Wheeler v. Garrison Prop. & Cas. Ins. Co.

80 F.4th 1006

The ESTATE OF Josiah WHEELER, pursuant to theassignment of rights of insured Deborah Overly and Terry Summers;Keith Wheeler; Rhetta Wheeler, individually and as representatives of theEstate of Josiah Wheeler, Plaintiffs-Appellants, v. GARRISON PROPERTY AND CASUALTY INSURANCE COMPANY,a subsidiary of USAA Insurance Company, Defendant-Appellee.

No. 22-35484

United States Court of Appeals, Ninth Circuit

Filed September 6, 2023

D.C. No. 4:20-cv-00041-SLG

Kenneth L. Covell (argued), Law Offices of Kenneth L. Covell, Fairbanks, Alaska, for Plaintiffs-Appellants.

Cheryl L. Graves (argued), Farley & Graves PC, Anchorage, Alaska, for Defendant-Appellee.

Before: Mary H. Murguia, Chief Judge, and Richard A. Paez and Jacqueline H. Nguyen, Circuit Judges.

ORDER

Mary H. Murguia, Chief Judge

The Estate of Josiah Wheeler and Josiah's parents, Keith and Rhetta Wheeler, (collectively, "the Wheelers") appeal the district court's grant of summary judgment in favor of Garrison Property and Casualty Insurance Company ("Garrison"). Because this case involves an issue of first impression under Alaska law, we respectfully ask the Alaska Supreme Court to exercise its discretion to decide the certified question set forth in Part III of this order.

I.

The facts underlying this case are undisputed. In October 2018, seventeen-year-old Josiah Wheeler moved into a cabin owned by Deborah Overly and Terry Summers in Tok, Alaska. Josiah was found dead in the cabin's bathtub in January 2019. An autopsy showed that he died from acute carbon monoxide poisoning. After an investigation, the deputy fire marshal determined that the cabin's water heater had emitted the carbon monoxide. Summers had installed the water heater in the same small bathroom as the bathtub without connecting its flue to a venting system, in contravention of the heater's instruction manual.

At the time of Josiah's death, the cabin was covered by a homeowners' insurance policy that Garrison issued to Overly and Summers. The policy contained the following pollution exclusion:

SECTION II - EXCLUSIONS

1. Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not apply to "bodily injury" or "property damage":

. . .

k. Arising out of the actual, alleged, or threatened discharge, dispersal, release, escape, seepage or migration of "pollutants" however caused and whenever occurring. This includes any loss, cost or expense arising out of any:

(1) Request, demand or order that any "insured" or others test for, monitor, clean up, remove, contain, treat, detoxify, or assess the effects of "pollutants"; or

(2) 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 policy defines "pollutants" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste."

The Wheelers brought wrongful death and survivorship claims against Overly and Summers. Overly and Summers submitted an insurance claim to Garrison. In April 2019, Garrison denied liability coverage on the basis that carbon monoxide was a "pollutant" that fell under the policy's pollution exclusion.

In August 2020, Overly and Summers signed a confession of judgment in which they admitted liability for Josiah's death. They also assigned to the Wheelers their rights to pursue coverage claims against Garrison.

In December 2020, the Wheelers filed a declaratory judgment action against Garrison seeking a declaration of coverage and an award of damages. The parties filed cross motions for declaratory judgment, which the district court construed as motions for summary judgment. See Est. of Wheeler v. Garrison Prop. & Cas. Ins. Co., 604 F. Supp. 3d 844, 845 & n.1 (D. Alaska 2022). The district court, concluding that the Wheelers' case fell within the pollution exclusion, denied their motion and granted summary judgment for Garrison. Id. at 853. The Wheelers appealed.

II.

A.

The pollution exclusion emerged in the 1970s to shield the insurance industry from "ever-increasing economic burdens due to environmental claims" under newly enacted air pollution laws by barring coverage for "government-mandated cleanup from long-term industrial pollution." 9 Couch on Insurance § 127:3 (3d ed. 2021). The original pollution exclusion was a "qualified" exclusion that restored coverage if pollution was "sudden and accidental." Claudia G. Catalano, Annotation, What Constitutes "Pollutant," "Contaminant," "Irritant," or "Waste" Within Meaning of Absolute or Total Pollution Exclusion in Liability Insurance Policy, 98 A.L.R.5th 193 (2002). Later versions of the exclusion eliminated that caveat, producing the modern "absolute" or "total" pollution exclusion. Id. The Garrison homeowners' insurance policy issued to Overly and Summers contained a total pollution exclusion.

