Porterfield v. Audubon Indem. Co.

• Decision Date: 22 November 2002
• Docket Number: No. 1010894.,1010894.
• Citation: 856 So.2d 789
• Parties: Janice Denise PORTERFIELD, as mother and next friend of Yolanda Porterfield and Mary Charlissa Porterfield; et al. v. AUDUBON INDEMNITY CO.
• Court: Alabama Supreme Court

856 So.2d 789

Janice Denise PORTERFIELD, as mother and next friend of Yolanda Porterfield and Mary Charlissa Porterfield; et al. v. AUDUBON INDEMNITY CO.

No. 1010894.

Supreme Court of Alabama.

November 22, 2002.

Rehearing Denied March 7, 2003.

James A. Harris III and G. Nicole Mapp of Harris & Harris, L.L.P., Birmingham; and D. Coleman Yarbrough, Montgomery, for plaintiffs Janice Denise Porterfield, as mother and next friend of Yolanda Porterfield and Mary Charlissa Porterfield, and Montgomery Housing Authority.

H.L. Ferguson, Jr., and John H. Dodson of Ferguson, Frost & Dodson, L.L.P., Birmingham, for defendant.

HARWOOD, Justice.

United States District Judge Ira DeMent, acting pursuant to Rule 18, Ala. R.App. P., certified to this Court the following question of law, the answer to which he anticipates will be dispositive of a case pending before him:

"Does the pollution exclusion clause contained in Audubon's comprehensive general liability insurance policy preclude coverage to its insured for liability for injuries allegedly caused from the ingestion of lead contained in paint, blinds, water, pipes and soil on premises operated by the insured?"

The case pending before Judge DeMent is styled "In the United States District Court for the Middle District of Alabama, Northern Division: Janice Denise Porterfield, as mother and next friend of Yolanda Porterfield and Mary Charlissa Porterfield, and Housing Authority for the City of Montgomery, Plaintiffs v. Audubon Indemnity Co., Defendant, Civil Action No. 00-D-1291-N." Judge DeMent has transmitted to this Court the entire record in the case. Further, he stated in his order certifying the question that "[t]he phrasing of the question is not intended to limit the inquiry of the Supreme Court of Alabama. In answering the certified question, the Supreme Court is at liberty to consider the problems and issues involved in this case as it perceives them." Accepting that invitation, and consonant with established procedure for answering a certified question, this Court has revised the question slightly, to frame it as follows:

"Does an `absolute' pollution-exclusion clause contained in a commercial general liability insurance policy exclude coverage for injuries resulting from the ingestion of lead contained in the paint, blinds, water, pipes, and soil on premises under the control of the insured?"

The "absolute pollution-exclusion clause" at issue, contained in the commercial general liability insurance policy issued to the Housing Authority for the City of Montgomery ("MHA") by Audubon Indemnity Company ("Audubon") for the period July 1, 1991, to July 1, 1992, reads as follows:

"II. Exceptions

"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:

"(a) At or from premises you own, rent or occupy;

"(b) At or from any site or location used by or for you or others for the handling, storage, disposal, processing or treatment of waste;

"(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:

"(i) if the pollutants are brought on or to the site or location in connection with such operations; or

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

"(2) Any loss, cost, or expense arising out of any governmental direction or request that you test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants.

"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."

The certified question inquires concerning the effect on "coverage" of the exclusion under the circumstances recited. Although we have retained that frame of reference, the coverage question actually subdivides into two discrete aspects: "The duty to defend" and "the duty to indemnify."

"It is well settled `that [an] insurer's duty to defend is more extensive than its duty to [indemnify]. United States Fid. & Guar. Co. v. Armstrong, 479 So.2d 1164, 1168 (Ala.1985) (citations omitted). Whether an insurance company owes its insured a duty to provide a defense in proceedings instituted against the insured is determined primarily by the allegations contained in the complaint. Id. at 1168. If the allegations of the injured party's complaint show an accident or occurrence within the coverage of the policy, then the insurer is obligated to defend, regardless of the ultimate liability of the insured. Ladner & Co. v. Southern Guar. Ins. Co., 347 So.2d 100, 102 (Ala.1977) (citing Goldberg v. Lumber Mut. Cas. Ins. Co., 297 N.Y. 148, 77 N.E.2d 131 (1948)).

