Case Name: POLKOW v. CITIZENS INSURANCE COMPANY OF AMERICA
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1991-08-26
Citations: 438 Mich. 174
Docket Number: Docket No. 87617; Calendar No. 10
Parties: POLKOW v CITIZENS INSURANCE COMPANY OF AMERICA
Judges: Levin, Brickley, and Boyle, JJ., concurred with Cavanagh, C.J.
Reporter: Michigan Reports
Volume: 438
Pages: 174–196

Head Matter:
POLKOW v CITIZENS INSURANCE COMPANY OF AMERICA
Docket No. 87617.
Argued January 10, 1991
(Calendar No. 10).
Decided August 26, 1991.
Rehearing denied 439 Mich 1202.
Robert Polkow, doing business as Polkow Oiling Service, brought an action in the Ingham Circuit Court against Citizens Insurance Company of America, alleging duties under a policy of liability insurance to defend him against charges by the Department of Natural Resources and the Environmental Protection Agency of groundwater contamination, and to indemnify him for the cost of undertaking a study, as requested by the dnr, to identify the source of the contamination. The court, James T. Kallman, J., granted summary disposition for the plaintiff, finding both a duty to defend and a duty to indemnify the costs incurred in responding to governmental inquiries. The Court of Appeals, D. E. Holbrook, Jr., P.J., and Sawyer and Neff, JJ., affirmed in an opinion per curiam (Docket No. 108437). The defendant appeals.
In an opinion by Chief Justice Cavanagh, joined by Justices Levin, Brickley, and Boyle, the Supreme Court held:
Summary disposition was inappropriate. The circuit court resolved the factual disputes itself, depriving the parties of the right to an evidentiary hearing.
1. Factual disputes regarding the cause of the contamination remain. Given the state of the factual development, resolution of whether the sudden and accidental exception to the policy’s pollution-exclusion clause applies is impossible.
2. Under the insurance contract, the insurer had a duty to defend against any claim where coverage was even arguable. Fairness requires that there be a duty to defend at least until there is sufficient factual development to determine what caused the pollution so that a determination can be made regarding whether the discharge was sudden and accidental. Until that time, the allegations must be seen as arguably within the comprehensive liability policy, resulting in a duty to defend.
3. Without proof of the source of the discharge, the court cannot determine whether the discharge falls within the pollution-exclusion clause or whether the unknown discharge falls within the sudden and accidental exception to the exclusion clause. Because this uncertainty creates doubt regarding coverage, summary disposition was inappropriate, requiring reversal of the grant and remand for factual determinations.
Reversed and remanded.
Justice Riley, joined by Justices Griffin and Mallett, dissenting, stated that neither the routine release of toxic materials over a period of years nor the gradual leakage of an underground tank containing the materials can be considered sudden and accidental events, so as to preclude application of the pollution exclusion of the defendant’s policy. Thus, coverage should be barred for any release that occurred on the plaintiff’s property, and the defendant should have no duty to indemnify.
The duty to defend is broader than the duty to indemnify and is properly invoked when claims are even arguably within coverage. To determine whether coverage exists, it is necessary to focus on the basis of the injury, not the nomenclature of the underlying claim. Any doubt pertaining to the duty to defend is resolved in favor of the insured. Thus, only if there is a possibility of coverage on the basis of the underlying facts is there a duty to defend. Generally, policy language that is ambiguous is construed in favor of the insured. Unless a term is clearly defined in a policy, its meaning will be in accordance with the common usage of the term. Ambiguity should not be created where none exists, nor should a policy be rewritten under the guise of interpretation.
The pollution exclusion of the policy at issue bars recovery unless the release of toxins is sudden and accidental. The proper focus is not whether the contamination or damage is sudden and accidental, but whether the release is sudden and accidental. Clearly, the definition of "occurrence” is not intended to be coterminous with a sudden and accidental release.
