Nucor Corp. v. Emp'rs Ins. Co. of Wausau
Decision Date | 23 April 2013 |
Docket Number | 1 CA–CV 10–0454.,Nos. 1 CA–CV 10–0174,s. 1 CA–CV 10–0174 |
Citation | 296 P.3d 74,231 Ariz. 411,648 Ariz. Adv. Rep. 20 |
Parties | NUCOR CORPORATION, Plaintiff/Appellant/Cross–Appellee, v. EMPLOYERS INSURANCE COMPANY OF WAUSAU, Defendant/Appellee/ Cross–Appellant, and Hartford Accident and Indemnity Company, Defendant/Appellant/ Cross–Appellee. Nucor Corporation, Plaintiff/Appellant, v. Employers Insurance Company Of Wausau, Defendant/Appellee. |
Court | Arizona Court of Appeals |
OPINION TEXT STARTS HERE
Winston & Strawn, LLP by Scott P. DeVries, Pro Hac Vice, Yelitza V. Dunham, Pro Hac Vice, San Francisco, and Fennemore Craig, P.C. by Timothy BergChristopher L. Callahan, Theresa Dwyer–Federhar, Phoenix, Attorneys for Plaintiff/Appellant/Cross–Appellee Nucor Corporation.
Barber Law Group by Bryan M. Barber, Pro Hac Vice, San Francisco, and Ryley Carlock & Applewhite PA by John C. Lemaster, Phoenix, Attorneys for Defendant/Appellee/Cross–Appellant Employers Insurance Company of Wausau,
Gordon & Rees LLP by David C. Capell, Pro Hac Vice, San Francisco, and Bowman and Brook LLP by Thomas M. Klein, Phoenix, Attorneys for Defendant/Appellant/Cross–Appellee Hartford Accident and Indemnity Company.
¶ 1 Nucor Corporation (“Nucor”), Hartford Accident and Indemnity Company (“Hartford”), and the Employers Insurance Company of Wausau (“Wausau”) challenge rulings the trial court made in resolving indemnity and defense costs claims. As we explain, we affirm in part, reverse in part and remand for further proceedings.1
¶ 2 The City of Phoenix detected trichloroethylene (“TCE”) 2 in its water wells in July 1982. The Arizona Department of Environmental Quality (“ADEQ”) began an investigation into the source and extent of the contamination and determined that Nucor had contributed to the contamination because it owned an electronics manufacturing plant that had used TCE as a cleaning solvent. ADEQ sent Nucor a letter in 1989 identifying it as a potentially responsible party (“PRP”) and directing it to take remedial action. Nucor subsequently settled the ADEQ claim for $1,275,000.3
¶ 3 Before the settlement was approved, Nucor and others were sued in Baker v. Motorola (“ Baker ”), Maricopa Cnty.Super. Ct. Cause No. CV 1992–002603. A year later, they were sued in Lofgren v. Motorola (“ Lofgren ”), Maricopa Cnty.Super. Ct. Cause No. CV 1993–005322. The class action lawsuits were consolidated, which resulted in three classes of plaintiffs: (1) those who sought expenses for future medical monitoring because of TCE exposure (“medical monitoring claims”); (2) those who sought damages for the diminution in the value of their property because of the stigma of being located above groundwater containing TCE (“stigma claims”); and (3) those who suffered personal injuries or death allegedly caused by the contamination. Nucor subsequently settled the class claims for more than $21 million.
¶ 4 During the class action litigation, Nucor sued Hartford and another insurer in May 1997, for declaratory relief, breach of contract, and breach of the covenant of good faith and fair dealing. Nucor subsequently amended the complaint to add additional claims and to add Wausau, American Mutual, Travelers, and various excess carriers as defendants. The trial court granted partial summary judgment to Travelers and Wausau in 2004 after finding that their insurance policies did not cover the settlement of the “stigma claims” because the groundwater contamination had not damaged any property or interfered with the use of any property.
¶ 5 Nucor subsequently filed motions for summary judgment against its carriers. Hartford, Travelers, Twin City Fire Insurance Company, and First State Insurance Company settled with Nucor; Travelers also assigned its contribution rights to Nucor, and Nucor agreed to defend Hartford on the released policies and claims, including those by other insurers. The court subsequently found that Wausau had breached its duty to defend Nucor on the ADEQ claim and grantedNucor partial summary judgment. Wausau then filed a cross-complaint against Hartford and Travelers for declaratory relief, equitable indemnity and equitable contribution claims. Nucor unsuccessfully sought to be substituted as the indemnitor for Hartford and Travelers, but was allowed to intervene in the cross-claim.
