Park-Ohio Industries, Inc. v. Home Indem. Co.

• Citation: 975 F.2d 1215
• Decision Date: 09 November 1992
• Docket Number: PARK-OHIO,No. 91-3826,91-3826
• Parties: INDUSTRIES, INC., and Tocco, Inc., Plaintiffs-Appellants, v. The HOME INDEMNITY COMPANY, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 1215

975 F.2d 1215

61 USLW 2182

PARK-OHIO INDUSTRIES, INC., and Tocco, Inc., Plaintiffs-Appellants, v. The HOME INDEMNITY COMPANY, Defendant-Appellee.

No. 91-3826.

United States Court of Appeals, Sixth Circuit.

Argued Aug. 14, 1992.

Decided Sept. 22, 1992.

Rehearing and Rehearing En Banc

Denied Nov. 9, 1992.

Marvin L. Karp (argued and briefed), Ulmer & Berne, Harold A. Madorsky, Cleveland, Ohio, for plaintiffs-appellants.

Steven G. Janik, David L. Lester (argued and briefed), Janik, Lester & Dunn, Cleveland, Ohio, for defendant-appellee.

Before: MERRITT, Chief Judge; and MILBURN and GUY, Circuit Judges.

MILBURN, Circuit Judge.

In this diversity action, plaintiffs Park-Ohio Industries, Inc. ("Park-Ohio") and its wholly-owned subsidiary, Tocco, Inc. ("Tocco"), appeal the district court's grant of summary judgment in favor of defendant Home Indemnity Co. ("Home") in their action seeking a declaratory judgment that Home has a duty to defend and indemnify Tocco against all claims asserted against it in the ongoing litigation of Fleenor v. Goodyear Tire & Rubber Co., No. 15,705 (Morris Co., Texas), a product liability action for personal injury and wrongful death. This is a case of first impression because this is the first time a court has addressed the issue of a pollution exclusion as it applies to an alleged defective product placed in the stream of commerce by one insured under a policy of insurance containing a pollution exclusion.

On appeal, the sole issue is whether the district court erred in granting summary judgment for Home by concluding that the "pollution exclusion" provision in the defendant's insurance policy precluded any obligation on the part of Home to defend or to pay any judgment rendered against plaintiffs in the Fleenor case. For the reasons that follow, we affirm. 785 F.Supp. 670.

I.

Plaintiff Park-Ohio purchased a comprehensive general liability policy from Home through Frank B. Hall & Co. of Ohio, Inc., effective February 1, 1988, to February 1, 1989. This policy covered Park-Ohio and Tocco for damages arising from any defective product that they as insureds produced, subject to the terms, conditions, and exclusions contained in the policy.

The material facts are undisputed. In January of 1989, William B. Fleenor and 47 other individuals instituted an action against Tocco and other entities alleging that certain induction furnaces manufactured by Tocco caused injuries, disabilities, and deaths to past and present employees of the Red River Army Depot in Bowie, Texas, where the Tocco furnaces were being used. ¹ The Fleenor plaintiffs claim that Tocco's furnaces, used to strip and burn rubber from the metal tracks of army tanks and armored personnel and missile carriers, were defective, unreasonably dangerous, and not reasonably fit for their intended use. Tocco's furnaces were used in a procedure, commonly referred to as the rubber de-nuding process, which is "designed and intended to break the bond between the rubber tread and metal components of the tracks of the tanks and armored personnel and missile carriers." J.A. 136. The tracks of these "vehicles were reassembled with rubber tread being molded back onto the metal components" at the depot. Id. In addition, the employees of the rubber branch rebuild road wheels. Id. The Fleenor plaintiffs charge in relevant part that

[d]uring all of these operations, certain rubber combustion products resembling soot, smoke, fumes, dust pollutants and other particulates, evolve from the incomplete combustion of organic materials. These rubber combustion products contain compounds called polynuclear aromatic hydrocarbons including coal tar pitch volatiles and Benzo[a]pyrene which are carcinogenic agents.

The burning of rubber released these hazardous, dangerous and carcinogenic agents into the atmosphere which were then breathed, inhaled, absorbed or otherwise ingested by the "workers" employed in the rubber branch section. Nineteen (19) of the "workers" have died or presently are suffering from cancer as a result of exposure to these carcinogenic agents. Many more of the "workers" have suffered from a myriad of respiratory problems as a result of exposure to the carcinogenic agents.

* * * * * *

Plaintiffs would further show that Defendants breached express and implied warranties in that their products were not merchantable nor reasonably fit for their intended use. To the contrary, the heat systems were unmerchantable and unfit and Defendants' breach of the warranties, express and implied, proximately caused the injuries, disabilities or deaths of the "workers" and the Plaintiffs' resulting damages.

