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South Dakota State Cement Plant Commission v. Wausau Underwriters Insurance Co.8/23/2000
GILBERTSON, Justice (dissenting).
[ ] Wausau did not meet its burden of proving that the cement dust released by SDCP constitutes a pollutant within the meaning of Wausau's policy pollution exclusion clause. I agree with the circuit court's analysis and rationale in refusing Wausau's broad construction of the words "contaminant" and "irritant" so as to preclude coverage. To accept Wausau's all encompassing definition is to assume that SDCP paid for a comprehensive policy that provided almost no coverage. Thus, I disagree with the majority opinion and dissent.
[ ] Wausau, as the insurer in this case, has the burden of showing that no duty to defend exists. State Farm Mut. Auto. Ins. Co. v. Wertz, 540 NW2d 636, 638 (SD 1995) (citing North Star Mut. Ins. Co. v. Kneen, 484 NW2d 908, 912 (SD 1992)). The insurer must prove that the insured's claim "clearly falls outside of policy coverage" to satisfy this burden. Id. (quoting Kneen, 484 NW2d at 912 (citing City of Fort Pierre v. United Fire & Cas. Co., 463 NW2d 845, 847 (SD 1990); Bayer v. Employers Reinsurance Corp., 383 NW2d 858, 861 (SD 1986); Hawkeye-Sec. Ins. Co. v. Clifford, 366 NW2d 489, 490 (SD 1985))). "Limits to coverage, whether in exclusions, limitations, riders, or endorsements, should be set forth clearly and explicitly." Mid-Century Ins. Co. v. Lyon, 1997 SD 50, n4, 562 NW2d 888, 891 (citing Essex Ins. Co. v. Fieldhouse, Inc., 506 NW2d 772, 776 (Iowa 1993) (other citations omitted)). "This rule of construction applies with particular force to provisions which attempt to exclude liability coverage under certain conditions." Westchester Fire Ins. Co. v. City of Pittsburgh, Kan., 768 FSupp 1463, 1467 (DKan 1991).
[ ] If after reviewing the complaint and the record "doubt exists whether the claim against the insured arguably falls within the policy coverage, such doubts must be resolved in favor of the insured." Wertz, 540 NW2d at 638 (quoting City of Fort Pierre, 463 NW2d at 847 (citing Hawkeye, 366 NW2d at 492)).
[ ] While Wausau urges this Court to adopt the literal, dictionary meanings of these terms, this is not appropriate because it isolates the terms, and takes them out of context. The circuit court was correct when it concluded that taking the terms out of context and construing them broadly in effect "render the [pollution] exclusion meaningless since any substance could conceivably irritate or contaminate." In reaching this conclusion the circuit court relied upon Guilford Industries Inc. v. Liberty Mut. Ins. Co., 688 FSupp 792 (DMe 1988). The court in Guilford noted that if adopted, a broad construction of the meaning of the terms "contamination" or "irritants" would render a pollution exclusion meaningless, since any substance could conceivably irritate or contaminate. Id. at 794.
[ ] Many other courts follow this rationale. See In re Hub Recycling, 106 BR 372, 375 (DNJ 1989); Sullins v. Allstate Ins. Co., 667 A2d 617, 621 (MdApp 1995); Certain Underwriters at Lloyd's London v. C.A. Turner Constr. Co. Inc., 112 F3d 184, 188 (5thCir 1997); Regional Bank of Colorado, N.A. v. St. Paul Fire & Marine Ins. Co., 35 F3d 494, 498 (10thCir 1994); Westchester, 768 FSupp at 1470. The circuit court was correct in concluding that because a broad interpretation of pollution exclusion clauses could potentially eliminate coverage in virtually all situations, courts must distinguish between harmful and relatively benign substances.
[ ] While the Court correctly points out that the court in Guilford granted the insurer's motion for summary judgment on the coverage issue, the court stated that the policy provision in that case was "far from all-inclusive or meaningless" because
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