifying a discharge of pollutants "into or upon land, the atmosphere or any water course or body of water . . .," the court was convinced by its review of the exclusion's history that the omission was of no moment. Thus, the court reasoned "that any discharge, dispersal, release, or escape' of a pollutant must be into the environment in order to trigger the pollution exclusion clause and deny coverage to the insured" and that the discharge at issue, "confined to a cooler within a chicken processing plant," did not qualify. Id. at 325, 409 S.E.2d at 700. Persuaded by the North Carolina court's analysis, the trial court in the present case concluded that since the alleged pollutant, Euco Floor Coat, had been contained within the polyethylene envelope at all times, there had been no discharge of the substance into the environment and therefore no event to which the pollution exclusion clause applied.

A divided panel of the Superior Court (Olszewski, J.; Cavanaugh, J., concurring in the result; and Wieand, J., dissenting without opinion) affirmed the trial court's entry of summary judgment in favor of Madison, but on a different ground. The lead opinion by Judge Olszewski rejected the trial court's conclusion that the vapors emanating from the floor covering were not pollution.

While the floor-covering material itself was a necessary instrument of Madison's work, the vapors, however unavoidable, were not. They were an unwanted irritating waste product of the floor covering, and thus could be construed to fit within the policy's definition of pollution.

Op. at 145, 678 A.2d 802.² Judge Olszewski concluded, however, that the pollution exclusion was ambiguous in light of the existence of two contrary schools of thought concerning its interpretation. According to one school of thought, the exclusion did not apply where the pollution in question was not environmental or industrial in nature; according to the other, the exclusion was indeed absolute and applied to any set of facts that came within the literal meaning of its terms.³ Relying on the Superior Court's decision in Cohen v. Erie Indemnity Co., 288 Pa.Super. 445, 432 A.2d 596 (1981), Judge Olszewski reasoned that "[t]he mere fact that several appellate courts have ruled in favor of a...