Olds-Olympic, Inc. v. Commercial Union Ins. Co.
| Decision Date | 11 July 1996 |
| Docket Number | No. 61914-0,INC,OLDS-OLYMPI,61914-0 |
| Citation | 129 Wn.2d 464,918 P.2d 923 |
| Parties | , Appellant, v. COMMERCIAL UNION INSURANCE COMPANY, and Fireman's Fund Insurance Company, Respondents. |
| Court | Washington Supreme Court |
Reaugh, Fischnaller & Oettinger, Sylvia Luppert, Seattle, for appellant.
Cusack & Knowles, Kenneth J. Cusack, Jose E. Gaitan; and Hagens & Berman, Jeffrey C. Grant, Jenniphr A. Breckenridge, Seattle, for respondent.
Allan W. Munro, Coie Perkins, Charles C. Gordon, Jeffrey I. Tilden, Seattle, Davis, Wright & Tremaine, Thomas S. James, Jr., Seattle, Eugene Anderson, Robert Horkovich, Peter J. Andrews, William Passannante, New York City, amici curiae.
Olds-Olympic, Inc. (Olds-Olympic) seeks indemnification from its primary and excess comprehensive general liability (CGL) insurers, Commercial Union Insurance Co. (Commercial Union) and Fireman's Fund Insurance Co. (Fireman's Fund) for costs incurred in removing contaminated soil that had allegedly polluted the groundwater under its Stone Way site near Lake Union in Seattle. The King County Superior Court entered a judgment on the verdict of the jury denying insurance coverage to Olds-Olympic. Although the jury made the necessary factual findings to support coverage under the CGL policies issued to Olds-Olympic when it found property damage to the State's groundwater caused by an occurrence, the jury further determined Olds-Olympic had no legal liability for that property damage.
Because the jury was not properly instructed on the question of Olds-Olympic's legal liability for the remediation of the property damage at its Stone Way site, we reverse the judgment of the King County Superior Court and remand the case for a new trial confined to the question of Olds-Olympic's legal liability for the costs of the remediation of the contamination to the groundwater, and damages, if any.
1. Did the trial court erroneously instruct the jury on the question of Olds-Olympic's legal liability for the damage to the State's groundwater under the CGL policies?
2. Did the trial court err in failing to dismiss the insurers' late notice defense?
Olds-Olympic operated a home heating oil distribution facility at 3410 Stone Way North in Seattle near Lake Union for 58 years. Three 20,000-gallon underground storage tanks for oil were installed at the site in the 1950's. In 1970, two additional 250-gallon waste oil tanks were installed. Olds-Olympic also had an underground gasoline storage tank for fueling company vehicles on the site.
Two major fuel spills occurred on the site in 1972 and 1974. In 1972, a Shell Oil tank overturned at the Stone Way property, spilling approximately 4,200 gallons of diesel fuel into the soil. Only 500 gallons of the fuel was recovered. The subsequent spill involved several thousand gallons of heating oil which spilled onto the ground after pumps were activated because a previous user had not properly closed a fuel valve.
In 1985, Olds-Olympic sold the Stone Way site to Wayne Singleton, but continued to lease the property from him for its oil business. In 1986, Olds-Olympic ceased operating its home heating oil distribution facility, and discontinued using the underground storage tanks on the site, but used the site for other purposes.
In December 1988, Olds-Olympic notified the Department of Ecology (DOE) of the potential pollution resulting from a leaking underground storage tank on the Stone Way site, but leaks from the tank were not a major oil contamination source. 1
In June 1989, the Fremont Dock Company (Fremont Dock) purchased the Stone Way property from Singleton. Under the sales agreement, Fremont Dock agreed to remove the underground storage tanks, and contracted with a firm to remove the fuel handling facilities and underground storage tanks. Olds-Olympic learned of potential contamination of the soil at the Stone Way site from Fremont Dock when the first storage tank was removed.
