US Fidelity & Guar. v. Morrison Grain Co., 86-1863-C.

Decision Date20 March 1990
Docket NumberNo. 86-1863-C.,86-1863-C.
Citation734 F. Supp. 437
CourtU.S. District Court — District of Kansas
PartiesUNITED STATES FIDELITY & GUARANTY COMPANY, St. Paul Mercury Insurance Company, Hartford Casualty Company, and Home Indemnity Company, Plaintiffs, v. MORRISON GRAIN COMPANY, INC., and Morrison Coal Company, Inc., Defendants.

Arthur S. Chalmers, Kahrs, Nelson, Fanning, Hite & Kellogg, and Stephen W. Kerwick, Foulston & Siefkin, Wichita, Kan., Thomas R. Hill, Overland Park, Kan., Richard I. Stephenson, Wichita, Kan., and Mitchell L. Lathrop, San Diego, Cal., for plaintiffs.

J. Stan Sexton, Hampton, Royce, Engleman & Nelson, Salina, Kan., for defendants.


CROW, District Judge.

The case comes before the court on the plaintiffs' motions for summary judgment. In this insurance coverage dispute, the insureds, Morrison Grain Company, Inc. (Morrison Grain), a dissolved Kansas corporation, and Morrison Coal Company, Inc. (Morrison Coal), a dissolved Arkansas corporation, seek a declaratory judgment that the plaintiffs, as insurers, have a duty to defend and indemnify the defendants under the respective general liability policies for environmental damage claims made against them by governmental entities. The insureds also seek a money judgment against the plaintiffs in the amount of the sums paid to settle the environmental claims and attorney's fees and expenses.

This action was commenced on October 29, 1986, by United States Fidelity & Guaranty Company (USF & G) seeking a declaratory judgment that there is no coverage under its policies for the environmental claims against the defendants. The defendants answered and counterclaimed and later successfully joined the other insurers as plaintiffs to their counterclaim. Each of the insurers has answered the counterclaim denying coverage of these claims for indemnity and defense arising from defendants' liability to the United States Environmental Protection Agency (U.S. EPA) and the Illinois Environmental Protection Agency (Illinois EPA) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq. (CERCLA), or the Illinois Environmental Protection Act, Ill.Rev.Stat. ch. 111½, par. 1001 et seq. (1987).

Each of the plaintiffs has moved for summary judgment on a number of issues with many of them common to all motions. The common issues raised include: (1) whether CERCLA response costs are damages under the policies; (2) whether the CERCLA response costs constitute property damage under the policies; (3) whether the defendants are named insureds under the respective policies; and (4) whether the pollution exclusion precludes coverage. Two of the plaintiffs, Hartford Casualty Company (Hartford) and St. Paul Mercury Insurance (St. Paul), also contend there is no proof of an "occurrence" during the policy period. As will be shown, the court believes the application of the exclusionary clause is determinative of the case, thereby making it unnecessary to discuss with any detail, or even to address, the other common issues and specific arguments of the plaintiffs.

In ruling on a motion for summary judgment, the trial court conducts a threshold inquiry of the need for a trial. Without weighing the evidence or determining credibility, the court grants summary judgment when no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-252, 106 S.Ct. at 2512.

An issue of fact is "genuine" if the evidence is significantly probative or more than merely colorable such that a jury could reasonably return a verdict for the nonmoving party. Id. at 248, 106 S.Ct. at 2510. An issue of fact is "material" if proof thereof might affect the outcome of the lawsuit as assessed from the controlling substantive law. 477 U.S. at 249, 106 S.Ct. at 2510. Factual inferences are drawn to favor the existence of triable issues, and where reasonable minds could ultimately reach different conclusions, summary judgment is inappropriate. See Riley v. Brown & Root, Inc., 896 F.2d 474 (10th Cir.1990).

The movant's initial burden under Fed.R. Civ.P. 56 is to show the absence of evidence to support the nonmoving party's case. Windon Third Oil and Gas v. Federal Deposit Ins., 805 F.2d 342, 345 (10th Cir. 1986), cert. denied 480 U.S. 947, 107 S.Ct. 1605, 94 L.Ed.2d 791 (1987). The movant must specify those portions of "`the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits if any,'" which demonstrate the absence of a genuine issue of fact. Windon, 805 F.2d at 345 (quoting Fed.R.Civ.P. 56(c)). It may be sufficient for the movant to establish that the alleged factual issues are without legal significance. Dayton Hudson Corp. v. Macerich Real Estate Co., 812 F.2d 1319, 1323 (10th Cir.1987).

