Restaurant Recycling, LLC v. Employers Mutual Casualty Company, d/b/a EMC Insurance Companies; Hamilton Mutual Insurance Company

New 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 court1 granted the motion,

and Restaurant Recycling appeals. We conclude that the total pollution exclusion

applies and affirm the judgment.



Disputes 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.



New 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



1The Honorable David S. Doty, United States District Judge for the District of

Minnesota.



-2-



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.



Restaurant 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. 2010).



Under 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, plainmeaning

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).



-3-



Restaurant 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 qualifies.

We need 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).

New 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.



-4-



The 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”).



In its 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 of the lascadoil throughout the processed fat

product and New Fashion Pork’s swine feed.



Restaurant Recycling posits that dispersal must be an intentional act, and

argues that the company never intended to spread lascadoil through its fat product

deliveries. See MacKinnon v. Truck Ins. Exch., 73 P.3d 1205, 1215-18 (Cal. 2003).

Restaurant Recycling argues that the “plain meaning” of dispersal implies

intentionality. Failing that, the company also points to the fact that the policy covers

only property damage caused by an “occurrence,” which is defined as “an accident.”

The company argues that because an intentional act of dispersing pollutants would

not be a covered accident or occurrence, the exclusion is logically limited to

intentional acts.



We are not convinced by the plain-meaning argument. For one thing, the

policy is phrased in the passive voice (excluding damage resulting from the “dispersal



-5-



. . . of ‘pollutants’”) and does not even specify that the insured must cause the

“dispersal,” intentionally or otherwise. The ordinary meaning of dispersal, moreover,

is not limited to intentional acts. In Hanson, the Minnesota Court of Appeals

concluded that the unintentional chipping of lead paint through opening and closing

a window counted as dispersal. 588 N.W.2d at 781; see also The New Oxford

American Dictionary 492 (2001) (noting that “storms can disperse seeds via high

altitudes”). Likewise, the processing of the lascadoil into the fat product, and the

blending of the fat product into the swine feed, constitutes a “dispersal” of lascadoil,

even if Restaurant Recycling and New Fashion Pork were unaware of its presence.

That the insurance policy provides coverage for property damage caused by

“occurrences,” or accidents, does not mean logically that the exclusion is limited to

intentional acts. Where a policy generally grants coverage for damage caused by

accidents, the insurer naturally has reason to exclude certain types of accidents.



Restaurant Recycling’s interpretation, by contrast, would render the “dispersal”

aspect of the exclusion superfluous. If the company is correct that an intentional act

would never be a covered occurrence under the insurance policy, then there would be

no need to exclude damages arising from intentional dispersals.

The judgment of the district court is affirmed.