United Fire & Casualty Company v. Titan Contractors Service, Inc.

Filing 88

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that defendant Titan Contractors Service, Inc.s motion for summary judgment is GRANTED. [Doc. 66] IT IS FURTHER ORDERED that plaintiff United Fire & Casualty Companys motion for summary judgm ent is DENIED. [Doc. 69] IT IS FURTHER ORDERED, ADJUDGED and DECLARED that plaintiff United Fire & Casualty Company has a duty under the commercial general liability policy issued to defendant Titan Contractors Service, Inc. (Titan) to defen d and indemnify Titan on the claims asserted against it by (1) Merri Bogard in Case No. 09-L-295 in the Circuit Court for the Third Judicial Circuit, Madison County, Illinois; (2) Valerie Furlow in Case No. 09-L-296 in the Circuit Court for the Thir d Judicial Circuit, Madison County, Illinois; and (3) Tallauah Todd in Case No 09-L-297 in the Circuit Court for the Third Judicial Circuit, Madison County, Illinois arising out of the incident involving Titans application of the concrete sealant, TIAH, on or about April 20, 2007. Signed by District Judge Charles A. Shaw on 1/28/2013. (KSM)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

UNITED FIRE & CASUALTY COMPANY,
Plaintiff/Counter Defendant,
v.
TITAN CONTRACTORS SERVICE, INC.,
Defendant/Counter Claimant.

)
)
)
)
)
)
)
)
)

No. 4:10-CV-2076 CAS

MEMORANDUM AND ORDER
This matter is before the Court on plaintiff/counter defendant United Fire & Casualty
Company’s (“United Fire”) motion for summary judgment and defendant/counter claimant Titan
Contractors Service, Inc.’s (“Titan”) cross motion for summary judgment. The matter is fully
briefed and ready for disposition. For the following reasons, the Court will deny United Fire’s
motion for summary judgment and grant Titan’s cross motion for summary judgment.
Background
In this declaratory judgment action, plaintiff United Fire seeks a determination of its
rights and obligations under a policy of insurance issued to defendant Titan. At issue is whether
a concrete sealant Titan uses in its business, TIAH, is a pollutant under the pollution exclusion of
Titan’s comprehensive general liability policy.
Underlying this case is a personal injury action brought by three individuals, Tallauah
Todd, Valerie Furlow, and Merri Bogard against Titan and the Alton Center Business Park in the
Circuit Court of Madison County, Illinois arising out of their exposure to the chemical concrete
sealant applied by Titan.

Titan applied the sealant to a warehouse area adjacent to the

individuals’ office space in the Alton Business Park. Plaintiffs allege various injuries resulting
from this exposure, including headaches, wheezing, and throat irritation.
Summary Judgment Standard
The standards applicable to summary judgment motions are well settled. Pursuant to
Federal Rule of Civil Procedure 56(c), a court may grant a motion for summary judgment if all
of the information before the court shows “there is no genuine issue of material fact and the
moving party is entitled to judgment as a matter of law.” See Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); Board of Education, Island Trees v. Pico, 457 U.S. 853, 863 (1982). “Where
the unresolved issues are primarily legal rather than factual, summary judgment is particularly
appropriate.” Cearley v. General Am. Transp. Corp., 186 F.3d 887, 889 (8th Cir. 1999) (citing
Crain v. Board of Police Commissioners, 920 F.2d 1402, 1405-06 (8th Cir. 1990)).
Where parties file cross motions for summary judgment, each summary judgment motion
must be evaluated independently to determine whether a genuine dispute of material fact exists
and whether the movant is entitled to judgment as a matter of law. Husinga v. Federal-Mogul
Ignition Co., 519 F. Supp. 2d 929, 942 (S.D. Iowa 2007). “[T]he filing of cross motions for
summary judgment does not necessarily indicate that there is no dispute as to a material fact, or
have the effect of submitting the cause to a plenary determination on the merits.” Wermager v.
Cormorant Township Bd., 716 F.2d 1211, 1214 (8th Cir.1983).
With this standard in mind, the Court accepts the following facts as true for purposes of
resolving this motion for summary judgment.
Facts
Titan’s Business
Titan is a construction clean up company.

-2-

Titan supplies day labor and cleans

construction projects when the projects are finished. Titan also cleans and seals concrete floors.
The exact breakdown of Titan’s work is not entirely clear, but generally the bulk of Titan’s gross
receipts comes from its construction clean up work. Titan operates out of an office located at
4134 Meramec Bottom Road, St. Louis, Missouri 63129. Its principal place of business is in the
State of Missouri. Titan also works at various job sites in Illinois.
When Titan applied for commercial insurance with United Fire in 2003, it identified its
premises as the office on Meramec Bottom Road and at 1305-1307 Lark Industrial Drive,
Fenton, Missouri 63026. Titan’s coverage under the policy has remained largely the same over
the years, with modifications to take into account Titan’s changing business activities,
employees, and equipment. The general method by which Titan’s premiums for the policy were
calculated has remained the same over the years. United Fire calculated Titan’s premiums for
the policy based on the classification of the work Titan was performing, the location where Titan
performed that work, and the amount of that work as measured by Titan’s payroll assigned to the
work during the policy year.
Titan does business in both Missouri and Illinois. The relative percentages of Titan’s
business in Missouri and in Illinois change from year to year. In November 2004, approximately
ten percent of Titan’s work was performed in Illinois. See Pl.’s Mem. in Opp’n to Defs.’ Summ.
J., Ex. Z-2. According to Titan’s President, Mark Melroy, historically about sixty percent of
Titan’s work has been in Missouri and forty percent of Titan’s work has been in Illinois,
although the percentages vary from year to year. See Titan’s SOF, Ex. 1, Melroy Aff. at ¶ 5(b).
Underlying Personal Injury Action
Merri Bogard, Valerie Furlow, and Tallauah Todd (the “tort plaintiffs”) each filed
lawsuits against Titan in the Circuit Court of Madison County, Illinois. The tort plaintiffs allege

