Maryland Cas. Co. v. Wausau Chemical Corp., 91-C-479-C.

• Decision Date: 16 December 1992
• Docket Number: No. 91-C-479-C.,91-C-479-C.
• Citation: 809 F. Supp. 680
• Parties: MARYLAND CASUALTY COMPANY and Northern Insurance Company of New York, Plaintiffs, v. WAUSAU CHEMICAL CORPORATION and James E. Cherwinka, Defendants, v. CONTINENTAL INSURANCE COMPANY and Hallmark Insurance Company, Third-Party Defendants.
• Court: U.S. District Court — Western District of Wisconsin

809 F. Supp. 680

MARYLAND CASUALTY COMPANY and Northern Insurance Company of New York, Plaintiffs, v.WAUSAU CHEMICAL CORPORATION and James E. Cherwinka, Defendants, v.CONTINENTAL INSURANCE COMPANY and Hallmark Insurance Company, Third-Party Defendants.

No. 91-C-479-C.

United States District Court, W.D. Wisconsin.

December 8, 1992.

As Amended December 16, 1992.

COPYRIGHT MATERIAL OMITTED

Richard A. Hollern, Madison, WI, for Maryland Cas. Co., Northern Ins. Co.

Steven P. Means, Michael, Best & Friedrich, Madison, WI, for Wausau Chemical Corp.

Raymond R. Krueger, Michael, Best & Friedrich, Madison, WI, for James E. Cherwinka.

Victor J. Piekarski, Querrey & Harrow, Chicago, IL, for Hallmark Ins. Co., Continental Ins. Co.

OPINION AND ORDER

CRABB, Chief Judge.

This is a civil action for declaratory relief.Maryland Casualty Company seeks a declaration that it has no obligation to defend or indemnify Wausau Chemical Corporation or its president, James E. Cherwinka, in connection with claims asserted against Wausau Chemical by the United States and State of Wisconsin that were resolved in a consent decree.Wausau Chemical filed a counterclaim against Maryland Casualty and a supplemental counterclaim against Continental Insurance Company and Hallmark Insurance Company seeking a money judgment of indemnification and a declaration that Maryland Casualty, Continental and Hallmark are obligated under certain insurance policies they issued to indemnify Wausau Chemical for all sums that Wausau Chemical has paid or will be legally obligated to pay in complying with the consent decree.This court has jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332.

The case is before the court on motions for summary judgment by Maryland Casualty, Wausau Chemical, Continental and Hallmark.Maryland Casualty denies coverage for the following reasons: (1) the government suits do not seek covered "damages" from Wausau Chemical under the policies; (2) Wausau Chemical failed to provide timely notice to Maryland Casualty as required by the policies; (3) the obligations assumed by Wausau Chemical under the consent decree constitute voluntary payments not covered under the policies; (4) the government suits and consent decree concern environmental contamination arising from chemical spills that took place after the termination of the policies; and (5) Wausau Chemical is estopped from seeking coverage for claims asserted in EPA's General Notice Letter because of Wausau's failure to inform this court of the pendency of those claims at the time Wausau sought dismissal of Maryland Casualty's previous declaratory judgment suit.

Continental and Hallmark deny coverage for several of the reasons listed above as well as five additional reasons: (1) the underlying actions do not seek damages for "property damage" as defined by the policies; (2) coverage is excluded to the extent that the alleged property damage is to property owned by Wausau Chemical; (3) the environmental contamination began and was known to Wausau Chemical before it purchased the policies; (4) to the extent that the claims arise out of the December 1983 spill, that spill did not occur during the policy periods; and (5) the November 1988 release precludes coverage under the policies.

I find that (1) the damages at issue in the government suits are covered "damages" under the policies; (2) the damages are "property damages" under the policies; (3)"owned-property" exclusions do not foreclose coverage in this case; (4) the insurers have suffered no prejudice from any alleged untimely notice of occurrence or suit; (5) the principle of fortuity and exclusion for known risks do not apply in this case; and (6) there is no basis for estoppel.I find also that there are disputed facts concerning when the environmental damage occurred, which policies applied during those periods and how damages should be allocated among the insurers.

