Liberty Mutual Insurance Co. v. Fag Bearings Corporation, Case No. 99-5017-CV-SW-3 (W.D. Mo. 5/21/2001)
| Decision Date | 21 May 2001 |
| Docket Number | Case No. 99-5017-CV-SW-3. |
| Parties | LIBERTY MUTUAL INSURANCE CO., Plaintiff, v. FAG BEARINGS CORPORATION, Defendant. |
| Court | U.S. District Court — Western District of Missouri |
The facts giving rise to the present lawsuit have been discussed on multiple occasions by federal and state courts in Missouri. Defendant ("FAG") operated a ball bearing parts manufacturing plant in Joplin, Missouri. In 1972 or 1973, FAG installed a degreasing system that used trichlorethylene ("TCE") to remove grease and oil from parts as they traveled on a conveyor belt.
Various environmental claims have been made against FAG, charging it with contaminating the drinking water of neighboring communities with TCE. Four of those cases were consolidated under the caption Moretz, et al. v. FAG Bearings Corp., No. 92-5070-CV-SW-8, and has been consistently referred to as "the Moretz Action." The case was eventually settled.
Before the Moretz Action settled, Liberty Mutual Insurance Company ("Liberty Mutual") filed suit seeking a declaration that it was not obligated to indemnify or defend FAG (its insured) with regard to either (1) a letter of inquiry from the Environmental Protection Agency ("EPA") or (2) the Moretz Action. The case was styled Liberty Mutual Insurance Co. v. FAG Bearings Corp., No. 94-0241-CV-W-8, and shall hereafter be referred to as "LM I". Like the Moretz Action, LM I was assigned to the Honorable Joseph E. Stevens, Jr., late a judge of this Court. At issue was application of the following pollution-exclusion clause from the insurance policies:
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.
In particular, the focus of LM I was whether FAG's releases of TCE were "sudden and accidental."
Approximately six months after LM I was filed, a claim was filed by another nearby resident against FAG in state court; this has been referred to as "the Lewis Action." In December 1995, FAG filed suit against several neighboring businesses, alleging they were responsible for or contributed to the TCE contamination and seeking contribution from them. This case, captioned FAG Bearings Corp. v. Gulf States Paper Co., No. 95-5081-CV-SW-8 (hereinafter "Gulf States") was also assigned to Judge Stevens.
Judge Stevens issued his ruling in LM I on May 14, 1996, before the Lewis Action went to trial. In summary, Judge Stevens ruled that Liberty Mutual (1) was not obligated to indemnify FAG in the Moretz Action and (2) was obligated to defend FAG in the Moretz Action until the date of Judge Stevens' judgment in LM I, at which time Liberty Mutual's obligation terminated. Judge Stevens dismissed the claim regarding the EPA's letter without prejudice because it was not discussed in the parties' cross-motions for summary judgment and because the EPA "turned over to the Missouri Department of Natural Resources the responsibility for investigating the potential groundwater contamination near Joplin, Missouri." LM I, No. 94-0241-CV-W-8, slip op. at 7 n.2 (W.D. Mo. May 14, 1996).
FAG filed two Motions to Alter and Amend the Judgment; the motions were denied on January 13, 1997. One of the issues FAG raised was a request that Judge Stevens clarify Liberty Mutual's obligation with respect to other lawsuits, including particularly the Lewis Action and Black v. FAG Bearings Corp., ("the Black Action"), which had recently been filed in Newton County (Missouri) Circuit Court. One of FAG's arguments contended that the Lewis Action was different from the Moretz Action in that the claims in the Lewis Action were not limited to TCE contamination. In denying the motions, Judge Stevens reiterated his intent that his May 14, 1996 Order not conclusively address Liberty Mutual's obligation in other potential lawsuits. This was an obvious reference to the Lewis and Black Actions, as well as any other claims that might be filed in the future. The January 13 Order specifically adopted "the reasons stated in plaintiff's June 21, 1996 Suggestions in Opposition," wherein Liberty Mutual argued that the substance of the claims made by potential tort victims other than those involved in the Moretz Action were not in the record or otherwise before Judge Stevens, so there was no way for Judge Stevens to determine whether those unspecified claims were or were not covered by the policy.
