Steyer v. Westvaco Corp., Civ. A. No. 72-452-M

• Court: United States District Courts. 4th Circuit. United States District Court (Maryland)
• Writing for the Court: Donald L. Merriman and Merriman, Crowther & Mann, Baltimore, Md., for Insurance Co. of North America
• Citation: 450 F. Supp. 384
• Decision Date: 20 March 1978
• Docket Number: 72-453-M,Civ. A. No. 72-452-M,72-560-M and 73-731-M.
• Parties: Virgil T. STEYER, Jr., et al., Plaintiffs, v. WESTVACO CORPORATION, Defendant and Third-Party Plaintiff, v. INSURANCE COMPANY OF NORTH AMERICA, and The Hartford Accident and Indemnity Company, and The Home Insurance Company, and Employers-Commercial Union Insurance Company of America, Third-Party Defendants.

450 F. Supp. 384

Virgil T. STEYER, Jr., et al., Plaintiffs,
v.
WESTVACO CORPORATION, Defendant and Third-Party Plaintiff,
v.
INSURANCE COMPANY OF NORTH AMERICA, and The Hartford Accident and Indemnity Company, and The Home Insurance Company, and Employers-Commercial Union Insurance Company of America, Third-Party Defendants.

Civ. A. Nos. 72-452-M, 72-453-M, 72-560-M and 73-731-M.

United States District Court, D. Maryland.

March 20, 1978.

450 F. Supp. 385

COPYRIGHT MATERIAL OMITTED

450 F. Supp. 386

Richard W. Emory and Paul F. Strain and Venable, Baetjer & Howard, Baltimore, Md., for Westvaco Corp

Donald L. Merriman and Merriman, Crowther & Mann, Baltimore, Md., for Insurance Co. of North America.

Frank J. Vecella and Anderson, Coe & King, Baltimore, Md., for The Hartford Accident and Indemnity Company.

Alva P. Weaver, III, Baltimore, Md., and John P. Arness and Edward F. Glynn, Jr., and Hogan & Hartson, Washington, D.C., for The Home Insurance Company.

Donald C. Allen and Robert L. Ferguson, Jr., Baltimore, Md., for Employers-Commercial Union Ins. Co. of America.

MEMORANDUM

JAMES R. MILLER, Jr., District Judge.

The question presented in these third-party actions is whether Westvaco Corporation, a defendant in the original suits claiming damages for air pollution, or its insurance companies, third-party defendants, will bear (1) Westvaco's defense costs, allegedly

450 F. Supp. 387

$373,232.55, in defending against the original suits, and (2) Westvaco's costs and expenses in litigating its claim against the insurance companies for reimbursement of those costs.¹

I Procedural Posture

A Motions on the Merits

Westvaco originally filed a third-party complaint and supplements against four insurance companies: Hartford, Employers-Commercial Union, I.N.A., and Home. See Papers 12, 59, 61, 180, 181, and 183.

Approximately 29 answers have been filed by the insurance companies to the various complaints, amended complaints and supplemental complaints.

Motions to dismiss the third-party complaint of Westvaco were filed by Hartford (Paper 18), by Employers (Paper 19, 211-214), by I.N.A. (Paper 20), and by Home (Paper 23). An opposition was filed by Westvaco (Paper 24).

The motion to dismiss on behalf of Employers-Commercial Union Insurance Co. was granted (Paper 217, Sept. 15, 1975), and Employers is no longer active in this litigation.

The other motions to dismiss the third-party complaint were, with the consent of counsel, declared moot. See Paper 26.

A motion for summary judgment against Westvaco has been filed by the Home Insurance Co. (Papers 200, 248, 250, 202); it has been opposed by Westvaco (Papers 201, 249).

A second motion for summary judgment against Westvaco was filed by I.N.A. (Paper 251); a hearing was requested by Westvaco (Paper 252), but no other memoranda were filed.

A motion for summary judgment in favor of Westvaco against Hartford Insurance Co. was filed (Paper 216) and opposed by Hartford (Papers 246, 247, 253).

The merits of these motions will be discussed below.

B Discovery

Initially, the insured Westvaco filed Rule 36 Requests for Admissions against its insurance companies (Paper 186). Formal responses were eventually² filed by Hartford (Paper 204), I.N.A. (Paper 205), and Home (Paper 203).

A motion was filed by Westvaco (Paper 207) to determine the sufficiency of those formal responses. At a conference on May 12, 1975, the insurance companies were ordered to designate with particularity the relevant provisions of their respective insurance policies. Such designations were made for Hartford by its letter of May 26, 1975 (Attachment A); for I.N.A. by its letters of May 21 and 27, 1975 (Attachment B); and for Home by its letter of May 22, 1975 (Attachment C). The court will treat these letters as supplemental responses by the parties to the requests of Westvaco Corporation for admissions, and the clerk shall file the letters as Attachments to this Memorandum and Order.

Also at the May 12, 1975, conference, the insurance companies' counsel were instructed to indicate the type of factual evidence that they desired to offer on the issues of liability. Such indications were made for Hartford by letter of June 9, 1975 (Attachment D); for I.N.A. by letter of June 5, 1975 (Attachment E); and for Home by letter of June 6, 1975 (Attachment F). A response was made for Westvaco by letters of June 16 and 20, 1975 (Attachment G). These letters shall be filed as Attachments also.

