Red Panther Chemical Co. v. Insurance Co. of State of Pa.

• Decision Date: 19 December 1994
• Docket Number: No. 93-6400,93-6400
• Citation: 43 F.3d 514
• Parties: RED PANTHER CHEMICAL COMPANY, a corporation, Plaintiff-Appellant, v. INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 514

43 F.3d 514

RED PANTHER CHEMICAL COMPANY, a corporation, Plaintiff-Appellant, v. INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, a

corporation, Defendant-Appellee.

No. 93-6400.

United States Court of Appeals, Tenth Circuit.

Dec. 19, 1994.

Glen Mullins, Oklahoma City, OK, for plaintiff-appellant.

Tom L. King (Linda P. Brown with him, on the briefs), King, Roberts & Beeler, Oklahoma City, OK, for defendant-appellee.

Before MOORE and KELLY, Circuit Judges, and KANE, District Judge. ^*

JOHN P. MOORE, Circuit Judge.

Red Panther Chemical Company appeals the district court's grant of summary judgment in favor of the Insurance Company of Pennsylvania. We conclude judgment was improvidently granted and reverse.

Red Panther held a corporate general liability policy from which this litigation emanates with the Insurance Company. The controversy arose when the Insurance Company refused to defend Red Panther in an Oklahoma state court case alleging claims of negligence, strict liability, and products liability brought against Red Panther by Dennis Graham. Red Panther filed this action seeking a defense and indemnification for Mr. Graham's claim. Applying Mississippi law, the district court held the Total Pollution Exclusion clause of Red Panther's insurance policy was plain and unambiguous. ¹ The clause specifically excluded insurance coverage for bodily injury and property damage claims arising from the escape of pollutants. The district court held this case fell within the exclusion, making summary judgment appropriate as a matter of law. The court concluded the chemical ethyl parathion was a pollutant as defined by the policy, and Mr. Graham's injury was the result of the escape of that pollutant. Red Panther argues that the Total Pollution Exclusion is ambiguous, making summary judgment improper. We agree.

The underlying claim in this case involves a bizarre set of circumstances eerily reminiscent of the trials and tribulations of the legendary Mrs. Palsgraf. ² A.L. McAllister Trucking Company picked up forty-eight 55-gallon drums and two hundred seventy-two 5-gallon containers of the insecticide ethyl parathion from Red Panther's manufacturing plant in Clarksdale, Mississippi. McAllister was engaged by Estes Chemical Company to truck the pesticide to a variety of locations, including several in Oklahoma. The cargo was loaded and secured on the McAllister truck by Red Panther representatives in Mississippi. The truck made at least one other stop where some of the pesticide was unloaded, and other items were added to the cargo. While the truck was traveling outside Oklahoma City, seven of the 5-gallon containers fell off onto Interstate 40. A vehicle driven by Vonnie Brown struck and dragged one of the errant containers for several miles. Noticing an engine warning light in her vehicle, Mrs. Brown drove to a service station in El Reno, Oklahoma, to have the car examined. At the station, mechanic Dennis Graham hoisted the Brown vehicle on a lift and became exposed to the ethyl parathion by inhaling chemical fumes and absorbing the insecticide through his skin. Mr. Graham alleged that the chemical dripped on him when he placed Mrs. Brown's automobile on the rack to search for the broken oil or hydraulic line he suspected was the cause of Mrs. Brown's problem. Mr. Graham sued Red Panther in Oklahoma state court. Some time later, the Insurance Company informed Red Panther that it was denying coverage for Mr. Graham's claim and would not defend the company in any lawsuits because the claim was excluded from coverage under the policy's Total Pollution Exclusion. That exclusion reads:

TOTAL POLLUTION EXCLUSION

It is agreed that Exclusion (f) of SECTION I--COVERAGES, COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY, SUBSECTION 2. Exclusions, is replaced with the following:

f(1) "Bodily injury" or "property damage" at any premises, site or location and arising out of the actual, alleged, or threatened discharge, dispersal, release, or escape of pollutants. This "bodily injury" or "property damage" that arises may be due to any of the insureds operations including those which produce a "products--completed operations hazard."

(2) Any loss, costs, 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.

All other terms and conditions remain unchanged. (emphasis added).

We review the district court's grant of summary judgment de novo, applying the same standard used by the trial court under Fed.R.Civ.P. 56(c). Merrick v. Northern Natural Gas Co., 911 F.2d 426, 429 (10th Cir.1990); Building & Constr. Dep't v. Rockwell Int'l Corp., 7 F.3d 1487, 1492 (10th Cir.1993). Summary judgment shall issue if the evidence before the court, viewed in the light most favorable to the party opposing the motion, indicates that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In this case, the district court concluded the plain language of the Total Pollution Exclusion precluded coverage for Mr. Graham's claim. The court held no genuine issue of material fact necessitated a trial because no extrinsic evidence such as the intent of the parties or the common usages and understandings of the insurance industry was necessary to interpret either the exclusion or the insurance policy as a whole. The question we must resolve, then, is whether the district court correctly concluded that the Total Pollution Exclusion unambiguously applied to Mr. Graham's claim.

