Md. Cas. Co. v. Asbestos Claims Court

• Decision Date: 25 March 2020
• Docket Number: OP 19-0051
• Parties: MARYLAND CASUALTY COMPANY, Petitioner, v. The ASBESTOS CLAIMS COURT, and the Honorable Amy Eddy, Asbestos Claims Court Judge, Respondent.
• Court: Montana Supreme Court

399 Mont. 279

460 P.3d 882

2020 MT 70

MARYLAND CASUALTY COMPANY, Petitioner,

v.The ASBESTOS CLAIMS COURT, and the Honorable Amy Eddy, Asbestos Claims Court Judge, Respondent.

OP 19-0051

Supreme Court of Montana.

Argued and Submitted: August 14, 2019

Decided: March 25, 2020

For Petitioner: Daniel W. Hileman, Kaufman Vidal Hileman Ellingson, P.C., Kalispell, Montana, Edward J. Longosz, II, (argued), Mark A. Johnston, Kennedy C. Ramos, Eckert Seamans Cherin & Mellott, LLC, Washington, District of Columbia

For Respondent: Amy Eddy, Asbestos Claims Court Judge, Kalispell, Montana Allan M. McGarvey, (argued), Dustin Leftriddge, McGarvey, Heberling, Sullivan & Lacey, PC, Kalispell, Montana, (for Plaintiff and Respondent Ralph V. Hutt)

Amicus Curiae: Maxon R. Davis, (argued), Davis, Hatley, Haffeman & Tighe, P.C., Great Falls, Montana

Justice Dirk M. Sandefur delivered the Opinion of the Court.

¶1 We previously assumed supervisory control over proceedings pending before the Montana Asbestos Claims Court in the matter of In re Asbestos Litigation , Consolidated Case No. AC-17-0694, 2017 WL 5949936, as applicable to Hutt v. Maryland Casualty Co. , Cause No. DDV-18-0175, Montana Eighth Judicial District Court.¹ We now address on extraordinary review the assertion of Petitioner-Defendant Maryland Casualty Company ("MCC") that the court erroneously concluded that MCC owed a duty of care to warn third-party employees of its insured (W.R. Grace and Company ("Grace")) of a known risk of airborne asbestos exposure in or about Grace facilities in and about Libby, Montana, between 1963 and 1970. We restate the dispositive issue as:

Whether the Asbestos Court erroneously concluded that MCC had a common law duty to warn third parties of a known risk of harm caused by the conduct of its insured based merely on foreseeability of harm and related public policy?

¶2 We affirm and remand for further proceedings in accordance with this opinion.

PROCEDURAL AND FACTUAL BACKGROUND

¶3 Vermiculite is a hydrous silicate mineral naturally occurring in asbestos-laden rock on Vermiculite Mountain in the Rainy Creek drainage of the Kootenai Forest about seven miles northeast of Libby, Montana. When heated, vermiculate expands and puffs (exfoliates) like popcorn. Exfoliated vermiculite has extraordinary thermal qualities useful for insulation, fire-proofing, and other commercial purposes. In the early 1920s, upon recognition of the economic potential of vermiculite and acquiring the mineral rights to large deposits on the top of Vermiculite Mountain, Edward Alley formed the Mineral Carbon and Insulating Company (rebranded as the Zonolite Company in 1923), which thereafter commenced large-scale vermiculite mining and processing operations in the Libby area. Grace acquired the Zonolite Company² in 1963 and continued its vermiculite mining and processing operations under Grace’s Zonolite Division until ceasing Libby area operations in 1990.

Overview of Grace Vermiculite Extraction and Refining Process

¶4 Zonolite/Grace extracted vermiculite ore from the mountaintop mine site using various open-pit mining techniques. It trucked the extracted ore a short distance to an adjacent reduction mill facility located below the mine site. The processed vermiculite concentrate was then transported down the mountain from the mill to a screening/loading facility site that straddled the Kootenai River near Highway 37.

¶5 At the mountainside mill, trucks dumped raw vermiculite ore into a large hopper. The ore passed through steel "grizzly" bars on the top of the hopper to separate out large waste rock. The ore then passed through a mechanical shaker-screen in the hopper to screen out additional waste rock. From approximately 1922-1954, the hopper-screened ore passed through a dry-mill process that used series of mechanical screening operations to further breakdown the ore and separate the vermiculite from waste slag. In 1954, Zonolite Company added a preliminary open wet-mill process that used a series of wet mechanical screening operations to produce a mill mix for further processing through the original dry mill. The original wet- and dry-mill processes operated in tandem until 1974 when Grace replaced both with a new closed wet-milling process. Prior to installation of the closed wet-milling process in 1974, the mill operations produced a great deal of asbestos-laden airborne dust in and about the facility. The extent to which the subsequent processing and handling of milled concentrates generated additional asbestos dust is unclear on the record.

