Aetna Cas. & Sur. Co. v. Dow Chemical Co.
| Decision Date | 04 December 1997 |
| Docket Number | No. 93-73601.,93-73601. |
| Citation | 44 F.Supp.2d 847 |
| Parties | AETNA CASUALTY & SURETY CO., Plaintiff, v. DOW CHEMICAL COMPANY, Defendant, and American Guarantee and Liability Co., et al., Insurer Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
This action arises out of an insurance contract dispute. Defendants Dow Chemical Company and Dow Corning, Inc. (collectively "Dow") have been the target of environmental contamination claims in approximately 360 locations across 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.
This matter comes before the Court on Dow's motion for partial summary judgment, in which Dow argues that its pre-1985 primary insurers are obligated to defend Dow and to reimburse Dow for defense costs it has or may incur while defending the underlying suits involved at nine of the ten Final Sites at issue in this litigation.2 Dow's motion addresses the existence and scope of Dow's pre-1985 primary insurers' duty to defend Dow; not their duty to indemnify Dow. Defendant Insurers Travelers,3 Fireman's Fund,4 Zurich, American Guarantee and Liability Company, and Century5 (collectively "Primary Insurers") have filed cross-motions for partial summary judgment arguing that they are not obligated to defend Dow or reimburse Dow for any defense costs in any of the underlying claims involved at any of the ten Final Sites.
Dow's and the Primary Insurers' motions are GRANTED IN PART and DENIED IN PART. The Court concludes that, with the exception of those underlying claims described below that are not the functional equivalent of a "suit" within the meaning of the insurance contract and those underlying suits where Dow is not a named party, Dow has satisfied its burden of establishing that the underlying claims involved in the nine Final Sites at issue here are arguably covered under the respective Primary Insurers' policies, and therefore, the Primary Insurers implicated at each of the nine Final Sites owe Dow a duty to defend as to those underlying claims. Primary Insurers' obligation to defend is not dependent upon its obligation to indemnify, nor Dow's timely notice, formal tender or compliance with a policy's voluntary payment provision. The duty to defend is contractual, and it arises at the time the underlying suit is brought; not when it is tendered or when notice is given.
The Court further concludes that Dow is not entitled to summary judgment as to Primary Insurer's obligation to reimburse it for pre-tender defense costs. Dow's right to those costs is factually dependent upon its claim that it had an absolute right to control the defense of the underlying suits because a conflict of interest existed between it and its Primary Insurers. Questions of material fact remain as to whether a conflict-of-interest has been created thus giving Dow the absolute right to control the defense of the underlying suits.
Since 1944, Dow's primary insurance carriers have insured Dow through a series of Comprehensive General Liability ("CGL") policies. Dow's pre-1985 primary insurers and their coverage periods are as follows:
Insurer Coverage Period
Century June 1, 1944 to March 28, 1949
Zurich and American Guarantee March 28, 1949 to March 28
1950
Travelers March 28, 1950 to Nov. 19
1956
Fireman's Fund Nov. 19, 1956 to April 1, 1976
Aetna (now Travelers CS) April 1, 1976 to April 1, 1985
Dow implicates the following Primary Insurers at the following nine Final Sites:
Insurer Final Site
Century Cliffs-Dow only
Zurich Cliffs-Dow only
American Guarantee Cliffs-Dow only
Travelers Brookhurst
Cliffs-Dow
Aetna Brookhurst
Cliffs-Dow
Daffron & Pinion
Farley Street
Hartley & Hartley
Midland, Texas
Monahans, Texas
Silresim
Fireman's Fund Brookhurst
Cliffs-Dow
Daffron & Pinion
Farley Street
Hartley & Hartley
Midland, TX
Monahans, TX
PPI
Silresim
A. Relevant Policy Terms
Each of the Primary Insurers' policies provides coverage for "property damage," "bodily injury," or "personal injury." Each of the policies issued to Dow also contains a provision which obligates the Primary Insurer to defend in "any suit against the insured". That same clause further provides that the insurer may make such investigation, negotiation and settlement of any claim or suit as it deems expedient.
The Century policies provide that: "the company shall ... defend in the name and on behalf of the insured any suit against the insured alleging such injury or destruction and seeking damages on account thereof; even if such suit is groundless, false or fraudulent". Dow Exs. 2., 1944-45 policy. The remaining Century policies have a similar defense provision. See Dow Exs. 3-6.
Zurich and American Guarantee's 1949-50 policy provisions are substantially similar. See Dow Exs. 7-8. The same is true for Travelers' 1950-56 policies, Dow Exs. 9-10, 12, and Fireman's Fund's 1956-1969 policies, Dow Exs. 13-16. Beginning in 1970, however, the defense provision in Fireman's Fund's provides that the insurer "shall have the right and duty to defend any suit against the insured seeking damages on account of such personal injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent ... but the Company shall not be obligated to ... defend any suit after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements." Dow Ex. 17-18.
Aetna's 1976-81 policies provide that the insurer "shall have the right and duty to defend any suit against the insured seeking damages on account of such personal injury, ..., or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, ..., but the Company shall not be obligated to ... defend any suit after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements." Dow Ex. 19. See also Dow Exs. 20-24. Aetna's policies taking effect after April 1, 1982 and continuing through April 1, 1985 contain an endorsement which provides that: Dow Ex. 25. See also Dow Exs. 26-27.
A number of the subject policies also contain cooperation clauses requiring the insured's cooperation with the insurer's defense of any suit. The clauses also contain a voluntary payment prohibition which provides: "The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of each occurrence." Dow Ex. 9.
B. The Parties' Cross-Motions
Dow is before the Court on a motion for partial summary judgment arguing that each of the underlying environmental claims involves a suit for damages against Dow that potentially occurred during one or more of the Primary Insurers' policy periods. Thus, Dow seeks a declaration that Primary Insurers owe Dow a duty to defend in the underlying claims at issue in nine of the Final Sites. Dow also seeks a declaration that Primary Insurers are obligated to reimburse Dow for pre-tender defense costs it will or has already incurred. Primary Insurers respond with cross-motions arguing they do not owe Dow a duty to...
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