Alabama Gas Corporation v. Travelers Casualty and Surety Company et al

Filing 220

MEMORANDUM OPINION. Signed by Senior Judge Inge P Johnson on 7/16/13. (ASL)

FILED
2013 Jul-16 PM 03:44
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ALABAMA GAS CORPORATION,
Plaintiff,
vs.

CASE NO. CV-10-J-1840-S

TRAVELERS CASUALTY AND
SURETY COMPANY, et al.,
Defendants.
MEMORANDUM OPINION
Pending before the court are cross- motions for summary judgment filed by the
parties. Each of the claims in this case arises out of defendants’ refusal to defend or
indemnify plaintiff on a claim for which the plaintiff asserts the insurance policies in
question should provide coverage.
As previously set forth by the court, the facts relevant to this case began before
1900. The lengthy, relevant facts are not in dispute, and the court summarizes the
same here.

The Huntsville Gas Light Company incorporated in 1856 and

manufactured gas. That company and its operations moved to the site relevant to this
action prior to 1886, under the name Huntsville Gas Light and Coke Company
(“HGLC”). See e.g., doc. 130-3 (Exhibit B) at 3. HGLC, under several different
names, provided gas produced from various sources to customers until 1946. Spills,
leaks and emissions released substances classified as hazardous into the

environment.1 In 1946, the Huntsville facility was converted to a propane air system,
and then plaintiff (a corporate successor to the Huntsville company) sold the plant
and distribution system to the City of Huntsville in 1949. Depo. of Dennis Unites
(doc. 144-1), at 37-38. Although a natural gas pipeline was installed in March 1952,
ending the need for the propane system, the City of Huntsville used the site for
various utility service purposes until 1967. In 1967 ownership of the site was
transferred for purposes of constructing public housing. The plant was demolished,
and the Searcy Homes public housing project was completed in 1971, with title to the
land passing to the Huntsville Housing Authority at that time. Doc. 133-1 at 6, ¶ 9.h.
From 1947 until 1984, plaintiff allegedly was insured under liability policies
issued by various subsidiaries of defendant Travelers Casualty and Surety Company.2
In 2008 plaintiff received an “information request” letter from the EPA and a
pollution report regarding this site. See e.g, doc. 130-20 (Exhibit N) at 3. Plaintiff
forwarded the same to the defendants along with a demand for coverage in October

1

More specifically, in both the coal gasification process and the carbureted gas manufacture
process, tars and oils are generated which contain polynuclear aromatic hydrocarbons (“PAHs”),
which are carcinogenic. See e.g., doc. 133-1 at 8; Unites depo. (doc. 144-1) at 38.
2

Defendants dispute that Travelers and its subsidiaries insured plaintiff continuously from
1947 until 1984 because portions of policies issued between 1947 and 1967 are missing.
Defendants’ brief in opposition (doc. 163) at 2. No evidence of any policies issued prior to 1967
has been submitted to the court. By Opinion and Order dated February 2, 2011, this court has
previously ruled that the only proof of an insurance contract between the parties is for July 10,
1967, to July 10, 1983. See Memorandum Opinion and Order of February 2, 2011 (doc. 66), at 2-3.
2

2008. Id., at 1. In November 2008 defendants notified plaintiff that there was no
“formal claim” and thus there could be no coverage until “such a claim or lawsuit is
received.” Doc. 130-22 (Exhibit P). In June 2009 the plaintiff received a formal PRP
letter, which it again forwarded to the defendant.3 Doc. 130-21 (Exhibit O). On
February 3, 2010, the defendants informed plaintiff that there was no “suit” and hence
there was no defense obligation on its part. See Memorandum Opinion of December
7, 2010 (doc. 51), at 8-9; see also doc. 130-23 (Exhibit Q). The plaintiff’s claims
include Declaration of Duty to Defend; Reimbursement for Defense Costs; Bad
Faith; Declaration of Duty to Indemnify; and Waiver and Estoppel. In sum, this case
concerns whether defendants’ denial of insurance coverage to plaintiff was
reasonable, and if not, whether such denial was in bad faith.4
Because the parties agreed that “no Alabama state court or any federal court
applying Alabama law ha[s] ever addressed whether a PRP letter from the EPA

