Opinion ID: 2092445
Heading Depth: 1
Heading Rank: 3

Heading: pollution exclusions

Text: We now address OMC's appeal. As stated above, the insurers all moved for summary judgment as to both their duty to defend OMC against the underlying actions and their duty to indemnify OMC for liabilities it has incurred because of the PCB contamination. The insurers' motions for summary judgment were based on, inter alia, the pollution exclusion provisions in their respective policies. Relying on the pollution exclusions, the circuit court granted these motions for summary judgment on the issues of both the insurers' duty to defend OMC and their duty to indemnify OMC. Since these motions address two different issues (see, e.g., Conway v. Country Casualty Insurance Co. (1982), 92 Ill.2d 388, 394, 65 Ill.Dec. 934, 442 N.E.2d 245), we will consider the rulings on each issue separately. Initially, we are called upon to construe terms within the pollution exclusion provisions of the insurers' policies. With the exception of International (whose policy will be discussed separately), all the insurers' policies which contained pollution exclusion clauses provide in part: This insurance does not apply    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 watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental. (Emphasis added.) This standard pollution exclusion provision contains two parts: (1) the insurer excludes coverage for the release of environmentally toxic materials into any part of our natural environment and (2) the insurer makes an exception from this broad exclusion for toxic releases which are sudden and accidental. (See United States Fidelity & Guaranty Co. v. Wilkin Insulation Co. (1991), 144 Ill.2d 64, 79, 161 Ill.Dec. 280, 578 N.E.2d 926.) In other words, the pollution exclusion exception reinstates coverage for toxic releases which are sudden and accidental. In the instant case, OMC has allegedly released PCBs into Waukegan Harbor and Lake Michigan. Therefore, it appears that the first part of the exclusion applies. The issue before this court is whether, under the facts of this case, OMC's releases of PCBs were sudden and accidental, thereby triggering the pollution exclusion exception and recreating coverage for OMC. As stated above, in construing the terms in an insurance policy, the court must ascertain the intent of the parties. (See Maryland Casualty Co. v. Chicago & North Western Transportation Co. (1984), 126 Ill.App.3d 150, 153, 81 Ill.Dec. 289, 466 N.E.2d 1091.) If the terms in the policy are clear and unambiguous, the court must give them their plain, ordinary, popular meaning. ( Wilkin, 144 Ill.2d at 74, 161 Ill.Dec. 280, 578 N.E.2d 926.) If a term in the policy is subject to more than one reasonable interpretation within the context in which it appears, it is ambiguous. ( Wilkin, 144 Ill.2d at 74, 161 Ill.Dec. 280, 578 N.E.2d 926.) Ambiguous terms are construed strictly against the drafter of the policy and in favor of coverage. ( Wilkin, 144 Ill.2d at 74, 161 Ill.Dec. 280, 578 N.E.2d 926; Maryland Casualty Co., 126 Ill. App.3d at 152, 81 Ill.Dec. 289, 466 N.E.2d 1091.) This is especially true with respect to exclusionary clauses. ( Reliance Insurance Co. v. Martin (1984), 126 Ill.App.3d 94, 96, 81 Ill.Dec. 587, 467 N.E.2d 287; see Wilkin, 144 Ill.2d at 80, 161 Ill.Dec. 280, 578 N.E.2d 926.) This is so because there is little or no bargaining involved in the insurance contracting process ( Canadian Radium & Uranium Corp. v. Indemnity Insurance Co. of North America (1952), 411 Ill. 325, 335, 104 N.E.2d 250), the insurer has control in the drafting process, and the policy's overall purpose is to provide coverage to the insured (see United States Fidelity & Guaranty Co. v. Specialty Coatings Co. (1989), 180 Ill.App.3d 378, 384, 129 Ill.Dec. 306, 535 N.E.2d 1071). In the case sub judice, the appellate court found that sudden was an unambiguous term, construing it to mean abrupt with a quick, temporal element in its connotation. Since the underlying complaints alleged that OMC had been releasing PCBs into Waukegan Harbor and Lake Michigan for several years, the appellate court concluded that the underlying complaints alleged continuous polluting by OMC which could not be considered abrupt. Therefore, the appellate court granted summary judgment to the insurers, finding that they had no duty to defend or indemnify OMC because the broad pollution exclusions in their policies applied to exclude coverage for OMC under the facts of this case. 212 Ill.App.3d at 243-49, 156 Ill.Dec. 432, 570 N.E.2d 1154. Before this court, OMC argues that the appellate court erred in its construction of the term sudden. OMC contends that sudden is an ambiguous term and should be construed in its favor. OMC and its amici urge this court to construe sudden to mean unexpected or unintended. We find that the term sudden as used in the