Opinion
Case No. 1:03-CV-55
August 11, 2003
OPINION
Plaintiff, Aero-Motive Company ("Aero-Motive"), claims that Defendant, Great American Insurance ("Great American"), must defend and indemnify Aero-Motive under a commercial general liability insurance policy (the "Policy") with a term of July 1, 1982, through July 1, 1985. Before the Court is Great American's motion for summary judgment on the limited issue of whether coverage is excluded the Policy's "sudden and accidental pollution exclusion" clause. The Court will grant Great American's motion in part and deny it in part.
Factual and Procedural Background
The facts underlying this suit were set forth in detail in the Court's Opinion in Aero-Motive Co. v. Becker, No. 1:99-CV-384, 2001 WL 1699191, at *1-3 (W.D.Mich. Oct. 2, 2001). The Court will not rehash those facts.
A. The Policy
Aero-Motive's predecessor in interest, Daniel Woodhead, Inc., entered the Policy, No. X03824098, with Great American for coverage between July 1, 1982, through July 1, 1985. (Policy, Def.'s Br. Supp. Mot. Summ. J. Ex. A.) The Policy contains, inter alia, a "sudden and accidental pollution exclusion" clause, which provides as follows:
The Policy states:
The company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damage because of
A. bodily injury or
B. property damage
to which this insurance applies, caused by an occurrence and the company shall have the right and duty to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it seems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.
(Policy at GA081, § I.)
The Policy defines"property damage" and "occurrence" as follows: "Property Damage" means:
1) Physical injury to or destruction of tangible property which occurs during the policy period, therefrom, or
2) Loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period. "Occurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage, neither expected nor intended from the standpoint of the insured.
(Letter from Miller to Zimmerman of 9/27/96 at 2, Def.'s Br. Supp. Mot. Summ. J. Ex. C.) Pursuant to agreement of the parties, the Court will reserve judgment on issues relating to these definitions and only address the scope of the "sudden and accidental pollution exclusion" clause at this time. (Case Management Order, No. 1:03-CV-55 (W.D.Mich. Mar. 7, 2003).)
This insurance does not apply:
. . .
(f) 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 into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden or accidental.
(Policy at GA081, § I, Exclusions (f).)
B. Great American's Denial of Aero-Motive's Coverage Claim
In 1996, Aero-Motive filed a claim with Great American for indemnification of costs related to cleaning up pollution at Aero-Motive's Kalamazoo, Michigan, manufacturing facility (the "Facility"), and for defense of Aero-Motive in legal actions related to that clean up. (Letter from Miller to Zimmerman of 9/27/96, Def.'s Br. Supp. Mot. Summ. J. Ex. C.) In a letter dated September 27, 1996, Great American denied Aero-Motive's coverage request, because it concluded that "[t]here is no evidence that a sudden and accidental event occurred during the Great American Insurance policy period." (Id. at 2.) Subsequent to Great American's 1996 denial, Aero-Motive submitted Aero-Motive employees' statements to Great American regarding spontaneous fires that occurred as paint product residue was allowed to heat and ignite in a disposal pit located at the Facility. (Aero-Motive Employee Deps., Def.'s Br. Supp. Mot. Summ. J. Ex. D.) Great American reviewed the materials that Aero-Motive submitted and determined that the statements did not alter Great American's previous analysis regarding the inapplicability of the "sudden and accidental pollution exclusion" clause. (Letter from Bohlig to Eugster of 11/11/02 at 2, Def.'s Br. Supp. Mot. Summ. J. Ex. E.)
Standard of Review
Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. The rule requires that the disputed facts be material. Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986). A dispute over trivial facts which are not necessary in order to apply the substantive law does not prevent the granting of a motion for summary judgment. Id. at 248, 106 S.Ct. at 2510. The rule also requires the dispute to be genuine. A dispute is genuine if a reasonable jury could return judgment for the non-moving party. Id. This standard requires the non-moving party to present more than a scintilla of evidence to defeat the motion. Id. at 251, 106 S.Ct. at 2511 (citing Improvement Co. v. Munson, 14 Wall. 442, 448, 20 L.Ed. 867 (1872)).