450 F. Supp. 388

At a conference on June 23, 1975, the insurance companies' counsel were instructed to summarize their expert testimony in accord with Rule 26(b)(4). Such a summary was submitted for Hartford by letter of September 8, 1975 (Attachment H), and for I.N.A. by letter of September 8, 1975 (Attachment I). It appears that no summary was submitted for Home. A reply was made for Westvaco by letter of September 11, 1975 (Attachment J). These letters shall also be filed as Attachments.

Finally, at the June 23, 1975, conference counsel were promised a court interpretation of the policy provision "occurrence" to guide further action in the cases.

II

On July 10, 1975 (Paper 215), this court ruled on the meaning of the term "occurrence" in the insurance policies of Hartford, I.N.A., and Home. That Memorandum states:

"Each of the three policies explicitly sets out a definition of the term `occurrence.' The Hartford policy states that:

`"occurrence" means an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury, or property damage neither expected nor intended from the standpoint of the insured;' (emphasis in original).

"The INA policy provides:

`OCCURRENCE — "occurrence," as respects property damage means an accident or injurious exposure to conditions, which results, during the policy period in property damage neither expected nor intended from the standpoint of the Insured;'

"The Home policy provides:

`The term "occurrence" wherever used herein shall mean an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in personal injury, property damage or advertising liability during the policy period. All such exposure to substantially the same general conditions existing at or emanating from one premises location shall be deemed one occurrence.'

"Under those definitions of the term `occurrence,' the third-party plaintiffs and the third-party defendants disagree as to whether what must be unexpected or unintended in order for the insured to recover under the policy are the emissions from the Westvaco plant or the damage of the type complained of by the plaintiffs. After consideration of the policy provisions and the arguments presented by counsel for the respective parties, it is the opinion of this court that the words `unexpected or unintended' or words of similar import in all three policies with respect to the definition of `occurrence' do not refer to unknown, unexpected, or unintended emissions from the Westvaco plant, but instead refer to unknown, unexpected, and unintended damage of the type complained of by the plaintiffs. All further proceedings in the third-party actions of Westvaco Corporation will be conducted based upon said meaning."

See Grand River Lime Co. v. Ohio Casualty Ins. Co., 32 Ohio App.2d 178, 289 N.E.2d 360, 364-65 (1975); Aetna Casualty & Surety Co. v. Martin Bros. Container & Timber Products Corp., 256 F.Supp. 145, 149-50 (D.Ore.1966); McGeough, The Applicability of Liability Insurance Coverage to Actions Involving Environmental Damage, 1971 A.B.A. Section on Ins., Neg. & Comp. Law Proceedings 312, 318-19 (1971). Cf. Aerial Agricultural Service of Montana, Inc. v. Till, 207 F.Supp. 50, 55-59 (N.D.Miss.1962).

III

The task now before the court is to apply the definition of "occurrence" to the three pending motions for summary judgment. Preliminarily, the court will review the law governing an insurance company's duty to defend its insured.³

450 F. Supp. 389

A Duty to Defend

An insurance company's duty to defend is separate and distinct from the company's duty to pay a resulting judgment. See, e. g., Employers Mutual Liability Ins. Co. v. Hendrix, 199 F.2d 53 (4th Cir. 1952); Riviera Beach Volunteer Fire Co. v. Fidelity & Casualty Co. of N. Y., 388 F.Supp. 1114, 1120 (D.Md.1975); Kelly v. Phoenix Assurance Co., 225 F.Supp. 562, 564 n.3 (D.Md.1964); 7A J.A. Appleman, Insurance Law and Practice § 4682 (1962 ed.) hereinafter Appleman; Annot., 50 A.L.R.2d 458 (1956). The company's preliminary duty to defend and its ultimate duty to pay a judgment are related in that both in the last analysis depend on the scope of coverage under the policy. See id.

In order to determine whether the insurer has a duty to defend a suit against the insured, the insurance policy provisions governing coverage and the duty to defend must generally be compared to the allegations of the complaint against the insured. See Hendrix, supra; Riviera Beach, supra; Appleman § 4683; Annot., 50 A.L.R.2d 458 (1956). In contrast, the question whether the insurer has a duty to pay a final judgment against the insured turns on a comparison of the ultimate findings of fact concerning the alleged occurrence with the policy coverage. See American Casualty Co. v. Denmark Foods, Inc., 224 F.2d 461, 464 (4th Cir. 1955).

Once it is determined that the insurance policy creates a duty to defend against claims made within the policy's coverage and it is further determined that the complaint alleges a cause of action within the policy's coverage, the company is obligated to defend the suit, notwithstanding alternative allegations outside the policy's coverage, until such time, if ever, that the claims have been limited to ones outside the policy coverage. See, e. g., Brohawn v. Transamerica Ins. Co., 276 Md. 396, 347 A.2d 842 (1975) (implicit); Hendrix, 199 F.2d at 56-57; Bundy Tubing Co. v....