Liberty Mut. Ins. Co. v. FAG Bearings Corp.

• Court: U.S. Court of Appeals — Eighth Circuit
• Writing for the Court: Before McMILLIAN and HANSEN; DAVIS
• Citation: Liberty Mut. Ins. Co. v. FAG Bearings Corp., 153 F.3d 919 (8th Cir. 1998)
• Decision Date: 08 September 1998
• Docket Number: Nos. 97-1480,97-1599 and 97-2844,s. 97-1480
• Parties: 29 Envtl. L. Rep. 20,040 LIBERTY MUTUAL INSURANCE COMPANY, Appellee/Cross-Appellant, v. FAG BEARINGS CORPORATION, Appellant/Cross-Appellee. LIBERTY MUTUAL INSURANCE COMPANY, Appellee, v. FAG BEARINGS CORPORATION, Appellant.

Page 919

153 F.3d 919

29 Envtl. L. Rep. 20,040

LIBERTY MUTUAL INSURANCE COMPANY, Appellee/Cross-Appellant, v. FAG BEARINGS CORPORATION, Appellant/Cross-Appellee.

LIBERTY MUTUAL INSURANCE COMPANY, Appellee, v. FAG BEARINGS CORPORATION, Appellant.

Nos. 97-1480, 97-1599 and 97-2844.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 11, 1998.

Decided Sept. 8, 1998.

David F. Oliver, Kansas City, MO, argued (David A. Roth, Kathleen A. Pierce, James S. Richter and Daniel R. Young, on the brief), for appellant.

Martha J. Koster, Boston, MA, argued (Michael J. Gill and Paul A. Williams, on the brief), for appellee.

Before McMILLIAN and HANSEN, Circuit Judges, and DAVIS, ^* District Judge.

DAVIS, District Judge.

Appellee/Cross-Appellant Liberty Mutual Insurance Company ("Liberty") filed this declaratory judgment action to determine its contractual obligations to defend and indemnify Appellant/Cross-Appellee FAG Bearings Corp. ("FAG") for damages arising out of an alleged environmental contamination and cleanup. The district court ^** granted summary judgment to Liberty in part, ordering that there is no duty of indemnification; granted summary judgment to FAG in part, finding that Liberty had a duty to defend FAG until the issue of indemnification was resolved; and denied Liberty a right to reimbursement of defense costs incurred to date. The court further denied FAG's subsequent Fed.R.Civ.P. 60(b) motion, based on newly discovered evidence.

Both parties appeal portions of the district court's order as follows: FAG appeals (1) the grant of summary judgment to Liberty on its obligation to indemnify FAG; (2) the denial of FAG's cross-motion for partial summary judgment on Liberty's continuing defense obligations; and (3) the denial of FAG's Fed. R. Civ. Pro. 60(b) motion. Liberty, on the other hand, cross-appeals the district court's order to the extent that it concluded that Liberty had a duty to defend FAG and denied reimbursement to Liberty of defense costs paid. For reasons discussed below, we affirm.

I. BACKGROUND

FAG is named as a defendant in four lawsuits brought by individuals who reside near FAG's plant in Joplin, Missouri. The plaintiffs in those suits allege that FAG is responsible for contaminating their water supply with the solvent trichloroethylene ("TCE"). Specifically, they allege that the contamination has caused their property values to decrease, has affected their use and enjoyment of property, and has caused or may cause bodily injury. Only one of those actions, collectively referred to as the Moretz action ¹, is currently before this Court. FAG has agreed to a settlement in this action, but the three others are still pending against FAG.

FAG has operated a ball bearing parts manufacturing plant in Joplin, Missouri since 1970. In about 1972 or 1973, the plant installed a degreasing system which sprayed newly manufactured balls with TCE to remove grease and waste oil from the balls as they moved down a conveyor belt. Because TCE evaporates quickly, the system created a significant amount of TCE vapor. To prevent escape of the vapor, FAG used a TCE reclamation device referred to as the vapor recovery system, which separated water, oil and other substances from the TCE so that pure TCE could be reused.

The system was designed to be a contained, closed-loop process, from which no TCE vapor could escape into the surrounding environment. However, due to recurring mechanical and electrical malfunctions, significant amounts of TCE vapor escaped from the system. A common malfunction caused a vent in the machinery to be left open, allowing TCE vapor to escape into the atmosphere. Employees could see the TCE vapor leak into the atmosphere and the system required repair every one or two weeks. As early as 1973, FAG was aware that large amounts of TCE were escaping from the system. In 1973 alone, FAG estimated that 40 tons of TCE vapor escaped through the vent as a result of malfunctions in the vapor recovery system, creating the need to replace large quantities of TCE in the system. Yet, FAG continued using TCE until 1981 or 1982.

