Doe v. Lexington Ins. Co.
| Decision Date | 13 June 2013 |
| Docket Number | No. 12–2215.,12–2215. |
| Citation | 719 F.3d 868 |
| Parties | DOE RUN RESOURCES CORPORATION, Plaintiff–Appellant v. LEXINGTON INSURANCE COMPANY, Defendant–Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
OPINION TEXT STARTS HERE
Marc D. Halpern, argued, San Diego, CA, Heather L. Mayer, on the brief, for appellant.
Joseph Hinkhouse, argued, Chicago, IL, Scott R. Ostericher, Seth M. Jaffe, Sarah H. Dearing, Robyn Fox, on the brief, for appellee.
Before LOKEN, MURPHY, and COLLOTON, Circuit Judges.
Doe Run Resources Corporation (“Doe Run”), the largest integrated lead producer in the Western Hemisphere, operates the Sweetwater Mine and Mill near Viburnum, Missouri. Doe Run extracts and crushes ore containing lead and other metals at the mine, processes the crushed ore at a mill near the mine, and either sells the resulting lead concentrate on the world market or transports it by truck to Doe Run's smelter for processing into ingots, bars, and other forms. In 2006, Nadist, LLC, a neighboring landowner, sued Doe Run, alleging environmental property damage resulting from the mine and mill operations (the “Nadist Lawsuit”).
More than three years later, Doe Run tendered defense of the Nadist Lawsuit to Lexington Insurance Company (“Lexington”) under Commercial General Liability (CGL) policies Doe Run purchased between 1998 and 2006. When Lexington denied coverage on numerous grounds, Doe Run commenced this declaratory judgment action seeking to enforce Lexington's contractual duty to defend Doe Run. The district court 1 granted summary judgment dismissing the complaint, concluding that Lexington had no duty to defend because the policies' absolute pollution exclusions unambiguously bar coverage of all claims asserted in the Nadist Lawsuit. Doe Run appeals. Missouri law governs the issues raised on appeal in this diversity case. Reviewing the district court's grant of summary judgment and interpretation of the policies de novo, we affirm. See Royal Ins. Co. of Am. v. Kirksville Coll. of Osteopathic Med., 191 F.3d 959, 961 (8th Cir.1999) (standard of review).
Nadist filed the Nadist Lawsuit in June 2006 and the operative First Amended Complaint in February 2008. In October 2008, the State of Missouri intervened as plaintiff, asserting the same claims for relief under state and federal environmental laws. In September 2009, Doe Run gave Lexington notice of the Nadist Lawsuit and demanded “full defense coverage” under enumerated CGL policies. Those policies imposed two distinct contractual duties, the duty to indemnify Doe Run for covered losses, and the duty to defend Doe Run in a lawsuit seeking damages for losses that may be covered. In this lawsuit, Doe Run seeks only to enforce the duty to defend, which is broader than the duty to indemnify. “The presence of some insured claims in the underlying suit gives rise to a duty to defend, even though uninsured claims or claims beyond the coverage may also be present.” Lampert v. State Farm Fire & Cas. Co., 85 S.W.3d 90, 93 (Mo.App.2002).
Under Missouri law, the duty to defend arises when there is potential liability at the outset of the third party's case. Normally, the duty “is determined by comparing the language of the insurance policy with the allegations in the complaint.” McCormack Baron Mgmt. Servs., Inc. v. Am. Guar. Liab. Ins. Co., 989 S.W.2d 168, 170 (Mo.1999) (citation omitted). “But the insurer may not ignore ‘actual facts,’ that is, ‘facts which were known, or should have been reasonably apparent at the commencement of the [underlying lawsuit].’ ” Esicorp, Inc. v. Liberty Mut. Ins. Co., 193 F.3d 966, 969 (8th Cir.1999) (quotation omitted). Here, this standard is more difficult to apply because Doe Run waited three years before tendering defense of the Nadist Lawsuit to Lexington, when Doe Run had already incurred $2,700,000 in defense costs. But as the district court recognized, our focus must still be on the claims asserted in the Nadist Lawsuit's First Amended Complaint. Lexington has no duty to defend if the policies' pollution exclusions barred coverage of all claims asserted in the Nadist Lawsuit. Cas. Indem. Exch. v. City of Sparta, 997 S.W.2d 545, 553 (Mo.App.1999). Where insurance policy terms unambiguously apply, including coverage exclusions, they will be enforced as written. Krombach v. Mayflower Ins. Co., 827 S.W.2d 208, 210 (Mo.1992); Auto Club Family Ins. Co. v. Jacobsen, 19 S.W.3d 178, 183 (Mo.App.2000).
