United Fire & Casualty Company v. Titan Contractors Service, Inc , 751 F.3d 880 ( 2014 )

United States Court of Appeals
For the Eighth Circuit
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No. 13-1307
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United Fire & Casualty Company
lllllllllllllllllllll Plaintiff - Appellant
v.
Titan Contractors Service, Inc.
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
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Submitted: January 14, 2014
Filed: May 13, 2014
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Before GRUENDER, BRIGHT, and MELLOY, Circuit Judges.
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GRUENDER, Circuit Judge.
United Fire and Casualty Company (“United”) brought this declaratory
judgment action against Titan Contractors Services, Inc. (“Titan”), and Titan
counterclaimed for declaratory relief. United appeals the district court’s grant of
summary judgment in favor of Titan on United’s claim and Titan’s counterclaim, as
well as the district court’s denial of United’s motion for summary judgment. For the
reasons discussed below, we vacate and remand.
I. Background
Titan provides construction-cleanup services, including cleaning and sealing
concrete floors. At all relevant times, Titan was insured under a commercial general
liability insurance policy provided by United. The policy excluded from coverage
“‘[b]odily injury’ or ‘property damage’ which would not have occurred in whole or
part but for the actual, alleged or threatened discharge, dispersal, seepage, migration,
release or escape of ‘pollutants’ at any time.” The policy defines “pollutant” as “any
solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot,
fumes, acids, alkalis, chemicals and waste.” This provision, typically denominated
the “absolute pollution exclusion,” appears in many commercial general liability
insurance policies. See William P. Shelley & Richard C. Mason, Application of the
Absolute Pollution Exclusion to Toxic Tort Claims: Will Courts Choose Policy
Construction or Deconstruction?, 33 Tort & Ins. L.J. 749, 752-53 & n.13 (1998).
In March 2009, three women brought negligence claims against Titan in
Illinois state court. They alleged that on April 20, 2007, Titan applied TIAH, an
acrylic concrete sealant, to the floor in a portion of the office park in which they
worked. Because Titan failed to ventilate its worksite properly, the TIAH infiltrated
the women’s office. They were exposed to TIAH and developed significant physical
ailments, including acute chemically-induced asthma and vocal cord dysfunction.
Titan gave notice and tendered defense of the lawsuit to United pursuant to the
policy. United commenced defense of Titan against the negligence claims subject to
a reservation of rights. United then filed this action seeking a declaration that it did
not owe a duty to defend or indemnify Titan against the pending state-court lawsuit
because the policy’s absolute pollution exclusion barred coverage for the claims
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raised in the lawsuit. United also sought recovery of the costs it had expended thus
far defending the state-court lawsuit. Titan counterclaimed, seeking a declaration that
United owes duties to defend and indemnify it against the state-court lawsuit. The
parties filed cross-motions for summary judgment. The district court granted Titan’s
motion and denied United’s, entering a judgment declaring that United owes a duty
to defend and indemnify Titan against the state-court lawsuit. The district court
reasoned that TIAH did not constitute a “pollutant” and, thus, that the absolute
pollution exclusion did not apply to exclude coverage for the claims raised in the
state-court lawsuit. United timely appealed both the grant of summary judgment in
favor of Titan and the denial of its own motion for summary judgment.
II. Discussion
We review both the district court’s grant of summary judgment and its
interpretation of the insurance policy de novo. Bethel v. Darwin Select Ins. Co., 735
F.3d 1035, 1038 (8th Cir. 2013). Summary judgment is proper only if “there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). The parties agree that Missouri substantive law
governs this diversity action. As such, “we are bound by the decisions of the
Supreme Court of Missouri. If the Supreme Court of Missouri has not addressed an
issue, we must predict how the court would rule, and we follow decisions from the
intermediate state courts when they are the best evidence of Missouri law.” Dannix
Painting, LLC v. Sherwin-Williams Co., 732 F.3d 902, 905 (8th Cir. 2013) (quoting
Kingman v. Dillard’s Inc., 643 F.3d 607, 615 (8th Cir. 2011)).