The phrase "sudden and accidental” is plain and unambiguous. "Sudden” includes a temporal element, combining elements of the immediate and the unexpected, and "accidental” is defined as occurring unexpectedly and unintentionally, by chance. In this case, the spillage of contaminants occurred regularly over a period of years in the normal course of transferring materials between trucks and the underground tanks and was not sudden and accidental. The only reasonable inference is that any loss from the tanks was gradual. Embodied in the meaning of "sudden and accidental” is the notion of unexpectedness. Because the pollutants were released in the ordinary course of business over a period of years, the plaintiff must have expected that spillage would result. Thus, as a matter of law, any release from the plaintiff’s business operations could not have been sudden and accidental, and the pollution exclusion should apply.
180 Mich App 651; 447 NW2d 853 (1989) reversed.
Richard J. Quist and Robert N. Sayler for the plaintiff.
Mika, Meyers, Beckett & Jones (by Douglas A. Donnell and Linda L. Blais) and Foster, Swift, Collins & Smith, P.C. (by Lawrence B. Lindemer), for the defendant.
Amici Curiae:
Cooper, Fink & Zausmer, P.C. (by David H. Fink, Thomas A. Biscup, and Alan D. Wasserman), for Gelman Sciences Inc. and Ralph Jackson.
Drinker, Biddle & Reath (by Thomas S. Schau-felberger, Steven A. Bennett, and John W. Scott), Miller, Canñeld, Paddock & Stone (by Michael B. Ortega), and Petersmarck, Callahan, Bauer & Maxwell, P.C. (by Neal W. Bauer), for American Motorists Insurance Company and Lumbermens Mutual Casualty Company.
Warner, Norcross & Judd (by Paul T. Sorensen) and Covington &. Burling (by Robert N. Sayler, Gregg H. Levy, and Eric C. Bosset) for Gencorp, Inc., Laidlaw, Inc., Teledyne Industries, Inc., and the Upjohn Company.
Rivkin, Radler, Bayh, Hart & Kremer (by John L. Rivkin, Alan S. Rutkin, and Barbara Si- rothen) and Nelson & Krueger (by James R. Nelson) for Michigan Association of Insurance Companies.
Willingham & Coté, P.C. (by John A. Yeager and Anthony S. Kogut), for Michigan Farm Bureau and Farm Bureau Mutual Insurance Company of Michigan.
Clark, Klein & Beaumont (by Dwight H. Vincent and Susan J. Sadler) for Michigan Manufacturers Association.
Varnum, Riddering, Schmidt & Howlett (by Robert J. Eleveld, Matthew D. Zimmerman, and Mark S. Allard) for Michigan Municipal League.
Clary, Nantz, Wood, HoMus, Rankin & Cooper (by Douglas W. VanEssen and Debra L. Geibig) for Celina Mutual Insurance Company.

Opinion:
Cavanagh, C.J.
We granted leave in this case to consider an insurance contract with a pollution-exclusion clause and an exception to that exclusion where the discharge is sudden and accidental. In applying the definition of the "sudden and accidental" exception to this case, we recognize that the insurance contract contains a duty-to- defend clause. Thus, the insurer has a duty to defend against any claim where coverage is even arguable, even where the claim may be groundless or frivolous. The posture of the case is one of summary disposition; there has been no fact finding, and there is, at the very least, a question of fact regarding whether coverage is "arguable." Accordingly, we reverse the decision of the Court of Appeals and remand for further proceedings. To avoid redundancy, we adopt the statement of facts as set out in Justice Riley's dissent and direct our focus to the resolution of the appeal.
