Zurich Am. Ins. Co. v. Fluor Corp.

• Decision Date: 30 September 2019
• Docket Number: No. 4:16CV00429 ERW,4:16CV00429 ERW
• Parties: ZURICH AMERICAN INSURANCE COMPANY, Plaintiff, v. FLUOR CORPORATION, et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

ZURICH AMERICAN INSURANCE COMPANY, Plaintiff, v. FLUOR CORPORATION, et al., Defendants.

No. 4:16CV00429 ERW

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

September 30, 2019

MEMORANDUM AND ORDER

This matter comes before the Court on Plaintiff/Counter-DefendantZurich American Insurance Company's Motion for Partial Summary Judgment against Defendant/Counter-ClaimantFluor Corporation with respect to Zurich's claim in its First Cause of Action [192]; Fluor's Motion to Dismiss Zurich's First, Second and Third Causes of Action [218]; and Fluor's Motion for Partial Summary Judgment against Zurich [220] with respect to Zurich's Affirmative Defenses 1, 6, 7, and 18 to Fluor's Second Cause of Action for bad faith failure to settle ("BFFS").

BACKGROUND

Zurich issued general liability policies at certain periods from December 31, 1958, to June 1, 1985(the "Zurich Policies"), to a company called St. Joseph Lead, which later became St. Joe Minerals.ECF No. 1 at ¶ 12.From 1981 to 1994, Fluor Corporation owned St. Joe Minerals, ("St. Joe"), which operated a lead smelter facility in Herculaneum, Missouri.Id.at ¶ ¶ 7, 12.In 1994, Fluor sold its interest in St. Joe to the Renco Group, Inc., which renamed the company The Doe Run Resources ("Doe Run").Id.at ¶ 7.

Each of the Zurich Policies provide in relevant part, that Zurich:

shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false, or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient.

Fluor's Statement of Uncontroverted Material Facts in Support of its Motion for Partial Summary Judgment("FSUMF"), ECF No. 221-1 at ¶ 2.The Zurich Policies also provide that the insured "shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense."Id.at ¶ 3.The Zurich Policies state that Zurich:

will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence[.]

Id.at ¶ 4.

Commencing in 1995, various parties, including Fluor and Doe Run, were sued for bodily injury and property damage claims arising from St. Joe's lead smelter facility in Herculaneum, Missouri (hereafter referred to as the "Herculaneum Claims").ECF No. 1 at ¶¶ 22-23.In 2005, certain residents of Herculaneum filed claims against Fluor, Doe Run, and others in the Missouri Circuit Court, Twenty-Second Judicial Circuit in the City of St. Louis, Missouri, for alleged injuries arising from the operation of the smelter, including the period 1981 through 1994.Id. at ¶ 23.On September 5, 2005, Fluor tendered seven lawsuits (the "Herculaneum Lawsuits"), including Alexander, et al. v. Fluor Corporation, et al., Heilig, et al. v. Fluor Corporation, et al., Pedersen, et al. v. Fluor Corporation, et al. (the "Alexander/Pedersen/Heilig Litigation) to Zurich for a "full and complete defense" under each of the Zurich Policies.FSUMF, ECF No. 221-1 at ¶ ¶ 5-11.¹On December 14, 2005, Zurich agreed to defend Fluor in these lawsuitspursuant to a reservation of rights.Id.at ¶¶ 15-21.Among the rights Zurich reserved in connection with each of the Herculaneum Lawsuits, Zurich asserted that coverage was "not available if and to the extent that any insured has failed to satisfy any of the conditions precedent to coverage set forth in the Zurich/St. Joe policies," including "the duty to refrain from making voluntary payments or voluntarily assuming obligations (except at its own expense)."Id.at ¶ 25.

On November 18, 2010, a mediation of the Herculaneum Lawsuits involving representatives from Fluor, Doe Run, Zurich, and the underlying plaintiffs was conducted in Clayton, Missouri.Id.at ¶ 28.After this mediation, on December 13, 2010, Doe Run reached a settlement with plaintiffs in the remaining Herculaneum Claims, including the plaintiffs in the Alexander/Pedersen/Heilig Litigation ("Doe Run Settlement").ECF No. 1 at ¶ 24.Fluor was not included in the Doe Run Settlement.Id.at ¶ 25.Fluor never requested Zurich fund any settlement on its behalf at that mediation nor at any subsequent mediation of the Alexander/Pedersen/Heilig litigation.Id.The claims against Fluor in the Alexander/Pedersen/Heilig Litigation proceeded to trial and resulted in a judgment against Fluor for $38,527,186 in compensatory damages, and $320 million in punitive damages.Id.at ¶ 26.In October 2014, Fluor entered into a settlement with plaintiffs from the Herculaneum Lawsuits (that had settled with Doe Run in December 2010) for approximately $300 million (the "Fluor Global Settlement").FSUMF, ECF No. 221-1 at ¶ 32.²

In March 2012, Zurich made payments to Doe Run through a settlement (the "Zurich-Doe Run Global Settlement") to resolve disputes with regard to coverage for the Doe Run Settlement.ECF No. 1. at ¶ 29.Zurich alleges the Global Settlement payments exhausted the Zurich Policies for the Herculaneum Claims.Id.at ¶ 30.

