Briggs & Stratton Corp. v. Royal Globe Ins. Co.

Decision Date23 September 1999
Docket NumberNo. 5:97-CV-569-2(WDO).,5:97-CV-569-2(WDO).
Citation64 F.Supp.2d 1346
PartiesBRIGGS & STRATTON CORPORATION, Plaintiff, v. ROYAL GLOBE INSURANCE COMPANY, now known as Royal Insurance Company of America; and Transcontinental Insurance Company, Defendants.
CourtU.S. District Court — Middle District of Georgia

Daniel S. Reinhardt, David C. Vigilante, Brad L. Schoenfeld, Eric A. Szweda, Atlanta, GA, for Briggs & Stratton Corporation, a Wisconsin Corporation, plaintiffs.

Linda B. Foster, Atlanta, GA, Cynthia Ruth Mather, Thomas Tobias Locke, Ross, Dixon & Masback, L.L.P., Washington, DC, for Transcontinental Insurance Company, defendants.


OWENS, District Judge.

In previous order granting the motion of plaintiff Briggs & Stratton ("B & S") for partial summary judgment, the court found that Georgia law applies to construction of an excess coverage liability policy of insurance issued by defendant Transcontinental. We also ruled that under Georgia law remediation conducted by B & S pursuant to a United States Environmental Protection Agency ("EPA") Order, and Notice of Violation of the Georgia Department of Natural Resources Environmental Protection Division ("EPD"), constitutes "damages" under the policy.

Now before the court are cross-motions for summary judgment filed by B & S and Transcontinental. B & S seeks a motion for partial summary judgment as to Count II of its complaint, which alleges a breach of contract against Transcontinental. Transcontinental seeks a partial summary judgment that there is no coverage under the terms of the policy, that Transcontinental did not receive proper notice of the claim, and that the Transcontinental policy layer has not been reached.

I. Facts

In 1985 B & S closed its manufacturing facility for automotive locking systems located in Perry, Georgia. In the spring and summer of 1985, B & S transferred, for the sum of one dollar, certain electroplating chemicals and other raw chemical substances to Peach Metal Industries, Inc. ("PMI"), in Byron, Georgia, B & S maintains that the chemicals and substances were good and useable substances that were suitable for use in electroplating processes. Several of the materials PMI purchased from B & S were used within days of receiving them.

The electroplating processes engaged in by PMI generated waste waters that contained chemicals. From April of 1978 until approximately September of 1987, PMI discharged untreated waste waters into two unlined surface impoundments at the PMI property, which were discharged through an auxiliary pump into an open vat, then directly onto the property.

In 1987 the EPD began investigating environmental contamination at the PMI site. EPD eventually issued a Notice of Violation finding B & S to be in violation of Georgia's Hazardous Waste Management Act. On February 12, 1991, the EPA, pursuant to CERCLA1 §§ 104, 106, and 122, issued Administrative Order No. 91-01-C concluding that hazardous substances were being disposed of at the PMI site and that a number of drums of chemicals substances on the site had been identified as having come from B & S's Perry plant. The EPA ordered B & S, along with the owners of the PMI site and others, to undertake remediation. B & S subsequently spent approximately $5.2 million cleaning up the site.

Royal Insurance Company of America ("Royal") issued a primary insurance policy to B & S for the period April 1, 1985, to April 1, 1986. B & S has agreed to settle its claims against Royal in the present lawsuit. B & S also purchased, through its insurance agent Corroon & Black of Wisconsin, Inc., Transcontinental Commercial Umbrella Liability Policy No. UMB 169 39 31, an excess coverage policy incorporating the provisions of the underlying Royal policy. The policy provided that Transcontinental would pay for loss in excess of the limits of liability of the insurance policy issued by Royal. Corroon & Black arranged for the purchase through the use of an insurance intermediary, sometimes referred to as an insurance wholesaler. The intermediary was known at that time as Pyramid Excess Insurance Brokers, Inc., now Crump E & S of California ("Crump").2 The use of intermediaries is a common practice in the insurance industry, particularly for the purchase of excess insurance.