-3-

that Titan is liable for damages based on its application of TIAH, an acrylic concrete floor
sealant, in a space occupied by Imperial Manufacturing Group in the Alton Center Business Park
in Alton, Illinois. On April 21, 2007, the tort plaintiffs were working for American Water
Resources Company, Inc. in office space adjacent to Imperial Manufacturing Group. Plaintiffs
allege they were exposed to TIAH and were injured as a result of the exposure. Specifically,
Merri Bogard claims that she experienced shortness of breath, headaches, and wheezing and was
diagnosed with chemically-induced asthma as a result of her exposure. Tallauah Todd claims
that she experienced severe headaches, wheezing, and disorientation, and was diagnosed with
chemical exposure. Valerie Furlow claims that she experienced headaches, wheezing, and throat
irritation, and was diagnosed with chemical exposure/chemical pneumonitis.
United Fire agreed to provide Titan with a defense to the underlying personal injury suits
subject to a reservation of rights.
TIAH
As part of Titan’s construction clean up work, it applies concrete sealant after new
construction is finished. According to Phil L. Fuglsang, Titan’s project estimator and manager,
in 2007 Titan’s concrete sealing work played a role in its construction clean up work “maybe 25
percent” of the time. See Fuglsang Dep. at 9. He approximated that he has used TIAH as a
concrete sealer “maybe 5 to 10 times a year.” Id. at 19-20. United Fire has submitted a “Loss
Control Service Account Update Report” dated July 2007 that states: “About 80% of [Titan’s]
gross receipts come from cleaning, about 15% are from interior demolition and the remaining
5% is from concrete sealing.”

United Fire SOF, Ex. X.

Although Titan questions the

admissibility of United Fire’s report, and it appears the relevant part of this business record is
hearsay, the Court finds that the exact percentage of Titan’s work that can be attributed to

-4-

concrete sealing is immaterial. What is material and apparent from the record is that at least five
percent, and as much as twenty-five percent, of Titan’s work involved sealing concrete floors.
The manufacturer of TIAH created product data sheets for TIAH. One such product data
sheet provides:
Avoid prolonged breathing of vapors which can cause dizziness or suffocation.
Avoid prolonged contact with skin as contact may irritate or burn skin and eyes . .
. Fire may produce irritating or poisonous gases. Runoff from fire control or
dilution water may cause pollution.
Another product data sheet provides:
Avoid direct contact with this product, as it may cause irritation to the eyes and/or
skin. Inhalation of vapors may result in transient central nervous system
depression.
The material safety data sheet for TIAH provides:
EYE CONTACT: This product is presumed to be moderately irritating to the
eyes. Exposure may cause corneal injury. Product vapors and/or mists may also
be irritating to the eyes.
SKIN CONTACT: This product is presumed to be moderately irritating to the
skin. Prolonged contact may cause damage to the skin. Prolonged or repeated
contact may result in defatting and drying of the skin which may result in
dermatitis.
INHALATION: Exposure may produce irritation to the nose, throat, respiratory
tract, and other mucous membranes. Exposure to excessive vapor concentrations
may cause transient central nervous system depression.
The Policy
United Fire issued Titan a Commercial General Liability and Commercial Liability
Umbrella Policy Number 60328503 for the policy period October 5, 2006 to October 5, 2007
(the “policy”). Titan applied for and purchased this insurance through its agent, NEC Insurance,
Inc., which is located in Pacific, Missouri.
The Commercial General Liability policy part provides as follows:

-5-

SECTION I – COVERAGES
COVERAGE
LIABILITY

A

BODILY

INJURY

AND

PROPERTY

DAMAGE

1.

Insuring Agreement

a.

We will pay those sums that the insured becomes legally obligated to pay
as damages because of “bodily injury” or “property damage” to which this
insurance applies. We will have the right and duty to defend the insured
against any “suit” seeking those damages. However, we will have no duty
to defend the insured against any “suit” seeking damages for “bodily
injury” or “property damage” to which this insurance does not apply. We
may, at our discretion, investigate any “occurrence” and settle any claim
or “suit” that may result.

The Commercial General Liability policy also part provides as follows:
TOTAL POLLUTION
EXCEPTION

EXCLUSION

WITH

A

HOSTILE

FIRE

This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
Exclusion f. under Paragraph 2., Exclusions of Section I – Coverage A – Bodily
Injury and Property Damage Liability is replaced by the following:
This insurance does not apply to:
f.

Pollution
(1)

“Bodily injury” or “property damage” which would not have
occurred in whole or part but for the actual, alleged or threatened
discharge, dispersal, seepage, migration, release or escape of
“pollutants” at any time.
This exclusion does not apply to “bodily injury” or “property
damage” arising out of heat, smoke or fumes from a “hostile fire”
unless that “hostile fire” occurred or originated:
(a)

At any premises, site or location which is or was at any
time used by or for any insured or others for the handling,
storage, disposal, processing or treatment of waste; or

(b)

At any premises, site or location on which any insured or
any contractors or subcontractors working directly or

-6-

indirectly on any insured’s behalf are performing
operations to test for, monitor, clean up, remove, contain,
treat, detoxify, neutralize or in any way respond to, or
assess the effects of, “pollutants.”
(2)

Any loss, cost or expense arising out of any:
(a)

Request, demand, order or statutory or regulatory
requirement that any insured or others test for, monitor,
clean up, remove, contain, treat, detoxify or neutralize, or
in any way respond to, or assess the effects of “pollutants”;
or

(b)

Claim or suit by or on behalf of a governmental authority
for damages because of testing for, monitoring, cleaning
up, removing, containing, treating, detoxifying, or
neutralizing, or in any way responding to, or assessing the
effects of, “pollutants”.

