Traverse City Light & Power Board v. Home Insurance

M. J. Matuzak, J.

(dissenting). I respectfully dissent. The majority’s determination that the deposit of fly ash was an intentional and deliberate act and a critical event triggering the exclusion misses the point regarding whether defendant had a duty to defend pursuant to the policy’s terms. The majority ignores the practical consideration that plaintiff’s action has not been shown to be the source or cause of contamination. In my opinion, absent culpability on the part of plaintiff, defendant would be required to offer representation.

Both parties rely primarily upon one or more of a trilogy of cases decided by our Supreme Court construing pollution exclusions in comprehensive general liability policies. Protective Nat'l Ins Co of Omaha v City of Woodhaven, 438 Mich 154; 476 NW2d 374 (1991); Polkow v Citizens Ins Co, 438 Mich 174; 476 NW2d 382 (1991); Upjohn Co v New Hampshire Ins Co, 438 Mich 197; 476 NW2d 392 (1992).

In Polkow, supra, the plaintiff owned an oil reclamation business. In the course of his business, the plaintiff picked up used oil from various sources and deposited the oil into underground tanks, where the oil separated from the water. Id. at 182. Once the oil separated, the plaintiff moved the oil to another tank. The plaintiff admitted in depositions that in addition to routine spillage during the transmission of the oil into the various tanks, at least one tank overflow had occurred. Id. at 182-183.

Ultimately, the Department of Natural Resources contacted the plaintiff and informed him *121that soil samples taken from his property indicated that the plaintiff was responsible for local ground water contamination. Id. at 183. The dnr ordered the plaintiff to test his property, remove the source of the contamination, and submit a remediation plan. Id. Shortly thereafter, the plaintiff contacted the defendant, with whom the plaintiff had a comprehensive general liability contract with a pollution exclusion identical to the 1981-1984 policy at issue in this case, and requested that the defendant defend the plaintiff in his action against the dnr. The defendant, citing the pollution exclusion, denied coverage. Id.

The plaintiff’s engineer subsequently determined that, although there was ground water contamination, the plaintiff was not the source of the contamination. Id. at 183-184. When the plaintiff repeated his request that the defendant pay for the cost of his defense, the defendant again refused. Id. at 184. The plaintiff then brought a declaratory action against the defendant, requesting that the defendant be ordered to defend the plaintiff and indemnify against future loss. The circuit court granted the plaintiff’s motion for summary disposition, finding that the defendant owed the plaintiff both duties. Id. This Court affirmed. Id.

The Supreme Court analysis noted the existence of a factual question regarding whether the plaintiff’s operations were the cause of the contamination. Id. at 178-179. The Court observed that "[i]t was the 'duty of [the insurer] to undertake the defense until it could confine the claim to a recovery that the policy did not cover.’ ” Id. at 179 (citations omitted). Furthermore, the Court stated that the insurer’s duty to provide a defense extends to allegations that even arguably come within the policy coverage. Id. at 180 (citations omitted). Next, the Court stated that it could not *122determine whether the pollution exclusion applied, or whether the plaintiff was responsible, or, if the plaintiff was responsible, how the contamination occurred. Id.

Thus, the Court determined that the lower court erred in granting the plaintiff’s motion for summary disposition because it was unclear whether the defendant’s policy provided coverage for the plaintiff’s claim. Id. at 180-181. However, the Court also determined that, until the factual dispute could be resolved, the defendant owed a duty to defend the plaintiff because the plaintiff’s claim "arguably” came within the terms of the defendant’s policy. Id. at 180. Accordingly, the Court held that the defendant owed the plaintiff a duty to defend until it could be determined that the defendant did not owe this duty. Id. The Court reversed the lower court’s grant of summary disposition and remanded the case to resolve the pertinent factual questions. Id. at 181.

The facts of the instant case are similar to the facts in Polkow. Most importantly, in this case, the lower court record demonstrates that no determination has been made regarding whether plaintiff’s fly ash is the cause of the ground water contamination. As Catherine Cline, the dnr’s ground water geologist testified, the tests to date have not determined conclusively whether plaintiff’s fly ash was the source of the ground water, contamination. Accordingly, Cline stated that, even if plaintiff was responsible, she could not determine whether the process of contamination was fast or slow. Also, plaintiff’s geologist determined that plaintiff was not the cause of the ground water contamination.

