American States Ins. Co. v. Hanson Industries

• Decision Date: 04 January 1995
• Docket Number: Civ. A. No. H-93-3331.
• Citation: 873 F. Supp. 17
• Parties: AMERICAN STATES INSURANCE COMPANY, Plaintiff, v. HANSON INDUSTRIES, Successor-In-Interest to U.S. Industries, Inc. and Wyatt Industries, Inc.; Insurance Company of North America; Travelers Insurance Company; and American Motorists Insurance Company, Defendants.
• Court: U.S. District Court — Southern District of Texas

873 F. Supp. 17

AMERICAN STATES INSURANCE COMPANY, Plaintiff, v. HANSON INDUSTRIES, Successor-In-Interest to U.S. Industries, Inc. and Wyatt Industries, Inc.; Insurance Company of North America; Travelers Insurance Company; and American Motorists Insurance Company, Defendants.

Civ. A. No. H-93-3331.

United States District Court, S.D. Texas.

January 4, 1995.

COPYRIGHT MATERIAL OMITTED

Christopher W. Martin, Bracewell & Patterson, Houston, TX, for plaintiff.

Murray J. Fogler, McBade & Fogler, Houston, TX, Gene Francis Creely, II, Boswell & Hallmark, Houston, TX, John R. Pearson, Sewell & Riggs, Houston, TX, Michael R. Ross, Houston, TX, for defendants.

MEMORANDUM AND ORDER

CRONE, United States Magistrate Judge.

Pending before the court is Plaintiff American States Insurance Company's ("American States") Motion for Partial Summary Judgment (Docket Entry # 41), Defendant Insurance Company of North America's ("INA") Motion for Partial Summary Judgment (Docket Entry # 39), Defendant Travelers Insurance Company's ("Travelers") Motion for Partial Summary Judgment (Docket Entry # 40), and Defendant American Motorists Insurance Company's ("AMICO") Motion for Partial Summary Judgment (Docket Entry # 42). American States, INA, Travelers, and AMICO (collectively "the Insurers") move for partial summary judgment on the issue of their obligation to defend Defendants Wyatt Industries ("Wyatt") and U.S. Industries, Inc. ("USI") in two causes of action filed in state court relating to pollution of a site previously owned by Wyatt and USI.

Also pending before the court is Wyatt's and USI's (collectively "the Insured") Cross-Motion for Partial Summary Judgment (Docket Entry # 47). Having reviewed the motions, the submissions of the parties, the pleadings, and the applicable law, this court is of the opinion that the Insurers' motions for partial summary judgment should be granted, and the Insured's cross-motion for partial summary judgment should be denied.

I. Background.

Wyatt Metal & Boilerworks, Inc. was formed in 1917, incorporated in 1956, and changed its name to Wyatt Industries, Inc. in 1959. In 1968, USI gained control of Wyatt through a merger of the two companies. Hanson Industries, Inc. ("Hanson") subsequently purchased USI in 1983. Today, Hanson controls the assets of USI and Wyatt.

In 1952, Wyatt purchased a thirty-acre tract of land on Old Katy Road in Houston, Texas ("the Site"), for the purpose of building and operating a plastics and rubber plant. Wyatt divided the Site into two tracts, the "Fluorocarbon Tract," which eventually contained a plastic and rubber manufacturing facility, and the "Wyatt Tract." Wyatt operated a plastics and rubber plant on the Fluorocarbon Tract from 1962 to 1968.

In 1968, Wyatt merged with USI. In conjunction with the merger, Wyatt conveyed all thirty acres of the Site to USI. USI continued the production of molded plastic and rubber products on the Fluorocarbon Tract from May 31, 1968, to March 27, 1978, when it sold six acres of the tract to Plastic and Rubber Products, Inc. ("PRP"). While PRP did not purchase the remaining six acres of the Fluorocarbon Tract until June 7, 1981, it owned and operated the molded plastics plant on the Fluorocarbon Tract from March 1978, until February 29, 1984, when it sold the Fluorocarbon Tract to The Fluorocarbon Company. Likewise, The Fluorocarbon Company continued the production of molded plastic and rubber products on the Fluorocarbon Tract until late 1985.

Thus, from 1962 until 1985, the Fluorocarbon Tract was used for the manufacture of plastic and rubber products. This process involved the injection of raw plastics and rubber into molds, thereby forming the desired product. As part of the manufacturing process, formic acid and methylene chloride were used to remove plastic and rubber residue from the molds, and degreasing chemicals, including trichloroethane and 1,1,1-trichloroethane, were used to remove oil and grease from various molds and metal forms.

Throughout the years that plastic and rubber products were manufactured on the Site, the manufacturers discarded most of their degreasing chemicals by dumping them on the ground outside of the manufacturing building located on the Site. The remaining degreasing chemicals were stored in fifty-five gallon tanks that leaked on the ground outside of the manufacturing building. The manufacturers stored the formic acid and methylene chloride in similar tanks that also leaked on the land surface of the Site.