Under Missouri law, an insurer owes a duty to defend its insured whenever the
complaint in the underlying lawsuit “alleges facts that give rise to a claim potentially
within the policy’s coverage.” McCormack Baron Mgmt. Servs., Inc. v. Am. Guar.
& Liab. Ins. Co., 989 S.W.2d 168, 170 (Mo. banc 1999). “The duty to defend is
determined by comparing the language of the insurance policy with the allegations
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in the [underlying] complaint.” Id. The parties agree that the claims raised in the
state-court lawsuit fall within the general inclusionary terms of the policy. So here,
United owes Titan a duty to defend so long as those claims potentially fall outside the
scope of the absolute pollution exclusion. Because an insurer’s duty to defend is
broader than its duty to indemnify, id., if United owes no duty to defend, it likewise
owes no duty to indemnify, Trainwreck West Inc. v. Burlington Ins. Co., 235 S.W.3d
33, 44 (Mo. Ct. App. 2007).
The interpretation of an insurance policy is a question of law. Schmitz v. Great
Am. Assurance Co., 337 S.W.3d 700, 705 (Mo. banc 2011). If the policy language
is unambiguous, “the contract will be enforced as written.” Rice v. Shelter Mut. Ins.
Co., 301 S.W.3d 43, 47 (Mo. banc 2009) (quotation omitted). But if the policy
language is ambiguous, it will be construed against the insurer. Id. “An ambiguity
exists when there is duplicity, indistinctness, or uncertainty in the meaning of the
language in the policy. Language is ambiguous if it is reasonably open to different
constructions.” Jones v. Mid-Century Ins. Co., 287 S.W.3d 687, 690 (Mo. banc 2009)
(quotation omitted). When interpreting insurance policies, Missouri courts “appl[y]
the meaning [that] would be attached [to the policy] by an ordinary person of average
understanding if purchasing insurance.” Burns v. Smith, 303 S.W.3d 505, 509 (Mo.
banc 2010) (quotation omitted).
This case turns, then, on whether an ordinary person of average understanding
purchasing the policy would consider TIAH to fall unambiguously within the policy’s
definition of “pollutant.” We conclude that she would. The policy defines
“pollutant” to include an “irritant,” but it does not define the latter term. When a term
“is not defined in the policy, . . . it is necessary to use the ordinary meaning of the
word, as set forth in the dictionary.” Schmitz, 337 S.W.3d at 708; see also Burns, 303
S.W.3d at 512 n.5 (“This Court looked to the dictionary definition . . . to determine
what the ordinary layperson would interpret as the meaning of that word.”). An
irritant is “something that irritates,” that is, that “produce[s] irritation.” Webster’s
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Third New International Dictionary 1197 (2002). There can be little doubt that TIAH
falls within that definition. TIAH’s material safety data sheet1 warns that the
substance “may produce irritation to the nose, throat, respiratory tract, and other
mucous membranes”; may be “irritating” to the eyes and skin; is “toxic”; and can
cause serious injury, including “permanent brain and nervous system damage.”
Similarly, promotional materials from TIAH’s manufacturer caution that TIAH can
“cause irritation of the eyes and/or skin” and that TIAH vapors might “result in
transient central nervous system depression.” This evidence shows clearly that TIAH
produces irritation. An ordinary insurance purchaser would conclude from this that
TIAH constitutes an irritant and, in turn, a pollutant under the absolute pollution
exclusion. That conclusion is buttressed by the fact that the federal Clean Air Act
classifies xylene, one of TIAH’s constituent chemicals, as a “pollutant.” See 42
U.S.C. § 7412(b)(1). While perhaps not dispositive, federal statutory classification
of a substance as a pollutant can put an insurance purchaser on notice that the
substance might trigger the absolute pollution exclusion. See Porterfield v. Audubon
Indem. Co., 856 So. 2d 789, 805 (Ala. 2002); Quadrant Corp. v. Am. States Ins. Co.,
110 P.3d 733, 741-42 (Wash. 2005). Thus, TIAH unambiguously constitutes a
pollutant under the absolute pollution exclusion.
