Polkow v. Citizens Ins. Co. of America
| Decision Date | 21 November 1989 |
| Docket Number | Docket No. 108437 |
| Parties | Robert POLKOW, d/b/a Polkow Oiling Service, Plaintiff-Appellee, v. CITIZENS INSURANCE COMPANY OF AMERICA, Defendant-Appellant. |
| Court | Court of Appeal of Michigan — District of US |
Scott E. Pederson and Richard J. Quist, Grand Rapids, for plaintiff-appellee.
Mika, Meyers, Beckett & Jones by Douglas A. Donnell and Linda L. Blais, Grand Rapids, for defendant-appellant.
Provizer, Lichtenstein, Pearlman & Phillips, P.C. by Randall E. Phillips, Southfield, and Wiley, Wein & Fielding by Thomas W. Brunner, James M. Johnstone, and John W. Cavilia, of counsel, Washington D.C., amicus curiae, for Ins. Environmental Litigation Ass'n.
Before HOLBROOK, P.J., and SAWYER and NEFF, JJ.
Plaintiff brought suit against his liability insurer, defendant Citizens Insurance Company of America, seeking a declaration that defendant was under a duty to defend and to provide coverage for costs, expenses, and potential liability arising from an administrative inquiry into possible environmental contamination associated with plaintiff's business operations in hauling and storing waste oil. The circuit court required defendant to provide reimbursement for the costs expended by plaintiff in conducting an investigation into possible ground water contamination at the prompting of the Department of Natural Resources and the United States Environmental Protection Agency. The court further granted a declaratory judgment that defendant was required to defend and to afford coverage under the terms of its comprehensive general liability policy issued to plaintiff. Defendant appeals as of right, and we affirm.
A perusal of the briefs indicates that, generally, the question whether or not the standard phraseology of liability policies covers legal responsibility for environmental pollution is hotly disputed and has given rise to conflicting judicial holdings. However, the case law developed in Michigan, particularly by this Court, provides clear guidance in resolving the issues raised in the instant case, and we are not persuaded by the lengthy, policy-oriented arguments of appellant and amicus curiae to depart from our past precedent or to chart a new course of law for this jurisdiction. Hence, our decision for affirmance.
The policy provides that the insurer
will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ... property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such ... property damage ... and may make such investigation and settlement of any claim or suit as it deems expedient.
Because no complaint was filed by the DNR or the EPA against plaintiff in a court of law, defendant argues that its duty to defend a "suit against the insured seeking damages" has not yet been triggered.
Contrary to this argument, another panel of this Court in United States Aviex Co. v. Travelers Ins. Co., 125 Mich.App. 579, 336 N.W.2d 838 (1983), construed very similar policy language to trigger the insurer's duty to defend and indemnify, notwithstanding that the insured's cooperation in the investigation of environmental contamination had been induced by the DNR without formal resort to the courts (although the Attorney General filed an action for injunctive relief during the interim between the declaratory judgment trial and this Court's resolution of the appeal). Although the case was conceptually decided on the question of whether the DNR was seeking damages within the meaning of the policy, we note that the "suit" requirement was part of the quoted portions of the policy. The Court reasoned:
Under MCL 323.10; MSA 3.529(1), the Attorney General is empowered to file a suit "to recover the full value of the injuries done to the natural resources of the state...." This language clearly indicates the state's interest in its natural resources. Defendant agrees that the contamination of subterranean and percolating water as a result of the fire is "physical injury to tangible property" within the terms of the insurance policy. If the state were to sue in court to recover in traditional "damages," including the state's costs incurred in cleaning up the contamination, for the injury to the ground water, defendant's obligation to defend against the lawsuit and to pay damages would be clear. It is merely fortuitous from the standpoint of either plaintiff or defendant that the state has chosen to have plaintiff remedy the contamination problem, rather than choosing to incur the costs of clean-up itself and then suing plaintiff to recover those costs. The damage to the natural resources is simply measured in the cost to restore the water to its original state. [Id., pp. 589-590, 336 N.W.2d 838.]
Analysis of the policy terms "suit" and "damages" are not dissimilar: damages are traditionally a remedy associated with a lawsuit brought in a court of law. Given the reasoning in Aviex, viewed against the backdrop of the nearly identical policy terms, inferring that the Aviex panel would not find the absence of a complaint filed in a court of law to preclude coverage seems a logical, if not obvious, extension of its precise holding. 1
Our reading of Aviex is in keeping with Fireman's Fund Ins. Companies v. Ex-Cell-O Corp., 662 F.Supp. 71, 75 (E.D.Mich.1987), where, in reliance on the Aviex decision, it was held that "a 'suit' includes any effort to impose on the policyholders a liability ultimately enforceable by a court, and that 'damages' include money spent to clean up environmental contamination." Cf. Detrex Chemical Industries, Inc. v. Employers Ins. of Wausau, 681 F.Supp. 438, 452-455 (N.D.Ohio, 1987) ().
In this case, the DNR by letter indicated to plaintiff that it was "requiring" plaintiff to undertake a hydrogeological investigation of the extent of ground water contamination and to take corrective action to remedy any contamination attributable to plaintiff's conduct. The letter further required plaintiff to submit within thirty days a plan for conducting a study of the contamination and a cleanup. As authority for its actions, the DNR cited the Hazardous Waste Management Act, M.C.L. § 299.501 et seq.; M.S.A. § 13.30(1) et seq., and the water resources commission act, M.C.L. § 323.1 et seq.; M.S.A. § 3.521 et seq. The former enactment authorizes the Attorney General to bring suit against a violator "to recover the full value of the damage done to the natural resources of this state and the costs of surveillance and enforcement by the state resulting from the violation." M.C.L. § 299.548(9); M.S.A. § 13.30(48)(9). The latter enactment similarly authorizes suit "to recover the full value of the injuries done to the natural resources of the state and the costs of surveillance and enforcement by the state resulting from the violation." M.C.L. § 323.10; M.S.A. § 3.529(1). The Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., cited by the EPA in correspondence with plaintiff, provides for the costs of an environmental cleanup of hazardous waste to be borne by the polluter. 42 U.S.C. § 9607. The foregoing is not intended to set forth in exhaustive detail the administrative mechanisms available to governmental agencies entrusted with safeguarding the environment, but only to illustrate some of the impressive array of those mechanisms available to coerce otherwise noncooperative persons who may be legally responsible for such contamination. When faced with the alternative of potentially enormous liability for money damages in a civil suit, it is little wonder that operators of businesses contacted by the DNR attempt to resolve allegations of...
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