¶6 At the Kootenai River screening/loading facility, Zonolite/Grace screened out different sizes/grades of milled vermiculite concentrate and temporarily stored them in large metal silos on the highway side of the river. For rail transportation, a conveyor system transported milled concentrates from the storage silos across the river to a rail car loading facility on a GN/BNSF rail spur line.³ The loading facility loaded the bulk of the screened vermiculite concentrates into open rail cars for transportation to the Libby rail yard, train staging, and bulk shipment to vermiculite expanding/exfoliation plants around the country. Zonolite/Grace also shipped smaller quantities of vermiculite concentrate by truck or rail from the screening/loading facility to its 19-acre export area site in downtown Libby.

¶7 At the Libby export facility site, Grace operated a heat-processing exfoliation facility from 1963-1969 that converted vermiculite concentrate into an end-use Zonolite product.⁴ Also present on the export area site were various offices, a bagging facility, temporary storage facilities, and related operation areas. The bagging facility bagged exfoliated Zonolite product (1963-1969) and vermiculite concentrates (1963-1990) for special order shipments.

Co-Occurrence of Vermiculite and Amphibole Asbestos—Resulting Risk

¶8 Though not all vermiculite naturally occurs with asbestos, the United States Geological Service ("USGS") reported in 1929 that the vermiculite found on Vermiculite Mountain naturally occurs in rock mixed with amphibole asbestos.⁵ Based on the silicate nature of vermiculite and co-occurrence of hazardous asbestos, the Industrial Hygiene Division of the Montana Board of Health regularly conducted industrial hygiene inspections and studies at Zonolite/Grace facilities in the Libby area. In the period of 1956-1963, various Board of Health studies repeatedly reported that excessively high levels of airborne dust in or about the Zonolite/Grace facilities and operations, particularly the mill facility, created a significant risk of silicosis

and asbestos-related disease to exposed workers.⁶ Despite warnings and dust control recommendations in earlier Board of Health reports since at least 1956, the 1962 report noted Zonolite’s continuing disregard of the Board’s recommendations. From 1963-1974, Board of Health inspectors continued to regularly inspect and report to Grace on the ongoing asbestos-related disease hazard caused by the high levels of asbestos-laden dust in and about its Libby area facilities and operations.

MCC Involvement as a Workers’ Compensation Insurer

¶9 From 1963-1973, Grace acquired statutorily required workers’ compensation insurance coverage for its Zonolite Division operations from MCC. Inter alia , Grace’s MCC workers’ compensation insurance policy included the following limiting language regarding MCC’s right and role in conducting related inspections of Grace’s Zonolite Division facilities and operations:

We have the right, but are not obliged to inspect your workplaces at any time. Our inspections are not safety inspections. They relate only to the insurability of the workplaces and the premiums to be charged. We may give you reports on the conditions we find. We may also recommend changes. While they may help reduce losses, we do not undertake to perform the duty of any person to provide for the health or safety of your employees or the public. We do not warrant that your workplaces are safe or healthful or that they comply with laws, regulations, codes or standards. Insurance rate service organizations have the same rights we have under this provision.

MCC conducted its first site inspection of Grace’s Libby area Zonolite Division facilities and operations in July 1964. In accordance with the foregoing policy language, MCC was thereafter actively involved in inspecting, monitoring, and consulting with Grace regarding the ongoing asbestos dust problem in and about its Libby area facilities and operations.

¶10 The available documentary record from 1963-1973, as supplemented by the deposition record in this case, clearly indicates that the asbestos dust hazard in and about Grace’s Libby area facilities and operations was an ever-present concern to Grace, MCC, and other involved government and private entities and individuals from 1963 forward.⁷ Grace repeatedly received and considered dust hazard notices, warnings, and recommendations from the Montana Board of Health and other government and private entities including MCC. Grace continued the practice, started by Zonolite Company in 1956 and expanded in 1959, of requiring pre-employment physical examinations, with chest x-ray

screening, of Zonolite Division workers for adverse lung conditions and respiratory ailments. In addition to the information and assistance provided by the Montana Board of Health, MCC, and others, Grace independently conducted its own workplace air quality monitoring/sampling and safety inspections between 1963 and 1974.

¶11 In August 1964, a Libby doctor (Dr. Woodrow Nelson) wrote to Grace advising of his observation and concern that Grace workers were developing adverse lung conditions associated with workplace asbestos exposure. Grace acknowledged Nelson’s concern and advised that it had referred his report to its workers’ compensation insurance carrier (MCC) for medical review and consideration.⁸ Grace further advised Nelson...