SCSC Corp. v. Allied Mut. Ins. Co.
| Decision Date | 18 August 1995 |
| Docket Number | C8-93-1414 and C3-93-1630,Nos. C2-93-1408,s. C2-93-1408 |
| Citation | 536 N.W.2d 305 |
| Parties | SCSC CORP., formerly known as Schloff Chemical and Supply Company, Petitioner, Respondent, v. ALLIED MUTUAL INSURANCE COMPANY, as Successor in Interest to AID Insurance Company, Tower Insurance Company, Petitioners, Appellants. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
1. Insured established at trial its prima facie case of coverage under its Comprehensive General Liability (CGL) policies.
2. When a CGL policy contains a qualified pollution exclusion clause with an express exception, the insured bears the burden of proof at trial to show the exception restores coverage.
3. The insurer bears the burden of proof at trial to show, as an affirmative defense, that the insured's damages were the result of a noncovered overriding cause.
4. Primary insurer's contractual duty to defend its insured arose when the Minnesota Pollution Control Agency (MPCA) issued a Request for Information, because such action by the MPCA constituted a "suit" for purposes of a CGL policy. However, to invoke the duty to defend, the insured must, as a condition precedent, properly tender its defense request to its insurer.
5. When the fact finder concludes that property damage arose in a single year, from a sudden and accidental occurrence, and concludes that the damage was not divisible, only the CGL policies that were on the risk in the year property damage arose are triggered.
6. Absent proper statutory authority, an insured cannot be awarded in an environmental insurance coverage case enhanced attorney fees the insured incurs in bringing a declaratory judgment action against its insurer. The insured is entitled only to reasonable attorney fees.
Sean E. Hade, Mary P. Rowe, Jardine, Logan & O'Brien, St. Paul, for Tower Ins. Co.
Dale O. Thornsjo, Eric J. Strobel, Peters & Hektner, Ltd., Minneapolis, for Allied Mut. Ins. Co.
Thomas C. Mielenhausen, James A. Mennell, Popham, Haik, Schnobrich & Kaufman, Ltd., Minneapolis, for respondent.
Stephen Shakman, Adonis A. Neblett, Asst. Attys. Gen., St. Paul, for amicus curiae State of MN.
Charles E. Lundberg, Bassford, Lockhart, Truesdell & Briggs, P.A., Minneapolis, for amicus curiae Ins. Env. Litigation Assoc.
IT IS HEREBY ORDERED that the motion for clarification filed in the above-entitled matter be, and the same is, granted for the limited purpose of issuing the attached amended opinion and that the petition for rehearing filed in the above entitled matter be, and the same is, denied.
IT IS FURTHER ORDERED that the motion to remand for a hearing on post-July 1, 1993 damages, interest, fees and disbursements filed in the above-entitled matter be, and the same is, denied.
/s/ Alexander M. Keith
Chief Justice
ANDERSON, J., took no part in the consideration or decision of this case.
Heard, considered and decided by the court en banc.
In October 1990, SCSC Corp., formerly known as Schloff Chemical and Supply Company, commenced this action against its liability insurance carriers, Allied Mutual Insurance Company and Tower Insurance Company. SCSC sought a determination of the insurers' obligations under liability insurance policies for costs SCSC incurred as the result of soil and groundwater contamination. Following trial, the jury returned a verdict in favor of SCSC. In its Amended Findings of Fact, Conclusions of Law and Order for Judgment [hereinafter "amended order"], the trial court ordered a total judgment of $996,017.90 against Allied. This included $100,000 in remediation costs, enhanced reasonable attorney fees based on a 1.5 multiplier, and additional costs, disbursements and interest. The trial court also ordered judgment against Tower for remediation costs of $386,294.41. The Minnesota Court of Appeals affirmed in all respects except the enhanced portion of the attorney fees award. We affirm in part, reverse in part and remand.
From 1976 to the end of 1988, SCSC operated a dry cleaning and laundry supply distribution facility in St. Louis Park, Minnesota. As a small portion of its business, SCSC purchased, stored, repackaged and distributed perchloroethylene (PCE or "perc"), a chemical used by retailers to dryclean clothes. The Minnesota Pollution Control Agency ("MPCA") has identified perc as a volatile organic compound. SCSC stored perc in two above-ground storage tanks. Outgoing perc was dispensed through a fill pipe at the southwest corner of SCSC's building into independent contract delivery trucks, which delivered the perc to SCSC customers. To fill a delivery truck with perc the truck driver connected a hose from the truck's tank to the fill pipe. The driver was responsible for placing a five gallon bucket under the fill pipe to capture any perc that dripped when the fill pipe and the hose were uncoupled.