On April 28, 1997, FAG filed a motion for relief under Rule 60(b), contending that newly discovered evidence disclosed new sources of TCE. The motion did not mention the cutting of a pipe in 1983 or 1984 that supposedly resulted in the release of TCE; the importance of this observation will become clearer later in this Order. Judge Stevens denied the motion on May 30, 1997, holding that (1) FAG could have discovered the evidence if it had been diligent, (2) the "new" evidence was not material, and (3) the "new" evidence would not have resulted in a different outcome. In fact, Judge Stevens characterized the motion as "patently meritless" and "border[ing] on the absurd." The Eight Circuit affirmed both the judgment and the denial of FAG's post-judgment motions. Liberty Mutual Ins. Co. v. FAG Bearings Corp., 153 F.3d 919 (8th Cir. 1998).
On September 30, 1998, Judge Stevens issued an order in Gulf States. To charitably describe his order, Judge Stevens excoriated FAG for, inter alia, (1) engaging experts to support a particular hypothesis, not to determine the true state of matters on its property, (2) failing to provide experts with all the information at its disposal in an attempt to dictate their conclusions, (3) "fraudulently assert[ing] that it was not responsible for any contamination at its property," (4) failing to cooperate fully in the investigation into the existence of and its responsibility for TCE contamination, (5) "knowingly misrepresent[ing] the existence of a document retention policy" and other discovery violations, and (perhaps most seriously), (6) relying on testimony and advancing theories and arguments it knew to be false. His order also criticized FAG's penchant for continuously changing its explanation for the existence of TCE on its property as each theory it advanced was debunked or as otherwise necessary to pursue its litigation goals. Included among Judge Stevens' findings were the following:
• Approximately 12,000 to 25,000 gallons of TCE was released through "still bottoms," waste, spills, leaks, overflowing tanks, and incidental use of TCE. Gulf States, slip op. at 8-11.
• Documents FAG submitted to MDNR revealed that FAG released 6,750 gallons of TCE in 1973 alone. Gulf States, slip op. at 12.
• "TCE or TCE-related chemicals were detected in at least 36 different locations across the FAG facility during . . . investigations at FAG's facility from 1991 to 1996." Gulf States, slip op. at 21.
• The highest levels of contamination are found at locations where TCE was intentionally dumped by FAG's employees. Gulf States, slip op. at 22-23.
• The "trail" (or plume) of contamination runs from these locations directly to residential wells to the south of FAG's property. Gulf States, slip op. at 23-24.
Judge Stevens' order has been appealed; oral argument was set to occur in May 2002 but has recently been postponed.
Meanwhile, a jury awarded the plaintiff in the Lewis Action $716,000 in actual damages and $1.25 million in punitive damages. The award of actual damages was affirmed on appeal, but the award of punitive damages was vacated. Lewis v. FAG Bearings Co., 5 S.W.2d 579 (Mo. Ct. App. 1999). A review of that opinion reveals that the only contaminant discussed at trial was TCE. The Missouri Court of Appeals briefly summarized the evidence demonstrating how FAG released TCE into the environment:
In this case, there was evidence that Defendant knew of leaks of TCE during the years that it used the chemical. In fact, Defendant disposed of TCE on portions of its property which generally sloped towards Silver Creek during a period of time prior to Plaintiff moving to that area. The individual in charge of disposing of the TCE testified that Defendant stopped disposing of it on the ground and started storing it in barrels about the time the Environmental Protection Agency ("EPA") started issuing regulations concerning the chemical. The evidence indicated that, although he made his supervisor aware that the barrels were leaking, they remained on Defendant's property for over a year. Defendant stopped using TCE in 1982 when it no longer conducted the manufacturing processes that used the chemical.
In April 1998, FAG entered a consent judgment with the EPA to reimburse the EPA for its previously-incurred costs. In December 1998, FAG entered an Abatement Order on Consent with the Missouri Department of Natural Resources ("MDNR"), requiring it to conduct an investigation and remediation on its Joplin property. In October 1999, another private action — Hughes v. FAG Bearings Corp. — was filed in Jasper County (Missouri) Circuit Court. The case is (apparently) still pending.
Liberty Mutual initiated this case in March 1999. Count I seeks a declaration that Liberty Mutual is not obligated to provide coverage or defense for the Lewis Action, the EPA's inquiries and resulting consent decree, or the Black Action (Counts I through III, respectively). The...
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