To succeed on a motion for summary judgment, the moving party must show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.Fed. R.Civ.P. 56(c);Celotex Corp. v. Catrett,477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265(1986);Indiana Grocery, Inc. v. Super Valu Stores, Inc.,864 F.2d 1409, 1412(7th Cir.1989).When the moving party succeeds in showing the absence of a genuine issue as to any material fact, the opposing party must set forth specific facts showing that there is a genuine issue for trial.Fed.R.Civ.P. 56(e);Matsushita Electric Indus. Co. v. Zenith Radio Corp.,475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538(1986);Bank Leumi Le-Israel, B.M. v. Lee,928 F.2d 232, 236(7th Cir.1991).The opposing party cannot rest on the pleadings alone, but must designate specific facts in affidavits, depositions, answers to interrogatories or admissions that establish the existence of a genuine issue for trial.Celotex,477 U.S. at 324, 106 S.Ct. at 2553.Also, if a party fails to make a showing sufficient to establish the existence of an essential element on which that party will bear the burden of proof at trial, summary judgment for the opposing party is proper.Celotex,477 U.S. at 322, 106 S.Ct. at 2552.

For the purposes of deciding these motions only, I find from the parties' proposed findings of fact that the following material facts are undisputed.

UNDISPUTED FACTS

The Parties

PlaintiffMaryland Casualty Company is incorporated under the laws of Maryland, has its principal place of business in Baltimore, Maryland, and is engaged in the business of providing and underwriting insurance, including the extension of liability insurance.PlaintiffNorthern Insurance Company of New York is incorporated under the laws of New York, has its principal place of business in Baltimore, Maryland, is a wholly-owned subsidiary of Maryland Casualty, and is engaged in the business of providing and underwriting insurance, including the extension of liability insurance.DefendantWausau Chemical Corporation is incorporated under the laws of Wisconsin, has its principal place of business in Wausau, Wisconsin, and is a supplier of chemicals and related products.DefendantJames E. Cherwinka is an individual resident of Wisconsin and has been the president, treasurer, and chief executive officer of Wausau Chemical at all times relevant to this action.Third-party defendantHallmark Insurance Company is incorporated under the laws of Wisconsin, has its principal place of business in Philadelphia, Pennsylvania, and is engaged in the business of providing insurance.Third-party defendantContinental Insurance Company is incorporated under the laws of New Hampshire, has its principal place of business in New York, New York, and is engaged in the business of providing insurance.

The Maryland Casualty and Northern Policies

Maryland Casualty and Northern issued primary general liability insurance policies to Wausau Chemical for the period February 21, 1967 to February 21, 1982, and excess insurance policies for the period May 6, 1974 to March 1, 1982.

Certain of the primary policies issued by Maryland Casualty and Northern to Wausau Chemical obligated the insurer to indemnify the insured for:

all sums which the insured shall become legally obligated to pay as damages because of ... property damage to which this insurance applies, caused by an occurrence....

Certain of the umbrella policies issued by Maryland Casualty to Wausau Chemical obligated the insurer to:

indemnify the insured for ultimate net loss in excess of the retained limit which the Insured by reason of liability imposed upon the Insured by law or assumed by the Insured by contract or agreement, shall become legally obligated to pay as damages because of ... Property Damage Liability ... to which this policy applies, caused by an occurrence.

These policies define "occurrence" as:

an accident or event including continuous or repeated exposure to conditions which results in personal injury or property damage neither expected nor intended from the standpoint of the insured.

The policies define "property damages" as:

(a) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (b) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

The policies require compliance with certain notice of occurrence provisions as a precondition of coverage:

In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, ... shall be given by or for the insured to the Company or any of its authorized agents as soon as practicable.

or

When an occurrence takes place which in the opinion of the Insured, involves or may involve liability on the part of the Company, prompt written notice shall be given by or on behalf of the Insured to the Company or any of its authorized representatives.

Some of the policies add that:

Failure to so notify Maryland Casualty of any occurrence which at the time of its happening did not appear to involve this policy but which at a later date, would appear to give rise to a claim hereunder shall not prejudice such claim provided such notice is then given.

The policies also require compliance with notice of claim provisions as a precondition of coverage:

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.

or

The Company shall have the right and shall be given the opportunity to associate with the insured or its underlying insurers, or both, in the defense and control of any claim, suit or

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