American Motorists Ins. Co. v. General Host Corp.

• Decision Date: 28 July 1987
• Docket Number: Civ.A. No. 84-1802-T.
• Citation: 667 F. Supp. 1423
• Parties: AMERICAN MOTORISTS INSURANCE COMPANY, Plaintiff, v. GENERAL HOST CORPORATION, and American Salt Company, Inc., Defendants.
• Court: U.S. District Court — District of Kansas

667 F. Supp. 1423

AMERICAN MOTORISTS INSURANCE COMPANY, Plaintiff, v. GENERAL HOST CORPORATION, and American Salt Company, Inc., Defendants.

Civ.A. No. 84-1802-T.

United States District Court, D. Kansas.

July 28, 1987.

Timothy C. Russell, Patricia A. Gotschalk, Theresa W. Hajost, Drinker, Biddle & Reath, Washington, D.C., M. Kathryn Webb, Morrison, Hecker, Curtis, Kuder & Parrish, Wichita, Kan., for plaintiffs.

Thomas D. Kitch, Ron Campbell, Fleeson, Gooing, Coulson & Kitch, Wichita, Kan., for defendants.

OPINION AND ORDER

THEIS, Senior District Judge.

This action is an insurance dispute concerning a policy that plaintiff, American Motorists Insurance Company (hereinafter AMICO), issued to defendants. The dispute concerns two actions brought against defendants, Miller v. Cudahy Co. and Brothers v. American Salt. Specifically, defendants have asserted that AMICO is responsible to indemnify them for any damages which have been or may be awarded against them in those cases, and that AMICO has a duty to defend them, or to reimburse them for the defense expenses which they incurred, in the above cases. Plaintiff denied that the policy of insurance obligated them to defend the suits, or to pay any damages awarded. Plaintiff brought this action seeking a declaration of the respective rights and obligations of the parties. The case is currently before the Court upon plaintiff's motion for summary judgment to the effect that AMICO's policies exclude any and all obligations which it might otherwise have to the defendants regarding the above cases.

The Court is familiar with the standards governing the consideration of a motion for summary judgment. Summary judgment is a drastic remedy to be applied with caution in order to preserve a litigant's right to trial. Machinery Center, Inc. v. Anchor National Life Insurance Co., 434 F.2d 1, 6 (10th Cir.1970). To rule favorably on a motion for summary judgment, the Court must first determine that the matters on file regarding the motion "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). By its very terms, Rule 56(c) "provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, ___, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (emphasis in original). Instead, 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." Id. at ___, 106 S.Ct. at 2512. However, the Court must look at the record in the light most favorable to the non-moving party. Lindley v. Amoco Production Co., 639 F.2d 671, 672 (10th Cir.1981). Pleadings and documentary evidence must be liberally construed in favor of the party opposing the motion. Harman v. Diversified Medical Investments Corp., 488 F.2d 111, 113 (10th Cir.1973), cert. denied 425 U.S. 951, 96 S.Ct. 1727, 48 L.Ed.2d 195 (1976). If the facts support an inference which would permit the non-movant to prevail, summary judgment is inappropriate. Thomas v. United States Department of Energy, 719 F.2d 342, 344 (10th Cir.1983).

The underlying facts of this matter are relatively involved, but may be briefly summarized. Defendant American Salt Company, Inc. operates a salt company in Lyons, Kansas. In 1977, neighboring landowners filed suit in this Court, claiming that the careless operation of the salt plant had resulted in tons of salt brine polluting the environment, as a result of which the aquifer under their land had become unfit for irrigation purposes. That suit, Miller v. Cudahy, was brought against the Cudahy Company (of which American Salt at that time was merely an operating division) and against General Host Corporation, the parent company of Cudahy. Cudahy later changed its name to AMS Industries, and American Salt was spun off as a separate corporate entity so that today American Salt, Inc. (defendant in this action) is a wholly-owned subsidiary of AMS Industries, Inc. (not a defendant in this action), which in turn is a wholly-owned subsidiary of General Host Corporation (a defendant in this action).

