Weber v. IMT Ins. Co.

• Decision Date: 17 October 1990
• Docket Number: No. 88-1389,88-1389
• Citation: 462 N.W.2d 283
• Parties: Leo WEBER, Daniel Weber, Doug Weber and Howard Weber, Appellants, v. IMT INSURANCE COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 283

462 N.W.2d 283

Leo WEBER, Daniel Weber, Doug Weber and Howard Weber, Appellants, v. IMT INSURANCE COMPANY, Appellee.

No. 88-1389.

Supreme Court of Iowa.

Oct. 17, 1990.

Thomas M. Walter of Johnson, Hester & Walter, Ottumwa, for appellants.

Marsha Ternus of Bradshaw, Fowler, Proctor & Fairgrave, Des Moines, and W. Kent Thomson and Alanson K. Elgar of the Elgar Law Office, Mt. Pleasant, for appellee.

Douglas E. Gross of Brown, Winick, Graves, Donnelly, Baskerville and Schoenebaum, Des Moines, and Lester O. Brown and Thomas G. Rozinski of Anderson, Kill, Olick & Oshinsky, P.C., New York City, for amicus curiae Iowa Public Service Co.

Roger S. Lande and David J. Meloy of Stanley, Rehling, Lande & Van Der Kamp, Davenport, and Peter C. Condron, Michael Y. Horton and Paul A. Zevnik of Kaye, Scholer, Fierman, Hays & Handler, Washington, D.C., for amici curiae Iowa Southern Utilities Co., the City of Clinton, Iowa, Quantum Chemical Corp., Getty Chemical Co. and ACC Chemical Co.

Mark E. Schantz of Dickinson, Throckmorton, Parker, Mannheimer & Raife, Des Moines, and Thomas W. Brunner, Marilyn E. Kerst and Thomas B. Griffith of Wiley, Rein & Fielding, Washington, D.C., for amici curiae Employers Mut. Cas. Co., Hawkeye-Sec. Ins. Co., United Sec. Ins. Co. and Ins. Environmental Litigation Ass'n.

Considered by McGIVERIN, C.J., and LARSON, SCHULTZ, SNELL and ANDREASEN, JJ.

McGIVERIN, Chief Justice.

Ralph Newman brought an action against Leo, Daniel, Doug and Howard Weber (Webers) for nuisance and damages resulting from Webers' alleged contamination of his crops and land. Webers asked their farm insurer, IMT Insurance Company (IMT), to defend and indemnify them against the Newman lawsuit.

When IMT refused to defend or provide coverage, Webers filed this declaratory judgment action seeking a judicial determination that IMT had a duty to defend and indemnify them against Newman's claim. The district court ruled that IMT was not required to defend and indemnify Webers.

Upon Webers' appeal, our court of appeals affirmed. We granted Webers' application for further review. We, now, vacate the decision of the court of appeals and affirm in part and reverse in part the district court judgment.

I. Background facts and proceedings. Webers operate a farm in Wapello County, raising crops and hogs. The hogs' manure is used to fertilize the Webers' crops. Since approximately 1971, manure has been transported in manure spreaders to Webers' fields over a public road that passes Newman's home and farm. While the manure is being hauled by Newman's property, the manure spreaders drop manure on the road, and the tires of the manure spreaders track manure onto the road. Newman alleges that the odor from the manure left on the road contaminated his sweet corn crop and made the corn unmarketable.

In 1986, Newman filed suit for nuisance and damages against the Webers claiming contamination of his sweet corn crop and interference with the enjoyment of his property. The petition, as amended, alleged that, "the Defendants, while hauling hog manure from their hog feeding operation, have repeatedly allowed manure to fall on the country road ... and have failed to remove the same therefrom."

Webers looked to their insurer IMT to defend them against the Newman suit. IMT had issued two insurance policies that might provide coverage, a Farmer's Comprehensive Personal Liability Policy (liability policy), and a Personal Umbrella Policy (umbrella policy).

IMT conducted an investigation of the facts surrounding the Newman lawsuit, and decided under the facts then known that neither policy obligated them to provide coverage or a defense. IMT's position was: (1) there had not been an "occurrence" within the meaning of the liability policy language, (2) the liability policy did not provide coverage for discharge of "waste material" unless the discharge was "sudden and accidental," and (3) there had not been an "occurrence" within the meaning of the umbrella policy language.

Webers filed the present petition for declaratory judgment after learning that IMT refused to defend and indemnify them. The petition sought a determination that IMT was obligated to defend against the Newman lawsuit. After a bench trial in this law action, the district court ruled in favor of IMT, holding that IMT had no duty to provide a defense in the Newman case. Webers appealed. The court of appeals affirmed the judgment of the district court.