3

Under CERCLA, a PRP shall be liable for: “(A) all costs of removal or remedial action
incurred by the United States Government or a State or an Indian tribe not inconsistent with the
national contingency plan; (B) any other necessary costs of response incurred by any other person
consistent with the national contingency plan; (C) damages for injury to, destruction of, or loss of
natural resources, including the reasonable costs of assessing such injury, destruction, or loss
resulting from such a release; and (D) the costs of any health assessment or health effects study
carried out under section 9604(i).” 42 U.S.C. § 9607(a)(4).
4

By separate opinion, the court has already determined that the denial of coverage was not
taken in “bad faith.”
3

satisfies the “suit” requirement under a liability policy,”5 the court certified this
question to the Alabama Supreme Court. See Travelers Casualty and Surety
Company v. Alabama Gas Corp.., – So.3d – , 2012 WL 6720790 (Ala.2012). The
Supreme Court of Alabama responded by stating “[w]e answer this question in the
affirmative.” Id., at 1. With this background, the court considers the pending
motions on the duty to indemnify.
A. The Duty to Indemnify Claim:
The duty to indemnify does not rise out of the existence of a duty to defend.
See e.g., Allstate Indem. Co. v. Lewis, 985 F.Supp. 1341, 1349 (M.D.Ala.1997)
(“Although the existence of a duty to defend may be established by the allegations in
the injured party's complaint, the insurer’s liability to the insured is ultimately
established by what is developed at trial.”). “Although the bare allegations of the
complaint may trigger an insurer’s duty to defend its insureds, ‘[t]he duty to pay ...
must be analyzed separately.’” Porterfield v. Audubon Indem. Co., 856 So.2d 789,
792 (Ala.2002) (quoting United States Fid. & Guar. Co. v. Armstrong, 479 So.2d
1164, 1167 (Ala.1985)). “The insured’s conduct rather than the allegedly injured
person’s allegations determine whether the insurer has a duty to indemnify.” Tanner

5

Defendants’ brief in opposition to plaintiff's motion for summary judgment (doc. 162, at
12), citing to plaintiff's brief (doc. 22) at 1, 17, 19.
4

v. State Farm Fire & Cas. Co., 874 So.2d 1058, 1066 (Ala.2003) (quoting City
Realty, Inc. v. Continental Cas. Co., 623 So.2d 1039, 1047 (Ala.1993)).
The court has before it the following documents on plaintiff’s claim that
defendants have a duty to indemnify: Plaintiff’s motion for partial summary
judgment on defendants’ duty to indemnify (doc. 128); plaintiff’s brief and evidence
in support of said motion (docs. 130, 140-148, 150, 175-176); defendants’ opposition
to plaintiff’s motion and evidence in support of said opposition (doc. 163) and the
plaintiff’s reply thereto (doc. 182). The defendants also filed a motion for summary
judgment on “trigger of coverage” (doc. 132); and a brief and evidence in support of
said motion (docs. 133-134, 149), to which the plaintiff filed a response and evidence
in opposition (docs. 161, 165), and defendants thereafter filed a reply (doc. 180).
Under the defendants’ “trigger of coverage” argument, there is no duty to indemnify
because no event triggered coverage during any of the policy periods.
Plaintiff seeks to have defendants indemnify it for the sums plaintiff agreed to
pay to EPA pursuant to an Administrative Settlement Agreement and Order on
Consent for Removal Action (“AOC”). Plaintiff’s motion (doc. 128). Conversely,
the defendants argue that neither the use of the property nor the value of the property

5

was impaired in any way prior to 2008.6 Defendants’ brief in support (doc. 133), at
4.
In response to plaintiff’s requests for coverage to defendants, defendants
informed plaintiff that defendants were reviewing the file and any potentially
applicable policies, and repeatedly “advise[d] that Alagasco act in a manner that it
believes will best protect its interests with respect to the USEPA’s AOC.” See docs.
130-27 (Exhibit U) and 130-28 (Exhibit V). Thus, in October 2009, plaintiff
executed the AOC with the Huntsville Housing Authority and the EPA. Doc. 130-29
(Exhibit W). In carrying out the work called for in the AOC, plaintiff expended
approximately four million dollars. Doc. 130-33 (Exhibit AA). Plaintiff asserts that
defendants have breached their duty to indemnify plaintiff. Defendants raise several
arguments in support of their position that there is no coverage under any of the
multiple policies issued.7
6

