Olin Corp. v. Insurance Co. of North America

Decision Date23 April 1991
Docket NumberNo. 84 Civ. 1968 (LBS).,84 Civ. 1968 (LBS).
Citation762 F. Supp. 548
PartiesOLIN CORPORATION, Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA, et al., Defendants.
CourtU.S. District Court — Southern District of New York

Haythe & Curley, New York City (Michael L. Gioia, James J. Harrington, Russell K. Statman, of counsel), Anderson, Kill, Olick & Oshinsky, P.C., Washington, D.C. (Sherry Gilbert, Jerold Oshinsky, of counsel), for Olin Corp.

Seward & Kissel, New York City (Dale C. Christensen, Jr., R. Scott Garley, Dan F. Laney, III, of counsel), for The Hanover Ins. Co.

Rogers & Wells, New York City (Barry W. Rashkover, Joseph H. Spain, of counsel), for Federal Ins. Co.

Jackson & Campbell, P.C., Washington, D.C. (Richard W. Bryan, James P. Schaller, of counsel), Sheft, Wright & Sweeny, New York City (Leonard Sheft, Peter Sheft, of counsel), Smith, Mazure, Director & Wilkens, New York City (Marvin Fuhrman, Marc H. Pellinger, Stuart Wilkins, of counsel), for Nat. Union Fire Ins. Co. of Pittsburgh (Excess), American Home Assur. Co., Lexington Ins. Co.

Gottesman, Wolgel, Smith & Secunda, P.C., New York City (Lawrence L. Flynn, Harold H. Wolgel, of counsel), for Great American Ins. Co.

Mudge Rose Guthrie Alexander & Ferdon, New York City (Richard Eaton, Paul R. Koepff, of counsel), for Ins. Co. of North America.

Zelle & Larson, San Francisco, Cal. (Steven D. Meier, of counsel), for Employers Ins. of Wausau.

Zelle & Larson, Minneapolis, Minn. (Michelle K. Enright, Paul L. Gingras, Pat St. Peter, of counsel), Kroll & Tract, New York City (Jerome Murray, of counsel), for Employers Ins. of Wausau.

Gilberg & Kurent, Washington, D.C. (K. Thomas Shahriari, of counsel), Levy, Bivona & Cohen, New York City (Howard Epstein, of counsel), for Fireman's Fund Ins. Co.

Bromley, Brown & Walsh, Washington, D.C. (James W. Greene, Deborah Warner, of counsel), Bower & Gardner, New York City (Allen G. Katz, Barry G. Saretsky, of counsel), for American Reinsurance Co., Continental Cas. Co., Nat. American Ins. Co. of California, Northbrook Excess and Surplus Ins. Co.

Locker, Greenberg & Brainin, New York City (Theodore M. Greenberg, Aaron Locker, of counsel), Hopkins & Sutter, Washington, D.C. (Richard H. Gimer, John G. Goodyer, Laura A. Lane, Kathryn A. Underhill, of counsel), for Falcon Ins. Co. and Commercial Union Ins. Co.

Hamel & Park, Washington, D.C. (Richard Gimer, Stephen L. Humphrey, of counsel), for Commercial Union Ins. Co.

Hansel & Post, Atlanta, Ga. (G. Lee Garrett, Jr, of counsel), for Witness Benton H. Wilcoxon.

McCullough, Campbell & Lane, Chicago, Ill. (Richard J. Geddes, of counsel), Condon & Forsythe, New York City (Thomas J. Whalen, Michael Holland, of counsel), for certain underwriters at Lloyd's, London North River Ins. Co., London & Edinburgh Ins. Co., Ltd.

OPINION

SAND, District Judge.

Faced with a rising tide of lawsuits stemming from the alleged chemical contamination of the areas surrounding a number of its chemical plants, the Olin Corporation ("Olin") filed suit in 1984 against its primary and excess liability insurance carriers, seeking a declaration that they were obligated to defend and indemnify in the underlying lawsuits. Now, after seven years of discovery and motion practice, the case again comes before this Court.1 Presently at issue are motions for partial summary judgment by fourteen of Olin's primary and excess insurers. These motions relate to the insurers' duty to defend and indemnify Olin for losses stemming from alleged dichlorodiphenyltrichloroethane ("DDT") contamination in areas near Olin's Huntsville, Alabama plant ("Huntsville plant").

Defendant Employers Insurance of Wausau ("Wausau"), a primary insurer, moves for partial summary judgment on the ground that a so-called "pollution exclusion" clause in its policies with Olin absolves it of any obligation to defend or indemnify Olin. Twelve excess liability carriers2 (collectively, "the Excess Insurers") also move for partial summary judgment. They claim that they have no obligation to indemnify on the grounds that there was no "occurrence" within the meaning of their policies with Olin, and that in any event at least part of their liability is absolved by the pollution exclusion clauses in their policies. Defendant Hanover Insurance Company ("Hanover"), a primary insurer, moves for judgment on the occurrence issue and on the additional ground that Olin did not notify it of the alleged Huntsville occurrence in a timely fashion.

