Case Name: PROTECTIVE NATIONAL INSURANCE COMPANY OF OMAHA v. CITY OF WOODHAVEN
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1991-08-26
Citations: 438 Mich. 154
Docket Number: Docket No. 85180; Calendar No. 11
Parties: PROTECTIVE NATIONAL INSURANCE COMPANY OF OMAHA v CITY OF WOODHAVEN
Judges: Brickley, Boyle, Griffin, and Mallett, JJ., concurred with Riley, J.
Reporter: Michigan Reports
Volume: 438
Pages: 154–173

Head Matter:
PROTECTIVE NATIONAL INSURANCE COMPANY OF OMAHA v CITY OF WOODHAVEN
Docket No. 85180.
Argued January 10, 1991
(Calendar No. 11).
Decided August 26, 1991.
Protective National Insurance Company of Omaha brought a declaratory action in the Wayne Circuit Court against the City of Woodhaven, alleging that the pollution exclusion of its general liability insurance policy was applicable to an underlying action brought by a third party against the city for damages sustained as an alleged result of exposure to chemical pesticide sprayed by it. The court, Michael Stacey, J., granted summary disposition for Protective National, holding that because the discharge of pesticide was intentional and part of the normal continuous services provided by the city to its residents, coverage under the policy was precluded by the pollution exclusion and that, as a matter of law, Protective National had no duty to defend or indemnify the city. The Court of Appeals, Shepherd, P.J., and D. E. Holbrook, Jr., and M. D. Schwartz, JJ., reversed in an unpublished opinion per curiam (Docket No. 101968). The plaintiff appeals.
In an opinion by Justice Rimy, joined by Justices Brickley, Boyle, Griffin, and Mallett, the Supreme Court held:
The pollution exclusion applies; Woodhaven, as a matter of law, is not entitled to coverage under the policy. Because coverage under the policy was not even possible, Protective National had no duty to defend Woodhaven.
1. Under the policy at issue, the insurer must pay for damages to which the policy applies, and must defend, under the policy, any suit against the insured claiming such damages, even if the suit is groundless, false, or fraudulent. However, the duty to defend arises only with respect to insurance afforded by the policy. Thus, if the policy does not apply, there is no duty to indemnify or defend the insured.
2. The allegations of the third party against the insured do not even arguably come within the policy coverage. Because coverage is not possible, the policy does not impose a duty on the insurer to indemnify or defend Woodhaven. The policy does not apply to damage arising out of the discharge, dispersal, release, or escape of toxic chemicals into the atmosphere unless it is sudden and accidental. Because the release of the pesticide into the atmosphere was intentional, it was not sudden and accidental. Clearly, the type of release to which both the exclusion and the exception refer is an initial release into the atmosphere, not subsequent migration. The behavior of the pesticide in the environment after the initial release is irrelevant. Because the release of the pesticide by Woodhaven into the atmosphere was intentional, it cannot, as a matter of law, have been accidental.
3. The pollution exclusion is not ambiguous. The pesticide was a substance to which the exclusion clearly applied, and the trial court was correct in so determining. Thus coverage was excluded under the policy, and the plaintiff had no duty to defend the city.
Reversed.
Chief Justice Cavanagh, joined by Justice Levin, dissenting, stated that the insurer had a duty to defend at least to the point of proving that this ordinary business operation of spraying for insects is the type of operation excluded by the pollution-exclusion clause. If the pesticide is not in the class of substances intended to be excluded by the pollution-exclusion clause, then the exclusion does not apply and there is no need to examine the sudden and accidental exception to exclusion.
Until the factfinder determines whether the pesticide satisfied the exclusion clause, the insurer has a duty to defend. The determination should depend upon an analysis of the specific facts of the case and not a general sweeping view that would allow the exclusion to encompass any substance that may be considered an irritant, contaminant, or pollutant. Courts may take judicial notice of facts that are of general knowledge or of facts that can be accurately determined by sources of unquestionable reliability. In this case it is doubtful that the toxicity of the chemical at issue can be declared generally known. A court may not take notice of what a contract phrase means.
