Joslyn Mfg. Co. v. Liberty Mut. Ins. Co., Civ. A. No. 90-2456.

Decision Date08 July 1993
Docket NumberCiv. A. No. 90-2456.
Citation836 F. Supp. 1273
CourtU.S. District Court — Western District of Louisiana

T. Haller Jackson, III, Tucker Jeter Jackson & Hickman, Shreveport, LA, Jay A. Canel, Stephen D. Davis, Canel Davis & King, Chicago, IL, for plaintiff.

Jack O. Brittain, Sr., Brittain & Sylvester, Natchitoches, LA, Martha J. Koster, Lee Glickenhaus, Mintz Levin Cohn Ferris Glovsky & Popeo, Boston, MA, for defendant.


STAGG, District Judge.

This is an action for a declaratory judgment and damages arising from a denial of insurance coverage. Joslyn Manufacturing Company ("Joslyn"), a Massachusetts corporation, filed this action against its insurer, Liberty Mutual Insurance Company ("Liberty Mutual"), an Illinois corporation. Joslyn seeks, first, the determination whether Liberty Mutual must defend and indemnify Joslyn against the orders of the Louisiana Department of Environmental Quality ("DEQ") compelling remediation of contamination at the old Lincoln Creosoting site in Bossier City, Louisiana; second, Joslyn wants a determination whether Liberty Mutual must pay any costs incurred by Joslyn in connection with the toxic tort personal injury and property damage claims made by neighbors to the site in a suit entitled Johnson v. Lincoln Creosote et al., which is pending in state court. This court has jurisdiction pursuant to 28 U.S.C. § 1332.

This case was tried to a jury from March 15 to March 18, 1993. The insurance policies at issue contain exclusions for damages which were "expected or intended" by the insured and for damage to the insured's own property. The jury found that Joslyn neither expected nor intended that contamination of the environment would result from its operations at the Bossier City site and that Joslyn incurred costs on account of damage to groundwater. Essentially, what remains to be decided is whether Joslyn is entitled to any insurance coverage from Liberty Mutual and, if so, the amount of coverage available.


Lincoln Creosoting Company treated wood with creosote at the Bossier City, Louisiana, plant between 1935 and 1950. It also leased property from the Louisiana and Arkansas Railroad, in connection with its operation of the plant.

Joslyn purchased the Lincoln Creosoting Plant in Bossier City on July 24, 1950. It operated the plant until 1969. Lincoln assigned the railroad leases to Joslyn in connection with the plant sale. Joslyn entered into leases for additional property from the railroad on January 15, 1955 and on October 12, 1967. Both sets of leases contained an indemnity clause. When Lincoln operated the plant, waste water from the creosote treatment operation flowed into a slough on the east end of the property. When Joslyn began operating the plant in 1950, Joslyn by-passed the slough and installed a 30,000-gallon settlement tank to recover creosote for re-use. Within six months, Joslyn also installed a second 10,000-gallon tank in series after the 30,000-gallon tank for the recovery of creosote. In the mid- to late-50s, Joslyn installed an unlined pond in series after the settling tanks to enable it to use pentachlorophenol ("penta") to treat poles. Penta was also recovered from the ponds for re-use. This recovery system was instituted for economic reasons, but it did not recover all creosote and penta from the waste water. In the 1960's, Joslyn began using a small amount of chromium arsenic copper ("CAC") to treat wood, which was used with a closed-system treatment method. Treatment chemicals were released into the environment in each year of Joslyn's operation. Joslyn sold the plant to Koppers, Inc. on December 1, 1969.

Joslyn has been a Liberty Mutual insured since 1945. From 1962 through 1969, the creosote plant was an insured location under Joslyn's policies with Liberty Mutual. Neither party can locate any of the pre-1962 liability policies between Joslyn and Liberty Mutual.

Between 1962 and 1966, Joslyn's general liability policies with Liberty Mutual contained a special Louisiana endorsement which provided coverage for property damage and personal injury caused by an occurrence. An occurrence was defined as "either an accident or a continuous or repeated exposure to conditions which result during the policy period in injury to persons or real or tangible property which is accidentally caused. All damages arising out of such exposure to substantially the same general conditions shall be considered as arising out of one occurrence." In the 1967-69 policies, an occurrence was defined as "an accident, including injurious exposure to conditions which results during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint in the insured." None of the policies between 1962 and 1969 contained a pollution exclusion. All of the policies provided insurance coverage for Joslyn's contractual liability to indemnify a lessor for certain specific liability imposed by law on the lessor.

