Title: Federated Mutual Insurance Company v. Abston Petroleum, Inc., et al.

State: alabama

Issuer: Alabama Supreme Court

Document:

REL: 04/13/2007 Federated Mutual v. Abston
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
242-4621), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
 OCTOBER TERM, 2006-2007
_________________________
1051589
_________________________
Federated Mutual Insurance Company
v.
Abston Petroleum, Inc., et al.
Appeal from Choctaw Circuit Court
(CV-03-110)
LYONS, Justice.
Federated Mutual Insurance Company appeals from a
judgment of the Choctaw Circuit Court in favor of Abston
Petroleum, Inc., Eddie Abston, Victor Schill, and Cynthia
Schill.  We reverse and remand.
1051589
2
I. Factual Background and Procedural History
Victor Schill and Cynthia Schill owned a hardware and
grocery store in Silas.  The Schills sold gasoline from pumps
located in front of the store pursuant to a consignment
agreement with Abston Petroleum.  Abston Petroleum owned the
pumps, the tanks in which the gasoline was stored, and the
underground lines connecting the tanks and the pumps, all of
which were located on the Schills' property.  In 1999,
pursuant to applicable state and federal laws, Abston
Petroleum removed the existing underground gasoline storage
tanks on the Schills' property and replaced them with
aboveground storage tanks.  After the aboveground tanks were
installed, the Schills said that they complained repeatedly to
Abston Petroleum about leaks in the underground lines from the
aboveground tanks to the pumps.  The Schills alleged that in
May 2001 customers and adjacent landowners complained about a
gasoline smell and a gasoline film in and around the store.
On June 11, 2001, the Schills notified the Alabama Department
of Environmental Management that a significant and dangerous
quantity of gasoline fumes was emanating from the leaks, and,
as a result, the state fire marshal closed their business.
1051589
3
The store remained closed for six to eight weeks while
environmental cleanup efforts were conducted and the necessary
repairs were attempted.  Abston Petroleum ultimately removed
all the gasoline pumps and tanks from the Schills' property,
but the Schills were never able to reopen their business.  
The Schills sued Abston Petroleum and Eddie Abston, its
president (hereinafter collectively referred to as "Abston
Petroleum"), alleging that their property was contaminated by
gasoline that had leaked from the underground lines owned and
maintained by Abston Petroleum, and that the contamination had
caused them to suffer personal injury, including a worsening
of Cynthia Schill's migraine headaches, and property damage,
including the loss of revenue during the period the store was
closed and, ultimately, the loss of their business. 
At the time of the gasoline contamination, Abston
Petroleum was insured under a commercial general-liability
insurance policy issued by Federated Mutual.  After Abston
Petroleum notified Federated Mutual of the Schills' personal
injury and property damage and their resulting claims,
Federated Mutual informed Abston Petroleum that the pollution-
exclusion endorsement to its insurance policy with Federated
1051589
4
Mutual excluded coverage for the Schills' claims arising out
of the gasoline contamination.  
Abston Petroleum filed a third-party complaint against
Federated Mutual and Keith Mills, the agent who had sold the
Federated Mutual policy to Abston Petroleum and who serviced
the account.  Abston Petroleum sought a judgment declaring
that the policy covered the Schills' claims against it and
asserted claims against Federated Mutual alleging breach of
contract, bad faith, and negligent or wanton hiring and
retention of Mills.  Abston Petroleum asserted claims against
Mills of fraudulent misrepresentation and suppression, and
claims against both defendants of conspiracy to defraud and
negligent or wanton procurement of insurance.  The trial court
severed Abston Petroleum's claims against Federal Mutual and
Mills from those of the Schills against it. 
In July 2004, the Schills settled their action against
Abston Petroleum, entered into a $500,000 consent judgment and
nonexecution agreement, and dismissed their complaint.  Abston
Petroleum assigned its rights to the Federated Mutual
insurance policy to the Schills.  They, in turn, agreed not to
proceed further against Abston Petroleum.  The Schills and
1051589
5
Abston 
Petroleum 
agreed 
to 
jointly 
prosecute 
Abston
Petroleum's claims against Federated Mutual and Mills.  The
Schills then filed a complaint in intervention in Abston
Petroleum's third-party action against Federated Mutual and
Mills.  They later filed a motion requesting permission to
intervene; the trial court granted that motion.  
