Quadrant Corp. v. American States Insurance

¶44 (dissenting) — The majority embarks upon the noble quest of clarifying the law. Unfortunately, the majority confuses the “occurrence,” or coverage triggering event, with the consequent damages. Specifically, the majority confuses a nonpolluting event covered by the policy with the resulting damages, which were caused by pollutants. Because we look at the occurrence to determine coverage, not the resulting damage, I respectfully dissent.

Chambers, J.

f 45 Our jurisprudence has been consistent in analyzing pollution exclusions. “The relevant inquiry is whether there has been a polluting event.” Key Tronic Corp. v. Aetna (CIGNA) Fire Underwriters Ins. Co., 124 Wn.2d 618, 626, 881 P.2d 201 (1994). In my view, the pollution exclusion operates only on polluting events. But if the “occurrence” triggering coverage was not a polluting event, then there is coverage. As we said, “ ‘[i]f the initial event, the “efficient proximate cause,” is a covered peril, then there is coverage under the policy regardless whether subsequent events within the chain, which may be causes-in-fact of the loss, are excluded by the policy.’ ” Key Tronic, 124 Wn.2d at 625-26 (quoting Safeco Ins. Co. of Am. v. Hirschmann, 112 Wn.2d 621, 628, 773 P.2d 413 (1989)). This initial event, the efficient proximate cause, should not be confused with the resulting damage.

¶[46 This is not new. This court has long adopted the “efficient proximate cause” rule for determining whether an event is covered or not.

“Where a peril specifically insured against sets other causes in motion which, in an unbroken sequence and connection between the act and final loss, produce the result for which recovery is sought, the insured peril is regarded as the ‘proximate cause’ of the entire loss.

*188“It is the efficient or predominant cause which sets into motion the chain of events producing the loss which is regarded as the proximate cause, not necessarily the last act in a chain of events.”

Allstate Ins. Co. v. Raynor, 143 Wn.2d 469, 479, 21 P.3d 707 (2001) (emphasis added) (quoting Graham v. Pub. Employees Mut. Ins. Co., 98 Wn.2d 533, 538, 656 P.2d 1077 (1983)).

¶47 Consider an auto accident in which a driver was saturated in fuel and suffered specific injuries from the irritating nature of the chemical compound and its noxious fumes. There would be coverage for this “occurrence” and the resulting damages. In this example, the occurrence is the alleged negligent act which caused the motor vehicle collision. The mere fact that a pollutant was involved in the causal chain of events does not trigger the pollution exclusion. See Kent Farms, Inc. v. Zurich Ins. Co., 140 Wn.2d 396, 402, 998 P.2d 292 (2000). There is coverage so long as “a covered peril sets in motion a causal chain” even when “the last link of which is an uncovered peril.” See Key Tronic, 124 Wn.2d at 625. The covered peril here was the alleged negligence of the contractor and apartment owner in performing routine work necessary to maintain the apartment building.

148 There are several things upon which the majority and I agree. “Under settled principles of construction, an insurance policy is construed as a whole, with the policy being given ‘ “a fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance.” ’ ” Key Tronic, 124 Wn.2d at 627 (quoting Queen City Farms, Inc. v. Cent. Nat’l Ins. Co. of Omaha, 126 Wn.2d 50, 65, 882 P.2d 703, 891 P.2d 718 (1994) (quoting Grange Ins. Co. v. Brosseau, 113 Wn.2d 91, 95, 776 P.2d 123 (1989))). Thus, first, “we are required to view the exclusion in light of the whole policy to determine whether, in that context, the exclusion applies.” Kent Farms, 140 Wn.2d at 400. Second, “construction of policy language is for the court and undefined terms should be given their plain, ordinary, and popular meaning in accord *189with the understanding of the average purchaser of insurance.” Queen City Farms, 126 Wn.2d at 74. Third, and related to the second, “ ‘exclusions should be construed strictly against the insurer.’ ” Kent Farms, 140 Wn.2d at 401-02 (quoting Queen City Farms, 126 Wn.2d at 74, 78). These are not rules of construction to be applied only when the court finds an ambiguity but fundamental to the court’s task of interpreting and determining the intent of the parties.

|49 Turning then to the first principle, the policies at issue are commercial comprehensive general liability policies. For our purposes, the apartment owners are insured under both policies. Because these are broad and comprehensive policies we must not only interpret them as would an average person purchasing insurance, but we must also strictly construe any exclusions against the insurers. Queen City Farms, 126 Wn.2d at 74 (citing Phil Schroeder, Inc. v. Royal Globe Ins. Co., 99 Wn.2d 65, 68, 659 P.2d 509 (1983), modified on recon., 101 Wn.2d 830, 683 P.2d 186 (1984)).

¶50 Here, coverage is broad. The American States’ policy says, “We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury5 or ‘property damage’ to which this insurance applies.” Clerk’s Papers (CP) at 208 (American State’s Policy); cf. CP at 296 (State Farm Policy). As any exclusion must be read within the context of the coverage provided, we must first examine the definitions of “occurrence” within the policies. Both policies have the identical definition of occurrence: “ ‘Occurrence’ means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” CP at 217; cf. CP at 308. Thus, the insured is led to understand that his insurance coverage extends to the continuous or repeated exposure to harmful conditions.

¶51 Next we must examine the pollutions exclusion. The policies in question are very similar to the policies we have dealt with before. This insurance does not apply to:

*190(1) “Bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants:

(a) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to any insured;

(d) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or indirectly on any insured’s behalf are performing operations:

(i) if the pollutants are brought on or to the premises, site or location in connection with such operations by such insured, contractor or subcontractor.