It is crucial for some factfinder to determine whether the pesticide is the type of liquid intended by the exclusion clause. Only this determination would properly trigger the exclusion and remove the insurer’s liability. While chemical by-products and industrial waste products probably were targeted by the pollution-exclusion clause, it is not clear that spraying for insects specifically was. It may be accurate to conclude that the pesticide is a toxic chemical and seen to be an irritant. Nevertheless, a determination whether it was the type of irritant intended by the parties to the contract to be excluded from coverage requires factual analysis.
Sullivan, Ward, Bone, Tyler, Fiott & Asher, P.C. (by Ronald S. Lederman and Thomas L. Auth, Jr.), for the plaintiff.
Krall & O’Neill (by Martin P. Krall, Jr., and James P. O’Neill) for the defendant.

Opinion:
Riley, J.
In this case, we are asked to interpret and apply pertinent policy provisions of a comprehensive general liability insurance policy. The question presented is whether the policy's pollution exclusion is applicable, thus, absolving the insurer of any duty to indemnify or defend the insured in the underlying action.
We find that the Court of Appeals erred in holding that the policy's pollution exclusion arguably did not apply and that therefore, the insurer had a duty to defend the insured. Accordingly, we reverse the decision of the Court of Appeals.
I. FACTS AND PROCEEDINGS
On August 24, 1984, a third party brought an action against the City of Woodhaven for damages sustained as an alleged result of exposure to chemical pesticide sprayed by Woodhaven. Woodhaven sprayed pesticide as part of its service to control insects and pests.
Woodhaven had a comprehensive general liability policy with Protective National Insurance Company of Omaha. Woodhaven sought coverage under the policy, claiming that Protective National had a duty to indemnify and defend Woodhaven in the underlying action. Protective National agreed to defend Woodhaven, but under a reservation of rights.
On January 6, 1986, Protective National filed a declaratory action in the Wayne Circuit Court. Protective National contended that the policy's pollution exclusion was applicable to this case and, therefore, absolved it of any duty to indemnify or defend Woodhaven in the underlying action.
On January 13, 1987, Protective National filed a motion for summary disposition pursuant to MCR 2.116(0(10). The court held that since the discharge of pesticide by Woodhaven was intentional and part of the normal continuous services provided by the city to its residents, coverage under the policy was precluded by the pollution exclusion. Consequently, the court found that Protective National did not, as a matter of law, have a duty to indemnify or defend Woodhaven. Therefore, on June 29, 1987, the court granted Protective National's motion for summary disposition.
On September 28, 1988, the Court of Appeals reversed the circuit court's grant of summary disposition in an unpublished opinion per curiam (Docket No. 101968). The Court held that the policy's pollution exclusion arguably did not apply and, therefore, Protective National had a duty to defend Woodhaven. The Court further held that summary disposition should be granted in favor of Woodhaven pursuant to MCR 2.116(I)(2).
Protective National filed an application for leave to appeal in this Court. We initially elected to deny leave to appeal. However, on July 13, 1990, we granted reconsideration, vacated the order denying leave to appeal, and granted Protective National's application for leave to appeal. The Court further ordered that the case be consolidated with Upjohn Co v New Hampshire Ins Co and Polkow v Citizens Ins Co.
II. ANALYSIS
Protective National argues that their policy does not impose upon them a duty to indemnify or defend Woodhaven in the underlying action. The policy states, under the section titled "Insuring Agreement":
In consideration of the payment of premium, in reliance upon the statements herein or attached hereto, and subject to all of the terms of this policy, the Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay by reason of liability imposed by law, or liability assumed under contract, insofar as the Named Insured may legally do so, for damages because of:
Coverage A - Bodily Injury Liability
Coverage B - Property Damage Liability
Coverage C - Errors or Omissions Liability
Coverage D - Personal Injury Liability
Coverage E - Indemnification for Claims Administration Errors and Omissions
to which this policy applies, caused by an occurrence, during the policy period. [Emphasis added.]
The policy states, under the "Defense, Settlement, Supplementary Payments" section, that "[a]s respects such insurance as is afforded by this policy, the Company shall: (a) defend any suit against the Insured claiming such damages, even if such suit is groundless, false or fraudulent . . . ." (Emphasis added.)
Under this policy, the insurer will pay for damages "to which this policy applies," and the insurer will defend under the policy any suit against the insured claiming such damages even if the suit is groundless, false, or fraudulent. However, the duty to defend arises only "[a]s respects such insurance as is afforded by this policy." Therefore, if the policy does not apply then the insurer does not have a duty to indemnify or defend the insured.