After the sale to Koppers in December 1969, the Bossier City plant was not listed on Joslyn's policy with Liberty Mutual as a location for which coverage was provided.

In 1985, the DEQ began studying the old Lincoln Creosoting Plant site. On October 14, 1985, a report was issued to the DEQ that found the soil contaminated at the site and an extremely high probability of groundwater contamination. On December 6, 1985, the DEQ sent Joslyn an information request concerning the site, and Joslyn responded on February 7, 1986. On August 2, 1986, the DEQ issued a compliance order finding that Joslyn and twelve other parties were subject to liability for clean-up and remedial costs, and ordered the parties to submit an approved clean-up plan for the site. This order was stayed because of requests for a hearing. On December 17, 1987, the DEQ ordered Joslyn and the other potentially responsible parties to investigate and clean up the site. Joslyn's investigation confirmed soil and groundwater contamination at the site.

Joslyn advised Liberty Mutual of the DEQ action on May 19, 1987, and on June 23, 1987. Liberty denied coverage by letter of March 30, 1989.

In March 1987, site neighbors filed a suit against Joslyn and others in the 26th Judicial District Court for Bossier Parish, Louisiana, entitled Johnson v. Lincoln Creosote Company, Inc. The complaint alleges that plaintiffs suffered personal injuries and property damage as the result of exposure to chemicals which emanated from the site. Joslyn tendered this suit to Liberty Mutual on or about April 10, 1987. Liberty Mutual tendered a defense to Joslyn for the Johnson suit as of February 26, 1992.


The parties agree that Joslyn has been insured by Liberty Mutual since 1945, but that the pre-1962 policies are lost. The parties stipulated that the 1955 and 1956 comprehensive general liability policies with Liberty Mutual provided $1 million in coverage for personal injury, and $1 million for property damage. The 1957-66 policies also provided comprehensive general liability coverage. The 1957-58 policies provided $1 million for personal injury and $1 million for property damage. The 1959 policy had a $3 million single aggregate limit, bodily injury and property damage combined. The 1960-69 policies had a $10 million single aggregate limit for bodily injury and property damage combined.

This is the only evidence concerning the pre-1962 policies which is properly before the court.1 Joslyn has introduced no evidence of the terms and provisions of the pre-1962 policies. However, even if Joslyn had established the terms and provisions of the pre-1962 policies, coverage would be denied for the reasons stated in the following section.


On August 2, 1986, the Department of Environmental Quality ("DEQ") issued a compliance order finding that Joslyn was subject to liability for clean-up and remedial costs, and ordered it to submit an approved clean-up plan for the site. Joslyn advised Liberty Mutual of the DEQ's actions on May 19, 1987 and June 23, 1987.2 The August 2, 1986 DEQ compliance order was amended on December 17, 1987. Liberty Mutual denied coverage on March 30, 1989 based on a 1985 insurance policy.

The insurance policies at issue provide, in part:

NOTICE OF CLAIM OR SUIT. If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.

And also that:

No action shall lie against the company unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial, or by written agreement of the insured, the claimant and the company.

See page LM01211 of the policy, found at Tab B of the appendix to Liberty Mutual's post-trial brief, titled "Requests for Rulings of Law".3

Joslyn delayed for over nine months before informing Liberty Mutual of the August 2, 1986 DEQ compliance order. Joslyn's notice to Liberty Mutual was clearly not immediate, as required by the insurance contracts.

"The rule in Louisiana is that where the requirement of timely notice is not an express condition precedent, the insurer must demonstrate that it was sufficiently prejudiced by the insured's late notice." Peavey Co. v. Zurich Insurance Company, 971 F.2d 1168, 1173 (5th Cir.1992) (emphasis added), citing Auster Oil & Gas, Inc. v. Stream, 891 F.2d 570 (5th Cir.1990); MGIC Indem. Corp. v. Central Bank of Monroe, La., 838 F.2d 1382, 1387 (5th Cir.1988); Barnes v. Lumbermen's Mutual Casualty, Co., 308 So.2d 326, 328 (La.App. 1st Cir. 1975). In the present case, timely notice was an express condition...

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