Aetna Cas. & Sur. Co. v. Dow Chemical Co.
| Decision Date | 10 April 1998 |
| Docket Number | No. 93-73601.,93-73601. |
| Citation | 10 F.Supp.2d 771 |
| Parties | AETNA CASUALTY & SURETY CO., Plaintiff, v. DOW CHEMICAL CO., Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Charles Browning, Detroit, MI, for Plaintiff..
Michael P. Foradas, Stephen P. Jeffirs, Kirkland & Ellis, Chicago, IL, for Defendant.
This action arises out of an insurance contract dispute. Defendants Dow Chemical Company and Dow Corning, Inc. (collectively "Dow") have been the target of third-party and government-related environmental contamination claims asserting that Dow is responsible for damages, including clean-up costs for alleged contamination, at several hundred sites in the United States and Canada. Aetna Casualty & Surety Company is one of Dow's insurers. Aetna1 filed this declaratory judgment action against Dow and 48 of Dow's primary and excess insurers requesting that the Court determine the rights and liabilities of the parties under Dow's various insurance policies for coverage as to these environmental claims.
Dow seeks indemnification coverage under a series of comprehensive general liability ("CGL") policies issued to it between 1944 and 1985. Although the language varies slightly, with the exception of Dow's earliest primary policy, the policies at issue provide indemnity coverage for all sums that Dow becomes legally obligated to pay as damages that result from property damage or bodily injury caused by an occurrence.2 Dow began purchasing primary CGL policies in 1944, and it first purchased excess coverage in 1955.
In an effort to resolve this dispute efficiently, the parties and the Court have agreed to focus the litigation in the first instance on ten Final Sites: Brookhurst; Cliffs-Dow; Daffron & Pinion; Harris/Farley Street; Hartley & Hartley; Midland, Texas; Monahans, Texas; Petro Processors, Inc ("PPI"); Silresim; and Conalco. The Court has previously ruled that: (1) Michigan law applies to the insurance contracts in this case, 883 F.Supp. 1101; (2) the absolute pollution exclusion in Dow's post-1985 primary policies bars coverage for all claims at issue, 933 F.Supp. 675; (3) the "personal injury" coverage in Dow's policies does not afford coverage for trespass and nuisance claims, 933 F.Supp. at 680-81; (4) Dow's motion for summary judgment concerning the duty to defend would be granted in part and denied in part, 12/4/97 Mem. Op.; (5) the issue of Dow's right to reimbursement of pretender defense costs would be reserved for trial, 12/4/97 Mem. Op.; and (6) the issue of whether and how defense costs are to be allocated among the primary insurers would also be reserved, 12/4/97 Mem. Op.
This matter comes before the Court on the following motions for partial summary judgment: (1) Fireman's Fund's and Travelers/Aetna's motions as to the pollution exclusion; (2) Travelers/Aetna's and Dow's cross motions concerning the loss-in-progress doctrine; (3) Travelers/Aetna's motion regarding the lack of property damage; (4) Fireman's Fund's and Dow's cross motions regarding indemnification coverage where Dow is not a named party; and (5) Century's motion regarding indemnification coverage under its accident-based policies.
For the reasons stated below, this Court: (1) GRANTS Fireman's Fund's motion for partial summary judgment based on the pollution exclusion; (2) GRANTS IN PART AND DENIES IN PART Travelers/Aetna's motion for partial summary judgment based on the pollution exclusion; (3) DENIES Travelers/Aetna's and Dow's cross-motions for partial summary judgment based on the loss-in-progress doctrine; (4) GRANTS IN PART AND DENIES IN PART Travelers' motion for partial summary judgment based on the lack of property damage; (5) GRANTS Fireman's Fund's motion and DENIES Dow's cross motion for partial summary judgment regarding claims and suits where Dow is not a named party; and (6) DENIES Century's motion for summary judgment regarding indemnification coverage under its accident-based policies.
