St. Paul Fire & Marine Ins. Co., Inc. v. McCormick & Baxter Creosoting Co.

• Decision Date: 26 September 1996
• Citation: 923 P.2d 1200,324 Or. 184
• Parties: , 43 ERC 1903 ST. PAUL FIRE & MARINE INSURANCE COMPANY, INC., and St. Paul Mercury Insurance Company, Inc., Petitioners on Review/Respondents on Review, v. McCORMICK & BAXTER CREOSOTING CO., Respondent on Review/Petitioner on Review, and National Continental Insurance Company, successor to American Star Insurance Company by change of name; Consolidated American Insurance Company; Hartford Accident & Indemnity Company; United States Fire Insurance Company; Gulf Insurance Company, Respondents on Review, and Certain Underwriters at Lloyd's, London; Continental Casualty Company, Petitioners on Review/Respondents on Review, and Scottsdale Insurance Company; Boston Insurance Company; Mission Insurance Company (in liquidation); Mission National Insurance Company (in liquidation) and National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Defendants. McCORMICK & BAXTER CREOSOTING CO., Petitioner on Review/Respondent on Review, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, INC.; St. Paul Mercury Insurance Company, Inc., Respondents on Review/Petitioners on Review, and National Continental Insurance Company, successor to American Star Insurance Company by change of name; Consolidated American Insurance Company; Hartford Accident & Indemnity Company; United States Fire Insurance Company; Gulf Insurance Company and National Fire Insurance Company of Hartford, Respondents on Review, and Certain Underwriters at Lloyd's, London; Continental Casualty Company, Respondents on Review/Petitioners on Review, and Scottsdale Insurance Company; Boston Insurance Company; Mission Insurance Company (in liquidation) and Mission National Insurance Company (in liquidation), Cross-Defendants. CC A8711-07096; CA A71072; SC S41582, SC S41584.
• Court: Oregon Supreme Court

Page 1200

923 P.2d 1200

324 Or. 184, 43 ERC 1903

ST. PAUL FIRE & MARINE INSURANCE COMPANY, INC., and St. Paul

Mercury Insurance Company, Inc., PetitionersonReview/Respondents on Review, v.McCORMICK & BAXTER CREOSOTING CO., Respondenton

Review/Petitioner on Review,

and

National Continental Insurance Company, successor to

American Star Insurance Company by change of name;

Consolidated American Insurance Company; Hartford Accident

& Indemnity Company; United States Fire Insurance Company;

Gulf Insurance Company, Respondents on Review,

and

Certain Underwriters at Lloyd's, London; Continental

Casualty Company, Petitioners on

Review/Respondents on Review,

and

Scottsdale Insurance Company; Boston Insurance Company;

Mission Insurance Company (in liquidation); Mission

National Insurance Company (in liquidation) and National

Union Fire Insurance Company of Pittsburgh, Pennsylvania,

Defendants.

McCORMICK & BAXTER CREOSOTING CO., PetitioneronReview/Respondent on Review, v.ST. PAUL FIRE & MARINE INSURANCE COMPANY, INC.; St. Paul

Mercury Insurance Company, Inc., Respondents on

Review/Petitioners on Review,

and

National Continental Insurance Company, successor to

American Star Insurance Company by change of name;

Consolidated American Insurance Company; Hartford Accident

& Indemnity Company; United States Fire Insurance Company;

Gulf Insurance Company and National Fire Insurance Company

of Hartford, Respondents on Review,

and

Certain Underwriters at Lloyd's, London; Continental

Casualty Company, Respondents on

Review/Petitioners on Review,

and

Scottsdale Insurance Company; Boston Insurance Company;

Mission Insurance Company (in liquidation) and

Mission National Insurance Company (in

liquidation), Cross-Defendants.

CC A8711-07096; CA A71072; SC S41582, SC S41584.

Supreme Court of Oregon.

Argued and Submitted May 9, 1996.

Decided Sept. 26, 1996.