The Commercial General Liability policy part provides a definition of “pollutants” as follows:
SECTION V – DEFINITIONS
...
15.
“Pollutants” mean any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and
waste. Waste includes materials to be recycled, reconditioned or reclaimed.
The only exclusion United Fire cited in its complaint was the “Pollution” exclusion as
modified to become “EXCLUSION TOTAL POLLUTION WITH A HOSTILE FIRE
EXCEPTION CG 21 55 (09-99).”
Discussion
Before examining whether the pollution exclusion applies to bar coverage under the
insurance policy, the Court must first examine which state’s substantive law applies to the
insurance coverage dispute. Titan argues that Illinois law applies; United Fire argues that
Missouri law applies.
I.

Conflict of Law Analysis
In a case where federal jurisdiction is based on diversity of citizenship, the law of the

-7-

forum state is applied when deciding choice of law issues. Klaxon Co. v. Stentor Electrical Mfg.
Co., 313 U.S. 487 (1941); Whirlpool Corp. v. Ritter, 929 F.2d 1318, 1320 (8th Cir. 1991).
Missouri follows the Restatement (Second) of Conflict of Laws sections 188 and 193 to
determine choice of law issues in insurance contract actions. Viacom, Inc. v. Transit Cas. Co.,
138 S.W.3d 723, 724-25 (Mo. 2004) (en banc).
The Eighth Circuit has discussed the interplay between sections 188 and 193 succinctly
as follows:
Section 188 is a general choice-of-law test for use when a contract contains no
choice-of-law provision. It is a multi-factored test for assessing the contacts a
state has with the parties and the underlying events in a case. See Viacom, 138
S.W.3d at 725 (describing section 188). Section 193 is a more specific choice-oflaw provision that addresses “contracts of fire, surety or casualty insurance” and
treats the principal location of the insured risk as the most important factor in the
choice-of-law determination. See Restatement (Second) of Conflict of Laws §
193 (“The validity of . . . [the] insurance and the rights created thereby are
determined by the local law of the state which the parties understood was to be
the principal location of the insured risk during the term of the policy . . . .”).
St. Paul Fire & Marine Ins. Co. v. Building Constr. Enters., Inc., 526 F.3d 1166, 1168 (8th Cir.
2008).
Because the policy at issue is a liability insurance contract, our analysis begins with
section 193. Pursuant to section 193, the Court shall apply the law of “the state which the parties
understood was to be the principal location of the insured risk during the term of the policy . . . .”
Restatement (Second) of Conflict of Laws § 193 (1971). The comment section informs this
analysis. The principal location of an insured risk, i.e., the “activity that is the subject matter of
the insurance,” is “the state where it will be during at least the major portion of the insurance
period.” Id. at cmt. b. As the comments to section 193 discuss, in instances in which the
insurance covers immovable objects, it is easy to predict where the risk will be located, or at
least principally located, during the policy period. In our case, however, the insurance covers the

-8-

liability associated with a contractor’s business operations. The insured risk, therefore, is not an
immovable object such as a particular building or house.
Based on the evidence, the Court can determine the state where Titan was operating
“during at least the major portion of the insurance period.” Id. at cmt. b. According to the
affidavit of Mark Melroy, historically about sixty percent of Titan’s business operations were in
Missouri. Other evidence indicates that as much as ninety percent of Titan’s business operations
have been in Missouri. See Pl.’s Mem. in Opp’n to Defs.’ Summ. J., Ex. Z-2. Regardless of the
exact percentage associated with Titan’s Missouri operations, the evidence shows that at least
sixty percent of Titan’s business was in Missouri. Accordingly, Titan’s business activity that is
the subject matter of the policy has its principal location in Missouri—the state where it was
“during at least the major portion of the insurance period.”
Despite the rather clear definition of “insured risk” and “principal location” in comment
(b) to Restatement section 193, Titan argues that “there is no question” the insured risk giving
rise to the claims was in Illinois. See Titan Summ. J. Mem. at 12. Titan construes section 193
far too narrowly and overlooks the key definitions provided in comment (b). While the activity
that is the subject matter of the underlying suit took place in Illinois, that is not the “insured risk”
under section 193. Rather, the insured risk is the “activity which is the subject matter of the
insurance,” namely Titan’s business operations and its principal location is “the state where it
will be during at least the major portion of the insurance period.” Restatement (Second) of
Conflict of Laws § 193 cmt. b (emphasis added). At least sixty percent, and as much as ninety
percent, of Titan’s business was located in Missouri. Missouri is the principal location of the
insured risk during the term of the policy.
Titan also argues that comment (f) to section 193 controls this case. Comment (f)

-9-

concerns multiple risk policies that insure against risks located in several states and the special
problems they present. Comment (f) does not deal with situations like Titan’s policy, where the
policy provides commercial liability coverage to all Titan’s business operations, regardless of
where they may be.

