PSI Energy, Inc. v. Home Ins. Co.

Decision Date16 January 2004
Docket NumberNo. 32A01-0204-CV-146.,32A01-0204-CV-146.
Citation801 N.E.2d 705
PartiesPSI ENERGY, INC., Appellant-Plaintiff, v. The HOME INSURANCE COMPANY, et al., Appellees-Defendants.
CourtIndiana Appellate Court

Donald P. Bogard, Eric M. Cavanaugh, Cinergy Services, Inc., Plainfield, IN, George M. Plews, Jeffrey D. Claflin, Plews, Shadley, Racher & Braun Indianapolis, IN, Lester O. Brown, Thomas M. McMahon, Kenneth A. Remson, Howrey, Simon, Arnold & White, LLP, Los Angeles, CA, Lara A. Degenhart, Howrey, Simon, Arnold & White, LLP, Washington, D.C., Attorneys for PSI Energy, Inc.

Frank J. Deveau, Bradley R. Sugarman, Sommer, Barnard, Ackerson, Indianapolis, IN, Amicus Curiae The Indiana Manufacturers Assn.

Kevin J. Hinkle, Hinkle & Gibbs, Danville, IN, Robert V.P. Waterman, Jr., Judith L. Herrmann, Lane & Waterman, Davenport, IA, Attorneys for Commercial Union Insurance Company.

Pamela Paige, White & Raub, LLP, Indianapolis, IN, Charles W. Browning, Kenneth C. Newa, Plunkett & Cooney, P.C., Detroit, MI, Attorneys for The Travelers Indemnity Company.

James E. Rocap, Jeffrey B. Fecht, Rocap Witchger, LLP, Indianapolis, IN, Joseph A. Hinkhouse, Richard McDermott, Lord, Bissell & Brook, Chicago, IL, Attorneys for London Insurers.

Thomas J. Costakis, Krieg DeVault LLP, Indianapolis, IN, Timothy J. Fagan, Michael Resis, John D. LaBarbera, O'Hagan, Smith & Amundsen, LLC, Chicago, IL, Attorneys for Continental Casualty Company and Continental Insurance Company.

Mary K. Reeder, Riley, Bennett & Egloff, Indianapolis, IN, James S. Stickles, Laura J. McGrath, Kaplan & Von Ohlen Chicago, IL, Attorneys for The Home Insurance Company.

Thomas J. Costakis, Krieg DeVault LLP, Indianapolis, IN, Victor J. Piekarski, Ellen L. Green, O'Hagan, Smith & Amundsen, LLC, Wheaton, IL, Attorneys for General Reinsurance Corporation.

Wayne C. Turner, McTurnan & Turner, Indianapolis, IN, Michael R. Orlando, Cohn & Baughman, Chicago, IL, Attorneys for Century Indemnity Company.

Andrew W. Hull, Alice M. Morical, Hoover Hull Baker & Heath LLP, Indianapolis, IN, Amicus Curiae Complex Insurance Claims Litigation Association.

OPINION

MATHIAS, Judge.

PSI Energy, Inc. ("PSI") has incurred substantial clean-up costs due to environmental contamination at its former manufactured gas plant sites. After certain insurance companies ("the Insurers") refused to indemnify PSI for those clean up costs, PSI filed a complaint against those Insurers in Hendricks Superior Court requesting, in part, a declaratory judgment concerning the Insurers' obligations to PSI under the various insurance policies it purchased between 1950 and 1985. The parties filed motions for summary judgment raising several issues concerning whether PSI is entitled to coverage, including whether PSI "expected" or "intended" the property damage at issue and whether coverage was "triggered" under the policies.

The trial court denied several of the parties' motions for summary judgment finding that genuine issues of material fact precluded the entry of summary judgment. However, the trial court did grant the Insurers' motions for summary judgment with regard to whether PSI has submitted sufficient evidence to prove the terms and conditions of certain insurance policies that are lost. The trial court then entered a final judgment in favor of the Insurers on the lost policies issue. Both PSI and the Insurers appeal the trial court's rulings on the motions for summary judgment raising the following issues, which we consolidate and restate as:

I. Whether a justiciable controversy exists concerning five of the six sites at issue;

II. Whether genuine issues of material fact preclude entry of summary judgment on the timeliness of the notice PSI provided to the Insurers of its claim at the Shelbyville site;

III. Whether the admissible evidence presented by PSI creates a genuine issue of material fact as to its ability to establish the terms and conditions of the lost policies;

IV. Whether genuine issues of material fact preclude entry of summary judgment on the Insurers' defense that PSI "expected" or "intended" the property damage at issue;1

V. Whether genuine issues of material fact preclude entry of summary judgment on PSI's contention that coverage under the policies has been "triggered" by the contamination at issue; and,

VI. Whether the trial court abused its discretion when it denied the Insurers' motions to strike the testimony of PSI's expert witness, Thomas Helfrich.

