Harleysville Mut. Ins. v. Sussex County, Del.

• Decision Date: 27 August 1993
• Docket Number: Civ. A. No. 92-144-RRM,92-289-RRM and 92-513-RRM.
• Citation: 831 F. Supp. 1111
• Parties: The HARLEYSVILLE MUTUAL INSURANCE COMPANY, INC., Plaintiff, v. SUSSEX COUNTY, DELAWARE, Defendant. SUSSEX COUNTY, DELAWARE, Plaintiff, v. MARYLAND CASUALTY COMPANY and Northern Insurance Company of New York, Defendants. SUSSEX COUNTY, DELAWARE, Plaintiff, v. THE HOME INSURANCE COMPANY and The Home Indemnity Company, Defendants.
• Court: U.S. District Court — District of Delaware

831 F. Supp. 1111

The HARLEYSVILLE MUTUAL INSURANCE COMPANY, INC., Plaintiff, v. SUSSEX COUNTY, DELAWARE, Defendant.

SUSSEX COUNTY, DELAWARE, Plaintiff, v. MARYLAND CASUALTY COMPANY and Northern Insurance Company of New York, Defendants.

SUSSEX COUNTY, DELAWARE, Plaintiff, v. THE HOME INSURANCE COMPANY and The Home Indemnity Company, Defendants.

Civ. A. Nos. 92-144-RRM, 92-289-RRM and 92-513-RRM.

United States District Court, D. Delaware.

August 27, 1993.

COPYRIGHT MATERIAL OMITTED

Daniel L. McKenty, and Keith E. Donovan, Swartz, Campbell and Detweiler, Wilmington, DE, Anthony J. Zarillo, Jr., Riker, Danzig, Scherer, Hyland and Perretti, Morristown, NJ, for Harleysville Mut. Ins. Co., Inc.

B. Wilson Redfearn, Dawn L. Becker, Tybout, Redfearn & Pell, Wilmington, DE, John B. Wyss, Thomas W. Brunner, Ida C. Wurczinger, David R. Anderson, Cynthia A. Capwell, Wiley, Rein & Fielding, Washington, DC, for Maryland Cas. Co. and Northern Ins. Co. of New York.

Norman M. Monhait, Carmella P. Keener, Rosenthal, Monhait and Gross, Wilmington, DE, Stephen A. Fennell, Stephanie A. Philips, Steptoe and Johnson, Washington, DC, for The Home Ins. Co. and The Home Indem. Co.

Richard E. Poole, Gregory A. Inskip, and Stephen C. Norman, Potter Anderson and Corroon, Wilmington, DE, and Dennis L. Schrader, Wilson, Halbrook and Bayard, Georgetown, DE, for Sussex County, DE.

OPINION

McKELVIE, District Judge.

This is a contract case. The parties are Sussex County, Delaware ("the County") and several of its comprehensive general liability insurers, Harleysville Mutual Insurance Company ("Harleysville"), Maryland Casualty Company and its subsidiary Northern Insurance Company of New York (collectively "Maryland Casualty"), and the Home Insurance Company and the Home Indemnity Company (collectively "The Home").

In 1984, the United States Environmental Protection Agency ("EPA") detected the presence of volatile organic compounds at the County's Landfill No. 5. Thereafter, the EPA placed Landfill No. 5 on the Superfund National Priorities List, notified the County of its potential liability under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), and encouraged the County to perform or finance voluntarily those response activities the EPA determines to be necessary at Landfill No. 5. The issue in this case is whether the insurers are obligated under their policies to defend the County against the EPA CERCLA proceeding and indemnify the County for sums it may become legally obligated to pay as a result of the EPA CERCLA proceeding.

The parties have completed discovery. Each of the insurers has moved for summary judgment that it has no duty under its policy to defend the County against the EPA proceeding or indemnify the County for sums it may become legally obligated to pay as a result of those proceedings. Additionally, Maryland Casualty has moved to certify a question of law to the Delaware Supreme Court. The County has moved for summary judgment that the insurers are obligated under their policies to defend the County against the CERCLA proceeding brought by the EPA to investigate and control the release or threatened release of hazardous substances, pollutants, or contaminants at Landfill No. 5.

On July 14, 1993, the Court heard oral argument on these motions. This is the Court's decision on the motions.

FACTUAL BACKGROUND

In 1968, perceiving that open dumping and incineration of waste created health and safety hazards, the Delaware State Board of Health promulgated a new State Solid Waste Disposal Code ("the 1968 Code"). See Insurers' Joint Appendix, Docket Items 167-171 ("D.I. ___") at 718 ("JA-___"). Through the 1968 Code, the State Board of Health delegated to municipalities and counties the responsibility for providing facilities for the disposal of solid waste generated within their political jurisdictions.

In 1969, the County retained a consultant, Associated Delaware Engineers, Inc., to identify appropriate sites for six landfills and to prepare a plan for the construction and operation of each one.