The defendant must defend the plaintiff when the plaintiff’s claim even arguably comes within defendant’s policy. If a doubt exists regarding *123whether a claim falls within a policy, that doubt must be resolved in the insured’s favor. Woodhaven, supra at 159. In this case, plaintiff’s claim arguably comes within the policy because, in addition to the lower court’s finding that there was an "occurrence” under the policy, it is possible that plaintiff’s claim will fall within the "sudden and accidental” exception to the pollution exclusion. This follows from the fact that it cannot be determined whether, or how, plaintiff is responsible for the contamination.

The only way defendant can withhold coverage is if the pollution exclusion in its policies applies. Because it is unclear whether plaintiff is responsible for the contamination in the instant case, it cannot be determined whether that exclusion can be invoked, and if it can, whether the exception to that exclusion applies. Accordingly, defendant’s duty to defend has been triggered, and it must defend against the dnr’s allegations until it can prove its pollution exclusion applies. Polkow, supra at 180-181.

The error in defendant’s argument that Wood-haven controls this case is that the argument assumes plaintiff’s fly ash is the source of the contamination. Woodhaven is distinguishable from this case on its facts because, in Woodhaven, the fact that the insured was responsible for some harm was not in question. Here, however, that issue has not been resolved. In other words, before it can be determined that the pollution exclusion does apply, it must be determined that the insured has caused the pollution.

This Court’s recent decision in American Bumper & Mfg Co v Hartford Fire Ins Co, 207 Mich App 60; 523 NW2d 841 (1994), should guide the determination in this case. American Bumper *124deals with a difficulty similar to that presented in the instant litigation:

What makes this case difficult is the fact that ultimately there was no contamination, or at least not in sufficient amounts to warrant epa action, by which we could examine the facts and determine the éxistence of an event that would trigger coverage under the policy. [Id. at 65-66.]

The American Bumper Court went on to find:

However, we are not called upon to determine whether there is coverage to clean up a pollution site, but whether there was a duty to defend against the epa investigation into possible contamination, where that investigation resulted in the conclusion that there was no contamination. . . .
An insurer’s duty to defend differs from the duty to provide coverage. It extends to even nonmeritorious claims where those claims allege theories of recovery which fall within the policy. If there is any doubt regarding whether an allegation comes within the scope of the policy, that doubt must be resolved in the insured’s favor. Thus, the insurer owes the duty to defend until such time as the insurer has confined the claims against the insured to those theories the policy would not cover. In the context of pollution cases, this means that the insurer has a duty to defend until there is at least sufficient factual development to determine what caused the pollution so that a determination can be made regarding whether the discharge was sudden and accidental. Until that point, the allegation must be regarded as coming arguably within the liability policy, thus resulting in a duty to defend. [Id. at 66-67. Emphasis added; citations omitted.]

In providing its own defense, plaintiff succeeded in setting aside the initial remediation order as *125being in excess of the dnr’s statutory authority. Following that, plaintiff succeeded in showing that contamination at the site, if any, was not attributable to plaintiff’s conduct. Further, under the terms of the dnr consent order, the dnr determined no remediation was required.

As I have noted above, under the plain terms of the policy, the insurer has a duty to defend its insured against groundless claims. As the American Bumper Court stated:

The difficulty in applying this analysis to the case at bar is that no pollution was ever found, at least not in sufficient quantities to merit a full-scale cleanup. That is, without such a discharge, the facts will never be developed to the point where it can be determined that the discharge was or was not sudden and accidental, thus triggering policy coverage. . . .
Thus, we find ourselves grappling with the horns of a dilemma. Do we consider the discharge that never occurred to have been sudden and accidental had it occurred and therefore triggering coverage and a duty to defend? Or do we consider it as something other than sudden and accidental and, therefore, coming within the provisions of the pollution exclusion, not meeting the definition of an occurrence under the policy, and therefore not triggering coverage or duty to defend? [Id. at 67-68.]

After undertaking a brief analysis of the decision in Polkow, as it pertains to the insurer’s duty to defend, this Court concluded:

With these principles in mind, we conclude that, under the circumstances of this case, an "occurrence” sufficient to trigger the duty to defend under the policies may have happened. More specifically, a duty to defend was owed until such time as it could be established that no sudden and *126accidental discharge of a pollutant had occurred.
Thus, the question is not so much whether an "occurrence” has occurred, but whether it has been established that an occurrence has not occurred. Until it is established that an occurrence has not occurred, a duty to defend is owed. Because it was not clearly established that an occurrence did not occur, the duty to defend existed until either the epa investigation was complete and there was no need for further defense or until the carriers could affirmatively establish that no occurrence had occurred. [American Bumper, supra at 69-70. Emphasis added.]

