Great Northern Nekoosa v. Aetna Cas. and Sur. Co., Civil Action No. 1:92CV017-S-D.

• Court: U.S. District Court — Northern District of Mississippi
• Writing for the Court: F. Ewin Henson, III, Greenwood, MS, Thomas J. Groark, Jr., Hartford, CT, for Defendant Aetna
• Citation: 921 F. Supp. 401
• Parties: GREAT NORTHERN NEKOOSA CORPORATION, Leaf River Corporation, Leaf River Forest Products, Inc., and Warren Richardson, Plaintiffs, v. AETNA CASUALTY AND SURETY COMPANY, California Union Insurance Company, Federal Insurance Company, Home Insurance Company, Insurance Company of North America, International Insurance Company, National Union Fire Insurance Company of Pittsburg, Pa., and New England Insurance Company, Defendants.
• Docket Number: Civil Action No. 1:92CV017-S-D.
• Decision Date: 08 April 1996

921 F. Supp. 401

GREAT NORTHERN NEKOOSA CORPORATION, Leaf River Corporation, Leaf River Forest Products, Inc., and Warren Richardson, Plaintiffs,
v.
AETNA CASUALTY AND SURETY COMPANY, California Union Insurance Company, Federal Insurance Company, Home Insurance Company, Insurance Company of North America, International Insurance Company, National Union Fire Insurance Company of Pittsburg, Pa., and New England Insurance Company, Defendants.

Civil Action No. 1:92CV017-S-D.

United States District Court, N.D. Mississippi, Eastern Division.

April 8, 1996.

921 F. Supp. 402

COPYRIGHT MATERIAL OMITTED

921 F. Supp. 403

James E. Price, Jr., Corinth, MS, John H. Gross, Finley Harckham, New York City, for Plaintiffs

F. Ewin Henson, III, Greenwood, MS, Thomas J. Groark, Jr., Hartford, CT, for Defendant Aetna.

L.F. Sams, Jr., Tupelo, MS, Stuart H. Newberger, Washington, DC, for Defendant California Union.

Walker W. Jones, III, Jackson, MS, for Defendant Federal Insurance.

Dermont S. McGlinchey, New Orleans, LA, for Defendant Home Insurance.

L.F. Sams, Jr., New Orleans, LA, for Defendant Insurance Company of North America.

Mark Douglas Herbert, Jackson, MS, Lawrence M. McHeffey, Morristown, NJ, for Defendant International Ins.

921 F. Supp. 404

William M. Beasley, Tupelo, MS, for Defendant National Union Fire.

Robert K. Upchurch, Tupelo, MS, for Defendant New England Ins.

MEMORANDUM OPINION

SENTER, Chief Judge.

This declaratory judgment is before the court on cross-motions for summary judgment as to the obligation of Aetna Casualty & Surety Company (hereinafter referred to as "Aetna") to defend the plaintiffs (hereinafter collectively referred to as "GNN") in a multitude of civil cases which have been filed in state court. The issue the court must address is whether the personal injury endorsement in the Aetna policies provides coverage for the claims of trespass, nuisance, and emotional distress which have been alleged in the underlying state lawsuits.

Facts

The pending state court actions have been filed by over 2,000 individuals who own or use land along the Leaf and Pascagoula Rivers. The first of such lawsuits was brought in 1989. All of the cases are related to the operation of the Leaf River Forest Products' pulp mill in New Augusta, Mississippi. The mill processes timber into market pulp which is used to produce high-quality paper products. As part of daily operation, the pulp mill discharged pollutants, including dioxin, into the Leaf River which joins the Chickasawhay River to form the Pascagoula River. The typical underlying complaint makes claims for trespass, nuisance, and claims for emotional distress due to the fear of developing cancer.

Aetna sold GNN two primary comprehensive general liability insurance policies covering from January 1, 1984, through April 1, 1986. These two policies cover the subsidiaries of Great Northern Nekoosa. The coverage under the policies included the obligation to pay the defense costs of any action covered under the bodily injury, property damage, or personal injury provisions. Aetna defended the plaintiffs during Simmons v. Leaf River Forest Products, Inc., Civil Action No. 4566 (Cir. Ct., Greene County), but a judgment was entered against Leaf River. After further investigation, and during the pendency of Ferguson v. Leaf River Forest Products, Civil Action No. 91D-20 (Cir. Ct., Jackson County), Aetna notified the plaintiffs that the insurance policy did not provide coverage for the alleged incidents in state court, and that Aetna had no duty to defend nor an obligation to indemnify the plaintiffs. Aetna had agreed to defend the plaintiffs under a reservation of rights.

