Liberty Mut. Ins. Co. v. Triangle Industries, Inc., CC999

• Decision Date: 21 February 1990
• Docket Number: No. CC999,CC999
• Citation: 182 W.Va. 580,390 S.E.2d 562
• Court: West Virginia Supreme Court
• Parties: LIBERTY MUTUAL INSURANCE COMPANY v. TRIANGLE INDUSTRIES, INC., and Triangle PWC, Inc. v. WAUSAU INSURANCE COMPANIES and Employers Insurance of Wausau; New Jersey Property-Liability Guaranty Association, on Behalf of Ideal Mutual Insurance Company, in Liquidation, and Zurich-American Insurance Company, Severally and in the Alternative.

Page 562

390 S.E.2d 562

182 W.Va. 580

LIBERTY MUTUAL INSURANCE COMPANY v. TRIANGLE INDUSTRIES, INC., and Triangle PWC, Inc. v. WAUSAU INSURANCE COMPANIES and Employers Insurance of

Wausau; New Jersey Property-Liability Guaranty Association,

on Behalf of Ideal Mutual Insurance Company, in Liquidation,

and Zurich-American Insurance Company, Severally and in the

Alternative.

No. CC999.

Supreme Court of Appeals of

West Virginia.

Feb. 21, 1990.

Syllabus by the Court

In a case involving the interpretation of an insurance policy, made in one state to be performed in another, the law of the state of the formation of the contract shall govern, unless another state has a more significant relationship to the transaction and the parties, or the law of the other state is contrary to the public policy of this state.

James P. Whitters, III, Martha J. Koster, Lee H. Glickenhaus, Gaston & Snow, Boston, Mass., James F. Companion, Frederick P. Stamp, Jr., Patrick S. Casey, Schrader, Stamp, Byrd, Byrum & Companion, Wheeling, for Liberty Mut. Ins. Co.

Michael E. Runyon, Washington, D.C., John Skaggs, Charleston, for New Jersey Property.

J. Greg Goodykoontz, Steptoe & Johnson, Clarksburg, Stephen M. Orlofsky, Carlo Scarmella, Blank, Rome, Comisky & McCauley, Cherry Hill, N.Y., for Triangle Industries, Inc.

Anthony R. Zelle, Wm. Gerald McElroy, Jr., Zelle & Larson, Waltham, Mass., Patrick S. Cassidy, O'Brien, Cassidy & Gallagher, Wheeling, for Wausau Ins. Co.

William A. Trainer, J. Michael Weber, Parkersburg, Robert J. Bates, Jr., Phelan, Pope & John, Ltd., Chicago, Ill., for Zurich-American Ins. Co.

BROTHERTON, Justice:

This case involves two questions certified to this Court from the United States District Court for the Northern District of West Virginia. The district court asks that we answer the following:

1. Does West Virginia's substantive law apply to the interpretation of the insurance policies at issue?

2. If so, do the insurance policies at issue give rise to a duty to defend and indemnify the insured by the respective insurers?

I.

Triangle Industries (alternately known as Trian Holdings, Inc. and Triangle PWC, hereinafter referred to as Triangle) is a company that was headquartered in New Jersey at the time the insurance coverage at issue was sought. Triangle owned and operated a processing plant in Glen Dale, West Virginia. The Glen Dale plant was engaged in the business of steel "pickling" which generated a waste product known as "lime stabilized waste pickle liquor sludge" (sludge).

Between November, 1977, and October, 1980, the sludge was shipped for disposal to the Buckeye Landfill outside St. Clairsville, Ohio. Triangle engaged the services of an independent contractor to transport the sludge to the landfill.

On October 15, 1980, the Ohio EPA conducted sampling of the sludge located at the Buckeye Landfill site and determined that the sludge was "toxic." In December, 1980, the Ohio EPA conducted further samplings of surface water from a stream near the Buckeye Landfill. The water analysis indicated that contaminated materials were escaping from the landfill.

On September 8, 1983, the Buckeye Landfill was listed on the National Priorities List pursuant to § 105 (8) (B) of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.A. § 9601 et seq. (West 1983) (CERCLA). Based upon tests conducted at the site, the Ohio EPA and the Federal EPA concluded that the Buckeye Landfill had been releasing and was continuing to release hazardous substances which posed an imminent and substantial danger to the public health, welfare, and the environment.

On December 7, 1984, Triangle was notified by the Federal EPA that it was being designated a "potentially responsible party" pursuant to CERCLA, in connection with the environmental contamination at the landfill.

On March 7, 1985, Triangle's counsel placed all of Trian and PWC's insurance carriers on notice of the claims asserted by the Federal EPA arising out of the enforcement actions at the Buckeye Landfill. In response, the plaintiff, Liberty Mutual, acknowledged its duty to defend Triangle. In a February 27, 1986, letter from James M. Shaw, Examiner, Special Claims Division, Liberty Mutual Insurance Company, Mr. Shaw stated, "We do, however, agree to participate in the defense of Triangle with other insurers that owe a duty to defend."

