Minnesota Min. and Mfg. Co. v. Travelers Indem. Co.

• Decision Date: 08 June 1990
• Docket Number: Nos. C4-88-1931,C9-88-2296 and C1-88-2244,s. C4-88-1931
• Citation: 457 N.W.2d 175
• Parties: MINNESOTA MINING AND MANUFACTURING COMPANY, Plaintiff, v. The TRAVELERS INDEMNITY COMPANY, Great American Insurance Company, as successor in interest to Anchor Casualty Company of St. Paul, Minnesota, Commercial Union Insurance Company, as successor in interest to Employers Liability Assurance Corporation, Insurance Company of North America, Inc., Northwestern National Insurance Company, Defendants. JOSLYN CORPORATION, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant, The State of Minnesota, Through its Attorney General and its Pollution Control Agency, Intervenor-Plaintiff. BITUMINOUS CASUALTY CORPORATION, Plaintiff, v. TONKA CORPORATION, Defendant and Counterclaimant, Travelers Insurance Company, North River Insurance Company, Industrial Indemnity Company and United States Fire Insurance Company, Great American Insurance Company, Zurich Insurance Company, Fireman's Fund Insurance Company, Mission National Insurance Company, Twin City Fire Insurance Company, Additional Defendants on Counterclaim.
• Court: Minnesota Supreme Court

Page 175

457 N.W.2d 175

58 USLW 2747

MINNESOTA MINING AND MANUFACTURING COMPANY, Plaintiff, v. The TRAVELERS INDEMNITY COMPANY, Great American Insurance

Company, as successor in interest to Anchor Casualty Company

of St. Paul, Minnesota, Commercial Union Insurance Company,

as successor in interest to Employers Liability Assurance

Corporation, Insurance Company of North America, Inc.,

Northwestern National Insurance Company, Defendants.

JOSLYN CORPORATION, Plaintiff, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant,

The State of Minnesota, Through its Attorney General and its

Pollution Control Agency, Intervenor-Plaintiff.

BITUMINOUS CASUALTY CORPORATION, Plaintiff, v. TONKA CORPORATION, Defendant and Counterclaimant,

Travelers Insurance Company, North River Insurance Company,

Industrial Indemnity Company and United States Fire

Insurance Company, Great American Insurance Company, Zurich

Insurance Company, Fireman's Fund Insurance Company, Mission

National Insurance Company, Twin City Fire Insurance

Company, Additional Defendants on Counterclaim.

Nos. C4-88-1931, C9-88-2296 and C1-88-2244.

Supreme Court of Minnesota.

June 8, 1990.

Syllabus by the Court

Expenditures mandated by the Minnesota Pollution Control Agency pursuant to the Minnesota Environmental Response and Liability Act, Minn.Stat. ch. 115B (1988), which are necessary to effectuate the cleanup of contamination which has already occurred to the state's water resources, are "damages because of * * * property damage" within the meaning of the comprehensive general liability insurance policies issued by these defendants.

G. Marc Whitehead, Thomas J. Barrett, Thomas C. Mielenhausen, Popham, Haik, Schnobrich & Kaufman, Ltd., Minneapolis, John E. Heintz, Lisa I. LaTorre, Washington, D.C., for Minnesota Min. and Mfg. Co.

David M. Coyne, Gray, Plant, Mooty, Mooty & Bennett, P.A., Minneapolis, for Joslyn Corp.

Hubert H. Humphrey, III, Atty. Gen., Ann M. Shea, Sp. Asst. Atty. Gen., St. Paul, for intervenor-plaintiff, State of Minn., et al.

Kay Nord Hunt, Thomas E. Peterson, James C. Searls, Lommen, Nelson, Cole & Stageberg, P.A., Minneapolis, for Bituminous Cas. Corp.

Scott H. Peters, William J. Keppel, Dorsey & Whitney, Minneapolis, for Travelers Indem. Co.

John Q. McShane, Marcia M. Kull, Bowman & Brooke, Minneapolis, and Jerome C. Randolph, Donald A. Lane, Keating, Meuthing & Klekamp, Cincinnati, Ohio, for Great American Ins. Co., et al.

James T. Martin, Gislason, Martin & Varpness, Minneapolis, for Commercial Union Ins. Co., et al.

Paul G. Neimann, Thomas J. Shroyer, Moss & Barnett, Minneapolis, and Dennis M. Flannery, W. Scott Blackmer, Wilmer, Cutler & Pickering, Washington, D.C., for Ins. Co. of North America, Inc., et al.

Richard J. Nygaard, Patricia Ann Burke, Rider, Bennett, Egan & Arundel, Minneapolis, for Northwestern Nat. Ins. Co.

John F. Angell, Terry J. Bartz, Stich, Angell, Kreidler & Muth, P.A., Minneapolis, and James P. Whitters, III, Lee H. Glickenhaus, Gaston & Snow, Boston, Mass., for Liberty Mut. Ins. Co.

David F. Herr, John H. Gilmore, Maslon, Edelman, Borman, & Brand, Minneapolis, for Tonka Corp.

Paul G. Neimann, Moss & Barnett, Minneapolis, for Travelers Ins. Co.

Leon R. Erstad, Chadwick, Johnson & Condon, P.A., Minneapolis, for North River Ins. Co., et al.

Garrett E. Mulrooney, Maun, Green, Hayes, Simon, Johanneson & Brehl, St. Paul, and Robert J. Bates, Jr., Phelan, Pope & John, Chicago, Ill., for Zurich Ins. Co.

