Independent Petrochem. Corp. v. Aetna Cas. & Sur.

• Decision Date: 04 February 1986
• Docket Number: Civ. A. No. 83-3347.
• Parties: INDEPENDENT PETROCHEMICAL CORPORATION, et al., Plaintiffs, v. AETNA CASUALTY AND SURETY COMPANY, et al., Defendants.
• Court: U.S. District Court — District of Columbia

654 F. Supp. 1334

INDEPENDENT PETROCHEMICAL CORPORATION, et al., Plaintiffs, v. AETNA CASUALTY AND SURETY COMPANY, et al., Defendants.

Civ. A. No. 83-3347.

United States District Court, District of Columbia.

February 4, 1986.

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Alan G. Miller, Mitchell S. King, Hunter O'Hanian, Morrison, Mahoney & Miller, Boston, Mass., for U.S. Fire Ins. Co.

Michael Gallagher, Katheryn A. Dux, German, Gallagher & Murtaugh, Philadelphia, Pa., for Stonewall Ins. Co.

Lawrence E. Carr, Jr., Margaret H. Warner, Carr, Goodson & Lee, Washington, D.C., for The Continental Ins. Co.

James T. Wharton, Digges, Wharton & Levin, Annapolis, Md., for Midland Ins. Co.

Richard H. Gimer, Stephen L. Humphrey, Hamel & Park, Washington, D.C., for The American Employers' Co., Commercial Union Ins. Co.

James W. Greene, Charles O'Hara, Bromley, Brown & Walsh, Washington, D.C., for Continental Cas. Co., North Star Reinsurance Corp., Unigard Mut. Ins. Co., American Re-Ins. Co.; Mission Ins. Co.

James P. Schaller, M. Elizabeth Medaglia, Timothy R. Dingillian, Jackson & Campbell, Washington, D.C., for American Home Assur. Co., The Ins. Co. of the State of Pa., Lexington Ins. Co.

Robert E. Heggestad, Casey, Scott & Canfield, Washington, D.C., for Harbor Ins.

Martin R. Baach, Michael Nussbaum, Eric L. Lewis, Nussbaum, Owen & Webster, Washington, D.C., Harry S. Redmon, Jr., Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., John G. McAndrews, Mendes & Mount, New York City, for Certain Underwriters at Lloyd's London, London Market Ins. Companies.

Peter J. Schlesinger, Simpson, Thacher & Bartlett, New York City, Douglas B. Mishkin, Melrod, Redmon & Gartlan, Washington, D.C., for The Travelers Indem. Co.

Dennis M. Flannery, W. Scott Blackmer, Alan S. Tenenbaum, Wilmer, Cutler & Pickering, Washington, D.C., for Ins. Co. of North America.

James E. Rocap, III, Martin D. Minsker, Stephen L. Nightingale, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for Aetna Cas. & Sur. Co.

Jerold Oshinsky, Sherry W. Gilbert, Robert H. Shulman, Patricia A. Van Dyke, David M. Halbreich, Anderson, Baker, Kill & Olick, Washington, D.C., Mark Hulsey, Tim E. Sleeth, Smith & Hulsey, Jacksonville, Fla., for plaintiffs Independent Petrochemical Corp., The Charter Co., Charter Oil Co.

John P. Arness, P.C., Jamie M. Bennett, Hogan & Hartson, Washington, D.C., for Hartford Acc. & Indem. Co., First State Ins. Co.

MEMORANDUM

FLANNERY, District Judge.

This matter comes before the court on a variety of motions: (1) plaintiffs' motion for partial summary judgment regarding the method of triggering coverage of certain liability insurance and regarding defendants' obligation to pay defense costs for civil actions against plaintiffs; (2) defendants' motion to strike the affidavit of Thomas J. Terbrueggen which accompanies plaintiffs' motion for partial summary judgment; (3) defendant Pacific Indemnity Company ("Pacific")'s motion for summary judgment recognizing that Pacific never insured plaintiffs during the time in question; and (4) plaintiffs' cross motion for summary judgment against Pacific on the same issue.

I. Background

Plaintiff Independent Petrochemical Corporation ("IPC") is primarily in the business of terminaling and marketing various petrochemical products in Missouri. IPC is a wholly-owned subsidiary of plaintiff Charter Oil Company ("Charter"), which in turn is owned by plaintiff The Charter Company ("TCC"). Plaintiffs have filed for Chapter 11 bankruptcy in Florida.

