Motorists Mut. Ins. Co. v. Ironics, Inc.

• Decision Date: 23 March 2022
• Docket Number: 2020-0306
• Parties: MOTORISTS MUTUAL INSURANCE COMPANY, Appellant, v. IRONICS, INC., et al., Appellees.
• Court: Ohio Supreme Court

168 Ohio St.3d 467

200 N.E.3d 149

MOTORISTS MUTUAL INSURANCE COMPANY, Appellant,

v.IRONICS, INC., et al., Appellees.

No. 2020-0306

Supreme Court of Ohio.

Submitted March 4, 2021

Decided March 23, 2022.

Milligan Pusateri Co., L.P.A., Merle D. Evans III, Canton, and Jack B. Cooper, for appellant.

Buckley King, L.P.A., and Theodore M. Dunn Jr., Cleveland, for appellee Ironics, Inc.

Shumaker, Loop & Kendrick, L.L.P., John Siciliano, and John K. Nelson, Toledo, for appellee Owens-Brockway Glass Container, Inc.

Vorys, Sater, Seymour & Pease, L.L.P., and Natalia Steele, Cleveland, urging reversal for amicus curiae the Ohio Insurance Institute.

Brouse McDowell, L.P.A., Stacy R.C. Berliner, Cleveland, and P. Wesley Lambert, Akron, urging affirmance for amicus curiae United Policyholders.

Brunner, J. {¶ 1} This appeal calls for us to consider whether an umbrella insurance policy between plaintiff-appellant, Motorists Mutual Insurance Company ("Motorists"), and defendant-appellee Ironics, Inc., applies to claims made against Ironics by defendant-appellee Owens-Brockway Glass Container, Inc. ("Owens"). The trial court held that the umbrella policy does not apply and therefore granted summary judgment in favor of Motorists, but the Sixth District Court of Appeals reversed. We affirm the Sixth District's judgment.

I. Background...........................................................................................................................	¶ 2
II. Analysis...................................................................................................................................	¶ 8
A. Standard of review...........................................................................................................	¶ 8
B. Burden of proof................................................................................................................	¶ 9
C. Do Owens's claims fall within the coverage provisions?..........................................	¶ 10
1. Was there "property damage"?...............................................................................	¶ 11
a. Owens's claims against Ironics are for "property damage"...........................	¶ 14
b. Decisions in analogous cases support............................................................
the finding that Owens's claims involve "property damage"....................	¶ 23
c. We decline to adopt the integrated-system rule to determine......................
whether a claim involves "property damage"...........................................	¶ 25
i. Adopting the integrated-system rule..................................................
would undermine reliance on contracts..........................................	¶ 26
ii. Wisconsin Pharmacal is not persuasive................................................	¶ 33
iii. Cases cited by Motorists do not require a contrary holding...............	¶ 37
2. Was there an "accident"?.......................................................................................	¶ 42
a. The principle of fortuity and Custom Agri ......................................................	¶ 43
b. The parties’ arguments..................................................................................	¶ 49
c. Owens's claims arose out of an "occurrence"...............................................	¶ 53
D. Do any of the policy exclusions apply?.........................................................................	¶ 63
III. Conclusion...........................................................................................................................	¶ 68

I. BACKGROUND

{¶ 2} Ironics is in the business of buying and selling metal products, including waste generated by steel mills and similar facilities. This case involves a material originally generated as waste by a steel mill in Youngstown that makes tubular products. Ironics obtained the waste product—"tube scale"—in raw form and, after having it processed, resold it to a number of customers.

{¶ 3} Owens manufactures glass containers. In October and November 2016, it purchased tube scale from Ironics to use as a coloring agent to make its containers amber or brown. After using Ironics's tube scale to make glass containers, however, Owens discovered that chrome stones were embedded in the containers. The presence of these stones increased the likelihood that the glass containers would break. The stones could not be removed from the glass, nor could the containers otherwise be restored to use. Owens therefore had to scrap more than 1,850 tons of glass containers.

{¶ 4} Upon investigation, Ironics discovered that the tube scale had been contaminated when its materials processor, American Waste Management, subcontracted the tube-scale screening to another company, Foundry Sand Services ("Foundry"). According to Ironics, raw tube scale fell onto the ground while it was being screened by Foundry. American Waste Management instructed Foundry to put the fallen tube scale back into the screening process, but the fallen tube scale had been contaminated with chrome stones, a material that Foundry also processed.