Concluding that the trial court properly found that genuine issues of material fact remain regarding notice, the "expected" or "intended" damage defense, and the trigger of coverage, but that the trial court erred when it granted the Insurers' motions for summary judgment on the lost policies issue, we affirm in part, reverse in part, and remand for proceedings consistent with this opinion.

Facts and Procedural History

This case involves a contractual dispute over insurance coverage for environmental contamination at six Indiana sites where gas was manufactured ("MGPs"). PSI and other companies operated MGPs in Bedford, Goshen, Greencastle, Lafayette, Seymour, and Shelbyville from the mid-1800s to approximately 1950. In 1945, PSI sold the MGPs at issue to the newly created Indiana Gas Company.

During the manufactured gas process at the MGP sites, tar was produced as a by-product. When the MGPs were dismantled, underground containment structures (which were usually constructed of brick or concrete) were often left in place and in most cases those structures continued to contain tar that was not extracted and properly disposed of at the time of sale or closure. During the 1980s and 1990s, environmental investigations revealed groundwater contamination at each of the six MGP sites. PSI has alleged that after the MGPs were decommissioned, tar and its related constituents leaked from the underground containment structures into the soil and groundwater at and around those sites. PSI has alleged that such environmental contamination has occurred continuously from the time the MGPs were decommissioned and has continued throughout the policy periods at issue in this case. In response, the Insurers generally allege that the groundwater contamination resulted from intentional dumping of MGP wastes during plant operations. PSI also alleges that its environmental clean up costs are estimated at thirty million dollars.

From 1950 through 1985, PSI purchased comprehensive liability policies from several insurance companies. These policies generally provided that the Insurers would pay "all sums" that PSI is legally obligated to pay as damages due to an "occurrence" of property damage or "accidental" property damage. PSI also purchased excess liability coverage from the named Insurers. However, PSI has not been able to locate copies of certain excess insurance policies it purchased during the 1950s through the 1970s from those Insurers. All Insurers have generally refused to indemnify PSI for the environmental clean up costs associated with the six MGP sites.

In 1998, PSI filed a complaint against those Insurers in Hendricks Superior Court requesting, in part, a declaratory judgment concerning the Insurers' obligations to PSI under the various insurance policies purchased between 1950 and 1985. Specifically, PSI requested that the trial court find that the Insurers are obligated to pay PSI's pending and future environmental clean up costs at the MGP sites and award compensatory damages for their refusal to do so. The Insurers named in the complaint include Century Indemnity Company ("Century Indemnity"), Certain Underwriters at Lloyd's, London and Certain London Market Insurers ("London Insurers"), Commercial Union Insurance Company ("Commercial Union"), Continental Casualty Company ("Continental Casualty"), General Reinsurance Corporation ("General Reinsurance"), Home Insurance Company ("Home Insurance"), and Travelers Indemnity Company ("Travelers Indemnity").

On September 7, 2001, the parties filed cross-motions for summary judgment. The Insurers' motions raised several issues, which included: 1) whether PSI submitted sufficient evidence to establish the terms of the policies that are lost; 2) whether PSI "expected or intended" the property damage for which it seeks coverage; 3) whether the policies have been "triggered" by groundwater contamination at and around the six MGP sites; and, 4) whether PSI provided timely notice to the Insurers with respect to the Shelbyville MGP site. The Insurers also filed a motion to strike the testimony of one of PSI's experts, Thomas Helfrich, which was denied. Finally, in its motion for summary judgment, Commercial Union argued that no justiciable controversy existed with regard to five of the six MGP sites at issue.

In pertinent part, PSI raised the following issues in its motion: 1) whether the Insurers bear the burden of proving that PSI "expected or intended" the property damage for which it seeks coverage; and, 2) whether PSI's policies have been "triggered" by the groundwater contamination at and around the MGP sites.

On February 1, 2002, the trial court issued its order on the parties' cross-motions for summary judgment. In the order, the trial court granted the Insurers' motion on the issue of the lost policies finding that PSI's evidence is "insufficient as a matter of law for a trier of fact to cast liability upon an insurer for the coverage demanded." Appellant's App. p. 105. On March 25, 2002, the trial court entered a final judgment in favor of those Insurers on the lost policy issue. PSI then filed a notice of appeal.

In its February 1, 2002 order, the trial court also denied summary judgment on the issue of whether the property damage was "expected or intended," finding remaining genuine issues of material fact. The trial court also denied the parties' motions for summary judgment on the "trigger of coverage issue" finding that the timing of the...

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