Abston Petroleum and the Schills moved for a summary
judgment as to two counts of the third-party complaint:  Count
I, seeking a judgment declaring that the Federated Mutual
policy provided coverage to Abston Petroleum for the Schills'
claims and damages, and Count II, alleging that Federated
Mutual had breached the insurance contract.  Abston Petroleum
and the Schills also moved for a judgment declaring that
Federated Mutual was bound by their consent judgment.  The
trial court did not rule on that motion.  After discovery was
completed, Federated Mutual and Mills filed a cross-motion for
a summary judgment in their favor as to all claims in the
third-party complaint.  The trial court entered a summary
judgment in favor of Abston Petroleum and the Schills as to
Counts I and II of the complaint, holding that Federated
Mutual was obligated as a matter of law to provide coverage
1051589
6
for the Schills' damage.  The court also entered a summary
judgment in favor of Federated Mutual and Mills as to Count
III, alleging bad faith against Federated Mutual, and Count
VI, alleging that Federated Mutual and Mills had conspired to
defraud Abston Petroleum and the Schills.  The court denied
all motions as to the other claims in the complaint, including
the fraud claims against Mills, the claims of negligent or
wanton failure to procure insurance against both defendants,
and the claims of negligent or wanton hiring and retention
against Federated Mutual.  The court made the summary judgment
final pursuant to Rule 54(b), Ala. R. Civ. P.  Federated
Mutual appeals the trial court's summary judgment in favor of
Abston Petroleum and the Schills on Count I, seeking a
judgment declaring that the Federated Mutual policy provided
coverage to Abston Petroleum for the Schills' personal injury
and property damage and their resulting claims, and on Count
II, alleging that Federated Mutual had breached the insurance
contract.  
II. Standard of Review
"The standard by which this Court will review a
motion for summary judgment is well established:
1051589
7
"'The principles of law applicable to
a motion for summary judgment are well
settled.  To grant such a motion, the trial
court must determine that the evidence does
not create a genuine issue of material fact
and that the movant is entitled to a
judgment as a matter of law.  Rule
56(c)(3), Ala. R. Civ. P.  When the movant
makes a prima facie showing that those two
conditions are satisfied, the burden shifts
to the nonmovant to present "substantial
evidence" creating a genuine issue of
material fact.  Bass v. SouthTrust Bank of
Baldwin County, 538 So. 2d 794, 797-98
(Ala. 1989); § 12-21-12(d)[,] Ala. Code
1975.  Evidence is "substantial" if it is
of 
"such 
weight 
and 
quality 
that
fair-minded persons in the exercise of
impartial judgment can reasonably infer the
existence of the fact sought to be proved."
West v. Founders Life Assur. Co. of
Florida, 547 So. 2d 870, 871 (Ala. 1989).
"'In our review of a summary judgment,
we apply the same standard as the trial
court.  Ex parte Lumpkin, 702 So. 2d 462,
465 (Ala. 1997).  Our review is subject to
the caveat that we must review the record
in a light most favorable to the nonmovant
and must resolve all reasonable doubts
against the movant.  Hanners v. Balfour
Guthrie, Inc., 564 So. 2d 412 (Ala.
1990).'"
Payton v. Monsanto Co., 801 So. 2d 829, 832-33 (Ala. 2001)
(quoting Ex parte Alfa Mut. Gen. Ins. Co., 742 So. 2d 182, 184
(Ala. 1999)).  
III.  Analysis
1051589
8
Federated Mutual contends that the pollution-exclusion
clause in the insurance policy issued to Abston Petroleum is
unambiguous and, therefore, that Federal Mutual is not
obligated to indemnify Abston Petroleum for the contamination
that occurred on the Schills' property.  Abston Petroleum and
the Schills argue that the pollution-exclusion clause is
ambiguous and, therefore, that Federated Mutual should be
responsible for the damage sustained by the Schills.  
