Port of Longview, Mun. Corp. v. Arrowood Indem. Co.
| Decision Date | 21 December 2016 |
| Docket Number | No. 46654-6-II,46654-6-II |
| Court | Washington Court of Appeals |
| Parties | THE PORT OF LONGVIEW, a Washington municipal corporation Respondent, v. ARROWOOD INDEMNITY COMPANY; MARINE INDEMNITY INSURANCE COMPANY OF AMERICA; Defendants, and ASSICURAZIONI GENERALI S.P.A.; BALOISE INSURANCE COMPANY, LTD.; BISHOPSGATE INSURANCE COMPANY, LTD.; COMMERCIAL UNION ASSURANCE COMPANY, P.L.C.; CONTINENTAL ASSURANCE OF LONDON, LTD.; DRAKE INSURANCE COMPANY LTD.; ECONOMIC INSURANCE COMPANY; EDINBURGH ASSURANCE COMPANY, LTD.; ELDERS INSURANCE COMPANY, LTD.; EXCESS INSURANCE COMPANY, LTD.; FUJI FIRE AND MARINE INSURANCE COMPANY (U.K.) LTD.; HANSA MARINE INSURANCE COMPANY (U.K.) LTD.; INDEMNITY MARINE ASSURANCE COMPANY, LTD.; INTERESTED UNDERWRITERS AT LLOYD'S, LONDON; LA REUNION FRANCAISE S.A. d'ASSURANCES ET DES REASSURANCES; LONDON & OVERSEAS INSURANCE COMPANY, LTD.; NIPPON FIRE & MARINE INSURANCE COMPANY (UK) LTD.; NIPPON FIRE AND MARINE INSURANCE COMPANY U.K.W. LTD.; NORTHERN ASSURANCE COMPANY LTD.; NORTHERN MARITIME INSURANCE COMPANY, LTD.; OCEAN MARINE INSURANCE COMPANY, LTD.; ORION INSURANCE COMPANY LTD.; PEARL ASSURANCE P.L.C.; PHOENIX ASSURANCE COMPANY LTD.; PROVINCIAL INSURANCE COMPANY, LTD.; PRUDENTIAL ASSURANCE COMPANY, LTD.; RIVER THAMES INSURANCE COMPANY, LTD.; SCOTTISH LION INSURANCE COMPANY, LTD.; SKANDIA U.K. INSURANCE PLC; SPHERE INSURANCE COMPANY LTD.; SWITZERLAND GENERAL INSURANCE COMPANY (LONDON) LTD.; THREADNEEDLE INSURANCE COMPANY, LTD.; VESTA (U.K.) INSURANCE COMPANY LTD.; WURTTEMBERGISCHE FEUERVERSICHERUNG A.G.A.W. A/C; YASUDA FIRE & MARINE INSURANCE COMPANY (UK) LTD., Appellants. |
MAXA, J. - The Port of Longview filed an insurance coverage action against certain London market insurers (LMI)1 that issued several primary and excess liability insurance policies to the Port between 1977 and 1985.2 The Port sought a declaration that LMI had an obligation toprovide coverage under its policies for groundwater contamination at two different sites on Port property: the TWP (treated wood products) site and the TPH (total petroleum hydrocarbon) site.
A mistrial occurred in the first trial when the Port found undisclosed documents. After the second trial, the jury entered a special verdict finding that (1) LMI did not prove that it suffered actual and substantial prejudice resulting from the Port's late notice to LMI of its insurance claims (relating to the prompt notice provisions in the primary policies), (2) the Port proved that it did not expect or intend groundwater contamination at either the TWP site or the TPH site before issuance of any of the LMI primary and excess policies (relating to the "occurrence " requirement in the policies), and (3) the Port proved that it did not expect or intend the release of contamination to groundwater before issuance of any of the LMI excess policies (relating to the exception to the qualified pollution exclusion in the excess policies). Based on the special verdict and multiple pretrial rulings, the trial court entered declaratory judgment orders ruling that LMI was obligated under its primary policies to defend and indemnify the Port and under its excess policies to indemnify the Port against all claims arising out of liability at the TWP and TPH sites. The trial court later awarded attorney fees to the Port under Olympic Steamship.3
LMI appeals certain trial court rulings, arguing that the trial court erred by (1) imposing sanctions against LMI for delayed discovery responses and denying its motion to vacate the sanctions after the mistrial; (2) making three rulings regarding late notice prejudice: denying its summary judgment motions on late notice prejudice for the TWP and TPH sites, improperly limiting the evidence it could present at trial on late notice prejudice at the TPH site, andimproperly instructing the jury on late notice prejudice; (3) ruling as matter of law that the known loss principle did not preclude coverage for the TWP site; (4) denying its motions for judgment as a matter of law on the occurrence requirement because the Port did not present sufficient evidence that it did not expect or intend groundwater contamination; (5) denying its motions for judgment as a matter of law on the qualified pollution exclusion because the Port did not present sufficient evidence that it did not expect or intend the release of contaminants into the groundwater; and (6) awarding attorney fees to the Port under Olympic Steamship and determining the amount of the fee award.
