Opinion ID: 853272
Heading Depth: 2
Heading Rank: 1

Heading: Liability for Property Damage to Ground Water on Dana-Owned Property

Text: Each of the policies provides that Allstate will pay all sums Dana becomes obligated to pay because of liability for damages resulting from property damage. Much of the disputed cost is for remediation of contaminated ground water. A primary issue in the trial court and Court of Appeals was whether ground water constitutes property of the landowner, and if it does, whether the policies cover cleanup related to ground water in Dana's own property. Whether Allstate must pay for the costs incurred by Dana in complying with orders to clean up its own property depends on (1) the scope of the policies' coverage grants, [3] and (2) the effect of the policies' exclusions for property damage to property owned by Dana. Essentially, the determination of both issues comes down to how property damage is defined in each policy. Other courts have arrived at varying interpretations of similar owned property exclusions in the context of claims for costs associated with environmental cleanup orders. [4] We start from the proposition that contracts for insurance are subject to the same rules of interpretation as are other contracts. If the policy language is clear and unambiguous, it should be given its plain and ordinary meaning. Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d 467, 470 (Ind.1985) (citations omitted). Here, each policy's language does provide an answer, albeit different answers for different policies. The 1977, 1978 and 1979 policies contain identical language in both their coverage grants and owned property exclusions. The 1980 and 1981 policies are identical to each other in this respect, but differ from the first three.
The 1977-79 policies define property damage as loss of or direct damage to or destruction of tangible property (other than property owned by an Insured) which results in an Occurrence during the policy period. Given this definition of property damage, these policies provide coverage for: all sums which the insured shall be obligated to pay by reason of the liability... imposed upon the Insured by law... for damages on account of ... [loss of or direct damage to or destruction of tangible property ( other than property owned by an Insured )] ... caused by or arising out of each Occurrence happening anywhere in the world. (emphasis added). Thus, these policies provide coverage for liability resulting from damage to property owned by others, but deny coverage for liability resulting from damage to Dana's own property. Because there is no liability coverage for damage to Dana's own property, reference to the owned property exclusion in these policies is unnecessary. We are uncertain to what extent Dana's claims are based on cleanup of ground water that remained solely within the confines of Dana's property. Under this coverage grant, if ground water in Dana's land is Dana's property, then the 1977-79 policies provide no coverage for cleanup in that category. The Court of Appeals concluded that [u]nless and until a landowner takes the ground water into actual possession, it remains the property of the State, 737 N.E.2d at 1187, and that because Dana had not taken the ground water into possession, the policies afforded coverage. We disagree with the Court of Appeals' analysis of this issue. In Wiggins v. Brazil Coal & Clay Corp., 452 N.E.2d 958, 964 (Ind.1983), this Court held that plaintiffs who owned a lake formed from ground water had no cause of action against a strip mining company, where the company's removal of ground water on its property resulted in a lower water level for the plaintiffs' lake. This Court stated, Ground water is part of the land in which it is present and belongs to the owner of that land. Id. This holding derives from the English Rule, or absolute dominion rule, that ground water is part of the land and the landowner has the absolute right to use the water as he wishes. City of Valparaiso v. Defler, 694 N.E.2d 1177, 1179 (Ind.Ct.App.1998). In Defler, the Court of Appeals took Wiggins to mean that the plaintiffs had no cause of action because, not having taken it into possession, they had no ownership interest in the ground water on their land. Id. at 1181. The Court of Appeals in the present case applied this doctrine, citing Defler, to conclude that the owned property exclusion did not apply. We believe the Court of Appeals, here and in Defler, misconstrued the holding in Wiggins by equating restrictions on ground water use with lack of ground water ownership. Wiggins observed that Indiana follows a modified version of the English Rule, in that water may be put to use to the fullest extent to further enjoyment of the land, however this right does not extend to causing injury gratuitously or maliciously to nearby lands and their owners.  Wiggins, 452 N.E.2d at 964 (emphasis added). This is not a holding with respect to ownership of the water. Rather, it is a holding that although ground water is the landowner's property, the landowner does not enjoy the absolute immunity for its harmful use that the English Rule would have granted. Otherwise stated, the plaintiffs in Wiggins had no cause of action, not because they had no ownership interest in the water in their land, but because the strip mining company was free to do with the water in its land as it saw fit, so long as the resulting injury was not gratuitous or malicious. Wiggins, 452 N.E.2d at 964. So viewed, the Indiana modification to the English Rule limited the permissible use of ground water, but did not abandon the common law status of ground water as property of the landowner. [5] Because any contamination of ground water in Dana-owned land is contamination of Dana-owned property, the 1977-79 policies do not provide indemnification under property damage for the cost of treating contamination on Dana's property. The necessary corollary to this principle is that if the ground water has percolated beyond the confines of the landowner's property, it no longer belongs to that landowner. As a result, there is property damage coverage to the extent liability is based on damage caused by contaminated ground water escaping Dana's property or by contamination directly affecting ground water outside Dana's borders. Although we reach this conclusion as to the 1977-79 policies by a reading of the coverage grants, rather than their owned property exclusions, we affirm the trial court's denial of Dana's motion for partial summary judgment on this issue.
The 1980 and 1981 policies do not refer to any concept of ownership by others in defining the coverage for property damage. These policies provide indemnification for all sums which the INSURED shall be obligated to pay by reason of the liability imposed upon the INSURED by law ... for damages and expenses, because of [physical injury to or destruction of tangible property]. As to these policies, Allstate relies on the owned property exclusion. It states: This policy shall not apply: ... [u]nder PROPERTY DAMAGE to injury to or destruction of or loss of: (1) property owned by any INSURED.... Allstate contends this exclusion bars indemnification for costs imposed on Dana to clean up contamination at Dana-owned sites. We do not agree. The exclusion states that no coverage exists for the damage to Dana's property, but does not state that no coverage exists for the liability to third parties resulting from that damage. This difference between claims for property damage and claims for liability resulting from property damage was highlighted in Unigard Mut. Ins. Co. v. McCarty's Inc., 756 F.Supp. 1366, 1369 (D.Idaho 1988). Here, as in Unigard, Dana has not asserted claims intended to restore [its] land for [its] benefit, id.; rather, Dana is asserting claims based on its liability to third parties, which is the very purpose for which the policies were procured. Cf. Patz v. St. Paul Fire & Marine Ins. Co., 15 F.3d 699, 705 (7th Cir.1994) (It is a policy of liability insurance, not casualty insurance, on which [the insureds] have sued. They seek to recover the cost of complying with a government order.... The fact that the clean up occurred on their land is irrelevant.). It is well settled that `[w]here there is ambiguity, insurance policies are to be construed strictly against the insurer' and the policy language is viewed from the standpoint of the insured. Bosecker v. Westfield Ins. Co., 724 N.E.2d 241, 244 (Ind. 2000) (quoting Am. States Ins. Co. v. Kiger, 662 N.E.2d 945, 947 (Ind.1996)). We think the exclusion can be fairly read to apply only to exclude repair or replacement of Dana's property, not to exclude liability to third parties. Unlike the 1977-79 policies, it does not exclude damages from injuries to self-owned property. Given these frequently cited maxims of insurance law, that is enough to confer coverage. As to the 1980 and 1981 policies, we reverse the trial court and direct entry of partial summary judgment on this issue for Dana.