A. History of the Pollution-Exclusion Clause
The pollution-exclusion clause in the Federated Mutual
policy is customarily referred to as an "absolute pollution-
exclusion clause."  For a thorough discussion of the history
of the pollution-exclusion clause and the differences between
an qualified pollution-exclusion clause and an absolute
pollution-exclusion 
clause, 
see 
Porterfield 
v. 
Audubon
Indemnity Co., 856 So. 2d 789 (Ala. 2002).  
Examining the absolute pollution-exclusion clause at
issue in Porterfield, a clause comparable to the clause in
this proceeding, this Court stated that the applicability of
the clause depended upon the "affirmative confluence" of three
elements:
1051589
We concluded that the substance at issue in Porterfield--
1
lead paint--qualified as a pollutant under the terms of the
absolute pollution-exclusion clause in the policy.  However,
we ruled in favor of the insured because the exclusion was
ambiguous in the context of treating the presence of lead-
paint flakes, chips, and/or dust in a residential apartment as
a discharge, dispersal, release, or escape of a pollutant.
856 So. 2d at 805.  
9
"[T]he bodily injury or property damage in question
must have been caused by exposure to a 'pollutant';
that exposure must have arisen out of the actual,
alleged, 
or 
threatened 
discharge, 
dispersal,
release, or escape of the pollutant; and that
discharge, dispersal, release, or escape must have
occurred at or from certain locations or have
constituted 'waste.'  In other words, the exclusion
comes into play only with respect to bodily injury
or property damage arising out of the discharge,
dispersal, release, or escape (terms not defined in
the policy) of pollutants (a term defined in the
policy) at or from certain categories of locations,
or which have been transported, stored, handled,
treated, disposed of, or processed 'as waste.'"  
Porterfield, 856 So. 2d at 801.  We noted in Porterfield that
the absolute pollution-exclusion clause has generated much
litigation, much of it involving disputes over whether a
particular substance qualified as a pollutant.   
1
 
Subsections (1)(f) and (2)(f) of the coverage section in
the Federated Mutual policy exclude the following from
coverage:  
"(1) 'Bodily injury' or 'property damage' arising
out of the actual, alleged or threatened discharge,
1051589
The policy elsewhere defines "pollutants" as "any solid,
2
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."  
10
dispersal, seepage, migration, release or escape of
'pollutants':[ ]
2
"....
"(f) At or from any tank, piping, pumps or
dispensers at premises, sites or locations
in 
addition 
to 
those 
described 
in
subparagraphs (a), (b), (d) or (e), which
are or were at any time owned, leased,
installed, removed, tested, repaired or
filled by or on behalf of any insured,
wherever located (except at residences
primarily used for dwelling purposes) which
contain, transport or dispense or are
designed to contain, transport or dispense:
"(i) motor fuels;
"....
"(2) Any loss, cost or expense arising out of any
request, demand, order or statutory or regulatory
requirement that any insured or others test for,
monitor, clean up, remove, contain, treat, detoxify,
or neutralize, or in any way respond to, or assess
the effects of 'pollutants' or any claim or suit by
or on behalf of a governmental authority for damages
because of testing for, monitoring, cleaning up,
removing, 
containing, 
treating, 
detoxifying 
or
neutralizing, or in any way responding to, or
assessing the effects of 'pollutants'; if the
loss[,] cost or expense arises out of the actual,
alleged or threatened discharge, dispersal, seepage,
migration, release or escape of 'pollutants':
1051589
11
"....
"(f) At or from any tank, piping, pumps or
dispensers at premises, sites or locations
in 
addition 
to 
those 
described 
in
subparagraphs (a), (b), (d) or (e) which
are or were at any time owned, leased,
installed, removed, tested, repaired or
filled by or on behalf of any insured,
wherever located (except at residences
primarily used for dwelling purposes) which
contain, transport or dispense or are
designed to contain, transport or dispense:
"(i) motor fuels;
"....