Upon further review, we must consider the following questions: (1) whether the pollution exclusion precludes coverage for Webers under the liability policy; (2) whether the doctrine of reasonable expectations requires coverage for Webers under the liability policy; (3) whether there was an "occurrence" within the meaning of the umbrella policy language; and (4) the identity of the insureds under the umbrella policy.

II. The duty to defend and indemnify. An insurer's duty to defend arises whenever there is a potential or possible liability to pay based on the facts at the outset of the case. McAndrews v. Farm Bureau Mut. Ins. Co., 349 N.W.2d 117, 119 (Iowa 1984). "The insurer has no duty to defend if after construing both the policy in question, the pleadings of the injured party and any other admissible and relevant facts in the record, it appears the claim made is not covered by the indemnity insurance contract." Id. (citing Central Bearings Co. v. Wolverine Ins. Co., 179 N.W.2d 443, 445 (Iowa 1970)). Thus, in determining IMT's duty to defend the Newman suit our review will focus on the facts known at the outset of that case.

III. The liability policy. Webers' liability policy with IMT provided coverage for any "occurrence." The policy, however, did not define "occurrence." We will assume without deciding that there was an occurrence under the liability policy issued by IMT because we conclude that even if there was an occurrence, exclusion (q) (pollution exclusion) of the liability policy is determinative of coverage in this case. The pollution exclusion provides that the liability policy does not apply:

to 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 ... but this exclusion does not apply if such discharge, release or escape is sudden and accidental.

(Emphasis added.)

Therefore, in determining whether the liability policy provides coverage, we must determine whether the Webers' hog manure was "waste material," and if it was waste material, whether the discharge of the hog manure was "sudden and accidental."

A. Does hog manure fall within the pollution exclusion which excludes coverage for damage caused by waste material? The district court decided that a reasonable interpretation of the term waste material, as it was used in the liability policy, included Webers' discharge of hog manure onto the road.

Webers challenge the district court's finding that the hog manure discharged on the road was waste material. Webers assert that the term waste material is ambiguous and, therefore, construing waste material in the light most favorable to the insured, the term waste material does not include hog manure that is being used as fertilizer. Ambiguity exists if after the application of pertinent rules of interpretation to the face of the instrument, a genuine uncertainty results as to which one of two or more meanings is the proper one. Cairns v. Grinnell Mutual Reinsurance Co., 398 N.W.2d 821, 824 (Iowa 1987).

"Waste material" is not defined in the policy. Therefore, we are required to give the term its ordinary meaning. Connie's Constr. Co. v. Fireman's Fund Ins. Co., 227 N.W.2d 207, 210 (Iowa 1975); Andresen v. Employers Mut. Casualty Co., 461 N.W.2d 181, 184 (Iowa 1990). We believe that the ordinary meaning of waste material encompasses the hog manure that was spilled on the road in this case, and, we believe that waste material is not ambiguous as it applies in this case.

We have previously referred to hog manure as waste. See Valasek v. Baer, 401 N.W.2d 33 (Iowa 1987). After reviewing the evidence and circumstances in this case, we are not persuaded that this manure should be considered anything other than waste. There may be circumstances when hog manure should be classified as something other than waste material, but when it is spilled on the road it unambiguously constitutes waste.

We are, however, inclined to limit our holding to the facts of this case. Courts are currently struggling in an attempt to define the limitations imposed by pollution exclusions identical to the exclusion in this case. Amici in support of IMT has urged us to follow the rationale used in Guilford Industries, Inc. v. Liberty Mut. Ins. Co., 688 F.Supp. 792 (D.Me.1988). The court, in Guilford, held that oil spilled from storage tanks constitutes a pollutant. Id. at 794. The court reasoned that once oil escapes into the environment, it no longer maintains its beneficial purpose; it becomes a pollutant. Id. Amici urges us to extend this logic to all instances where bodily injury or property damage results from the discharge, dispersal, release or escape of anything, since anything that escapes into the environment and causes bodily injury or property damage is a pollutant.

We strive to give effect to all of the language of a contract. Berryhill v. Hatt, 428 N.W.2d 647, 654 (Iowa 1988). "[A]n interpretation which gives a reasonable, lawful, and effective meaning to all terms is preferred to an interpretation which leaves a part unreasonable, unlawful or of no effect." Id. at 655 (citing Fashion Fabrics v. Retail Investors, 266 N.W.2d 22, 26 (Iowa 1978)).

We recognize that following the line of reasoning suggested by amici would essentially eliminate any meaning for the terms "smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or...