Underwriters at Lloyd's v. So. Natural Gas

• Decision Date: 24 March 2006
• Docket Number: 1041880.
• Citation: 939 So.2d 21
• Parties: CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, and Certain London Market Insurance Companies v. SOUTHERN NATURAL GAS COMPANY.
• Court: Alabama Supreme Court

939 So.2d 21

CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, and Certain London Market Insurance Companies v. SOUTHERN NATURAL GAS COMPANY.

1041880.

Supreme Court of Alabama.

March 24, 2006.

Richard W. Lewis, William K. Bradford, and Douglas H. Bryant of Austill, Lewis & Simms, P.C., Birmingham; Deborah Alley Smith of Christian & Small, LLP, Birmingham; and Jay Russell Sever of

Phelps Dunbar, LLP, New Orleans, Louisiana, for appellants.

Tony G. Miller of Maynard, Cooper & Gale, P.C., Birmingham; and Michael John Miguel of Morgan, Lewis & Bockius, LLP, Los Angeles, California, for appellee.

HARWOOD, Justice.

Certain Underwriters at Lloyd's, London, and Certain London Marketing Insurance Companies (collectively "the Insurers") appeal from an order of the Jefferson Circuit Court, entered at the conclusion of a trial conducted from February 28 to March 10, 2005, and assessing damages against the Insurers in favor of the plaintiff, Southern Natural Gas Company ("Sonat"), for nearly $1 million. The Insurers have appealed that judgment but have also moved this Court for an expedited determination of appellate jurisdiction, contending that the order does not constitute a final judgment that can support an appeal. In particular, the Insurers assert that the order did not completely dispose of any single "claim for relief" and that, consequently, the trial court's attempted certification of the "judgment" as final pursuant to Rule 54(b), Ala. R. Civ. P., was unavailing and should be vacated by this Court and the appeal dismissed. Based on our analysis set forth below, we agree.

Background

Sonat operates approximately 14,000 miles of pipeline in the southeastern United States for the purpose of transporting natural gas to markets in a seven-state area. As Sonat explains in the complaint it filed to institute the underlying litigation, its "integrated pipeline operations" include, among other operational features, numerous "compressor stations," including 11 located in Alabama, and numerous "mercury-metering stations," including 131 located in Alabama. The Insurers provide a balanced summary of the circumstances giving rise to the action in their principal brief to this Court:

"From 1957 to 1972, Sonat used a PCB-based[¹] synthetic lubricant at many of its compressor stations. Environmental testing performed by Sonat in 1989 revealed that 13 of its 38 compressor stations had PCB contamination. Sonat also allegedly sustained environmental damage to its property at 14,700 other sites, including 25 additional compressor stations; 650 mercury metering stations; 14,000 liquid removal points; five manufactured gas plants; and 20 offshore platforms. Sonat voluntarily undertook to remediate the contamination at its sites.

"In 1991 Sonat put [the Insurers] on notice that it had discovered contamination at 13 of its compressor stations and that it had taken action to contain and remediate the contamination. In November 1995, counsel for [the Insurers] sent Sonat a reservation of rights letter with respect to the claim made by Sonat. In 1996 Sonat advised [the Insurers] that the cleanup had been completed and that [the Insurers] should close their files on the claim."

(The Insurers' brief, pp. 6-7.)

In the action it subsequently filed against the Insurers, Sonat asserted that the Environmental Protection Agency, "other governmental agencies and departments and/or private parties," including Alabama residents, "have brought or asserted lawsuits, claims, and demands against Sonat alleging property damage, personal injury, bodily injury, and other damages and causes of action, including, without limitation, nuisance, trespass, negligence and strict liability, allegedly as a result of Sonat's operations and ownership" of the pipeline system. Sonat asserted that it had "paid substantial amounts under legal obligation for the remediation of damage in, at, and around the vicinity of compressor stations, and for mercury damage arising from mercury meters." Sonat went on to explain that the contamination experienced at the compressor stations involved principally the presence of PCBs and the contamination at the mercury-metering stations involved principally "the presence of mercury in the ground water, surface water, air and general environment in, at, around, and in the vicinity of the mercury-metering stations."

