South Dakota State Cement Plant Commission v. Wausau Underwriters Insurance Co.

AMUNDSON, Justice.

[¶ 1.] Wausau Underwriters Insurance Company (Wausau) appeals the trial court’s judgment finding Wausau breached its duty to defend its insured South Dakota State Cement Plant (SDCP), claiming they had no duty to defend because the underlying lawsuit against SDCP fell within the “absolute pollution exclusion” in SDCP’s insurance policy with Wausau. Wausau also appeals the trial court’s decision that Wausau was liable for the underlying settlement amount of $200,000, the amount for which SDCP settled the underlying lawsuit. We reverse.

*399FACTS

[¶ 2.] SDCP is engaged in the business of manufacturing, marketing, and transporting cement products. This action involves SDCP’s operations in Natrona County, Wyoming. Under Wyoming Air Quality Standards and Regulations, if a party wishes to construct or modify a facility which “may cause the issuance of, or an increase in the issuance of air contaminants into the air of the State [they] should obtain a construction permit from the State of Wyoming Department of Environmental Quality” (DEQ). See Wyoming Air Quality Standards and Regulations § 21(a). Further, “the owner or operator of the facility is responsible for obtaining a permit to construct and/or operate and that the application shall show the design of the source, the nature and amount of emission, and the manner in which it will be operated and controlled.” See id. at § 21(b). SDCP submitted its permit application to the Wyoming Department of Environmental Quality (DEQ) in an effort to gain approval to operate its facility. SDCP noted on its permit application, which was submitted to DEQ, that the “pollutant removed” would be “cement dust,” and the pollutant’s emission would be controlled through the use of “air contaminant control equipment.” Based upon this representation, SDCP received a waiver from the permit requirement and was allowed to operate its facility.

[¶ 3.] From November 1987 to October 1989, DEQ received numerous complaints from residents regarding excessive cement dust emissions from SDCP. On November 15, 1989, SDCP received a notice of violation from DEQ, alleging a violation of Wyoming environmental statutes and regulations because of their excessive dust emissions.1 DEQ claimed that SDCP operated its facility “without full use of control equipment designed to limit excessive dust emissions;” a violation of Wyoming environmental statute 35-11-201 which provides that “[n]o person shall cause, threaten or allow the discharge or emission of any air contaminant in any form so as to cause pollution which violates rules, regulations and standards adopted by the Administrator....” In addition, SDCP was alleged to be in violation of section 21(a) of the Wyoming Air Quality Standards and Regulations which prohibits a person from using a facility “which may cause the issuance of, or an increase in the issuance of air contaminants into the air of the State” without a permit.

[¶ 4.] On October 20, 1989, property owners and residents of the Brookhurst Subdivision, which is located near SDCP’s Natrona County facility, commenced an action against SDCP and nineteen other defendants. The nineteen defendants were divided into two classes: “polluting defendants” and “developer defendants.” The “polluting defendants” were SDCP and seventeen other industrial operations in the Natrona County area. The action was brought to recover compensation for damages to property and property interests, both past, present, and future, “as a result of defendant’s past and present toxic *400chemical and other emission/discharges” from SDCP’s industrial facility. The complaint also sought recovery for private nuisance, public nuisance, intentional and negligent violation of statutory, regulatory and other permits and rules, intentional and negligent infliction of emotional distress, strict liability, trespass, and negligence.

[¶ 5.] SDCP had several general liability policies with Wausau during the time involving the litigation. These policies provided that Wausau had the “right and duty to defend any suit.” However, the policies included an absolute pollution exclusion which relieves Wausau of liability on the policies if the bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants. Wausau refused to defend the suit against SDCP based upon the absolute pollution exclusion clause. Eventually, SDCP settled this lawsuit in November 1991 for $200,000, but incurred defense costs in the amount of $352,393 while defending the suit.

[¶ 6.] SDCP brought an action against Wausau for breaching its duty to defend. On October 8, 1992, the circuit court denied Wausau’s motion for summary judgment, ruling that Wausau had not affirmatively established that cement dust was a pollutant within the meaning of the absolute pollution exclusion. Subsequently, the court granted SDCP summary judgment on the issues that Wausau had a duty to defend and that Wausau was liable for the $352,393 in costs of defending the suit. Following a bench trial, SDCP was awarded the $200,000, plus prejudgment interest, as a proximate result for Wausau’s breach of its duty to defend.