We are guided by Mississippi law which establishes a number of conventions for interpreting insurance contracts. Plain and unambiguous language in an insurance policy is to be construed just as in any other contract. Employers Mut. Cas. Co. v. Nosser, 250 Miss. 542, 164 So.2d 426, 430, suggestion of error overruled, 250 Miss. 542, 168 So.2d 119 (1964) (rehearing on other grounds). All of the provisions of an insurance policy must be read together, giving effect to each. Employers Ins. of Wassau v. Trotter Towing Corp., 834 F.2d 1206, 1210 (5th Cir.1988); Continental Cas. Co. v. Hester, 360 So.2d 695, 697 (Miss.1978). However, in contrast, ambiguous insurance policies should be construed in favor of the insured. Griffin v. Maryland Cas. Co., 213 Miss. 624, 57 So.2d 486, 489 (1952). They are construed in light of the circumstances in which they were issued and according to common usages and understandings. Lumbermen's Mut. Cas. Ins. Co. v. Randle, 370 F.2d 68, 72 (5th Cir.1966). To determine the meaning of a particular phrase in an insurance contract and therefore decide which of the above interpretive rules apply, Mississippi law provides:

[W]ords, terms, phrases and clauses in insurance contracts are to be given their everyday meanings, not hypertechnical or esoteric definitions, but their plain and common meaning. Aero International, Inc. v. United States Fire Ins. Co., 713 F.2d 1106, 1109 (5th Cir.1983); Benton v. Canal Insurance Co., 130 So.2d 840 (1961); Ferguson v. Provident Life & Acc. Ins. Co., 155 So. 168 (1934). This follows because insureds are not expected to be wordsmiths, schooled in the craft of lexicology and, further, because the law disfavors the employment of arcane, subtle definitions of common words which but promise to confuse even the educated and frustrate the unlearned.

McFarland v. Utica Fire Ins. Co., 814 F.Supp. 518, 525 (S.D.Miss.1992), aff'd, 14 F.3d 55 (5th Cir.1994).

Applying these principles to this case, the exclusion can be considered unambiguous only if one can read its text in conjunction with the facts of Mr. Graham's claim and reach the conclusion the claim falls within the exclusion's terms. If there are two reasonable interpretations of the exclusion, then it is considered ambiguous.

The district court relied on four cases that involved similar pollution exclusion language. All four courts found the language to be unambiguous. Guilford Indus., Inc. v. Liberty Mut. Ins. Co., 688 F.Supp. 792, 794 (D.Me.1988), aff'd, 879 F.2d 853 (1st Cir.1989); Alcolac, Inc. v. California Union Ins. Co., 716 F.Supp. 1546, 1549 (D.Md.1989); League of Minn. Cities Ins. Trust v. City of Coon Rapids, 446 N.W.2d 419, 422 (Minn.Ct.App.1989); Budofsky v. The Hartford Ins Co., 147 Misc.2d 691, 556 N.Y.S.2d 438, 440 (S.Ct., Suffolk Co.1990). ³

The determination of whether a particular pollution exclusion is ambiguous has not been an exact or a scientific inquiry. The courts that have addressed this issue have reached a variety of different and often contradictory conclusions. ⁴ Courts construing identical exclusions have held them either unambiguous or ambiguous depending on the circumstances of the particular case. No obvious organizing principle exists to distinguish those cases that have found a pollution exclusion unambiguous from those that reached the opposite conclusion.

Red Panther suggests courts have limited pollution exclusions found in corporate general liability policies to "environmental pollution." In support of this proposition, Red Panther cites a variety of cases but principally relies upon Westchester Fire Ins. Co. v. City of Pittsburg, Kan., 794 F.Supp. 353, (D.Kan.1992), aff'd, 987 F.2d 1516 (10th Cir.1993); and Continental Cas. Co. v. Rapid-Am. Corp., 177 A.D.2d 61, 581 N.Y.S.2d 669 (1992), aff'd, 80 N.Y.2d 640, 593 N.Y.S.2d 966, 609 N.E.2d 506 (1993). Indeed, these cases can be read to limit the application of pollution exclusions to "environmental pollution." Unfortunately, however, other cases exist which do not fall neatly within Red Panther's paradigm. For example, in League of Minn. Cities, the court...