Defendants are 23 insurance companies that sold 67 primary and excess liability insurance policies to plaintiffs from 1971 to 1983, for which plaintiffs paid in excess of $10 million and which provide coverage of approximately $1.115 million for each "occurrence" of certain "bodily injury" and "property damage."

In 1971, IPC agreed to help one of its customers, Northeastern Pharmaceutical and Chemical Company ("NEPACCO"), to remove waste products from a holding tank at NEPACCO's facility in Verona, Missouri. IPC did this by contacting an independent contractor, Russell Martin Bliss, who removed over twenty thousand gallons of waste products. It is now alleged that this waste material contained a concentration of dioxin, a toxic element that can cause physical injury.¹ Bliss allegedly mixed these waste products with waste oils he collected from other sources and sprayed the mixture as a dust suppressant at a number of sites in Missouri.

Fifty-seven civil actions involving more than 1,600 claimants have been filed in other courts against plaintiffs, as well as class actions and suits by the State of Missouri and the United States.² Most of the claims allege bodily injury and property damage from exposure to the contaminated spray material . One aspect of the claims is that they allege "delayed-manifestation" injury, meaning continuous and progressive damage from the exposure. The individual claimants seek in aggregate $4 billion in bodily injuries and property damage, as well as $4 billion in punitive damages.

Some of the claims have been settled. Four of plaintiffs' six primary insurance companies³ have agreed to pay all of plaintiffs' defense costs for the time being in the remaining actions pursuant to a Standstill Interim Defense Agreement. Although the parties have attempted to negotiate a final settlement of defendants' obligations to defend and indemnify plaintiffs in the dioxin-related claims, no such settlement has been reached.

Although the insurance policies vary in minor ways, language from a representative policy⁴ is as follows:

The "Coverage" provision states:

The company will pay on behalf of the insured all sums which the insured shall become legally obliged to pay as damages because of

bodily injury or property damage

to which this insurance applies, caused by an occurrence ....

The term "occurrence" is defined as:

an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

"Bodily injury" is defined as:

bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom.

"Property damage" is defined as"

(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

The "defense" provision states:

the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent....

Suit was filed in this court by plaintiffs in November of 1983. On June 14, 1985, plaintiffs filed a motion for partial summary judgment. Plaintiffs seek a declaration of the primary insurance carriers' obligations to defend plaintiffs against the dioxin-related claims on a final basis and a declaration of the primary and excess insurance carriers' obligations to indemnify plaintiffs for settlements and judgments, if any, in the dioxin-related claims.

Defendants were allowed to file jointly and individually papers under seal because of the sensitive nature of the information the insurance companies have had to reveal in their defenses. Defendants have moved to strike the affidavit of Thomas J. Terbrueggen, which plaintiffs submitted to support their motion.

Jointly, defendants oppose this court reaching such a summary declaration, contending that more time for discovery is needed. As defendants see it, there are genuine facts still in dispute regarding the dioxin-related claims and the applicability of the insurance policies to these claims. Defendants also argue that it is not clear which state's law applies to this action.

Individually, some defendants have raised objections peculiar to their particular policies. For instance, defendant Aetna argues that it was never made aware of existing dioxin-related claims when its policy was implemented in 1974. Absent such disclosure, the policy was procured through misrepresentation. Defendant Continental argues that it only insured plaintiff TCC and in a Florida lawsuit TCC itself seeks to establish that TCC's corporate liability for IPC's activities is a material issue of disputed fact. Defendant INA asserts that the definition of "occurrence" in its policy as well as the failure to disclose prior dioxin exposure precludes application of its policy. Certain excess insurers have also made individual objections. Defendant U.S. Fire Insurance Company ("U.S. Fire") argues that its policies can only be construed according to New York law. U.S. Fire has counterclaimed against plaintiffs, asserting fraud, misrepresentation, and failure to disclose material facts. Certain London defendants (underwriters at Lloyd's of London and companies in the London market) argue that language in their policies prohibit cumulation of policy limits and that on the evidence before the court, plaintiffs can be shown to have expected the dioxin injuries. Defendant Stonewall Insurance Company asserts that its provisions on the limits of liability may be incompatible with plaintiffs' requested relief. Many of the defendants assert that pollution-exclusion clauses in their policies prevent application of the policies to the dioxin-related claims.

One of the defendants, Pacific Indemnity Company, contends that it never insured IPC as a subsidiary of Charter (it had insured IPC as a subsidiary of another company prior to the dioxin-spraying) and therefore summary judgment should be granted against plaintiffs' claims regarding Pacific. On September 16, 1985, plaintiffs...