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South Dakota State Cement Plant Commission v. Wausau Underwriters Insurance Co.8/23/2000
ution exclusion clauses such as Wausau's, for otherwise "the pollution exclusion clause would extend far beyond its intended scope, and lead to some absurd results." Jabar, 188 F3d at 31 (citing Pipefitters Welfare Educational Fund. Westchester Fire Ins. Co., 976 F2d 1037, 1043 (7thCir 1992)); see also Westchester, 768 FSupp at 1470 (concluding that the insurance company's broad reading of "irritant or contaminant" to include a fogging mixture as a pollutant "stretch the definition of 'pollutant' beyond 'what a reasonable person placed in the position of the insured would have understood the word to mean.'). The Seventh Circuit Court of Appeals in Pipefitters provided two examples of how a pollution exclusion clause might be extended beyond its intended scope:
To take but two simple examples, reading the clause broadly would bar coverage for bodily injuries suffered by one who slips and falls on the spilled contents of a bottle of Drano, and for bodily injury caused by an allergic reaction to chlorine in a public pool. Although Drano and chlorine are both irritants or contaminants that cause, under certain conditions, bodily injury or property damage, one would not ordinarily characterize these events as pollution. 976 F2d at 1043.
In this case, under Wausau's suggested broad interpretation of the pollution exclusion clause, "almost any function undertaken by [the government] could be characterized as 'polluting' under the [clause]." Westchester, 768 FSupp at 1470.
[ ] Admittedly, it is not "crystal clear" under the pollution exclusion clause whether cement dust can be considered a "pollutant," "contaminant," or "irritant." However, it is for that very reason the parties in this case have gone through extensive litigation - the terms as used in Wausau's pollution exclusion clause are susceptible to different interpretations. The fact that the parties are contesting what is meant by the terms "pollutant," "contaminant," or "irritant" and can mount a valid argument on their behalf is supportive of the conclusion that the pollution exclusion clause is ambiguous. Therefore, the policy should be construed in favor of SDCP. "Where an insurance policy is susceptible to different interpretations, the interpretation most favorable to the insured must be adopted." Colonial Ins. Co. of Cal. v. Lundquist, 539 NW2d 871, 873 (SD 1995); see also Christensen v. Royal Insurance Co. of Liverpool, 272 NW 820, 65 Sd 246 (1937) (stating that an exclusionary clause is strictly construed and doubts as to its construction are resolved in favor of the insured); Tokley v. State Farm Ins. Co., 782 FSupp 1375 (DSD 1992) (stating exclusionary clauses are interpreted strictly in favor of coverage for the insured).
[ ] For these reasons I would affirm the circuit court's refusal to grant Wausau's motion for summary judgment, as the pollution exclusion clause is ambiguous as a matter of law.
[ ] I would also affirm the circuit court's settlement award to SDCP, because there has been no showing that its finding the $200,000 naturally flowed from Wausau's refusal to defend is clearly erroneous.
[ ] SABERS, Justice, joins this dissent.
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