Opinion ID: 1532996
Heading Depth: 1
Heading Rank: 3

Heading: Travelers' Violation of Law Exclusion

Text: As an alternative ground for denying coverage with respect to its policy, Travelers relies on part (a)(2) of its pollution exclusion, which provides that the insurance will not apply to a release of pollutants resulting from or contributed to by any condition in violation of or non-compliance with any governmental rule, regulation or law applicable thereto. Although Count II of the class action complaint is not at issue here, it specifically alleges violations of Maine statutes, including 17 M.R.S.A. § 2802, Miscellaneous Nuisances. Travelers argues that Count I also describes a nuisance in violation of § 2802. No governmental rule or regulation is suggested to us, nor are we aware of any applicable here. Travelers relies on Marston 's holding that a violation-of-law exclusion [5] was sufficient to require a denial of coverage. 319 A.2d at 114. As discussed above, the present case presents a variety of possible circumstances ultimately to be proved, as opposed to the single, specific set of facts alleged in Marston. However, even if Count I alleges a violation of § 2802, the Travelers exclusion does not apply to every violation of law. Section 2802 declares the following to be nuisances: The erection, continuance or use of any building or place for the exercise of a trade, employment or manufacture which, by noxious exhalations, offensive smells or other annoyances, becomes injurious and dangerous to the health, comfort or property of individuals, or of the public; . . . causing or suffering any offal, filth or noisome substance to collect, or to remain in any place to the prejudice of others; . . . corrupting or rendering unwholesome or impure the water of a river, stream, pond or aquifer. . .. In 1979, after the events which give rise to the class action, the Legislature added aquifer after pond in § 2802. The same act, P.L.1979, ch. 472, provided additional means of preventing pollution of ground water including a grant of regulatory authority to the Board of Environmental Protection (BEP). The complaint does not allege that Dingwell's operation has ever been found to violate any state statute or regulation, or that prior to the effective date of chapter 472, the BEP or any other agency ever attempted to regulate the kind of activity in which Dingwell was engaged. In fact, it appears from the complaint to be possible that Dingwell's operation conformed to the then existing law. We do not need to express any opinion on the application of § 2802 to various hypothetical facts. It is sufficient for present purposes to observe that the clause of § 2802 which covers corrupting . . . the water prohibits any conduct with that result ; it does not prohibit any conduct per se. Similarly the other clauses prohibit conduct which actually becomes injurious or prejudices others, not conduct with that potential. To establish a violation of § 2802 requires proof of some injurious consequences. We repeat that we are not here dealing with actual facts, we are concerned only with the necessary implications of the allegations contained in the class action complaint. Assuming, without deciding, that Count I necessarily alleges a violation of § 2802 in that conduct of Dingwell's operation resulted in a corruption of the water, any such violation exists if, and only if, the injurious consequences occurred. We read part (a)(2) of Travelers' pollution exclusion as applicable only to a condition which in and of itself constitutes a violation of law by its very existence regardless of the presence or absence of injurious consequences. Part (a)(2) excludes from coverage some, but no all releases of pollutants. When a release of pollutants results from a condition which violates the law, coverage is excluded. But when a release of pollutants results in a condition which violates the law, coverage is not excluded under part (a)(2). The difference is that which exists between cause and effect. To oversimplify, part (a)(2) becomes operational only when the unlawful condition is a cause of, rather than an effect of, a release of pollutants. The operative words contained in part (a)(2) are plain words and must be given their plain meaning. In addition, a narrow construction of an exclusion from coverage is in accord with the policy of liberally construing the entire agreement in favor of the insured. See Farm Bureau Mutual Ins. v. Waugh, 159 Me. 115, 119, 188 A.2d 889, 891-892 (1963) and cases there cited. We read the word condition in the sense of mode or state of being. [6] Therefore, any circumstance in the conduct or maintenance of Dingwell's operation which in and of itself constitutes a violation of law, regardless of whether or not any injurious consequences ensue, would be a condition in violation of law. If a release of pollutants resulted from or was contributed to by such an unlawful condition then coverage is excluded. However, if the circumstances of Dingwell's operation were lawful until after the occurrence of a release of pollutants, even though the release resulted in injurious consequences within the prohibition of § 2802, then coverage is not excluded by part (a)(2). In conclusion, we hold that all three insurers do have a duty to defend Dingwell in the underlying class action. The Superior Court's judgment must therefore be reversed, with an order that summary judgment be granted in favor of defendant Dingwell declaring that each of the plaintiffs has a duty to defend. We do not, of course, reach the duty to indemnify. [7] The entry will be: Appeal sustained. Judgment reversed. Case remanded to the Superior Court for the entry of judgment declaring that each plaintiff has a duty to defend defendant Dingwell. All concurring.