Titan does not seriously contest the foregoing analysis but instead contends
that such strict fidelity to the policy’s text conflicts with the Missouri Court of
Appeals’s decision in Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d
510 (Mo. Ct. App. 1999). In Hocker Oil, 2,000 gallons of gasoline leaked from the
insured’s gas station onto adjacent property. Id. at 512. The court found it to be
ambiguous whether gasoline constituted a pollutant under the insurance policy’s
pollution exclusion and thus construed the provision against the insurer. Id. at 518.
1
Federal law requires manufacturers to furnish material safety data sheets
identifying the potential risks of all “hazardous chemicals” that they produce or
import. 29 C.F.R. § 1910.1200(g). Similarly, employers must “have a safety data
sheet in the workplace for each hazardous chemical [that] they use.” Id.
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The insurer had issued the policy through its “Gasoline Department,” id. at 515, and
the insured’s business consisted entirely of operating gas stations, id. at 514. The
court observed that “it would be an oddity for an insurance company to sell a liability
policy to a gas station that would specifically exclude that insured’s major source of
liability.” Id. at 518. As such, the insured reasonably could have concluded that
gasoline was a “product it sells” rather than a pollutant. Id. Titan seeks to analogize
this case to Hocker Oil, claiming that TIAH is a “product it sells” and thus that it
reasonably could conclude that TIAH is not a pollutant.
We reject Titan’s reliance on Hocker Oil for two reasons. First, we doubt that
the Supreme Court of Missouri would apply Hocker Oil in the manner urged by Titan.
As we recently observed, Hocker Oil’s approach “was a minority position when
adopted, has been almost uniformly rejected by appellate courts in other jurisdictions,
and has not since been cited or referred to favorably by the Supreme Court of
Missouri.” Doe Run. Res. Corp. v. Lexington Ins. Co., 719 F.3d 868, 875 (8th Cir.
2013) (applying Missouri law and rejecting insured’s reliance on Hocker Oil).
Indeed, not even Missouri’s intermediate appellate courts have relied on this aspect
of Hocker Oil in the fifteen years since the case was decided. This should come as
no surprise, since Hocker Oil seems out of step with Missouri’s deeply-entrenched
rule that a court “may not ‘create an ambiguity in order to distort the language of an
unambiguous policy, or, in order to enforce a particular construction which it might
feel is more appropriate.’” Id. at 875-76 (quoting Rodriguez v. Gen. Accident Ins.
Co., 808 S.W.2d 379, 382 (Mo. banc 1991)). Thus, we do not find Hocker Oil
probative of how the Supreme Court of Missouri would decide this case.
Second, even if Hocker Oil were to represent the best evidence of Missouri
law, its unique facts differ substantially from those presented here. The insured in
Hocker Oil purchased its insurance from the insurer’s “Gasoline Department,” and,
as a gas station operator, nearly all of its liability risk related in some way to gasoline.
Under those circumstances, a reasonable insurance purchaser might be surprised to
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discover that its policy excludes categorically all harm arising out of the release of
gasoline. For this reason, “the court in Hocker Oil expressly limited its holding to
gasoline.” Doe Run, 719 F.3d at 874. In contrast, sealing concrete floors represents
only a portion—perhaps twenty-five percent—of Titan’s business, and Titan uses a
number of concrete sealants other than TIAH. Titan faces a wide range of liability
risks unrelated to TIAH, and many of those risks would fall within the policy’s
coverage. Thus, we do not believe that Hocker Oil would obligate us to cast aside the
unambiguous text of the policy.2
We are mindful of the concern that an unbounded pollution exclusion could
swallow up the inclusionary provisions of a policy. See Pipefitters Welfare Edu.
Fund v. Westchester Fire Ins. Co., 976 F.2d 1037, 1043 (7th Cir. 1992). But the text
of the exclusion imposes limitations on its own scope separate from the definition of
pollutant. For example, the absolute pollution exclusion applies only to harm caused
by the “discharge, dispersal, seepage, migration, release or escape” of a pollutant.