Since the inception of the pollution exclusion, its scope "has been repeatedly litigated, spawning conflicting judicial decisions throughout the country." Century Sur. Co. v. Casino W., Inc., 677 F.3d 903, 908 (9th Cir. 2012) (quoting Apana v. TIG Ins. Co., 574 F.3d 679, 682 (9th Cir. 2009)). We have observed that "[m]ost state court decisions fall into one of two broad camps": they either find the exclusion's terms to be unambiguous and apply it literally, or they limit the exclusion to traditional environmental pollution due to ambiguity or the reasonable expectations of the insured. Id. (internal quotation marks omitted).

Many states have decisions in both "camps" because their courts make a fact-specific determination in each case, tailoring their analysis to the insurance policy and the cause of the damage.¹ State courts' approaches and the results in these cases thus vary according to the facts and over time.

This principle holds true when applied to carbon monoxide cases. Some states have decided that carbon monoxide falls outside the total pollution exclusion after having previously held that its language was unambiguous with respect to a different substance. For instance, a Nevada federal district court applying state law held that an exclusion was unambiguous as applied to hazardous waste in a landfill, Mont. Refin. Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 918 F. Supp. 1395, 1396 (D. Nev. 1996); years later, in response to our certified question,² the Supreme Court of Nevada nonetheless held that the exclusion did not bar coverage for deaths from carbon monoxide inhalation, Century Sur. Co. v. Casino W., Inc., 130 Nev. 395, 329 P.3d 614 (2014).

State courts or federal courts applying the law of Massachusetts, Illinois, Ohio, Kentucky, Tennessee, Washington, and the District of Columbia have likewise held that carbon monoxide is outside the scope of the exclusion but reached the opposite conclusion about different substances.³ Minnesota, Iowa, and Georgia have held that carbon monoxide falls within the pollution exclusion.⁴

B.

The question of how the Alaska Supreme Court interprets this homeowners' insurance policy pollution exclusion as applied to carbon monoxide may determine the outcome of this case. If the exclusion applies only to active industrial polluters or traditional environmental pollution, then there would be coverage in this case. In contrast, if the plain language unambiguously encompasses carbon monoxide exhaust from a residential water heater, coverage might be precluded unless that result contravenes the reasonable expectations of the insured. See Bering Strait Sch. Dist. v. RLI Ins. Co., 873 P.2d 1292, 1294-95 (Alaska 1994).

Existing Alaska law does not permit us to predict how the Alaska Supreme Court would resolve this issue. The Alaska Supreme Court has only once addressed the scope of an insurance policy's total pollution exclusion in a published decision. Whittier Props., Inc. v. Alaska Nat'l Ins. Co., 185 P.3d 84 (2008). Whittier concerned an underground storage tank at a gas station that leaked over 50,000 gallons of gasoline into the surrounding soil. Id. at 87. Environmental authorities discovered the damage, investigated, and assessed penalties as well as cleanup costs. Id. at 87-88. Neighboring property owners also filed suit for property damage. Id.

The gas station owner submitted a claim for coverage under his commercial general liability insurance policy. The policy contained a clause excluding property damage arising out of the "discharge, dispersal, seepage, migration, release or escape of pollutants." Id. at 89. The policy defined a "pollutant" as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste." Id. at 87, 89-91.

The Alaska Supreme Court held that the exclusion provision was unambiguous and covered the gasoline leak by its plain terms. The Court explained that the policy's other provisions and extrinsic evidence also supported a literal interpretation.

Garrison argues that Whittier conclusively establishes that the Alaska Supreme Court would interpret the pollution exclusion literally in the Wheelers' case. The district court recognized that Whittier did not address carbon monoxide but concluded that the Court's reasoning suggested a preference for literal interpretation and represented Alaska's choice of a "camp" in the national debate over the scope of the pollution exclusion. Est. of Wheeler, 604 F. Supp. 3d at 850-51.⁵ But see Sauer v. Home Indem. Co., 841 P.2d 176, 181 n.8 (Alaska 1992) (stating that the "new pollution exclusion language . . . 'shifts the emphasis to industrial sites' " (quoting 1 W. Freedman, Richards on the Law of Insurance § 5:2[d] (6th ed. supp. 1991))).

Although the Whittier Court cited cases from other factual contexts, it explicitly tailored its holding to coverage for a gasoline leak in a commercial general liability policy. See,...