On October 3, 1985, Triangle, along with other potentially responsible parties, executed an administrative order, known as a consent decree, as required by the Federal and Ohio EPA, for the cleanup of the landfill. ¹

By letter dated February 1, 1988, Donald Nelson, Technical Claims Specialist at Liberty Mutual Insurance Company, denied coverage under each of Liberty Mutual's insurance policies and declared that Liberty Mutual would not provide indemnification for this claim and would not pay for defense costs beyond February 1, 1988. ²

By letter dated March 25, 1988, defense counsel wrote to Liberty Mutual to clarify Triangle's position regarding the insurance coverage. In this letter, counsel for Triangle stated that coverage should be afforded under the comprehensive general liability policy (CGL) because there had been an "occurrence," as defined by the policy, during the policy period. ³

Finally, Triangle advised Liberty Mutual that if it continued to decline coverage, Triangle would initiate a declaratory judgment action. However, three weeks later, Liberty Mutual filed suit in United States District Court for the Northern District of West Virginia requesting a declaratory judgment, stating that it owed no duty to defend or indemnify Triangle.

On June 20, 1988, the defendants filed a third party complaint against third party defendants, Wausau Insurance Companies, Zurich American Insurance Company, and New Jersey Property Liability Insurance Guarantee Association on behalf of Ideal Mutual Insurance Company, in liquidation (NJPLIGA), who also held CGL and other insurance policies for the defendants. ⁴

On January 17, 1989, the plaintiff, Liberty Mutual, filed a motion for summary judgment against the defendants. On March 1, 1989, the defendants filed a cross motion for summary judgment. Similar motions were filed by the other third party defendants. By order dated July 5, 1989, the United States District Court for the Northern District of West Virginia certified the two questions listed above to this Court.

II.

The first certified question asks that we determine whether West Virginia substantive law applies to the interpretation of the insurance policies at issue in this case. We must first identify the type of issue involved in order to determine what conflict of law rule to apply. ⁵ This Court has held that the interpretation of insurance policy coverage, rather than liability, is treated as a contract question for purposes of conflicts analysis. Lee v. Saliga, 179 W.Va. 762, 373 S.E.2d 345, 350 (1988). As the issue presented in the case before us involves a question of the interpretation of the terms of an insurance policy, we must therefore focus our analysis on the conflicts of law rule applicable to a contract issue.

West Virginia law has not yet dealt with the precise issue of the applicable choice of law when an insurance policy is executed in one state for coverage in another state, and damage takes place in a third. The general issue of choice of law was examined in General Electric Co. v. Keyser, 166 W.Va. 456, 275 S.E.2d 289 (1981), in which this Court invalidated a choice of law provision contained in a contract after examining § 187(2) of the Restatement (2d) of Conflict of Laws (Restatement ). At syllabus point 2, the Court concluded that:

"The law of the state in which a contract is made and to be performed governs the construction of a contract when it is involved in litigation in the courts of this state." Syl. pt. 1 (in part) Michigan National Bank v. Mattingly, W.Va. , 212 S.E.2d 754 (1975).

More recently, in Lee v. Saliga, 170 W.Va. 762, 373 S.E.2d 345 (1988), this Court examined insurance contracts under a conflicts of law analysis. Saliga involved a question of coverage under an uninsured motorist policy issued in Pennsylvania, where the accident in question occurred in West Virginia. Under West Virginia law, a requirement of physical contact is directly incorporated into the uninsured motorist statute. By contrast, Pennsylvania did not require physical contact under its uninsured motorist act, as the physical contact requirement was held void as contrary to public policy.

After reviewing the West Virginia choice of law cases and the Restatement, Justice Miller determined that:

Our traditional contract conflict rule gives substantial deference to the state where the contract is made and where it is to be performed, assuming both incidents occur in the same state. This rule is subject to two qualifications: (1) that the parties have not made a choice of applicable law in the contract itself; and (2) the law of the other state does not offend our public policy.

Id. 179 W.Va. at 768, 373 S.E.2d at 351. Applying that rule to the facts in Saliga, the Court determined that "[t]he provisions of a motor vehicle liability policy will ordinarily be construed according to the laws of the state where the policy was issued and the risk insured was principally located, unless another state has a more significant relationship to the transaction and the parties." Id. 179 W.Va. at 770, 373 S.E.2d at 353.

Both cases, however, fail to contemplate a situation in which the contract is made in one state to be performed in another state. ⁶ In the case now before us, we find that the policy was issued in New Jersey, while the insured risk was located in West Virginia and the damage occurred in Ohio. Further, as Triangle points out, the insurance policies insured risks in numerous other locations besides the Glen Dale, West Virginia, site. Obviously, these facts differ...