[¶ 7.] The trial court held that “Wausau’s policy would have covered the SDCP had SDCP been found liable for nuisance or trespass and had cement dust been found not to be a ‘pollutant’ within the meaning of Wausau’s policies.” In addition, “Wau-sau had a duty to defend the claims in the underlying complaint for trespass and nuisance allegedly caused by the ‘other emissions/discharges.’ ” Finally, the trial court found that SDCP had proven a “causal connection between the settlement paid and Wausau’s breach of its duty to defend” and that Wausau’s breach was “instrumental” in “forcing the SDCP to settle the underlying suit.” As a result, Wausau’s breach of its duty to defend entitled SDCP to damages for breach of contract which would compensate SDCP for all detriment proximately caused by their breach of the duty to defend: the amount of the settlement ($200,000) plus prejudgment interest ($111,713.23).

[¶ 8.] Wausau appeals on the following issues:

1. Whether Wausau had a duty to defend the underlying lawsuit because the allegations of the underlying complaint fall squarely within the absolute pollution exclusion of the Wausau policies.
2. Whether the trial court improperly concluded that Wausau was liable for the underlying settlement as a consequence of its alleged breach of its duty to defend.

SDCP filed a notice of review raising the following issues:

3. Whether Wausau was justified under the pollution exclusion in Wau-sau’s policies in failing to defend a complaint that alleged trespass and nuisance in addition to pollution claims.
4. Whether Wausau was liable for all damages naturally and reasonably flowing from the breach of the duty to defend.

STANDARD OF REVIEW

[¶ 9.] This case involves review of the trial court’s granting of summary judgment on the issue of duty to defend. In discussing our standard of review for issues on summary judgment, we have often stated:

In reviewing a grant or a denial of summary judgment under SDCL 15-6-56(c), we must determine whether the moving *401party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. If there exists any basis which supports the ruling of the trial court, affirmance of a summary judgment is proper.

Stoebner v. South Dakota Farm Bur. Mut. Ins. Co., 1999 SD 106, ¶ 6, 598 N.W.2d 557, 558 (quoting Weiss v. Van Norman, 1997 SD 40, ¶ 9, 562 N.W.2d 113, 115 (citations omitted)). “[A] disputed fact is not ‘material’ unless it would affect the outcome of the suit under the governing substantive law in that a ‘reasonable jury could return a verdict for the nonmoving party.’ ” Weiss, 1997 SD 40, ¶ 11 n. 2, 562 N.W.2d at 116 (quoting Parsons v. Dacy, 502 N.W.2d 108, 110 (S.D.1993) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202, 212 (1986)). We will affirm a granting of summary judgment “if the trial court has correctly decided the legal issues before it.” Alverson v. Northwestern Nat’l Cas. Co., 1997 SD 9, ¶ 4, 559 N.W.2d 234, 235 (citing Farmland Ins. Cos. v. Heitmann, 498 N.W.2d 620, 622 (S.D.1993) (citations omitted)).

[¶ 10.] The second part of this case on indemnification of the settlement amount was decided by a court trial. The court entered findings of fact and conclusions of law on June 15, 1998. A “trial court’s findings of fact and decision are presumed correct and we will not seek reasons to reverse.” City of Winner v. Bechtold Invs., Inc., 488 N.W.2d 416, 418 (S.D.1992) (citations omitted). In addition, since this action was tried to a court without a jury, we “will not disturb findings unless evidence clearly preponderates against them.” Id. (citing Gross v. Connecticut Mut. Life Ins. Co., 361 N.W.2d 259 (S.D.1985) (further citations omitted)). “ ‘In applying the “clearly erroneous” standard, we do not ask whether we would have made the same findings as did the trial court. Rather, the test is whether, after reviewing all the evidence, we are left with a definite and firm conviction that a mistake has been made.’ ” Mash v. Cutler, 488 N.W.2d 642, 645-46 (S.D.1992) (quoting Chamberlain Livestock Auction v. Penner, 462 N.W.2d 479, 482 (S.D.1990) (citing Temple v. Temple, 365 N.W.2d 561 (S.D.1985); Cunningham v. Yankton Clinic, P.A., 262 N.W.2d 508 (S.D.1978); In re Estate of Hobelsberger, 85 S.D. 282, 181 N.W.2d 455 (1970))). The construction and interpretation of an insurance contract is a question of law. See Colonial Ins. Co. of Cal. v. Lundquist, 539 N.W.2d 871, 873 (S.D.1995), and State Farm Mut. Auto. Ins. Co. v. Wertz, 540 N.W.2d 636, 638 (S.D.1995). Our standard of review for questions of law is de novo; therefore, “this Court is not required to defer to the trial court’s legal determinations.” Wertz, 540 N.W.2d at 638 (citations omitted).