pollution exclusion exception contained in these occurrence-based CGL policies is ambiguous and that the appellate court erred in this regard. Numerous dictionaries define sudden as happening unexpectedly, without notice or warning, or unforeseen. These same dictionaries also define sudden as abrupt, rapid, or swift. (See, e.g., Webster's Third New International Dictionary 2284 (1986); American Heritage Dictionary of the English Language 1286 (10th ed. 1981); Black's Law Dictionary 1432 (6th ed. 1990).) Courts throughout the country are divided on the meaning of sudden within the instant context. (Compare, e.g., United States Fidelity & Guaranty Co. v. Star Fire Coals, Inc. (6th Cir.1988), 856 F.2d 31, 34 (sudden is unambiguous and is construed to mean abrupt); Lumbermens Mutual Casualty Co. v. Belleville Industries, Inc. (1990), 407 Mass. 675, 680-81, 555 N.E.2d 568, 572 (same); Upjohn Co. v. New Hampshire Insurance Co. (1991), 438 Mich. 197, 207, 476 N.W.2d 392, 397 (same); Waste Management of Carolinas, Inc. v. Peerless Insurance Co. (1986), 315 N.C. 688, 693, 340 S.E.2d 374, 381-83, with Hecla Mining Co. v. New Hampshire Insurance Co. (Colo.1991), 811 P.2d 1083, 1091-92 (sudden is ambiguous and construed to mean unintended or unexpected); Claussen v. Aetna Casualty & Surety Co. (1989), 259 Ga. 333, 335, 380 S.E.2d 686, 688 (same); Broadwell Realty Services, Inc. v. Fidelity & Casualty Co. (1987), 218 N.J.Super. 516, 531-35, 528 A.2d 76, 83-86 (same); United Pacific Insurance Co. v. Van's Westlake Union, Inc. (1983), 34 Wash.App. 708, 714-15, 664 P.2d 1262,1265 (same).) Even panels of the Illinois appellate court are divided on this issue. (Compare Specialty Coatings Co., 180 Ill. App.3d at 384-88, 129 Ill.Dec. 306, 535 N.E.2d 1071, with International Minerals & Chemical Corp., 168 Ill.App.3d at 376-80, 119 Ill.Dec. 96, 522 N.E.2d 758.) We conclude that the two definitions of sudden set forth above are both reasonable interpretations of this term in the context in which it appears. Therefore, sudden is, at a minimum, ambiguous as used in these policies. In Illinois, ambiguities and doubts in insurance policies are resolved in favor of the insured, especially those that appear in exclusionary clauses. (See, e.g., Dora Township v. Indiana Insurance Co. (1980), 78 Ill.2d 376, 379, 36 Ill.Dec. 341, 400 N.E.2d 921; Specialty Coatings Co., 180 Ill.App.3d at 384, 129 Ill.Dec. 306, 535 N.E.2d 1071.) Consequently, in this particular context, we construe sudden in favor of OMC and find it to mean unexpected or unintended. The insurers and their amici argue that the rule of construction which directs the court to construe ambiguities in favor of the insured should not apply in the instant case. They assert that this rule of construction was developed to aid the unwary insured who was unsophisticated in insurance matters. The insurers argue that it should not apply here because OMC is a large corporation, sophisticated and counseled in insurance matters. We disagree with this contention. The insurance industry is powerful and closely knit. As evidenced by the CGL policies in the instant case, most policies are standard-form, are worded very similarly (see Zurich Insurance Co. v. Raymark Industries, Inc. (1987), 118 Ill.2d 23, 33, 112 Ill.Dec. 684, 514 N.E.2d 150), and are offered on a take-it-or-leave-it basis ( Aetna Casualty & Surety Co. v. Condict (S.D.Miss.1976), 417 F.Supp. 63, 73). Any insured, whether large and sophisticated or not, must enter into a contract with the insurer which is written according to the insurer's pleasure by the insurer. (See AIU Insurance Co. v. Superior Court (1990), 51 Cal.3d 807, 822, 799 P.2d 1253, 1264-65, 274 Cal.Rptr. 820, 831-32; Broadwell Realty Services, Inc. v. Fidelity & Surety Co. (1987), 218 N.J.Super. 516, 524, 528 A.2d 76, 80.) Generally, since little or no negotiation occurs in this process, the insurer has total control of the terms and the drafting of the contract. ( AIU Insurance Co., 51 Cal.3d at 822, 799 P.2d at 1264-65, 274 Cal.Rptr. at 831-32; Broadwell Realty Services, Inc., 218 N.J.Super. at 524, 528 A.2d at 80.) This rule of construction recognizes, inter alia, these facets of the insurance contracting process. ( AIU Insurance Co., 51 Cal.3d at 822, 799 P.2d at 1264-65, 274 Cal.Rptr. at 831-32; Broadwell Realty Services, Inc., 218 N.J.Super. at 524, 528 A.2d at 80.) Like any insured, OMC is entitled to its application where the court has determined that the policy is ambiguous. (See Boeing Co. v. Aetna Casualty & Surety Co. (1990), 113 Wash.2d 869, 882, 784 P.2d 507, 514. But see AIU Insurance Co., 51 Cal.3d at 823, 799 P.2d at 1265, 274 Cal. Rptr. at 832.) After all, the insurer chose the words used in the policy. Cf. Claussen, 259 Ga. at 337, 380 S.E.2d at 688. In addition, the insurers and their amici argue that this court's interpretation of sudden renders it mere surplusage, contrary