¶ 6 The trial court then divided the remaining issues into four trial phases.4 Phase II focused on the percentage of defense costs owed by the primary insurers. After a bench trial, the court concluded that Travelers and Hartford had to reimburse Wausau for prejudgment interest to the extent that they had not paid their fair share of Nucor's defense costs. Additionally, the court set the percentage that each insurer would have to equitably contribute to pay Nucor's reasonable and necessary defense costs. Nucor, Hartford, Twin City, and First State subsequently filed their appeals after the court entered its final amended judgment incorporating rulings from the first three phases in January 2010 pursuant to Arizona Rule of Civil Procedure (“Rule”) 54(b).
¶ 7 Nucor and Wausau challenge different summary judgment rulings. Nucor argues that the court erred by ruling that Wausau's policies do not cover the portion of the Baker settlement paid to settle the stigma claims. Wausau contends the court erred by ruling that it had a duty to defend Nucor in the ADEQ proceeding.
¶ 8 Mindful of the requirements of Rule 56, we review the grant of summary judgment de novo. Hamill v. Mid–Century Ins. Co. of Ariz., 225 Ariz. 386, 387, ¶ 5, 238 P.3d 654, 655 (App.2010). We also review statutory interpretations and the application and validity of exclusions in insurance policies de novo. See Farmers Ins. Co. v. Young, 195 Ariz. 22, 24, ¶ 5, 985 P.2d 507, 509 (App.1998).
¶ 9 When interpreting insurance policies, we apply the language according to its plain and ordinary meaning from the standpoint of an individual untrained in law or business. Desert Mountain Props. Ltd. P'ship v. Liberty Mut. Fire Ins. Co., 225 Ariz. 194, 200, ¶ 14, 236 P.3d 421, 427 (App.2010). If the policy is ambiguous because it is susceptible to “conflicting reasonable expectations,” we then consider “legislative goals, social policy, and examin [e] the transaction as a whole, including the reasonable expectations of the insured.” State Farm Mut. Auto. Ins. Co. v. Wilson, 162 Ariz. 251, 258, 782 P.2d 727, 734 (1989); Desert Mountain, 225 Ariz. at 200, ¶ 14, 236 P.3d at 427.
¶ 10 Nucor contends that the trial court erred by determining that the portion of the settlement attributed to the stigma claims is not covered by the subject insurance policies. We have to determine whether the portion of the settlement attributed to the stigma claims is covered under the policies.
¶ 11 To answer the question we must turn to the language of the policies and the nature of the claims being made and the damages sought. State Farm Mut. Auto. Ins. Co. v. Connolly ex rel. Connolly, 212 Ariz. 417, 419, ¶ 9, 132 P.3d 1197, 1199 (App.2006). We also look at the underlying action to determine if coverage exists. Auto–Owners Ins. Co. v. Carl Brazell Builders, Inc., 356 S.C. 156, 588 S.E.2d 112, 115 (2003); see Travelers Ins. Co. v. Waltham Indus. Labs. Corp., 883 F.2d 1092, 1099 (1st Cir.1989) ( ). We know that an insured cannot pursue insurance indemnification for a claim that was dismissed. See Great Am. Lloyds Ins. Co. v. Mittlestadt, 109 S.W.3d 784, 786 (Tex.Ct.App.2003) (). Moreover, in other contexts we have held that there is no coverage for economic loss claims in the absence of physical damage to property. See McCollum v. Ins. Co. of N. Am., 132 Ariz. 129, 130–31, 644 P.2d 283, 284–85 (App.1982) ( ); Travelers Indem. Co. v. State, 140 Ariz. 194, 196–97, 680 P.2d 1255, 1257–58 (App.1984) ( ).5
¶ 12 The policies obligate Wausau to indemnify Nucor for “all sums [Nucor] shall become legally obligated to pay as damages because of property damage.” The policies define “property damage” as:
(1) [P]hysical 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
(2) 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.
¶ 13 In making its ruling, the trial court knew that the Baker class action property damage claims had been dismissed by summary judgment. As a result, the court found that “[t]he home-owner[s]/plaintiffs in the underlying action were not compensated in the settlement for physical injury to tangible property (groundwater) or their right to use the groundwater but were paid for intangible property loss[,] that is, diminution in the value of their real property.” Nucor, however, contends that the policies do not require the property to be damaged; but only that if there was a claim for property damage, any resulting damages are covered by the policies.
¶ 14 Nucor argues that other courts have allowed recovery under an insurance policy when the plaintiff in the underlying action sought purely economic damages that arose out of property damage to a third party. For example, in DiMambro–Northend Associates v. United...
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