Superior Equipment Co., Inc. v. Maryland Cas. Co.

• Decision Date: 15 December 1998
• Docket Number: No. 73559,73559
• Citation: 986 S.W.2d 477
• Parties: SUPERIOR EQUIPMENT COMPANY, INC., Plaintiff/Appellant, v. MARYLAND CASUALTY COMPANY, Northern Insurance Company of New York, Safety National Casualty Corporation, TIG Insurance Company, formerly Transamerica Insurance Company, and American Alliance Insurance Company, Defendants/Respondents.
• Court: Missouri Court of Appeals

Page 477

986 S.W.2d 477

SUPERIOR EQUIPMENT COMPANY, INC., Plaintiff/Appellant, v. MARYLAND CASUALTY COMPANY, Northern Insurance Company of New

York, Safety National Casualty Corporation, TIG Insurance

Company, formerly Transamerica Insurance Company, and

American Alliance Insurance Company, Defendants/Respondents.

No. 73559.

Missouri Court of Appeals,

Eastern District,

Division Five.

Dec. 15, 1998.

Motion for Rehearing and/or Transfer to

Supreme Court Denied March 4, 1999.

Lewis C. Green, St. Louis, for appellant.

Jeffrey L. Cramer, T. Michael Ward, Brown & James, P.C., St. Louis, for respondent.

ROBERT G. DOWD, Jr., Chief Judge.

Superior Equipment Company, Inc. (Superior) appeals from the trial court's grant of summary judgment in favor of Maryland Casualty Company (Maryland), Northern Insurance Company of New York (Northern), Safety National Casualty Corporation (Safety), TIG Insurance Company (TIG) (formerly Transamerica Insurance Company), and American Alliance Insurance Company (American) (collectively referred to as the insurers) in a declaratory judgment action. Superior argues the trial court erred in granting summary judgment in that the insurers had a duty to defend Superior because the complaint in the underlying federal action alleges facts stating a claim potentially within the coverage of the comprehensive general liability policies issued by Maryland and Northern, the umbrella policies issued by Maryland and Safety, and the business automobile policies issued by American and TIG. Superior further contends the issue of whether the insurers have a duty to indemnify Superior under those policies is not ripe. We reverse and remand in part and affirm in part.

I. Facts and Procedural History

From November 1982 to August 1988, Superior transported hazardous substances to a waste disposal facility known as the Wastex Research, Inc. (the Wastex site) in East St. Louis, Illinois. Wastex accepted waste solvents, painting inks, waste oils, and other substances from off-site facilities and blended some of the substances into supplemental fuel for industrial customers. Wastex stored on-site thousands of drums and containers of waste in several-dozen buildings and hundreds of thousands of gallons of waste in tanks.

In May 1989, the Illinois Environmental Protection Agency (IEPA) issued a Notice pursuant to the Illinois Environmental Protection Act, Ill.Rev.Stat.1987, ch. 111 1/2, par. 1004(q). The Notice named numerous companies, including Superior, as potentially responsible parties with regard to the hazardous conditions at the Wastex site. To respond to the Notice, approximately 250 companies formed the Wastex Joint Steering Committee (Wastex Committee), an unincorporated association. Superior and another company identified in the IEPA Notice declined to respond to the Notice and to join Wastex Committee.

In October 1993, Wastex Committee filed a lawsuit against Superior in the United States District Court for the Eastern District of Missouri (underlying federal action). Pursuant to the Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA), Wastex Committee sought to recover from Superior the "response costs" it had incurred or would incur in the future to clean up hazardous substances which Superior allegedly transported and deposited at the Wastex site. Among other allegations, Paragraph 17 of the federal complaint alleges:

Releases which have occurred or are threatened to occur at the facility include but are not limited to spills from bulk tanks, leaking drums and tanks, and explosions and resultant leaking from tanks. These releases and others have contaminated and continue to contaminate or threaten to contaminate the environment at the Wastex site.

During the time period pertinent to the underlying federal action, the insurers had issued nine separate policies insuring Superior. Although each policy used somewhat different language, the insurers in essence agreed to defend any action seeking damages against Superior for property damage covered by the relevant policy. Through their policies, the insurers also agreed to indemnify Superior for damages it was legally obligated to pay for such property damage. The policies excluded from coverage property damage caused by the discharge or escape of pollutants, unless such discharge was "sudden and accidental." Superior submitted to the insurers the claims raised by Wastex Committee in the underlying federal action to the insurers. Superior requested each insurer to defend Superior in the federal action and to acknowledge coverage of any judgment Wastex Committee might obtain against Superior. The insurers refused to defend and denied any coverage under their respective policies.

