Jostens, Inc. v. Federated Mut. Ins. Co.

• Citation: 612 N.W.2d 878
• Decision Date: 22 June 2000
• Docket Number: No. C9-99-1452.,C9-99-1452.
• Parties: JOSTENS, INC., Respondent, v. FEDERATED MUTUAL INSURANCE COMPANY, petitioner, Appellant, Employers Insurance of Wausau, A Mutual Company, Defendant. Employers Insurance of Wausau, Third-Party Plaintiff, v. Jostens, Inc., et al., Third-Party Defendants.
• Court: Minnesota Supreme Court

612 N.W.2d 878

JOSTENS, INC., Respondent, v. FEDERATED MUTUAL INSURANCE COMPANY, petitioner, Appellant, Employers Insurance of Wausau, A Mutual Company, Defendant.

Employers Insurance of Wausau, Third-Party Plaintiff, v. Jostens, Inc., et al., Third-Party Defendants.

No. C9-99-1452.

Supreme Court of Minnesota.

June 22, 2000.

Rehearing Denied July 25, 2000.

Laura J. Hanson, Stacy A. Broman, William M. Hart, Meagher & Geer P.L.L.P., Minneapolis, for appellant.

Mark M. Nolan, Stapleton, Nolan & Hynes P.A., St. Paul, for respondent.

Heard, considered, and decided by the court en banc.

OPINION

LANCASTER, Justice.

Respondent Jostens Incorporated commenced an action against appellant Federated Mutual Insurance Company in Ramsey County District Court for defense costs and indemnification stemming from chemical contamination at a Jostens operating plant site. Federated subsequently filed a motion for summary judgment. After the court denied this motion, Federated moved the court to certify two questions as "important and doubtful" pursuant to Minn. R. Civ.App. P. 103.03(h) in order to immediately appeal those questions. The court granted Federated's motion, but the Minnesota Court of Appeals dismissed Federated's appeal, holding that the questions had been improperly certified. We affirm the court of appeals, but on different grounds.

Beginning in 1964, Jostens operated a manufacturing facility in Princeton, Illinois. In addition to other chemicals, Jostens used tricholoroethane (TCE) to degrease and clean equipment during its manufacturing process. Until 1976, Jostens disposed of TCE in a filter bed that it had constructed on its property pursuant to acceptable industry practices at that time. The filter bed was a square pit in the ground that measured approximately 10 feet in length, width, and depth. The pit was lined with rocks, sand, and gravel, which were intended to filter and cleanse industrial wastes that were deposited in the pit. TCE was not placed on the Environmental Protection Agency's (EPA) list of hazardous substances until 1980, and land disposal of the substance was not banned until 1986.

In 1981, Jostens learned that its own property was contaminated by TCE and, pursuant to its environmental consultant's advice, Jostens removed the filter bed. In 1988, an environmental consultant retained by the EPA Hazardous Site Division found "shallow" soil contamination on Jostens' property. However, the EPA did not order Jostens to take any remedial action at that time.

In 1994, Springwood Associated Limited Partnership, which owned property adjacent to Jostens' Princeton plant, conducted soil and groundwater tests through an environmental consultant, ATEC. Those tests revealed TCE contamination on Springwood's property that originated from Jostens' plant. In March 1995, Springwood informed Jostens of ATEC's findings, asserted that Jostens was responsible for the contamination, and stated that Jostens, as a "responsible party," should clean it up. Springwood also urged that "all site investigation and remedial feasibility studies [should] be performed under the auspices of [the Illinois] EPA." Springwood subsequently filed suit against Jostens in federal court. On May 3, 1995, Jostens received notice from the United States EPA that it intended to take soil and groundwater samples from the Jostens property. Because Jostens knew that these samples would reveal contamination, it voluntarily entered the Illinois EPA's pre-notice environmental cleanup program on May 30, 1995.

Federated insured Jostens under general liability policies from 1964 to 1979. Until 1971, those policies covered property damage like the groundwater contamination at the Jostens plant. The pre-1971 policies also provided unlimited coverage for defense costs and at least $100,000 in indemnity coverage. However, beginning in January 1971, Federated's policies contained a qualified pollution exclusion that limits Jostens from coverage under those policies. Federated's policies contained a limit on indemnity coverage, but did not contain a limit for defense costs. In December 1995, Jostens notified its insurance broker of the groundwater and property contamination, who then forwarded the notice to Federated. In September 1996, Federated denied both the duty to defend and to indemnify Jostens.

