Upjohn Co. v. New Hampshire Ins. Co.

Decision Date17 October 1991
Docket NumberDocket Nos. 86906-86908,GC-809000
Citation438 Mich. 197,476 N.W.2d 392
Parties, 33 ERC 1849 The UPJOHN COMPANY, a Delaware corporation; John Russell Butler, a foreign insurance underwriter, First State Insurance Company, issuing property policy, a Delaware corporation, and The Home Insurance Company, a New York corporation, Plaintiffs-Appellees, v. NEW HAMPSHIRE INSURANCE COMPANY, a New Hampshire corporation, Granite State Insurance Company, a New Hampshire corporation, The Insurance Company of the State of Pennsylvania, a foreign corporation, and First State Insurance Company, issuing excess liability policy 916075, a Delaware corporation, jointly and severally, Defendants, and Allstate Insurance Company, Successor to Northbrook Excess and Surplus Insurance Company, an Illinois corporation, Defendant-Appellant, and Insurance Environmental Litigation Association, Amicus Curiae. Granite State Insurance Company, a New Hampshire corporation, Defendant-Appellee, and Insurance Environmental Litigation Association, Amicus Curiae. The UPJOHN COMPANY, a Delaware corporation; John Russell Butler, a foreign insurance underwriter; and First State Insurance Company, issuing property policy, a Delaware corporation, Plaintiffs-Appellees, and The Home Insurance Company, a New York corporation, Plaintiff, v. NEW HAMPSHIRE INSURANCE COMPANY, a New Hampshire corporation; and Granite State Insurance Company, a New Hampshire corporation, Defendants, and The UPJOHN COMPANY, a Delaware corporation; John Russell Butler, a foreign insurance underwriter; First State Insurance Company, issuing property policy, a Delaware corporation, and The Home Insurance Company, a New York corporation, Plaintiffs-Appellees, v. NEW HAMPSHIRE INSURANCE COMPANY, a New Hampshire corporation, The Insurance Company of the State of Pennsylvania, a foreign corporation; and First State Insurance Company, issuing excess liability policy 916075, a Delaware corporation, jointly and severally, Defendants, and Allstate Insurance Company, Successor to Northbrook Excess and Surplus Insurance Compa
CourtMichigan Supreme Court
OPINION

RILEY, Justice.

In this case, we are asked to interpret and apply the pollution-exclusion clause found in the comprehensive general liability policy of Allstate Insurance Company. 1 The resolution of this issue requires us to answer two questions: (1) is the phrase "sudden and accidental" which appears in the pollution-exclusion clause and which creates an exception to the exclusion, unambiguous, and (2), if unambiguous, what is the proper meaning of the phrase "sudden and accidental."

We hold that the phrase "sudden and accidental" is unambiguous. Furthermore, we find that the definition of "sudden" includes a temporal element as well as a sense of the unexpected, and that "accidental" means unexpected and unintended.

We, therefore, find that the Court of Appeals erred in holding that the pollution-exclusion clause did not apply under the facts of this case. Accordingly, we reverse the decision of the Court of Appeals and find, as a matter of law, that the pollution-exclusion clause applies and, therefore, plaintiff, The Upjohn Company, is not entitled to coverage under defendant Allstate's policy.

I. FACTS AND PROCEEDINGS

On August 13, 1982, The Upjohn Manufacturing Company, (UMC), a Puerto Rico-based division of The Upjohn Company, began its annual production of clindamycin, an antibiotic. Two toxic by-products were produced in the clindamycin campaign. These chemicals were pumped into an underground storage tank designated FA-129 which had a ten thousand gallon capacity.

Each weekday of the year, an Upjohn employee measured the level of by-product in the tank. The employee recorded the measurement on a tank farm inventory sheet and turned the sheet over to his supervisor. Each day's sheet was reviewed, and compared with previous days' sheets which were kept on file at the UMC facility. This was Upjohn's standard procedure.

Prior to August 16, 1982, the tank-level measurements remained constant at ten inches or 475 gallons. However, on August 16, 1982, the same day that Upjohn had pumped its first batch of approximately seventeen hundred gallons of the by-product into tank FA-129, the tank-level measurement read three inches or eighty gallons. Despite this discrepancy in the tank-level measurement, Upjohn continued, over the next few weeks, to pump eight more batches of by-product into tank FA-129. Approximately seventeen hundred gallons of by-product were added to tank FA-129 on each of the following days: August 18, 19, 24, 25, 26, 30 and 31, and on September 1, 1982. The daily tank measurement readings continued to show levels which did not coincide with the amount of by-product which was pumped into tank FA-129. 2

On September 3, 1982, Upjohn completed its monthly audit of the tank-level inventory records. Since the tank-level measurements did not coincide with what was intended to be in tank FA-129, no additional quantities of the by-product were pumped into the tank.

It was determined that tank FA-129 had three holes in it due to corrosion. Upjohn estimated that approximately fifteen thousand gallons of the toxic by-product leaked from the tank since the first batch of by-product was pumped into tank FA-129.

On January 11, 1985, Upjohn 3 filed suit against defendant Allstate Insurance Company, 4 claiming that Upjohn was covered under Allstate's comprehensive general liability policy for damages and expenses arising out of the leaking underground storage tank FA-129.

On September 24, 1986, Upjohn moved for summary disposition. The court held that there was coverage under the policy and that coverage was not precluded by the pollution-exclusion clause contained in the policy. The Court, therefore, granted Upjohn's motion for summary disposition.

The Court of Appeals affirmed the trial court's grant of summary disposition. Relying on the definition of "sudden and accidental" as stated in Jonesville Products, Inc. v. Transamerica Ins. Group, 156 Mich.App. 508, 512, 402 N.W.2d 46 (1986), the Court held that "even a continuous discharge of chemicals may be both accidental (i.e., unintended) and, sudden (i.e., unexpected), and, therefore, outside the pollution exclusion." The Court held that the trial court properly concluded that there was no genuine issue of material fact that the leak was "sudden and accidental." Upjohn v. New Hampshire Ins. Co., 178 Mich.App. 706, 716, 444 N.W.2d 813 (1989).

On July 13, 1990, this Court granted Allstate's leave to appeal and ordered that it be consolidated with Polkow v. Citizens Ins. Co., 435 Mich. 862 (1990), and Protective Nat'l Ins. Co. v. City of Woodhaven. 5

II. ANALYSIS

The Allstate Comprehensive General Liability Policy is subject to several exclusions which limit the broad coverage otherwise provided under the policy. 6 The policy's pollution exclusion provides "This policy shall not apply:--

* * * * * *

"(f) to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalies, toxic chemicals, liquids or gaseous waste materials or other irritants, contaminants or pollutants into or upon land, the...

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