Jeffrey Alan Brouse v. Nationwide Agribusiness Insurance Company

• Court: Court of Appeals of Minnesota
• Decided: July 27, 2015
• Docket: A14-1729
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA IN COURT OF APPEALS A14-1729

Jeffrey Alan Brouse, et al., Appellants,

vs.

Nationwide Agribusiness Insurance Company, et al., Respondents.

Filed July 27, 2015 Affirmed Reyes, Judge

Marshall County District Court File No. 45CV08301

William R. Sieben, James S. Ballentine, Schwebel, Goetz & Sieben, P.A., Minneapolis, Minnesota; and

Charles Daniel Miller, Speer Law Firm, P.A., Kansas City, Missouri (for appellants)

David C. Linder, Hilary J. Palazzolo, David P. McKinney, Larson • King, L.L.P., St. Paul, Minnesota (for respondents)

Considered and decided by Larkin, Presiding Judge; Rodenberg, Judge; and

Reyes, Judge.

UNPUBLISHED OPINION

REYES, Judge

On appeal from the district court’s grant of summary judgment to respondents,

appellants argue that the district court erred by (1) determining the absolute-pollution exclusions in the insurance policies are unambiguous; (2) failing to apply the reasonable-

expectations doctrine; and (3) granting summary judgment to respondents. We affirm.

FACTS

In 2005, a group of investors operating as The Dairy Dozen-Thief River Falls,

LLP purchased Excel Dairy, a dairy operation. The Minnesota Pollution Control Agency

(MPCA) then received an expansion request from Excel and authorized the construction

of an additional barn and two additional manure basins in March 2007. Unfortunately, as

the district court found, “[t]he expansion did not go well,” and Excel’s neighbors

complained of illnesses related to Excel’s hydrogen-sulfide emissions. Eventually, Excel

faced civil and administrative action by the MPCA and criminal charges by Marshall

County, as well as other actions by the Minnesota Department of Health and the United

States Environmental Protection Agency. In 2010, this court affirmed the MPCA’s

revocation of Excel’s permit. In re Dairy Dozen-Thief River Falls, LLP, Nos. A09-936,

A09-1406, 2010 WL 2161781, at *1 (Minn. App. June 1, 2010).

Appellants, who are Excel’s neighbors, started this lawsuit in June 2008 against

Dairy Dozen, alleging that “invasive, offensive, and noxious odors” were interfering with

the enjoyment of their properties. Dairy Dozen filed for bankruptcy in April 2010. As

part of the bankruptcy proceeding, the bankruptcy court identified respondents

Nationwide Agribusiness Insurance Company and Farmland Mutual Insurance Company

as Dairy Dozen’s insurers. Dairy Dozen then agreed to assign its rights in its insurance

policies to appellants, permitting appellants to sue respondents on its behalf. In return,

2 appellants agreed not to “levy execution or garnishment or collection” against Dairy

Dozen.

In April 2013, appellants filed a second amended complaint against several

defendants, including respondents, alleging that “[o]ffensive and noxious odors,

particulate matter, flies and other insects emanating from the Excel Dairy facilities

impaired [their] ability to use and enjoy their property and caused substantial damage to

[their] quality of life.”1 Appellants sought a declaratory judgment that respondents had a

duty under Dairy Dozen’s insurance policies to pay appellants’ damages. Respondents

moved for summary judgment, arguing that the absolute-pollution exclusions in Dairy

Dozen’s insurance policies precluded insurance coverage for appellants’ claims. Citing

caselaw from this court, the district court agreed and granted summary judgment to

respondents. This appeal follows.

DECISION

A motion for summary judgment shall be granted “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any,

show that there is no genuine issue as to any material fact and that either party is entitled

to a judgment as a matter of law.” Minn. R. Civ. P. 56.03. On appeal from an award of

summary judgment, this court reviews de novo whether there is a genuine issue of

material fact and whether the district court erred when it applied the law. STAR Ctrs.,

Inc. v. Faegre & Benson, L.L.P., 644 N.W.2d 72, 76-77 (Minn. 2002). We “view the

1 Appellants later agreed to dismiss all other defendants from the lawsuit, and the district court filed a stipulation of dismissal.