In November 1996, Jostens commenced an action against Federated in Ramsey County District Court for defense costs and indemnification. The parties subsequently engaged in extensive and complex pretrial litigation. This included a motion by Jostens in June 1998 to amend its complaint to add Employers Insurance of Wausau as an additional defendant. Jostens argued that Wausau had been its primary general liability insurer between 1979 and 1985, and that Jostens had discovered occurrences that contributed to the TCE contamination during those periods. The district court initially denied the motion, but when Jostens brought the same motion six months later, the district court granted it. Wausau, in turn, filed a third-party complaint against four other insurance companies, claiming that they had all insured Jostens between 1964 and 1985.

Federated's appeal to this court arises out of its October 1998 summary judgment motion. Jostens also moved for partial summary judgment at that time. By an order filed February 12, 1999, the district court granted Jostens' motion while denying Federated's motion. In its order, the district court found that, cumulatively, the EPA's May 1995 site investigation notice, Springwood's March 1995 request that Jostens fully investigate the site and study remediation options, and the ATEC report were "tantamount to a suit, triggering Federated's duty to defend." The court therefore found that Federated had a duty to defend, and to pay all defense costs that Jostens had incurred after December 20, 1995, when Jostens had tendered defense of the "suit." The court defined defense costs as those fees that are "reasonable and necessary to reduce or minimize the eventual liability for damages to the State of Illinois and to Springwood, including experts and consultants engaged in investigation, feasibility studies, and working with government officials and the public."

In July 1999, following joinder of Wausau, Federated moved the district court to certify the following two questions as "important and doubtful" pursuant to Minn. R. Civ.App. P. 103.03(h):

1. Whether the May 3, 1995 letter from a U.S. EPA contractor notifying Jostens of a site investigation, in conjunction with the ATEC report revealing off-site contamination, and Springwood's * * * March 1995 assertions against Jostens of the obligations of a "responsible party" to fully investigate the site and study remediation options in conformance with the IEPA procedures is tantamount to a suit, triggering a duty to defend.

2. Whether the duty to defend includes paying for all costs and fees, which Jostens has incurred since December 20, 1995, which are reasonable and necessary to reduce or minimize the eventual liability for damages to the State of Illinois and to Springwood, including experts and consultants engaged in investigation, feasibility studies, and working with government officials and the public.

For convenience, we will refer to the first issue as the "suit" issue, and the second issue as the "defense costs" issue.

The district court granted Federated's motion, finding both issues to be doubtful because there is no controlling precedent. The court then cited this court's decision in Emme v. C.O.M.B., Inc., 418 N.W.2d 176 (Minn.1988), as providing a balancing test for determining whether issues are "important" under Rule 103.03(h). Because the district court found that the questions had "statewide impact," were important to the resolution of the case, provided a "major impediment to settlement," and that their resolution would expedite resolution of the action, the court determined that the questions were "important" under Emme.

Federated filed notice of appeal with the court of appeals on the certified questions. By an order filed September 1, 1999, the court of appeals concluded that under Emme an appeal from a denial of summary judgment is premature if reversal of the certified questions will not terminate the action. As a result, the court held Federated's appeal improper. Following a motion by Federated to reinstate its appeal, the court of appeals, by an order dated September 28, 1999, reiterated its earlier order.

I.

On appeal to this court, Federated argues that the court of appeals misapplied Emme because Emme does not hold that termination of the proceedings is a prerequisite for an issue to be "important" under Rule 103.03. Federated argues that whether reversal will terminate the proceedings is a factor that must be considered as part of a balancing test, but is not itself determinative. This issue raises a legal question that requires construction of a procedural rule, which we review de novo. See State v. Nerz, 587 N.W.2d 23, 24-25 (Minn.1998).

Minnesota Rule of Civil Appellate Procedure 103.03(h) provides that an appeal may be taken to the court of appeals "if the trial court certifies that the question presented is important and doubtful, from an order which * * * denies a motion for summary judgment." Rule 103.03(h) provides a mechanism for interlocutory appeals, because without certification the denial of a summary judgment motion would not ordinarily be appealable until the end of the proceedings.

We addressed this certification process in Emme. In Emme we considered whether a question had been properly certified as "important and doubtful" in a products liability action involving a child who sustained an eye injury while playing a dart game. See id. at 178. In addressing the certification, we began by noting that the general policy behind the appellate rules is to avoid piecemeal litigation, conserve judicial resources, and...