DECISION

[¶ 11.] 1. Whether Wausau had a duty to defend the underlying lawsuit because the allegations of the underlying complaint fall squarely within the absolute pollution exclusion of the Wau-sau policies.

[¶ 12.] It is concerning and frustrating that this case was not resolved in a separate declaratory judgment action preceding the trial.2 This Court has previously noted that “[t]ypically, and most appropriately, the issue regarding an insurer’s duty to defend arises in a separate declaratory judgment action, preceding a trial on the underlying damage action.” Stoebner, *4021999 SD 106, ¶ 27, 598 N.W.2d at 561 (citations omitted) (Miller, J., dissenting). As Justice Miller noted in his dissent in Stoebner, “[i]t is unfortunate that neither party, especially [Wausau], sought to have this issue appropriately resolved earlier.” Id.

[¶ 13.] In the hearing on the summary judgment motion in regards to the duty to defend, the trial court noted that “the insurance company has the burden of proving that all the underlying claims clearly fall outside the policy coverage.” The court found that “facts in the underlying action [exist] which would support a nuisance and trespass cause of action even if the jury in the underlying action was to find that the cement dust was not a pollutant, that it is a contaminant or an irritant within the meaning of the policy language.” The court emphasized that the complaint should not be read as a whole; instead, “if any part of the underlying suit states a claim then there is a duty to defend.” The trial court found, in granting SDCP’s motion for summary judgment on Wausau’s duty to defend, that “damages in nuisance and trespass” are causes of action “clearly, as well as potentially,” within Wausau’s policy coverage.

[¶ 14.] In the present case, bodily injury and property damage coverage was provided by Wausau to SDCP in the “Products-Completed Operations Hazard” provision and the “Comprehensive Liability” provision. In each of the Wausau insurance policies, the “absolute pollution exclusion” (exclusion) provides:

This insurance does not apply:
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(f)(1) to bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants:
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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. (Emphasis added.)

[¶ 15.] We have often stated that “[a]n insurer’s duty to defend and its duty to pay on a claim are severable and independent duties.” Wertz, 540 N.W.2d at 638 (citing Hawkeye-Sec. Ins. Co. v. Clifford, 366 N.W.2d 489, 490 (S.D.1985)). An insurer’s duty to defend “ ⅛ much broader than the duty to pay a judgment rendered against the insured.’ ” Id. (quoting Hawkeye, 366 N.W.2d at 490). The insurer has the burden of showing that no duty to defend exists. Id. (citing North Star Mut. Ins. Co. v. Kneen, 484 N.W.2d 908, 912 (S.D.1992)). The insurer’s burden is satisfied by proving that the insured’s claim “ ‘clearly falls outside of policy coverage.’ ” Id. (quoting Kneen, 484 N.W.2d at 912 (citing City of Fort Pierre v. United Fire & Cas. Co., 463 N.W.2d 845, 847 (S.D.1990); Bayer v. Employers Reinsurance Corp., 383 N.W.2d 858, 861 (S.D.1986); Hawkeye, 366 N.W.2d at 492)) (emphasis in original). In addition, if it “arguably appears from the face of the pleadings in the action that the alleged claim, if true, falls within the policy coverage, the insurer must defend.” Hawkeye, 366 N.W.2d at 491. If, after reviewing the complaint and other appropriate record evidence, “ ‘doubt exists whether the claim against the insured arguably falls within the policy coverage, such doubts must be resolved in favor of the insured.’ ” Wertz, 540 N.W.2d at 638 (quoting City of Fort Pierre, 463 N.W.2d at 847 (citing Hawkeye, 366 N.W.2d at 492)).