Comment (f) contemplates an insurance policy that insures several

immovable, static risks located in different states. The example used in comment (f) is a policy
that insures dwelling houses located in states X, Y, and Z. In this instance, the single policy will
incorporate special statutory forms of the several states involved. That is not our case. In St.
Paul Fire & Marine Insurance Co. v. Building Construction Enterprises, Inc., 484 F. Supp. 2d
1004, 1008-09 (W.D. Mo. 2007), aff’d, 526 F.3d 1166 (8th Cir. 2008), the court dealt with this
precise choice of law issue, and found comment (f) inapposite. “[T]he commercial general
liability policies at issue in the present case did not contemplate a set of enumerated construction
job sites but rather were intended to cover [the contractor’s] commercial operations wherever
they happened to occur, including projects yet to begin when the policies were delivered. . . . The
logic of Comment f is therefore inapposite to the case at hand.” Id. at 1009. The Court adopts
the reasoning of the St. Paul Fire & Marine court, and finds comment (f) inapplicable to the
situation presented here.
As the comments to section 193 state, however, there are situations in which the location
of the risk has less significance, including “where the policy covers a group of risks that are
scattered throughout two or more states.” Restatement (Second) of Conflict of Laws § 193 cmt.
b. The importance of the principal location of the insured risk varies from case to case. It is
most significant when the risk is immovable. In the case of movable objects, the significance of
the state of the risk’s principal location “diminishes with the length of time that it can be
anticipated the chattel will be in other states during the term of insurance.” Id. In our case,

- 10 -

although the Court finds that the risk’s principal location is Missouri, the Court is not inclined to
give this factor greater weight than any other single contact. The significance of this factor is
diminished because the parties anticipated that Titan’s risk would be in other states during the
term of insurance.
Thus, the Court must consider the five factors enumerated in section 188. Section 188
provides that the law of the state with the most significant relationship to the transaction and
parties governs. The contacts that direct this analysis are: (a) the place of contracting; (b) the
place of negotiation of the contract; (c) the place of performance; (d) the location of the subject
matter of the contract; and (e) the domicile, residence, nationality, place of incorporation and
place of business of the parties. See Restatement (Second) of Conflict of Laws, § 188 (1971).
Missouri is the place of contracting, the place of negotiation of the contract, the place of
performance for the majority of the contract, the primary location of the majority of Titan’s
business, and the physical location of Titan’s offices. The only section 188 factor that tips
slightly in favor of Illinois is that Titan is incorporated in Illinois. The largest grouping of
relevant contacts, however, is in Missouri. See, e.g., St. Paul Fire & Marine, 484 F. Supp. 2d at
1007-08 (applying sections 188 and 193 and finding Missouri law governed commercial general
liability policy issued to Missouri contractor where work at issue was performed in Kansas);
Becker Metals Corp. v. Transp. Ins. Co., 802 F. Supp. 235, 238-29 (E.D. Mo. 1992) (applying
sections 188 and 193 and finding Missouri law applicable to CGL policy issued to Missouri
company where claim involved an Illinois site); Superior Equip. Co. v. Maryland Cas. Co., 986
S.W.2d 477, 480-81 (Mo. Ct. App. 1998) (finding Missouri law governed insurance contract
where insured was in Missouri during major portion of insured period, was a Missouri
corporation with principal place of business in Missouri, policy negotiated through a Missouri

- 11 -

broker and executed in Missouri, and only factor favoring Illinois law was the location of the
contaminated site at issue).
Titan argues that Illinois law applies because the parties “clearly contemplated that for
some risks the Policy would be governed by Illinois substantive law.” Titan Summ. J. Mem. at
12. For support, Titan points to the parallel Missouri and Illinois state-specific provisions
included in the policy.

For example, the policy includes an employment-related practices

exclusion for Missouri and Illinois; an amendment of liquor liability exclusion for Missouri and
Illinois; a nuclear energy liability exclusion for Missouri and Illinois; and, as relevant here, a
total pollution exclusion with a hostile fire exception for Missouri and Illinois. There is no
dispute, however, that the parties did not agree to a choice of law provision. Titan cites no case
law or other authority to support its argument that by merely inserting state-specific policy
provisions, the parties intended that a particular state’s law would apply to a particular risk.1
Titan cites only to cases that recite general principles of insurance contract analysis. Because the
parties did not agree to a choice of law provision, it is the Court’s job to analyze which state’s
law applies. United Fire’s insertion of state-specific provisions into an insurance policy does not
truncate that analysis.
Also, Titan argues Illinois substantive law applies to this coverage dispute because it was
charged a premium based on its relative risk of exposure in Missouri and Illinois. The fact that
Titan paid higher premiums because of its exposure to liability in Illinois does not alter or inform

1

Even if by inserting parallel state-specific provisions the parties had implicitly agreed that
Illinois law would apply to certain risks, the Court would have no way of knowing which risks
were to be governed by Illinois provisions and which were to be governed by Missouri
provisions. Titan assumes, without analysis, that the parties meant for Illinois law to apply to
liability occurring in Illinois, and for Missouri law to apply to liability occurring in Missouri.
There is nothing in the insurance contract, however, that would dictate this result.

- 12 -

the choice of law analysis. Titan is confusing the underlying liability issue with the insurance
coverage issue. The potential underlying liability in Illinois does not affect the determination of
which state has the most significant contacts to the insurance contract—Missouri.
Titan relies on Dillard v. Shaughnessy, Fickel and Scott Architects, Inc., 943 S.W.2d 711
(Mo. Ct. App. 1997), to support its argument that Illinois law should apply. In Dillard, the
Missouri court applied Kansas state law to a construction contract for masonry work on a Kansas
building project. Dillard is distinguishable on several grounds. First, it involved a construction
contract, not an insurance contract. Section 193 of the Restatement (Second) of Conflicts of
Law, therefore, was never applied. Second, although the subcontract at issue did not have a
choice of law provision, it incorporated portions of a general contract that did have a choice of
law provision. The general contract chose Kansas state law. Because the Missouri court found
the five factors set out in section 188 were essentially tied between favoring Kansas law and
Missouri law, and because the subcontract incorporated portions of the general contract, which
applied Kansas law, the Court determined Kansas law applied. In the end, the Missouri court
applied the law of the state in which the accident occurred, but not because the accident occurred
there. The Dillard case has little relevance here.
Finally, the application of Missouri law to this coverage issue fosters the principles set
out in sections 6(d), 6(f), and 6(g) of the Restatement (Second) of Conflict of Laws—these are
certainty, predictability, and uniformity of result; ease in determination and application of the
law to be applied; and protection of the justified expectation of the parties. Consistent with these
principles, the pollution exclusion should apply consistently to Titan’s activities based on the
nature of the activity itself, not based on the state in which the activity occurs. It would be
inconsistent with the principles of Restatement section 6 for Titan’s insurance policy to cover its