The court described an insurer's duty to defend in Detroit Edison Co v Michigan Mutual Ins Co, 102 Mich App 136, 141-142; 301 NW2d 832 (1980), as follows:
The duty of the insurer to defend the insured depends upon the allegations in the complaint of the third party in his or her action against the insured. This duty is not limited to meritorious suits and may even extend to actions which are groundless, false, or fraudulent, so long as the allegations against the insured even arguably come within the policy coverage. An insurer has a duty to defend, despite theories of liability asserted against any insured which are not covered under the policy, if there are any theories of recovery that fall within the policy. Dochod v Central Mutual Ins Co, 81 Mich App 63; 264 NW2d 122 (1978). The duty to defend cannot be limited by the precise language of the pleadings. The insurer has the duty to look behind the third party's allegations to analyze whether coverage is possible. Shepard Marine Construction Co v Maryland Casualty Co, 73 Mich App 62; 250 NW2d 541 (1976). In a case of doubt as to whether or not the complaint against the insured alleges a liability of the insurer under the policy, the doubt must be resolved in the insured's favor. 14 Couch, Insurance, 2d (rev ed), § 51:45, p 538 [now § 51:49, p 489]. [Emphasis in original.]
In Jonesville Products, Inc v Transamerica Ins Group, 156 Mich App 508, 513; 402 NW2d 46 (1986), the Court stated that "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."
We conclude that the allegations of the third party against the insured, under the facts presented in this case, do not even arguably come within the policy coverage. There is no doubt, even after looking behind the third party's allegations, whether coverage is possible. It is not. Therefore, we find that the policy did not impose upon Protective National a duty to indemnify or defend Wood-haven.
The policy is subject to several exclusions which limit the broad coverage otherwise provided under the policy. The policy's pollution exclusion provides:
This policy does not apply:
I. 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 material 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 . [Emphasis added.]
The claimed damages in Woodhaven arose out of the discharge, dispersal, release, or escape of irritants, contaminants, or pollutants into the atmosphere. Thus, the pollution exclusion applies and, as an initial matter, precludes coverage under the policy. However, coverage may be restored if the exception to the pollution exclusion is applicable. The exception to the pollution exclusion states that "this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental." The lower courts and both parties agreed that the "release" of the pesticide into the atmosphere was intentional and therefore not "sudden and accidental." The only argument made by Woodhaven and the Court of Appeals is that it is possible that coverage exists because the exception to the pollution exclusion could possibly apply to the subsequent dispersal of the pesticide.
[W]hile it is clear from the record that the release of the pesticide was a regular, intentional activity of defendant, it is arguable that the "dispersal" or "escape" of the pesticide to an area where it could come in contact with Ronald Vann's skin was both a sudden and an accidental event, which caused injury to Ronald Vann. Potentially, a temporal event, i.e., a sudden gust of wind, blew the pesticide into the window of the Vann's house causing the injury. [Slip op, p 4.]
This argument by Woodhaven and the Court of Appeals misapplies and misconstrues the clear language of the pollution exclusion and the exception thereto. The discharge, dispersal, release, or escape of irritants, contaminants, or pollutants to which the pollution exclusion refers is that discharged, dispersed, released, or permitted to escape into the atmosphere. Likewise, the exception to the exclusion does not apply unless such discharge, dispersal, release, or escape into the atmosphere is "sudden and accidental." It is clear that the 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. In Travelers Indemnity Co v Dingwell, 414 A2d 220, 225 (Me, 1980), the Supreme Court of Maine held that "[t]he behavior of the pollutants in the environment, after release, is irrelevant to [the application of the pollution exclusion]." (Emphasis in original.) Similarly, in Technicon Electronics Corp v American Home Assurance Co, 74 NY2d 66; 544 NYS2d 531; 542 NE2d 1048 (1989), the Court of Appeals of New York upheld the finding of the Supreme Court, Appellate Division, that "the logical and proper application of the pollution exclusion depends solely upon the method by which the pollutants entered the environment . . . ." Technicon Electronics Corp v American Home Assurance Co, 141 AD2d 124, 144; 533 NYS2d 91 (1988). See also Fireman's Fund Ins Cos v Ex-Cell-O Corp, 662 F Supp 71, 75 (ED Mich, 1987) ("[application of the pollution exclusion depends exclusively upon the process by which pollutants entered the environment"). We agree.
