McGuirk Sand & Gravel, Inc. v. Meridian Mut. Ins. Co.

• Citation: 220 Mich.App. 347,559 N.W.2d 93
• Decision Date: 06 December 1996
• Docket Number: Docket No. 183051
• Parties: McGUIRK SAND & GRAVEL, INC., Plaintiff-Appellee, v. MERIDIAN MUTUAL INSURANCE COMPANY, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 93

559 N.W.2d 93

220 Mich.App. 347

McGUIRK SAND & GRAVEL, INC., Plaintiff-Appellee, v. MERIDIAN MUTUAL INSURANCE COMPANY, Defendant-Appellant.

Docket No. 183051.

Court of Appeals of Michigan.

Submitted June 18, 1996, at Lansing.

Decided Dec. 6, 1996, at 9:00 a.m.

Released for Publication Feb. 25, 1997.

William R. Thompson, Mt. Pleasant, for plaintiff-appellee.

Willingham & Cote, P.C. by John A. Yeager and Curtis R. Hadley, East Lansing, for defendant-appellant.

Before SMOLENSKI, P.J., and FITZGERALD and F.D. BROUILLETTE, ^* JJ.

SMOLENSKI, Presiding Judge.

Defendant Meridian Mutual Insurance Company appeals by leave granted the order denying its motion for summary disposition pursuant to MCR 2.116(C)(10). We reverse and remand.

This case involves a request for declaratory relief that defendant is under a duty to defend and indemnify plaintiff McGuirk Sand & Gravel, Inc., in spite of the pollution exclusion contained in the parties' commercial general liability insurance contract.

The City of Mt. Pleasant requested bids for the removal or demolition of various farm-related structures on land owned by the city. In particular, the work required the removal of two underground fuel storage tanks. Bidders were notified that the work required removal of all materials from the site for proper disposal. Plaintiff was aware that the tanks might contain contaminants that would have to be sent to a landfill. Plaintiff submitted a bid, specifically noting that "if any contaminated dirt is found upon the removal of tanks--all testing, digging & hauling will be extra." Plaintiff was thereafter awarded the contract. A third tank was discovered, and plaintiff was authorized by the city to also remove this tank. Before plaintiff removed the tanks, the city hired a waste hauler to pump out any contents remaining in the tanks. These contents were tested and, although determined to consist of water contaminated with petroleum, found to be clean enough to permit disposal at the city's water treatment plant.

After the contamination was discovered, plaintiff hired GarTech Environmental Services, Inc., to test the soil for petroleum products for the purpose of establishing a clean closure and to monitor the removal of the tanks. One tank was removed without incident. A second tank leaked approximately one quart of material as it was removed. The third tank disintegrated during the removal process, releasing up to ten gallons of liquid. The disintegrated tank, as well as soil that had come in contact with the released liquid, was dug up, placed on plastic sheets, and removed to a landfill. The remaining two tanks were taken to plaintiff's shop. A "floor dry, ... like cat litter" was spread on the bottom of the tanks, which were then scraped with a drywall knife and cleaned. The scrapings were put in five-gallon pails and sent to a landfill for disposal. The two tanks were cut up and sold for scrap. GarTech did not test any of the soil excavated by plaintiff or prepare a report for closure because it was apparent that the property was polluted, as indicated by the strong smell of fuel from the ground where the tanks were removed.

After the city determined that the property and groundwater were contaminated, the city sued Union Land Company, a Michigan partnership that had formerly owned the property, and its partners, alleging breach of an environmental covenant in the sales agreement and claiming that the partnership and partners were liable to the city for all costs of remediation and cleanup of the contaminated soil and groundwater. The partners filed third-party complaints against plaintiff for contribution premised on claims of state and federal law violations, as well as negligence.

After defendant denied an obligation to defend or indemnify plaintiff in that action, plaintiff filed its complaint in this case, which asserted that defendant had the duty to defend and indemnify plaintiff in the underlying suit and sought declaratory relief to that effect, as well as damages for breach of contract. The coverage clause of the contract provides, in relevant part, as follows:

1. Insuring Agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damages" to which this insurance applies. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS--COVERAGES A AND B. This insurance applies only to "bodily injury" and "property damage" which occurs during the policy period. The "bodily injury" or "property damage" must be caused by an "occurrence." The "occurrence" must take place in the "coverage territory." We will have the right and duty to defend any "suit" seeking those damages.

