NEWMONT USA LTD. v. American Home Assur. Co.

• Citation: 676 F. Supp.2d 1146
• Decision Date: 13 November 2009
• Docket Number: No. CV-09-033-JLQ.,CV-09-033-JLQ.
• Parties: NEWMONT USA LIMITED and Dawn Mining Co., Plaintiff, v. AMERICAN HOME ASSURANCE CO., et al., Defendants.
• Court: U.S. District Court — Eastern District of Washington

676 F.Supp.2d 1146

NEWMONT USA LIMITED and Dawn Mining Co., Plaintiff, v. AMERICAN HOME ASSURANCE CO., et al., Defendants.

No. CV-09-033-JLQ.

United States District Court, E.D. Washington.

November 13, 2009.

James Earl Reed, Winston & Cashatt, Spokane, WA, Sarah Block Wallace, Andrew J. Petrie, Bruce A. Featherstone, Featherstone Petrie Desisto LLP, Denver, CO, for Plaintiff.

Cathy Spicer, David R. Voyles, Katie Smith Matison, Lane Powell PC, Michael P. Hooks, Martin Joseph Pujolar, Forsberg & Umlauf PS, Misty A. Edmundson, Pamela A. Lang, Soha & Lang, Lawrence Gottlieb, Betts Patterson & Mines PS, Michael D. Handler, Peter J. Mintzer, Jodi A. McDougall, John C. Ditzler, Melissa Oloughlin White, Cozen O'Connor, Thomas S. James, Jr., Donald S. Kunze, Opus Law Group, Seattle, WA, Jonathan Kranz, Neal Glazer, D'Amato & Lynch LLP, New York, NY, Michael J. Baughman, Cohn Baughman & Martin, Chicago, IL, Brian

William Walsh, Colliau Elenius Murphy Carluccio Keener & Morrow, San Francisco, CA, Aaron Denton, David E. Prange, Prange Law Group LLC, Portland, OR, Bradley Edward Smith, Ewing Anderson PS, Spokane, WA, Elaine Whitman Klinger, John C. Falls, Ralph J. Luongo, Christie Pabarue Mortenen & Young, Philadelphia, PA, for Defendants.

ORDER DENYING IN PART AND GRANTING IN PART PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT

JUSTIN L. QUACKENBUSH, Senior District Judge.

On October 16, 2009 the court heard telephonic argument on Plaintiffs' Motion for Partial Summary Judgment (Ct. Rec. 160). Plaintiffs sought summary judgment that three Defendant insurers breached their duty to defend and that such breaches were in bad faith and violated the Consumer Protection Act. The motion pertains to three Defendant insurance carriers: Continental, OneBeacon, and Insurance Company of North America (INA). Participating and arguing at the hearing were: Andrew Petrie, on behalf of Plaintiffs; Pamela Lang on behalf of INA; Lawrence Gottlieb on behalf of Continental; and Ralph Luongo on behalf of OneBeacon. Other counsel appearing were Sarah Wallace, Beverly Anderson, Michael Baughman, Misty Edmondsen, Brian Walsh, Brad Smith, Ralph Luongo, Elaine Klinger, Martin Pujolar, Don Kunze, Thomas James, Jonathan Kranz, Melissa White, and David Prange. The following is intended to memorialize and supplement the oral rulings of the court.

I. FACTS

A. ALLEGATIONS IN THE UNDERLYING CERCLA LITIGATION

In January 2005, the United States Environmental Protection Agency filed an action in this court against Plaintiffs under the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq. ("CERCLA") United States of America v. Newmont USA Ltd., et al, No. CV-05-020-JLQ, 2008 WL 4621566 (E.D.Wash. Oct. 17, 2008). Proof of service was not filed until after the filing of an Amended Complaint on May 20, 2005, after which waivers of service of process were filed by Newmont and Dawn. It is undisputed the EPA's Complaint against Newmont and Dawn alleged they were responsible for a release of pollutants associated with the Midnite Mine uranium mine located near Ford, Washington. It is also undisputed that the Complaint filed by the EPA did not include specific facts regarding alleged discharges. Ct. Rec. 187 at 23. The Amended Complaint stated at ¶ 9:

"The Site is an inactive open-pit uranium mine, which includes four pits backfilled with waste-rock, two open pits, waste rock and uranium protore piles. Mining activities at the Site disturbed approximately 320 acres. Mining activities at the Site have resulted in elevated levers of metals and radionuclides in soils, sediments, surface water and groundwater including within the drainage, surface, and sediments of Blue Creek, which flows into the Spokane River arm of Lake Roosevelt."

Cause No. 05-CV-020, Ct. Rec. 3. At ¶ 14, it stated: "There have been and continue to be `releases' or `substantial threats of releases' of such hazardous substances or pollutants or contaminants into the environment in and around the Site . . ." Id. at ¶ 14. "Materials located at the Site include `hazardous substances' and/or `pollutants or contaminants which may present an imminent and substantial danger to the public health or welfare'..." Id. at ¶ 13.