Gay B. Urness, Miller & Neary, Minneapolis, and William M. Savino, Gary D. Centola, Alan C. Eagle, Rivkin, Radler, Dunne & Bayth, Uniondale, N.Y., for Fireman's Fund Ins. Co.

Robert J. McGuire, Barbara A. Burke, Cousineau, McGuire, Shaughnessy & Anderson, Minneapolis, for Mission Nat. Ins. Co.

Charles E. Gillen, Sean E. Hade, Jardine, Logan & O'Brien, St. Paul, for Twin City Fire Ins. Co.

Charles E. Lundberg, Bassford, Heckt, Lockhart, Truesdell & Briggs, P.A., Minneapolis, and Thomas W. Brunner, James M. Johnstone, Robert R. Lawrence, Wiley, Rein & Fielding, Washington, D.C., amicus curiae, for Ins. Environment Litigation Ass'n.

David L. Lillehaug, Leonard, Street & Deinard, Minneapolis, and (Joanne B. Grossman, Eric C. Bosset, Covington & Burling, Washington, D.C., of counsel), for amici curiae, American Petroleum Institute, et al.

Hubert H. Humphrey, III, Atty. Gen., Steven Shakman, Ann M. Shea, Sp. Asst. Attys. Gen., St. Paul, amici curiae, for State of Minn., et al.

Heard, considered and decided by the court en banc.

KEITH, Justice.

These three cases present certified questions from the federal district court in Minnesota requiring us to decide whether the costs of complying with directives issued by state and federal environmental agencies to clean up groundwater contamination caused by pollution are covered under the insureds' comprehensive general liability insurance policies.

The cases present similar factual backgrounds. Tonka Corporation ("Tonka"), Joslyn Corporation ("Joslyn") and Minnesota Mining and Manufacturing Company ("3M") have been insured by the various insurance companies involved in these cases under comprehensive general liability ("CGL") insurance policies dating back several decades. The policies in each instance contain nearly identical language by which the particular insurance company involved agreed "to pay on behalf of the insured 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." ¹ During the years the policies were in effect, the insureds in these cases were engaged in manufacturing operations which produced hazardous chemical wastes. Like many other manufacturers at the time, the insureds disposed of these wastes by underground burial or by the use of settling pools. Over the years the chemical wastes have escaped into the soil, contaminating the soil and the groundwaters. The Minnesota Pollution Control Agency ("MPCA") has become involved in investigating soil and groundwater contamination at the waste disposal sites used by the insureds in these cases.

In the disposal site used by 3M, the MPCA requested that 3M participate in a hydrogeologic study. 3M financed much of the study and later commissioned a surface cleanup of deteriorating drums at the site. In 1983, 3M entered a consent order with the MPCA and the United States Environmental Protection Agency ("EPA") agreeing to clean up the soil and groundwater contamination at the sites and to reimburse the agencies for the past and future expenses associated with the cleanup effort. In exchange, the agencies released 3M from liability under state and federal pollution statutes, including the Minnesota Environmental Response Liability Act ("MERLA"), Minn.Stat. ch. 115B, and from all common law liabilities.

In the cases of Joslyn and Tonka, the MPCA pursuant to MERLA issued a Request for Response Action ("RFRA") which directed the insureds to conduct an investigation of the soil and groundwater contamination at their sites and then to prepare and implement a response plan to remedy the contamination. The RFRA also advised the insureds that their failure to take the requested action would result in the MPCA undertaking the cleanup, after which it would seek to recover its costs from the insureds, or it could seek a court order to compel them to clean up the site and impose civil penalties. The insureds were also advised that they could be liable for permanent damages caused to the natural resources of the state, and that the MPCA would seek reimbursement of its own expenses. Joslyn entered into a consent order with the MPCA in which it agreed to investigate suspected contamination, develop and implement a cleanup plan, and reimburse the MPCA for its expenses. In return, MPCA agreed that it would not pursue any of its statutory or common law remedies against Joslyn. Tonka has not entered a consent order, but has complied with the RFRA by taking the requested actions.

Each of the insureds has spent considerable amounts investigating the extent of the contamination and complying with the applicable RFRAs and consent orders. The insureds separately brought suit in federal court against the insurance companies who sold the CGL insurance policies during the years that the groundwater contamination was occurring. The insurance companies in each case brought motions for summary judgment seeking declarations that claims for environmental cleanup costs mandated by the MPCA are not covered "damages" within the meaning of the CGL policies. In each case the issue of whether these costs are covered under the terms of the insurance policies has been certified to this court for resolution under applicable Minnesota law. ²

The insurance companies argue that the CGL policies indemnify the insureds only when the insureds are legally obligated to pay "damages" to a third party. They assert that the term "damages" should be interpreted in the insurance policies to contemplate amounts paid as monetary compensation for injuries to third parties, and should not cover amounts paid to comply with injunctive orders. The insurance companies argue that the consent orders and the RFRAs issued by the MPCA which require that the insureds in these cases undertake to clean up the contaminated sites are akin to injunctive orders. ³ They assert that they must indemnify the policyholders against action taken against them by the MPCA only when the MPCA is seeking compensation for the monetary value of permanent damage to the natural resources of the state, as permitted by Minn.Stat. Sec. 115B.04, subd. 1(c) (1988). In essence, they are arguing that the term "damages" as used in the CGL policies embodies a distinction between injunctive or other forms of equitable relief, and legal or monetary damages. They argue that the actions taken by the MPCA in these cases seek equitable relief, including restitutionary relief and therefore...