Thus, the exclusion will not apply, even in cases involving a pollutant, if the pollutant
did not propagate in one of these enumerated ways. See, e.g., Porterfield, 856 So. 2d
at 805-06 (holding that, although lead paint constitutes a “pollutant,” the absolute
2
Titan also cites American National Property & Casualty Co. v. Wyatt, 400
S.W.3d 417 (Mo. Ct. App. 2013), which held—relying almost exclusively on cases
from other jurisdictions—that an ordinary insurance purchaser reasonably could
conclude that “pollutant” includes only traditional environmental pollution. Id. at
426. Titan does not urge us to adopt this sweeping rule, which conflicts with several
Missouri cases that have applied the absolute pollution exclusion to a wider range of
substances. See, e.g., Heringer v. Am. Family Mut. Ins. Co., 140 S.W.3d 100, 105-06
(Mo. Ct. App. 2004) (expressly rejecting the argument that “pollutant” is limited to
traditional environmental pollution); Boulevard Inv. Co. v. Capitol Indem. Corp., 27
S.W.3d 856, 858 (Mo. Ct. App. 2000) (holding that kitchen grease constituted
pollutant). Given its limited consideration of Missouri case law and its failure even
to address contrary authority such as Heringer and Boulevard, we do not find Wyatt
especially instructive as to how the Supreme Court of Missouri would decide this
case.
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pollution exclusion did not apply because flaking of lead paint from walls did not
constitute “discharge”); cf. 9 Couch on Insurance § 127:9 (3d ed. 2013) (collecting
cases). So “if a child were injured because he drank from a bottle of . . . [a]
household product, even if that product properly could be classified as a ‘pollutant,’
the injury would not be covered by the pollution exclusion because the pollutant was
not disseminated by one of the prescribed methods.” Lefrak Org., Inc. v. Chubb
Custom Ins. Co., 942 F. Supp. 949, 954 (S.D.N.Y. 1996). Similarly, textual analysis
might also avert “absurd results,” such as the speculation that the exclusion “would
bar coverage for bodily injuries suffered by one who slips and falls on the spilled
contents of a bottle of Drano.” Pipefitters, 976 F.2d at 1043. As we have noted
previously, the absolute pollution exclusion will not necessarily apply where the
substance causing injury has the potential to irritate but has—like the Drano in the
hypothetical—caused harm in a manner other than by irritating. See Sargent Const.
Co. v. State Auto Ins. Co., 23 F.3d 1324, 1327 (8th Cir. 1994) (applying Missouri
law).3 We believe that these interpretive principles, grounded in the text of the
policy, substantially limit the scope of the absolute pollution exclusion without
deviating radically from its actual language.
3
Citing Sargent Construction, the dissent states that “this court has previously
concluded that identical language defining ‘pollutant’ is ambiguous.” Post at 11. But
“[t]he question of ambiguity cannot be viewed in the abstract. A particular word or
phrase in any writing is ambiguous only with reference to some specific issue.” State
ex rel. Mathewson v. Bd. of Election Comm’rs, 841 S.W.2d 633, 635 (Mo. banc
1992). Thus, a particular policy provision may be ambiguous with respect to the
factual situation presented by one claim but unambiguous as to another. See State
Farm Mut. Auto. Ins. Co. v. DeCaigney, 927 S.W.2d 907, 909-10 (Mo. Ct. App.
1996). The “specific issue” presented in Sargent Construction—whether a substance
constitutes an irritant when it causes harm other than by irritating—is wholly
unrelated to the question presented here. Thus, Sargent Construction does not control
whether the term “pollutant” is ambiguous as to the facts of this case.
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We therefore conclude that TIAH unambiguously constitutes a pollutant under
the absolute pollution exclusion. The district court rested its grant of summary
judgment in favor of Titan exclusively on the ground that TIAH is not a pollutant, and
Titan did not present any alternate grounds for affirming that decision. Accordingly,
we vacate the district court’s grant of summary judgment.
United also asks that we reverse the district court’s denial of its summary
judgment motion. Ordinarily, we cannot review the denial of a motion for summary
judgment, because it does not constitute a final order. Nyari v. Napolitano, 562 F.3d
916, 922 (8th Cir. 2009); see also 28 U.S.C. § 1291. However, when a party appeals
both the denial of its motion for summary judgment and the grant of summary
judgment in favor of the appellee, we may review both orders and, if appropriate,
direct the entry of summary judgment in favor of the appellant. Nyari, 562 F.3d at
922. Under such circumstances, the denial of summary judgment “merge[s] into” the
final order granting summary judgment and thereby becomes reviewable. Swaback
v. Am. Info. Techs. Corp., 103 F.3d 535, 543 (7th Cir. 1996).
