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Friday, January 23, 2015

Ind. Decisions - 7th Circuit decides one Indiana case today, re duty to indemnify and defend

In Visteon Corporation v. National Union Fire Insurance (SD Ind., Young), an 11-page opinion, Judge Posner writes:

Visteon, a large manufacturer of automotive parts, with manufacturing facilities scattered around the world but its headquarters in Michigan, brought this diversity suit for breach of contract against the National Union insurance company. Visteon had bought a liability insurance policy from National Union providing worldwide liability coverage between 2000 and 2002. The policy contains an exclusion for liability resulting from pollution caused by Visteon, but the exclusion is expressly made inapplicable to liability arising from a “Completed Operations Hazard.” National Union has refused to indemnify or defend Visteon from suits arising from pollution caused by one of Visteon’s plants. * * *

The plant in question was in Connersville, Indiana. In 2001, and thus during the insurance coverage period, the powerful toxic solvent TCE that was used to clean machin-ery in the plant was discovered to have leaked into the soil and groundwater. Neighboring landowners sued Visteon for damages caused by the leakage. Visteon expended millions of dollars to settle the suits and additional millions to clean up the pollution that the leakage had caused. When National Union refused either to defend Visteon or to reimburse it for any of the costs it had incurred, Visteon filed this suit in an Indiana state court; National Union removed the case to fed-eral district court.

A dispute soon arose between the parties over whether Indiana or Michigan law governed the substantive issues in the case. Visteon wanted Indiana law to apply because Indiana does not enforce standard pollution-exclusion clauses, and the insurance policy included as we noted such a clause; Indiana requires that for such a clause to be enforceable the policy must “specify what falls within its pollution exclu-sion.” State Automobile Mutual Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845, 851 (Ind. 2012). TCE is one of the pollutants that must be specified, and it was not specified in the policy that National Union had sold to Visteon. Michigan law, however, does enforce the more general kind of pollution-exclusion clause found in the policy, City of Grosse Pointe Park v. Michigan Municipal Liability & Property Pool, 702 N.W.2d 106, 114 (Mich. 2005), and so Michigan was National Union’s pre-ferred choice for the governing law. The district court ruled that Michigan law governed.

A second question addressed by the district court was whether, under Michigan law, Visteon’s liability from the TCE leak was within the scope of the Completed Operations Hazard clause of the insurance policy, an exception as we mentioned to the pollution-exclusion clause. The district court ruled that Visteon was not entitled to coverage under that clause and so dismissed Visteon’s entire suit. Having thus struck out in the district court, Visteon has appealed to us. * * *

[The present litigation] arises from the insurance contract between Visteon and National Union, and the contract is not limited to Visteon’s Connersville plant—it covers all of Visteon’s plants, the world over. The Indiana Supreme Court has decided that in the case of an alleged breach of a contract insuring against liability for environ-mental contamination that could occur at different sites, Indiana will follow what is called the “uniform-contract-interpretation approach,” which “applies the law of a single state to the whole contract even though [the contract] covers multiple risks in multiple states,” and the single state that is chosen will usually be “the state having more insured sites than any other.” National Union Fire Ins. Co. of Pittsburgh, PA v. Standard Fusee Corp., 940 N.E.2d 810, 813, 815–16 (Ind. 2010) (emphasis added). * * *

We’re left with Michigan. Its law, as the district court found, determines whether National Union is liable to Viste-on for the liabilities that Visteon incurred as a result of the contamination resulting from the leak of TCE from its Indiana plant.

The insurance policy excludes coverage for damages caused by “the actual or threatened discharge, dispersal, seepage, migration, release or escape of pollutants anywhere in the world”—which obviously encompasses the TCE leak. With Michigan enforcing pollution-exclusion clauses, Viste-on is left to argue that what happened in Connersville is within an exception (part of the Completed Operations Haz-ard clause that we mentioned) to the pollution-exclusion clause for damages “occurring away from premises you own or rent and arising out of … Your Work except … work that has not yet been completed or abandoned.” So the question is whether the TCE leaked by the Connersville plant was a result of completed “work.” * * *

All these cases hold that pollution arising from ongoing op-erations (including manufacturing, as in several of the cases cited above) isn’t covered by the Completed Operations Hazard clause, even though these are cases in which the insureds were completing their performance of particular sales contracts with customers.

We note finally that the pollution-exclusion clause is unambiguous, and therefore National Union had no duty to defend Visteon against the suits brought against it by neighboring landowners who experienced losses because of the leak of TCE from Visteon’s Connersville plant.

Visteon has failed to make a case. The judgment in favor of National Union is therefore AFFIRMED.

Posted by Marcia Oddi on January 23, 2015 01:42 PM
Posted to Ind. (7th Cir.) Decisions