J.A. 136, 137, 143.

Park-Ohio and Tocco notified Home of the Fleenor action; however, Home informed plaintiffs in a letter dated October 26, 1989, that it would not defend Tocco in the Fleenor action or indemnify Tocco for any damages awarded against Tocco. Home based this determination on a "pollution exclusion" provision found in the insurance policy issued by Home to Park-Ohio. The pollution exclusion states that the policy does not cover

... bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water.

J.A. 195.

Thereafter, on June 8, 1990, plaintiffs filed the present action in the district court. Both plaintiffs and defendant filed motions for summary judgment, and on August 6, 1991, the district court granted defendant's motion and entered summary judgment for the defendant. This timely appeal followed.

II.

A.

As earlier stated, the material facts in this case are not in dispute. Thus, this appeal involves solely a question of law which this court reviews de novo. See Brooks v. American Broadcasting Cos., Inc., 932 F.2d 495, 500 (6th Cir.1991). See also Salve Regina College v. Russell, --- U.S. ----, ----, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991) (a district court's interpretation of state law is reviewed de novo).

The parties agree that the applicable law in this case is Ohio law. In applying Ohio law, the district court determined that the pollution exclusion in issue is clear and unambiguous, and, according to Ohio rules of construction, the insurance policy precludes coverage for the injuries alleged by the Fleenor plaintiffs. The district court further concluded that where exclusion of coverage under an insurance policy is clear, then under Ohio law the insurer has no duty to defend the insured in an action against the insured.

The district court also rejected the conclusion of a Minnesota court in a case the district court considered to be "directly on point" because the Minnesota court applied the reasonable expectation doctrine in determining that the pollution exclusion at issue did not preclude coverage for the insured. See Grinnel Mut. Reinsurance Co. v. Wasmuth, 432 N.W.2d 495 (Minn.App.1988). In this case, the district court determined under Sterling Merchandise Co. v. Hartford Ins. Co., 30 Ohio App.3d 131, 506 N.E.2d 1192, 1196-97 (1986), that the reasonable expectation doctrine does not apply in Ohio, and, according to Ohio's rules of construction, the pollution exclusion precluded coverage. We agree.

B.

In Ohio, an insurance policy is a contract, and the parties' rights under the policy are purely contractual in nature. Nationwide Mut. Ins. Co. v. Marsh, 15 Ohio St.3d 107, 472 N.E.2d 1061, 1062 (1984) (per curiam). Both parties agree that under Ohio law, where a provision excluding coverage in an insurance policy is clear and unambiguous, the plain language of the exclusion provision applies. See Moorman v. Prudential Ins. Co. of Am., 4 Ohio St.3d 20, 445 N.E.2d 1122, 1124 (1983) (per curiam); United States v. A.C. Strip, 868 F.2d 181, 185 (6th Cir.1989). Moreover, both parties also agree that where a provision is ambiguous, the provision is interpreted in favor of the insured. Id. In this case, the primary dispute is whether an ambiguity exists in the pollution exclusion in question.

As plaintiffs correctly assert, the burden is on the insurer to prove that a particular claim is precluded by an exclusion provision. State Farm Fire & Casualty Co. v. Hiermer, 720 F.Supp. 1310, 1314 (S.D.Ohio 1988), aff'd, 884 F.2d 580 (6th Cir.1989) (unpublished); see also Moorman, 445 N.E.2d at 1124 ("[W]here exceptions ... are introduced into an insurance contract, a general presumption arises to the effect that that which is not clearly excluded from the operation of such contract is included in the operation thereof.").

In this case, plaintiffs argue that defendant has failed to meet its burden. According to plaintiffs, the pollution exclusion possesses a latent ambiguity which becomes visible when the pollution exclusion is applied to the specific facts in this case.

Pollution exclusions like the one at issue are common in the insurance industry today. See, e.g., Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118 (2d Cir.1990); Perkins Hardware Lumber Co. v. Bituminous Casualty Corp., 190 Ga.App. 231, 378 S.E.2d 407 (1989); League of Minnesota Cities Ins. Trust v. City of Coon Rapids, 446 N.W.2d 419 (Minn.App.1989).

Plaintiffs argue that it is unclear whether the pollution exclusion in this case should apply in products liability cases where the insured (1) was not actively engaged in the discharge of the pollutants at issue or (2) did not discharge the pollutants on its premises. According to plaintiffs, the pollution exclusion is clear and unambiguous only in those situations where the insured was actively engaged in polluting, e.g., an oil tanker dumping oil in the ocean, or where the discharge occurred on the premises of the insured, e.g., a chemical company emitting toxins into the air from its plant. Plaintiffs contend that because Tocco was neither...