Rhone-Poulenc Basic Chemicals Co. v. American Motorists Ins. Co.

• Decision Date: 09 September 1992
• Docket Number: RHONE-POULENC
• Citation: 616 A.2d 1192
• Parties: , 61 USLW 2375 BASIC CHEMICALS COMPANY, a Delaware corporation, Defendant-Below, Appellant, v. AMERICAN MOTORISTS INSURANCE COMPANY, an Illinois corporation, Plaintiff-Below, Appellee. . Submitted:
• Court: Supreme Court of Delaware

Page 1192

616 A.2d 1192

35 ERC 1931, 61 USLW 2375

RHONE-POULENC BASIC CHEMICALS COMPANY, a Delaware corporation, Defendant-Below, Appellant, v. AMERICAN MOTORISTS INSURANCE COMPANY, an Illinois corporation, Plaintiff-Below, Appellee.

Supreme Court of Delaware.

Submitted: Sept. 9, 1992.

Decided: Nov. 18, 1992.

Upon interlocutory appeal from the Superior Court. AFFIRMED AND REMANDED.

Thomas R. Hunt, Jr., Morris, Nichols, Arsht & Tunnell, Wilmington, Denis V. Brenan and Glen R. Stuart, Morgan, Lewis & Bockius, Philadelphia, Pa., and Robert N. Sayler (argued), Douglas R. Wright and Marc S. Mayerson, Covington & Burling, Washington, D.C., for appellant Rhone-Poulenc Basic Chemicals Co.

Robert K. Beste, Biggs & Battaglia, Wilmington, John Chesney (argued), and David Abernethy, Drinker Biddle & Reath, and S. Elizabeth Evans, Washington, D.C., for appellee American Motorists Ins. Co.

Gary W. Aber and Donald L. Gouge, Jr., Heiman, Aber & Goldlust, Wilmington, and Barry R. Ostrager and Robert F. Cusumano (argued), Simpson Thacher & Bartlett, New York City, for appellee Travelers Indem. Co.

Before VEASEY, C.J., HORSEY and MOORE, JJ.

VEASEY, Chief Justice:

This is an interlocutory appeal ¹ from two orders of the Superior Court entered on January 16, 1992 and January 31, 1992, respectively, ² granting summary judgment against Rhone-Poulenc Basic Chemical

                Company ("RPB") in a declaratory judgment action filed by certain insurance carriers (the "insurance carriers").  The insurance carriers are National Union Fire Insurance Company of Pittsburgh ("National Union"), Travelers Insurance Company ("Travelers"), and American Motorists Insurance Company ("AMICO"). 3  The insurance carriers sought a declaration that they are not obligated to defend or indemnify RPB under standard-form comprehensive general liability ("CGL") insurance policies which they issued to Stauffer Chemical Company ("Stauffer"), RPB's predecessor. 4  The underlying dispute involves the proper construction of a mitigation provision in the AMICO and Travelers policies that requires the insured promptly to take, at its expense, reasonable steps to mitigate damages
                

TYBOUTS CORNER LANDFILL

The relevant facts in this appeal are not in dispute. The issue before the Superior Court and this Court is purely a legal one. Stauffer operated a polyvinyl chloride ("PVC") manufacturing plant in Delaware City, Delaware between 1966 and 1981. The plant generated two principal wastes: (i) polyvinyl chloride resin and (ii) ethylene dichloride ("EDC") sludge. ⁵ These wastes were disposed of at a municipal landfill located near the Stauffer facility in New Castle County Delaware at Tybouts Corner. The acts of disposal took place from 1969 until July of 1971 when the landfill reached its capacity and was closed. ⁶ By the time the landfill ceased operating, Stauffer had dumped some 4.2 million pounds of EDC sludge and approximately 26 million pounds of other industrial wastes at the Tybouts Corner site. The sludge was transported to the landfill in open 55-gallon drums and was poured directly into the ground.

Pursuant to State permitting requirements, the County established a program for testing the hydrological characteristics of the surface and subsurface waters at the landfill. In February 1969 the University of Delaware was employed to monitor the quality of the groundwater at Tybouts Corner and to issue periodic reports to the State and County. Data collected by the University between July 1969 and June 1971 indicated that leachate from the landfill was percolating downward through the soil into an aquifer. Although the reports indicated a progressive deterioration of the groundwater, the level of pollution was not considered to be serious at that time. It was not until May 1976 that the State Department of Natural Resources and Environmental Control ("DNREC") informed the County that a private well near Tybouts Corner was contaminated and that the landfill was the probable source. By 1984 the site was ranked second on the EPA National Priorities List.

