Meridian Mutual Insurance v. Kellman, 98-1801

• Decision Date: 05 November 1999
• Docket Number: No. 98-1801,98-1801
• Citation: 197 F.3d 1178
• Parties: (6th Cir. 1999) Meridian Mutual Insurance Company, Plaintiff-Appellant, v. Roslyn E. Kellman, Defendant-Appellee, Skender Bajrami, individually and doing business as Kopliku Painting Company, Defendant. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1178

197 F.3d 1178 (6th Cir. 1999)

Meridian Mutual Insurance Company, Plaintiff-Appellant, v. Roslyn E. Kellman, Defendant-Appellee, Skender Bajrami, individually and doing business as Kopliku Painting Company, Defendant.

No. 98-1801

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: November 5, 1999

Decided and Filed: December 2, 1999

Appeal from the United States District Court for the Eastern District of Michigan at Detroit, No. 97-72462--George E. Woods, District Judge.

Rosalind Rochkind, Daniel S. Saylor, GARAN, LUCOW, MILLER, SEWARD, COOPER & BECKER, Detroit, Michigan, for Appellant.

Michael J. Haddad, Goodman, Eden, Millender & Bedrosian, Richard A. Soble

(briefed), Matthew E. Krichbaum, SOBLE & ROWE, Ann Arbor, Michigan, for Appellee.

Before: MARTIN, Chief Judge; DAUGHTREY, Circuit Judge; KATZ, District Judge^*.

OPINION

KATZ, District Judge.

Plaintiff-Appellant Meridian Mutual Insurance Company ("Meridian") appeals the trial court's grant of summary judgment in favor of Defendant Skender Bajrami, d/b/a Kopliku Painting Company ("Kopliku"), based on a determination that an insurance policy it issued to Kopliku, obliges it to defend and indemnify Kopliku in a personal injury action arising out of exposure to certain chemicals used by Kopliku in the course of its business. For the following reasons, we AFFIRM.

Background

At all times relevant to this suit, Kopliku was covered by a commercial general liability ("CGL") insurance policy issued by Meridian. The policy obliged Meridian to defend and indemnify Kopliku for bodily injuries caused by Kopliku in the course of its business, but contained a total pollution exclusion providing that:

This insurance does not apply to . . . "[b]odily injury" or "property damage" which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.

* * *

Pollutants means any solid, liquid, gaseous, or thermal irritant or contaminant including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste. Waste includes material to be recycled, reconditioned or reclaimed.

In November of 1994, Kopliku contracted with the Detroit, Michigan Board of Education to perform construction work, including painting and drywall sealing, at Cass Technical High School ("the High School"). Defendant-Appellee Roslyn Kellman ("Kellman") was a teacher at the High School. Kellman alleges that fumes from chemicals that Kopliku was using to seal a floor in the room immediately above Kellman's classroom caused her severe and disabling respiratory injuries. She brought a personal injury suit against Kopliku in Michigan state court in February of 1997.

Kopliku tendered the defense of Kellman's state court action to Meridian, which denied coverage on the basis of the total pollution exclusion, and defended Kopliku under a reservation of rights. Meridian then instituted this declaratory judgment action in federal district court, seeking a declaration that it had no duty to defend or indemnify Kopliku in Kellman's state court action.

The trial court ruled in Kopliku's favor on cross motions for summary judgment. Both sides agree that the sealer that caused Kellman's alleged injuries was a pollutant. The sole issue before the trial court, and on this appeal, was whether the movement of the vapors had been a "discharge, dispersal, seepage, migration, release or escape" of pollutants so as to bring the injuries within the insurance policy's total pollution exclusion. The trial court found that:

the pollution exclusion clause is intended to protect the insurer from liability for the enforcement of environmental laws. The exclusion contains environmental terms of art because it is intended to exclude coverage only as it relates to environmental pollution. When a toxic substance is confined to an area of intended use it does not come within the exclusion clause.

The primer/sealer was used in its intended manner inside Cass. The fact that the fumes from the primer allegedly injured Kellman one floor below does not turn the fumes into environmental pollution within the meaning of the total pollution exclusion clause. Therefore, Meridian has a contractual obligation to defend the insured, [Kopliku], in the underlying lawsuit.

Meridian appeals from that judgment. It argues that the movement of the fumes constituted "discharge, dispersal, seepage, migration, release or escape" as defined in the policy. On an appeal from summary judgment, we review the district court's judgment de novo. Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir. 1997).

Discussion

The sole issue on appeal is whether the movement of fumes from a toxic chemical used to seal a floor in the course of an insured's business constitutes "discharge, dispersal, seepage, migration, release or escape" within the terms of an insurance policy's total pollution exclusion, when those fumes injure an employee of the institution for which the sealant is being applied, while that employee is working in a room on the floor immediately below the area where the sealer is being applied.