- 13 -

concrete sealing activities in Illinois, but (as United Fire argues) not cover the same activities in
Missouri. Considerations of certainty, predictability, uniformity of result, ease, and justified
expectations dictate that Missouri law apply to coverage disputes arising out of an insurance
contract negotiated and executed in Missouri by a company located in Missouri, whose principal
location of risk is in Missouri.
II.

Coverage Analysis
United Fire moves for summary judgment based on the pollution exclusion, arguing that

under Missouri law the underlying claims were caused by exposure to pollutants. United Fire
argues that this case involves a straightforward analysis. It states that TIAH is an irritant, and
points to the product data materials provided by the manufacturer for support. These product
materials state that TIAH may cause “irritation of the eyes and/or skin”; contact with skin “may
irritate or burn skin and eyes”; “the product is presumed to be moderately irritating to the eyes”
and “moderately irritating to the skin”; and exposure by inhalation may produce “irritation to the
nose, throat, respiratory tract, and other mucous membranes.” United Fire counters Titan’s
arguments, stating that Missouri courts have not limited the pollution exclusion to traditional
environmental pollutants, pollutants specifically identified in the policy, or pollutants that are
dispersed outside.
In its cross motion for summary judgment, Titan acknowledges that the Missouri
Supreme Court has never addressed the meaning of the total pollution exclusion, and there is no
Missouri appellate decision directly on point. Titan argues, however, that the most apposite
Missouri decision is Hocker Oil Co., Inc. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d 510 (Mo.
Ct. App. 1999). Titan states that similar to the alleged pollutant in Hocker Oil (gasoline), here
TIAH was sold by Titan as a product in the ordinary course of its services to its customers. So,

- 14 -

considered from the perspective of the layman who acquired the policy of insurance, Titan’s
interpretation of TIAH being a product—and not a pollutant—is reasonable. Titan argues the
policy is at least ambiguous as to whether TIAH is a pollutant for purposes of the exclusion, and
the policy provision must be construed against United Fire.
Both parties agree that the Missouri Supreme Court has not interpreted the total pollution
exclusion. Thus, this Court will have to predict how the Missouri Supreme Court would resolve
the issue. “Decisions of the various intermediate appellate courts are not [binding on this Court],
but they are persuasive authority, and we must follow them when they are the best evidence of
what [the state] law is.” Continental Cas. Co. v. Advance Terrazzo & Tile Co. Inc., 462 F.3d
1002, 1007 (8th Cir. 2006) (quoting Garnac Grain Co., Inc. v. Blackley, 932 F.2d 1563, 1570
(8th Cir. 1991)). This Court must consider the rather inconsistent precedents of the Missouri
Court of Appeals, and predict how the Missouri Supreme Court would resolve the issue of
whether TIAH is a pollutant under the policy. In their briefing, the parties pick and choose
which Missouri cases they want the Court to rely upon, so the Court will engage in a
chronological review of the most relevant Missouri cases on the pollution exclusion.
In Hocker Oil, 997 S.W.2d 510, the Missouri Court of Appeals for the Southern District
found the policy’s pollution exclusion did not preclude coverage for property damage caused
when a gasoline tank at one of the plaintiff’s service stations failed, and 2,000 gallons of gasoline
were released into the ground and migrated to adjoining land. The landowner sued the plaintiff
and after settling the suit, the plaintiff sought indemnification from its insurer. The insurer
denied coverage on the basis of the applicable policy’s pollution exclusion.

The plaintiff

appealed, arguing that gasoline was its product and not a pollutant. Id. at 513. The Missouri
Court of Appeals noted that gasoline had not been identified with particularity as a pollutant in

- 15 -

the insurance policy, and determined the plaintiff “could have reasonably concluded that
gasoline was not deemed a pollutant for purposes of the exclusion since it was not specifically
identified as such.” Id. at 518. Notably, the court observed “it would be an oddity for an
insurance company to sell a liability policy to a gas station that would specifically exclude that
insured’s major source of liability.” Id.
In an attempt to analogize the facts of this case to the facts of Hocker Oil, Titan argues
that it sold TIAH to its customers in the ordinary course of business, and like the gas at issue in
Hocker Oil, TIAH is a “product” and not a “pollutant.” United Fire counters that Titan is not in
the business of transporting, selling, and storing TIAH, unlike the insured in Hocker Oil; Titan is
a construction clean up company. It does not sell TIAH like a department store or a convenience
store sells products, and it does not sell TIAH like a gas station sells gas.
Both parties interpret Hocker Oil’s relevance too narrowly. United Fire is correct that
Titan is not in the business of selling TIAH, and therefore the distinction made in Hocker Oil
between a “product” and a “pollutant” is not entirely relevant here. What is relevant is that the
Missouri Court of Appeals did not take a literal approach to interpreting the pollution exclusion.2
The Hocker Oil court ascertained whether an insurance policy is plain and unambiguous by
looking to what the layman acquiring the policy ordinarily would have understood. Id. at 518.
“In this light, Hocker’s suggestion that it, as a layperson, would not have paid a substantial
2

