Oscar W. Larson Co. v. United Capitol Insurance (845 F. Supp. 451, 1993)

OPINION

BENJAMIN F. GIBSON, Chief Judge.

This is an insurance case. This case was the subject of a prior Opinion of this Court rendered on February 8, 1993. See The Oscar W. Larson Co. v. United Capitol Insurance Co., 845 F.Supp. 445 (W.D.Mich.1993). Currently pending before the Court are renewed cross-motions for summary judgment and a motion for reconsideration. This case involves the same insurance policy at issue in the ease of Action Auto v. Oscar W. Larson, 845 F.Supp. 428 (W.D.Mich.1993). The Court adopts many of the conclusions it reached in Action Auto with regard to the applicability of certain policy exclusions.

I.

The facts, as stated in the Court’s Opinion of February 8, 1993, are as follows: Plaintiff Osear W. Larson Company (“Larson”) installs underground field distribution systems. In the fall of 1988, Meijer, Inc. decided to install a Pipe Jacket Total Containment and Leak Detection system (“system”) manufactured by Total Containment, Inc. (“TCI”) and distributed by Clawson Tank Company (“CTC”). The work was done by several different general contractors. Larson was hired by three of these general contractors to perform work relating to the installation of the system. Larson performed some of the work at these sites itself, and it used subcontractors to perform some of the work.

In June 1992, Meijer filed its First Amended Complaint in Kent County Circuit Court against TCI, CTC, and seven general contractors. The complaint alleged that the general contractors had breached their contracts by failing to provide Meyer with a properly functioning system and that TCI and CTC were liable for negligence in the design, manufacture, and sale of the system. The complaint alleged that while the system initially passed air pressure tests, it subsequently failed. The general contractors which employed Larson subsequently filed third-party complaints against it for contribution and/or indemnification. A cross-claim was also filed against Larson by CTC alleging negligence for improper installation of the system.

Larson has a general liability insurance policy which it purchased from defendant United Capitol. Defendant has previously defended Larson in an action for negligent installation of a gasoline containment system. See Action Auto v. Larson, 845 F.Supp. 428 (W.D.Mich.1993). Defendant, however, has refused to provide a defense in this action pursuant to a denial letter sent on January 21, 1992. Larson filed a complaint in the Kent County Circuit Court seeking a declaratory judgment that defendant had a duty to defend Larson in the underlying litigation as well as for coverage for any settlement or judgment which may be awarded. Defendant removed the case to this Court based upon diversity of parties. Larson has used its own counsel to defend the suit and now seeks reimbursement for attorneys fees.

II.

Summary judgment is appropriate only where no genuine issue of fact remains to be decided so that the moving party is entitled to judgment as a matter of law. Atlas Concrete Pipe, Inc. v. Roger J. Au & Son, Inc. (In re Atlas Concrete Pipe, Inc.), 668 F.2d 905, 908 (6th Cir.1982). There is no material issue of fact for trial unless, in viewing the evidence in favor of the nonmoving party, a reasonable fact finder could return a verdict for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). “If the evidence is merely colorable or is not significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at 249, 106 S.Ct. at 2510 (citations omitted).

The party moving for summary judgment bears the initial responsibility of informing the court of the basis of its motion and identifying those portions of the record which demonstrate the absence of a material issue of fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Once this has been done, the non-moving party must come forward with specific facts showing that there is a material issue of fact on an issue which the nonmoving party will bear the burden of proof at trial. Fed.R.Civ.P. 56(e); Celotex, 477 U.S. at 322-24, 106 S.Ct. at 2552-53. If after adequate discovery the party bearing the burden of proof fails to make a showing sufficient to establish an essential element of his claim, summary judgment is appropriate. Id.

III.

In a prior Opinion, this Court disposed of several issues pending in the case and requested that the parties rebrief other issues. Specifically, the Court made the following findings:

(1) Insurance coverage was not barred by the “absolute pollution exclusion” clause located at Section F of an endorsement to the insurance policy. The Oscar W. Larson Co. v. United Capitol Insurance Co., 845 F.Supp. 445, 447-48 (W.D.Mich.1993).

(2) Coverage was not barred by exclusion 2(m) of Section I of the Insurance Policy. Id. at, 448 — 49.

(3) Coverage was not barred by exclusion 2(n) of Section I of the insurance policy. Id. at, 449.

(4) The Court interpreted exclusion 2(k) and 2(1) of Section I of the insurance policy to exclude only coverage for damage to the insured’s work or work product and not to exclude damage done to surrounding or adjacent land. Id. at, 449-50.

(5) Finally, the Court found that the damage resulted from an “occurrence,” such that it was covered by the insurance policy. Id. at, 450-51.

The Court requested that the parties submit renewed summary judgment motions to further brief the issue of whether exclusion 2(j)(5) of Section I of the insurance policy barred coverage. Specifically the Court requested that the parties address whether the clause contained a temporal element and whether or not the property damage at issue in this litigation fell within the definition of “that particular part of real property.” The parties have submitted renewed briefs addressing these issues. In addition, defendant has filed a motion for reconsideration in which it contends that the Court was incorrect in determining that the pollution exclusion clause contained in the policy endorsement does not bar coverage.

