SnyderGeneral Corp. v. Great American Ins. Co., 3-90-CV-2396-BD.

• Citation: 928 F. Supp. 674
• Decision Date: 25 April 1996
• Docket Number: No. 3-90-CV-2396-BD.,3-90-CV-2396-BD.
• Parties: SNYDERGENERAL CORPORATION, Plaintiff, v. GREAT AMERICAN INSURANCE COMPANY and United States Fire Insurance Company, Defendants.
• Court: U.S. District Court — Northern District of Texas

928 F. Supp. 674

SNYDERGENERAL CORPORATION, Plaintiff, v. GREAT AMERICAN INSURANCE COMPANY and United States Fire Insurance Company, Defendants.

No. 3-90-CV-2396-BD.

United States District Court, N.D. Texas, Dallas Division.

April 25, 1996.

COPYRIGHT MATERIAL OMITTED

Michael L. Jones, Frieda A. Clark, Henry, Meier & Jones, L.L.P., Dallas, Texas, D. Ronald Reneker, Bush, Craddock & Reneker, Texas Commerce Bank Building, Dallas, Texas, for Plaintiff.

Robert O. Lamb, Belinda Vrielink, Thompson, Coe, Cousins & Irons, L.L.P., Dallas Texas, for U.S. Fire.

Kevin Risley, Houston, Texas, for Great American.

MEMORANDUM OPINION AND ORDER

KAPLAN, United States Magistrate Judge.

Defendants Great American Insurance Company and United States Fire Insurance Company have filed motions for summary judgment based on certain defenses under a comprehensive general liability policy. The Court holds that: (1) the pollution exclusion unambiguously precludes coverage for the regular, continuous and intentional discharge of toxic chemicals over an extended period of time; (2) plaintiff cannot circumvent the plain language of this policy exclusion under the guise of regulatory estoppel; and (3) the summary judgment evidence does not establish bad faith or any violation of the Texas Insurance Code. For these reasons, the motions are granted.

BACKGROUND

McQuay, Inc. owned and operated a manufacturing plant in Visalia, California. The plant made aluminum heating and cooling coils of various sizes. The assembled coils were cleaned with trichloroethylene in a large vapor degreaser.¹ TCE was also used to clean the floor and flush out large coils that could not be processed through the degreaser. The plant utilized a drain system to collect any liquid that spilled onto the floor. The drains emptied into four or five dry wells at the west end of the property. This system was in place from 1962 until 1974.

Plaintiff SnyderGeneral Corporation merged with McQuay in 1984. It was later determined that the groundwater surrounding the manufacturing plant was contaminated by TCE. The State of California ordered plaintiff to clean-up this hazardous waste site. Plaintiff was also sued by two adjacent landowners for damages caused by environmental contamination. Plaintiff has paid in excess of $7 million in costs, settlements and legal fees as a result of these proceedings.

Plaintiff and its predecessor had liability insurance for operations at the Visalia plant. Two of these policies were issued by Defendants Great American and U.S. Fire. The policies provide excess coverage for "injurious exposure to conditions which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." However, the insurance policies also exclude coverage for polluting activities other than "sudden and accidental" discharges. The pollution exclusion reads as follows:

This policy shall not apply ... to liability arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

(Emphasis added).

Plaintiff notified the defendants of these claims beginning in July 1990. This suit was filed three months later. The operative trial pleading is now plaintiff's sixth amended complaint. Plaintiff has sued for declaratory relief, breach of contract, unfair claims settlement practices, and breach of the duty of good faith and fair dealing. Defendants have filed a motion for summary judgment on all claims. The issues have been fully briefed by the parties and this matter is now ripe for determination.

SUMMARY JUDGMENT STANDARD

Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. FED.R.CIV.P. 56(c); Celotex v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is "genuine" if the issue could be resolved in favor of either party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Thurman v. Sears, Roebuck & Co., 952 F.2d 128, 131 (5th Cir.), cert. denied, 506 U.S. 845, 113 S.Ct. 136, 121 L.Ed.2d 89 (1992). A fact is "material" if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Gleasman v. Jones, Day, Reavis & Pogue, 933 F.2d 1277, 1281 (5th Cir.1991). Cases involving the interpretation of an insurance policy are appropriate for summary disposition. See Principal Health Care of Louisiana v. Lewer Agency, Inc., 38 F.3d 240, 242 (5th Cir.1994).