[¶ 16.] The following excerpts from the original complaint filed in the lawsuit identify the allegations against SDCP and the other “polluting defendants”:

I.
Facts Common to All Causes of Action Against All Except Developer Defendants
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2. This action is brought to recover compensation for damage to proper*403ty and property interests, for present, past and the threat of future health problems, past, present and future hospital and doctor expenses, medications paid and to be paid, together with emotional injury suffered in the past and which will be suffered in the future by the plaintiffs as a result of defendant’s past and present toxic chemical and other emissions/discharges and the threat of future emissions from the defendant’s industrial facilities which have been and threatened to be conducted on the properties in the immediate vicinity of the Brookhurst Subdivision, Natrona County, Wyoming[J
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II.
Polluting Industries
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0. South Dakota Cement
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213. Competent medical authority has determined that the long-term inhalation and exposure to cement dust is hazardous to human and animal health, deleterious to vegetation growth, and the release of this substance has had the effect of decreasing the value of the properties of the plaintiffs.
214. By reason of the release of the cement dust as hereinabove described and by reason of the cement company’s permitting the dust to escape its premises and envelope the Brookhurst Subdivision, including the properties and persons of the plaintiffs, the air, soil and tuaters of the subdivision have been altered and contaminated and rendered useless to the plaintiffs enjoyment, dangerous to the plaintiffs health and destructive to the value of the plaintiffs properties, as well as having the effect of being harmful to the plaintiffs, animals and plant life.
215.As a direct result of the negligent and loillful and ivanton release of the hazardous cement dust from the premises occupied and utilized by South Dakota Cement into the tuater, soil and air of the Brookhurst environment, the plaintiffs have been injured and their properties damaged in ways which are more particularly described in subsequent paragraphs of this Complaint.
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III.
Plaintiffs First Cause of Action Against All Polluting Defendants: Private Nuisance
260. Plaintiffs ... allege that all named defendants have jointly and severally negligently and intentionally caused the air, ground and surface water, and soil contamination problems in Brookhurst Subdivision and that such actions ... constitute a private nuisance in the following, but not exclusive, respects:
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f. The defendants, in causing the conditions which have led to the air, water and soil contamination problems in the Brookhurst Subdivision, have acted with reckless abandon amounting to a purpose to cause the contamination of the air, soil, ground and surface waters of the subdivision. ...
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IV.
Plaintiffs Second Cause of Action Against All Polluting Defendant’s: Public Nuisance
262. Plaintiffs ... allege that all the defendants have negligently and in*404tentionally caused the contamination herein described in the Brookhurst Subdivision and that such actions of the defendant constitute a public nuisance in the following, but not exclusive, respects:
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f. The defendants, in causing the conditions which have led to the air, water and soil contamination problems in the Brookhurst Subdivision have acted for the purpose of causing the plaintiffs to suffer such contamination without regard to their suffering and deprivation of their enjoyment of public facilities....
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V.
Plaintiffs Third Cause of Action Against All Polluting Defendants: Damages Resulting From Intentional and Negligent Violations of Statutory, Regulatory and Other Permits and Rules
264. Plaintiffs ... allege that the various defendants have negligently and intentionally caused the contamination of the air, soil, ground and surface waters ... and that such actions of the polluting defendants have been in direct violation of their various duties of care to these plaintiffs guaranteed to them by Wyoming State laws and regulations.
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VII.
Plaintiffs Fifth Cause of Action Against All Polluting Defendants: Strict Liability
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270. The defendants have allowed toxic wastes to gather upon and to escape from the aforesaid facilities and migrate into the ground, air and waters of the Brookhurst Subdivision,
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273. The toxic and hazardous substances heretofore identified have permeated the air and soil and have contaminated the ground and surface waters on and under Brookhurst, and these materials and substances have trespassed upon and contaminated the persons and properties of the plaintiffs.
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XIII. [sic]
Plaintiffs Sixth Cause of Action Against All Polluting Defendants: Trespass
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278. The defendants, by permitting the leakage and escape of toxic wastes into the environment of Brookhurst and, particularly, into the ground and surface water, the soil and the air of that environment, have set in motion various forces which, in the usual course of events, will damage the property and have damaged the persons and properties of these plaintiffs.
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IX.
Plaintiffs Seventh Cause of Action Against All Polluting Defendants: Negligence
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282. By reason of the negligent and willful and wanton acts and omissions of the defendants as have been, at least in part, described herein, the soil, air and waters of the plaintiffs *405have been contaminated and the well-being of the plaintiffs has otherwise been adversely affected.
(Emphasis added in all previous sections.)

