On Appeal from Superior Court, Bennington Unit, Civil Division, John P. Wesley, J.
Shapleigh Smith, Jr. and Sophie E. Zdatny of Dinse, Knapp & McAndrew, P.C., Burlington, for Plaintiff-Appellant.
Joel P. Iannuzzi of Cleary Shahi & Aicher, P.C., Rutland, and Jennifer Deck Samuelson (On the Brief) of Samuelson Law Offices, Manchester Center, for Defendants-Appellees.
PRESENT: Dooley, Skoglund and Robinson, JJ., and Morris, Supr. J. (Ret.), Specially Assigned
¶ 1. Insurer Cincinnati Specialty Underwriters Insurance Company appeals from the trial court’s order granting summary judgment to defendants Energy Wise, Inc. and Michael D. and Shirley A. Uhler in this declaratory-judgment action. It argues that the court should have granted summary judgment in its favor because the “total pollution exclusion” in its policy plainly and unambiguously precludes coverage in this case. We agree with insurer, and therefore reverse the trial court’s decision and remand with instructions to enter judgment in insurer’s favor.
¶ 2. The facts are undisputed. Energy Wise is a Vermont corporation that specializes in insulating buildings and homes. It purchased a commercial general liability (CGL) policy from insurer, effective March 1, 2010 to March 1, 2011. As insurer notes, this was a “surplus lines” policy.  See 8 V.S.A. § 5022(b)(8) (defining “surplus lines insurance” as “coverage not procurable from admitted insurers”); id. § 5022(b)(1) (defining “admitted insurer” as “an insurer possessing a certificate of authority to transact business in [Vermont] issued by the Commissioner [of Financial Regulation] pursuant to [8 V.S.A. § 3361]”).
¶ 3. In late 2010, Energy Wise installed spray-foam insulation at the Shrewsbury Mountain School. A school employee, Shirley Uhler, and her husband later filed suit against Energy Wise. Ms. Uhler asserted that she was “exposed to and encountered airborne chemicals and airborne residues” from the spray-foam insulation and suffered bodily injury as a result.  The Uhlers raised claims of negligence, res ipsa loquitur, and loss of consortium. Energy Wise requested coverage under its CGL policy, and insurer agreed to defend Energy Wise under a bilateral reservation of rights.
¶ 4. In September 2012, insurer filed a complaint for declaratory judgment, asserting that its policy did not cover the claims at issue. Insurer cited the “Total Pollution Exclusion Endorsement” in its policy, which excluded coverage for “[b]odily injury... [that] would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ at any time.”
¶ 5. The policy defined “pollutants” as:
any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, petroleum, petroleum products and petroleum by-products, and waste. Waste includes materials to be recycled, reconditioned or reclaimed. “Pollutants” include but are not limited to, that which has been recognized in industry or government to be harmful or toxic to persons, property or the environment, regardless of whether the injury, damage, or contamination is caused directly or indirectly by the “pollutants” and regardless of whether: (a) The insured is regularly or otherwise engaged in activities which taint or degrade the environment; or (b) The insured uses, generates or produces the “pollutant.”
The following specific pollutants were expressly excluded: respirable dust, microorganisms, fungi, bacteria, sulfuric acid, tainted drywall, chromated copper aresante, fluorine, beryllium, benzene, formaldehyde, and manganese.
¶ 6. The policy also excluded coverage for “bodily injury” arising out of “the installation or application of any exterior insulation and finish system or any substantially similar system, including the application or use of conditioners, primers, accessories, flashings, coatings, caulking or sealants in connection with such system.” (Quotation marks omitted.)
¶ 7. Insurer argued that given the broad language used in the exclusion, and the fact that the policy included additional exclusions for actual or alleged bodily injury arising out of or caused by other potential toxins, it was clear that the policy “d[id] not provide any coverage for bodily injuries related to toxins, chemicals, or pollutants.” Thus, insurer argued, the Uhlers ’ underlying claim, which was based on exposure to toxic “airborne chemicals” and “airborne residues, ” was not covered.
¶ 8. The Uhlers opposed insurer’s motion for summary judgment. They argued that the pollution exclusion was intended only to protect against liability for traditional environmental hazards, and that insurer’s interpretation was so overbroad as to make the policy meaningless.
