159 F.3d 348 (8th Cir. 1998), 97-4028, Hawkins Chemical, Inc. v. Westchester Fire Ins. Co.

Docket Nº:97-4028, 97-4032.
Citation:159 F.3d 348
Party Name:HAWKINS CHEMICAL, INC., a Minnesota corporation; The Lynde Company, a Minnesota corporation, Plaintiffs--Appellees, v. WESTCHESTER FIRE INSURANCE COMPANY, a New York corporation; North River Insurance Company, a New Jersey corporation, Defendants--Appellants.
Case Date:October 21, 1998
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Page 348

159 F.3d 348 (8th Cir. 1998)

HAWKINS CHEMICAL, INC., a Minnesota corporation; The Lynde

Company, a Minnesota corporation, Plaintiffs--Appellees,

v.

WESTCHESTER FIRE INSURANCE COMPANY, a New York corporation;

North River Insurance Company, a New Jersey

corporation, Defendants--Appellants.

Nos. 97-4028, 97-4032.

United States Court of Appeals, Eighth Circuit

October 21, 1998

Submitted May 11, 1998.

Page 349

[Copyrighted Material Omitted]

Page 350

Jeffrey Michael Thompson, Minneapolis, MN, argued (Charles E. Spevacek and Thomas M. Crouch, on the brief), for North River.

Robert Chaney, Chicago, IL, argued (Paul A. Banker, Minneapolis, MN, Jeffrey A. Goldwater, Chicago, IL, on the brief), for Westchester Fire.

Stuart T. Williams, Minneapolis, MN, argued, for appellee.

Before RICHARD S. ARNOLD, JOHN R. GIBSON, and FAGG, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

North River Insurance Company and Westchester Fire Insurance Company appeal from a summary judgment entered in favor of Hawkins Chemical, Inc., and its subsidiary, The Lynde Company. Lynde occupied a downtown Minneapolis warehouse owned by Hawkins, a chemical distributor. A fire in February 1995 destroyed the warehouse and sent toxic smoke and fumes to the surrounding area. Those injured by the smoke and fumes pursued a class action against Hawkins, which tendered the defense of the suit to North River and Westchester. Both insurers denied coverage and refused to defend Hawkins, claiming that their respective policies excluded this sort of liability under a "total pollution exclusion." Hawkins brought this diversity action in response. Applying Minnesota law, the district court 1 found for Hawkins. The court adopted the recommendations of the magistrate judge 2 and awarded Hawkins the amounts it paid to settle the class action as well as the fees and expenses incurred for defending it. Following the parties' stipulation to his jurisdiction, the magistrate judge also awarded Hawkins attorneys' fees incurred in this action for establishing the insurers' breach of the duty to defend under the insurance contracts. We affirm.

North River and Westchester present distinct legal claims based on different facts. North River first sold Hawkins a one-year general liability policy in August 1993, naming Lynde as an insured. North River renewed the policy in September 1994, thus covering Hawkins from September 30, 1994, to September 30, 1995. The policy generally required North River to defend and indemnify Hawkins from claims for "bodily injury," "property damage," and "personal injury" as the policy defined those terms. Certain aspects of North River's coverage were limited by a pollution exclusion outlined in the policy jacket. A "total pollution exclusion" endorsement further limited North River's coverage; unlike the pollution exclusion in the policy jacket, the endorsement did not include an exception for "hostile fire" 3 incidents.

North River's appeal depends upon the endorsement's validity; without the endorsement, North River's policy encompasses the hostile fire in question. Minnesota law requires insurers to file policies and provisions in advance with the State's Commissioner of Commerce. See Minn.Stat. § 70A.06 (1994). 4 Several months before North River sold its policy to Hawkins, the Commissioner's office had declared that pollution exclusions in general liability policies must contain an exception for hostile fire. The decision followed a request by the Insurance Services Office, Inc. (ISO)--a trade association of property and casualty insurers--

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to approve a "form" "total pollution exclusion" endorsement without a hostile fire exception. An analyst working under the Commissioner denied the ISO's request, citing the Department's longstanding policy that general pollution exclusions must make exceptions for hostile fire. Henceforth, any individual insurer wishing to use such an endorsement would need the approval of the Department, which would approve "reasonable" filings on an individual basis.

North River sought no such approval of the endorsement attached to Hawkins's policy. Nevertheless, it attempted to prove to the district court that the Commissioner had in 1989 approved a set of forms that included a "total pollution exclusion" endorsement outlined in wording nearly identical to that of Hawkins's endorsement in the 1993 policy. The parties dispute this factual contention, and the district court ultimately rejected it. Alternatively, the court held the North River/Hawkins endorsement invalid regardless of the Commissioner's alleged actions in 1989; because "total pollution exclusion" endorsements without hostile fire exceptions were specifically disapproved, North River could not use the Commissioner's earlier approval--if any--to "resurrect" currently-disapproved policy language. North River's endorsement was therefore void, and Hawkins's coverage was limited only by the policy jacket's pollution exclusion. So interpreted, the policy covered "property damages" and "bodily injury"--but not "personal injuries"--caused by the fire's smoke and fumes.

While North River served as Hawkins's primary insurer, Westchester sold Hawkins a one year "umbrella" policy to begin September 1993. The umbrella policy provided excess coverage to the North River general liability policy as well as certain coverage (not relevant to our decision) that North River's policy did not provide. The policy included a pollution exclusion similar to that contained in North River's policy jacket; specifically, the exclusion provided an exception for hostile fire incidents. In September 1994, Westchester and Hawkins agreed to renew the policy for one year. The magistrate judge's report and recommendation, adopted in full by the district court, stated that neither the binder issued to Hawkins nor its accompanying cover letter identified any...

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