Farmland Industries, Inc. v. Republic Ins. Co., No. 79032

• Court: United States State Supreme Court of Missouri
• Writing for the Court: COVINGTON
• Citation: 941 S.W.2d 505
• Decision Date: 25 March 1997
• Docket Number: No. 79032
• Parties: , 65 USLW 2656 FARMLAND INDUSTRIES, INC., et al., Appellants/Cross-Respondents, v. REPUBLIC INSURANCE CO., et al., Respondents/Cross-Appellants.

Page 505

941 S.W.2d 505 45 ERC 1216, 65 USLW 2656 FARMLAND INDUSTRIES, INC., et al., Appellants/Cross-Respondents,
v.
REPUBLIC INSURANCE CO., et al., Respondents/Cross-Appellants. No. 79032. Supreme Court of Missouri,
En Banc. March 25, 1997.

Douglas Y. Curran, David L. Heinemann, Kansas City, Nancer H. Ballard, Nina R. Michkin, Charles N. Le Ray, Boston, Massachusetts, for Appellants/Cross-Respondents.

Joel R. Mosher, Stephen M. Bledsoe, Richard M. Paul, III, Kansas City, for Millers' Mutual Insurance Association.

Alan K. Goldstein, St. Louis, for Home Insurance Co. and Home Indemnity Co.

Page 506

Margaret A. Arnold, Wayne S. Karbal, Chicago, Illinois, William T. Session, Margaret Pemberton, Kansas City, for Hartford Accident & Indemnity Co. and First State Insurance Co.

Alan C. Kohn, St. Louis, for Respondents/Cross-Appellants.

Lewis C. Green, Bruce A. Morrison, Kathleen G. Henry, St.Louis, for Amicus Curiae, Superior Equipment Co., Inc.

Jeremiah W. (Jay) Nixon, Attorney General, Shelley A. Woods, Assistant Attorney General, Jefferson City, for Amicus Curiae, State.

Sherri C. Strand, St. Louis, Stephan G. Weil, Washington, D.C., Joe B. Whisler, Susan E. McKeon, Kansas City, for Amicus Curiae.

John H. Gross, Seth B. Schafler, Lee M. Epstein, New York City, for Amicus Curiae, Gold Fields American Corp., Emerson Electric Co., Monsanto Co., Trans World Airlines, Inc., and Union Electric Co.

Laura A. Foggan, Daniel E. Troy, Bryan N. Tramont, Washington, D.C., for Amicus Curiae, Insurance Environmental Litigation Association.

COVINGTON, Judge.

Farmland Industries, Farmer's Chemical Company, and Union Equity Cooperative Exchange (collectively "Farmland") filed a declaratory judgment action in the Circuit Court of Clay County against Respondent insurance companies. These companies include Republic Insurance Company, Millers' Mutual Insurance Association of Illinois, The Home Insurance Company, The Home Indemnity Company, First State Insurance Company, and Hartford Accident and Indemnity Company. Farmland asserted that Respondents are obligated to defend and indemnify Farmland for environmental response costs under the comprehensive general liability insurance policies, umbrella policies, and other excess liability policies that Respondents sold to Farmland and its predecessors in interest. The trial court determined that environmental response costs were not "damages" within the meaning of the policies and granted Respondents' cross-motion for summary judgment. Farmland appealed, and this Court transferred the case prior to an opinion of the Missouri Court of Appeals. The judgment of the trial court is reversed and the case is remanded for further proceedings.

The Comprehensive Environmental Response Compensation Liability Act of 1980 (CERCLA), as amended, 42 U.S.C.A. §§ 9601-9675 (West 1995 & Supp.1997), and analogous state statutes impose liability on individuals and companies who own or operate, or formerly owned or operated, facilities from which hazardous substances have been released. 42 U.S.C.A. § 9607(a). The law also imposes liability if an individual or company arranged for the treatment or disposal of hazardous substances at a facility from which hazardous substances have been released. Id.

CERCLA provides two responses to environmental harm: removal ¹ and remedial action. ² 42 U.S.C.A. § 9601(25). The costs of

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these responses are commonly known as "environmental response costs." The government may require a responsible party to pay environmental response costs through one or more means. The Environmental Protection Agency (EPA) itself may conduct removal and remedial work, then sue responsible parties for reimbursement. 42 U.S.C.A. § 9604(a)(1). The EPA may seek injunctive relief requiring the responsible parties to abate the danger of a hazardous substance or the threatened release of a hazardous substance. 42 U.S.C.A. § 9606(a). CERCLA provides that the EPA may enter into an agreement with responsible parties to perform any response action. 42 U.S.C.A. § 9622(a). Following approval by the Attorney General of the United States, the agreement is entered as a consent decree in the appropriate United States district court. 42 U.S.C.A. § 9622(d)(1)(A).

