Can AutoOwners dodge responsibility for injuries at Ludington Motel?
The Bronkema family was injured by chlorine gas while staying at the Holiday Inn Express in Ludington. No one denied the family's injuries, and AutoOwners initially paid more than $10,000.00 in medical expenses incurred by the family. When the incident turned out to be more significant than anticipated, however, AutoOwners denied responsibility and stopped paying, citing the "pollution" exception in the coverage it wrote for the motel. The trial judge rejected AutoOwners' pollution argument and awarded the motel and the Bronkemas more than $500,000.00 in damages, fees and costs.
The family's injuries occurred when there was a malfunction in the heating system for the attached swimming pool. During the course of making repairs, the maintenance man accidentally released a cloud of chlorine gas, which had collected in the PVC lines serving the combined pump room pool and heating system, into the pool area.
Although the insurance policy was supplemented with an endorsement that provided coverage if injury to a patron was "caused by smoke, fumes, vapor or soot from equipment used to heat a building", AutoOwners claimed this language did not apply. Instead, it argued that the policy exclusion for injuries caused by pollution (defined as any "irritant or contaminant" in liquid, solid or gaseous form) eliminated its duty to pay damages to the Bronkema family.
The Court of Appeals majority held that these contradictory provisions created a policy ambiguity. Therefore, it overturned the judgment against AutoOwners and returned the case to the trial court for a decision by the jury: the majority concluded that the finder of fact--the jury in this case--must interpret the insurance policy and decide whether there was coverage.
In a very thoughtful opinion, Judge O'Connell dissented from the majority opinion and would have affirmed the lower court's decision. Judge O'Connell pointed out that broad-form pollution exclusions must be applied with recognition of the factual circumstances. He provided, as an analogical example, the use of flouride: if added to a city water supply, it is not a pollutant; if spilled in quantity somewhere else, it is a pollutant. By this analysis, Judge O'Connell concluded that the lower court had properly determined that the pollution exclusion in the Holiday Inn policy could not be enforced to wipe out coverage under the heating endorsement, because in the contextual circumstances, chlorine was not a "pollutant".
We suspect that while it will take longer and be more expensive, ultimately the jury will agree with Judge O'Connell and the Mason County trial judge, and AutoOwners will be required to honor its contractual responsibilities to the Holiday Inn (and thus to the Bronkemas). In the meantime, another insurer gains mileage from using illusory insurance policy language that gives with one hand, while taking away with the other. In most states, the reviewing Court interprets this kind of language to effect the "reasonable expectation" of the insured (who was likely mailed the policy a month or two after purchasing it). In Michigan, the Engler majority eliminated the "reasonable expectation" doctrine under the guise of "tort reform."