A moving party who does not have the burden of proof at trial may properly support a motion for summary judgment by showing the court that there is no evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 2553-54 (1986). If the motion is so supported, the party opposing the motion must then demonstrate with "concrete evidence" that there is a genuine issue of material fact for trial. Id.; Frank v. D'Ambrosi, 4 F.3d 1378, 1384 (6th Cir. 1993). The court must draw all inferences in a light most favorable to the non-moving party, but may grant summary judgment when "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Agristor Financial Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir. 1992) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986)).
Discussion
The insured has the burden to prove coverage. Upjohn Co. v. Aetna Cas. Surety Co., 850 F. Supp. 1342, 1345 (W.D.Mich. 1993) (citing Roddis Lumber Veneer Co. v. Am. Alliance Ins. Co., 330 Mich. 81, 47 N.W.2d 23 (1951)). In Upjohn Co. v. New Hampshire Insurance Co., 438 Mich. 197, 476 N.W.2d 392 (1991), the Michigan Supreme Court addressed a similar "sudden and accidental" pollution exclusion clause and concluded that the language of the exclusion was clear and unambiguous. Upjohn, 438 Mich. at 207-08, 476 N.W.2d at 397). The Upjohn court stated:
[W]hen considered in its plain and easily understood sense, "sudden" is defined as a "temporal element that joins together conceptually the immediate and unexpected." The common, everyday understanding of the term "sudden" is "`happening, coming, made or done quickly, without warning or unexpectedly; abrupt.'" "Accidental" means "[o]ccurring unexpectedly and unintentionally; by chance."
Upjohn Co., 438 Mich. at 207-08, 476 N.W.2d at 397 (internal citations omitted). "[T]he discharge, dispersal, release, or escape to which both the exclusion and the exception refer is the initial discharge, dispersal, release, or escape into the atmosphere and not the subsequent migration." Protective Nat'l Ins. Co. of Omaha v. City of Woodhaven, 438 Mich. 154, 162, 476 N.W.2d 374, 377 (1991).
Aero-Motive claims that Great American must provide coverage for four sources of pollution at the Facility: (1) the disposal pit; (2) the underground storage tank; (3) the degreaser; and (4) the factory addition. The Court will address each in turn.
A. The Disposal Pit
The disposal pit was an unlined hole, dug and operated at the southwest of the manufacturing plant in the late 1960s to early 1970s, into which Aero-Motive Manufacturing disposed of waste materials generated in its manufacturing operations. (Corke Dep. at 79-80, Pl.'s Br. Opp'n Def.'s Mot. Summ. J. Ex. A.) The materials dumped into the disposal pit, many at regular intervals, included waste paper, paint filters, paint residue, laquer thinners, toluene, and trichloroethylene ("TCE") waste from the degreaser. (Corke Statement at 4-6, Def.'s Br. Supp. Def.'s Mot. Summ. J. at Ex. B.) Some of the waste materials have apparently leaked out of the disposal pit and into surrounding soil and groundwater, as well as a nearby creek. The Michigan Department of Environmental Quality has ordered Aero-Motive to clean up the pollution at substantial cost to Aero-Motive.
1. Dumping
Aero-Motive contends that the release of the waste material that was dumped into the disposal pit was both "sudden" and "accidental." First, Aero-Motive claims that the releases of the waste material from the disposal pit was sudden, because "[t]he Disposal Pit at the Subject Property was unlined and, therefore, hazardous materials disposed of at the Subject Property would have entered the subsurface environment instantaneously upon dispersal." (Pl.'s Br. Opp'n Def.'s Mot. Summ. J. at 16.) Aero-Motive thus argues that the relevant release or releases of waste material from the disposal pit only occurred at the precise moment that the materials were dumped into the disposal pit, because suddenness is only evaluated in terms of the initial discharge, not the subsequent migration. (Id. at 16 n. 9.) Therefore, it stands to reason that if the waste materials were suddenly discharged into the surrounding soil and groundwater "instantaneously upon disposal," and the disposal pit was last used in the early 1970s, then the last "sudden" pollution event would have taken place at some point in the early 1970s, which was well before Great American's coverage period began.
