International Surplus Lines Insurance Co. v. Anderson Development Co.

No. 87-2102 (901 F.2d 1368) (6th Cir. May 7, 1990)

Following the precedent established by another panel, the court holds that emissions produced by an insured as by-products of its production of curene 442 are not "sudden and accidental" under an insurance policy's pollution exclusion clause. The insurer thus has no duty to defend the insured.

Counsel for Plaintiff-Appellee
Bruce T. Wallace, Charles W. Borgsdorf
Hooper, Hathaway, Price, Beuche & Wallace
126 S. Main St., Ann Arbor MI 48104
(313) 662-4426

Counsel for Defendant-Appellant
Webb A. Smith, Charles E. Barbieri, Lynn K. Richardson
Foster, Swift, Collins & Smith
313 S. Washington Sq., Lansing MI 48933-2193
(517) 372-8050

Before WELLFORD and BOGGS, Circuit Judges; and McQUADE^*, District Judge.

[20 ELR 21428]

WELLFORD, Circuit Judge.

The original panel of this court to hear this case included The Honorable Richard B. McQuade, Jr., a district court judge who resigned his position before a majority opinion could be molded. The author of this opinion was of the view that the decision of the district court in this case should be reversed and remanded following the rationale of Jonesville Products, Inc. v. Transamerica Ins. Group, 156 Mich.App. 508, 402 N.W.2d 46 (1986), leave to appeal denied, 428 Mich. 897 (1987), and the principle of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L.Ed. 1188 (1938), and Grantham and Mann, Inc. v. American Safety Prod., Inc., 831 F.2d 596 (6th Cir. 1987).

Other Michigan courts have considered the issue involved in this case since the Jonesville Products case, but the Michigan Supreme Court has consistently declined to consider the issue.¹ Recently, in Upjohn Co. v. New Hampshire Ins. Co., 178 Mich. App. 706, 444 N.W.2d 813 (1989) (per curiam), the Michigan Court of Appeals reaffirmed its decision in Jonesville Products. Even though the leak of the by-product polluting material in Upjohn took place over a three-week span, the Michigan court held that the leak could be both "accidental (i.e., unintended) and sudden (i.e., unexpected) and, therefore, outside the pollution exclusion." 444 N.W.2d at 817. The court also referred to Fireman's Fund Ins. Cos. v. Ex-Cell-O Corp., 685 F. Supp. 621, 625 (E.D.Mich.1987), and United States Fidelity & Guar. Co. v. Thomas Solvent Co., 683 F. Supp. 1139, 1168-70 (W.D.Mich.1988), and United States Aviez Co. v. Travelers Ins. Co., 125 Mich.App. 579, 336 N.W.2d 838 (1983), in its opinion. Other courts have expressed disagreement that Jonesville Products correctly states the law to be applied in this case.²

[20 ELR 21429]

Judge Boggs was and is in disagreement with that rationale and would affirm the district court. Ordinarily, under such circumstances, the matter would have to be argued again before a full three judge panel of this court for resolution. In light of the decision of another panel of this court in F. L. Aerospace v. Aetna Casualty & Surety Co., 897 F.2d 214 (6th Cir.1990), however, we feel compelled to rule that, at least for the present, F. L. Aerospace is controlling because it involves the same issue in dispute here. Although the panel in F.L. Aerospace acknowledged that the "Michigan Court of Appeals steadfastly has affirmed its Jonesville definition" of the applicable policy exception, it chose to depart from the Jonesville Products interpretation of the words in the insurance policy in controversy, "sudden and accidental." Thus, a panel of our court has now held that there is no duty on the insurance carrier to defend its insured in circumstances comparable to those in the instant case. We are obligated by court policy and precedent in this court now to adhere to the rationale and decision in F.L. Aerospace.³

Accordingly, we AFFIRM the decision of the district court.

* The Honorable Richard B. McQuade, Jr., Judge, United States District Court for the Northern District of Ohio, sitting by designation. (Judge McQuade resigned as judge effective September 30, 1989, and did not participate in this decision).

1. The Michigan Supreme Court refused to answer the question certified in this case.

2. We have dealt with this same issue in United States Fidelity & Guar. Co. v. Star Fire Coals, Inc., 856 F.2d 31 (6th Cir.1988). In Star Fire, applying the law of Kentucky, we interpreted identical language to relieve the insurer of its duty to defend a lawsuit arising from "coal dust . . . generated by the normal operation of the [coal] tipple and . . . routinely discharged on a regular, continuing basis . . . [despite] various steps [undertaken by Star Fire] to minimize the problem." Star Fire, 856 F.2d at 32. In this case, we are asked to address the same issue under Michigan law. The emissions Anderson produced were by-products of its production of curene 442; Star Fire's emissions were coal dust from its coal mining, cleaning, and loading operation. Both Star Fire and Anderson had some awareness of the problem. Star Fire installed a sprayer; Anderson installed a filter and lagoon.

3. Judge Wellford would dissent, if he were otherwise free to do so, from the result reached herein. We note that Judge James Ryan, formerly a justice on the Michigan Supreme Court, concurred fully in F.L. Aerospace. Jonesville has been cited with approval in Pattison v. Employers Reinsurance Co., 900 F.2d 986 (6th Cir. 1990).