"However, `[t]his Court ... has rejected the argument that the insurer's obligation to defend must be determined solely from the facts alleged in the complaint in the action against the insured.' Ladner, 347 So.2d at 103. In Pacific Indemnity Co. v. Run-A-Ford Co., 276 Ala. 311, 161 So.2d 789 (1964), this Court explained:

"`We are of opinion that in deciding whether a complaint alleges such injury, the court is not limited to the bare allegations of the complaint in the action against insured but may also look to facts which may be proved by admissible evidence....'

"276 Ala. at 318, 161 So.2d at 795; see Ladner, 347 So.2d at 103 (quoting this language). `[I]f there is any uncertainty as to whether the complaint alleges facts that would invoke the duty to defend, the insurer must investigate the facts surrounding the incident that gave rise to the complaint in order to determine whether it has a duty to defend the insured.' Blackburn v. Fidelity & Deposit Co. of Maryland, 667 So.2d 661, 668 (Ala.1995) (citing United States Fid. & Guar. Co. v. Armstrong, 479 So.2d 1164 (Ala.1985)) (other citations omitted). When a complaint alleges both acts covered under the policy and acts not covered, the insurer is under a duty to at least defend the allegations covered by the policy. Blackburn, 667 So.2d at 670 (citing Tapscott v. Allstate Ins. Co., 526 So.2d 570, 574 (Ala.1988))."

Acceptance Ins. Co. v. Brown, 832 So.2d 1, 14 (Ala.2001).

Although the bare allegations of the complaint may trigger an insurer's duty to defend its insureds, "[t]he duty to pay ... must be analyzed separately." United States Fid. & Guar. Co. v. Armstrong, 479 So.2d 1164, 1167 (Ala.1985).

The parties, in their "coverage" arguments in their respective briefs, have not discriminated between the duty to defend and the duty to indemnify, but the practical difference between the two concepts requires that they be analyzed separately.

The lawsuit that underlies the action presently pending before Judge DeMent, and which was also handled by him, was styled "Janice Denise Porterfield, as mother and next friend of Yolanda Porterfield and Mary Charlissa Porterfield, Plaintiff v. Housing Authority of the City of Montgomery, et al., Civil Action No. 98-D-133-N" (hereinafter referred to as the "underlying lawsuit"). In addition to MHA, three other companies were sued. Audubon was not a party to that action. The underlying lawsuit was settled according to the terms of an extensive "Settlement Agreement" executed by the plaintiffs and the four defendants on August 10, 2000, and that agreement was ratified and approved in a 15-page "Pro Ami Settlement Order and Judgment" entered by Judge DeMent on that same date. By the terms of the settlement, MHA participated with the other defendants in funding an immediate payment of damages and the purchase of an annuity to supply an income stream to "Special Needs Trusts" established for the benefit of the two minor plaintiffs. An additional $1,000,000 award of damages was ordered, but satisfaction of that award was to be limited to only such sums as might be owing by Audubon on behalf of MHA under the terms of Audubon's comprehensive general liability insurance policy.

Judge DeMent provides in his certification order the following summary of the allegations contained in the complaint in the underlying lawsuit:

"As alleged in the underlying complaint, as amended, Porterfield's children sustained permanent injuries, both physical and mental, as a result of inhaling and ingesting lead, which was contained in the blinds, in the paint which was `peeling and flaking,' in the water, in the pipes, and in the soil surrounding the complex. Allegedly, the problem was exacerbated by a refurbishment project conducted at the housing complex which `disturbed the chipping lead paint and caused lead dust and paint chips to be disbursed.' Based upon these facts, Porterfield brought several causes of action against the MHA under both federal and state law, the state law claims sounding primarily in negligence/wantonness."

(Footnotes omitted.)

Although that complaint did indeed allege that the refurbishment project disturbed the chipping lead paint and caused lead dust and paint chips containing lead to be "disbursed," it also specifically alleged that the refurbishment "created lead dust from the lead paint."

The pollution-exclusion clause in question is customarily referred to as an "absolute pollution-exclusion clause." Judge DeMent refers to it that way in his certification order. He references Nationwide Mutual Insurance Co. v. Richardson, 270 F.3d 948, 952-53 (D.C.Cir.2001), as a case providing "a concise discussion of the history of the pollution exclusion clause." That history has also been reconstructed and recapitulated in a number of other cases, including Westchester Fire Insurance Co. v. City of...