Miller was a complex, contentious case, involving ten years of activity at the trial court level, and resulting in hundreds of filings and scores of written court orders, of which three may be found in the West publications: 567 F.Supp. 892 (D.Kan.1983), 592 F.Supp. 976 (D.Kan.1984) and 656 F.Supp. 316 (D.Kan.1987). For purposes of this matter, it is sufficient now to say that this Court found for plaintiffs in Miller, and awarded them $3.06 million in actual damages and $10 million in punitive damages. The Brothers case has yet to be adjudicated, but it involves essentially the same claims for essentially the same plaintiffs, differing largely in that it covers the time period beginning where the Miller case ended. Beyond this, the details of defendants' pollution for over three quarters of a century, their efforts and lack thereof to address the pollution, and the damages caused by their actions are far too lengthy to be repeated here.

General Host and AMICO entered into comprehensive general liability insurance policies for policy periods from November 1, 1981 to November 1, 1984. In addition, a fourth one-year policy was entered into effective November 1, 1984, which was terminated effective June 15, 1985. These liability policies are what is known as manuscript policies, which means that the signed policy was not a "boilerplate" policy, but was negotiated between the parties as to each item. Although each policy was for one year's duration only, and a separate policy was constructed for the following years (during the 1981 through 1984 period), the changes were minor, involving primarily changes in premium amounts. The material provisions of the policies for the purposes of this case were unchanged. Therefore, the Court will refer only to the relevant policy provisions, and not hereafter be concerned with the fact that there were four consecutive policies, not one.

The manuscript policy itself is quite lengthy and comprehensive, but only certain portions are relevant to this action. Those portions are the insuring agreement, the definition of "occurrence" and an exclusion commonly referred to as the "pollution exclusion." Those portions are reproduced as follows:

AMERICAN MOTORISTS INSURANCE COMPANY ... agrees with General Host Corporation, in consideration of the payment of premium, and subject to all the terms of this policy:

INSURING AGREEMENT

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages (including punitive damages where permitted by law to be insured and liability assumed under contract) because of:

(a) bodily injury or property damage, ... to which this policy applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the insured alleging such injury or property damage and seeking damages even if any of the allegations of the suit are groundless, false, or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the Company's liability has been exhausted by payment of judgments or settlements.

"Occurrence" means: (1) with respect to bodily injury and property damage, an accident or a happening or event or a continuous or repeated exposure to conditions which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

This policy does not apply: ... (k) to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acid, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon open land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental....

(emphasis added)

When negotiations between AMICO and General Host for insurance coverage commenced, in the summer of 1981, the Miller case was already nearly four years old, and discovery was well underway (the Pretrial Order in the case was filed on March 9, 1982, only four months after the insurance coverage first began). AMICO contends that it did not receive notice of the Miller action until March 19, 1984, when General Host sent them a letter demanding that they defend the action in trial, which began March 26, 1984. Defendants dispute that. Instead, they assert, and for purposes of this motion the Court accepts, that AMICO was informed of the Miller action before the first insurance contract was consummated. However, the case apparently was not discussed in detail, if at all, between the parties. Further, even accepting defendants' representations of when AMICO was first informed of the Miller case, it apparently is not disputed that General Host did not demand coverage from AMICO for the Miller action until the March 19, 1984, letter. AMICO advised General Host, by letter dated April 4, 1984, that it was of the opinion that it had no coverage obligation under its policies due to the pollution exclusion. The Brothers action was filed on September 5, 1984, and General Host notified AMICO of it by letter dated September 5, 1984, and General Host notified AMICO of it by letter dated September 18, 1984. AMICO responded on November 13, 1984 in a fashion similar to its earlier response.

AMICO argues that coverage, both as to damages and as to the costs of defense, is...