Curran Composites, Inc. v. Liberty Mut. Ins. Co.

• Decision Date: 01 December 1994
• Docket Number: No. 93-1063-CV-W-8.,93-1063-CV-W-8.
• Citation: 874 F. Supp. 261
• Parties: CURRAN COMPOSITES, INC. and Total Composites, Inc., d/b/a Cook Composites and Polymers Co., Plaintiffs, v. LIBERTY MUTUAL INSURANCE CO., Defendant.
• Court: U.S. District Court — Western District of Missouri

874 F. Supp. 261

CURRAN COMPOSITES, INC. and Total Composites, Inc., d/b/a Cook Composites and Polymers Co., Plaintiffs, v. LIBERTY MUTUAL INSURANCE CO., Defendant.

No. 93-1063-CV-W-8.

United States District Court, W.D. Missouri, Western Division.

December 1, 1994.

Douglas P. McLeon, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, MO, for plaintiffs.

Robert T. Adams, Shook, Hardy & Bacon, Kansas City, MO, for defendant.

ORDER

STEVENS, Chief Judge.

This diversity action springs from a dispute over the scope of coverage for environmental cleanup under comprehensive general liability and umbrella excess liability insurance policies issued to plaintiff by defendant. Plaintiff alleges that defendant insurance company breached those contracts. Defendant's motions for summary judgment and to stay discovery are before the court. For the reasons stated below, summary judgment is granted in favor of the defendant and the motion to stay discovery is dismissed as moot.

I. BACKGROUND

Curran Composites ("Curran") owns and operates a resin production plant in Saukville, Wisconsin. Curran acquired the plant from Freeman Chemical Corporation ("Freeman") and inherited all of Freeman's rights and interests in the property. Liberty Mutual Insurance Company ("Liberty Mutual") provided general comprehensive liability and umbrella excess liability insurance coverage to Curran and its predecessor in interest, Freeman, for much of the period from 1966 through 1988. Because all of the policies cannot be located, the exact dates of coverage are not clear.¹

The process used in Freeman's resin production facility generated "reaction water," a liquid waste containing hazardous chemicals. In 1952, Wisconsin state officials notified Freeman that it could dispose of the hazardous reaction water in a dry well at the Saukville facility. Freeman did that until approximately 1965, when it began to dispose of the waste in an on-site incinerator.

In 1979, after Saukville residents complained of odors in their municipal water, the Environmental Protection Agency ("EPA") and the Wisconsin Department of Natural Resources ("WDNR") initiated an investigation. The EPA and WDNR determined that the reaction water stored in the dry well had migrated into the municipal water supply, causing significant groundwater contamination.

In August of 1987, Freeman notified Liberty Mutual of its claim to recover costs of investigating and remediating contamination caused by operations at the Saukville facility. In October of 1987, Freeman signed a consent order with the EPA and WDNR under the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. § 6901 et seq. Freeman entered this order, which outlined its cleanup and reporting obligations, apparently as an attempt to minimize costs and avoid liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), 42 U.S.C. § 9601 et seq., commonly known as "Superfund." On August 2, 1989, Liberty Mutual informed Freeman that it had denied Freeman's claim for reimbursement of investigation and cleanup costs.

Plaintiff's two count complaint followed. In Count I, plaintiff alleges breach of contract. Plaintiff contends that the breach arises from (1) Liberty Mutual's failure to defend Curran, and (2) Liberty Mutual's failure to compensate Curran for cleanup and remediation costs. In Count II, plaintiff seeks a declaratory judgment defining Liberty Mutual's obligations under the insurance contracts.

Defendant moved for summary judgment, claiming that (1) defendant had no duty to defend because there was no lawsuit, and (2) the costs incurred by plaintiffs are not "damages" requiring reimbursement under the terms of the contract.

II. STANDARD FOR SUMMARY JUDGMENT

Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, 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). If a party is unable to make a sufficient showing to establish the existence of some essential element of its case upon which it will bear the ultimate burden of proof at trial, all other facts are necessarily immaterial. Celotex Corp. v. Catrett, 477 U.S. 317, 321, 106 S.Ct. 2548, 2551-52, 91 L.Ed.2d 265 (1986); Thomas v. FAG Bearings Corp., Inc., 846 F.Supp. 1400, 1405 (W.D.Mo.1994). A defendant moving for summary judgment bears the initial burden of showing the court that an essential element of the plaintiff's case is lacking. Celotex. The burden then shifts to the plaintiff to show that there is a factual controversy as to that element, or to explain why such evidence is not currently available. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Thomas, 846 F.Supp. at 1405; Fed. R.Civ.P. 56(e). If the plaintiff fails to demonstrate that there will be evidence which would allow a reasonable jury to find in its favor, summary judgment should be granted for defendant. Anderson, 477 U.S. at 251, 106 S.Ct. at 2511-12; Thomas, 846 F.Supp. at 1405.