The court conducted a bench trial of the CERCLA action and on October 17, 2008, entered a 101 page decision declaring Newmont and Dawn, in conjunction with the United States, liable for cleanup costs totaling many millions of dollars in the remediation of the Midnite Mine site.

B. THE INSURANCE POLICIES

1. One Beacon (Umbrella Insurance Policy)

OneBeacon policy no. E 60003 was issued (by "Employers' Surplus Lines Insurance") to Newmont Mining Corporation and provided $5 million in umbrella coverage for the period of July 1, 1969 to July 1, 1972. Dawn Mining is also a named insured on the policy. Prouty Decl., Ex 1 at 24. The policy under the section entitled "I. Coverage" provides that OneBeacon will:

Indemnify the Assured for all sums which the Assured shall be obligated to pay by reason of the liability

(a) imposed upon the Assured by law; or

(b) assumed coverage for all sums by the Named Assured ... for damages, direct or consequential and expenses, all as more fully defined by the term "ultimate net loss" on account of

(I) Personal Injuries, including death at any time resulting therefrom;

(ii) Property Damage,

(iii) Advertising Liability, caused by or arising out of each occurrence happening anywhere in the world.

Prouty Decl., Ex. 1 at 42.

The policy defines "ultimate net loss" to mean:

The total sum which the Assured, or any company as his insurer, or both, become obligated to pay by reason of... property damage, ... either through adjudication or compromise, and shall also include ... all sums paid as ... fees, charges and law costs ... and for litigation, settlement, adjustment and investigation of claims and suits which are paid as a consequence of any occurrence covered hereunder ....

Id.

The policy defines "occurrence" to mean "an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage, or advertising liability during the Certificate period ..." Id.

In Section II, entitled "Limit of Liability" the policy essentially provided that the insurer "shall only be liable for the ultimate net loss which is the excess of either (a) the limits of the underlying insurances as set out in the Schedule in respect of each occurrence covered by said underlying insurances ..."; or (b) the deductible $10,000, "ultimate net loss respect of each occurrence not covered by said underlying insurances." The policy further provided that in the event of "exhaustion of the aggregate limits of liability under said underlying insurances by reason of losses paid thereunder," "this Certificate shall ... continue in force as underlying insurance." Id.

The OneBeacon policy also states certain "conditions." One of them is under the heading "Assistance and Co-operation", which provides:

The Underwriters shall not be called upon to assume charge of the settlement or defense of any claim made or suit brought or proceeding instituted against the Assured but Underwriters shall have the right and shall be given the opportunity to associate with the Assured or the Assured's underlying insurers, or both, in the defense and control of any claim, suit or proceeding relative to an occurrence where the claim or suit involves or appears reasonably likely to involve Underwriters, in which event the Assured and Underwriters shall co-operate in all things in the defense of such claim, suit or proceeding.

Id. at 43.

Plaintiff claims the underlying insurance policy to which the OneBeacon policy refers is Pacific policy no. LAC 164801, which has a per-occurrence policy limit of $500,000. Pacific's policy provided primary coverage for the original term of September 15, 1964 to September 15, 1967, but was subsequently renewed with endorsement, the last annual policy period effective July 1, 1970. Id. at Ex. 2 at 47 (original term), 158 (endorsement regarding premium payment effective July 1, 1970). It is not clear whether this policy expired in 1971 and there was no underlying insurance for the annual period of 1971 to 1972. Plaintiff admits the absence of exhaustion of the policy limits for the July 1971-July 1972 annual policy period. Ct. Rec. 187 at 19.

The Pacific policy provides that Pacific shall:

(a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent . . .

. . . .

The amounts incurred under this insuring agreement, except settlements of claims and suits, are payable by the Company in addition to the applicable limit of liability of this Policy.

Prouty Decl., Ex. 2 at 48.

Plaintiffs declare through its Statement of Facts and the Prouty Declaration at ¶ 7 that the Pacific policy limits have been exhausted. Defendants dispute this statement. Plaintiffs/Prouty do not offer any other evidence to support this statement made in Mr. Prouty's declaration. One-Beacon also claims that there are at least two additional Pacific Indemnity policies, at least one of which may be the primary policy that replaced the policy no. LAC 164801 when it expired. Plaintiffs have not supplied the court with these apparent policies, or apparently produced them to defendants. OneBeacon SOF, ¶ 7.

2. Continental

Continental (as successor to Harbor Insurance Company ("Harbor")) issued a primary insurance policy, no. GLA 010076, to Newmont Mining Corp. providing coverage for the period of April 1, 1975-1976, then another policy no. GLA 010441 for the period April 1 1976 to April 1, 1977. Prouty Decl., Ex. 3 at 163, 4 at 204. Both policies provide:

The Company shall have the right and duty to defend any suit against the insured seeking damages on

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