As commentators and other courts have discussed, there are two main approaches when it
comes to interpreting pollution exclusions: the literal approach, and the situational approach.
See State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845, 850-51 (Ind. 2012) (citing Apana
v. TIG Ins. Co., 574 F.3d 679, 682-83 (9th Cir. 2009)); see also Couch on Insurance 3d § 127:6
(2008). Courts applying the literal approach generally hold the absolute pollution exclusion to
be unambiguous in all circumstances, which often leads to odd and unreasonable results. See
State Auto Mut. Ins. Co., 964 N.E.2d at 851 (citing Maxine Furs, Inc. v. Auto-Owners Ins. Co.,
426 F. App’x 687, 688 (11th Cir. 2011) (per curiam) (holding that the smell of curry from Indian
restaurant that damaged merchandise in adjacent fur salon was a “contaminant” under the
pollution exclusion and the damage was not covered)).

- 16 -

premium for a liability policy that would not afford coverage for damages resulting from
gasoline leaks from its storage tanks is not unreasonable.” Id.
As further indication of the Missouri court’s willingness not only to look at the alleged
pollutant, but to look at the alleged pollutant through the eyes of the insured, the court states:
“Gasoline belongs in the environment in which Hocker routinely works. . . . [I]n that
environment, gasoline is not a pollutant.” Id. This approach informs the Court’s analysis of
whether TIAH is a pollutant in the context of a construction clean up business. Importantly, as
much as twenty-five percent of Titan’s clean up business involves applying concrete sealant after
new construction is finished. See Fuglsang Dep. at 9.
Two months after Hocker Oil, the Missouri Court of Appeals for the Southern District
examined another absolute pollution exclusion, this time in the context of toxic sludge. In
Casualty Indemnity Exchange v. City of Sparta, 997 S.W.2d 545 (Mo. Ct. App. 1999), the court
held that sludge containing “substances and compounds toxic to humans and animals, i.e.,
fluoride, cadmium, lead, mercury, iron, arsenic, aluminum, selenium and molybdenum” applied
to land as fertilizer, which caused damage to a neighboring farm including diminished milk
production, death of cows, and loss of breeding opportunity, was a pollutant under the absolute
pollution exclusion. Id. at 546. The court engaged in a straightforward analysis, finding that the
pollution exclusion barred coverage for claims arising out of exposure to toxic substances; the
underlying plaintiffs pled the sludge contained substances toxic to humans and animals; and
therefore the underlying claims were excluded from coverage under the pollution exclusion. Id.
at 549-50.
While the Casualty Indemnity Exchange court found the pollution exclusion applicable
under the facts of the case, it refused to speculate about other substances in other cases.

- 17 -

“Whether the Absolute Pollution Exclusion might be found ambiguous regarding some other
substance in a different factual setting is a subject about which this court need not speculate.” Id.
at 551. The court also distinguished an Arkansas case in which a septic system in a mobile home
park broke down and flooded a resident’s home with sewage. In the case of the septic system,
the Arkansas state court found the pollution exclusion inapplicable. The Missouri court, faced
with a case involving a similar pollutant, declared an “immense difference between a mobile
home park providing a septic system for its occupants and a municipality collecting and
disposing of sewage generated within the municipality.” Id. at 552. Although this “immense
difference” is not specified, the opinion suggests that the Missouri court found the smaller
“magnitude” and “relatively small dimension” of the septic system overflow to not trigger the
pollution exclusion. Id. at 552.
A year after the Hocker Oil and Casualty Indemnity Exchange decisions, the Missouri
Court of Appeals for the Eastern Division engaged in a different and more literal analysis of the
pollution exclusion in Boulevard Investment Company v. Capitol Indemnity Corporation, 27
S.W.3d 856 (Mo. Ct. App. 2000). In Boulevard, the insured owned a restaurant whose plumbing
system was blocked by “various forms of waste, including kitchen grease, scour pads, heavy
plastic, and underwear.” Id. at 857. The pollution exclusion at issue defined pollutants as “any
solid, liquid, gaseous, or thermal irritant or contaminant including . . . waste.” Id. at 858. In a
two-page opinion, the Missouri court noted the issue was one of first impression, and consulted
Webster’s Dictionary for the definition of “waste.” Upon finding that Webster’s defined waste
to include “garbage, rubbish, excrement, and sewage,” the court found that the kitchen grease
and scour pads clogging the plumbing system were waste within the ordinary meaning of the
word. Consequently, it held that this sundry kitchen waste was a “pollutant” under the policy

- 18 -

and fell within the pollution exclusion barring coverage for the property damage.
Less than one year after the opinion in Boulevard, however, the Missouri Court of
Appeals for the Eastern District issued a different type of opinion in Cincinnati Insurance
Company v. German St. Vincent Orphan Association, Inc., 54 S.W.3d 661 (Mo. Ct. App. 2001).
In this case, the court applied the pollution exclusion to bar coverage for asbestos exposure after
the insured hired a contractor to remove an old vinyl floor containing asbestos. Although
Cincinnati Insurance Company is of little precedential value in determining whether Missouri
courts would find TIAH to be a pollutant, it is significant because the Missouri Court of Appeals
took a slight turn from its more literal reading of pollutant in Boulevard. In its opinion, the court
agreed with a Kansas federal court that it is questionable whether some substances should be
considered pollutants. Specifically, the Missouri court discussed Westchester Fire Insurance
Company v. City of Pittsburgh, Kansas, 768 F. Supp. 1463, 1470 (D. Kan. 1991), in which the
court, applying Kansas law, found that an insecticide mixture, Zep Formula 2162 containing
malathion, sprayed off the back of a municipal truck could not be considered a pollutant under
the policy.