"Motor fuels means petroleum or a petroleum-based
substance that is typically used in the operation of
a motor or engine, including but not limited to
gasoline, aviation fuel, number one or two diesel
fuel, or any grade of gasohol."
B. Whether the Pollution-Exclusion Clause Is Ambiguous
This Court has recognized that "[t]he issue whether a
contract is ambiguous or unambiguous is a question of law for
a court to decide."  State Farm Fire & Cas. Co. v. Slade, 747
So. 2d 293, 308 (Ala. 1999).  "'If the terms within a contract
are plain and unambiguous, the construction of the contract
and its legal effect become questions of law for the
court....'"  Slade, 747 So. 2d at 308 (quoting McDonald v.
U.S. Die Casting & Dev. Co., 585 So. 2d 853, 855 (Ala. 1991)).
1051589
12
Because the question of ambiguity is one of law, we must first
decide whether the pollution-exclusion clause in the Federated
Mutual policy is ambiguous or unambiguous.  If the clause is
unambiguous, then this Court must enforce the terms of the
insurance policy as written.  Safeway Ins. Co. of Alabama,
Inc. v. Herrera, 912 So. 2d 1140 (Ala. 2005).  
Abston 
Petroleum 
and 
the 
Schills 
argue 
that 
the
pollution-exclusion clause is ambiguous because, they argue,
the clause does not specifically define "gasoline" as a
"pollutant" and because Eddie Abston did not expect that
gasoline would be considered an excluded pollutant under the
policy.  Eddie Abston testified in an affidavit that, in his
eyes, gasoline is not a pollutant and that "gasoline should be
considered 
in 
its 
normal 
circumstance, 
not 
in 
the
unusual/accidental circumstance."  He insists that gasoline is
neither an irritant nor a contaminant, and, therefore, Abston
Petroleum and the Schills argue, gasoline does not come within
the definition of pollutant as stated in the policy.  
Abston Petroleum and the Schills rely heavily on Molton,
Allen & Williams, Inc. v. St. Paul Fire & Marine Insurance
Co., 347 So. 2d 95 (Ala. 1977), in which this Court held that
1051589
13
whether a clause in an insurance policy is ambiguous is to be
determined by deciding what a reasonable, ordinary person
applying for insurance would expect the policy to mean, and
they argue that the scope of the pollution-exclusion clause
should not be defined by resorting to technical definitions of
terms in the clause that differ from what a reasonable,
ordinary person would have understood those terms to mean.
Although the pollution-exclusion clause in Molton, Allen &
Williams was a qualified pollution-exclusion clause rather
than an absolute pollution-exclusion clause, Abston Petroleum
and the Schills argue that that distinction was not
dispositive to this Court's holding that the pollution-
exclusion clause in Molton, Allen & Williams was ambiguous
because the insured could have reasonably expected from
reading the clause that its construction activity would be
covered.  Abston Petroleum and the Schills also rely upon
Molton, Allen & Williams to support their argument that Eddie
Abston reasonably expected that the personal injury and
property damage allegedly suffered by the Schills as a result
of gasoline leaks would be covered by the liability policy he
purchased to cover his gasoline-distribution business.  Abston
1051589
14
Petroleum and the Schills state in their brief that Eddie
Abston "purchased a 'PETRO PAC' policy [from Federated Mutual]
for $30,500 expecting that third party negligence or accident
claims involving his gasoline business would be covered."  
We first address whether the absolute pollution-exclusion
clause in the Federated Mutual policy is ambiguous.  That
determination requires us to consider whether gasoline can be
considered a "pollutant" as that term is defined by the
policy.  Although whether such a clause excludes coverage for
damages arising out of gasoline contamination is a question of
first impression for this Court, a number of other courts have
analyzed similar pollution-exclusion clauses and determined
that those clauses exclude damages for claims similar to those
of the Schills, i.e., personal injury and property damage
caused by gasoline that has leaked from storage tanks or
pipes.  In so doing, these courts have necessarily concluded
that gasoline is a pollutant as defined by the policy under
consideration.  