[¶ 17.] This is the first opportunity for this Court to review and interpret the parameters of an absolute pollution exclusion. It has been often noted that the purpose of a pollution exclusion clause is “to limit liability for environmental damage.” Westchester Fire Ins. Co. v. City of Pittsburg, Kansas, 768 F.Supp. 1463, 1468-69 (D.Kan.1991). Pollution exclusion clauses are “ ‘intended to exclude insurance coverage resulting from pollution and contamination of the environment, be it land, water, or the atmosphere.’ ” Id. at 1469. Many jurisdictions have upheld the pollution exclusion as a bar to the insurer’s duty to defend. See, e.g., National Elec. Mfrs. Ass’n v. Gulf Underwriters Ins. Co., 162 F.3d 821, 827 (4th Cir.1998) (holding that the “pollution exclusion unambiguously and explicitly applies to exclude coverage” and therefore, insurer had no duty to defend); Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1044 (7th Cir.1992) (holding that because the underlying suit arises from the release of pollutants, the pollution exclusion bars coverage and the insurer did not owe a duty to defend).

[¶ 18.] In the present case, Wausau contends that according to the pollution exclusion, all “bodily injury” or “property damage” arising out of the “actual, alleged, or threatened discharge, dispersal, release or escape of pollutants” precludes coverage in this case. It is Wausau’s contention that each and every asserted claim against SDCP, including the trespass and nuisance claim, are premised upon SDCP’s polluting conduct (emission of cement dust); therefore, the pollution exclusion clause negates any duty to defend that Wausau owes to SDCP.

[¶ 19.] Wausau further argues that the cement dust released by SDCP constitutes a “pollutant.” The pollution exclusion defines “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Wausau claims that cement dust constitutes an “irritant” or “contaminate” within a literal dictionary definition of the terms.3 In addressing the dictionary definition of the terms, the circuit court noted that “[a]l-though the factual allegations in the underlying complaint do fit within the broad dictionary definition of ‘contaminants’ or ‘irritants,’ [the case of Guilford Indus., Inc. v. Liberty Mut. Ins. Co., 688 F.Supp. 792, 794 (D.Me.1988) ] has succinctly explained why Wausau’s proposed ‘construction cannot be sanctioned[.]’” The court noted that if it were to use “such a broad construction [it] would render the exclusion meaningless since any substance could conceivably irritate or contaminate.”

[IT 20.] In Guilford, a flooding Piscata-quis River caused two pipes from Guil-ford’s textile mill’s oil tanks to rupture and damage property down river from the plant. 688 F.Supp. at 793. The insurer’s policy contained a pollution exclusion which applied to “pollutants, defined, in part, as any liquid irritant or contaminant.” Id. at 794. Guilford contended that “the terms ‘contaminant,’ ‘irritant,’ and ‘chemicals,’ viewed broadly and in isolation, are ‘meaningless,’ and that by applying such a construction, “any substance would meet the exclusion.” Id. In granting the insurer’s motion for summary *406judgment on the coverage issue, the court opined that Guilford was correct that “almost any substance might fall within the exclusion,” but the provision is far from “all-inclusive or meaningless” because to fall within the exclusion, the substance must meet a “certain very precisely drawn circumstance[ ]: if it is an irritant or contaminant.” Id. The court ultimately found that the pollution exclusion provision was “far from all-inclusive or meaningless.” Id.

[¶ 21.] In the present case, the circuit court erred in its interpretation and application of Guilford. . In addition, Guil-ford is distinguishable from the other cases cited by the circuit court because, in Guil-ford, the court ultimately upheld the provision as not being overly broad, but limited to a “certain very precisely drawn circumstance! ]: if it is an irritant or contaminant.” See Guilford, 688 F.Supp. at 794. Wausau’s exclusion was intended not to cover any substance, but only those substances which irritate or contaminate.