Jeffrey L. Fillerup, of Luce, Forward, Hamilton & Scripps, San Francisco, CA, argued the cause for petitioners on review/respondents on reviewSt. Paul Fire & Marine Insurance Company and St. Paul Mercury Insurance Company, Inc.With him on the briefs were Robin Craig-Olson, San Francisco, CA, and Thomas A. Gordon and Gene D. Kennedy, of Gordon & Polscer, Portland.

Jay T. Waldron, of Schwabe, Williamson & Wyatt, Portland, argued the cause for petitioners on review/respondents on review Certain Underwriters at Lloyd's, London, and Continental Casualty Company.With him on the brief was Mildred J. Carmack.

F. Scott Farleigh and Karen E. Saul, of Farleigh, Wada & Witt, P.C., Portland, filed a brief for respondent on review/petitioner on review Certain Underwriters at Lloyd's, London.With them on the brief were Paul D. Nelson and Michael A. Gevertz, of Hancock Rothert & Bunshoft, San Francisco, CA.

Peter R. Chamberlain, of Bodyfelt Mount Stroup & Chamberlain, Portland, argued the cause for respondent on reviewHartford Accident & Indemnity Company.With him on the brief were Barry M. Mount and Richard A. Lee.

David M. Jacobi, of Wilson, Smith, Cochran & Dickerson, Seattle, WA, argued the cause for respondent on reviewUnited States Fire Insurance Company.With him on the brief was Mark A. Hiefield, of Underwood, Norwood & Hiefield, Portland.

Barry S. Levin, of Heller, Ehrman, White & McAuliffe, San Francisco, CA, argued the cause for respondent on review/petitioner on reviewMcCormick & Baxter Creosoting Co.With him on the briefs were Daniel J. Dunne, Jr., San Francisco, CA, Eric R. Todderud, Portland, and Paul R. Gary, of Paul R. Gary, P.C., Portland.

George W. McKallip, Jr., of Kennedy, King & Zimmer, Portland, filed the briefs for respondents on reviewNational Continental Insurance Company and Consolidated American Insurance Company.With him on a brief for respondent on reviewGulf Insurance Company was Mildred J. Carmack, of Schwabe, Williamson & Wyatt, Portland.

Philip Schradle and Stephanie L. Striffler, Assistant Attorneys General, and Theodore R. Kulongoski, Attorney General, and Virginia L. Linder, Solicitor General, Salem, filed briefs on behalf of amicus curiaeOregon Department of Environmental Quality.

James T. McDermott and James L. Buchal, of Ball, Janik & Novack, Portland, filed a brief on behalf of amici curiae Associated Oregon Industries, Schnitzer Steel Industries, Inc., Schnitzer Investment Corp., and Unified Sewerage Agency of Washington County.

Steven J. Dolmanisth, Eugene R. Anderson, Finley T. Harckham, and Marjorie Han, of Anderson Kill Olick & Oshinsky, P.C., New York City, filed briefs on behalf of amici curiaeColumbia Corridor Association, Jesuit High School, Cascade Corporation, Reynolds Metal Company, Carr Chevrolet Co., Inc., and Esco Corporation.

I. Franklin Hunsaker, of Bullivant, Houser, Bailey, Pendergrass & Hoffman, Portland, filed a brief on behalf of amicus curiaeInsurance Environmental Litigation Association.With him of counsel on the brief were Laura A. Foggan, Daniel E. Troy, and Luis de la Torre, of Wiley, of Rein & Fielding, Washington, DC.

Jeffrey V. Hill and Bradford H. Lamb, of Zarosinski & Hill, Portland, filed a brief on behalf of amicus curiaeAetna Casualty and Surety Company.With them of counsel on the brief were Edward Zampino, Peter E. Mueller, and Victor C. Harwood, III, of Harwood Lloyd, Hackensack, NJ.

Before CARSON, C.J., and VAN HOOMISSEN, FADELEY, GRABER, and DURHAM, JJ.^**

GRABER, Justice.

