Plain Language Of Insurance Policy's Pollution Exclusion Precludes Coverage For Gasoline Release
WEST BEND MUTUAL INSURANCE CO. v. UNITED STATES FIDELITY AND GUARANTEE CO. (March 25, 2010)
MDK owned a gasoline station in Goshen, Indiana. In 1996, it discovered that one of its underground gasoline storage tanks was leaking. Several years later, a group of nearby residents allegedly affected by the release sued MDK for personal injury and property damage. MDK requested coverage from its insurers, including West Bend Mutual Insurance Company ("West Bend") and Federated Mutual Insurance Company "(Federated"). West Bend agreed and eventually settled the case for $4 million. Federated declined based on its policy's pollution exclusion and other limitations. West Bend sued Federated. The district court granted summary judgment to Federated, concluding that the policy’s Pollution Exclusion provided a defense to coverage and that the Products-Completed Operations Hazard coverage did not obligate Federated to provide coverage. The court did not address whether the Known Loss Exclusion affected coverage. West Bend appeals.
In their opinion, Judges Flaum, Williams, and Sykes (dissenting) affirmed. The Court identified its task as to construe the policy as a whole, giving words their ordinary meaning, and construing any ambiguities against the insurer. The principal focus of the Court's approach was the Indiana Supreme Court's decision in American States. That case also dealt with a release from a gasoline storage tank. The policy in question contained a Pollution Exclusion that excluded coverage for certain losses arising out of the release of "pollutants." The definition of "pollutants" was identical to that in the Federated policy and did not mention motor fuels or gasoline. The Indiana Supreme Court found that the policy did not unambiguously identify gasoline as a pollutant. It resolved the ambiguity against the insurer and found coverage to exist. Although the definition of "pollutant" was identical in the policies, the Court noted that the Federated policy's Pollution Exclusion did include "motor fuels," which included gasoline. Thus, the Court concluded that the Federated Pollution Exclusion unambiguously and explicitly excluded gasoline contamination from the policy's coverage. The Court proceeded to consider both the excess liability coverage and the Products-Completed Operations Hazard coverage as possible sources for coverage. It concluded that; a) the excess coverage was coextensive with the primary coverage, and thus also excluded gasoline contamination, and b) the Products-Completed Operations Hazard coverage did not cover the loss. That coverage only applies to abandoned product and knowingly completed market transactions, neither of which is present here.
Judge Sykes dissented. She concurred with the majority's treatment of the policy’s Pollution Exclusion but disagreed with its treatment of the Products-Completed Operations Hazard coverage. Specifically, she disagreed that the case relied upon by the majority created a general rule of insurance law that the coverage only applies to abandoned product or knowingly completed market transactions. Without that general rule, Judge Sykes would conclude that the plain policy language covers the loss.
Wavie Luster lived alone in her home in
Websolv sent an unsolicited fax to the dental office of Guy Bibbs. The fax was an advertisement for a healthcare seminar. Bibbs sued Websolv in state court. Websolv tendered its defense to Auto-Owners Insurance Co. Auto-Owners filed an action in federal court seeking a declaratory judgment that it had no duty to defend. Although the parties stipulated to the application of Iowa law, the court applied Illinois law and granted Websolv’s motion for summary judgment. Auto-Owners appeals.
Sandra Castronovo died the day after her car was struck by a truck driven by Kenneth Lively. At the time of the accident, Lively was employed by and driving a truck owned by Doug Lavery, Ltd. He was hauling a trailer owned by GE Capital Corp. and leased to Greif Brothers Corp., who loaned it to Lavery. Lavery and Lively were named insureds under a $1 million policy issued by Owners Insurance. Travelers Property Casualty Company issued a $2 million policy to Greif. National Union issued a $25 million umbrella policy to Grief which covered permissive users of vehicles owned by Grief. The National Union policy provided excess coverage to the Travelers policy and provided primary coverage for covered risks that were not covered at all by any other insurance. Sandra’s husband John sued Lively, Lavery, GE and Greif. Owners provided a defense to Lively and Lavery but eventually tendered its $1 million policy limit to the court. Travelers defended GE and Greif under the Greif policy. Travelers refused to defend Lavery and made no decision with respect to Lively. In early 2005, Greif and Travelers both spoke with National Union about the case. And National Union continued to follow the developments. In September the court approved a consent judgment against Lively and Lavery in the amount of $6 million. They assigned their rights of coverage to Castronovo in return for a covenant not to execute on their personal assets. National Union learned of the consent judgment only after it was entered. In October, Travelers determined that Lively and Lavery were both insureds and paid their $2 million policy limit to Castronovo. Castronovo sued National Union to recover the approximate $3 million balance. The court granted summary judgment to National Union, holding that Lively and Lavery breached the policy by not notifying National Union of the consent judgment. Castronovo appeals.
Several home owners in the same subdivision began to notice water damage in their new homes. Litigation ensued against the general contractor, Sheehan Construction Co. Although the problem was traced to one of Sheehan's subcontractors, Sheehan settled the litigation for nearly $3 million. Sheehan is ensured by Westfield Insurance Co. under a general liability policy. Sheehan brought an action against Westfield for indemnity. The district court granted judgment to Westfield. Sheehan appeals.
James Stilwell was an entrepreneur and property owner in central Illinois. Stilwell found himself at times in need of cash, however. He devised a scheme whereby he would write a check on his account at Tuscola National Bank (“TNB”) and present it to First State Bank of Monticello (“FSB”) in return for a bank money order. Stilwell frequently had no money in his account at TNB. Even though cashing a check for a noncustomer was against FSB’s policy, it sold him almost $2 million in money orders over the course of several months. When questioned by bank representatives, Stilwell made up stories to cover his scheme. Finally, TNB froze his account, leaving FSB with $307,000 in worthless checks. Stilwell agreed to repay FSB, but died before he did. FSB filed a claim with its insurer, Ohio Casualty Insurance Company (“Ohio Casualty”). Ohio Casualty denied the claim on two grounds: that the loss was not covered under the policy and that it was an excluded loss because it was caused by a FSB employee. FSB filed suit to recover. The district court granted summary judgment to FSB. FSB requested prejudgment interest in a Rule 59(e) motion. The court declined. Both Ohio Casualty and FSB appeal.