Preview:

Michigan Supreme Court Lansing, Michigan

Opinion
CITY OF GROSSE POINTE PARK, Plaintiff-Appellee, v MICHIGAN MUNICIPAL LIABILITY AND PROPERTY POOL, Defendant-Appellant. _______________________________

Chief Justice:

Justices:

Clifford W. Taylor

Michael F. Cavanagh Elizabeth A. Weaver Marilyn Kelly Maura D. Corrigan Robert P. Young, Jr. Stephen J. Markman

FILED JULY 19, 2005

No. 125630

BEFORE THE ENTIRE BENCH (except CORRIGAN, J.). CAVANAGH, J. Plaintiff city of Grosse Pointe Park had a practice of discharging sewage into a nearby creek when its sewer

system became overtaxed during, for example, heavy periods of rain. As a result of these discharges, the residents

who lived near the creek filed a lawsuit against the city. Defendant Michigan Municipal Liability and Property Pool was the city's insurer and provided a defense in the

lawsuit under a reservation of rights.

Although the pool

covered other claims regarding sewage backups into homes and businesses, the pool refused to cover claims regarding

the discharges into the creek on the basis of the insurance policy's pollution exclusion clause. In this insurance coverage case, we must decide

whether the insurance policy's pollution exclusion clause is ambiguous and whether extrinsic evidence may be examined in this particular case to aid in the construction of the policy. not We hold that this pollution exclusion clause is therefore, construction consideration aid is not of extrinsic

ambiguous; as a

evidence

appropriate.

Further, we conclude that the city's discharges fell within the scope of the pollution exclusion provision and, thus, coverage was properly denied on this basis. Because we conclude that the pollution exclusion

clause applies, we must also decide whether the pool is nonetheless estopped from enforcing this clause because of its practice of covering sewage backup claims or because of the manner in which it provided a defense to the city. We

hold that under these facts, the pool is not estopped from enforcing the pollution exclusion clause. The pool timely

reserved its rights under the policy, and the city was aware of the reservation. While the city claims to have

suffered prejudice as a result of its reliance on a belief that the underlying lawsuit would be covered, this belief was not justifiable under the facts presented in this case.

2


Accordingly,

the

decision

of

the

Court

of

Appeals

is

reversed, and we remand this case to the trial court for entry of an order of summary disposition in favor of the pool. I. Facts and Proceedings In 1938, plaintiff city of Grosse Pointe Park entered into a contract with the city of Detroit to use Detroit's sewer system. Under the terms of the contract, Grosse

Pointe Park acquired the right to pump the contents of its sewer line into an interceptor sewer for transport to

Detroit's treatment plant.

Further, Grosse Pointe Park was

permitted under the contract to build a pump station and a discharge exceeded became pipe. If Grosse cubic Pointe a Park's sewer its flow line

eighty-four the

feet

second would

and

overtaxed,

discharge

pipe

allow

Grosse Fox

Pointe Park to discharge the overflow into Fox Creek.

Creek is a tributary located in Detroit, but rests close to the Detroit-Grosse Pointe Park border. At the time, Grosse Pointe Park had what is known as a combined sewer system, whereby sewage and rainwater are

transported to a treatment plant in a single sewer line. If, for example, there was a heavy rainfall and the

capacity of the sewer system became strained, both sewage and rainwater would flow into the basements of buildings

3


connected

to

the

city's

sewer

line.

To

relieve

the

overflow and prevent basement backups, the city would pump sewage and rainwater into Fox Creek. Beginning in about

1940, the city began discharging overflow from the combined sewer system into Fox Creek. Soon after the first

discharges, residents near Fox Creek began to complain of this practice. Nonetheless, this practice continued until

1995, roughly fifty-five years.1 Defendant Pool is a Michigan Municipal Liability pool and by Property certain

group

self-insurance

created

local governments. in 1985 and

See MCL 124.5. through 1998,

Every year, beginning Grosse Pointe Park

running

purchased

one-year,

occurrence-based

liability

policies

from the pool. July 31. While

Each policy period ran from August 1 to these policies were in effect, Grosse

Pointe Park residents made numerous claims against the city for sewage backups into their homes and businesses, and the pool covered these claims. At issue in this case is the

policy issued on August 1, 1994, and effective through July 31, 1995.

Grosse Pointe Park now uses a separated sewer system, whereby sewage and rainwater are collected and transported in separate sewer lines. Further, the city has blocked the discharge pipe leading into Fox Creek.

1

4


Underlying this case is a class action filed in Wayne Circuit Court against the city by residents who lived near Fox Creek, Etheridge v Grosse Pointe Park (Docket No. 95527115NZ).2 The Etheridge complaint was filed on September

14, 1995, and the plaintiffs alleged that their homes were flooded by the city's discharge of sewer overflow into Fox Creek on July 24, 1995. Because of this discharge, as well

as the city's long-term practice of discharging into Fox Creek, the plaintiff class alleged gross claims for trespass, and a

nuisance,

trespass/nuisance,

negligence,

taking; also alleged were third-party beneficiary claims arising under the contracts between Grosse Pointe Park and Detroit. complaint coverage. On October 6, 1995, the pool sent a letter to the city, indicating that it would provide the city a defense, but that it was reserving its rights under the policy. letter provided, in pertinent part: Our review of the [Etheridge] Complaint reveals that if judgment or damages are awarded based on certain allegations, the judgments based on those allegations may not be covered by the The Grosse to the Pointe pool Park submitted and the Etheridge

for

defense

indemnification

The Etheridge complaint Detroit as a defendant.

2

also

named

the

city

of

5


coverage contract. The purpose of this letter is to point out the allegations and exposures that may not be covered, and to formally advise you that we will defend the entire action, with your cooperation, but will not pay any damages not covered by our contract. In legal terms, we are reserving our rights to restrict payments to those owed under the coverage contract. * * * Please be advised that if there is any judgment against the City of Grosse Pointe Park for eminent domain, a discharge of any pollutants, or an intentional act, the Michigan Municipal Liability & Property Pool reserves the right not to indemnify Grosse Pointe Park for said damages. After other noting the the allegations letter and exposures, the among to

things,

pool's

referred

city

section V of the insurance policy and specifically quoted the following language from that section--the pollution

exclusion clause: In addition to the specific exclusions in SECTION I

Download CITY OF GROSSE POINTE PARK V MICHIGAN MUNI LIABILITY & PROP POOL.pdf

Michigan Law