Because the district court premised its denial of United’s motion for summary
judgment exclusively on the erroneous conclusion that TIAH does not constitute a
pollutant, we vacate the district court’s order. However, we decline to direct the entry
of summary judgment in favor of United. In addition to contesting whether TIAH
constitutes a pollutant, Titan also argued to the district court that the complaint in the
underlying state-court case did not allege the “discharge, dispersal, seepage,
migration, release or escape” of TIAH. This contention, if correct, would render the
absolute pollution exclusion inapplicable in this case. The district court did not reach
this issue, and the parties have not addressed it on appeal. Because this argument
raises complex factual and legal questions, we believe that “it would be beneficial for
the district court to consider this issue in the first instance.” Loftness Specialized
Farm Equip., Inc. v. Twiestmeyer, 742 F.3d 845, 851 (8th Cir. 2014). Accordingly,
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we vacate the denial of United’s motion for summary judgment and remand for
further proceedings.
III. Conclusion
For the foregoing reasons, we vacate the district court’s grant of summary
judgment in favor of Titan and its denial of United’s motion for summary judgment,
and we remand this case to the district court for further proceedings consistent with
this opinion.
BRIGHT, Circuit Judge, dissenting.
I respectfully dissent. The district court correctly concluded that an ambiguity
exists “in the policy language as it relates to Titan’s allegedly negligent application
of TIAH to seal the concrete floor.”
Under Missouri law, ambiguity exists in an insurance policy “‘when there is
duplicity, indistinctness, or uncertainty in the meaning of the language in the policy’”
and “‘[l]anguage is ambiguous if it is reasonably open to different constructions.’”
Daughhetee v. State Farm Mut. Auto. Ins. Co., 743 F.3d 1128, 1132 (8th Cir. 2014)
(quoting Burns v. Smith, 303 S.W.3d 505, 509 (Mo. 2010) (en banc)). In construing
the terms of an insurance policy, this court “must apply ‘the meaning which would
be attached by an ordinary person of average understanding if purchasing insurance.’”
Id. (quoting Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo. 2007) (en
banc)). Additionally, under Missouri law, we strictly construe ambiguous policy
exclusions and limitations against the insurer. Capitol Indem. Corp. v. 1405 Assocs.,
Inc., 340 F.3d 547, 550 (8th Cir. 2003) (citing Standard Artificial Limb, Inc. v.
Allianz Ins. Co., 895 S.W.2d 205, 209 (Mo. Ct. App. 1995)); Burns, 303 S.W.3d at
509-10.
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Here, a reasonable policy holder would expect that a liability insurance policy
issued to a contractor in the business of cleaning and sealing concrete floors would
cover injuries suffered as a result of exposure to the products used in cleaning and
sealing floors. As much as twenty-five percent of Titan’s business includes applying
concrete sealant after the completion of new construction. Thus, similar to the
gasoline at issue in Hocker Oil Co., Inc. v. Barker-Phillips-Jackson, Inc., TIAH “is
not a pollutant in [Titan’s] eyes.” 997 S.W.2d 510, 518 (Mo. Ct. App. 1999). Rather,
TIAH “belongs in the environment in which [Titan] routinely works” and “in that
environment, [TIAH] is not a pollutant.” Id. Furthermore, in that environment, with
ordinary ventilation, the product can be used safely. If any uncertainty exists as to
whether the policy’s “pollution” definition excludes TIAH, the policy must be
ambiguous. See Daughhetee, 743 F.3d at 1132. Moreover, this court has previously
concluded that identical language defining “pollutant” is ambiguous. See Sargent
Constr. Co., Inc. v. State Auto Ins. Co., 23 F.3d 1324, 1327 (8th Cir. 1994) (applying
Missouri law).
Because the operative policy language is ambiguous, Titan’s interpretation of
the pollution exclusion language controls. Therefore, I would affirm the district
court.
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