Farmland purchased comprehensive general liability policies, umbrella policies, and other excess liability policies from Respondents. The policies contain language identical or similar to the following:

The company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of ... property damage.... ³

Some of the policies do not contain a definition of the term "damages." The policies that do define "damages" do not distinguish between legal and equitable damages. The policies that define "damages" do so in the following manner:

"[D]amages" includes damages for death and for care and loss of services resulting from bodily injury and damages for loss of use of property resulting from property damage. ⁴

In 1994, Farmland filed suit, seeking a declaration that Respondents were obligated to defend and/or indemnify Farmland under the companies' respective insurance policies with respect to property damage and personal injury at sites located in Missouri and elsewhere. In its petition, Farmland alleged that it has incurred and/or faces the potential for substantial defense costs and liability for damages arising from alleged property damage and personal injury at and near these

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sites. Farmland alleged that the EPA and/or state agencies have required Farmland to conduct investigation and/or remediation activities. Farmland presented evidence that it has entered various consent agreements with the EPA and state agencies to respond to hazardous substances at the sites at issue.

Farmland filed a motion for partial summary judgment, asking the court to find that under Missouri law, environmental response costs incurred pursuant to CERCLA and similar state laws constitute "damages" as the term is used in the policies at issue. Respondents filed a cross-motion for summary judgment, arguing that the term "damages" does not include environmental response costs. The trial court entered an order denying Farmland's motion for partial summary judgment and sustaining respondents' cross-motion for summary judgment.

The issue, one of first impression for this Court, is whether environmental response costs incurred pursuant to CERCLA and similar state laws are "damages" within the meaning of the policies Respondents issued to Farmland. The parties agree that the environmental responses, when required of a responsible party by the government, are in the nature of equitable relief; the parties disagree on the question of whether the cost of this equitable relief is included within the policy term "damages." Farmland argues that the ordinary meaning of "damages" includes equitable relief. Respondents counter that the term "damages" means "legal damages," payments to third persons when those persons have a legal claim for damages. Respondents assert that "damages" does not include the cost of equitable remedies.

Although the issue presented is one of first impression in Missouri, Missouri's law governing interpretation of language in an insurance policy is settled. When interpreting the language of an insurance policy, this Court gives a term its ordinary meaning, unless it plainly appears that a technical meaning was intended. Peters v. Employers Mut. Casualty Co., 853 S.W.2d 300, 303 (Mo. banc 1993); Greer v. Zurich Ins. Co., 441 S.W.2d 15, 27 (Mo.1969). The ordinary meaning of a term is the meaning that the average layperson would reasonably understand. Peters, 853 S.W.2d at 303; Greer, 441 S.W.2d at 27.

The insurance policies at issue do not indicate that the parties plainly intended to give "damages" a technical meaning. In some of the policies at issue, the term "damages" is not defined. The policies that do define "damages" make no reference to a definition that distinguishes between legal and equitable relief. This Court will, therefore, give the term "damages" its ordinary meaning.

To determine the ordinary meaning of a term, this Court consults standard English language dictionaries. See, e.g., Peters, 853 S.W.2d at 303 n. 2 (rejecting insurer's technical definition purportedly used within the insurance industry and instead adopting definition from Webster's Third New International Dictionary and other standard English language dictionaries); Greer, 441 S.W.2d at 27; Levin v. State Farm Mut. Auto. Ins. Co., 510 S.W.2d 455, 459 (Mo. banc 1974).

Reference to standard English language dictionaries reveals that "damages" means "the estimated reparation in money for detriment or injury sustained." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 571 (1961). Webster's also defines "damages" as "compensation or satisfaction imposed by law for a wrong or injury caused by a violation of a legal right." Id. These definitions of "damages," those that a layperson would reasonably understand "damages" to mean, are broad and inclusive. The ordinary meaning of damages, therefore, includes environmental response costs required by the government.

Respondents nevertheless argue that "damages" does not include equitable relief even if "damages" is given its ordinary meaning. Respondents contend that the government has ordered that Farmland undertake specific actions in this case, such as investigating, planning, and cleaning up pollution. Respondents argue that such actions are not the "money equivalent for detriment or injuries sustained;" therefore, they are not "damages."

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Respondents' argument fails. The definitions of "damages" do not distinguish between legal damages and equitable relief. Farmland's cost of undertaking the actions required by the government under CERCLA or similar state laws are "damages" within the ordinary meaning of the term. In other words, the...