Hecla Min. Co. v. New Hampshire Ins. Co.
| Decision Date | 13 May 1991 |
| Docket Number | No. 89SC646,89SC646 |
| Parties | HECLA MINING COMPANY, a Delaware corporation, Petitioner, v. NEW HAMPSHIRE INSURANCE COMPANY and Industrial Indemnity Company, Respondents. |
| Court | Colorado Supreme Court |
Kelly, Haglund, Garnsey & Kahn, Edwin S. Kahn, Denver, Williams, Trine, Greenstein & Griffin, P.C., Jean E. Dubofsky, Boulder, for petitioner.
Crane & Leake, P.C., Robert E. Crane, James E. Casey, Durango, Buchalter, Nemer, Fields & Younger, Victor C. Rabinowitz, Los Angeles, Cal., for respondent N.H. Ins. Co.
Rothgerber, Appel, Powers & Johnson, Charles Goldberg, Frederick J. Baumann, Mark Spitalnick, JoAnn L. Vogt, Gregory A. Vallin, Denver, for respondent Indus. Indem. Co.
Denis H. Mark, and Berkowitz, Brady & Backus, William J. Brady, Denver, for amicus curiae Colo. Trial Lawyer's Ass'n.
Popham, Haik, Schnobrich & Kaufman, Ltd., Gary E. Parish, Wiley Y. Daniel, Denver Popham, Haik, Schnobrich & Kaufman, Ltd., John E. Heintz, Lisa I. Latorre, Washington, D.C., for amici curiae American Min. Congress, Colo. Min. Assoc., Newmont Min. Corp., Idarado Min. Co., Homestake Min. Co. and Cyprus Minerals Co.
Gale A. Norton, Atty. Gen., Raymond T. Slaughter, Chief Deputy Atty. Gen., Timothy M. Tymkovich, Sol. Gen., Jacqueline H. Berardini, Deputy Atty. Gen., James D. Ellman, First Asst. Atty. Gen., Mary Capdeville, Asst. Atty. Gen., Denver, for amicus curiae State of Colo.
Bradley, Campbell, Carney & Madsen, John R. Jacus, Golden, for amicus curiae The Lowry Coalition.
Geoffrey T. Wilson, Denver, Anderson Kill Olick & Oshinsky, P.C., Eugene R. Anderson, Geri L. Weiseman, New York City, for amicus curiae Colo. Mun. League.
White & Steele, P.C., Frederick W. Klann, Denver, for amicus curiae Ins. Environmental Litigation Ass'n.
We granted certiorari to review New Hampshire Insurance Co. v. Hecla Mining Co., 791 P.2d 1154 (Colo.App.1989), which held that a comprehensive general liability insurance policy did not require an insurer to defend an action for damages for pollution resulting from the insured's mining activities. We reverse and remand with directions.
In 1983, the state of Colorado (state) filed suit in federal district court under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), 42 U.S.C. §§ 9601, 9607 (1983 & 1990 Supp.), against Asarco, Inc., Resurrection Mining Company, and the Res-Asarco Joint Venture. 1 The state alleged that the defendants were jointly and severally liable under the strict liability provisions of CERCLA, and under common-law negligence theories, for the cleanup costs and other damages resulting from the discharge of heavy metals and other contaminants into California Gulch from the Yak Tunnel. 2 The state filed an amended complaint in April 1985, seeking compensation for the cleanup costs for the entire California Gulch drainage basin system.
The state's CERCLA complaint was initiated after employees of Asarco caused a surge of yellow sedimentary sludge to emit from the Yak Tunnel when shoring timbers and accumulated debris were removed that had impounded the contaminated water. 3 The yellow sedimentary sludge emitted from the Yak Tunnel was a limonitic precipitate, formed by ferric hydroxide and a variety of ferric sulfates, that accumulated on the bottom of the drainage tunnel. The surge of contaminated water turned a twenty-mile stretch of the Arkansas River orange.
In January 1985, Resurrection, Asarco, and Res-Asarco Joint Venture filed a third-party complaint against Hecla Mining Company. 4 The complaint against Hecla seeks contribution for alleged discharges into the Yak Tunnel that occurred from 1938 to 1953 when Hecla was a shareholder and had a one-third ownership interest in the Resurrection Mining Company. The Resurrection Mining Company mined gold, silver, and lead ore at the Resurrection mine. Two of Resurrection's mine shafts connect with and drain into the Yak Tunnel. From 1981 to 1985, Hecla also held a lease interest in a mill and several tailings impoundments located in the lower California Gulch.