The testimony offered to support this statement does not do so directly. For instance, Mr.
Shea was asked if the City of Huntsville's use of the site was impaired by MGP contaminants, to
which he replied,
I don't think so. And, again, I – It would surprise me. I certainly have no knowledge
that it was impaired, it would surprise – and it actually would surprise me if the fact
that there has been a manufactured gas plant there years before really influenced
anybody’s decision about anything. It was a different time.
Doc. 133-7, at 3-4.
7

The issues before the court are questions of law. See B.D.B. v. State Farm Mut. Auto. Ins.
Co., 814 So.2d 877, 879 (Ala.Civ.App. 2001) ("The interpretation of an insurance contract presents
a question of law"); American and Foreign Ins. Co. v. Tee Jays Mfg. Co., 699 So.2d 1226
6

B. The Duty to Indemnify (plaintiff’s brief in support (doc. 130), at 8)
Plaintiff relies on Alabama law for the proposition that having settled with the
EPA, defendants have a duty to indemnify plaintiff for the amount of the settlement.
In Alabama the general rule is that, “if indemnity is sought against an indemnitor
without notice of either the original suit or of the settlement by the indemnitee,” then
the indemnitee has the burden of establishing that it was actually liable to the plaintiff
and that the settlement was a reasonable one. Watts v. Talladega Fed. Sav. & Loan
Ass'n, 445 So.2d 316, 320 (Ala.Civ.App.1984). However, when the indemnitor has
actual notice of the suit and refuses to participate in reaching a settlement, Alabama
law requires a different burden of proof.
....A person legally liable for damages who is entitled to indemnity may
settle the claim and recover over against the indemnitor, even though he
has not been compelled by judgment to pay the loss....In the event that
an indemnitor is not afforded the alternative of participating in a
settlement or conducting the defense against the original claim, an
indemnitee settling the claim will have the burden of establishing actual
(Ala.1997) ("interpretation of an insurance policy is a question of law for the court to decide.") A
court must enforce the insurance policy as written if the terms are unambiguous. Rogers v. State
Farm Fire and Cas. Co., 2007 WL 2966694, *8 (Ala.2007); citing Safeway Ins. Co. of Alabama v.
Herrera, 912 So.2d 1140, 1143 (Ala.2005). See also State Farm Fire and Casualty Co. v. Davis,
612 So.2d 458, 466 (Ala.1993 ("if a contract is plain and free from ambiguity ... there is no room
for construction, and it is the duty of the court to enforce it as written").
Whether a clause in an insurance policy is ambiguous is a question of law to be decided by
the trial court. Auto-Owners Ins. Co. v. American Cent. Ins. Co., 739 So.2d 1078, 1081
(Ala.1999); First Mercury Syndicate, Inc. v. Franklin County, 623 So.2d 1075 (Ala.1993). "A
contract is not ambiguous merely because the parties disagree upon the correct interpretation or
upon whether it is reasonably open to just one interpretation." U.S. Quest, LTD, 2000 WL 1300363,
* 3 (5th Cir.2000), citing Childers v. Pumping Systems, Inc., 968 F.2d 565, 569 (5th Cir.1992).
7

liability to the original plaintiff rather than the lesser burden of showing
potential liability.
However, when the indemnitor has notice of the claim and refuses to
defend, the indemnitor is bound by any good faith reasonable settlement,
and the indemnitee need only show potential liability.
Liberty Mutual Insurance Co. v. Wheelwright Trucking Co., Inc., 851 So.2d 466, 476
(Ala.2002)(quoting 41 Am.Jur.2d Indemnity § 46 (1995)) (emphasis and footnotes
omitted).
Rather than participating in the settlement discussions, the defendants declared
a lack of any duty to provide a defense or coverage.8 The record contains substantial
evidence that plaintiff provided defendants notice and opportunity to participate in
the negotiations which culminated in plaintiffs’ 2009 AOC with the EPA. See e.g.,
Stone Bldg. Co. v. Star Elec. Contractors, Inc., 796 So.2d 1076, 1090-1091
(Ala.2000) (finding under similar facts duty to indemnify was created). However,
Alabama law contains yet a further limitation on the right to indemnification, namely
that an indemnitee must show that the “fact situation of the original claim was
covered by the contract of indemnity.” FabArc Steel Supply, Inc. v. Composite Const.