This case involves insurance coverage under a number of general comprehensive liability (GCL) policies issued to McCormick & Baxter Creosoting Co.(M & B), by different insurers, from 1949 through 1985.M & B seeks coverage under those policies for costs incurred in investigating and correcting environmental contamination that resulted from its operations in California and Oregon.The trial court concluded that the policies did not cover M & B for that environmental damage and granted the insurers' motions for summary judgment.The Court of Appeals affirmed in part and reversed in part the judgment of the trial court.St. Paul Fire v. McCormick & Baxter Creosoting, 126 Or.App. 689, 707, 870 P.2d 260, modified on recons.128 Or.App. 234, 238, 875 P.2d 537(1994).For the following reasons, we affirm in part and reverse in part the decision of the Court of Appeals.

I.FACTS AND PROCEDURAL BACKGROUND

This case comes to us on review of the trial court's grant of the insurers' motions for summary judgment.Accordingly, we view the evidence and all reasonable inferences that may be drawn from it in the light most favorable to M & B, the nonmoving party.ORCP 47 C;Fields v. Jantec, Inc., 317 Or. 432, 437, 857 P.2d 95(1993).On review, we determine whether there is a genuine issue as to any material fact and whether the moving party is entitled to judgment as a matter of law.ORCP 47 C;Fields, 317 Or. at 437, 857 P.2d 95.

M & B has owned and operated wood treatment plants since 1942 in Stockton, California, and since 1945 in Portland, Oregon.At those plants, during the relevant period (1949-85), M & B treated a variety of wood products.The treatment processes included the use of pentachlorophenol (PCP), creosote (a coal tar derivative, which usually is mixed with fuel oil before application), and heavy metal salts such as arsenic, chromium, and copper.As a result of M & B's operations at both facilities, chemicals leached into the soil and contaminated the soil and groundwater.At the Portland plant, surface water also was contaminated.

The contamination at both plants is attributable, in part, to leaching from "surface impoundments.""Surface impoundments" were uncovered pits that M & B used to store the waste water produced during the wood treatment processes.M & B used surface impoundments from 1967 to 1971 in Portland, and from 1942 to 1978 in Stockton.During those periods, surface impoundments were standard in the wood treatment industry.They were believed to hold the waste and to permit liquids to evaporate over time.

In the late 1970s, however, M & B learned that contaminants placed in the surface impoundments leached through layers of soil into the subsurface soil and groundwater.That leaching began within a year after the initial use of the surface impoundments.

Additional damage was caused by overflow from storage tanks, by equipment failures, and by storm-water runoff from treated products and equipment, which were coated with preservatives.Preservatives also dripped and spilled onto unprotected soil.

M & B also presented evidence that, during a labor dispute at the Portland plant in 1949 or 1950, someone opened a flange bolt on a storage tank, causing nearly 50,000 gallons of creosote to spill onto the soil.¹That contamination reached the groundwater within a year.

In 1974, M & B began working with the California Regional Water Quality Control Board to develop a plan for treatment of waste water at the Stockton site.In 1978, M & B agreed to a consent decree requiring clean-up and abatement.In 1983, after an inspection of the Stockton site, the California Department of Health Services found that M & B had violated the California Hazardous Waste Control Act.Cal.Health & Safety Code § 25100, et seq. M & B faced civil and criminal penalties if it did not clean up the contaminated soil and groundwater.M & B agreed to do so in a consent decree that it entered into with those agencies in July 1984.

In 1983, M & B notified the Oregon Department of Environmental Quality(DEQ) that there was soil and groundwater contamination at the Portland site.DEQ and M & B entered into a consent decree in 1987, under which M & B was to clean up the contamination.²

In 1987, M & B demanded that its insurers defend and indemnify it with respect to the investigation and clean-up costs for the Stockton and Portland sites.St. Paul Fire & Marine Insurance Company, Inc., and St. Paul Mercury Insurance Company, Inc.(collectively referred to as St. Paul), insurers that had sold a GCL policy to M & B,...