Under Wisconsin law, construction of an insurance policy presents a question of law that may be decided on summary judgment. Kennedy v. Washington Nat'l Ins. Co., 136 Wis.2d 425, 401 N.W.2d 842, 844 (Ct.App.1987). Therefore, in a claim alleging breach of an insurance contract, if by the plain language the terms of the insurance contract do not permit recovery, summary judgment for defendant is appropriate.

III. DISCUSSION

At issue is whether the terms of the insurance contracts entitled plaintiff to a legal defense and/or reimbursement for cleanup and remediation expenses from defendant. In order to interpret properly the insurance contracts, the court must first determine which law applies. Defendant argues that Wisconsin law applies. Plaintiff suggests that Wisconsin should not apply, but fails to propose an alternative.

Plaintiff brings this claim under 28 U.S.C. § 1332, with jurisdiction based on diversity. A federal court sitting in a diversity case must apply the forum state's conflict of law rules. Simpson v. Liberty Mutual Ins. Co., 28 F.3d 763, 764 (8th Cir.1994); Wright v. Minter, 736 F.Supp. 1024, 1025 (W.D.Mo. 1990). Accordingly, Missouri conflict of law rules govern here.

Missouri has adopted § 188 and § 193 of the Restatement (Second) of Conflict of Laws in casualty insurance cases. Becker Metals Corp. v. Transportation Ins. Co., 802 F.Supp. 235, 237 (E.D.Mo.1992); Crown Center Redevelopment Corp. v. Occidental Fire & Casualty Co., 716 S.W.2d 348, 358 (Mo.App.1986). If the insurance contract does not specify which state's law applies, or if the policy insures risks located in a state other than Missouri, Missouri applies § 193. Crown Center, 716 S.W.2d at 358-59. Under § 193, unless some other state has a more significant relationship to the insurance contract, the law of the "principal location of the insured risk" applies.

The insurance policies in this case covered multiple manufacturing facilities located in several different states. Under § 193 comment (f), which addresses multiple risk insurance policies covering risks located in different states, each insured risk is treated as though it were insured by a separate policy. Accordingly, the law of the state in which the specific risk is located generally applies. Crown Center, 716 S.W.2d at 358-59. Because this case concerns waste from a single facility located in Saukville, Wisconsin, under Missouri's conflict of law rules, Wisconsin law applies. See Becker, 802 F.Supp. at 238; Crown Center, 716 S.W.2d at 358-59.

Wisconsin law provides that insurance policies shall be interpreted to carry out the true intentions of the parties. Edgerton v. General Cas. Co., 184 Wis.2d 750, 517 N.W.2d 463, 476 (1994); Kennedy v. Washington Nat'l Ins. Co., 136 Wis.2d 425, 401 N.W.2d 842, 844 (Ct.App.1987), quoting Caporali v. Washington Nat'l Ins. Co., 102 Wis.2d 669, 307 N.W.2d 218, 221 (1981). Although a court will not create rights not in the contract, ambiguity in the contract is resolved in favor of the insured, Kennedy, 401 N.W.2d at 844, particularly when the ambiguity appears in an exclusionary clause. Just v. Land Reclamation Ltd., 157 Wis.2d 507, 456 N.W.2d 570 (1990). Moreover, public policy favors finding coverage if the terms of the insurance contract permit such a finding. Kennedy, 401 N.W.2d at 844; Western Casualty & Surety Co. v. Budrus, 112 Wis.2d 348, 332 N.W.2d 837, 839 (Ct.App.1983).

However, when parties specifically contract to limit recovery, a court should not alter the contract to include remedies not contracted for. Edgerton, 517 N.W.2d at 477, citing School Dist. of Shorewood v. Wausau Ins. Cos., 170 Wis.2d 347, 488 N.W.2d 82 (1992). When a plaintiff seeks remedies clearly beyond the scope of the insurance contract, the plaintiff's claim must be denied.

Pertinent provisions of the comprehensive general liability insurance policies Liberty Mutual provided to Curran read as follows:

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 policy applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, 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.

The umbrella excess liability policies at issue contain the following language:

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