Given this focus of the duty-to-defend inquiry, we will quote at some length from the twenty-six-page First Amended Complaint in the Nadist Lawsuit. The complaint began with general allegations regarding the Doe Run operations at issue:
2. Through its mismanagement of the Mine and Mill, Doe Run has caused hazardous and toxic substances, primarily lead, zinc and lead tailings but also other substances including arsenic, cadmium, chromium, copper, manganese, nickel, and thallium to contaminate the soil, air, and water around the Mine and Mill, including property owned by Nadist.
3. According to sampling performed by the Missouri Department of Natural Resources (“MDNR”) and Nadist itself, the contamination Doe Run has caused is extreme both in breadth and in the danger it poses to human health and the environment.
4. In addition, there is significant contamination in the Sweetwater and Adair Creeks downstream of likely discharge points ... in the Mill area.
6. .... MDNR has documented a release from the tailings pond into the Ozark Aquifer, on information and belief creating a risk to domestic wells near the Mine and Mill.
7. ... The high concentrations of lead and other toxic substances are being detected at or near the surface with the highest concentrations closest to Doe Run's Mill and the haul road, suggesting lead contamination emanates from the Mill and haul trucks that carry ore concentrate from the Mill.
8. .... Lead is a probable human carcinogen known to cause brain damage in humans.... Arsenic is a known human carcinogen that can cause death or nerve damage in humans and animals.... Thallium is another known human carcinogen.... Cadmium inhalation can lead to respiratory tract problems, renal failure, or liver and kidney damage. Chromium, nickel, manganese, and zinc also can cause serious injury to human health and/or the environment.
11. .... On information and belief, the dam holding back the Mine and Mill's lead-contaminated tailings pond and tailings pile ... has been in use almost thirty years. A dam failure would release a toxic stew that would likely cover thousands of acres with a poisonous sheen.
The complaint then asserted six statutory and common law tort causes of action, plus two contract claims that are not here at issue:
COUNT I—Violation of RCRA—Hazardous Waste
25. The Mill generates ore concentrate, which contain[s] toxic substances including lead. The haul trucks then haul loads of the ore concentrate from the Mill on the haul road.
26. On information and belief, ore concentrate is released from the Mill and haul trucks and contaminates the soil, air, and water at and near the Mill. In many instances, Doe Run then abandons the released ore concentrate where the contamination occurs.
27. When ore concentrate is released from the Mill area and the haul trucks and Doe Run leaves the released concentrate on Doe Run's and/or Nadist's property, this constitutes the discarding, disposal, and/or abandonment of a hazardous waste [in violation of 42 U.S.C. § 6923].
39. .... Doe Run has allowed water and wind to carry toxic tailings from the tailings pile and pond onto nearby property and into nearby surface water [entitling Nadist to relief under 42 U.S.C. § 6972].
51. On information and belief, including the MDNR's sampling, toxic contaminants including lead, zinc, arsenic, and thallium are being discharged from one or more unpermitted point sources into the Sweetwater and Adair Creeks.... from the Mill area [which constitutes the discharge of pollutants in violation of 33 U.S.C. § 1311(a) ].
59. .... [L]ead and other materials are being released or are emanating from the Mine and Mill site, including windborne lead from haul trucks operated by Doe Run that access the site to remove lead ore concentrate from the site [in violation of 42 U.S.C. § 7604].
64. Without Nadist's authorization, Doe Run has released toxic substances lead, zinc and lead tailings but also other substances including arsenic, cadmium, chromium, copper, manganese, nickel, and thallium, onto real property owned by Nadist.
66. Doe Run has allowed the pollution of and trespass upon Nadist's property to continue largely unabated, despite knowing the toxins emitted from Doe Run's operations pose an imminent risk to human health and the environment.
70. Without Nadist's authorization, Doe Run has released and on a regular or semi-regular basis is releasing toxic substances including lead onto real property owned by Nadist. Such releases impede Nadist's operations and endanger Nadist's employees and others on its property.
Lexington's CGL policies broadly insured Doe Run against liability to third parties for bodily injury or property damage caused by an “occurrence.” For purposes of this appeal, it is agreed that the tort claims asserted in the Nadist Lawsuit fell within these insuring provisions. However, all eight policies included what is known as an “absolute” pollution exclusion. In the policies issued between 1998 and November 2004, this provision excluded—
bodily injury or property damage ... caused by, contributed to or arising out of the actual or threatened discharge, dispersal, release, or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, pollutants or contaminantsinto or upon the land, the...
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