Second, Aero-Motive claims that the releases of the waste material from the disposal pit were accidental because the disposal pit was state of the art at the time it was utilized and no one was aware that it would leak. Michigan courts have found that discharges from waste disposal sites that were state of the art at the time the pollutant was placed into the site are accidental. See, e.g., Kent County v. Home Ins. Co., 217 Mich. App. 250, 270-71, 551 N.W.2d 424, 433 (1996) (finding that an unlined landfill was state of the art as late as the mid 1970s), vacated in part, 456 Mich. 858, 568 N.W.2d 671 (1997). Factors that indicate whether a facility was state of the art for its time include whether: (1) the facility was licensed by state or federal agencies; (2) it complied with state or federal guidelines; and (3) the design was the product of engineering studies that concluded that the design was effective to contain the contaminant. Id. at 269-70, 551 N.W.2d at 432. These factor tend to show whether the polluter originally acted in good faith in placing the waste into the container. Id. Since neither party has presented any evidence that the waste disposal pit was appropriately licensed, state of the art, or that no one was aware that the disposal pit would leak at the time that it was in use, the Court is unable to determine as a matter of law whether the dumping into the disposal pit was sudden and accidental.
The Court will thus temporarily deny Great American's motion with regard to materials dumped into the disposal pit. Each party may file an additional brief and additional materials, within twenty-one days of the date of this Opinion and Order, that addresses whether Aero-Motive Manufacturing satisfied any of the above discussed factors when it originally dumped the pollutants into the disposal pit.
The ultimate applicability of the sudden and accidental pollution exception, however, turns on whether the Policy covers sudden and accidental pollution that took place prior to the Policy's coverage period. That issue is not presently before the Court and may not be answered until additional discovery is conducted.
2. Fires
The materials in the disposal pit also caught fire on several occasions. (Corke Dep. at 96; Kelley Dep. at 47, Pl.'s Br. Opp'n Def.'s Mot. Summ. J. Ex. C; Shull Dep. at 32, Pl.'s Br. Opp'n Def.'s Mot. Summ. J. Ex. D; Folk Dep. at 23, Pl.'s Br. Opp'n Def.'s Mot. Summ. J. Ex. E.) The fires ignited spontaneously and were allowed to burn themselves out. Some employees had vague recollections that the fire department may have been called on one occasion. (Shull Dep. at 32, 34-35; Folk Dep. at 23-24.) Aero-Motive contends that the burning of the materials in the disposal pit may "have caused the creation of different or additional hazardous materials than those originally contained in the waste materials, and the firefighting efforts could well have spread or exacerbated the previously disposed wastes." (Pl.'s Br. Opp'n Def.'s Mot. Summ. J. at 4.) While two of the deponents state that the fire department may have responded to the fires in the disposal pit, none testified as to what method, if any, the fire department employed to put out the fire. Aero-Motive asserts, however, that the fire department may have doused the fire with water, thus increasing the likelihood of releasing the waste materials into the surrounding environment. There is also no testimony that the heat from the fires caused the chemical properties of the waste materials in the disposal pit to change or break down through a process known as pyrolysis.
Michigan courts have found that have found that fires resulting from spontaneous combustion can be "sudden and accidental events" falling within sudden and accidental exception clauses, so long as there is evidence that the fire "caused a release of pollutants." See, e.g., Americhem Corp. v. St. Paul Fire Marine Ins. Co., No. 5:93-CV-47, 1995 WL 861204, at *4 (W.D.Mich. July 12, 1995) (finding that plaintiff "failed to demonstrate a genuine issue of material fact regarding whether during the policy periods a `sudden' and `accidental' release of pollutants occurred" because there was no evidence that the fires caused a release of pollutants). Here, Aero-Motive has not offered any testimony regarding how the fires may have caused the waste materials from the disposal pit to be released into the environment. Aero-Motive simply glosses over this necessary casual link with speculation and conjecture. That is insufficient to rebut Great American's motion for summary judgment.
Additionally, while the fires may have occurred on several random occasions, it stands to reason that a company that professionally uses and handles on a daily basis the highly flammable materials that caught fire in the disposal pit should have realized and responded to the fire hazard after the first fire occurred. Thus, even though Aero-Motive Manufacturing could not have predicted the exact timing of the subsequent spontaneous fires, the fact that Aero-Motive Manufacturing could have easily foreseen their reoccurrence renders all fires after the first fire no longer accidental.