During much of the time SCSC was in business, it purchased from Allied and Tower the following comprehensive general liability policies and excess liability policies, each of which were in effect for a period of one year:
Insurer Cumulative Type of Coverage Property Damage Liability Limits
Period of
Coverage
Allied 10/10/75"10/- Comprehensive $100,000 per occurrence/
10/84
General Liability $100,000 in the aggregate
(CGL)
Coverage
Tower 4/2/77"10/10- Excess Liability $1,000,000 per occurrence/
/82
(Umbrella) Coverage $1,000,000 in the aggregate
$10,000 retained limit
Allied 10/10/82"10/- Excess Liability $1,000,000 per occurrence/
10/84
(Umbrella) Coverage $1,000,000 in the aggregate
$10,000 retained limit
----------
In October 1988, the MPCA contacted SCSC in regard to a detection of perc in the groundwater downgradient of the SCSC facility. Because SCSC was the only perc handler in the immediate area, the MPCA issued a Request for Information ("RFI"), instructing SCSC to provide information regarding chemical storage and potential chemical leaks at the facility. In his November 16, 1988 response to the MPCA's RFI, SCSC's general manager, Dennis Zimmer, indicated that SCSC stored perc waste at the facility and that Further, SCSC indicated that the "[v]olume [is] unknown--since drips have occurred for a period of years in small volume." In December 1988, in response to the MPCA's action, SCSC retained the services of Delta Environmental Consultants, Inc.
From December 1988 to January 1990, the MPCA required SCSC to develop several remedial work plans to investigate and to respond to the perc contamination detected in the aquifer under the SCSC facility. SCSC was required to pay for these measures, which included the installation of at least twenty monitoring wells and of a "pump and treat" system to decontaminate the groundwater. In response to these measures, in October 1989, SCSC contacted Allied and Tower and requested reimbursement for past costs and payment of future costs associated with the perc cleanup. Although the parties dispute whether SCSC provided the insurers with sufficient information to invoke coverage and hence, the duty to defend, it is undisputed that SCSC sent both Allied and Tower letters dated October 6, 1989, notifying the insurers of the MPCA actions and requesting indemnification.
Following this notice, SCSC and Allied exchanged a series of letters and information. Despite SCSC's explicit requests, and despite Allied's indication to SCSC that it was conducting an investigation, Allied did not take a coverage position. Allied now asserts that this refusal was grounded on its belief that "no 'allegations' were referenced nor facts presented which claimed that property damage existed during Allied's policies, that there was an occurrence under the policies, or that such alleged occurrence was a cause of the remediation costs at issue." On March 27, 1990, the MPCA issued a Request for Response Action ("RFRA") that required SCSC to take specific action to remediate the site. The RFRA indicated that SCSC's failure to comply would permit the MPCA either to undertake the response action and seek reimbursement from SCSC for all costs of such action, to initiate an action to compel performance or to enjoin a release or a threatened release of hazardous substances from the site. In either case, the MPCA could seek a civil penalty of up to $20,000 per day for each day SCSC failed to take the requested action.
In October 1990, after incurring significant costs in responding to the MPCA's RFI and RFRA, SCSC commenced an action in Hennepin County District Court against Allied and Tower seeking declaratory and compensatory relief. SCSC sought a determination of the insurers' obligations under the liability insurance policies each insurer issued to SCSC. Following discovery, but prior to trial, SCSC, Allied and Tower each moved for summary judgment. On August 17, 1992, the district court denied summary judgment on all issues relevant to this appeal.
While trial was pending, SCSC continued to pay its environmental consulting firm for the remediation costs. By May 1991, however, SCSC was no longer able to pay these costs. At that time, the MPCA moved to allocate state funds for the remediation. By June 1991, the MPCA contracted with outside companies to operate the treatment system and to conduct additional investigations. At the time of trial, the MPCA sought reimbursement for nearly $186,000 in costs it had...
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