Cotter Corp. v. AMERICAN EMPIRE SURPLUS
| Decision Date | 17 May 2004 |
| Docket Number | No. 02SC707.,02SC707. |
| Citation | 90 P.3d 814 |
| Parties | COTTER CORPORATION, Petitioner v. AMERICAN EMPIRE SURPLUS LINES INSURANCE COMPANY; Great American Insurance Company; American National Fire Insurance Company; American Employers' Insurance Company; Lexington Insurance Company; Granite State Insurance Company; and First State Insurance Company, Respondents. |
| Court | Colorado Supreme Court |
Moye, Giles, O'Keefe, Vermeire & Gorrell, LLP, John L. Watson, Leonard H. MacPhee, Denver, Colorado, Jenner and Block, LLC, Barry Levenstam, Chicago, Illinois, Joseph Dominguez, Philadelphia, PA, Attorneys for Cotter Corporation.
McGloin, Davenport, Severson & Snow, PC, Michael M. McGloin, Denver, Colorado, Hancock, Rothert & Bunshoft, LLP, William J. Baron, San Francisco, California, Attorneys for Great American Insurance Company and American National Fire Insurance.
Chrisman, Bynum & Johnson, Robert L. Matthews, Boulder, Colorado, Lord, Bissell & Brook, LLP, Michael P. Comiskey, Chicago, Illinois, Attorneys for American Empire Surplus Lines Insurance Company.
Markusson, Green & Jarvis, PC, H. Keith Jarvis, Kirstin G. Lindberg-Smith, Denver, Colorado, Attorneys for American Employers' Insurance Company.
Wood, Ris & Hames, PC, Clayton B. Russell, Denver, Colorado, Sinnot, Dito, Moura & Puebla, PC, J. Karren Baker, San Francisco, California, Attorneys for Lexington Insurance Company and Granite State Insurance Company.
Hogan & Hartson, LLP, Charles T. Mitchell, Coates Lear, Denver, Colorado, George W. Mayo, Jr., Washington, DC, Attorneys for First State Insurance Company.
Beth L. Krulewitch, Denver, Colorado, Attorney for Amicus Curiae Colorado Trial Lawyers Association.
Robert W. Smith, Denver, Colorado, Attorney for Amicus Curiae London Market Insurers.
Springer & Steinberg, PC, JoAnne M. Zboyan, Denver, Colorado, Attorneys for
Amicus Curiae Complex Insurance Claims Litigation Association.
This case arose from a declaratory judgment action initiated by petitioner Cotter Corporation ("Cotter"), a uranium mill operator, against its insurance providers. Cotter seeks a determination that the various insurance policies issued by the respondent insurers required them to both defend Cotter in two tort actions and indemnify Cotter for resulting liability. In response, the insurers contend that the qualified pollution exclusion clauses contained in the policies precluded coverage. In Cotter Corp. v. American Empire Surplus Lines Insurance Co., the court of appeals affirmed the district court's grant of summary judgment in favor of the insurers. 64 P.3d 886 (Colo.App.2002). The court of appeals held that the pollution exclusion clauses did not require the primary insurers to defend Cotter or any of the insurers to indemnify Cotter. Additionally, the court of appeals held that the excess insurance policies did not require the excess insurers to defend Cotter.
We granted certiorari to review the decision of the court of appeals affirming the trial court's grant of summary judgment in favor of the insurers. We specifically examine the court of appeals' interpretation of the qualified pollution exclusion clauses contained in Cotter's policies and its conclusion that the insurers owed no duties to defend or indemnify Cotter.1 We first conclude that the court of appeals applied the incorrect standard to determine that the qualified pollution exclusion clauses did not require the primary insurers to defend, or any of the insurers to indemnify, Cotter. Contrary to the court of appeals' reasoning, qualified pollution exclusion clauses do not automatically exclude coverage if the insured expected seepage from unlined tailings ponds. We hold that coverage exists if Cotter did not expect and intend contaminants to migrate either off its property or into the groundwater. We conclude that the court of appeals incorrectly affirmed the trial court's grant of summary judgment in favor of the primary insurers with respect to their duty to defend Cotter and in favor of all the insurers with respect to their duty to indemnify Cotter.
Next, we examine the court of appeals' determination that, by the terms of their policies, the excess insurers had no duty to defend Cotter. We hold that the court of appeals' correctly reached this conclusion. Therefore, we affirm the court of appeals' grant of summary judgment in favor of First State Insurance Company and American Empire Surplus Lines Insurance Company on this issue.