The movant has the initial burden of showing the absence of a genuine issue of material fact. Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir.1995). The burden then shifts to the non-movant to show that summary judgment is not proper. Duckett v. City of Cedar Park, 950 F.2d 272, 276 (5th Cir.1992). The non-movant may satisfy this burden by tendering depositions, affidavits, and other competent evidence. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 506 U.S. 825, 113 S.Ct. 82, 121 L.Ed.2d 46 (1992). All evidence must be viewed in the light most favorable to the party opposing the motion. Rosado v. Deters, 5 F.3d 119, 122 (5th Cir.1993); Reid v. State Farm Mut. Auto. Ins. Co., 784 F.2d 577, 578 (5th Cir.1986).

CHOICE OF LAW

This is a diversity case. The rules of the forum state determine which law applies. Klaxon v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941); Alberto v. Diversified Group, Inc., 55 F.3d 201, 203 (5th Cir.1995). Texas has adopted the "most significant relationship" test in both contract and tort cases. Mitchell v. Lone Star Ammunition, Inc., 913 F.2d 242, 249 (5th Cir.1990), citing Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 420-21 (Tex.1984). In a contract case, the court must consider: (1) the place of the contract; (2) the place where the contract was negotiated; (3) the location of the subject matter of the contract; and (4) the domicile, residence, nationality, place of incorporation, and place of business of the parties. Maxus Exploration Co. v. Moran Bros., Inc., 817 S.W.2d 50, 53 (Tex.1991), citing RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188 (1971). In a tort case, the court must consider: (1) the place where the injury occurred; (2) the place where the conduct causing the injury occurred; (3) the domicile, residence, nationality, place of incorporation, and place of business of the parties; and (4) the place where the relationship between the parties is centered. CPS Int'l, Inc. v. Dresser Indus., Inc., 911 S.W.2d 18, 29 (Tex.App. — El Paso 1995, writ denied), citing RESTATEMENT (SECOND) CONFLICTS OF LAWS § 145 (1971).

The Court must evaluate each of these contacts in light of the substantive issues presented in this case. See Mitchell, 913 F.2d at 249. The first step is to identify the interested states. Plaintiff SnyderGeneral purchased an insurance policy from Defendant U.S. Fire. The policy was negotiated and delivered in Texas. SnyderGeneral is a Delaware corporation with its principal place of business in Texas. U.S. Fire is incorporated and headquartered in New York. McQuay purchased an insurance policy from Defendant Great American. The policy was delivered in Minnesota. McQuay is incorporated and based in Minnesota. Great American is an Ohio corporation with its principal place of business in that state. Both insurance policies cover operations at a manufacturing plant in Visalia, California. The next step is to identify the substantive issues. This case involves contract and bad faith claims arising out of a standard comprehensive general liability policy. The interests of each state must be examined with respect to these issues. The number of contacts with a particular state is not outcome determinative. Rather, the selection of applicable law depends on the qualitative nature of the particular contacts. See Mitchell, 913 F.2d at 249, citing Gutierrez v. Collins, 583 S.W.2d 312, 319 (Tex.1979).

The parties agree that the claims against U.S. Fire are governed by Texas law. Article 21.42 of the Texas Insurance Code provides that "any contract of insurance payable to any citizen or inhabitant of the state by any insurance company ... doing business within this state shall be held to be a contract made by virtue of the laws of this state relating to insurance." TEX.INS.CODE ANN. art. 21.42 (Vernon 1981). SnyderGeneral has its principal place of business in Texas. U.S. Fire is an insurance company doing business in the state. The policy was issued and delivered in Texas. Therefore, the statute requires the application of Texas law. See also Hefner v. Republic Indem. Co. of America, 773 F.Supp. 11, 13 (S.D.Tex. 1991) (same result under the "most significant relationship" test).

Plaintiff contends that the claims against Great American are also governed by Texas law.² Great American argues that Minnesota law applies. In making this determination, the Court notes that the Great American policy was issued to McQuay and not SnyderGeneral. The relationship between the insurance company and its insured was clearly centered in Minnesota. The policy was negotiated and purchased in Minnesota. McQuay was incorporated and based in that state. Great American transacted business there. Texas lacks a significant relationship to the substantive issues involved in the breach of contract case. McQuay purchased this insurance policy long before the company was acquired by SnyderGeneral and had no reason to believe that Texas law would apply. The Court therefore concludes that Minnesota has the...