CP at 209-09 (American States); accord CP at 297-98 (State Farm).

¶52 Pollutant is broadly defined as any “irritant... or contaminant” in solid, liquid, gaseous or thermal form. CP at 209 (American States); accord CP at 308 (State Farm).11

¶53 Here, a contractor was hired by the insured to apply waterproofing to the exterior wood surface of the apartment complex. The specific allegation of negligence against the apartment owner was the failure to prevent exposure to toxic fumes and the failure to warn its tenant. Inherent in applying any waterproofing material, including stains and paints, is the exposure of toxic fumes. But the specific contention against the apartment owner was the failure to assure proper ventilation or to warn of the fumes.

¶54 The question before this court is whether the average purchaser of a comprehensive liability policy understands that the act or applying waterproofing to the exterior wall of an apartment building would be an act of “discharge, dispersal, seepage, migration, (or) release” of a *191pollutant. See Kent Farms, 140 Wn.2d at 398 (policy terms are given the sensible interpretation that an average person purchasing insurance would give them); Key Tronic, 124 Wn.2d at 627.

¶55 This court has never held that mere injury by a pollutant triggers a pollution exclusion. This court has always examined the pollution exclusion by determining whether the “occurrence” was a polluting event. A polluting event is the discharge, dispersal, seepage, migration, release or escape of pollutants. This court, when addressing this question within the plain, ordinary, and popular meaning in accord with the understanding of the average purchaser of insurance has adopted the traditional meaning of pollution. Kent Farms, 140 Wn.2d at 400-01 (considering an absolute pollution exclusion); Queen City, 126 Wn.2d at 84-85 (considering qualified and absolute pollution exclusions). This court has also always viewed pollution exclusions from their traditional purpose of avoiding massive exposure for environmental damage. See Kent Farms, 140 Wn.2d at 400-01; Queen City Farms, 126 Wn.2d at 84-85. This history is an integral part of a proper understanding of the clauses.

¶56 An excellent summation is found in Kent Farms:

The qualified pollution exclusion clause, a precursor to the clause at issue here, came into existence so insurers could avoid the “yawning extent of potential liability arising from the gradual or repeated discharge of hazardous substances into the environment.” Later, various forms of absolute pollution exclusion clauses, including the clause here, were incorporated into insurance policies in the wake of expanded environmental liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601--9675 (1995) (CERCLA). These clauses were clearly intended to exculpate insurance companies from liability for massive environmental cleanups required by CERCLA and similar legislation. The insurance companies’ objective in creating both clauses was to avoid liability for environmental pollution. To read the absolute exclusion clause more broadly ignores the general coverage provisions.

*192Kent Farms, 140 Wn.2d at 400-01 (citations omitted) (quoting Waste Mgmt. of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 698, 340 S.E.2d 374 (1986) and citing Queen City Farms, Inc. v. Cent. Nat’l Ins. Co. of Omaha, 64 Wn. App. 838, 873-84, 827 P.2d 1024 (1992) (surveying the history of the clause)); see also generally Jeffrey W. Stempel, Reason and Pollution: Correctly Construing the “Absolute” Exclusion in Context and in Accord with its Purpose and Party Expectations, 34 Tort & Ins. L.J. 1, 5 (1998).

¶57 The majority recognizes that it is dramatically departing from prior interpretation of pollution exclusions, but seems to justify departing from precedents by distinguishing the policy provisions before us as “absolute pollutions exclusions” to be distinguished from “qualified” exclusions, and by pointing to substantially irrelevant factual differences. Majority at 172-73 (absolute pollution exclusion), 175-78 (differences from Kent Farms). The majority acknowledges that pollution exclusions originated from insurers’ efforts to avoid sweeping liability for long-term release of hazardous waste. Majority at 173. The majority then concludes that the exclusions before us are absolute, not qualified, and for that reason our former jurisprudence holding that pollution exclusions are interpreted in light of their purpose of avoiding massive exposure of environmental damage should no longer apply. But in Kent Farms, the exclusion at issue was also an absolute pollution exclusion. Kent Farms, 140 Wn.2d at 398-99.12

¶58 The majority distinguishes Kent Farms on the grounds that Kent Farms did not explicitly recite that it *193found the clause ambiguous. Therefore, it concludes, Kent Farms discussion of the history of the clause was, apparently, not binding on future courts. But read as a whole, it is clear the court believed that the clause was ambiguous, at least as applied to the facts of Kent Farms, as it referred approvingly to the Court of Appeals holding that the clause was ambiguous and proceeded to review the drafting history of the clause. Kent Farms, 140 Wn.2d at 398, 400-02.

¶59 Against that backdrop, it is clear that applying the clause to exclude this type of harm is appropriate only if the “occurrence” that triggers coverage is a polluting event. In my view, the average consumer of a general liability policy would not understand that applying wood preservative to the exterior of an apartment building was a polluting event. Key Tronic Corp., 124 Wn.2d at 626. As this court has already noted, expanding the exclusion to cover any type of occurrence that involves pollution would be an “opportunistic afterthought,” outside the intent of the drafters. Kent Farms, 140 Wn.2d at 402 (citing Gamble Farm Inn, Inc. v. Selective Ins. Co., 440 Pa. Super. 501, 508, 656 A.2d 142 (1995). I conclude this does violence to the meaning of the exclusion and our recent unanimous Kent Farms opinion. Accordingly, I respectfully dissent.

C. Johnson and Sanders, JJ., and Ireland, J. Pro Tern., concur with Chambers, J.

In full, pollutant is defined as “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.” CP at 209, 308.

The Kent Farms exclusion said in relevant part:

This insurance does not apply to:

c. (1) “Bodily injury” and “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of 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.