944 F.2d 940 (D.C. Cir. 1991), 89-5367, Independent Petrochemical Corp. v. Aetna Cas. & Sur. Co.

Docket Nº:89-5367, 89-5368
Citation:944 F.2d 940
Party Name:INDEPENDENT PETROCHEMICAL CORPORATION, et al., Appellants, v. AETNA CASUALTY AND SURETY COMPANY, et al. (Two Cases). Nos. 89-5367, 89-5368.
Case Date:September 13, 1991
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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944 F.2d 940 (D.C. Cir. 1991)




Nos. 89-5367, 89-5368.

United States Court of Appeals, District of Columbia Circuit.

September 13, 1991

Rehearing Denied Nov. 5, 1991.

Argued March 14, 1991.

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Appeals from the United States District Court for the District of Columbia (Civil Action No. 83-03347).

John H. Gross, with whom Jerold Oshinsky, Sherry W. Gilbert, Robert H. Shulman and Stephan G. Weil were on the brief, for appellants in 89-5367 and 89-5368.

Dennis M. Flannery, with whom W. Scott Blackmer was on the brief, for appellee Ins. Co. of North America, in 89-5368.

Paul L. Friedman, with whom Anne D. Smith was on the brief, for appellee, Pacific Indem. Co., in 89-5367. Lloyd H. Randolph also entered an appearance for appellee.

Richard B. Stewart, Asst. Atty. Gen., Anne S. Almy, Steven R. Baer and Catherine M. Flanagan, Attys., Dept. of Justice, were on the brief, for amicus curiae, in 89-5367 and 89-5368 urging that the Order granting Summary Judgment to Independent Petrochemical Corporation's insurers be reversed.

James P. Schaller and Timothy R. Dingilian entered appearances for appellees, American Home Assur. Co., Insurance Co. of the State of Pennsylvania; and Lexington Ins. Co., in 89-5367 and 89-5368.

James E. Rocap, III, Niki Kuckes and Martin D. Minsker entered appearances for appellee, Aetna Cas. and Surety Co., in both cases.

Peter J. Schlesinger entered an appearance for appellee, The Travelers Indem. Co., in both cases.

Robert E. Heggestad entered an appearance for appellee, Harbor Ins. Co., in both cases.

Joseph F. Cunningham entered an appearance for appellee, Stonewall Ins. Co., in both cases.

James W. Greene entered an appearance for appellees, American Re-Insurance Co., et al., in both cases.

Richard H. Gimer, Potomac, Md., Stephen L. Humphrey, Kathryn A. Underhill, and Richard A. Ifft entered appearances for appellees, American Employers' Insurance Co. and Employers' Commercial Union Ins. Co. in No. 89-5368.

Michael Nussbaum and Martin R. Baach entered appearances for appellee, certain underwriters at Lloyd's London and certain

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companies in the London market, in No. 89-5368.

Before EDWARDS, WILLIAMS, and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge:

This diversity case reaches us on appeal after eight years of litigation in the district court about matters that have no connection whatever to the District of Columbia. The litigation, which involves a wide array of complex issues, is continuing. See Independent Petrochemical Corp. v. Aetna Casualty & Surety Co., 654 F.Supp. 1334 (D.D.C.1986). With respect to two claims, the court below entered final judgments pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, after finding "no just reason for delay." The first of these claims presents the question whether, under the law of the State of Missouri, insurance policies providing reimbursement for "damages" awarded against the insured include sums representing the cost of remedying environmental harm for which the insured is legally responsible. The second claim, also governed by state law, raises the question whether a particular policy issued by Pacific Indemnity Company continued to cover Independent Petrochemical Corporation after it became a wholly-owned subsidiary of plaintiff Charter Oil Company, which is owned by plaintiff The Charter Company.

With respect to the first claim, the facts, as set forth by the district court, are these. In 1971, Independent Petrochemical agreed to assist one of its Missouri customers in disposing of waste material containing "dioxin," a family of chemical compounds that, in sufficient concentrations, may cause serious harm to humans, animals and plants. Independent Petrochemical hired Russell M. Bliss, an independent contractor, to do the job. Bliss transported more than 20,000 gallons of the hazardous waste in his tank trucks to a facility in Frontenac, Missouri, where he mixed it with waste oil and emptied the resulting mixture into storage tanks. Bliss later sprayed the mixture to suppress dust at various sites in eastern Missouri. 654 F.Supp. at 1339.

In order to cure the harm resulting from Bliss's activities, the federal government and the State of Missouri undertook environmental cleanup activities costing millions of dollars. In an action by the United States seeking reimbursement from Bliss, Independent Petrochemical, its affiliated corporations and others, the United States District Court for the Eastern District of Missouri held Independent Petrochemical jointly and severally liable for these costs under section 107(a) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9607(a). United States v. Bliss, 667 F.Supp. 1298 (E.D.Mo.1987). Missouri also sued Independent Petrochemical to recover its cleanup costs. Missouri v. Independent Petrochemical Corp., No. 83-2670-C (E.D.Mo. filed Nov. 23, 1983). Independent Petrochemical's potential joint liability is estimated to be at least $96 million. The company is insolvent. 1 Under a plan of liquidation approved by the United States Bankruptcy Court for the Middle District of Florida, Independent Petrochemical will continue to defend the CERCLA claims against it and pursue coverage from its insurers.

Between 1971, when Independent Petrochemical agreed to assist its customer in disposing of the hazardous waste material, and 1983, when this case began, Independent Petrochemical purchased 67 Comprehensive General Liability policies from the 23 insurers named as defendants in the

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court below. 2 The Comprehensive General Liability Policy is a standard-form insurance policy drafted by insurance representatives under the sponsorship of the Insurance Service Office, a trade association that provides drafting assistance to about 3,000 insurers. The parties agree that each of these 67 policies contained language such as the following:

The [insurance] company will pay on behalf of the insured [Independent Petrochemical] all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence....

None of the policies defined the term "damages."

In November 1983, two weeks before Missouri brought its CERCLA action, Independent Petrochemical and its affiliated corporations brought this suit for a declaratory judgment. Jurisdiction rested on diversity of citizenship. 28 U.S.C. § 1332. Although Independent Petrochemical had its principal place of business in Missouri, where the incidents giving rise to this dispute occurred, and although none of the parties are incorporated in the District of Columbia, the case could be brought here apparently because the District of Columbia's Superintendent of Insurance accepts service of process for the defendant insurers (D.C.CODE ANN. § 35-423), which is sufficient to lay venue under the expansive provisions of 28 U.S.C. § 1391(a) & (c). Among other claims, plaintiffs sought a judgment that the provision just quoted obligates Independent Petrochemical's insurers to cover liability for environmental cleanup costs incurred by the United States and Missouri.

While this litigation proceeded, the United States Court of Appeals for the Eighth Circuit, sitting en banc, held in a five-to-three decision that under Missouri law "the term 'damages' in the standard-form comprehensive general liability insurance ... policy does not include cleanup costs" (Continental Ins. Cos. v. Northern Pharmaceutical & Chemical Co., 842 F.2d 977, 979 (8th Cir.), cert. denied, 488 U.S. 821, 109 S.Ct. 66, 102 L.Ed.2d 43 (1988) ("NEPACCO ")). NEPACCO not only dealt with the identical issue now facing us, but also arose out of the same factual circumstances. The hazardous waste Bliss handled under his agreement with Independent Petrochemical was NEPACCO's. The Eighth Circuit's decision relieved Continental Insurance...

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