The Missouri Court of Appeals agreed with the Westchester court “that it is

questionable whether an ‘insecticide of low mammalian toxicity’ should be considered a
pollutant.” Id. at 666. In the end, however, the Cincinnati Insurance Company court stated that
the friable asbestos at issue in its case unquestionably fell into the category of a “solid or thermal
‘irritant’ or ‘contaminant’” as used in the policy. Id. at 666.
Had the Cincinnati Insurance Company court been applying a literal interpretation of the
pollution exclusion, as it did in Boulevard, it would have been hard-pressed to agree with the
federal court’s Westchester holding that a chemical insecticide was not a pollutant under the
relevant policy, which specifically excluded chemicals. In less than one year, the Missouri Court

- 19 -

of Appeals of the Eastern District went from finding kitchen grease and scour pads to be
pollutants in Boulevard, to agreeing that it was questionable whether a chemical insecticide
should be considered a pollutant.
The most recent decision from the Missouri Court of Appeals is Heringer v. American
Family Mutual Insurance Company, 140 S.W.3d 100 (Mo. Ct. App. 2004). In Heringer, the
Missouri court found that the pollution exclusion applied to injuries a contractor sustained
scraping paint from the interior and exterior of the insured’s home.

Unbeknownst to the

contractor, the paint was lead-based, and the contractor was exposed to toxic quantities of lead
while using a heat gun to remove the paint. The Heringer case was rather straightforward,
because the policy definition of “pollutant” specifically included lead: “Pollutant means any
solid, liquid, gaseous or thermal irritant . . . including, but not limited to lead . . . .” Id. at 103.
Unlike the present case, the issue in Heringer was not the interpretation of a general definition of
pollutant; the Heringer policy specifically and unambiguously defined lead as a pollutant in the
policy. In fact, the Heringer court rejected analyses in which the pollutant was not specifically
defined in the policy. Id. at 105. So, this case is not of significant value to our analysis. See
also Hartford Underwriter's Ins. Co. v. Estate of Turks, 206 F. Supp. 2d 968, 975 (E.D. Mo.
2002) (finding lead paint to be pollutant where policy definition of pollutant specifically
included lead paint).
Titan also relies on the Eighth Circuit Court of Appeals’ interpretation of Missouri law in
Sargent Construction Company, Inc. v. State Auto Insurance Company, 23 F.3d 1324 (8th Cir.
1994). In Sargent, the Eighth Circuit, applying Missouri law, examined whether a solution of
muriatic acid used on a concrete floor by a contractor that resulted in damage to the property
owner’s fixtures was a pollutant within the meaning of the contractor’s insurance policy’s

- 20 -

pollution exclusion. The insured offered evidence that laypersons in the construction business
would not consider muriatic acid to be a pollutant. The policy defined “pollutants” as “any solid,
liquid, gaseous or thermal irritant or contaminant” and then listed examples of such substances.
The Eighth Circuit concluded that when the definition was applied to a particular substance, the
issue became whether the substance could be classified as an “irritant or contaminant.” The
Court found that the policy’s definition of “pollutant” was ambiguous because in the context of
the claim for bodily injury or property damage, a substance could be an “irritant or contaminant”
if it in fact caused a covered injury, or if it merely had the capability of causing a covered injury,
regardless of whether the accident giving rise to the specific claim involved the harm. Id. at
1327. Because the Eighth Circuit found the policy definition of “pollutants” was ambiguous, the
court reversed the trial court’s ruling on summary judgment that muriatic acid fell within the
pollution exclusion.
The policy definition of pollutant in this case is the same as that in Sargent, and therefore
similar ambiguities exist. In the nearly nineteen years since the Sargent opinion was decided,
however, Missouri courts have not found ambiguity in pollution exclusions because of the
distinction between whether an irritant or contaminant actually caused an injury, or was merely
capable of causing an injury. See, e.g., Casualty Indemnity Exchange, 997 S.W.2d at 551 (“This
court fails to see how Sargent governs the instant case.”). So, although a similar ambiguity
exists in this case, the Court does not find this ambiguity to be determinative.
Rather, the Court is guided by several principles of insurance policy interpretation as
gleaned from its review of the pollution exclusion under Missouri law. First, for the most part,
Missouri courts have taken a common sense, situational approach in determining whether a
particular substance is a pollutant under policy language. See, e.g., Hocker Oil, 997 S.W.2d at

- 21 -

518; Cincinnati Ins. Co., 54 S.W.3d at 665-66; see also Pipefitters Welfare Educ. Fund v.
Westchester Fire Ins. Co., 976 F.2d 1037, 1043-44 (7th Cir. 1992) (applying Missouri law) (“The
distinction we draw here between pollution and non-pollution is by no means scientific, but one
must remember that insurance contract interpretation is at bottom a practical art.”) (internal
quotation omitted). Second, the determination of whether a substance is a pollutant is fact
intensive.

Casualty Indem. Exch., 997 S.W.2d at 548 (“[C]ourts microscopically examine

exclusions and assiduously study facts to determine whether a particular exclusion bars coverage
for a specific claim.”). Third, whether an insurance policy’s language is plain and unambiguous
is determined by what the layman who bought and paid for the policy would ordinarily have
understood. Hocker, 997 S.W.2d at 516-18; Cincinnati Ins. Co., 54 S.W.3d at 666. Moreover,
the insured is entitled to characterize the allegedly polluting substance in a manner consistent
with the insured’s daily activities, particularly if the alleged pollutant belongs in the environment
in which the insured routinely works. Hocker, 997 S.W.2d at 518. The exclusion may not apply
if the court finds the definition of pollutant to be beyond the reasonable expectations of the
insured.