The opposing party may not rest upon mere allegations or denials in the pleadings but must set forth specific facts supported by the kinds of evidentiary materials listed in Rule 56(c). Anderson, 477 U.S. at 250, 106 S.Ct. at 2511. The nonmoving party's evidence is deemed true and all reasonable inferences are drawn in his favor. Windon, 805 F.2d at 346. More than a "disfavored procedural shortcut," summary judgment is an important procedure "designed `to secure the just, speedy and inexpensive determination of every action.' Fed.R. Civ.P. 1." Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986).

The pretrial order in this case was filed January 31, 1990. It states therein that the case is ready for trial and that any additional discovery would not delay the trial of the case. In their response brief to Home Indemnity's motion for summary judgment, the defendants set forth on pages three through twelve a factual statement without any citations to the record to support it. (Dk. 95). As their apparent justification for the lack of citations, defendants note just before this statement that the discovery is incomplete. (Dk. 95 at 3). Defendants have never sought leave to supplement their briefs with any later discovery. Mere allegations in a brief cannot be recognized as statements of facts in a summary judgment proceeding. For purposes of these motions, the court considers the following facts to be uncontroverted and relevant:

1. Defendant Morrison Grain, a dissolved Kansas corporation, was incorporated in 1953 and remained viable until December of 1986. Milton Morrison served as president of Morrison Grain from its inception to its dissolution. Defendant Morrison Coal, a dissolved Arkansas corporation, was formed a few years before 1970 to engage in the business of strip-mining in Arkansas. Morrison Coal was a wholly-owned subsidiary of Morrison Grain. Milton Morrison, was a corporate officer of Morrison Coal.

2. In 1970, Morrison Coal entered into a joint venture agreement with Cropland Chemical Company (Cropland) forming Agro Marketing Company (Agro). By the agreement, Cropland and Morrison Coal shared the profits equally. Robert Trowbridge was the principal stockholder of Cropland.

3. Agro engaged in the business of buying, selling, handling and storing surplus agricultural chemicals, fertilizers, insecticides and related products. Robert Trowbridge supervised and managed Agro's operations at its sites in Latham and Meredosia, Illinois.

4. The chemicals stored at Latham were accumulated over a period of years. In the mid-1970's, chemicals were handled haphazardly at the Latham site. Because a substantial quantity of pesticides stored at Latham were outdated and there was little market demand for them, they were simply moved to building A at Latham. The deteriorated containers sometimes allowed the chemicals to leak, but Agro took steps to repackage those chemicals having inadequate containers.

5. Concerned that some of the chemicals being stored were banned and extremely poisonous, Mr. Bunting, who had been a salesman, general manager and vice-president of Agro, told Mr. Trowbridge sometime before 1976 that the stored chemicals should be disposed of in an EPA dump.

6. Sometime around 1976, approximately thirty 55-gallon drums of pesticides were shipped in two truckloads from a garage in Latham to Meredosia. Agro employees excavated two pits at the Meredosia facility and buried the pesticides. The claimed hazardous waste contamination at Meredosia was the result of this burial of the pesticides. Ronald Ioerger and Timothy Brown, the two Agro employees in charge of this dumping of pesticides, anticipated the drums would rust and leak with time.

7. Upon discovering that this dumping was taking place, Mr. Bunting asked Mr. Ioerger whether he knew the condition of the soil and subsoil in Meredosia. Mr. Ioerger said he knew and that Mr. Trowbridge had instructed him to do this. At his deposition, Mr. Ioerger testified he did not believe that when the chemicals were transported and buried that Mr. Trowbridge knew of their actions.

8. The buried drums resurfaced in 1980 or 1981. While burying the drums again, Mr. Brown observed that they had rusted.

9. Milton Morrison assumed the management of Agro in June of 1979 and hired Mr. Bunting to dispose of Agro's assets at Latham. Through the efforts of Mr. Bunting, Agro sold the Latham facilities, including the stored fertilizers and pesticides, to Norman Waters in April of 1980. Creditors forced Agro into bankruptcy later in 1980.

10. In January of 1984, Morrison Sales Company, Inc. purchased the Meredosia facilities from Vernon Houchen, the trustee in bankruptcy for Agro, and then in turn sold it to A.B. Chrisman Fertilizer Company later that same month.

11. Between June...

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