The manufacturers' manner of disposing of the chemical wastes eventually led to the deposit of trichloroethane, 1,1,1-trichloroethane, and methylene chloride on and in the soil and groundwater at the Site. Furthermore, the chemical pollutants that leaked out of the storage tanks and drums seeped into the ground of the Site.

Approximately one year after purchasing the property from PRP, The Fluorocarbon Company entered into a sales contract dated January 1985 with The Home Depot for the sale of the Fluorocarbon Tract. As a result of the pending sale and The Home Depot's desire to build a retail outlet on the Site, an environmental survey of the Site was conducted on behalf of The Home Depot by Resource Engineering, Inc. ("REI"). In March and August 1985, REI issued reports identifying the presence of hazardous wastes in the soil and groundwater at the Site, including trichloroethane and methylene chloride. The August 1985 report further recommended that four "hot spots" of soil contamination be removed and that groundwater contamination be remediated by a groundwater recovery system.

Following a site inspection on November 8, 1985, the Texas Water Commission issued a Notice of Deficiency on November 15, 1985, to The Fluorocarbon Company referring to the presence of soil and groundwater contamination and the fact that hazardous wastes had been stored on the Site longer than 90 days. The Fluorocarbon Company responded to the Notice of Deficiency by submitting a formal "closure" plan on December 15, 1985, which indicated its desire to dismantle the plant.

The Texas Water Commission notified The Fluorocarbon Company on December 17, 1985, that dismantling the plant did not constitute site closure and did not remedy the violations noted in the recent site inspection. The Texas Water Commission further required The Fluorocarbon Company to submit a waste facility closure plan detailing procedures for soil and groundwater clean-up by January 20, 1986. The Fluorocarbon Company, however, never complied with this requirement; rather, it discontinued its manufacturing operations, dismantled its plant and equipment, and sold the property to The Home Depot on January 6, 1986.

The Home Depot, in turn, sold the Fluorocarbon Tract just twenty days later, on January 28, 1986, to the Old Katy Road 28 Limited ("OKR"), with Michael Kenny ("Kenny") as the general partner. In addition, OKR purchased the Wyatt Tract from the Insured on September 9, 1985.

OKR was able partially to clean up the contaminated soils on the site through an amended closure plan which REI submitted to the Texas Water Commission on OKR's behalf on July 9, 1986. Yet, the Water Commission required further information regarding the extent of the groundwater contamination before the Site could be designated as fully cleaned. Consequently, REI made supplementary studies of the groundwater on the Site and submitted a report to OKR on October 10, 1987, which identified extremely high concentrations of trichloroethane in the groundwater.

OKR filed suit against Wyatt and USI on January 27, 1988, alleging that Wyatt's and USI's actions in polluting the Site were "abnormally dangerous" and resulted in a public nuisance. Old Katy Road 28 Limited v. The Fluorocarbon Company, No. 88-3800 (127th Dist. Ct., Harris County, Tex., filed Jan. 27, 1988). OKR sought recovery from Wyatt and USI on theories of strict liability, negligence, misrepresentation, gross negligence, and violations of the Texas Deceptive Trade Practices Act and sought damages for diminution in the property value of the Site, future clean-up costs, and loss of future profits. Furthermore, Kenny, also a plaintiff to the suit, sought recovery for mental anguish and emotional distress.

In addition, the Federal Deposit Insurance Corporation ("FDIC"), as successor-in-interest to a mortgagee of the Site, brought an action against Wyatt and USI on September 8, 1989, seeking injunctive relief under the Resource Conservation and Recovery Act. FDIC v. Fluorocarbon Company, No. H-89-3068 (S.D.Tex. filed Sept. 8, 1989).

On February 7, 1992, a settlement agreement was reached between the parties of both suits, whereby a group of defendants in the OKR suit, including Wyatt and USI, agreed to pay for the clean-up of the contaminated land. Wyatt and USI, in turn, sought indemnity and defense from the insurance companies that insured them between 1962 and 1985. These insurance companies are American States, which insured Wyatt and USI between January 1, 1960, and April 1, 1971; Travelers, which insured USI from April 1, 1971, to April 1, 1972; INA, which insured USI between April 1, 1972, and April 1, 1976; and AMICO, which insured USI between April 1, 1976, and April 1, 1985. On October 20, 1993, American States filed the instant declaratory judgment action seeking a declaration that it does not owe Wyatt or USI coverage under its policies and asking the court to adjudicate the rights of USI's other insurers, as well.

II. Analysis.

A. The Applicable Standard.

Rule 56(c) provides that "summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c). The party seeking summary judgment bears the initial burden of informing the court of the...