Id.

Finally, Missouri courts will not limit the pollution exclusion to traditional

environmental pollutants. Heringer, 140 S.W.3d at 106.
Applying the Missouri precedents to the instant case, the Court concludes there is
ambiguity in the policy language as it relates to Titan’s allegedly negligent application of TIAH
to seal the concrete floor. Titan’s estimator and project manager, Phil Fuglsang, testified that
“maybe 25 percent” of the role Titan plays in construction clean up is applying concrete sealant
after new construction is finished. Fuglsang Dep. at 9. United Fire’s own reports indicate that at
least five percent of Titan’s business is in concrete sealing. Although Titan used different
sealants for different customers, Mr. Fuglsang estimated that he used TIAH approximately five

- 22 -

to ten times per year. Id. at 20. Thus, the underlying plaintiffs’ exposure to TIAH occurred in
the normal course of Titan’s business of sealing concrete floors.
Like the gasoline at issue in Hocker Oil, TIAH belongs in the environment in which the
insured routinely works. “Missouri’s criteria for determining whether an insurance policy’s
language is plain and unambiguous requires ascertainment of what the layman who acquired the
policy of insurance would ordinarily have understood.” Hocker Oil, 997 S.W.2d at 518. It is
reasonable for Titan to expect that its work in sealing concrete floors would be covered by its
commercial general liability insurance policy, and that TIAH would not be deemed a pollutant.
The Court is not persuaded by the rather inconsistent holdings of the Missouri Court of Appeals
that under Missouri law the pollution exclusion unambiguously precludes Titan from insurance
coverage for its common business activity.
This is not an easy case; it is a close case. Because United Fire is seeking to avoid
coverage under the exclusion, “it has the burden of proving the applicability of the exclusion.”
Heringer, 140 S.W.3d at 103. “Exclusionary clauses in insurance policies are strictly construed
against the insured.” Casualty Indem. Exch., 997 S.W.2d at 548. Because any ambiguity in the
policy must be construed in favor of the insured, and because exemptions to coverage are strictly
construed against the insurer, the Court finds that the pollution exclusion does not bar coverage
for the underlying tort plaintiffs’ injuries. The scope of the pollution exclusion is governed by
the expectations of a reasonable policy holder, and the Court finds that a reasonable policy
holder in Titan’s position would not expect that injury or damage arising from its use of TIAH in
the course of its business would be considered pollution within the meaning of the policy’s
pollution exclusion. In light of the inconsistent rulings of the Missouri Court of Appeals, no
reasonable policy holder would expect that an insurance policy issued to a contractor, that cleans

- 23 -

and seals concrete floors in the course of its business, unambiguously excluded coverage for
injuries suffered when office workers in adjoining office space were exposed to fumes from the
concrete sealant.3
Conclusion
For these reasons, the Court finds that United Fire has not met its burden to establish that
the pollution exclusion, when strictly construed against it, is clearly applicable as a matter of law
to bar any coverage to Titan based on the underlying claims. United Fire’s motion for summary
judgment should therefore be denied, and Titan’s motion for summary judgment should therefore
be granted.
Accordingly,
IT IS HEREBY ORDERED that defendant Titan Contractors Service, Inc.’s motion for
summary judgment is GRANTED. [Doc. 66]
IT IS FURTHER ORDERED that plaintiff United Fire & Casualty Company’s motion
for summary judgment is DENIED. [Doc. 69]
IT IS FURTHER ORDERED, ADJUDGED and DECLARED that plaintiff United
Fire & Casualty Company has a duty under the commercial general liability policy issued to
defendant Titan Contractors Service, Inc. (“Titan”) to defend and indemnify Titan on the claims
asserted against it by (1) Merri Bogard in Case No. 09-L-295 in the Circuit Court for the Third
3

Cases from other jurisdictions involving fumes from floor sealants, glues, and chemicals are
inconsistent. The Court does not find these cases persuasive. Compare Meridian Mut. Ins. Co.
v. Kellman, 197 F.3d 1178 (6th Cir. 1999) (finding movement of fumes from chemical floor
sealant was not “discharge, dispersal, seepage, migration, release or escape” within terms of
policy’s pollution exclusion); Calvert Ins. Co. v. S&L Realty Corp., 926 F. Supp. 44, 46-47
(S.D.N.Y. 1996) (fumes from cement used to install plywood floor not a pollutant); Freidline v.
Shelby Ins. Co., 739 N.E.2d 178, 184 (Ind. Ct. App. 2001) (fumes from carpet glue not a
pollutant), rev’d on other grounds, 774 N.E.2d 37, 42 (Ind. 2002) with Firemen’s Ins. Co. v.
Kline & Son Cement Repair, Inc., 474 F. Supp. 2d 779, 790-93 & n.6 (E.D. Va. 2007) (finding
fumes from epoxy/eurathane sealant are pollutants) (citing cases).
- 24 -

Judicial Circuit, Madison County, Illinois; (2) Valerie Furlow in Case No. 09-L-296 in the
Circuit Court for the Third Judicial Circuit, Madison County, Illinois; and (3) Tallauah Todd in
Case No 09-L-297 in the Circuit Court for the Third Judicial Circuit, Madison County, Illinois
arising out of the incident involving Titan’s application of the concrete sealant, TIAH, on or
about April 20, 2007.
An appropriate judgment will accompany this memorandum and order.

CHARLES A. SHAW
UNITED STATES DISTRICT JUDGE

Dated this 28th day of January, 2013.

- 25 -