[¶ 22.] The circuit court opined that Wausau had failed to affirmatively set forth evidence to establish that cement dust falls within the pollution exclusion. The trial court refused to use Wausau’s string of broad definitions to determine the pollution exclusion applied and found that “such a broad construction would render the exclusion meaningless since any substance could conceivably irritate or contaminate.” Wausau argues that they “did not have the burden to prove that the cement dust released from SDCP’s facility is, in fact, a ‘pollutant.’ ” We agree. As we stated earlier, it is the well settled law in this jurisdiction that an insurer has the burden of showing that no duty to defend exists and this burden is satisfied by proving that the insured’s claim “ ‘dearly falls outside of policy coverage.’ ” Wertz, 540 N.W.2d at 638 (quoting Kneen, 484 N.W.2d at 912 (citations omitted)) (emphasis in original). To determine whether the insurer has a duty to defend, we must only look to the complaint and other record evidence to determine whether the alleged claim, if true, falls within the policy coverage. See Hawkeye, 366 N.W.2d at 491.

[¶ 23.] A review of the complaint in this case reveals a common, basic underlying theory to all of the claims against SDCP, the emission of contaminants/cement dust. Does emission of cement dust fall within the confines of the pollution exclusion? We submit that it does. Under the “pollution exclusion” in the policy, “pollutants” are defined as “any solid, liquid, gaseous or thermal irritant or contaminant.” The use of a string of definitions, as proposed by Wausau, is unnecessary in resolving this issue. Instead, a careful reading of the complaint in ■ correlation with the pollution exclusion clause shows that the claims against SDCP were based upon allegations of “contamination,” thereby clearly falling under the pollution exclusion and negating Wausau’s duty to defend. A determination of whether cement dust actually constitutes a “pollutant” or “contaminant” is unnecessary; our obligation is to review the complaint and analyze whether “if any claim, if true, falls within the policy coverage.”4

*407[¶ 24.] It is quite obvious that the parties in this case did not negotiate for coverage for damages caused by emission or contamination. It is not the function of this Court to rewrite a contract. See Kroupa v. Kroupa, 1998 SD 4, ¶ 49, 574 N.W.2d 208, 217 (quoting Hisgen v. Hisgen, 1996 SD 122, ¶ 17, 554 N.W.2d 494, 499) (Sabers, J., dissenting) (noting that “ ‘[i]t is not a function of the court to rewrite the parties’ agreements’ ”). See also Schlosser v. Norwest Bank South Dakota, 506 N.W.2d 416, 421 (S.D.1993) (quoting Raben v. Schlottman, 77 S.D. 184, 190-91, 88 N.W.2d 205, 208 (1958)) (Wuest, J., concurring in part & dissenting in part) (stating that “ ‘a court cannot make a con tract for the parties that they did not make for themselves’ ”) and Amdahl v. Lowe, 471 N.W.2d 770, 777 (S.D.1991) (concluding that “we cannot create a contract for the parties which they did not intend”). Because the causes of action in the complaint are based upon alleged “contamination,” assuming that the allegations that SDCP caused contamination are true, no coverage would apply and Wausau would not have a duty to defend because the causes of action in the complaint all clearly fall within the definition of pollution in the pollution exclusion clause.5 Therefore, the trial court erred in granting summary judgment in favor of SDCP on the issue of duty to defend. Further, the trial court erred in denying Wausau’s motion for summary judgment on the duty to defend issue.

[¶ 25.] 2. The trial court improperly concluded that Wausau was liable for the underlying settlement as a consequence of its alleged breach of its duty to defend.

[¶ 26.] Based upon our disposition of issue one, we also reverse the trial court’s settlement award to SDCP, which was based upon Wausau’s breach of its duty to defend.

[¶ 27.] Based upon our disposition of this issue, we need not address SDCP’s notice of review issues regarding whether the exclusion specifically applies to “property damage” and “bodily injury,” not “personal injury.” Notably, SDCP in its brief to this Court, raised this issue for the first time in this case. It is this Court’s well settled position that issues not advanced at trial cannot ordinarily be raised for the first time on appeal. See State v. Henjum, 1996 SD 7, ¶ 13, 542 N.W.2d 760, 763 (citations omitted). If a party fails to *408raise an issue, it is deemed waived. Mash, 488 N.W.2d at 648. Therefore, because SDCP never argued this theory below, it is deemed waived.

[¶ 28.] We reverse.

[¶ 29.] MILLER, Chief Justice, and LEE D. ANDERSON, Circuit Judge, concur. [¶ 30.] SABERS, and GILBERTSON,. Justices, dissent. [¶ 31.] LEE D. ANDERSON, Circuit Judge, sitting for KONENKAMP, Justice, disqualified.