Industrial Indemnity Company provided a series of comprehensive general liability (CGL) insurance policies covering Hecla from January 1, 1974, through January 1, 1982. New Hampshire Insurance Company provided a series of one year CGL insurance policies for Hecla from January 1, 1980, through January 1, 1985. Hecla requested that both Industrial and New Hampshire provide a defense against the joint venture's third-party complaint. Industrial denied coverage and filed a declaratory judgment action in Denver District Court to obtain a judicial determination of whether it had a duty to defend the third-party claim, and whether it had a duty to indemnify Hecla for any liability resulting from the lawsuit. C.R.C.P. 57; § 13-51-101, 6A C.R.S. (1987). New Hampshire originally agreed to defend Hecla, subject to a reservation of its right to deny coverage. New Hampshire later denied coverage and intervened in the declaratory judgment action brought by Industrial.
The district court entered summary judgment in favor of Hecla, finding that Industrial and New Hampshire had a duty to defend Hecla in the CERCLA action, and that the issue of the duty to indemnify was not ripe for resolution. The court of appeals reversed the district court, holding that Hecla knew or should have known of a substantial probability that its mining activities would result in environmental damage, and therefore the resulting damage was not an unexpected and unintended occurrence and was thus outside the scope of Hecla's coverage. The court of appeals concluded that neither Industrial, nor New Hampshire, had a duty to defend or to indemnify Hecla for liability resulting from pollution generated by its mining activities. We hold that under the terms of Hecla's CGL policies, both Industrial and New Hampshire have a duty to defend Hecla against the state's CERCLA action. The issue of Industrial's or New Hampshire's duty to indemnify Hecla can only be determined after liability of Hecla has been determined, and is therefore not ripe for resolution at this stage of the proceedings. 5
I
The CGL insurance policies issued to Hecla by Industrial and New Hampshire limit defense and liability coverage to property damage caused by an occurrence. The word "occurrence" is defined in Hecla's policies as:
an accident, including continuous or repeated exposure to conditions, which result in bodily injury or property damage, neither expected nor intended from the standpoint of the insured.
See Fire Casualty & Surety Bulletin, Aat-1 (1986) (commenting on CGL coverage forms and interpretations of occurrence and claims-made trigger provisions). Hecla's policies also contain exclusions that limit the scope of coverage as defined in the insuring agreement. The pertinent exclusion at issue here is:
This insurance does not apply ... 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, 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 ....
(Emphasis added.) This CGL policy provides defense and liability coverage for damage that results from an unexpected and unintended occurrence, not including damage caused by the discharge of pollution, unless that discharge is sudden and accidental. 6
Hecla contends that the discharge of heavy metals into California Gulch was neither an expected, nor intended, consequence of its mining activity, and that although the discharge of heavy metals constitutes pollution, the discharge was sudden and accidental. Hecla therefore contends that both Industrial and New Hampshire are liable for defense and indemnification costs associated with the state's CERCLA action.
Industrial and New Hampshire both contend that the contamination of California Gulch was reasonably foreseeable and thus was expected and not an occurrence under the terms of Hecla's policies. Industrial and New Hampshire argue that even if this court determines that the damage was unexpected and unintended, the discharge of pollution was not sudden and accidental and is therefore not covered under the CGL insurance policies.
The court of appeals concluded that the damage caused by Hecla's mining operations was not unexpected, and therefore was not an occurrence covered by Hecla's insurance policies. The court of appeals reasons were that:
The results of one's intentional acts cannot be unexpected if they are the ordinary consequences of those acts.
Here, Hecla knew or should have known of a substantial probability that its mining activities would result in environmental damage. The Colorado Mined Land Reclamation Act, § 34-32-101, 14 C.R.S. (1984), expresses the General Assembly's intent to "aid in the protection of wildlife and aquatic resources ... and promote the health, safety, and general welfare of the people of this state." Section 34-32-102, 14 C.R.S. (1984).... Thus, absent a contrary showing, the Act provides constructive notice to all mine operators that their activities could cause environmental damage.
... Accordingly, the damage that occurred was an ordinary consequence of Hecla's actions. As a matter of law, it was not unexpected.
New Hampshire Ins. Co. v. Hecla Mining Co., 791 P.2d at 1157 (citations omitted).
The court of appeals reasoning is in error. The Colorado Mined Land Reclamation Act does not provide notice to all mine operators that mining could cause environmental damage. The court of appeals, in interpreting the Mined Land Act, failed to consider the entire section on which it relied for its holding. Section...
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