Texaco A/S (Denmark) v. Commercial Ins. Co. of Newark, NJ

Decision Date10 November 1998
Docket NumberDocket No. 97-7248
Citation160 F.3d 124
PartiesTEXACO A/S (DENMARK); S.A. Texaco Belgium N.V.; and Texaco Nederland B.V., Plaintiffs-Appellants, v. COMMERCIAL INSURANCE CO. OF NEWARK, NJ; United States Fidelity and Guaranty Company; Granite State Insurance Company; and The Insurance Company of the State of Pennsylvania, Defendants-Appellees.
CourtU.S. Court of Appeals — Second Circuit

John E. Heintz, Howrey & Simon, Washington, D.C. (Wendy Oatis, Howrey & Simon; Patrick M. McGovern, Zevnik Horton Guibord & McGovern, New York City, on the brief), for Plaintiffs-Appellants.

Eugene Wollan, Mound, Cotton & Wollan, New York City (Costantino P. Suriano, Renee M. Plessner, Michael T. Altman, on the brief), for Defendants-Appellees.

Wiley, Rein & Fielding, Washington, D.C. (Laura A. Foggan, Daniel E. Troy), for Amicus Curiae, Insurance Environmental Litigation Association.

Before: VAN GRAAFEILAND, MESKILL, and CABRANES, Circuit Judges.

JOSE A. CABRANES, Circuit Judge:

Plaintiffs Texaco A/S, Texaco Belgium, and Texaco Nederland (collectively, "Texaco Europe") appeal from the partial summary judgment of the United States District Court for the Southern District of New York (John F. Keenan, Judge ), dismissing the portion of their insurance coverage action that sought a declaration that they were entitled to indemnity under certain policies issued by the defendants (collectively, "AIU"). 1 The District Court based its determination on Texaco Europe's failure to establish either a judicial determination of its liability to a claimant or the existence of a settlement approved by AIU. Instead, the Court concluded that Texaco Europe had identified only claims that were either voluntarily settled, still awaiting final judicial determination, or not as yet filed by claimants. It recognized that Texaco might have been entitled to indemnity for voluntary settlements if AIU had denied coverage to a claim or category of claims. However, the Court concluded that Texaco Europe failed to show that such a denial had occurred. At the District Court's direction, judgment was entered as to this claim on January 21, 1997, pursuant to Fed.R.Civ.P. 54(b). 2 On this appeal, we conclude that the District Court erred in its determination that Texaco Europe has failed to adduce evidence sufficient to raise an issue of material fact as to AIU's denial of coverage, and accordingly vacate and remand.

I.
A. Factual Background

The following facts appear to be undisputed, unless otherwise indicated.

The three plaintiff entities we have styled "Texaco Europe" own and operate fuel service stations and associated facilities in Denmark, Belgium, and the Netherlands. Though they now are wholly-owned subsidiaries of Texaco Inc. ("Texaco"), they are successors in interest to three entities formerly owned by Chevron Oceanic, Inc. ("Chevron"): Chevron Oil A/S, Chevron Oil Belgium N.V., and Chevron Investments (Nederland) Inc. (these three predecessor entities collectively, "Chevron Europe"). In a series of agreements dated April 1, 1984, Texaco Europe acquired all outstanding stock of the predecessor companies in exchange for cash.

Between May 2, 1967 and April 1, 1984, Chevron Europe was covered by comprehensive general liability insurance policies issued by AIU (the "Chevron policies"). Texaco Europe thereafter purchased similar but not identical insurance coverage from AIU (the "Texaco policies"). In liability insurance policies generally, the insurer assumes both a duty to indemnify the insured--that is, "to pay all covered claims and judgments against the insured"--and a duty to defend "any lawsuit brought against the insured that alleges and seeks damages for a covered event, even if groundless, false or fraudulent." 1 Eric Mills Holmes, Holmes's Appelman on Insurance § 1.15, at 66 (2d ed.1996). The insurance policies at issue here included duty-to-defend and duty-to-indemnify provisions, and covered claims for, among other things, property damage liability.