II. Discussion
A. Summary judgment standard

Federal Rule of Civil Procedure 56(c) provides that summary judgment may be entered in favor of the movant where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is (1) no genuine issue as to any material fact and that (2) the moving party is entitled to judgment as a matter of law." See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Irby v. Bittick, 44 F.3d 949, 953 (11th Cir.1995).

Under the first element, the issue must be genuine, and the factual dispute must be material to the outcome of the litigation. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. "Materiality" is determined by reference to the substantive law that controls the case. Id.; Mulhall v. Advance Security, Inc., 19 F.3d 586, 590 (11th Cir.), cert denied, 513 U.S. 919, 115 S.Ct. 298, 130 L.Ed.2d 212 (1994). For a question of fact to be "genuine," the party opposing summary judgment "`must do more than simply show that there is some metaphysical doubt as to the material facts,'" Irby, 44 F.3d at 953 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)) — the evidence must be of such a quality that "a reasonable jury could return a verdict for the nonmoving party .... If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 248, 249-50, 106 S.Ct. 2505. The second element — that the movant be entitled to judgment as a matter of law — is satisfied where "the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

B. Policy terms

In this court's previous order granting plaintiff's motion for partial summary judgment, we determined that the policy coverage issues in this case are governed by Georgia law rather than Wisconsin law. To qualify for coverage under the Transcontinental policy, B & S must first show that it has incurred "damages" as a result of "property damage" caused by an "occurrence." These terms are defined in the underlying policy with Royal, in accordance with the following provision in the Transcontinental excess policy:

A. Coverage A — Excess Liability Over Underlying Insurance [Transcontinental] will pay on [B & S's] behalf for loss in excess of the total applicable limits of liability of the underlying insurance stated in the schedule. The provisions of the immediate underlying policy are, with respect to Coverage A incorporated as a part of this policy.

The applicable limits of the underlying insurance with Royal were $1,500,000.00. The provisions of the underlying policy with Royal, which were incorporated into the Transcontinental excess policy, provide:

1. Coverage A — Bodily Injury Liability

Coverage B — Property Damage Liability

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A, bodily injury or

Coverage B, property damage to which this insurance applies, caused by an occurrence.

(1) Damages

This court has already ruled in the previous order that remedial undertakings in response to EPA or state administrative agency orders fit the definition of "damages" under Georgia law. See Atlantic Wood Industries, Inc. v. Lumbermen's Underwriting Alliance, 196 Ga.App. 503, 504, 396 S.E.2d 541, 543 (1990), cert. denied, 498 U.S. 1085, 111 S.Ct. 958, 112 L.Ed.2d 1046 (1991); see also Claussen v. Aetna Cas. & Sur. Co., 259 Ga. 333, 380 S.E.2d 686 (1989)(EPA-mandated costs incurred by an owner are within the coverage of a comprehensive general liability policy absent a clear and unambiguous pollution exclusion clause). It is undisputed that B & S expended sums in response to the 1991 Administrative Order of the EPA. Such costs fit the definition of "damages" incorporated within the Transcontinental policy.

(2) Property damage

The underlying Royal policy defines "property damage" as:

(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

PMI conducted electroplating operations at the PMI site during the policy period between April 1, 1985, and April 1, 1986. These electroplating operations involved the discharge of waste waters containing chemical substances into unlined surface impoundments at the property, leading to the environmental damage cited by the EPA order.

In South Carolina Ins. Co. v. Coody ("Coody I"), 813 F.Supp. 1570, 1575 (M.D.Ga.1993), a case related to the present one, we outlined several approaches have been adopted by the courts for determining when an injury occurred in cases involving hazardous substances. The Georgia courts and legislature have not decided the question of when environmental damage occurs for the purpose of determining liability in insurance policies. In Boardman Petroleum, Inc. v. Fed. Mut. Ins., 926 F.Supp. 1566, 1577-78 (S.D.Ga. 1995), rev'd on other grounds, 150 F.3d 1327 (11th Cir.1998), the district court interpreted contract language similar to that in the Transcontinental policy, relying on elements of Georgia contract law in finding that the most rational interpretation of the language would support an "exposure"...

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