On March 29, 2016, Zurich filed suit in this Court, asserting five separate claims in its Complaint.Zurich's first three Causes of Action seek declaratory judgments stating the Zurich Policies do not provide coverage for the defense or indemnity of Fluor's litigation.Fluor filed a counterclaim against Zurich asserting three Causes of Action.At issue in the Motions considered here is Fluor's Second Cause of Action in its counterclaim for bad faith failure to settle in the Underlying Actions.³

Zurich has filed a Motion for Partial Summary Judgment against Fluor with respect to Zurich's claim in its First Cause of Action seeking a Declaratory Judgment that Zurich has no duty to indemnify Fluor for any liability it incurred in connection with certain Herculaneum Claims-the Bronson/Smoger lawsuits.⁴Pursuant to Federal Rule of Civil Procedure 12(b)(1), Fluor has filed a Motion to Dismiss Zurich's First, Second, and Third Causes of Action to the extent they seek a declaration regarding Zurich's contractual duty to indemnify.Fluor has also filed a Motion for Partial Summary Judgment against Zurich with respect to Zurich'sAffirmative Defenses 1, 6, 7, and 18 (collectively, "Indemnity Defenses") to Fluor's Second Cause of Action for bad faith failure to settle ("BFFS").The Court will first address Fluor's Motion to Dismiss Zurich's First, Second, and Third Causes of Action.

I. FLUOR'S MOTION TO DISMISS

Fluor requests that the Court dismiss the First, Second, and Third Causes of Action in Zurich's Complaint insofar as they seek a declaration that Zurich's Policies "do not provide coverage for the . . . indemnity of the Alexander/Pedersen/Heilig litigation" or the broader set of "Herculaneum Claims."ECF No. 218at 5.Fluor argues dismissal is required as there is no ripe dispute between the parties concerning Zurich's contractual duty to indemnify Fluor under the comprehensive general liability policies at issue in this case.

Legal Standard - Motion to Dismiss

Fluor's Motion to Dismiss[218] is brought pursuant to Federal Rule of Civil Procedure 12(b)(1).SeeWax'n Works v. City of St. Paul, 213 F.3d 1016, 1020(8th Cir.2000)(indicating that whether a claim is ripe for adjudication goes to a court's subject matter jurisdiction under the case or controversy clause of Article III of the federal Constitution)."A district court has the authority to dismiss an action for lack of subject matter jurisdiction on any one of three separate bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts."Johnson v. United States, 534 F.3d 958, 962(8th Cir.2008)(internal punctuation and quoted case omitted).

Discussion

Zurich's complaint seeks relief under the Declaratory Judgment Act, 28 U.S.C. § 2201, which provides that federal courts can grant declaratory relief in "a case of actual controversy."The controversy requirement of the Declaratory Judgment Act is synonymous with that of Article III of the Constitution."Carson v. Pierce, 719 F.2d 931, 933(8th Cir.1983)(citingAetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40, 57 S.Ct. 461, 81 L.Ed. 617(1974)).

In the declaratory judgment context, Article III requires a plaintiff to allege facts that, "under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment."MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127(2007)(quotingMaryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273(1941))."The Supreme Court has emphasized that the 'caseof actual controversy' language limits federal court action to justiciable cases."Public Water Supply Dist. No. 10 of Cass County, Mo. v. City of Peculiar, Mo., 345 F.3d 570, 572-73(8th Cir.2003)(citingHaworth, 300 U.S. at 239-40).To resolve the instant motion, the Court must determine whether Zurich's request for declaratory relief meets the traditional justiciability requirement of ripeness.

"The ripeness doctrine flows both from the Article III'cases' and 'controversies' limitations and also from prudential considerations for refusing to exercise jurisdiction."Nebraska Pub. Power Dist. v. MidAmerican Energy Co., 234 F.3d 1032, 1037(8th Cir.2000).The intent of the ripeness doctrine is to "prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements."Abbott Labs. v. Gardner, 387 U.S. 136, 148, 87 S.Ct. 1507, 18 L.Ed.2d 681(1967).The ripeness inquiry requires a court to examine both "the fitness of the issues for judicial decision and the hardship to the parties...