Applying this logic to the facts of this case, we conclude that the application of the pollution exclusion depends exclusively on the discharge, dispersal, release, or escape of the pesticide into the atmosphere. The behavior of the pesticide in the environment, after this initial release, is irrelevant. Furthermore, since the release of the pesticide by Woodhaven into the atmosphere was inten tional, it cannot, as a matter of law, be accidental. See n 5, citing Upjohn Co v New Hampshire Ins Co, 438 Mich 197; 476 NW2d 392 (1991), where this Court defined accidental as meaning "occurring unexpectedly or unintentionally, by chance." See also the opinion of the Court of Appeals of New York in Technicon, supra, 74 NY2d 73 ("[t]he waste discharges cannot be viewed as 'accidental' within the meaning of the exception to the pollution exclusion clause in this case where . . . the insured . . . knowingly discharged the pollutants into the waterway").
Therefore, we find that the pollution exclusion applies in this case and that Woodhaven, as a matter of law, is not entitled to coverage under the policy.
III. RESPONSE TO DISSENT
While the dissent appears to agree with the analysis presented above, in his opinion, Chief Justice Cavanagh argues that the majority has failed to focus on and analyze a crucial part of the pollution exclusion. The dissent believes that a determination must first be made with regard to whether the pesticide sprayed by Woodhaven is a substance to which the pollution exclusion applies. Furthermore, the dissent argues that there is no necessity for examining the sudden and accidental exception to the exclusion until there has first been a determination regarding whether the pesticide is a "pollutant." The dissent claims that since there has been no proper determination regarding whether the pesticide is a "pollutant," it is possible that it is not a "pollutant" and, therefore, the pollution exclusion arguably may not apply. This would mean coverage would arguably be possible and, thus, Protective National would have a duty to defend Woodhaven.
To be a "pollutant" under the clear language of the policy, the pesticide must be one of the following: "smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids, or gases, waste material or other irritants, contaminants or pollutants . . . See ante, p 160.
The dissent makes several arguments in support of its contention that the plain and clear language of the policy quoted above should not be applied.
First, the dissent argues that "[t]he very title of the clause is instructive, both sides in this matter refer to it as a 'pollution exclusion.' . It seems basic that the exclusion, therefore, should apply only to acts of pollution." Post, p 169.
We find the language of the policy to be better evidence of what the exclusion excepts from coverage than some term of convenience created by litigants, the judiciary, and other members of the legal community to describe the otherwise unnamed, untitled section of such policies.
In referring to the language of the policy, the so-called pollution exclusion is found under paragraph "i" of the section of the policy titled, simply, "Exclusions." The plain language of exclusion i clearly applies to "smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids, or gases, waste material or other irritants, contaminants or pollutants . . . ." (Emphasis added.) To hold, as the dissent would, that exclusion i should apply to exclude only acts of "pollutants" would be to ignore the other words in exclusion i. We refrain from such attempts to rewrite clear and unambiguous language under the guise of interpretation. Eghotz v Creech, 365 Mich 527, 530; 113 NW2d 815 (1962).
Second, the dissent argues that
[i]f the pesticide is not in the class of substances intended to be excluded by the pollution-exclusion clause, then the exclusion does not apply and there is no need to examine the sudden and accidental exception to the exclusion. Therefore, until the factfinder determines whether the pesticide satisfied the exclusion clause, the insurer has a duty to defend.
The lower court took judicial notice that Pratt 505K is a toxic chemical, but this is not a proper matter for judicial notice. [Post, pp 168-170.]
We refer the dissent to part of a deposition of Robert Thomas, Director of Public Service for the City of Woodhaven, which was read into the record in this case without objection from defendant-appellee Woodhaven. This evidence, present in the record, shows that the pesticide (Pratt 505K) contained directions and a caution label which read as follows:
"Caution, harmful if inhaled, swallowed or absorbed through the skin, avoid breathing spray mist, avoid contact with skin, eyes and clothing. In case of contact wash with soap and water for eyes. Get medical attention. Wash thoroughly after using. Store away from children and domestic animals. Avoid contamination in food."