In the insurance policy for bodily injury and property damage coverage, Aetna agreed to:

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

bodily injury or property damage

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

The insurance policy contains a pollution exclusion which provides:

This insurance does not apply:

* * * * * *

(f) to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants, or pollutants into or upon land, the atmosphere or any water course or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental....

Personal injury coverage which is provided in the Broad Form Comprehensive General Liability Endorsement is coverage separate and distinct from the bodily injury and property damage coverage. Section II of the personal injury coverage provides:

Aetna will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of personal injury ... to which this insurance applies, sustained by any person or organization

921 F. Supp. 405

and arising out of the conduct of the named insured's business ... and ... Aetna shall have the right and duty to defend any suit against the insured seeking damages on account of such injury....

"Personal injury" is defined as:

injury arising out of one or more of the following offenses committed during the policy period:

(1) false arrest, detention, imprisonment, or malicious prosecution;

(2) wrongful entry or eviction or other invasion of the right of private occupancy;

(3) a publication or utterance

(a) of a libel or slander or other defamatory or disparaging material, or

(b) in violation of an individual's right to privacy....

This definition was expanded by an endorsement amendment to include:

4. Fright, Mental Anguish, Plagiarism

5. Creation of Emotion Disturbance

6. Discrimination....

Ferguson v. Leaf River Forest Products Inc.

In Leaf River Forest Products v. Ferguson, 662 So.2d 648 (Miss.1995), Leaf River Forest Products (LRFP), a subsidiary of Great Northern Nekoosa and the operator of the Leaf River Paper Mill, was sued for the discharge of dioxin into the Leaf River which allegedly damaged the plaintiffs' property and caused them emotional distress. The Jackson County Circuit Court entered a judgment for Thomas and Bonnie Jane Ferguson against LRFP. The Mississippi Supreme Court reversed and rendered the judgment because it found there was insufficient evidence to support the verdicts based either on infliction of emotional distress or nuisance. Aetna had initially defended Great Northern Nekoosa in the case filed by the Fergusons, but concluded after some investigation that the insurance policy did not provide coverage for the allegations of the complaint. This withdrawal of defense is what prompted Great Northern Nekoosa to file the declaratory judgment action sub judice.

Both Great Northern Nekoosa and Aetna allege that Ferguson supports their position in this declaratory judgment action. The jury did not find trespass, but did return a verdict for the Fergusons in the amount of $10,000.00 each for nuisance; $90,000.00 each for emotional distress; and $3,000,000.00 in punitive damages. The Mississippi Supreme Court went into great detail reciting the facts and evidence presented at the circuit court trial, and concluded that the evidence was insufficient to support the jury's verdicts. Regarding the emotional distress verdict, the Ferguson court stated:

In this case, there is a lack of evidence proving exposure of the appellees to a dangerous or harmful agent and the record is devoid of any medical evidence pointing to possible distress predicated on potential or probable future illness. Certainly, if one is to recover for emotional distress predicated on potential future illness, there must be substantial proof of exposure and medical evidence that would indicate possible future illness.

Id. 662 So.2d at 658. After reviewing the elements of both private and public nuisance, the court concluded that the evidence presented was insufficient to constitute a significant interference with the Fergusons' use and enjoyment of their property, and that they had failed to articulate an individualized injury different from that suffered by the public in general. The Ferguson decision certainly affirms that with sufficient proof of injury, the release of dioxin into a stream will support a claim for nuisance, emotional distress, and presumably trespass. The decision does little to assist the court in determining whether the policies obligate Aetna to defend and indemnify GNN.

Contract Construction

The interpretation of an insurance policy is a question of law for the court when the meaning of the terms is clear and unambiguous. See Aero Int'l, Inc. v. United States Fire Ins. Co., 713 F.2d 1106, 1109 (5th Cir.1983); Reece v. State Farm Fire & Cas. Co., 684 F.Supp. 140, 143 (N.D.Miss.1987). "Where terms of insurance contracts are ambiguous or doubtful, the contract must be

921 F. Supp. 406

construed most favorably to insured and against insurer. Terms of insurance policies are construed favorably to insured wherever reasonably possible, particularly exclusion clauses." State Farm Mut. Auto. Ins. Co. v. Scitzs, 394 So.2d 1371, 1372 (Miss.1981)

It is equally well settled law that "the special rules favoring the insured are only applicable when there is an ambiguity ... and that courts ought not to strain to find such ambiguities, if, in so doing, they defeat probable intentions of the parties ... even when the result is an apparently harsh consequence to the insured." Courts will neither create an ambiguity where none exists nor make a new contract for the parties. If the policy language is clear, unequivocal, and, hence unambiguous, its terms will be enforced.

Brander v. Nabors, 443 F.Supp. 764, 769 (N.D.Miss.1978) (internal...