American Motorists Ins. Co. v. General Host Corp.
| Decision Date | 08 March 1996 |
| Docket Number | Civil Action No. 84-1802-FGT. |
| Citation | 919 F. Supp. 1506 |
| Parties | AMERICAN MOTORISTS INSURANCE COMPANY, Plaintiff, v. GENERAL HOST CORPORATION and American Salt Company, Inc., Defendants. |
| Court | U.S. District Court — District of Kansas |
M. Kathryn Webb, McDonald, Tinker, Skaer, Quinn & Herrington, Wichita, KS, Timothy C. Russell, Thomas S. Schaufelberger, Douglas Crowne McAllister, Drinker, Biddle & Reath, Washington, DC, T. Andrew Culbert, Tracey S. Ging, Drinker, Biddle & Reath, Philadelphia, PA, for plaintiff.
Ron C. Campbell, Thomas D. Kitch, Fleeson, Gooing, Coulson & Kitch, L.L.C., Wichita, KS, Rodney Zerbe, Thomas F. Munno, William F. Downey, Dechert, Price & Rhoads, New York City, for defendants.
Ron C. Campbell, Thomas D. Kitch, Fleeson, Gooing, Coulson & Kitch, L.L.C., Wichita, KS, Rodney Zerbe, Dechert, Price & Rhoads, New York City, for counter-claimants.
M. Kathryn Webb, McDonald, Tinker, Skaer, Quinn & Herrington, Wichita, KS, Timothy C. Russell, Thomas S. Schaufelberger, Drinker, Biddle & Reath, Washington, DC, for counter-defendant.
This is a declaratory judgment action in which the plaintiff, American Motorists Insurance Company ("AMICO"), seeks a determination that it is not responsible for paying the judgment or defense costs for the defendants in Miller v. Cudahy, a case which was tried to this court some twelve years ago. Miller involved salt pollution of the Cow Creek Aquifer caused by operations of the American Salt plant near Lyons, Kansas. Miller v. Cudahy, 592 F.Supp. 976 (D.Kan. 1984), aff'd in part, rev'd in part, 858 F.2d 1449 (10th Cir.1988), cert. denied, 492 U.S. 926, 109 S.Ct. 3265, 106 L.Ed.2d 610 (1989). The American Salt plant was, at that time, owned by a wholly owned subsidiary of General Host.
The court granted the plaintiff's motion for summary judgment in this case in 1987. American Motorists Ins. Co. v. General Host, 667 F.Supp. 1423 (D.Kan.1987). The matter was appealed to the Tenth Circuit Court of Appeals, which affirmed this court's grant of summary judgment as to the issue of plaintiff's duty to indemnify, but reversed as to the duty to defend. American Motorists Ins. Co. v. General Host, 946 F.2d 1489 (10th Cir.1991). The appellate court held that there was a credible possibility at the outset of Miller that the action would be covered under the AMICO policy, thus triggering the duty to defend Id. at 1491. Remand was necessary, however, to determine whether any defenses to the duty to defend, such as late notice, apply in this case. Id. The matter is before the court on plaintiff's motion for summary judgment on its own claims and on defendants' counterclaims. (Doc. 154).1
The facts surrounding this case are largely undisputed. In May 1977, the Miller lawsuit was filed in the United States District Court for the District of Kansas. The matter was tried to the court in 1984, resulting in a judgment for the plaintiffs for actual and punitive damages. Miller, 592 F.Supp. 976.
In 1977, General Host's insurance carrier was Liberty Mutual. Liberty Mutual agreed to defend General Host under a reservation of rights.
AMICO issued general liability policies to General Host and the American Salt Company which were effective from November 1, 1981, through June 15, 1984. These policies were countersigned and issued in the state of New York. Most of the negotiations were held in New York as well.
The policies provided that AMICO had the "duty to defend any suit against the insured alleging: ... property damage and seeking damages...." (Plaintiff's exhibit 31, p. 1). The policies also contained a provision requiring the insured to give written notice of an occurrence "as soon as practicable" and, in the event of a suit or claim brought against the insured, requiring the insured to forward to the insurer papers involved in the suit. (Plaintiff's exhibit 31, p. 17).
