The Supreme Court of Missouri
considered whether a pollution exclusion in a commercial general liability
policy issued to Doe Run barred coverage for bodily injury caused by exposure
to toxic emissions stemming from Doe Run's lead production facilities in
Peru. The pollution exclusion defined
pollutant to mean "any solid, liquid, gaseous, or thermal irritant or
contaminant." At issue was whether
lead, emitted in its particulate form, was an "irritant or
contaminant." The court applied the
dictionary definition of those terms and concluded that the pollution exclusion
applied to bar coverage.
I.
Facts
and Holding
Doe Run is a Missouri corporation
that produces lead and lead concentrate through its mining operations.[1] Doe Run also has a metallurgical complex
located in Peru.[2] In 2007, several individuals filed lawsuits
against Doe Run (“the Reid lawsuits”) alleging Doe Run released harmful
substances, such as heavy metals and sulfur dioxide, into the environment.[3] The plaintiffs claimed these emissions
created dust that infiltrated the air and water.[4] This dust then invaded the plaintiffs’ houses
and their furniture, clothing, water and crops.[5]
Doe Run had a commercial general
liability policy with St. Paul Fire and Marine Insurance Company.[6] They sought to add St. Paul to the lawsuit in
2012.[7] St. Paul denied coverage on the basis that
the underlying claims were barred by the pollution exclusion.[8] St. Paul also argued the “other insurance”
provision eliminates any duty to defend when they are an excess carrier and not
a primary insurer.[9] The pollution exclusion language was as
follows:
Pollution injury or damage. We
won't cover injury or damage or medical expenses that result from pollution at,
on, in[,] or from any[ ] protected person's premises.
...
Pollution means
any actual, alleged, or threatened discharge, dispersal, escape, migration,
release, or seepage of any pollutant.
Pollutant means
any solid, liquid, gaseous, or thermal irritant or contaminant, including[ ]
smoke, vapor, soot, fumes[,] acids, alkalis, chemicals[,] and waste.
Protected
person's premises means any premises, site, or
location that is or was at any time owned, rented, leased, borrowed, or
occupied by any protected person.[10]
Doe Run argued the language of the
pollution exclusion was ambiguous, and therefore St. Paul had a duty to defend
under the policy.[11] They also argued St. Paul was a primary
insurer.[12] The trial court entered summary judgment in
favor of Doe Run.[13] St. Paul appealed, and the Missouri Court of
Appeals, Eastern District, held St. Paul had a duty to defend.[14] The Supreme Court of Missouri found in favor
of St. Paul and held the pollution exclusion unambiguously barred coverage and
St. Paul had no duty to defend Doe Run in the underlying lawsuits.[15] The issue of primary versus excess coverage
was not addressed as the pollution exclusion issue was dispositive.[16]
II.
Legal
Background
The doctrine of contra proferentum controls when policy
language is ambiguous.[17] Under this doctrine, ambiguous terms are
construed against the drafter (here, the insurance company), and in favor of
the insured.[18] When the meaning is clear and unambiguous, the
policy language must be construed as written.[19] Courts cannot create an ambiguity when no
ambiguity exists.[20]
The issue of whether the pollution
exclusion applies when there is an alleged ambiguity regarding the word
“pollutant” was addressed in Hocker Oil
Company, Inc. v. Barker-Phillips-Jackson, Inc.[21] The insured in that case was a gas station
company.[22] Hocker had a liability policy with Ranger,
which contained a pollution exclusion that defined pollutants as “…any
solid, liquid, gaseous or thermal irritant or contaminant, including smoke,
vapor, soot, fumes, acids, alkalis, chemicals and waste.”[23] One of the drain plugs on a gasoline storage
tank failed, causing approximately 2,000 gallons of gasoline to leak into the
ground and onto adjacent property.[24] The owners of the adjacent property filed
suit for personal injuries and property damage caused by the leak.[25] Ranger denied coverage and declined to defend,
citing the pollution exclusion.[26] Hocker responded that “gasoline is a product,
not a pollutant,” and a loss caused by a gasoline leak was covered under the
policy.[27]
The
Missouri Court of Appeals, Southern District, held the policy language was
ambiguous as “gasoline” was not specifically listed as a pollutant.[28] The court noted it would be odd for a
liability policy to exclude the insured’s major source of liability.[29] Hocker’s primary business was selling and
storing gasoline, so in Hocker’s environment, gasoline is a product and not a
pollutant.[30] Because the pollution exclusion was
ambiguous, Ranger should have provided coverage and defended Hocker in the
underlying suit.[31]
III. Instant Decision
Doe Run relied heavily on the Hocker Oil case in its argument that St.
