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South Dakota State Cement Plant Commission v. Wausau Underwriters Insurance Co.8/23/2000
ischarges" from SDCP's industrial facility. The complaint also sought recovery for private nuisance, public nuisance, intentional and negligent violation of statutory, regulatory and other permits and rules, intentional and negligent infliction of emotional distress, strict liability, trespass, and negligence.
[ ] SDCP had several general liability policies with Wausau during the time involving the litigation. These policies provided that Wausau had the "right and duty to defend any suit." However, the policies included an absolute pollution exclusion which relieves Wausau of liability on the policies if the bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants. Wausau refused to defend the suit against SDCP based upon the absolute pollution exclusion clause. Eventually, SDCP settled this lawsuit in November 1991 for $200,000, but incurred defense costs in the amount of $352,393 while defending the suit.
[ ] SDCP brought an action against Wausau for breaching its duty to defend. On October 8, 1992, the circuit court denied Wausau's motion for summary judgment, ruling that Wausau had not affirmatively established that cement dust was a pollutant within the meaning of the absolute pollution exclusion. Subsequently, the court granted SDCP summary judgment on the issues that Wausau had a duty to defend and that Wausau was liable for the $352,393 in costs of defending the suit. Following a bench trial, SDCP was awarded the $200,000, plus prejudgment interest, as a proximate result for Wausau's breach of its duty to defend.
[ ] The trial court held that "Wausau's policy would have covered the SDCP had SDCP been found liable for nuisance or trespass and had cement dust been found not to be a 'pollutant' within the meaning of Wausau's policies." In addition, "Wausau had a duty to defend the claims in the underlying complaint for trespass and nuisance allegedly caused by the 'other emissions/discharges.'" Finally, the trial court found that SDCP had proven a "causal connection between the settlement paid and Wausau's breach of its duty to defend" and that Wausau's breach was "instrumental" in "forcing the SDCP to settle the underlying suit." As a result, Wausau's breach of its duty to defend entitled SDCP to damages for breach of contract which would compensate SDCP for all detriment proximately caused by their breach of the duty to defend: the amount of the settlement ($200,000) plus prejudgment interest ($111,713.23).
[ ] Wausau appeals on the following issues:
1. Whether Wausau had a duty to defend the underlying lawsuit because the allegations of the underlying complaint fall squarely within the absolute pollution exclusion of the Wausau policies.
2. Whether the trial court improperly concluded that Wausau was liable for the underlying settlement as a consequence of its alleged breach of its duty to defend.
SDCP filed a notice of review raising the following issues:
3. Whether Wausau was justified under the pollution exclusion in Wausau's policies in failing to defend a complaint that alleged trespass and nuisance in addition to pollution claims.
4. Whether Wausau was liable for all damages naturally and reasonably flowing from the breach of the duty to defend.
STANDARD OF REVIEW
[ ] This case involves review of the trial court's granting of summary judgment on the issue of duty to defend. In discussing our standard of review for issues on summary judgment, we have often stated:
In reviewing a grant or a denial of summary judgment under SDCL 15-6-56(c), we must determine whether
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