As previously noted, under the terms of the pollution-
exclusion clause at issue here, the policy does not cover
injury or damage 
1051589
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"arising out of the actual, alleged or threatened
discharge, dispersal, seepage, migration, release or
escape of 'pollutants' ... 
"....
"... [a]t or from any tank, piping, pumps
or 
dispensers 
at 
premises, 
sites 
or
locations ... which are or were at any time
owned, leased, installed, removed, tested,
repaired or filled by or on behalf of any
insured ... which contain, transport or
dispense ... motor fuels."  
(Emphasis added.)  Compressing the operative language quoted
above, we read the clause to exclude damage arising out of the
discharge from any tank or piping owned or installed by any
insured, which transports motor fuels.  A pollutant is "any
solid, liquid, gaseous or thermal irritant or contaminant,
including smoke, vapor, soot, fumes, acids, alkalis, chemicals
and waste."  (Emphasis added.)  In the amicus curiae brief
filed by the Complex Insurance Claims Litigation Association
("the Association") in support of Federated Mutual, the
Association explains why gasoline should be included within
the definition of a pollutant in the policy:
"Gasoline leaking from piping connecting an above
ground storage tank and gasoline pumps is plainly a
liquid 'irritant' or 'contaminant' excluded by the
term 'pollutants.'  The focus of the inquiry under
the absolute pollution exclusion is not on the
nature of the substance alone, but on the substance
1051589
16
in relation to the property damage or bodily injury.
Even if a substance such as gasoline is commercially
useful in one context, it may become a pollutant
when it is released and becomes a 'foreign'
substance in another medium."  
The Association and Federated Mutual support their
argument in favor of this well-reasoned approach by citing for
this Court's review cases from other jurisdictions that have
held that an absolute pollution-exclusion clause precludes
coverage for gasoline and other petroleum products when those
products are acting as pollutants.  See United States v.
Standard Oil Co., 384 U.S. 224, 226 (1966) (rejecting Standard
Oil's argument that oil was not refuse because it was a
commercially valuable and useful product and holding that even
a commercially valuable and useful product becomes a pollutant
when it contaminates a river); Western World Ins. Co. v. Stack
Oil, Inc., 922 F.2d 118 (2d Cir. 1990) (absolute pollution-
exclusion endorsement barred coverage for losses incurred when
fuel oil escaped from holding tank); Owners Ins. Co. v.
Farmer, 173 F. Supp. 2d 1330 (N.D. Ga. 2001) (holding that
diesel fuel is unambiguously a pollutant under the terms of
pollution-exclusion 
clause 
of 
insurance 
policy); 
North 
Georgia
Petroleum Co. v. Federated Mut. Ins. Co., 68 F. Supp. 2d 1321
1051589
17
(N.D. 
Ga. 
1999) 
(absolute 
pollution-exclusion 
clause
unambiguously excluded coverage for claims arising out of
petroleum leaks from underground storage tanks); Guilford
Indus. Inc. v. Liberty Mut. Ins. Co., 688 F. Supp. 792, 794
n.1 (D. Maine 1988), aff'd, 879 F.2d 853 (1st Cir. 1989)
(table) ("[I]t is common knowledge that oil spills, leaks, or
discharges 
are 
commonly 
considered 
polluting 
events.
Plaintiff's argument that it could not reasonably have
expected oil to be considered a pollutant is disingenuous.");
Harrison v. R.R. Morrison & Son, Inc., 862 So. 2d 1065, 1072
(La. Ct. App. 2003) (holding that policy with pollution-
exclusion clause identical to the one here precluded coverage
for claims for injury and damage caused when gasoline was
released from underground storage tank because "gasoline is a
liquid contaminant within the plain meaning of pollutant in
the insurance policy" and "the plain meaning of the policy
should control"); Wagner v. Erie Ins. Co., 2002 Pa. Super.
166, 801 A.2d 1226 (2002) (gasoline that leaked into soil from
underground line clearly was a pollutant pursuant to service
station's insurance policy, which excluded coverage for damage
resulting from release of pollutants); Truitt Oil & Gas Co. v.