Polkow testified in his deposition that there was frequent spillage during the transfer process from the tanker truck to the underground tanks. These "mini-spills" spanned many years and apparently resulted from ongoing, regular business activity. Admittedly, this could constitute grounds for a trier of fact to conclude that Polkow "expected" the release of contaminants. The difficulty is that there was some evidence that the contaminants at issue were not from these oil leaks and indeed may be entirely unrelated to Polkow's operation. In addition, the contamination may have resulted from a discharge from the underground tanks. In any event, there are factual disputes regarding the cause of the contamination. Therefore, resolution of whether the sudden and accidental exception applies is impossible, given the current state of factual development. The resolution of this question requires an examination of whether the discharge of pollutants was sudden and accidental. On a record where it is unclear even what the discharge was, how can we, absent some form of augury, possibly declare that this unknown form of discharge was not sudden and accidental? The dissent criticizes the lower court for focusing upon whether the damage was "sudden and accidental" rather than on whether the release was "sudden and accidental." Post, p 189. The dissent, however, declares that the release was not "sudden and accidental" without any determination of exactly what the release was in this case. It was the "duty of [the insurer] to undertake the defense until it could confine the claim to a recovery that the policy did not cover." Jonesville Products, Inc v Transamerica Ins Group, 156 Mich App 508, 513; 402 NW2d 46 (1986), cited with approval by the majority in Protective Nat'l Ins Co of Omaha v City of Woodhaven, 438 Mich 154; 476 NW2d 374 (1991), a companion to this case.
The grant of summary disposition was inappropriate in light of the factual dispute. The dissent would reverse the grant of summary disposition in favor of the plaintiff and impliedly grant summary disposition in favor of the defendant: "[Defendant would have no duty to defend or indemnify. Finally, we decline to address the remaining issues because our disposition of the pollution exclusion would dispose of this case." Post, pp 195-196. (Emphasis added.) We accept the proposition that the pollution exclusion is dispositive and that the issue is whether the discharge was sudden and accidental. We note, however, that there has been a lack of factual resolution regarding exactly where the release of the pollution occurred. The insurer's duty to provide a defense extends to allegations which even arguably come within the policy coverage. Allstate Ins Co v Freeman, 432 Mich 656; 443 NW2d 734 (1989). Fairness requires that there be a duty to defend at least until there is sufficient factual development to determine what caused the pollution so that a determination can be made regarding whether the discharge was sudden and accidental. Until that time, the allegations must be seen as "arguably" within the comprehensive liability policy, resulting in a duty to defend.
The dissent concedes that "the duty to defend is broader than the duty to indemnify and is properly invoked when claims are even arguably within coverage." Post, p 185. In addition, the dissent, citing Guerdon Industries, Inc v Fidelity & Casualty Co of New York, 371 Mich 12; 123 NW2d 143 (1963), correctly states, "any doubt pertaining to application of the duty to defend is to be resolved in favor of the insured." Post, p 185. But without proof of the source of the discharge, the court cannot determine whether the discharge falls within the pollution-exclusion clause or whether the unknown discharge falls within the sudden and accidental exception to the exclusion clause. This uncertainty creates doubt regarding coverage. Summary disposition was inappropriate.
A remand is needed in this case because application of the pollution-exclusion clause and of the exception to that exclusion depend upon the facts of each case. See Grant-Southern Iron & Metal Co v CNA Ins Co, 905 F2d 954 (CA 6, 1990) (summary judgment was reversed on the basis of the existence of a genuine issue of fact regarding how the discharge of contaminants occurred). The circuit court, despite its unsuccessful attempt to get the parties to stipulate facts, resolved the factual disputes itself, thus depriving the parties of the right to an evidentiary hearing. Well-established summary disposition procedures require this Court to reverse the grant of summary disposition and remand the case for factual determinations.
Levin, Brickley, and Boyle, JJ., concurred with Cavanagh, C.J.
The exclusion applies:
(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 and accidental.
The policy defines the obligation of Citizens Insurance Company as follows:
[To] pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages 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 . [Emphasis added.]
This obligation hinges upon the presence of a "suit" to defend against; this Court has elected not to address this threshold issue whether a "suit" exists on these facts.
Indeed, the dissent states that "[b]ecause the pollutants were released in the ordinary course of business, and occurred over a period of years, plaintiff must have expected that spillage would result from his transfer operations." Post, p 192.
The contaminants found in the downgrade wells were chlorinated solvents, not any type of oil. One expert, Aqua-Tech, suggested that the contamination of nearby wells may have been caused by a nearby electrical substation located upgrade of the affected wells and not by the Polkow facility.
While the court rules permit a grant of summary disposition to the nonmoving party, even the defendant in this case continues to argue that there are genuine issues of material fact precluding summary disposition.