For the reasons given below, Wausau's motion for summary judgment is granted. The motions of the Excess Insurers are granted to the extent they are based on the pollution exclusion clause issue, but denied insofar as they are based on the occurrence issue. Hanover's motion is granted on the late notice issue.

I. BACKGROUND

In 1954, Olin purchased the Calabama Chemical Company ("Calabama"), which operated a manufacturing plant near Huntsville, Alabama. The plant, which produced industrial-grade DDT for commercial use, was located on land owned by the United States Army in an area known as the Redstone Arsenal.3 Calabama had leased the plant and the surrounding land from the Army, and Olin assumed the lease when it bought Calabama. Benton Wilcoxin, a member of the partnership that owned Calabama, continued on as the manager of the plant after the Olin acquisition.

Olin manufactured DDT at the Huntsville plant from 1954 until 1970, at which time Olin voluntarily ceased operations there. During much of that time the plant operated on a continuous seven day a week schedule, producing one to two million pounds of industrial-grade DDT per month.

A. The DDT Manufacturing Process

The DDT manufacturing process at the Huntsville plant began with the manufacture of a chemical called chloral. After being created through a chemical reaction, the chloral was purified through a process which produced two byproducts, sulfuric acid and sodium hypochlorite (bleach). After being purified, the chloral was rinsed with water in a process which resulted in the creation of a third byproduct, hydrochloric acid. The three byproducts — sulfuric acid, bleach and hydrochloric acid — were released into waste water trenches running alongside the plant which eventually led into a creek known as the Huntsville Spring Branch. See Deposition of Benton H. Wilcoxin, Ex. 1 to Cover affidavit ("Wilcoxin Dep. I"), pp. 46-57.

After manufacturing the chloral, Olin started the process of making DDT. DDT was made by mixing the chloral with monochlorobenzene ("MCB") in a process which created molten DDT. The molten DDT was then subjected to three "washings" in water solutions. After the washings, the process water also was released into the waste water trenches. See id. at 58-72.

The molten DDT was then placed into a "steam stripper" which used steam to remove any remaining MCB from the DDT. After being stripped, the molten DDT was allowed to cool and solidify. The steam, now laced with MCB, condensed into a liquid with two layers, a layer of process water and a heavier layer of MCB. The MCB layer was transferred to a storage tank for reuse and the process water was dumped into the waste water trenches. See id. at 70-71.

As described above, the DDT manufacturing process involved the release of process waters and three byproducts (collectively, the "effluent"). The effluent was expelled into brick-lined waste water trenches running alongside the plant. The trenches carried the effluent 50 to 75 feet south of the plant to a 200 foot long drainage ditch. At the end of the drainage ditch the effluent flowed into an acid-neutralization pit and then flowed through a three-quarter mile long drainage ditch which emptied into the Huntsville Spring Branch. See Deposition of Donald E. Morgan, Ex. 2 to Cover affidavit, pp. 49-56.

B. Discharge of DDT from the Huntsville Plant

According to Olin, it believed that the Huntsville plant was a "closed" plant — that is, "a plant which did not, as part of its regular operations, allow its product, DDT, to escape into the effluent or waterways." Memorandum of Law of Olin Corporation in Opposition to Wausau's Motion for Partial Summary Judgment ("Olin's Memorandum of Law"), p. 16. However, the undisputed facts show that DDT was escaping from the plant on a more or less continuous basis during the sixteen years Olin operated the plant. In 1965, when Olin installed a "settling tank" through which the effluent passed, the tank filled up with 12,000 pounds of DDT-bearing material in four months. See United States Army Preliminary Sanitary Engineering Survey, Ex. 8 to Gimer affidavit ("Army Sanitary Survey Report"), p. 9. On the basis of this event, it is clear that substantial quantities of DDT were leaving the plant during the entire period of its operation.

The documents and affidavits submitted by the parties demonstrate that executives at the Huntsville plant were on notice that DDT was escaping from the plant even before Olin assumed operations there. During the sixteen years that Olin operated the plant, the evidence of DDT release and DDT contamination continued to mount.

As early as 1948, Mr. Benton Wilcoxin, the plant manager, knew that some DDT was escaping from the plant. At that time, Wilcoxin saw DDT in the waste water ditches running alongside the plant. Deposition of Benton H. Wilcoxin, Ex. 1 to Gimer affidavit ("Wilcoxin Dep. II"), p. 1.

By 1952 the United States Army, which owned the land on which the plant was situated, had become concerned about chemical discharges from the Olin plant. On June 23, 1952, Niles Prestage, the Army Chief of Utilities at the Redstone Arsenal, wrote a memorandum in which he set a maximum limit of DDT in Olin's effluent at 10 ppm (parts per million). He also established the permissible level of DDT in the Huntsville Spring Branch, into which the drainage ditch emptied, as "none". See Memorandum of Niles Prestage, Ex. 32 to Gimer affidavit, p. 1.

In 1955 two engineers, Donald Morgan a...

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