It is almost beyond comprehension how anyone would seriously argue that such a pesticide is not an "irritant, contaminant or pollutant." Similarly, on the basis of such evidence, we do not understand how anyone can seriously argue that the trial court improperly determined, for the purpose of granting Protective National's motion for summary disposition, that the pesticide was an "irritant, contaminant or pollutant" as required by the language of exclusion i in the policy. We believe the trial court was correct, under the circum stances, in finding that the pesticide was a substance to which the pollution exclusion applied.
The dissent also argues:
Under the expansive interpretation of the majority, everyday business operations such as tree spraying, mosquito removal, weed control, and rodent extermination could never be covered by insurance because they would involve chemicals that are potentially "toxic" and would not involve accidental releases. I am not persuaded that this was the intent of the insurance companies in drafting the pollution-exclusion clause. [Post, p 173.]
First, in so arguing, Chief Justice Cavanagh seems to be suggesting that the words "smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases" must be proven to fit the definition of another separate word in the exclusion— the word pollutant. Exclusion i does not read "release or escape of smoke, vapors . or other irritants, contaminants" which are "pollutants." Exclusion i simply reads "release or escape of smoke, vapors . or other irritants, contaminants or pollutants . . . ." As long as the substance is smoke, vapors, or other irritants, contaminants or pollutants, the exclusion applies (assuming the other language of the exclusion applies also).
Secondly, Chief Justice Cavanagh ignores the existence of the sudden and accidental exception clause which restores coverage for such releases that are "sudden and accidental." Obviously, this argument by the dissent is misplaced and is premised on a distortion of the majority's position.
IV. CONCLUSION
We do not find the pollution exclusion to be ambiguous. We believe that the pesticide was a substance to which the pollution exclusion clearly applied and that the trial court was correct in so determining. We find, therefore, that the exclusion applies in this case and excludes coverage under the policy.
Because coverage under the policy is not even possible, we find that Protective National did not have a duty to defend Woodhaven. We, therefore, reverse the decision of the Court of Appeals and reinstate the findings of the circuit court.
Brickley, Boyle, Griffin, and Mallett, JJ., concurred with Riley, J.
432 Mich 929 (1989).
435 Mich 862 (1990).
Although in Upjohn Co v New Hampshire Ins Co, 438 Mich 197; 476 NW2d 392 (1991), a companion case to this one, the Court rejected the definition of "sudden and accidental" as prescribed by the Michigan Court of Appeals in Jonesville, the Court's criticism of Jonesville was limited to that issue.
Since it is not disputed that Woodhaven's spraying operation was an "occurrence" as defined in the policy, we do not address this issue.
In Upjohn v New Hampshire Ins Co, n 3 supra, pp 207-208, a companion case to this one, the Court concluded that "when considered in its plain and easily understood sense, 'sudden' is defined with a 'temporal element that joins together conceptually the immediate and the unexpected.' [United States Fidelity & Guaranty Co v] Star Fire Coals, [856 F2d 31, 34 (CA 6, 1988)]. The common, everyday understanding of the term 'sudden' is ' "happening, coming, made or done quickly, without warning or unexpectedly; abrupt." ' FL Aerospace [v Aetna Casualty & Surety Co, 897 F2d 214, 219 (CA 6, 1990)]. 'Accidental' means '[occurring unexpectedly and unintentionally; by chance.' The American Heritage Dictionary: Second College Edition, p 72."
The full and proper quotation includes liquids or gases, "waste material or other irritants, contaminants or pollutants . . . See ante, p 160.
The dissent cites Farm Family Mutual Ins Co v Bagley, 64 AD2d 1014; 409 NYS2d 294 (1978), to support its claim that the pollution exclusion is ambiguous. However, in Technicon, supra, 141 AD2d 124, the same court, ten years later, declined to follow the rule of law enunciated in Farm Family Mutual, and held that the pollution exclusion is unambiguous. Moreover, the Court of Appeals of New York also held that the pollution exclusion is unambiguous. See Technicon, supra, 74 NY2d 71 ("the pollution exclusion from coverage provision in the applicable primary comprehensive general liability insurance policy is unambiguously plain and operative").