. In addition to receiving the “Notice of Violation,” SDCP also received a letter from Charles Collins, the administrator of the Wyoming Air Quality Division. Collins informed SDCP that,

[SDCP has failed] to utilize stated control equipment at the cement rail/truck transfer facility in Evansville, Wyoming.
Proper operation of this facility according to the terms of your original application has been a consistent problem for a number of years. In 1982 and again in 1983, I authorized the waiving of permitting requirements for this facility based on the relatively insignificant emissions resulting from this operation so long as the stated control equipment were in place and used at all times during operation.
I must tell you that continued incidents such as that specified in the enclosed Notice will force me to rescind your waiver under the authority of W.S. 35-11-110, "Powers of Administrators” and require that a formal permit to operate be obtained. I must also advise you that in today's environment, particularly in the Casper area, success in obtaining such a permit is by no means assured.

. Notably, Judge Zinter stated in his findings of fact and conclusions of law in the action on damages for the cost of settlement, that “Wausau did not seek a declaratory judgment nor did it defend under a reservation of rights.”

. Wausau argued in its summary judgment motion and its brief to this Court that Webster’s Ninth Collegiate Dictionary defines "contaminant” as "something that contaminates.” "Contaminant” is defined as: "1 a: to soil, stain, corrupt, or infect by contact or association ... > b: to make inferior or impure by admixture ... >2: to make unfit for use by the introduction of unwholesome or undesirable elements.” "Irritant” is defined as "something that irritates or excites.” "Irritate” is defined as: "1: to provoke impatience, anger, or displeasure in: ANNOY 2: to induce irritability in ~vi: to cause or induce displeasure or irritation.”

. SDCP argues that cement dust is not a pollutant. In Westchester, 768 F.Supp. at 1470, the court noted that a pollutant is a substance that is “a toxic or particularly harmful material which is recognized as such in industry or by governmental regulators." In the present case, cement dust is govern-mentally regulated. SDCP was required to obtain a variance before emitting the cement dust into the air. On the application, SDCP listed that "pollutant removed” as "cement dust.” In addition, SDCP had received a notice of violation from DEQ alleging excessive dust emission in violation of Wyoming environmental statutes and regulations. As the court in Pipefitters noted, "[t]he scope of ... [Wausau's] pollution exclusion is governed by the expectations of a reasonable policyholder, [citations omitted], and a reasonable policyholder would have to expect that the discharge of [cement dust] at the [SDCP] site was pollution. See 976 F.2d at 1044. Why else would a government regulate cement dust emission and provide notice of violation of environmental statutes and regulations unless it was not a harmful material or *407pollutant if emitted into the air? To argue that cement dust is not a pollutant faced with government regulation on the substance appears to be a specious argument at best.

. In the present case, we are confronted with a permit application to the Wyoming Department of Environmental Quality by Cement Plant in an effort to gain approval to operate its facility. This permit specifically requested that Cement Plant disclose what pollutant would be removed and how it would be removed. Cement Plant specifically declared the pollutant removed would be "cement dust.” The dissent argues that cement dust has never been "clearly defined as a 'pollutant,' let alone a ‘contaminant.’ ” The dissent further contends that "[t]he substance must generally 'occur in a setting such that they would be recognized as a toxic or particularly harmful substance in industry or by governmental regulators.' " In support of its argument, the dissent relies on several cases. None of the cases deal with industrial discharges where a permit application is involved, such as in the present case. See, e.g., Regional Bank of Colorado v. St. Paul Fire & Marine Ins. Co., 35 F.3d 494 (10th Cir.1994) (dealing with carbon monoxide poisoning at a rental apartment); In re Hub Recycling, Inc., 106 B.R. 372 (D.N.J.1989) (addressing the pollution of land by landowners recycling business and its subsequent clean up); Molton, Allen & Williams v. St. Paul Fire & Marine Ins., 347 So.2d 95 (Ala.1977) (involving the washing of sand down wet-weather streams by virtue of rainfall into the lakes owned by Williams). The dissent's reliance on Regional Bank is misplaced based upon the reliance by the Regional Bank decision on the doctrine of reasonable expectations. This doctrine has never been adopted by South Dakota; in fact, this Court has repeatedly declined to adopt the doctrine. See Stene v. State Farm Mut. Auto. Ins. Co., 1998 SD 95, ¶ 18, 583 N.W.2d 399, 402-03; Alverson, 1997 SD 9, ¶ 14, 559 N.W.2d at 237.