3 evidence in the light most favorable to the party against whom summary judgment was

granted.” Id.

“Interpretation of an insurance policy, and whether a policy provides coverage in a

particular situation, are questions of law that we review de novo.” Eng’g & Constr.

Innovations, Inc. v. L.H. Bolduc Co., Inc., 825 N.W.2d 695, 704 (Minn. 2013). “This

court must construe an insurance policy as a whole and must give unambiguous language

its plain and ordinary meaning. But when language in an insurance contract is

ambiguous, such that it is reasonably subject to more than one interpretation, we will

construe it in favor of the insured.” Mitsch v. Am. Nat’l Prop. & Cas. Co., 736 N.W.2d

355, 358 (Minn. App. 2007) (citations omitted), review denied (Minn. Oct. 24, 2007).

Although the insured bears the burden of proof to establish coverage, the insurer bears

the burden to show that an exclusion applies. Midwest Family Mut. Ins. Co. v. Wolters,

831 N.W.2d 628, 636 (Minn. 2013). If the insurer meets its burden, “the burden of proof

shifts back to the insured because the exception to the exclusion ‘restores’ coverage for

which the insured bears the burden of proof.” Id. (quotation omitted).

I.

Dairy Dozen’s 2005-2006 insurance policy excludes coverage for “[b]odily injury

or property damage which would not have occurred in whole or in part but for the actual,

alleged or threatened discharge, dispersal, release or escape of pollutants at any time.”

Under this policy, “[p]ollutants means 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.”

4 Similarly, Dairy Dozen’s 2006-2007 insurance policy excludes:

Bodily injury or property damage, arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants: (1) At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured. . . . [or] .... (2) At or from 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[.]

This policy contains the same definition of “pollutants.” Dairy Dozen’s policies for

2007-2008, 2008-2009, and 2009-2010 follow the 2006-2007 policy language.

These provisions are absolute-pollution exclusions. See id. at 637 n.3 (explaining

that absolute-pollution exclusions “eliminated” an exception for “sudden and accidental”

pollution discharge found in earlier qualified pollution exclusions). Although the

majority of jurisdictions limit these exclusions “to situations involving traditional

environmental pollution,” Minnesota follows the minority of jurisdictions in applying the

exclusions literally and finding the terms clear, unambiguous, and not limited to

traditional environmental pollution. Id. at 635. Minnesota applies “a non-technical,

plain-meaning approach to interpreting pollution exclusions.” Id. at 637 (quotation

omitted).

Appellants first argue that the district court erred by finding the absolute-pollution

exclusions unambiguous because the provisions do not specifically mention odors,

smells, flies, insects, or rodents and the definition of “pollutants” “is so broad as to be

5 nearly meaningless.”2 We disagree. Minnesota does not require pollution exclusions to

use specific words, as appellants suggest. See Board of Regents of Univ. of Minn. v.

Royal Ins. Co. of Am., 517 N.W.2d 888, 893-94 (Minn. 1994) (concluding that the

exclusion provision applied to asbestos even though asbestos was not specifically

mentioned in the provision); Auto-Owners Ins. Co. v. Hanson, 588 N.W.2d 777, 781

(Minn. App. 1999) (rejecting the argument that the exclusion provision did not apply to

lead paint because “the insurer could have specifically excluded lead paint from

coverage”), review denied (Minn. Apr. 20, 1999). And appellants’ cited caselaw

regarding broadness applies the majority rule, rather than Minnesota’s minority approach.

See Wolters, 831 N.W.2d at 635 (stating that Pipefitters Welfare Educ. Fund v.

Westchester Fire Ins. Co., 976 F.2d 1037 (7th Cir. 1992) applies the majority rule).