Summary judgment is appropriate only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R. Civ. P. 56(c). The central 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 v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). After adequate time for discovery and upon motion, Rule 56(c) mandates summary judgment against a party who fails to establish the existence of an element essential to that party's case and on which that party bears the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
The movant has an initial burden of showing "the absence of a genuine issue of material fact." Celotex, 477 U.S. 317, 323, 106 S.Ct. 2548. Once the movant meets this burden, the non-movant must come forward with specific facts showing that there is a genuine issue for trial. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). To demonstrate a genuine issue, the non-movant must present sufficient evidence upon which a jury could reasonably find for the non-movant; a "scintilla of evidence" is insufficient. Liberty Lobby, 477 U.S. at 252, 106 S.Ct. 2505. The court must believe the non-movant's evidence and draw "all justifiable inferences" in the non-movant's favor. Liberty Lobby, 477 U.S. at 255, 106 S.Ct. 2505.
Fireman's Fund and Travelers/Aetna (collectively "Insurers") have filed motions for partial summary judgment arguing that there is no duty to indemnify Dow under their policies containing a pollution exclusion with an exception for "sudden and accidental" discharges, dispersals, releases or escapes.3 A number of Excess Insurers have filed Joinders.4
Fireman's Fund issued primary comprehensive general liability (CGL) policies to Dow covering the period from 11/19/56 through 4/1/76. The policies that were in effect from 7/30/70 to 4/1/76 contain a pollution exclusion with a sudden and accidental exception. Aetna (now Travelers CS) issued primary CGL policies to Dow covering the period from 4/1/76—4/1/85. Aetna also issued excess indemnity policies to Dow from 1972 through 1985. Each of these policies contains a pollution exclusion with a sudden and accidental exception. No primary policy issued to Dow prior to July 30, 1970 contained an exclusion for pollution-related claims. It was not included in the excess policies until March 31, 1971, as the London Excess Insurers concede.
Insurers argue that Dow cannot present evidence showing that the "sudden and accidental" exception to the pollution exclusion applies as to some or all of the ten Final Sites, and therefore, Dow is not entitled to indemnification coverage at those sites for the years their policies contained this pollution exclusion. Specifically, Fireman's Fund argues that the pollution exclusion in its policies for the years 7/30/70 to 4/1/76 bars Dow's claims at the Cliffs-Dow, Conalco, Daffron & Pinion, Silresim and Harris/Farley Street Final Sites. Aetna argues that the pollution exclusion in its primary and excess policies bars Dow's claims as to each of the ten Final Sites.
Dow does not dispute that it has the burden of establishing that the exception to the pollution exclusion applies. Dow also concedes that there were no sudden and accidental events at the Cliffs-Dow, Daffron & Pinion, and Conalco Sites and thus no indemnification coverage exists for the years the subject pollution exclusions were in effect as to these three Final Sites. Dow asserts, however, that Insurers are not entitled to summary judgment on their pollution exclusion motions as to the remaining seven Final Sites because it has established that genuine issues of material fact exist whether some of the damage at those Final Sites could be the result of "sudden and accidental" discharges. Dow further asserts that: (1) under Michigan law, the proper focus for determining whether a discharge at a landfill is sudden and accidental is the discharge of pollutants from a landfill into the surrounding soil, groundwater and surface water, and not the initial placement of waste in the landfill; (2) Michigan law distinguishes between direct discharges into the environment without any expectation of containment and direct discharges where there is an expectation of containment; and (3) Michigan law recognizes that identifiable discharges can be separated from a larger pattern of discharges for application of the sudden and accidental exception to the pollution exclusion clause in an insurance policy. See South Macomb Disposal Authority v. American Ins. Co., 225 Mich.App. 635, 572 N.W.2d 686 (1997).
Insurers argue that South Macomb was wrongly decided and further argue that, under Michigan law, the proper focus is on the initial discharge of pollutants or contaminants into the environment and, where a regular pattern of discharges has taken...
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