In April 1994, Superior filed a declaratory action against Maryland, Northern, Safety, American, and TIG seeking a declaration of its rights under the various insurance policies. Specifically, Superior asked the trial court to declare the insurers had a duty under the various policies to defend Superior in the underlying federal action (Count I) and to indemnify Superior against any liability in the underlying federal action (Count II). The trial court denied Superior's motion for summary judgment and granted the insurers' motions to dismiss with prejudice. This court reversed that trial court's decision on the grounds a motion to dismiss is an improper method for ruling on the merits of a declaratory judgment action. See Superior Equipment Co. v. Maryland Casualty Co., 936 S.W.2d 190 (Mo.App. E.D.1996).

On remand, Superior renewed its motion for summary judgment on Count I, regarding insurers' duty to defend. The insurers also filed separate cross-motions for summary judgment on Count I, the duty to defend, and Count II, the duty to indemnify. The trial court granted the insurers' motions and entered summary judgment in favor of the insurers on both counts. This appeal followed.

II. Choice of Law

We first address the issue of whether to apply Missouri law or Illinois law. Missouri choice of law rules follow the "most significant relationship" test of the Restatement (Second) of Conflicts of Laws, Section 188. Protective Casualty Ins. Co. v. Cook, 734 S.W.2d 898, 905 (Mo.App. E.D.1987). This test requires a balancing of several factors to determine which state has the most significant relationship to the action. Id. These factors include: (a) the place of contracting; (b) the place of negotiation of the contract; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties. Id.; Bonner v. Automobile Club Inter-Insurance Exchange, 899 S.W.2d 925, 929 (Mo.App. E.D.1995). In cases involving surety or casualty insurance, as the present case, the most important factor is the state which the parties contemplated as the principal location of the insured risk. Hartzler v. American Family Mut. Ins. Co., 881 S.W.2d 653, 655 (Mo.App. W.D.1994); Restatement (Second) of Conflicts of Laws, Section 193. Comment b to Section 193 describes the principal location of the insured risk as "the state where it will be during at least the major portion of the insurance period" and states that in cases of automobile liability policy, it is where the vehicle will be garaged during most of the period. Id.

Superior contends Illinois law governs the interpretation of the insurance policies because the contamination at the Wastex site is located in Illinois and therefore, Illinois has the most significant relationship to the action. We disagree.

The principal location of the insured risk is Missouri because Missouri is the state where Superior was during the major portion of the insured period. The business automobiles operated and were garaged in Missouri. Superior is a Missouri corporation and its principal place of business is in Missouri. Further, the Maryland and Northern policies were negotiated through a Missouri broker and executed in Missouri. The Safety umbrella policy was also negotiated and executed in Missouri. The TIG policy was issued to Superior at Superior's mailing address in Missouri. The American and TIG business automobile policies covered vehicles registered in Missouri. The only factor favoring application of Illinois law is the location of the Wastex site in Illinois. Because Missouri has the most significant relationship under the Restatement factors, we will apply Missouri law.

III. Standard of Review

When considering appeals from summary judgments, we review the record in the light most favorable to the party against whom summary judgment was entered. ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo.1993). The propriety of summary judgment is a question of law and therefore our review is essentially de novo. Id. We affirm the judgment of the trial court if the record demonstrates the prevailing party has shown that he or she is entitled to judgment as a matter of law and there is no genuine issue of the material fact which would require a trial. Id. at 378.

IV. Duty to Defend

A. Comprehensive General Liability Policies

Superior argues the trial court erred in granting Maryland and Northern's motions for summary judgment because the complaint in the underlying federal action alleges facts which state a claim potentially within the coverage of the comprehensive general liability policies and therefore those insurers have a duty to defend. We agree.

The primary comprehensive general liability policies issued by Maryland and Northern provide in relevant part:

The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of...property damage to which this insurance applies, caused by an occurrence...and the Company shall have the right and duty to defend any suit against the insured seeking damages...