1051589
18
Ranger Ins. Co., 231 Ga. App. 89, 498 S.E.2d 572 (1998)
(gasoline that had leaked from storage container and
contaminated surrounding environment was pollutant according
to unambiguous definition of "pollutant" in insurance policy;
therefore, policy did not need to specifically list gasoline
as a pollutant); Millers Mut. Ins. Ass'n of Illinois v. Graham
Oil Co., 282 Ill. App. 3d 129, 135-36, 668 N.E.2d 223, 228
(1996) (interpretation of "gasoline" as the term was used in
a pollution-exclusion clause as a liquid that can be an
irritant or contaminant and therefore a pollutant "comports
not only with the plain, ordinary, and popular meaning of
'pollutant,' but also with common sense"); Crescent Oil Co. v.
Federated Mut. Ins. Co., 20 Kan. App. 2d 428, 437, 888 P.2d
869, 875 (1995) ("The clear language of the pollution
exclusion excludes coverage for property damage caused by
gasoline 
leaking 
from 
[the 
policyholder's] 
underground
tanks."); Heyman Assocs. No. 1 v. Insurance Co. of Pa., 231
Conn. 756, 776, 653 A.2d 122, 133 (1995) ("the clear and
unambiguous language of the absolute pollution exclusions
excludes coverage for the plaintiff's spill of fuel oil");
Legarra v. Federated Mut. Ins. Co., 35 Cal. App. 4th 1472,
1051589
19
1481, 42 Cal. Rptr. 2d 101, 106 (1995) ("'[The insured's]
contention that petroleum is not a pollutant within this
definition 
[in 
the 
pollution-exclusion 
clause 
defining
pollutant to include "any solid, liquid, gaseous or thermal
irritant or contaminant"] is belied both by science and common
sense.  Petroleum, either as a liquid or a gas, has been found
to be an environmental contaminant or irritant both by courts
and legislatures.'" (quoting Staefa Control-Sys. Inc. v. St.
Paul Fire & Marine Ins. Co., 847 F. Supp. 1460, 1471 (N.D.
Cal. 1994))); United States Fire Ins. Co. v. Ace Baking Co.,
164 Wis. 2d 499, 505, 476 N.W.2d 280, 283 (Wis. Ct. App. 1991)
("[I]t is a rare substance indeed that is always a pollutant;
the most noxious of materials have their appropriate and non-
polluting uses.  Thus, for example, oil will 'pollute' water
and thus foul an automobile's radiator, but be essential for
the engine's lubrication.").  
In support of their argument that gasoline is not a
pollutant, Abston Petroleum and the Schills also cite cases
from other jurisdictions.  See Governmental Interins. Exch. v.
City of Angola, 8 F. Supp. 2d 1120 (N.D. Ind. 1998) (term
"pollutants" as used in absolute pollution-exclusion clause
1051589
20
was ambiguous as to whether it included kerosene); Hocker Oil
Co. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d 510, 518 (Mo.
Ct. App. 1999) ("[F]ailure [of the policy] to identify
'gasoline' as a pollutant in its pollution exclusion resulted
in uncertainty and indistinctness.  The policy was, therefore,
ambiguous as to whether gasoline was a pollutant for purposes
of the exclusion."); American States Ins. Co. v. Kiger, 662
N.E.2d 945, 949 (Ind. 1996) ("the term 'pollutant' does not
obviously include gasoline and, accordingly, is ambiguous").
In response to Abston Petroleum and the Schills' argument
that gasoline is not a pollutant under the policy because it
is not specifically listed as a pollutant, the Association
cites Harnischfeger Corp. v. Harbor Ins. Co., 927 F.2d 974,
976 (7th Cir. 1991), in which the United States Court of
Appeals for the Seventh Circuit explained why it would be
impractical to list thousands of substances in defining
"pollutant" in an insurance policy:
"Drafters 
cannot 
anticipate 
all 
possible
interactions of fact and text, and if they could the
attempt to cope with them in advance would leave
behind a contract more like a federal procurement
manual than like a traditional insurance policy.
Insureds would not be made better off in the
process.  The resulting contract would be not only
incomprehensible but also more expensive."  