A.

The first issue the Court examines is the scope of the exclusion contained at paragraph 2(j)(5) of Section I of the insurance policy. This exclusion reads as follows:

2. This insurance does not apply to:

j. “Property damage” to:

(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations;

Insurance Policy, § 1 ¶ 2(j)(5).

The Court has already discussed at length the issue of whether this exclusion contains a temporal element. See Action Auto v. Oscar W. Larson, 845 F.Supp. at 434-36, 442 (W.D.Mich.1993). For the reasons stated in that Opinion, the Court determines that the exclusion does contain a temporal element such that the exclusion only applies to damage which was caused during the time in which plaintiff Oscar W. Larson was working on the property.

It does not appear that defendant United Capitol is contending that any of the damage done in the instant case occurred during the time plaintiff was performing operations. Thus, the Court’s holding on the temporal requirement of exclusion l(j)(5) may be dis-positive of the issue. In the event that any of the damages are found to have originated at the time the work was in progress, the Court goes on to examine the parties’ varying positions on the extent of the property damage falling within the scope of the exclusion.

In its first Action Auto opinion, this Court interpreted the phrase “that particular part of real property” in conjunction with the preposition “on” to include more than fixtures attached to real property. The Court found that the term was meant to apply to damage done to land or other property upon which the defendant physically worked. See Action Auto v. Larson, 845 F.Supp. at 425 (W.D.Mich.1993). While this definition is somewhat broader than that advanced by the Action Auto plaintiff or by plaintiff Oscar Larson in the pending case, it does not encompass surrounding or adjacent land upon which no work has been performed.

Defendant contends that the exclusion applies because plaintiff was performing operations on real property at the Meijer stores and because the damages were confined to land owned by Meijer. In making this argument, defendant misreads the Court’s prior holding. Defendant’s reading ignores the phrase “that particular part of real property” which is contained in the exclusionary clause. While the Court has already rejected plaintiffs interpretation of the clause as too narrow, it believes defendant’s is too broad. The Court finds that the exclusion applies to property located underneath that upon which the system was constructed and to any property which was operated upon in the sense that it was dug into, drilled, moved, or disturbed in the construction of the system. Damage to land located on the opposite side of the store, however, would not be excluded simply because operations were being performed elsewhere on the land.

Plaintiff argues that, at three of the Meijer locations at which it installed systems, it did not perform any operations upon the soil or groundwater. Plaintiff has submitted affidavit evidence that at these stores neither it nor its subcontractors did any excavation, back-fill, concrete work or otherwise disturbed the soil or groundwater at these locations. Affidavit of Kim Larson and Bruce Larson, at ¶¶ 2 and 3, Affidavit of Kim Larson at ¶¶2, 4, and 5, Exhibit E, Plaintiffs Motion for Summary Judgment. This evidence is unrefuted.

Plaintiff also argues that at the remaining store, there are no allegations that damage occurred because of operations done to the soil or groundwater. Plaintiff has submitted the affidavit of Joseph Falcone, an attorney representing Oscar Larson in the state court case, stating that there is no allegation in the state court suit that plaintiff performed any operations to soil and groundwater which resulted in their contamination. Affidavit of Joseph Falcone at ¶ 2, Exhibit D2, Plaintiffs Motion for Summary Judgment.

Based upon this evidence, the Court finds that plaintiffs summary judgment motion should be granted to the extent that it asks that the Court find that the damage done to soil and groundwater at stores 22, 63, or 68 is not excluded under paragraph 2(j)(5). Because plaintiff did not perform operations upon any of the real property, none of the damage to that property could have resulted from such operations. The Court denies summary judgment on this issue as to store 47 where plaintiff has admitted that it performed operations on real property. Plaintiff insists that the claim arising at this store is for damage resulting from the installation of a defective containment system instead of from operations performed upon the soil or groundwater. The cross-complaint involving store 47 states that plaintiff, among others, was involved in designing and installing the system and therefore liable for indemnification. Elzinga & Volkers, Inc.’s Cross-complaint Against Total Containment, Inc., Claw-son Tank Company, and Oscar W. Larson Company, No. 91-72598-NF (Kent County Circuit Court March 24, 1992) at ¶¶ 25-26, Exhibit F, First Amended Complaint For Declaratory Relief. Any operations performed to the soil and groundwater may well have been part of the overall installation of the system and thus be covered by the complaint. Plaintiffs motion for summary judgment is thus granted in part and denied in part. Defendant’s motion is denied.

B.

Defendant’s motion for summary judgment requests that this Court grant summary judgment as to provision 2(b) which states:

“Bodily injury” or “property damage” for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:

(1) Assumed in a contract or agreement that is an ‘insured contract’; or

(2) That the insured woul