The insurance policy at issue must be construed according to Michigan law. In construing questions of state law, the federal court must apply state law in accordance with the controlling decisions of the highest court of the state. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). If the state's highest court has not addressed the issue, the federal court must attempt to ascertain how that court would rule if it were faced with the issue. The Court may use the decisional law of the state's lower courts, other federal courts construing state law, restatements of law, law review commentaries, and other jurisdictions on the "majority" rule in making this determination. Grantham & Mann v. American Safety Prods., 831 F.2d 596, 608 (6th Cir. 1987). A federal court should not disregard the decisions of intermediate appellate state courts unless it is convinced by other persuasive data that the highest court of the state would decide otherwise. Commissioner v. Estate of Bosch, 387 U.S. 456, 465, 87 S. Ct. 1776, 1782, 12 L. Ed. 2d 886 (1967).

State and federal courts are split on the issue of whether an insurance policy's total pollution exclusion bars coverage for all injuries caused by contaminants, or whether the exclusion applies only to injuries caused by traditional environmental pollution. Many courts, including the Sixth Circuit, have held that a pollution exclusion clause in a CGL insurance policy applies only to injuries caused by traditional environmental pollution. See, e.g., Nautilus Ins. Co. v. Jabar, 188 F.3d 27, 30-31 (1st Cir. 1999) (applying Maine law); Enron Oil Trading & Transp. Co. v. Walbrook Ins. Co., Ltd., 132 F.3d 526, 530-31 (9th Cir. 1997) (applying Montana law); Stoney Run Co. v. Prudential-LMI Commercial Ins. Co., 47 F.3d 34, 38 (2d Cir. 1995) (applying New York law); Bituminous Cas. Corp. v. Advanced Adhesive Tech., 73 F.2d 335 (11th Cir. 1996) (applying Georgia law); Lumbermen's Mut. Cas. Co. v. S-W Indus., Inc., 23 F.3d 970, 981-82 (6th Cir. 1994) (applying Ohio law); Regional Bank of Colo., N.A. v. St. Paul Fire and Marine Ins. Co., 35 F.3d 494, 498 (10th Cir. 1994) (applying Colorado law); Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1043-44 (7th Cir. 1992); C. H. Heist Caribe Corp. v American Home Assurance Co., 640 F.2d 479 (3d Cir. 1981); Sphere Drake Ins. Co. v. Y.L. Realty Co., 990 F. Supp. 240 (S.D.N.Y. 1997); Lefrak Org., Inc. v. Chubb Custom Ins. Co., 942 F. Supp. 949 (S.D.N.Y. 1996); Island Assocs., Inc. v. Eric Group, Inc., 894 F. Supp. 200 (W.D. Pa. 1995); Center for Creative Studies v. Aetna Life & Cas. Co., 871 F. Supp. 941 (E.D. Mich. 1994); Minerva Enters., Inc. v. Bituminous Cas. Corp., 851 S.W.2d 403 (Ark. 1993); American States Ins. Co. v. Koloms, 687 N.E.2d 72 (Ill. 1997); Thompson v. Temple, 580 So.2d 1133 (La. Ct. App. 1991); Sullins v. Allstate Ins. Co., 667 A.2d 617 (Md. 1995); Western Alliance Ins. Co. v. Gill, 686 N.E.2d 997 (Mass. 1997); Cepeda v Varveris, 651 N.Y.S.2d 185 (N.Y. App. Term. 1996); Kenyon v Security Ins. Co., 626 N.Y.S.2d 347 (N.Y. Sup. Ct. 1993); West American Ins. Co., v. Tufco Flooring East, Inc., 409 S.E.2d 692 (N.C. Ct. App. 1991); Owens-Corning Fiberglas Corp. v Allstate Ins. Co., 660 N.E.2d 746 (Ohio Ct. Com. Pleas 1993).

The Seventh Circuit has explained the reasoning behind limiting the application of pollution exclusion clauses only to injuries caused by traditional environmental pollution as follows:

Without some limiting principle, the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results. To take but two simple examples, reading the clause broadly would bar coverage for bodily injuries suffered by one who slips and falls on the spilled contents of a bottle of Drano, and for bodily injury caused by an allergic reaction to chlorine in a public pool. Although Drano and chlorine are both irritants or contaminants that cause, under certain conditions, bodily injury or property damage, one would not ordinarily characterize these events as pollution.

To redress this problem, courts have taken a common sense approach when determining the scope of pollution exclusion clauses. [Westchester Fire Ins. Co. v. City of Pittsburg, 768 F. Supp. 1463, 1468-71 (D. Kan. 1991)], for instance, held that the clause did not bar coverage for injuries arising from an individual's ingestion of malathion during a municipal pesticide-spraying operation. Similarly, A-1 Sandblasting & Steamcleaning Co. v. Baiden, 632 P.2d 1377, 1379-80 (1981), aff'd, 643 P.2d 1260 (1982), held that coverage was not barred for paint damage to vehicles which occurred during the spraypainting of a bridge. See also Atlantic Mut. Ins. Co. v. McFadden, No. 90-5487, slip op. (Mass. Super. Ct. May...