1051589
The Association informs us in its amicus curiae brief
3
that the vast majority of courts nationwide--over 100 cases
from 36 jurisdictions--have upheld and enforced pollution-
exclusion clauses like the one at issue here, which bar
coverage for harms caused by exposure to a variety of
pollutants.  See Quadrant Corp. v. American States Ins. Co.,
154 Wash. 2d 165, 173-74, 110 P.3d 733, 738 (2005) (noting
number and citing cases); Deni Assocs. of Florida, Inc. v.
State Farm Fire & Cas. Ins. Co., 711 So. 2d 1135, 1137 n.2
(Fla. 1998) (same).
21
We conclude that the better-reasoned approach is that
applied by the majority of courts that have reviewed a
pollution-exclusion clause identical to or markedly similar to
the clause in the Federated Mutual policy before us.   We hold
3
that gasoline, although not a pollutant when properly used for
the purposes for which it is intended, is clearly a pollutant
when it leaks into the soil from underground lines or tanks or
when fumes from such a leak are so dangerous that a business
must be closed, as was the case here.  The simple fact that
gasoline serves a vital purpose when released from a properly
constructed tank into the confines of an internal combustion
engine does not permit us to blink reality and overlook the
deleterious 
consequences 
that 
occur 
when 
gasoline 
is
introduced into the soil or when its fumes escape into the
atmosphere.  Because we conclude that gasoline is clearly a
pollutant as that term is used in the policy, any argument
1051589
22
that the pollution-exclusion clause is ambiguous cannot be
supported.  Because we hold that the clause is unambiguous, we
need not consider the arguments made by Abston Petroleum and
the Schills that we should consider the drafting and
regulatory history of such clauses or that the policy must be
construed against the insurer, who drafted it.  
C. Whether an Insured's Reasonable Expectations
Can Overcome Unambiguous Language
We now turn to the argument made by Abston Petroleum and
the Schills that Eddie Abston reasonably expected that any
claims involving his gasoline-distribution business would be
covered by the Federated Mutual policy, despite his testimony
that he never read the pollution-exclusion clause before
Federated Mutual denied coverage for the Schills' claims.
This Court limited the doctrine of reasonable expectations as
applied to an insurance policy in Slade, supra.  We there
stated:
"The 
rule 
(or 
doctrine) 
of 
reasonable
expectations of the parties is based on Aetna
Casualty & Surety Co. v. Chapman, 240 Ala. 599, 200
So. 425 (1941). ...
"....
"'In giving effect to [the rule that
the insured is entitled to the protection
1051589
23
which he may reasonably expect from the
terms of the policy he purchases], it is
equally important that the contract made by
the parties shall prevail, and no new
contract be interpolated by construction.
"'Provisions clearly disclosing their
real intent are not to be given a strained
construction to raise doubts where none
reasonably exist.  No citation of authority
need be made in support of these well
settled principles.'
"[Chapman, 240 Ala. at 602, 200 So. at 426-27.]
"In Lambert v. Liberty Mutual Insurance Co., 331
So. 2d 260, 263 (Ala. 1976), a 'stacking' case
arising in regard to the statutorily mandated offer
of uninsured-motorist coverage, this Court referred
to Chapman and then stated:
"'As Professor Keeton analyzes it, the
principle 
of 
reasonable 
expectations
insures that "[t]he objectively reasonable
expectations of applicants and intended
beneficiaries 
regarding 
the 
terms 
of
insurance contracts will be honored even
though painstaking study of the policy
provisions 
would 
have 
negated 
those
expectations."  R. Keeton, Basic Text on
Insurance Law § 6.3(a), at 351 (1971).'
"(Emphasis in original.)  Then the Court observed
that its application of the rule of reasonable
expectations 
in 
the 
context 
of 
stacking
uninsured-motorist coverages allowed an insured to
enjoy 
increased 
coverage 
because 
'where 
an
expectation ... is in conflict with a limiting
clause in the policy, the resulting ambiguity must
be resolved in favor of the insured due to the
nature of insurance contracts.'  Id. at 263.