to other Illinois rules of construction. These parties assert that courts must construe policies as a whole, with each part of the policy having significance and each word having an individual meaning. The appellate court was persuaded by the insurers' arguments in this regard and found that sudden had to mean abrupt or this term would be surplusage with respect to the term accidental in the pollution exclusion exception. (212 Ill.App.3d at 244-46, 156 Ill.Dec. 432, 570 N.E.2d 1154.) The insurers correctly state the law, to a point. A court must strive to give each term in the policy meaning unless to do so would render the clause or policy inconsistent or inherently contradictory. (See Sentry Insurance v. Hogan (1982), 111 Ill. App.3d 638, 640, 67 Ill.Dec. 525, 444 N.E.2d 761; Hecla Mining Co., 811 P.2d at 1092.) In our view, construing sudden to mean abrupt creates a contradiction within this particular clause and the policy as a whole. These CGL policies are occurrence-based policies of insurance. These policies provide coverage for property damage caused by an occurrence. The policies at issue define occurrence as: an accident, including continuous or repeated exposure to conditions, which results in    property damage neither expected nor intended from the standpoint of the insured. (Emphasis added.) The pollution exclusion exception retriggers coverage for toxic releases which are sudden and accidental. The policies define accident to include continuous or repeated exposure to conditions. ( Wilkin, 144 Ill.2d at 77, 161 Ill.Dec. 280, 578 N.E.2d 926.) In our view, an accidental release or discharge would include, according to the policy, a gradual release or a continuous or repeated release. To construe sudden to mean abrupt results in a contradiction if one accepts the insurers' own definition of the term accident. (See Hecla Mining Co., 811 P.2d at 1092.) Such a construction would result in the pollution exclusion exception clause retriggering coverage for toxic releases which are abrupt and gradual or continuous or repeated releases. Clearly, under such a construction this clause would be rendered absurd. ( Hecla Mining Co., 811 P.2d at 1092.) However, if sudden means unexpected or unintended, as it is defined by numerous dictionaries, the clause retriggers coverage for unexpected or unintended releases which are exactly the type of uncertainties or risks that an insured would want to insure against. In light of the above, the insurers argument must fail. In addition, in our view, it is not coincidental that one of the definitions of sudden is unexpected or unintended and that an element of the policies' occurrence definitions is unexpected or unintended property damage. We recognize that, in the occurrence provision, it is the property damage that must be unexpected or unintended, whereas in the pollution exclusion exception it is the toxic release which must be unexpected or unintended. However, these clauses are closely related: one refers to the source of the property damage while the other refers to the property damage itself. Generally, an unexpected or unintended release would result in unexpected or unintended property damage. We find that, when the policy is viewed as a whole, these clauses work together to convey the intent of the parties that the policy's coverage would protect the insured from unexpected or unintended releases, including those that may have been continuous. Further, we are not persuaded by the insurers' arguments concerning surplusage. As OMC and its amici note, insurance policies are filled with words which overlap and complement each other. For example, within the pollution exclusion provision itself, the policies read: 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   . (Emphasis added.) These words all add contours to the general concept of a release of an environmentally toxic pollutant. It is not uncommon for provisions to appear in policies in this fashion. Faced with this common fact, we find the insurers' surplusage argument to be without merit. In summary, we find that the term sudden in the pollution exclusion exception of these CGL policies is ambiguous and we construe it in favor of the insured to mean unexpected or unintended. We find that the appellate court erred in its construction of the term. Both the circuit and appellate courts relied on this erroneous construction of sudden in ruling in favor of the insurers on their motions for summary judgment as to their duties to defend and indemnify OMC based on their pollution exclusion provisions. Because different standards apply with respect to the duty to defend and the duty to indemnify (see Conway, 92 Ill.2d at 394, 65 Ill.Dec. 934, 442 N.E.2d 245; City of Johnstown, New York v. Bankers Standard Insurance Co. (2d Cir.1989), 877 F.2d 1146, 1148), we shall address the rulings with respect to each duty separately. A.