8

In December 2010 this court ordered that defendants had a duty to defend, but this was
more than a year after plaintiff had already entered the AOC with the EPA. Plaintiff mistakenly
refers to this opinion as issuing in December 2011. Plaintiff’s brief in support (doc. 130) at 17.
Additionally, plaintiff omits the fact that the court modified the December 2010 Opinion and Order
(docs. 51 and 52) by subsequent opinion and order on February 2, 2011 (doc. 66), specifically to
hold that no evidence of an insurance policy from any of the defendant entities prior to 1967 was
before the court.
8

Systems, Inc., 914 So.2d 344, 356 (Ala.2005); see also Peerless Landfill Co., Inc. v.
Haleyville Solid Waste Disposal Authority, 941 So.2d 312, 317 (Ala.Civ.App.2006).
Thus, in order to rule on the question of indemnity, the court must first consider
whether there is policy coverage for clean up of environment contamination.
C. Whether plaintiff has proven the EPA directives requiring clean up of
contamination are covered by any policy of insurance issued by defendants
(defendants’ brief in opposition (doc. 133), at 5-6).
Defendants assert no “occurrence” took place during any policy period, thus
there is no coverage available. Defendants’ brief in opposition (doc. 133) at 7-9. In
the 1967-1970 policy, “occurrence” is defined as follows:
(a) an accident that takes place during the policy period, or
(b) in the absence thereof, a continuous or repeated exposure during the
policy period to conditions which unexpectedly and unintentionally
causes personal injury or injury to or destruction of tangible property,
including the loss or use thereof. When any one such exposure exists
prior to or after, as well as during the policy period, causing continuous
or repeated injury or destruction, this policy shall apply only to the
portion of each injury or destruction caused during the policy period.
All such exposure to substantially the same general conditions existing
at or emanating from each premises location shall be deemed one
occurrence.
Doc. 130-19, at 4.

9

Defendants allege that the continuous contamination of the property up to,
during, and after the 1940s does not fit the policy definition of “occurrence.” Under
Alabama law, the insured party bears the burden of proving coverage by showing that
a claim falls within the policy. Employers Mut. Cas. Co. v. Smith Const. &
Development, LLC 2013 WL 2635649, *6 (N.D.Ala.2013). See also Colonial Life
& Accident Ins. Co. v. Collins, 280 Ala. 373, 194 So.2d 532, 535 (1967) (citation
omitted); Alabama Hosp. Ass'n Trust v. Mutual Assur. Soc. of Alabama, 538 So.2d
1209, 1216 (Ala.1989) ("The trial court correctly placed the burden on AHAT as the
one seeking coverage to prove that coverage existed within the terms of the policy.");
Jordan v. National Acc. Ins. Underwriters Inc., 922 F.2d 732, 735 (11th Cir.1991)
("Under Alabama law the general rule is that the insured bears the burden of proving
coverage."); Thorn v. American States Ins. Co., 266 F.Supp.2d 1346, 1349
(M.D.Ala.2002) (“Under Alabama law, the insured bears the burden to establish
coverage by demonstrating that a claim falls within the policy ...”).
The plaintiff argues that the “occurrences” which give rise to damages in this
case include the demolition of the remaining structures at the site prior to the
construction of the housing project, the construction of the housing project itself, and
the commencement of continuous and repeated exposure to conditions on the part of

10

the residents of Searcy Homes.9 Plaintiff’s brief in support (doc. 130), at 15. The
plaintiff also argues each of these events took place during the 1967 to 1983 policy
period, and hence there must be coverage by the 1967 to 1983 policy. Id. at 15, 20.
Defendants respond that none of these events constituted an “occurrence” because the
EPA found plaintiff to be a PRP solely on the ground that it is the successor to the
owner/operator of the site at the time of disposal of the hazardous substances.
Defendants’ brief in opposition (doc. 133), at 10; citing doc. 133-1 at 8. In the AOC,
the EPA held in relevant part that