1051589
24
"However, the Court found that Lambert was not
within the zone of persons entitled to have a
reasonable expectation of stacked coverages, because
he was an employee of the purchaser of the policy.
Id. at 263-65.  The Court also held that Lambert was
not a person required by statute to be covered under
uninsured-motorist provisions and that the plain
terms of the policy limited the amount of coverage
provided for him; this, the Court held, was a
separate basis for affirming the summary judgment
for the insurer.  Id.  Given the Court's finding
that Lambert was not within the zone of persons
entitled to a reasonable expectation of stacked
coverages and its finding of a separate basis for
affirming, we must conclude that, to the extent
Lambert is inconsistent with Chapman's requirement
that, for the rule of reasonable expectations to
apply, there be, as a predicate, doubts as to the
real intent of the policy, the statements in Lambert
are dicta.  
"Moreover, we are not here presented with
separate provisions of an insurance policy each of
which is unambiguous when read without reference to
the other but, when read together, create a conflict
giving rise to an ambiguity.  Compare West American
Ins. Co. v. Biggs, 348 So. 2d 258 (Ala. Civ. App.
1977).  The State Farm policy at issue here clearly
limits its coverage by citing the policyholder to a
specific ensuing section of the policy that contains
several exclusions from coverage.  At least one
court has found that such a reference gives the
insured reasonable notice of the exclusion.  See
Kane v. Royal Ins. Co., 768 P.2d 678, 684 (Colo.
1989).
"Other courts have limited the use of the
doctrine of reasonable expectations to situations in
which an insurance policy is ambiguous.  See, e.g.,
Rodriguez v. General Acc. Ins. Co., 808 S.W.2d 379,
381 (Mo. 1991); Riffe v. Home Finders Assocs., Inc.,
205 W. Va. 216, 517 S.E.2d 313 (1999).  Furthermore,
1051589
25
expectations that contradict a clear exclusion are
not 'objectively reasonable.'  Wellcome v. Home Ins.
Co., 257 Mont. 354, 359, 849 P.2d 190, 194 (1993).
Such 
a 
limit 
on 
the 
doctrine 
of 
reasonable
expectations is necessary.  Otherwise, this Court
would be faced with the strong temptation to
substitute its notion of equity for the unambiguous
terms of a contract and the doctrine could be used
to invalidate every policy exclusion.  See Millar v.
State Farm Fire & Cas. Co., 167 Ariz. 93, 97, 804
P.2d 822, 826-27 (Ct. App. 1990), review denied, 168
Ariz. 144, 811 P.2d 1081 (Ariz. 1991) ('If ... all
that was required to defeat the operation of a
policy exclusion under the reasonable expectation
doctrine was a provision attempting to qualify or
limit the scope of policy coverage, then every
policy exclusion would be invalid as contrary to the
insured's reasonable expectation of coverage.').
"Accordingly, we conclude that the Slades'
expectations of coverage do not require us to
construe their policy so as to find coverage.  Their
expectations were limited by the unambiguous terms
of their policy and therefore their expectations of
coverage could not be 'objectively reasonable.'  See
Wellcome, supra." 
Slade, 747 So. 2d at 311-12.  
We therefore hold that the argument that Eddie Abston
reasonably expected that any claims involving his gasoline-
distribution business would be covered by the Federated Mutual
policy does not provide a basis for finding coverage for the
Schills' losses.  Eddie Abston's expectations were limited by
the unambiguous terms of the pollution-exclusion clause;
1051589
26
therefore, his expectations of coverage could not be
"objectively reasonable."  
IV. Conclusion
Because the pollution-exclusion clause is unambiguous,
the personal injury and property damage suffered by the
Schills are not covered by the Federated Mutual policy issued
to Abston Petroleum, and the trial court therefore erred in
entering a summary judgment in favor of Abston Petroleum and
the Schills on Counts I and II of the complaint.  We reverse
the judgment and remand the cause for further proceedings
consistent with this opinion.  
REVERSED AND REMANDED.  
Cobb, C.J., and Stuart, Bolin, and Murdock, JJ., concur.