{¶ 5} In January 2017, Owens asserted claims against Ironics for breach of contract, breach of warranties contained in the purchase orders for the tube scale, violations of the Uniform Commercial Code, negligence, and product liability. Ironics asked Motorists, as its insurer, to defend and indemnify it against Owens's claims. Ironics had a commercial general-liability policy ("CGL policy") and a commercial umbrella policy ("umbrella policy") with Motorists. Motorists sought a declaratory judgment that it had no obligation to defend and indemnify Ironics against Owens's claims under either policy. The trial court held that neither policy covered Owens's claims, and it granted summary judgment in favor of Motorists.

{¶ 6} The Sixth District Court of Appeals affirmed in part and reversed in part the trial court's summary-judgment decision. The appellate court held that Ironics was not entitled to coverage under the CGL policy but was entitled to coverage under the umbrella policy. With respect to the umbrella policy, the Sixth District held that Owens's claims against Ironics were covered because the parties had stipulated that Ironics was not aware that the tube scale was contaminated at the time it was used by Owens to make its glass containers and the contaminated tube scale caused physical injury to the containers manufactured by Owens. The Sixth District also held that none of the umbrella policy's coverage exclusions applied. Thus, the court held that Ironics was entitled to coverage for the damage claimed by Owens.

{¶ 7} Motorists appealed the judgment of the Sixth District to this court, asserting a single proposition of law for our review: "The incorporation of a defective ingredient into an integrated product or system does not constitute damage to ‘other’ property for purposes of liability coverage under commercial general liability and umbrella policies." See 158 Ohio St.3d 1504, 2020-Ohio-2819, 144 N.E.3d 444.

II. ANALYSIS

A. Standard of review

{¶ 8} "Our review of cases involving a grant of summary judgment is de novo." Marusa v. Erie Ins. Co. , 136 Ohio St.3d 118, 2013-Ohio-1957, 991 N.E.2d 232, ¶ 7. This case also involves contract interpretation. Our role is therefore "to give effect to the intent of the parties to the agreement." Westfield Ins. Co. v. Galatis , 100 Ohio St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, ¶ 11, citing Hamilton Ins. Servs., Inc. v. Nationwide Ins. Cos. , 86 Ohio St.3d 270, 273, 714 N.E.2d 898 (1999). We review an insurance contract as a whole, Cincinnati Ins. Co. v. CPS Holdings, Inc. , 115 Ohio St.3d 306, 2007-Ohio-4917, 875 N.E.2d 31, ¶ 7, and we presume that its language reflects the parties’ intent, Kelly v. Med. Life Ins. Co. , 31 Ohio St.3d 130, 509 N.E.2d 411 (1987), paragraph one of the syllabus. We apply the plain meaning of the policy's language "unless another meaning is clearly apparent from the contents of the policy." Galatis at ¶ 11, citing Alexander v. Buckeye Pipe Line Co. , 53 Ohio St.2d 241, 374 N.E.2d 146 (1978), paragraph two of the syllabus. When contractual language is clear, we look no further than the writing itself to determine the parties’ intent. Alexander at 246, 374 N.E.2d 146.

B. Burden of proof

{¶ 9} Motorists argues that Owens's claim is not covered under the umbrella policy.¹ The burden of showing coverage under a contract of insurance is on the insured. Sharonville v. Am. Emps. Ins. Co. , 109 Ohio St.3d 186, 2006-Ohio-2180, 846 N.E.2d 833, ¶ 19. In this case, Motorists argues that even if basic coverage is proved, exclusions in the insurance contract relieve it of any obligation to defend or indemnify Ironics against Owens's claims. The burden of proving that an exclusion applies is on the insurer. Neal-Pettit v. Lahman , 125 Ohio St.3d 327, 2010-Ohio-1829, 928 N.E.2d 421, ¶ 19.

C. Do Owens's claims fall within the coverage provisions?

{¶ 10} The umbrella policy at issue is a type of catchall policy providing that Motorists will pay Ironics for the "ultimate net loss" attributable to any "occurrence" that is either excluded or not covered by its CGL policy. An "occurrence" is defined in the policy as an "accident" that results in property damage. Motorists argues that Owens's claims are not subject to basic coverage, because Ironics's providing contaminated tube scale to Owens did not cause "property damage" and was not an "accident."

1. Was there "property damage"?

{¶ 11} We consider first whether there was "property damage." The insurance contract defines "property damage" as "[p]hysical injury to or destruction of tangible property * * *, including all resulting loss of use of that property." According to Motorists, the "tangible property" cannot be the insured's own product but must instead be some other property. As Motorists interprets the policy language, Ironics's tube scale did not cause "property damage," because it did not cause damage to other...