During negotiations for the policies, General Host informed AMICO of the Miller case, but told AMICO representatives that the Miller case was based on events which had occurred in the past and would not, therefore, be covered under the AMICO policies. At that time, General Host did not, in fact, expect to demand coverage from AMICO for the Miller action.
General Host contends that before December 9, 1983, at which the time the court held a pretrial conference in Miller, it was not aware that the Miller case involved claims that arguably could be covered by the AMICO policies. General Host claims that until that time, it believed the Miller plaintiffs sought only permanent damages measured by the diminution in value of their properties due to the salt pollution.2
General Host engaged in settlement negotiations with the Miller plaintiffs from October 1983 until shortly before trial. On March 9, 1984, General Host sent a letter to its insurance broker, John Schroeder, for the purpose of demanding coverage under the AMICO policies. Schroeder sent a letter to AMICO demanding coverage on March 19, 1984. The Miller trial was set to begin on March 19, 1984, and actually did commence on March 26, 1984. Miller, 592 F.Supp. at 981.
The Brothers action, involving the same salt pollution and some of the same plaintiffs, was filed on September 5, 1984. Defendant informed Schroeder of the filing of the Brothers suit by a letter dated September 13, 1984. Schroeder sent a letter to AMICO on September 18, 1984, conveying the same information. The filing of the Brothers had been anticipated since the court had ruled in Miller that the plaintiffs could recover temporary damages only through the year of trial.
The court is familiar with the standards governing the consideration of a motion for summary judgment. The Federal Rules of Civil Procedure provide that summary judgment is appropriate when the documentary evidence filed with the motion "shows 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). A principal purpose "of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses...." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The court's inquiry is to determine "whether there is the need for a trial — whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).
The burden at the summary judgment stage is similar to the burden of proof at trial. The court must enter summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact on its claim(s). Rule 56, however, imposes no requirement on the moving party to "support its motion with affidavits or other similar materials negating the opponent's claim." Id. at 323, 106 S.Ct. at 2552 (emphasis in original). Once the moving party has properly supported its motion for summary judgment, the nonmoving party may not rest upon mere allegations or denials, but must set forth specific facts showing a genuine issue for trial, relying upon the types of evidentiary materials contemplated by Rule 56. Fed.R.Civ.P. 56(e). Each party must demonstrate to the court the existence of contested facts on each claim it will have to prove at trial. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. The court reviews the evidence on summary judgment under the substantive law and based on the evidentiary burden the party will face at trial on the particular claim. Anderson, 477 U.S. at 254, 106 S.Ct. at 2513.
The court first addresses the issue of which state's law governs the plaintiff's claims. There is no dispute that a federal court sitting in diversity applies the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Furthermore, the parties agree that under Kansas law, interpretation of a contract is a matter governed by the law of the state in which the last act necessary for the contract's formation is completed. Simms v. Metropolitan Life Ins. Co., 9 Kan.App.2d 640, 642-43, 685 P.2d 321 (1984).
The plaintiff contends that the last act necessary for the formation of the insurance contract at issue in this case was the signing and countersigning of the policy, which occurred in New York. The court agrees. See Jameson v. Pack, 815 F.Supp. 410, 413 (D.Kan.1993); RLI Ins. Co. v. Kary, 779 F.Supp. 1300, 1303 (D.Kan.1991); Civic Assocs., Inc. v. Security Ins. Co., 749 F.Supp. 1076, 1079 (D.Kan.1990). Defendant argues that the last act necessary for the formation of an insurance contract may be delivery, which in this case occurred in Connecticut. There are cases holding that group insurance policies are governed by the law where the master policy is delivered, Frasher v. Life Investors Ins. Co of America, 14 Kan.App.2d 583, 796 P.2d 1069 (1990); Simms, 9 Kan. App.2d at 644, 685 P.2d 321, but there is no indication that this rule applies outside the context of group life or health insurance. In the other case cited by defendant, See v. United Ins. Co, 171 Kan. 146, 147, 230 P.2d 1008 (1951), the court held that Kansas law applied where not only had the policy been delivered to Kansas, but the insured had completed and signed the application for insurance in Kansas and had mailed premium payments from Kansas.
Because the policy at issue in this case was issued in New York, this court applies the law of New York in ...
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