9

The plaintiff argues that the demolition and construction of new housing in the late 1960s
through 1971 constitutes both the “occurrence” triggering coverage and the damages therefrom.
Faced with a similar argument the District Court for the Southern District of New York commented
In particular, with respect to environmental claims, the court held the policy required
"an actual release of pollution" in order to trigger coverage... In explaining its
conclusion, the court in OneBeacon relied significantly on the analysis in Long
Island Lighting Co. v. Allianz Underwriters Ins. Co., 301 A.D.2d 23, 749 N.Y.S.2d
488 (1st Dep't 2002) ( "LILCO" ). The court in LILCO reasoned that if migration of
preexisting contaminants was an "event" under the policy terms, the "event" and the
"happening" resulting from the "event" would be one and the same. See id. at 31–32,
749 N.Y.S.2d 488. "It would be illogical to deem the continuing migration of
preexisting contaminants to be both the damage itself and the cause of the damage."
Id.; but see, e.g., Cessna Aircraft Co. v. Hartford Acc. & Indem. Co., 900 F.Supp.
1489, 1504 (D.Kan.1995) ("Exposure of groundwater to contaminants which occurs
during the policy period could constitute an event within the meaning of the policy
language."). The Court is persuaded by this analysis, and concludes that New York,
Massachusetts, and Rhode Island would follow LILCO. Thus, any assertion that
hazardous waste deposited at the Mendon Road site migrated to the surrounding
environment during the relevant policy periods fails to allege an event under the
moving defendants' policies.
Narragansett Elec. Co. v. American Home Assur. Co., 2013 WL 432610, *19 (S.D.N.Y.2013).
11

d. In 1946, HG merged with the Alabama Gas Company, and the
Alabama Natural Gas Corporation. The corporate successor emerged
using the name Alabama Gas Company.
e. In the September 27, 1946, “Agreement of Merger,” the new Alabama
Gas Company assumed all of the “debts, liabilities, and duties” of its
predecessors. During this same year, the corporation began to produce
gas manufactured only from propane.
f. In 1948, Alabama Gas Company merged with Birmingham Gas
Company and became the Alabama Gas Corporation (AGCorp). At
some point in time, Alabama Gas Corporation, headquartered in
Birmingham, Alabama, became commonly known as Alagasco.
g. On December 30, 1949, the City of Huntsville purchased the facility, with
all of its structures and equipment, from AGCorp/Alagasco to construct
its own natural gas system: Huntsville Gas System (HGS).
h. By the mid 1960's, the facility had ceased manufacturing operations
and most structures were dismantled. On October 18, 1967, the City of
Huntsville sold the property on which the facility had been located,
along with other adjoining property, to HHA. By December 1970, no
buildings from the original facility remained. The property along with
adjoining property was subsequently developed into low income public
housing, Searcy Homes, which was occupied in 1971.
....
l. Analytical data confirms that carcinogenic polynuclear aromatic
hydrocarbons (cPAHs) exist at the Site at concentrations above
established Removal Action Levels (RALs.). The Department of Health
and Human Services (DHHS) has determined that some cPAHs may
reasonably be expected to be carcinogens.
m. The Site is located within a low-income residential apartment
complex that is freely accessible. Contaminated surface soils and
contamination of a drainage ditch may present a health risk to residents,
especially children. In addition, the Site is regularly mowed and soils
12

may become airborne. Children frequently play at the Site and are
potentially exposed to cPAHs. A vegetable garden was maintained
within the affected area for several years, and residents regularly
consumed produce from the garden. Contaminants in dust or soil may
have settled on leaf or fruit surfaces and presented a risk when food
grown in the neighborhood garden was ingested.
n. The cPAHs detected in the surficial soils at the Site are hazardous
substances which may be released posing an imminent and substantial
threat to the health of nearby Site residents....
V. EPA'S CONCLUSIONS
DETERMINATIONS

OF

LAW

AND

10. Based on the Findings of Fact set forth above, and the
Administrative Record supporting this removal action, EPA has
determined that:
d. Respondents are both responsible parties under Section 107(a) of
CERCLA, 42 U.S.C. § 9607(a), and are liable for performance of the
response actions and for response costs incurred and to be incurred at
the Site.
e. Respondent Alagasco is the successor to the owner and/or operator of
the facility at the time of disposal of hazardous substances, as defined
by Section 101(20) of CERCLA, 42 U.S.C. 9601(20), and within the
meaning of Section 107(a) (2) of CERCLA, 42 U.S.C. § 9607(a)(2).
Doc. 133-1 at 6-8.
In sum, plaintiff became a PRP by fact of its ownership of the land numerous
years prior. Turning back to the relevant policy definitions, as set forth supra, an
“occurrence” is defined as either (a) an accident that takes place during the policy
period, or (b) a continuous or repeated exposure during the policy period to
13

conditions which unexpectedly and unintentionally cause personal injury or injury to
or destruction of tangible property.”