Beginning in 1982, Liberty insured FAG through a series of Comprehensive General Liability and Excess Liability insurance policies. The policies issued in 1982, 1983 and 1984 generally provide as follows:

[Liberty] shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false, or fraudulent.

(Joint App. 158). The policies limited FAG's coverage with a pollution-exclusion clause as follows:

This policy 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 or 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.

Id. With respect to covered claims of "personal injury or advertising injury," the policies similarly obligate Liberty as follows:

[to] pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of personal injury or advertising injury to which this insurance applies...

(Joint App. 163). The policies define "personal injury" as follows:

Injury arising out of one or more of the following offenses committed during the policy period ... (2) wrongful entry or eviction or other invasion of the right of private occupancy.

(Joint App. 164).

The claims in the four actions against FAG include violations of the Comprehensive Environmental Cleanup Recovery Act ("CERCLA") and the Resource Conservation Recovery Act ("RECRA"), as well as claims for trespass, nuisance, negligence and strict liability. In April 1995, Liberty moved for summary judgment on its duty to defend and indemnify FAG. FAG filed a cross-motion for summary judgment on Liberty's duty to defend. The district court granted summary judgment to Liberty in part, finding that Liberty was not obligated to indemnify FAG due to application of the policy's pollution exclusion clause. The district court further granted summary judgment in part to FAG, finding that Liberty had a duty to defend FAG until the issue of indemnification was resolved and subsequently denying Liberty a right to reimbursement of defense costs incurred to date. The district court also denied FAG's Fed.R.Civ.P. 60(b) motion, based on newly discovered evidence.

II. DISCUSSION

This court reviews a grant of summary judgment de novo. Thus, summary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, demonstrates that there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Hill v. St. Louis University, 123 F.3d 1114, 1118-19 (8th Cir.1997); Duffy v. Wolle, 123 F.3d 1026, 1033 (8th Cir.1997).

A. Liberty's duty to indemnify FAG

The district court held that Liberty was not obligated to indemnify FAG, on grounds that the pollution from the vapor recovery system was not "sudden and accidental" and therefore the exception to the pollution exclusion clause did not apply. Rather, the court concluded that because FAG repaired the system frequently yet did not take the necessary steps to prevent the system from malfunctioning, FAG's actions in regards to the pollution were deliberate and the releases were foreseeable and expected. (Appellant's App. at 7A-11A).

First, FAG disputes factual findings by the district court that the only releases that could have caused the TCE pollution were the airborne releases from the vapor recovery system and that such releases were not "sudden and accidental". FAG argues that there were numerous allegations of other sources of TCE pollution which could constitute "sudden and accidental" sources of pollution if proven. Liberty counters that witnesses below identified the vent leaks as the only source of pollution and that the possibility of other sources were raised as mere allegations without any evidentiary support.

On a motion for summary judgment, the nonmoving party cannot rest on mere allegations and instead must set forth specific facts showing that there is a genuine issue for trial. Webb v. Lawrence County, 144 F.3d 1131, 1135 (8th Cir.1998). Furthermore, a district court's findings of fact are reviewed under a "clearly erroneous" standard. Fed. R. Civ. Pro. 52(a). Such findings must be upheld if they "fall within a broad range of permissible conclusions." Federal Deposit Ins. Corp. v. Lee, 988 F.2d 838, 841 (8th Cir.1993) (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 400, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990)). Contrary to FAG's assertion, requiring FAG to put forth facts to support its allegations is not an unfair shifting of any burden on FAG. Rather, that is the standard applied against every non-movant in a summary judgment motion. FAG has failed to set forth any facts to support its allegations that there were other releases of TCE pollution that could have caused the contamination at issue and were "sudden and accidental". Therefore, we conclude that it was not clearly erroneous for the district court to conclude that the only source of TCE pollution were the airborne releases from the vapor recovery system.

FAG next challenges the district court's interpretation of the meaning of the terms "sudden and accidental." Specifically, FAG argues that such terms can be interpreted to mean "unexpected" and "unintentional". Thus, FAG contends that because each occurrence of malfunction in the vapor recovery system was unexpected and the release of TCE was unintended, the TCE pollution was "sudden and accidental."

In determining that the TCE pollution was not sudden and...