Zurich Am. Ins. Co. v. Fluor Corp., 4:16CV00429 ERW
| Decision Date | 21 September 2020 |
| 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 |
This matter comes before the Court on Defendant/Counter-Claimant Fluor Corporation's Motion for Summary Judgment on Fluor's Second Cause of Action for Bad Faith Failure to Settle in its Counterclaim against Plaintiff/Counter-Defendant Zurich American Insurance Company [ECF No. 379]; Zurich's Motion for Partial Summary Judgment against Fluor with respect to the Second Count of Fluor's Counterclaim [ECF No. 386]; Fluor's Motion for Summary Judgment against Zurich with respect to the First, Second and Third Causes of Action in Zurich's Complaint [ECF No. 389]; and Zurich's Motion to Exclude the Declaration of John M. Wilson [ECF No. 455].
The following facts are derived from the evidence submitted by the parties regarding their Motions for Summary Judgment [ECF Nos. 379, 386, 389]. Because this Memorandum addresses several motions, including cross-motions for summary judgment, the Court has attempted to set forth only undisputed facts. In its substantive analysis, infra, the Court will recite additional pertinent facts, construing those facts and all reasonable inferences most strongly in favor of Zurich on Fluor's Motion, and vice versa.
Zurich issued a series of comprehensive general liability policies that cover periods from March 15, 1981, through June 1, 1985 (collectively, the "Zurich Policies"). ECF No. 381 at ¶ 1; ECF No. 396 at ¶ 1; ECF No. 395, Exs. 1-4. The Zurich Policies were issued to St. Joe Minerals Corp. ("St. Joe"), which operated a lead smelter facility in Herculaneum, Missouri. ECF No. 396 at ¶ 2. Each of the Zurich Policies provide that a "stockholder" of St. Joe is a "Person Insured" under the policy. Id. Fluor owned St. Joe during the policy periods from 1981-1985. Id. In 1994, Fluor sold its interest in St. Joe to the Renco Group, Inc., which renamed the company The Doe Run Resources Corporation ("Doe Run"). ECF No. 1 at ¶ 7; ECF No. 42 at ¶ 8.
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.
ECF No. 381 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 ¶ 3.1 The Policies state that Zurich:
From 2002-2011, various lawsuits were filed by attorneys Mark Bronson and Gerson Smoger on behalf of plaintiffs ("Bronson/Smoger lawsuits") and alleged liability against defendants, including Fluor and Doe Run, based on claims of bodily-injury to various residents and children of Herculaneum, Missouri, caused by exposure to lead, metals and other toxicsubstances from the Doe Run Smelter, located in Herculaneum, Missouri. ECF No. 388 at ¶¶ 1-6; ECF No. 396 at 5-22.2 During 2002 and 2003, Fluor tendered the Bronson/Smoger lawsuits captioned Warden, et al. v. Fluor Corporation, et al., Browning, et al. v. Fluor Corporation, et al., and Johnson, et al. v. Fluor Corporation, et al., to Zurich for a "full and complete defense" under each of the Zurich Policies. ECF No. 396 at ¶¶ 8-10. On September 5, 2005, Fluor and Doe Run tendered eight 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 the Zurich Policies. ECF No. 396 at ¶¶ 11-18. In 2009, 2010, and 2011, three additional Bronson/Smoger lawsuits (James, et al. v. Fluor Corporation, et al., Reece, et al. v. Fluor Corporation, et al., and Faulkner, et al. v. Fluor Corporation, et al.) were tendered by Fluor to Zurich for a "full and complete defense" under the Zurich Policies. ECF No. 381 at ¶¶ 12-14; ECF No. 396 at ¶¶ 19-22. In the tender letters sent to Zurich on behalf of Fluor for the Bronson/Smoger Lawsuits, Fluor designated Armstrong Teasdale as its independent defense counsel. ECF No. 388 at ¶ 7. Doe Run also tendered the Bronson/Smoger suits to Zurich, and designated Lewis Rice as its independent defense counsel. Id. at ¶ 8.
Zurich agreed to defend Fluor and Doe Run in the Bronson/Smoger suits pursuant to a reservation of rights. ECF No. 381 at ¶¶15-24; ECF No. 388 at ¶ 9. Zurich reserved its right to disclaim coverage by way of certain enumerated exclusions. See ECF No. 388 at ¶¶ 10-19. For example, Zurich expressly disclaimed its defense and indemnity obligations under any ZurichPolicy for the claims asserted by any named plaintiff not born or otherwise exposed to any alleged contaminants before February 4, 1985. Id. at ¶ 13.
