32 ELR 20476 -- Lansing Board of Water & Light v. Deerfield Insurance Co.

Lansing Board of Water & Light v. Deerfield Insurance Co.

No. 5:00-CV-131 (183 F. Supp. 2d 979) (UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN February 7, 2002)

ELR Digest

The court holds that a pollution exclusion clause did not bar an insurer's duty to provide coverage to a city power agency sued by an asbestos removal company for additional remuneration under an asbestos removal contract. The insurer defended the agency and provided funds for a settlement with the asbestos company, and the agency filed suit seeking a declaratory judgment that the policy did not bar coverage. The insurer counterclaimed seeking both indemnification from the agency and dismissal of the declaratory judgment motion. The court first holds that by representing the agency, the insurer did not waive its defense that the pollution exclusion clause precludes coverage. When the insurer undertook defending the agency, it immediately put the agency on notice that it reserved all of its policy rights, including the pollution exclusion. The court next holds, however, that the pollution exclusion does not bar the agency's claim seeking a declaratory judgment. The asbestos removal company's claim against the agency arose from the agency's misrepresentation of facts and the resultant unfair contract. The company's claims did not arise from contamination, the coverage of which the pollution exclusion clause barred. Although asbestos was the subject of the contract, it was not essential to the company's claims. Therefore, summary judgment cannot be granted to the insurer on the issue of indemnification and the claim is dismissed. The court further holds, however, that the insurer is entitled to recover the amount of the settlement that does not represent payment to the company for a wrongful act. The policy provides coverage for wrongful acts committed by the agency, but the company's claims against the agency also alleged unjust enrichment, which does not involve wrongful acts. Thus, the insurer's counterclaim against the agency for contribution for a portion of the settlement was not dismissed. Similarly, the motion to dismiss the insurer's quantum meruit claim against the agency for its receipt of the value of additional asbestos removal was denied.

The full text of this decision is available from ELR (11 pp., ELR Order No. L-456).

Counsel for Plaintiff
John A. Yeager
Willingham & Cote
333 Albert Ave., Ste. 500, E. Lansing MI 48826
(517) 351-6200

Counsel for Defendant
James W. Smith
Dietrich, Smith, Howard & VanderRoest
834 King Hwy., Ste. 110, Kalamazoo MI 49001
(616) 344-9236

[OPINION OMITTED BY PUBLISHER IN ORIGINAL SOURCE]