We reject LMI's substantive arguments and hold that the trial court did not err in granting and denying the motions at issue or in entering the declaratory judgment orders. We also hold that the trial court erred in awarding attorney fees for the Port's claims under the primary policies because under established law, the Port's late notice precluded its recovery of Olympic Steamship attorney fees. But we hold that the Port is entitled to recover attorney fees for its excess policy claims because the Port did not breach the notice provisions in those policies. Accordingly, we affirm the trial court's declaratory judgment orders but reverse the trial court's attorney fee order and remand for the trial court to determine the amount of attorney fees that should be awarded for the Port's claims under the excess policies.
International Paper (IP) originally owned the TWP site, which included two adjacent areas: the maintenance facility area (MFA) and the IP plant area. IP operated a wood treating plant on the IP plant area from the 1950s through 1982 using chemical preservatives, creosoteand pentachlorophenol. The adjacent MFA consisted of vacant land and some maintenance operations. The IP plant area contained an open ditch (referred to as the "lineament ditch") that conveyed the wood treating wastewater from the treatment area to seepage ponds, where the wastewater was contained. This lineament ditch ran across the MFA and was in use until the mid-1960s, when IP began discharging wastewater into ponds in the IP plant area. The Port purchased the MFA from IP in two transactions in 1963 and 1965, while the lineament ditch was still in use.
In 1981, the Washington Department of Ecology (DOE) sampled groundwater and discovered hazardous waste contamination in the groundwater at the IP plant area. IP worked with the DOE for several years to investigate and remediate the IP plant area. In 1997, IP entered into a consent decree with DOE in which IP agreed to assume complete responsibility for remediating the contaminated groundwater at the IP plant area.
Contaminated soil was discovered in the MFA in 1997 when IP installed an underground barrier wall around the IP plant area. Subsequent testing in 1998 revealed groundwater contamination at the MFA. DOE determined that contamination at the MFA should be investigated under the consent decree for the IP plant area.
In 1999, the Port purchased the IP plant area. Under the purchase agreement, IP remained responsible for continued investigation and remediation of the groundwater contamination. The Port was aware that it became automatically liable under the Washington Model Toxics Control Act (MTCA) for contamination at the IP plant area once it completed the purchase.
In 2005, DOE sent the Port a letter indicating the Port was a potentially liable person (PLP) under MTCA for the TWP site because it was the site's owner.4 The letter referenced both the IP plant area and the MFA. However, by agreement IP continued to be responsible for the TWP site and to date DOE has not required the Port to conduct any investigation or remediation of the TWP site.
The TPH site is located in the Port's rail yard, and the Port leased portions of the property to various entities between 1926 and 1985. The groundwater at this site became contaminated because of petroleum hydrocarbon releases from various operations, including Standard Oil (now Chevron) pipelines and Longview Fibre pipelines, loading racks, and associated above ground storage tanks. Contamination also occurred because of leaking from a small underground storage tank on property leased to Calloway Ross, a construction company.
The Port discovered the groundwater contamination at the TPH site in 1991, when it removed the Calloway Ross underground storage tank and noticed a small hole in the tank. The Port then conducted wider testing and discovered more extensive groundwater contamination at the TPH site beyond the Calloway Ross area, which likely came from leaking pipelines and larger storage tanks.
The Port continued to investigate the TPH site contamination and identified those who it suspected would be PLPs under MTCA.5 In 1998, the Port entered into a cost-sharing agreement with Chevron and Longview Fibre ("the Chevron agreement"). This agreement provided that Chevron would compensate the Port for past expenditures and would contribute 50 percent of future expenses related to investigation and remediation, up to a certain date.6 The Port agreed to contribute 20 percent of future costs (up to certain limits) and Longview Fibre agreed to cover the remaining 30 percent. DOE has not been involved in the TPH site investigation or remediation activities and it has not designated the Port a PLP under MTCA.
LMI issued four primary liability policies to the Port between 1979 and 1985: MC 5757, MC 5998, MC 6016, and MC 6027. Neither the Port nor LMI had complete copies of the four primary policies at issue. But the Port had broker's certificates and insuring agreements for the first three policies. The insuring agreements for these policies contained identical terms, including a coverage clause, insuring clause, and notice clause. For the fourth policy - MC 6027 - the Port did not have a broker's certificate or insuring agreement, but there was a handwritten notation on the MC 6016 broker's certificate indicating that MC 6027 had replaced MC 6016.
The portions of primary...
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