The analysis applied in American Bumper is the analysis that should have been applied to defendant in the instant case. The facts of the American Bumper case and the instant case are virtually indistinguishable. Pursuant to MCR 7.215(C)(2), a "published opinion of the Court of Appeals has precedential effect under the rule of stare decisis.” Clearly, American Bumper is controlling in the instant appeal and has precedential effect.

Defendant also argues that the trial court erred in failing to reconsider its initial decision based upon the long-term intentional dispersal of waste materials pursuant to Woodhaven, supra. Defendant asserts that the trial court erred in denying its motion for reconsideration because it focused on the wrong case law, and because defendant offered new case law interpreting the cases upon which it previously relied.

In response, plaintiff argues that the lower court correctly denied defendant’s motion for reconsideration because defendant improperly made the same arguments in that motion as it had in its motion for summary disposition. MCR 2.119(F)(3) states:

*127Generally, and without restricting the discretion of the court, a motion for rehearing or reconsideration which merely presents the same issues ruled on by the court, either expressly or by reasonable implication, will not be granted. The moving party must demonstrate a palpable error by which the court and the parties have been misled and show that a different disposition of the motion must result from correction of the error.

In Cason v Auto Owners Ins Co, 181 Mich App 600, 605; 450 NW2d 6 (1989), this Court affirmed the rule that "a motion which merely presents the same, issue as ruled, on by the court, either expressly or by reasonable implication, will not be granted.” Id.

Defendant relies on Fetz Engineering Co v Ecco Systems, Inc, 188 Mich App 362, 374; 471 NW2d 85 (1991), vacated on other grounds 439 Mich 977 (1992), in which this Court determined "not only was the trial court permitted to grant reconsideration on the basis of newly published precedent, it was obligated to do so.”

In this case, the new case law upon which defendant relied had been published before the lower court’s order. In fact, defendant only cites one case decided after 1991, and that case was published in January 1992. I believe that defendant’s motion for reconsideration was merely an attempt to bolster its earlier argument that Wood-haven controls the determination. The lower court, however, correctly determined that the instant action was controlled by Polkow.

Accordingly, I believe that the lower court did not abuse its discretion by denying defendant’s motion to reconsider under MCR 2.119(F)(3).

Finally, defendant argues that the trial court erred in denying its motion for summary disposition and in granting plaintiffs motion because *128plaintiff failed to show that its claim fell within the terms of defendant’s policy, and even if it did, defendant demonstrated that the pollution exclusion applies.

In response, plaintiff argues that the trial court correctly denied defendant’s motion and granted its motion because plaintiff demonstrated that its claim fell within defendant’s policy, and defendant did not show that the pollution exclusion applied.

The controlling issue is whether defendant has a duty to defend plaintiff. The court described an insurer’s duty to defend in the following manner:

The duty of the insurer to defend the insured depends upon the allegations in the complaint of the third party in his or her action against the insured. This duty is not limited to meritorious suits and may even extend to actions which are groundless, false, or fraudulent, so long as the allegations against the insured even arguably come within the policy coverage. An insurer has a duty to defend, despite theories of liability asserted against any insured which are not covered under the policy, if there are any theories of recovery that fall within the policy. [Woodhaven, supra at 159, quoting Detroit Edison Co v Michigan Mutual Ins Co, 102 Mich App 136, 141-142; 301 NW2d 832 (1980). Emphasis in original.]

In this case, plaintiff’s claim is arguably within defendant’s policy coverage because it cannot be determined whether the sudden and accidental exception to the pollution exclusion in defendant’s policy applies. As previously mentioned, it is this same factual dispute that precludes defendant from conclusively establishing that the pollution exclusion applies. Thus, plaintiff has established that its claim arguably falls within defendant’s policy, and defendant has not proven that its policy excludes plaintiff’s claim.

*129The trial court correctly denied defendant’s motion for summary disposition and granted plaintiffs motion for summary disposition because an insurer has a duty to defend its insured even when a claim is only arguably within the insurer’s policy. Because it could not be determined how or whether plaintiff was responsible for the ground water contamination, plaintiffs claim arguably fell within defendant’s policy, thus triggering defendant’s duty to defend. Furthermore, I believe the trial court did not err in denying defendant’s motion for reconsideration because defendant merely offered the same argument in its motion to reconsider as it had in its motion for summary disposition. Accordingly, for the reasons stated herein, I would affirm the decision of the trial court.