Texaco Europe asserts that, since April 1, 1984, it has received over five hundred requests, lawsuits, and demands from private and governmental entities seeking Texaco's investigation and "remediation" of environmental damage arising out of pre-1984 activities at thirty-five former Chevron facilities (the "test sites"). Texaco Europe notified AIU of at least six test site claims. 3 Although a local AIU claims handler initially filed two of those claims under the Chevron policies because they were based on damage that had allegedly occurred during Chevron's ownership, AIU subsequently took the position that the claims should be filed under the Texaco policies instead, because the first notice of the claims arose during Texaco's ownership.

In November 1988, AIU directed its claims handler that "any reported claims after [April 1984] become claims charged to Texaco "; the claims handler allegedly informed Texaco Europe of AIU's position by at least the end of 1988. On October 30, 1989, Texaco Europe wrote to AIU demanding that the six test site claims be reassigned to the Chevron policies. AIU refused by letter dated January 26, 1990. In that letter, AIU stated:

The standard which applies to these cases is one where ... [AIU] establishes a claim file according to the reporting date, or the date of first notice to the [insurer].... [A]s Texaco was the last owner of the properties at the time the pollution was reported, the Texaco policies would respond.

The practical differences between having the claims handled under the Chevron policies rather than the Texaco policies are not entirely clear, but this litigation is proof enough that the differences are significant. There is information in the record to suggest that AIU would bear the entire expense (above the policy's deductible) for claims attributed to Chevron policies for 1968-1975. By contrast, under the post-1975 Chevron policies and all the Texaco policies, it appears that the entire liability would be borne by a reinsurer affiliated with Texaco.

AIU proceeded to handle the submitted claims under the Texaco policies, pursuant to which it denied at least three claims (based, Texaco Europe contends, on limits contained in the Texaco policies but not in the Chevron policies), offered to pay two claims, and offered to defend the sixth claim. Texaco Europe acknowledges that it did not file or assert any further claims with AIU after receipt of the January 26, 1990 letter. Texaco Europe instead investigated and/or settled on its own a number of complaints and demands for remediation--allegedly including clean-up notices and demands from government regulatory authorities.

Texaco Europe filed this action on April 23, 1990, seeking a declaratory judgment that AIU was obligated to defend and to indemnify Texaco Europe under the Chevron policies with respect to any environmental damage alleged to have occurred prior to April 1, 1984, and seeking damages for AIU's breach of those contractual duties.

B. Procedural History

Texaco Europe's amended complaint set forth two interrelated causes of action: In the first, AIU sought a declaratory judgment to specify (1) AIU's duty to defend Texaco Europe under the Chevron policies "in connection with claims, demands and actions" concerning property damage that allegedly or potentially occurred during Chevron's ownership of the sites and (2) AIU's duty to indemnify Texaco Europe with respect to such actual property damage. 4 In the second cause of action, Texaco Europe asserted a breach of contract arising from AIU's handling of the six filed claims, and sought money damages.

The parties cross-moved for summary judgment on a number of grounds. The District Court initially resolved one significant issue in favor of Texaco Europe--namely, whether as Chevron Europe's successor, it could assert claims as the named insured under the Chevron policies. Reasoning that Texaco Europe was entitled to the benefit of Chevron Europe's insurance coverage, the Court granted partial summary judgment in favor of Texaco Europe on this question. (This issue lies beyond the scope of the present appeal, and we assume, without deciding, that Texaco Europe functions as the named insured under the Chevron policies.)

Although it regarded Texaco Europe as the named insured under the policies, the District Court held that Texaco Europe had failed to establish AIU's duty to indemnify. Accordingly, the Court granted AIU's motion for summary judgment. In so doing, the Court invoked a provision of the insurance policies--commonly known as a "no-action" clause--which the Court read to prohibit an action by the insured to seek indemnity from the insurer, in the absence of either a judicial determination of the insured's liability or a written settlement to which the insurer was also a party. The relevant portion of that clause reads as follows:

No action shall lie against the [insurer] unless, as a condition precedent thereto, the insured shall have fully complied with all of the terms of this policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant, and the [insurer]. Any person ... who has secured such judgment or written agreement shall thereafter be entitled to recover under the terms of this policy in the same manner and to the same extent as the insured. Nothing contained in this policy shall give any person or organization any right to join the [insurer] as a co-defendant in any action brought against the insured to determine the insured's liability.

The District Court held that Texaco Europe's claims for indemnity were unavailing because Texaco Europe had failed to satisfy the condition precedent to suit against AIU--namely, a legal obligation to pay, determined either by legal judgment or by a settlement authorized by...

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