In addition, among the rights Zurich reserved in connection with the Bronson/Smoger 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)." ECF No. 381 at ¶ 25. The Bronson/Smoger reservation of rights letters further stated that "Zurich reserves the right to withdraw from its agreement to defend Fluor and/or to seek to extinguish any alleged defense obligation if it becomes apparent that there is no potential for coverage of any of the claims asserted . . . ." See ECF No. 395, Exs. 72-73, 91-103.
Through November 2010, the pattern and practice for settlements of Bronson/Smoger lawsuits was that Doe Run, with contribution from Zurich, would settle the cases and secure releases from the settling plaintiffs on behalf of Doe Run and Fluor. ECF No. 388 at ¶ 61. Doe Run's independent defense counsel, Andrew Rothschild at Lewis Rice, took the lead on negotiating settlements with the Bronson/Smoger plaintiffs. ECF No. 388 at ¶ 30. Zurich did not communicate directly with Doe Run or Fluor (or their independent defense counsel). ECF No. 388 at ¶ 24; ECF No. 426 at ¶ 24. Instead, communications took place through each insured's coverage counsel. Id. Nor, did Zurich's representatives communicate directly with the Bronson/Smoger plaintiffs' counsel. ECF No. 388 at ¶ 66.3
In prior mediated Bronson/Smoger settlements, at Doe Run's request, Zurich would agree to fund those plaintiffs who alleged exposure during the Zurich policy periods. ECF No. 388 at ¶62. Doe Run funded the remaining plaintiffs' settlements. Id. Fluor did not contribute to the settlements of the Bronson/Smoger Lawsuits. Id. at ¶ 40. Fluor's position was that it was not required to contribute as it was either indemnified by Doe Run or covered by insurance. Id. at ¶ 40; ECF No. 426 at ¶ 40.
In 2009, Doe Run challenged Fluor's position of non-payment. During the 2009 mediation, which resulted in settlement of the Bronson/Smoger cases referred to as the Browning/Dawson cases, Doe Run demanded Fluor contribute to Doe Run's settlement offer, or risk being carved out. ECF No. 388 at ¶ 49. Although Fluor refused to contribute, Zurich contributed funding and Doe Run included Fluor in the 2009 Browning/Dawson settlement. Id. at ¶¶ 50, 51.
Then, in 2010, Doe Run again sought contribution from Fluor in order to globally settle the remaining Bronson/Smoger lawsuits. ECF No. 388 at ¶ 38. Doe Run informed Fluor of the plaintiffs' global settlement demand of $60 million, Doe Run's global settlement offer of $42 million (and, later, Doe Run's increased offer of $44 million). ECF No. 388 at ¶¶ 96, 97; ECF No. 392-1, Ex. 7, 90: 2-9. On October 18, 2010, Andy Rothschild, Doe Run's independent defense counsel at Lewis Rice, called Jack Quinn, Fluor's independent defense counsel at Armstrong Teasdale, to inform him November 18, 2010, was the scheduled date for the Bronson/Smoger mediation. ECF No. 408-27 at 7. Mr. Rothschild again requested contribution from Fluor to any settlement that might be reached. ECF No. 408 at ¶ 98; ECF No. 408-27 at 7. He also informed Mr. Quinn that Zurich was not an impediment to Fluor making a contribution because Zurich had denied coverage for 38 of the 58 plaintiffs. ECF No. 408 at ¶ 98; ECF No. 408-27 at 7. Although Doe Run continued to seek Fluor's contribution, three days prior to the scheduled mediation, Flour told Doe Run that it should "not expect financial participation fromFluor" at the upcoming mediation. ECF No. 388 at ¶ 99; ECF No. 392-1, Ex. 656; ECF No. 392-1, Ex. 660.
Doe Run also informed Zurich of the scheduled November 18, 2010 mediation and plaintiffs' $60 million demand. ECF No. 381 at ¶¶ 35, 36. In response to Doe Run's notification, Zurich requested information from Doe Run relating to the Bronson/Smoger plaintiffs to determine the reasonable settlement value for those plaintiffs potentially covered under the Policies. ECF No. 388 at ¶¶ 113-16.
In October 2010, Doe Run's coverage counsel, Marc Halpern, proposed a funding mechanism for the global settlement of the Bronson-Smoger Lawsuits to Zurich that would include a release for both Fluor and Doe Run. ECF No. 381 at ¶ 39. Under Doe Run's proposal, Zurich would front 50% of any settlement that may be negotiated in connection with the upcoming mediation, while reserving the right to seek reimbursement for any contributions that did not fall within Zurich's indemnity obligation. Id.
Prior to mediation, on November 7,...
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