The policy provides that " 'Occurrence' an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

After discovery was complete, defendant moved for summary disposition pursuant to MCR 2.116(C)(10), arguing that it had no duty to defend or indemnify plaintiff because the following provisions of the pollution exclusion of the policy unambiguously applied in this case to preclude coverage:

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, release or escape of pollutants.

* * * * * *

(c) Which are at any time transported, handled, stored, treated, disposed of, or processed as waste by or for you or any person or organization for whom you may be legally responsible; or

(d) At or from any site or location on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations:

* * * * * *

(ii) if the operations are to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize the pollutants.

* * * * * *

(2) Pollutants 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.

Following oral argument, the trial court denied defendant's motion:

The court finds that ... the plaintiff has set forth sufficient facts upon which viewed in a light most favorable to the plaintiff's position would give rise to a dispute. I don't think I need to necessarily get into all those facts. I think they're rather evident. Therefore, the motion for summary disposition is denied, counsel.

This appeal ensued.

Defendant again argues that summary disposition was appropriate because the previously quoted provisions of the pollution exclusion of the contract unambiguously apply to preclude coverage in this case.

We review the grant or denial of a motion for summary disposition pursuant to MCR 2.116(C)(10) de novo. Stehlik v. Johnson (On Rehearing), 206 Mich.App. 83, 85, 520 N.W.2d 633 (1994).

A motion pursuant to MCR 2.116(C)(10) tests the factual basis underlying a plaintiff's claim. MCR 2.116(C)(10) permits summary disposition when except for the amount of damages, there is no genuine issue concerning any material fact and the moving party is entitled to damages as a matter of law. A court reviewing such a motion must consider the pleadings, affidavits, depositions, admissions, and any other evidence in favor of the opposing party and grant the benefit of any reasonable doubt to the opposing party. [Id. ]

We find the following analysis from our Supreme Court's opinion in Allstate Ins. Co. v. Keillor (After Remand), 450 Mich. 412, 416-417, 537 N.W.2d 589 (1995), applicable to this case:

Allstate does not dispute coverage, so the only issue before this Court is whether that coverage is precluded by an exclusion. This, of course, means that the primary issue before this Court is one of policy interpretation. When interpreting insurance policies, a number of well-established rules guide the analysis. Those relevant here are succinctly recounted in Auto-Owners Ins. Co. v. Churchman, 440 Mich. 560, 566-567, 489 N.W.2d 431 (1992):

"An insurance policy is much the same as any other contract. It is an agreement between the parties in which a court will determine what the agreement was and effectuate the intent of the parties. Accordingly, the court must look at the contract as a whole and give meaning to all terms. Further, '[a]ny clause in an insurance policy is valid as long as it is clear, unambiguous and not in contravention of public policy.' This Court cannot create ambiguity where none exists.

"Exclusionary clauses in insurance policies are strictly construed in favor of the insured. However, coverage under a policy is lost if any exclusion within the policy applies to an insured's particular claims. Clear and specific exclusions must be given effect. It is impossible to hold an insurance company liable for a risk it did not assume. [Citations omitted.]"

The type of pollution exclusion at issue in this case is known as an absolute pollution exclusion. See Union Mutual Fire Ins. Co. v. Hatch, 835 F.Supp. 59, 63-64 (D.N.H.1993); Bureau of Engraving v. Federal Ins. Co., 793 F.Supp. 209, 211-212 (D.Minn.1992), aff'd 5 F.3d 1175 (C.A. 8, 1993). Because the insurance industry was dissatisfied with both the judicial constructions given to the previous type of standard pollution exclusion (i.e., such exclusions contain a "sudden and accidental" exception to the exclusion and thus preclude coverage for damage caused by pollution unless the damage is sudden and accidental, see, e.g., American Bumper & Mfg. Co. v. Hartford Fire Ins. Co., 452 Mich. 440, 449, 550 N.W.2d 475 [1996]; Auto-Owners Ins. Co. v. City of Clare, 446 Mich. 1, 8, 521 N.W.2d 480 [1994]; Traverse City Light & Power Bd. v. Home Ins. Co., 209 Mich.App. 112, 115, 530 N.W.2d 150 [1995] ) and the enormous expense and exposure resulting...