Opinion ID: 1846455
Heading Depth: 2
Heading Rank: 2

Heading: Whether the Pollution-Exclusion Clause Is Ambiguous

Text: 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)). 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 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 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  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 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, 86 S.Ct. 1427, 16 L.Ed.2d 492 (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 (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. 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, 218 Ill.Dec. 60, 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, 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 nonpolluting 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 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. 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. [3] We hold 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 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.