Paul’s policy language was ambiguous.[32] The court disagreed, and pointed out two key distinctions
between the Hocker Oil case and Doe
Run’s facts.[33] First, lead, as a particulate, is clearly an
irritant or contaminant when released into the environment.[34] While the words “irritant” or “contaminant”
weren’t specifically defined in the policy, lead as a particulate is an
irritant or contaminant under the words’ ordinary meanings.[35] Therefore, the emissions from Doe Run’s
facilities are also pollutants.[36]
Second, the toxic emissions
released from Doe Run’s facilities were not “business products.”[37] While the lead itself is a business product,
the complaint does not allege injury from the lead Doe Run produced.[38] The injuries alleged were related to the
“toxic metals and gases and other toxic substances” the plaintiffs were exposed
to.[39] As the court pointed out, Doe Run was not in
the business of polluting the environment, and the toxic emissions were not
products that Doe Run intended to sell.[40] Hocker
Oil, therefore, does not apply to this set of facts.[41] Because the language in the pollution
exclusion was unambiguous, coverage was properly denied under the pollution
exclusion and St. Paul had no duty to defend the underlying suit.[42]
IV. Comment
Doe Run attempted to broaden the
holding of the Hocker Oil case in
making the argument that the pollution exclusion language was ambiguous. In Hocker
Oil, the commodity in its sellable form leaked from underground storage
tanks. However, in Doe Run's case, the final,
sellable product was not what caused the toxic emissions. It was the byproduct, which could not be
constrained or marketed, that allegedly caused the bodily harm. These facts distinguish Doe Run’s argument
from Hocker Oil.
In holding the pollution exclusion
was not ambiguous, the court declined to broaden the Hocker Oil holding. Since
Doe Run's facts were not analogous to Hocker
Oil, the court did not need to address whether they would take a
"plain meaning" approach when interpreting a pollution exclusion in a
claim where the insured's actual product caused the injury. Whether Hocker
Oil continues to be valid precedent or becomes obsolete remains to be seen
in subsequent litigation regarding the interpretation of the pollution
exclusion.
-
Jessica Peterman
[1] Doe Run Res. Corp. v. Am.
Guarantee & Liab. Ins., No. SC
96107, 2017 WL 5078078, at *1 (Mo. Oct. 31, 2017).
[2] Id.
[3] Id.
[4] Id.
[5] Id,
[6] Id.
[7] Id.
[8] Id.
[10] Id. at *2.
[11] Id.
[12] Id.
[13] Id.
[14] Id.
[15] Id. at *6.
[16] Id.
[17] See Mendenhall v. Prop. and Cas. Ins.
Co. of Hartford, 375 S.W.3d 90, 92 (Mo. banc 2012).
[18] Id.
[19] Id.
[22] Id. at 512.
[23] Id.
[24] Id.
[25] Id.
[26] Id.
[27] Id. at 513.
[28] Id. at 517.
[29] Id.
[30] Id.
[31] Id.
[32] Doe Run Res. Corp. v. Am.
Guarantee & Liab. Ins., No. SC
96107, 2017 WL 5078078, at *3 (Mo. Oct. 31, 2017).
[33] Id. at *3-5.
[34] Id. at *3.
[35] Id. at *3-4.
[36] Id. at *4.
[37] Id. at *5.
[38] Id.
[39] Id.
[40] Id.
[41] Id.