B. The Underground Storage Tank
In approximately 1974, Aero-Motive Manufacturing installed an underground storage tank at the Facility. Cutting oils and some other waste liquids were accumulated in the underground storage tank. Aero-Motive contends that the underground storage tank overflowed on at least one occasion, causing a "sudden and accidental" discharge of hazardous waste. In support of its allegation, Aero-Motive offers the deposition testimony of a former Aero-Motive Manufacturing employee:
Q: What types of spills do you remember?
A: This tank that was out here had over filled several times and ran across the driveway and parking lot. One of the people had a motorcycle and when around the corner on the motorcycle, and he almost wiped out on the thing, I'll tell you.
Q: Do you remember when that happened?
A: I can't give you dates. I don't know. I know that tank was in the ground when it happened.
(Corke Dep. at 110.)
Overflows from storage tanks can be "sudden and accidental" events. See, e.g., Employers Ins. of Wausau v. Petroleum Specialties, Inc., No. 91-CV-74210, 1997 U.S. Dist. LEXIS 2553, at *17 (E.D.Mich. January 31, 1997) (citing Employers Ins. of Wausau v. Petroleum Specialties, Inc., 69 F.3d 98, 106-07 (6th Cir. 1995)). Aero-Motive has offered testimony that alleges that the storage tank was filed to the point that it overflowed, causing pollutants to spill across the driveway and parking lot. Thus, the Court finds that there are material facts in dispute regrading whether the overflow was sudden and accidental. Since the timing of the overflow is unknown, the applicability of the sudden and accidental pollution exception turns on whether the Policy covers the period in which the overflow occurred. However, that question is not presently before the Court and cannot be answered until additional discovery is conducted.
C. The Degreaser
Aero-Motive Manufacturing operated a degreaser machine to clean parts prior to painting. TCE was used as the degreasing solvent in the degreaser machine. (Corke Dep. at 39-40; Southwood Dep. at 22, Pl's Br. Opp'n Def.'s Mot. Summ. J. Ex. F.) Aero-Motive contends that the degreaser overflowed on at least one occasion, resulting in a sudden and accidental release of TCE into the subsurface soils adjacent to the drain pipe discharge located in the area near the degreaser machine. However, Aero-Motive only supports its assertion with hearsay statements from a former Aero-Motive Manufacturing employee:
Q: Did you notice if the degreaser ever leaked or if chemical ever spilled out the degreaser?
A: I think we did, but I'm not sure.
Q: You don't have a specific recollection of that happening?
A: No.
Q: What causes you to think that that may have happened?
A: Talks with the other guys, maintenance people.
Q: You recall maintenance people saying that the degreaser leaked or overflowed?
A: Overflowed, yes.
. . .
Q: Did you ever see the degreaser overflow?
A: Personally, I didn't see it overflow.
. . .
Q: Did you ever see maintenance clean any of the chemical that got on the floor because of overflow or a leak of some type?
A: No
(Kelley Dep. at 16-17.) These second hand statements do not create a genuine issue of material fact to rebut Great American's motion. Accordingly, summary judgment will be granted in favor of Great American with regard to the degreaser.
D. The Factory Addition
Aero-Motive contends that there is evidence that hazardous materials, such as TCE, were released on the southern side of the manufacturing plant prior to the construction of the 1967 factory addition. Aero-Motive asserts that this alleged contamination "may have been caused by spills, overflows or other accidental events that could constitute `sudden and accidental' releases." (Pl.'s Br. Opp'n Def.'s Mot. Summ. J. at 22.) However, Aero-Motive has offered no deposition testimony or affidavits to support its conjecture and rebut Great American's motion. (6/12/03 Hr'g Tr. at 22 (Aero-Motive's counsel admitting that "[t]here was not deposition testimony taken on that").) Accordingly, summary judgment will be granted in favor of Great American with regard to the factory addition.
Conclusion
For the foregoing reasons, the Court will grant Great American's motion in part and deny it in part. An Order consistent with this Opinion will be entered.