Olds-Olympic hired environmental consultants to document the environmental conditions during removal of the remaining underground storage tanks and to recommend remedial action for the site. Ultimately, Olds-Olympic removed the underground storage tanks and the contaminated soil from the site in 1989-90. During this period, Washington State Department of Ecology (DOE) officials visited the Stone Way site and advised Olds-Olympic about the disposition of contaminated soils and notified Olds-Olympic about the recommended levels of groundwater cleanup in light of a petroleum-related hazard. 2 Olds-Olympic's environmental consultants advised it that under Washington law, original operators of the site during the contamination period would ultimately be held responsible for cleanup of the site. This duty was confirmed by DOE officials. 3
Although DOE, the Singletons, or Fremont Dock, did not file a lawsuit against Olds-Olympic and DOE did not initiate any of its other formal enforcement actions under RCW 70.105D, Olds-Olympic was not operating in a legal vacuum. Both Mr. Singleton and John Mead of Fremont Dock testified they hired legal counsel and advised Forrest Bailey of Olds-Olympic they intended to hold Olds-Olympic responsible for the problems at the Stone Way site. Report of Proceedings at 835-36, 846-48. Olds-Olympic received a demand letter from Singleton and Fremont Dock, advising it would be held responsible for any cleanup of the Stone Way site. Report of Proceedings at 328-29. DOE sought voluntary compliance with cleanup standards (an "independent cleanup") by Olds-Olympic before initiating any formal action. Report of Proceedings at 491, 577-78. 4
Olds-Olympic paid for the cost of removing the contaminated soil on the site. It contends the cleanup of groundwater was effectuated by passive remediation, the removal of the soil rather than the groundwater. Prior to removing the soil, but after the contacts with Singleton, Fremont Dock, and DOE, Olds-Olympic sought insurance coverage from its CGL carriers. Commercial Union, by letter of December 11, 1989, denied any duty to defend or cover Olds-Olympic. Ex. 28. Shortly thereafter, Fireman's Fund sent a letter to Olds-Olympic denying a defense or coverage under the excess CGL policy. Ex. 154.
In 1992, Olds-Olympic filed the present action against its insurers seeking a declaration of coverage under the policies for remediation costs it incurred at the Stone Way site, and for damages and attorney fees under the Consumer Protection Act, RCW 19.86. 5 The case was tried in the King County Superior Court against Commercial Union and Fireman's Fund. The jury returned a verdict in favor of Commercial Union and Fireman's Fund. In specific response to interrogatories, the jury found there was property damage to the groundwater of the State as a result of an occurrence at the Stone Way site, but Olds-Olympic did not have a legal obligation with respect to the property damage to the groundwater. The trial court entered judgment upon the verdict, and subsequently denied Olds-Olympic's motion for judgment notwithstanding the verdict or for a new trial. We accepted direct review in this case.
Commercial Union insured Olds-Olympic by a CGL policy which contained the following insuring agreement for the period from 1974 to 1984:
The company will 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, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such ... property damage, even if any of the allegations of the suit are groundless, false or fraudulent and may make such investigation and settlement of any claim or suit as it deems expedient....
Ex. 12. Commercial Union provided similar coverage to Olds-Olympic for the period from 1966 to 1974. Fireman's Fund provided a similar CGL coverage to Olds-Olympic excess to the coverage of Commercial Union. The policies also covered Olds-Olympic for liability assumed by a contract.
Insofar as Commercial Union and Fireman's Fund received premiums from Olds-Olympic for CGL coverage, their insurance obligation is interpreted in a fashion consistent with the undertaking described in the policy label. Insureds are not purchasing "almost comprehensive" coverage. CGL policies are marketed by insurers as comprehensive in their scope and should be strictly construed when the insurer attempts to subtract from the comprehensive scope of its undertaking.
In the present case, the Commercial Union CGL policy contained an "owned property" exclusion, which excluded coverage for first party events pertaining to the property of the insured. The exclusion stated This insurance does not apply: ... to property damage to (1) property owned or occupied by or rented to the insured, (2) property used by the insured, or (3) property in the care, custody or control of the insured or as to which the insured is for any purpose exercising physical control; ...
Ex. 12. The Fireman's Fund policy contained similar exclusionary language relating to the owned property of the insured.
The general basis for the legal liability of Olds-Olympic to the State of Washington or by contract to the Singletons and Fremont Dock for their liability to the State of Washington is the Model Toxic Control Act of 1989 (MTCA). Washington adopted the MTCA in 1989 pursuant to Initiative Measure No. 97. RCW 70.105D et seq. governs liability for damages caused by hazardous substance releases. While the Act is designed to deal both with the remediation of former environmental hazards and to prevent environmental hazards in the future, a past or present property owner is strictly liable for the remediation of environmental hazards caused by hazardous...
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