Applying Minnesota’s “non-technical, plain-meaning approach,” the absolute

pollution exclusions here are not ambiguous. See id. at 637. Appellants fail to identify

any caselaw (and we can find none) in which a Minnesota court has found an absolute-

pollution exclusion ambiguous. See id. at 636-37 (holding that “pollutants” is

unambiguous and that carbon monoxide is a “pollutant” under the exclusion); Royal, 517

N.W.2d at 892 (concluding that asbestos unambiguously falls within the exclusion’s

language about “other irritants, contaminants, or pollutants”); Hanson, 588 N.W.2d at

779 (concluding that “lead in paint falls within the policy’s definition of pollutant”).

Instead, appellants attempt to rely upon extrinsic evidence regarding the provisions’

2 We note that appellants did not raise any allegations regarding rodents in their second amended complaint. We will only address those allegations appellants actually pleaded before the district court: (1) odors and (2) flies and other insects.

6 meanings. But we can consider extrinsic evidence only after determining that a provision

is ambiguous. Apple Valley Red-E-Mix, Inc. v. Mills-Winfield Eng’g Sales, Inc., 436

N.W.2d 121, 123 (Minn. App. 1989), review denied (Minn. Apr. 26, 1989). Because

appellants have failed to support their assertion that the provisions are ambiguous, we

decline to consider appellants’ extrinsic evidence.

II.

Appellants next argue that the district court erred by failing to apply the

reasonable-expectations doctrine. The reasonable-expectations doctrine “protects the

objectively reasonable expectations of the insured even if close study of the insurance

policy would negate those expectations.” Frey v. United Servs. Auto. Ass’n, 743 N.W.2d

337, 342 (Minn. App. 2008). But the doctrine does not apply absent “an ambiguity, a

hidden major exclusion, or other special circumstances.” Id. at 343.

Appellants rely on Atwater Creamery Co. v. W. Nat’l Mut. Ins. Co., in which the

supreme court held that, “in certain instances, such as where major exclusions are hidden

in the definitions section, the insured should be held only to reasonable knowledge of the

literal terms and conditions.” 366 N.W.2d 271, 278 (Minn. 1985). But the supreme court

has more recently explained that the reasonable-expectations doctrine “has a very narrow

application” and has suggested that its application is limited to the “unique situation” in

Atwater Creamery where the policy’s definition of burglary was really an exclusion

hidden in the definition section. Wolters, 831 N.W.2d at 639 n.4; see also Carlson v.

Allstate Ins. Co., 749 N.W.2d 41, 49 (Minn. 2008) (stating that the doctrine “correct[s]

extreme situations like that in Atwater, where a party’s coverage is significantly different

7 from what the party reasonably believes it has paid for and where the only notice the

party has of that difference is in an obscure and unexpected provision”). Because the

pollution exclusion in Wolters “was plainly designated as an exclusion” and located in

the exclusions section of the policy, the supreme court held that the reasonable-

expectations doctrine did not apply. 831 N.W.2d at 639.

As in Wolters, the pollution exclusions at issue here are located in the exclusions

section of the policies and are “plainly designated” as exclusions. See id. Any insured,

therefore, would “reasonably expect the clause to limit coverage.” Frey, 743 N.W.2d at

343. Given the caselaw and the absence of any ambiguity, hidden exclusion, or special

circumstance, the district court properly declined to apply the reasonable-expectations

doctrine here. See id.; see also Royal, 517 N.W.2d at 891 (“The reasonable expectation

test is not a license to ignore the pollution exclusion in this case nor to rewrite the

exclusion solely to conform to a result that the insured might prefer.”).

III.

Appellants argue in the alternative that, even if the absolute-pollution exclusions

are unambiguous, there are genuine issues of material fact as to whether the odors at issue

here fall within that exclusion.

In Wakefield Pork, Inc. v. Ram Mut. Ins. Co., neighbors “alleged that the pig

operation created ‘extremely noxious and offensive odors and gases’ that caused and/or

exacerbated their health problems, diminished their quality of life, curtailed their use and

enjoyment of their property, and caused a decrease in the market value of their property.”