PROCEDURAL HISTORY

On October 4, 1980, the federal government filed suit against Stauffer pursuant to § 7003 of the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6973, and §§ 104, 106, and 107, of the Comprehensive Environmental Response, Conservation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. §§ 9604, 9606, 9607, and 9613. United States v. New Castle County, C.A. No. 80-489 (D.Del. filed Oct. 4, 1980). The government sought

injunctive relief to abate any danger the waste at Tybouts Corner posed to the health and welfare of area residents and the environment. In addition, the government sought reimbursement for costs incurred in responding to the contamination and a declaratory judgment awarding monies for future remediation. The action was settled in April 1989 when RPB and the other parties to the litigation entered into a consent decree. Pursuant to the consent decree, RPB was required to share the expense of designing and implementing a remediation plan at the site. In order to foreclose the possibility of having to indemnify RPB for the environmental liability it incurred, AMICO, National Union, and Travelers filed a declaratory judgment action in Superior Court seeking a declaration that they are not liable under the respective CGL policies they issued to Stauffer. In the procedural context of cross-motions for summary judgment, the trial court ruled that a mitigation provision in the AMICO and Travelers policies precludes coverage for the cost of measures taken or to be taken to prevent the further release of contaminants from the landfill. National Union Fire Insurance Co. of Pittsburgh v. Rhone-Poulenc Basic Chemicals Co., Del.Super., C.A. No. 87C-SE-11, slip op. at 37, Poppiti, J., 1992 WL 22690 (Jan. 16, 1992). RPB's motion for reargument was denied on January 31, 1992, 1992 WL 22689, and this appeal followed. We affirm.

CONSTRUCTION OF CONDITION 4(a) OF THE INSURANCE POLICIES

Stauffer purchased three standard-form CGL insurance policies from AMICO covering the period January 1, 1969 through March 1, 1971. ⁷ Each of the CGL policies contains a condition imposing a duty upon the insured to pay for the prevention of further damage once an accident or injury occurs. Condition 4(a) expressly states:

4. Insured's Duties in the Event of Occurrence, Claim or Suit (a) ... The named insured shall promptly take at his expense all reasonable steps to prevent other bodily injury or property damage from arising out of the same or similar conditions, but such expense shall not be recoverable under this policy. ⁸

RPB argues that the failure of the drafter to include the mitigation provision in the list of policy exclusions negates any intended preclusionary effect. RPB further contends that the real purpose of the clause was to require the insured to take prompt steps to avoid a similar but different injury-producing event. The insured concludes that the reasonable steps which must be taken can never apply to remedial determinations taken after the fact because liability-avoiding measures cannot logically be taken after liability for an injury has been assessed. Rejecting RPB's reasoning, the trial court construed the mitigation provision as precluding from coverage the cost of all preventive measures. The sole issue on this appeal is the proper construction of the mitigation provision in Condition 4(a).

The proper construction of any contract, including an insurance contract, is purely a question of law. Aetna Cas. and Sur. Co. v. Kenner, Del.Supr., 570 A.2d 1172, 1174 (1990). Accordingly, we review de novo for legal error the Superior Court's decision. Rohner v. Niemann, Del.Supr., 380 A.2d 549, 552 (1977).

Clear and unambiguous language in an insurance policy should be given its ordinary and usual meaning. Johnston v. Tally Ho, Inc., Del.Super., 303 A.2d 677, 679 (1973). Absent some ambiguity, Delaware courts will not destroy or twist policy language under the guise of construing it. Hallowell v. State Farm Mut. Auto. Ins. Co., Del.Super., 443 A.2d 925, 926 (1982). "[W]hen the language of an insurance contract is clear and unequivocal, a party will A contract is not rendered ambiguous simply because the parties do not agree upon its proper construction. Rather, a contract is ambiguous only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings. Hallowell, 443 A.2d at 926. Ambiguity does not exist where the court can determine the meaning of a contract "without any other guide than a knowledge of the simple facts on which, from the nature of language in general, its meaning depends." Holland v. Hannan, D.C.App., 456 A.2d 807, 815 (1983). Courts will not torture contractual terms to impart ambiguity where ordinary meaning leaves no room for uncertainty. Zullo v. Smith, Conn.Supr., 179 Conn. 596, 427 A.2d 409, 412 (1980). The true test is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant. Steigler, 384 A.2d at 401 (contracts should be read to accord with the reasonable expectations of a reasonable purchaser); see also, State v. Attman/Glazer, 323 Md. 592, 594 A.2d 138, 144 (1991).

be bound by its plain meaning because creating an ambiguity where none exists could, in effect, create a new contract with rights, liabilities and duties to which the parties had not assented." Id. To the extent that ambiguity does exist, the doctrine of contra proferentum requires that the language of an insurance contract be construed most strongly against the insurance company that drafted it. Steigler v. Insurance Company of North America, Del.Supr., 384 A.2d 398, 400 (1978).

Three different federal courts have similarly construed the mitigation clause presently at issue. The consensus strongly suggests that the clause is...