Submitted: November 14, 2018
from United States District Court for the District of
Minnesota - Minneapolis
COLLOTON, SHEPHERD, and STRAS, Circuit Judges.
COLLOTON, CIRCUIT JUDGE.
Fashion Pork sued Restaurant Recycling for delivering
defective shipments of recycled fat, which New Fashion Pork
uses as an ingredient in its swine feed. Restaurant
Recycling, in turn, sued Employer Mutual Casualty Company,
seeking a declaratory judgment that the insurer had a duty to
defend and indemnify Restaurant Recycling. Employer Mutual
moved for judgment on the pleadings, citing a total pollution
exclusion in its policy that limited coverage in the case of
property damage arising from dispersal of pollutants. The
district court granted the motion, and Restaurant
Recycling appeals. We conclude that the total pollution
exclusion applies and affirm the judgment.
over an insurer's duty to defend are determined by
reference to the complaint in the underlying action, so we
recite the facts as alleged by New Fashion Pork. Restaurant
Recycling purchases used fat products, like waste cooking oil
from restaurants, and then processes and resells the
substances to livestock producers for blending with other
ingredients in their animal feed. From July to September
2014, Restaurant Recycling delivered several loads of its
blended fats to New Fashion Pork. These fat products were
contaminated with two substances-lasalocid and lascadoil.
Lasalocid, a chemical agent, "is not generally
recognized as safe and is known to cause deaths in horses,
turkeys, and swine." Lascadoil, a byproduct in the
manufacture of lasalocid, "is not approved for
consumption in humans or in animals and is not generally
recognized as safe." Lascadoil is an industrial waste
product whose only approved use is as biofuel.
Fashion Pork sued Restaurant Recycling in Minnesota state
court, seeking reimbursement of its payment for the fat
product and damages for the harm to its swine caused by the
contaminated feed. The complaint alleged breach of contract,
breach of implied warranties, negligence, strict liability,
and fraud. New Fashion Pork asserted that consumption of the
contaminated fat caused serious health issues for its swine,
including that nursery pigs at several facilities "had
difficulty starting feeding and experienced measurably
reduced feed consumption." Sows that consumed the
contaminated fat "experienced feed refusal, irregular
returns, and a reduced conception rate." And the feed
allegedly caused an increase in the occurrence of nursery
pigs dying suddenly.
Recycling sought a declaratory judgment that Employer Mutual
was obligated to defend and indemnify the company against New
Fashion Pork's lawsuit. Employer Mutual acknowledged that
it issued a commercial general liability policy to Restaurant
Recycling, but claimed that the damages alleged by New
Fashion Pork fell within the policy's total pollution
exclusion. The district court agreed and granted Employer
Mutual's motion for judgment on the pleadings. We review
the district court's interpretation of the insurance
policy de novo and apply Minnesota substantive law.
Thach v. Tiger Corp., 609 F.3d 955, 957 (8th Cir.
Minnesota law, we interpret insurance policies according to
the general principles of contract law. Midwest Family
Mut. Ins. Co. v. Wolters, 831 N.W.2d 628, 636 (Minn.
2013). "Provisions in an insurance policy are to be
interpreted according to both plain, ordinary sense and what
a reasonable person in the position of the insured would have
understood the words to mean." Farmers Home Mut.
Ins. Co. v. Lill, 332 N.W.2d 635, 637 (Minn. 1983)
(internal quotation marks omitted). When interpreting
pollution exclusions, Minnesota follows "a
non-technical, plain-meaning approach." Auto-Owners
Ins. Co. v. Hanson, 588 N.W.2d 777, 779 (Minn.Ct.App.
1999). An insured party bears the initial burden of
demonstrating coverage, and the insurer then bears the burden
of establishing an applicable exclusion. Midwest
Family, 831 N.W.2d at 636. The duty to defend is broader
than the duty to indemnify, and covers "those claims
that arguably fall within the scope of the policy."
Meadowbrook, Inc. v. Tower Ins. Co., 559 N.W.2d 411,
415 (Minn. 1997). In determining the scope of the duty,
"a court will compare the allegations in the complaint
in the underlying action with the relevant language in the
insurance policy." Id. (emphases omitted).
Recycling's policy provides that Employer Mutual has no
duty to defend or indemnify in cases of "'[b]odily
injury' or 'property damage' which would not have
occurred in whole or part but for the actual, alleged or
threatened discharge, dispersal, seepage, migration, release
or escape of 'pollutants' at any time."
Restaurant Recycling concedes that lascadoil is a
"pollutant" under the policy, but argues that the
district court erred in concluding that lasalocid so
not address the district court's rationale, because
Restaurant Recycling's concession that lascadoil is a
pollutant makes consideration of lasalocid's status
unnecessary. Although the district court did not address
whether lascadoil alone sufficed to trigger the pollution
exclusion, Employer Mutual presented the argument below, and
we may affirm on any ground raised in the district court.
Transcon. Ins. Co. v. W.G. Samuels Co., 370 F.3d
755, 758 (8th Cir. 2004).
Fashion Pork alleged in its complaint that both lascadoil and
lasalocid were "not generally recognized as safe,"
that lascadoil contains lasalocid, and that the fat product
delivered by Restaurant Recycling was contaminated with both
lasalocid and lascadoil. Each of the claims alleged that
consumption of the contaminated fat caused damage to swine.
The policy excludes property damage that "would not have
occurred in whole or part but for" dispersal of a
pollutant. Even if lasalocid were not a pollutant, the
complaint did not allege that lasalocid by itself
caused or would have caused all of the damage; to
the contrary, New Fashion Pork alleged that both lasalocid
and lascadoil were unsafe for consumption by animals, and
that fat product contaminated with both substances caused
serious health issues for its swine. (One count, alleging
fraud, is based entirely on the undisclosed presence of
lascadoil, the "industrial waste product.") The
allegations that lascadoil caused some measure of damage
suffice to place New Fashion Pork's claims within the
pollution exclusion if the damage was caused by
"dispersal" of the pollutant.
policy does not define the term "dispersal," so
under Minnesota's nontechnical, plain-meaning approach to
pollution exclusions, we use the ordinary meaning of
"disperse"-i.e., "to cause to break
up and go in different ways" or "to cause to become
spread widely." Webster's Third New
International Dictionary 653 (2002); see also The
American Heritage Dictionary 520 (5th ed. 2016)
(defining "disperse" as "[t]o drive off or
scatter in different directions" or "[t]o strew or
distribute widely"); The New Oxford American
Dictionary 492 (2001) (defining "dispersal" as
"the action or process of distributing things or people
over a wide area").
complaint, New Fashion Pork alleged that Restaurant Recycling
"collects waste cooking oil" and "processes
that waste oil into fat products" for use in animal
feed. New Fashion Pork "blended" the contaminated
fat into its feed and transported the feed to its swine
facilities in Indiana and Illinois. These actions by
Restaurant Recycling and New Fashion Pork qualify as
"dispersing" the lascadoil, for they involve the
breaking up and distributing ...