731 N.W.2d 154, 157 (Minn. App. 2007), review denied (Minn. Aug. 7, 2007). The pig

8 operation’s insurance policy excluded liability resulting from the “discharge, dispersal,

release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or

gases, waste materials or other irritants, contaminants or pollutants.” Id. at 160. We

analyzed the plain meaning of this language and concluded that the neighbors’ complaint

regarding gases and odors was “plainly covered by the insurance policy’s pollution

exclusion.” Id.

Appellants suggest that Wakefield Pork was wrongly decided. But Wakefield Pork

is a published decision of this court and remains precedential. Like the allegations in

Wakefield Pork, appellants allege that “offensive and noxious odors” damaged the “use

and quiet enjoyment of their lives, homes and properties.” See id. at 157. Diary Dozen’s

insurance policies excluded coverage for pollutant “fumes,” as did the policy in

Wakefield Pork. See id. at 160. We defined “fume” as “[v]apor, gas, or smoke,

especially if irritating, harmful, or strong” or “[a] strong or acrid odor.” Id. (quoting The

American Heritage Dictionary 734 (3d ed. 1996)). Based on this plain-meaning

definition of “fume,” we determined that the allegation regarding “noxious and offensive

odors” was “plainly covered by the insurance policy’s pollution exclusion.” Id. As in

Wakefield Pork, appellants’ allegations regarding “offensive and noxious odors” fall

within the plain language of the absolute pollution exclusions in Dairy Dozen’s insurance

policies. See id.

The absolute-pollution exclusions also encompass appellants’ claims regarding

flies and other insects. Under the exclusions, “pollutants” encompasses “any solid,

liquid, gaseous or thermal irritant or contaminant,” not just contaminants dispersed

9 through the air. “Contaminant” means “one that contaminates” and “contaminate” means

“to make impure or unclean by contact or mixture.” The American Heritage Dictionary

of the English Language 406 (3d ed. 1992). Flies and other insects meet the plain-

meaning definition of “contaminant” because they impaired appellants’ use and

enjoyment of their properties by making them “impure or unclean.” See id.

Finally, appellants argue that a genuine issue of material fact remains regarding

whether their claims arose out of the excluded pollutants.3 Because appellants did not

raise this argument to the district court, it is not properly before us. See Thiele v. Stich,

425 N.W.2d 580, 582 (Minn. 1988) (“A reviewing court must generally consider only

those issues that the record shows were presented and considered by the [district] court in

deciding the matter before it.” (quotation omitted)). Nevertheless, we note that appellants

specifically alleged in their second amended complaint that the “[o]ffensive and noxious

odors, particulate matter, flies and other insects emanate[ed] from the Excel Dairy

facilities”; that the mishandling of waste “result[ed] in the breeding of hoards of flies and

other insects that frequently travelled to [appellants’] properties”; and that “[t]he

horrendous waste management practices at the Excel Dairy facilities caused and created

the offensive and invasive odors, particulate matter, flies, other insects, and other

emissions.” Appellants themselves therefore alleged the necessary but-for causation. See

Progressive Cas. Ins. Co. v. Brockway, 411 N.W.2d 13, 16 (Minn. App. 1987) (stating

3 Appellants also argue that the district court’s grant of summary judgment to respondents violates public policy. But appellants provide no support for this argument, and the supreme court has stated that, even though an absolute-pollution exclusion can create a “regrettably harsh” result, “the place to settle the public policy issues underlying th[e] exclusion is in the marketplace or by legislative action.” Wolters, 831 N.W.2d at 638.

10 that but-for causation satisfies an arising-out-of provision and proximate cause is not

required), review denied (Minn. Nov. 13, 1987). Even viewing the record in the light

most favorable to appellants, no genuine issue of material fact remains regarding whether

appellants’ claims arose from Dairy Dozen’s pollution and waste-management problems.

Because appellants’ allegations fall within the plain meaning of the unambiguous

absolute-pollution exclusions and no genuine issues of material fact remain, the district

court did not err by granting summary judgment to respondents.

Affirmed.