Sonat stated in its complaint that the Insurers had issued various policies of liability insurance, covering successive policy periods commencing on November 30, 1949, and concluding on December 1, 1987, which entitled Sonat to coverage "for all sums, including costs of investigation and defense and legal liabilities, arising out of environmental and tort actions. ..." In paragraph 32 of the complaint (captioned "Environmental and Tort Action Concerning Reform, Alabama[,] Compressor Station"), Sonat alleged:

"Claims, demands and suits have been asserted against Sonat concerning property damage and other damages arising out of Sonat's operation of the Reform, Alabama[,] compressor station. The claimants in the environmental actions, allege, inter alia, damage and other injury based on purported damage including the presence of polychlorinated biphenyls and other substances of concern in the environment in, at, around, and in the vicinity of the Reform, Alabama[,] compressor station. Claimants seek damages for past and future response costs for alleged property damage which is continuous and progressive, beginning in or before 1949 and extending until at least 1986. The monies spent and to be spent in response to demands of a governmental agency, or a private party are `damages' under the Liability Insurance Policies.[²] Alabama Plating Co. v. United States Fidelity and Guar. Co., 690 So.2d 331 (Ala.1996). As such, the Liability Insurance Policies respond to and are required to pay for all damage because of property damage, bodily injury or personal injury (or a combination thereof) which Sonat is or becomes legally obligated to pay as respects the Reform, Alabama[,] compressor station. Sonat has paid, and is likely to continue to become legally obligated to pay, damages arising from the Reform, Alabama[,] compressor station."

By means of the next four paragraphs of its complaint, introduced by identical captions except for the name of the location of the compressor station, and making identical averments, Sonat made precisely parallel allegations concerning the compressor stations located at Elmore, Gallion, McConnells, and Tarrant, Alabama.

Thereafter, Sonat undertook in its complaint to delineate five separately captioned claims for relief. The claims respectively asserted that although the Insurers were obligated to pay in full Sonat's legal liabilities arising out of or in connection with the previously described "environmental and tort actions," the Insurers had "failed, or threatened to fail, to fulfill, or acknowledge completely their insuring obligations to pay in full Sonat's legal liabilities"; that there was an actual and justiciable controversy as to the Insurers' obligations in that regard (first claim for relief); that the Insurers had breached their insuring obligations to Sonat and were obligated to pay Sonat "all direct, indirect, consequential, incidental, special, compensatory and other damages resulting from" the breaches of contract (second claim for relief); that the conduct of the Insurers effected a waiver of their right "to enforce any contractual obligation, limitation, exclusion, or other provisions running in [their] favor" and Sonat was entitled to a judicial declaration to that effect (third claim for relief); that the Insurers had breached their contracts of insurance by "disclosing confidences of Sonat and confidential settlement communications of Sonat in violation of their contractual duties to act with good faith and with reasonable care and prudence with regard to their insured," thereby waiving the Insurers' "ability to enforce any contractual obligation, limitation, exclusion, or other provision running in [their] favor," entitling Sonat to a judicial declaration to that effect (fourth claim for relief); and that the conduct of the Insurers represented an anticipatory breach of contract entitling Sonat to recover damages (fifth claim for relief). In its concluding "prayer for relief," Sonat demanded judgment by way of a judicial declaration that the Insurers were "obligated to pay or reimburse in full Sonat's cost and expenses for investigation and defense of the environmental and tort actions and to pay or reimburse in full Sonat's legal liabilities in connection with said environmental and tort actions" and to pay an award for "compensatory damages in an amount or amounts to be determined by the trier of fact at trial, and attorneys' fees and costs."

Eventually, the trial court entered two case-management orders pertinent to the jurisdictional issue before this Court. The first order provided:

"Considering the number of sites at issue in this litigation and the complexity of the issues involved, it is necessary that the trial of this matter be conducted in phases, as follows:

"Trial Phase I: Trial Phase I shall involve the parties' claims and defenses relative to the availability of insurance coverage for a subset of those sites listed in Exhibit `A' ('Phase I Sites'), as agreed to by the parties or ordered by the Court in the future."

Exhibit A listed dozens of "compressor stations/PCBs" in Alabama, Georgia, Louisiana, and Mississippi, several hundred "meter and compressor stations/mercury" located in Florida, South Carolina, Alabama, Georgia, Louisiana, Texas, and Tennessee, and several dozen "offshore facilities." The second case-management order explained that "[t]he initial trial phrase in this action shall focus on the claims and defenses related to the Tarrant, Alabama, and Reform, Alabama, locations," those being two of the Alabama "compressor stations/PCBs"...