Between 1958 and 1986, Cotter operated a uranium mill near Canon City, Colorado. At the mill, Cotter extracted a crude uranium oxide known as yellowcake from uranium ore. The process of milling and refining uranium produced tailings, a liquid sludge that contained small amounts of uranium, nickel, arsenic, selenium, and molybdenum. These tailings retained roughly eighty-five percent of the radioactivity of the original uranium ore. Until 1983, Cotter treated and stored the tailings in unlined tailings ponds. Cotter later transferred the tailings from the unlined ponds into newly constructed lined ponds.
In 1989, two separate groups of residents of an area near the uranium mill brought two separate tort actions, with similar claims, against Cotter. See Dodge v. Cotter Corp., No. 91-Z-1801 (D. Colo. filed Oct. 24, 1991); Boughton v. Cotter Corp., No. 89-Z-1505 (D. Colo. filed Sept. 1, 1989). The plaintiffs alleged that Cotter's new and old tailings ponds were leaking and, as a result, hazardous materials were leaching into the groundwater. The plaintiffs claimed that the releases of hazardous materials caused personal injury and property damage, among other harms.
Cotter filed timely notice of the claims with the Respondent insurance companies (collectively "the insurers"). Relevant to this case, Cotter held primary policies issued by American Employers' Insurance Company ("American Employers'") and Great American Insurance Company and American National Fire Insurance Company (collectively "Great American"). These primary policies contained provisions promising that the insurers would defend and indemnify Cotter for liabilities under the policies. Cotter also held excess policies with American Empire Surplus Lines Insurance Company ("American Empire"), First State Insurance Company ("First State"), Lexington Insurance Company ("Lexington"), and Granite State Insurance Company ("Granite State"). These excess policies promised that the insurers would indemnify Cotter for resulting liability, but expressly disclaimed any duty to defend. Citing pollution exclusions in the policies issued to Cotter, all of the insurers refused to defend Cotter in the Boughton and Dodge suits or to indemnify Cotter for resulting liability.
A bellwether trial was held in the Boughton suit, and eight plaintiffs received a judgment of $79,600 against Cotter. Cotter then entered into a confidential settlement with the remaining plaintiffs. Two trials in the Dodge suit resulted in two jury verdicts against Cotter, which the U.S. Court of Appeals for the Tenth Circuit reversed and remanded for new trials. See Dodge v. Cotter Corp., 328 F.3d 1212 (10th Cir.2003)
.
Cotter filed this declaratory judgment action seeking a determination that the insurance policies issued by the insurers required them both to defend Cotter in the Boughton and Dodge suits and to indemnify Cotter for any resulting liability.2 In a series of orders, the district court granted summary judgments in favor of the insurers based on exclusions contained in the policies. The court of appeals affirmed.
First, the court of appeals held that the primary insurers had no duty to defend or indemnify Cotter, and that the excess insurers had no duty to indemnify Cotter, based on the qualified pollution exclusion clauses contained in the insurance policies. The court of appeals concluded that the qualified pollution exclusion clauses excluded coverage because Cotter expected contaminants to seep into the ground beneath the tailings ponds.
Second, the court of appeals held that excess insurers American Empire and First State had no duty to defend Cotter because their excess policies expressly disclaimed any such duty. Thus, the court of appeals concluded that the district court properly granted summary judgments in favor of the insurers.
We begin our analysis by setting forth the appropriate standard of review, as well as general principles for interpreting insurance policies. We review the court of appeals' decision to affirm the trial court's grant of summary judgment de novo. West Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo.2002). Summary judgment is appropriate when the pleadings and supporting documents clearly demonstrate that no issues of material fact exist and the moving party is entitled to judgment as a matter of law. Id. A court must afford all favorable inferences that may be drawn from the undisputed facts to the nonmoving party, and must resolve all doubts as to the existence of a triable issue of fact against the moving party. Id.
When construing the terms of insurance policies, we apply principles of contract interpretation. Thompson v. Md. Cas. Co., 84 P.3d 496, 501 (Colo.2004). As when interpreting contracts, we attempt to carry out the parties' intent and reasonable expectations when they drafted the policies. Id. Thus, we seek to give the words in a policy their plain and ordinary meaning, unless the intent of the parties indicates otherwise. Id. Where terms in an insurance policy are ambiguous, we construe the terms against the drafter and in favor of providing coverage to the insured. See id. at 502. We now apply these principles to interpret the insurance policies before us.
The court of appeals affirmed the trial court's grants of...
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