¶ 9. In a January 2014 decision, the court indicated its intent to grant summary judgment to defendants. It recognized that many other courts had interpreted total pollution exclusions like the one at issue, and it identified two cases that helped frame the debate: MacKinnon v. Truck Insurance Exchange, 73 P.3d 1205 (Cal. 2003), and Quadrant Corp. v. American States Insurance Co., 110 P.3d 733 (Wash. 2005). California holds that the total pollution exclusion is limited “to injuries arising from events commonly thought of as pollution, i.e. environmental pollution, ” and it is not intended to encompass “ordinary acts of negligence involving harmful substances.” MacKinnon, 73 P.3d at 1216. Washington, on the other hand, holds that the total pollution exclusion, by its plain language, excludes all injuries that occur from pollutants. Quadrant Corp., 110 P.3d at 735.
¶ 10. After considering these and other cases, the court found MacKinnon persuasive. It concluded that the purpose of the total pollution exclusion was and remained to protect insurers against traditional environmental liabilities. As applied to the facts here, the court found the term “pollutants” ambiguous because it was capable of such broad interpretation as to frustrate any reasonable purpose of the policy. It found that insurer’s definition admitted to no limiting principle that would provide a business such as Energy Wise with any assurance that any aspect of its business operations would be covered.
¶ 11. The court found that a similar ambiguity afflicted insurer’s broad definition of the term “discharge.” Energy Wise sprayed insulation into buildings as the fundamental aspect of its business operations. It did not spray the insulation into the air, water, or earth in way that was consistent with traditional environmental liability. Under insurer’s argument, the court reasoned, almost any use of the products of Energy Wise’s business that harmed a third party might be excluded. Seen in this light, the court concluded that the term “discharge” was ambiguous and insurer could not rely on the exclusion to relieve it of its duty to defend and indemnify Energy Wise.
¶ 12. The court disagreed with the reasoning of the Washington Supreme Court, finding its resort to plain-language analysis facile. It concluded that the Washington decision did not sufficiently account for the historical purpose and development of the pollution exclusion, or for the reasonable expectations of an insured business that the pollution exclusion should be subject to a limiting principle that preserved the meaning and value in a CGL policy. The court considered insurer’s argument an “opportunistic afterthought inimical to the expectations of coverage reasonably associated with the sale of a [CGL] policy to a company engaged in the business of spraying insulation.” (Quoting Quadrant Corp., 110 P.3d at 748 (Chambers, J., dissenting) (quotation omitted).)
¶ 13. Thus, given the ambiguities in the policy, and the rule that all ambiguities must be read in favor of the insured, Vt. Mut. Ins. Co. v. Parsons Hill P’ship, 2010 VT 44, ¶ 21, 188 Vt. 80, 1 A.3d 1016, the trial court rejected insurer’s argument that coverage was excluded. The court indicated that it would enter summary judgment in defendants’ favor absent a persuasive demonstration that such relief was unwarranted. Insurer submitted a response, which the court found unpersuasive. This appeal followed.
¶ 14. Insurer argues on appeal that its policy plainly bars coverage. According to insurer, its policy goes beyond excluding coverage for traditional environmental risks because its definition of “pollutants” includes “that which has been recognized in industry or government to be harmful or toxic to persons, property or the environment.” (Emphasis added and quotation marks omitted.) Insurer asserts that this language broadens the scope of the pollution exemption beyond traditional environmental claims and distinguishes this case from the cases relied upon by the trial court. Insurer maintains that it is entitled to have the policy enforced as written, that the reasonable expectations doctrine is irrelevant given the plain language of the policy, and that enforcement of the exclusion does not render coverage illusory.
¶ 15. We review the trial court’s decision “de novo, applying the same standard as the trial court.” Progressive Cas. Ins. Co. v. MMG Ins. Co., 2014 VT 70, ¶ 10, __ Vt. __, 103 A.3d 899. “Summary judgment is appropriate if the material facts are undisputed and any party is entitled to judgment as a matter of law.” Id.; see also V.R.C.P. 56.
¶ 16. We apply well-established legal principles to this dispute. An insurance policy is construed according to “its terms and the evident intent of the parties as expressed in the policy language.” Sperling v. Allstate Indem. Co., 2007 VT 126, ¶ 8, 182 Vt. 521, 944 A.2d 210 (quotation omitted). We interpret policy terms “according to their plain, ordinary and popular meaning.” Id. (quotation omitted). Ambiguity exists “[ i ]f a term is “subject to more than one reasonable interpretation, ” and all ambiguities “must be resolved in favor of the insured.” Id. (quotation omitted). Policies that “specifically and unambiguously exclude coverage are effective to preclude the insurer’s liability, ” and “we cannot deny the insurer the benefit of unambiguous provisions inserted into the policy for its benefit.” Id. ¶ 14 (quotation omitted). While we are mindful of “the reasonable expectations of the insured in interpreting insurance coverage ...