In January of 1970, the County purchased a thirty-eight acre parcel of land near Laurel, Delaware. This property eventually became the site for the County's Landfill No. 5 (also known as the "Laurel Landfill"). The property is surrounded by farm fields to the west, east, and north and by a wooded lot to the south. Further to the north, there are approximately twenty-four residences. Underlying the property is an aquifer which surrounding property owners use for drinking water and other purposes. The soil beneath the property is permeable, fine to medium sand with gravel and occasional layers of silt and clay.

In February of 1970, the County submitted to the State an Application for Facility Approval and a Plan of Operations for Landfill No. 5. Associated Delaware Engineers prepared the Plan which was to serve as the blueprint for Landfill No. 5. In its Application for Facility Approval, the County stated that the landfill would be for household wastes only, that certain industrial and agricultural wastes could be received by special permit, but that "hazardous wastes" would not be accepted. See County Appendix, D.I. 179 at 219-220 ("B-___").

Also in February of 1970, the County requested bids from private contractors to operate the landfill. The County attached to its bid proposal form a sample "Agreement" which specifically referenced and required compliance with the 1968 Code and the standards set forth in a 1968 United States Department of Health, Education, and Welfare ("HEW") publication titled Sanitary Landfill Facts. Sanitary Landfill Facts contained one paragraph on the topic of water pollution at sanitary landfills which reads in pertinent part:

If a sanitary landfill is intermittently or continuously in contact with ground water, the ground water can become grossly polluted and unfit for domestic or irrigational use. Proper planning and site selection, however, combined with good engineering design and operation of the sanitary landfill can normally eliminate the possibility of either surface or ground water pollution.

JA-1324.

By letter of March 20, 1970, the Delaware State Board of Health granted approval to the County to dispose of solid waste at Landfill No. 5, subject to ten conditions. Among those conditions were the following:

1. Disposal shall be by sanitary landfill in accordance with the 1968 Code. Any contract written between Sussex County and any private contractor who would operate the landfill shall clearly establish Delaware State Board of Health standards on the operation of the fill, as binding....

....

3. The estimated high ground water elevation shall be as being at elevation seven (7) feet above the reference datum utilized on the Plan of Operations and profile one (1) shall identify this level as the water table level.

4. A minimum of two (2) feet of clearance shall be maintained between the minimum elevation of refuse deposits and the anticipated high ground water elevation....

JA-738.

The 1968 Code referenced in the first condition in the State's letter of approval required, inter alia, that:

1. Individual refuse cells "shall be no greater than eight feet in depth."

2. At least six inches of cover material shall be placed over all refuse "at least by the end of each working day."

3. Final cover over completed cells compacted to a minimum thickness of two feet shall be placed "by the end of the working day" on each completed cell.

JA-727.

On May 11, 1970, the County opened Landfill No. 5. From May 11, 1970, to March 31, 1973, Sussex Sand and Gravel, Inc. ("Sussex Sand and Gravel") operated the landfill under three consecutive one year contracts with the County. The County, in conjunction with Sussex Sand and Gravel and future "operators," ran Landfill No. 5 as follows. First, to ensure that hazardous wastes were not deposited at the landfill, a County Gatekeeper would inspect incoming loads of waste. After the Gatekeeper inspected and cleared an incoming load, the waste would be brought into the landfill and dumped into a cell which had been excavated by the operator. The operator would then compact and level the trash within the cell.

In 1970, the County purchased a comprehensive general liability ("CGL") insurance policy from Maryland Casualty. That policy was effective from June 3, 1970, to June 3, 1973.¹

On June 30, 1970, Frederic L. Stiegler, Jr., a State Board of Health employee, inspected Landfill No. 5. He noted that "the facility is being operated in a manner which is consistent with the solid waste disposal code regulations by the operator...." and concluded that "generally the overall operation appears to comply completely with the requirements of the 1968 Code." B-224.

On April 29, 1971, Mr. Stiegler again inspected Landfill No. 5, this time with another Board of Health Employee, Robert R. King. Mr. Stiegler noted the following problems at Landfill No. 5: (1) the operator of the landfill reported that a water table problem had occurred and that the water table was observed to be approximately four feet from the surface of the ground; (2) a rodent problem had developed; and, (3) there was a "small problem" with blowing paper. B-225.

In 1973, the County purchased a second CGL policy from Maryland Casualty. That policy was effective from June 3, 1973 to June 3, 1976.

From April 1, 1973 to August 11, 1979, the Hudson Transfer & Construction Co. ("Hudson") operated the landfill under two consecutive three year contracts. During that time, John Argo, the County Supervisor of Landfill No. 5, wrote to Hudson approximately thirty times advising it that "a suitable layer of cover material had not been placed over all the refuse deposited at the landfill." See, e.g., JA-764.

In March of 1974, the Delaware Department of Natural Resources and Environmental Control ("DNREC") proposed new regulations governing sanitary landfills (Delaware...