The policy then states that if that continuous

or repeated exposure “exists prior to or after, as well as during the policy period,
causing continuous or repeated injury or destruction, this policy shall apply only to
the portion of each injury or destruction caused during the policy period. All such
exposure to substantially the same general conditions existing at or emanating from
each premises location shall be deemed one occurrence.” Doc. 130-19, at 4.
The question before this court is whether there was “a continuous or repeated
exposure during the policy period to conditions which unexpectedly and
unintentionally cause[d] personal injury or injury to or destruction of tangible
property, including the loss or use thereof.”
With the foregoing in mind, the court turns to the question of what policies of
insurance the parties entered into. The parties dispute what policies are actually
provable. According to plaintiff, it purchased insurance coverage from the various
Travelers entities from 1947 until 1983. Plaintiff’s brief in support (doc. 130) at 4.
According to defendants, even if the same is true, plaintiff bears the burden of
establishing the terms and conditions of the policies, and plaintiff cannot meet this
burden. Defendants’ brief in opposition (doc. 163), at 2. Neither party has produced

14

to the court a policy of insurance predating 1967.10 Instead, the plaintiff argues that
the policy entered in 1967 and continued through 1983 provides indemnity under the
facts of this case. Plaintiff’s brief in support (doc. 130) at 9. The plaintiff bases this
argument on Alabama law which directs that the test for whether an occurrence is
within a policy period turns on a review of when the “injurious exposure” took place,
and not when the injurious condition itself was created. Plaintiff’s brief in support
(doc. 130) at 10, citing U.S. Fidelity and Guaranty Co. v. Warwick Development Co.,
446 So.2d 1021, 1024 (Ala.1984). In that case, the Alabama Supreme Court ruled
that
“[A]s a general rule the time of an ‘occurrence’ of an accident within
the meaning of an indemnity policy is not the time the wrongful act was
committed but the time the complaining party was actually damaged.”
Muller Fuel Oil Co. v. Insurance Company of North America, 95
N.J.Super. 564, 232 A.2d 168 (1967), quoted in Deodato v. Hartford
Ins. Co., 363 A.2d at 365. See also Annot., 57 A.L.R.2d 1385. By
adopting this view, we necessarily overrule Wixom Brothers Co. v.
Truck Insurance Exchange, 435 So.2d 1231 (Ala.1983).

10

The parties do not dispute that the plaintiff bears the burden of proof to establish the
existence and terms of a policy of insurance, although they dispute how exacting the standard of
proof is. While the existence of such is a question of fact, the plaintiff has failed to offer any such
proof of a policy predating 1967, nor does plaintiff make any such argument. Rather, the plaintiff
limits itself to such obscure statements as “should Alagasco need to prove terms outside the 1967 to
1983 period already established, it will easily meet either standard,” in reference to the standard of
proof applied to the terms of “lost” policies. Plaintiff’s opposition (doc. 165), at 15, n. 4. Whether
proof by a preponderance of the evidence or by clear and convincing evidence is the correct
standard for establishing the existence and terms of lost insurance policies, the plaintiff has not met
either.
15

U.S. Fidelity & Guar. Co., 446 So.2d at 1024. See also American States Ins. Co. v.
Martin, 662 So.2d 245, 250 (Ala.1995). However, the United States District Court
for the Southern District of Alabama later clarified
The issue in Warwick was not whether coverage extends to property
damage occurring before the complaining party receives the property
(there was not, as here, a succession of property owners) but whether
coverage can be based on an insured's wrongful act within the policy
period when the only injury from the wrongful act occurs outside the
policy period.
Sua Ins. Co. v. S & O Investments, LLC, 2011 WL 5121285, *3 (S.D.Ala.2011).11
According to plaintiff, the exposure to injury occurred in 1971 when Searcy
Public Housing became occupied. Plaintiff’s brief in support (doc. 130) at 11-15.
According to defendant, plaintiff is simply wrong, because no directive to clean the
site came until 2008, and that directive is the time of injury to the plaintiff.
Defendants’ response (doc. 163) at 13.
To make sense of the parties’ widely divergent arguments, the court begins
with consideration of why plaintiff has any liability at all. To have liability for any
portion of the clean up expenses as a PRP, the entity in question must be a “covered
person” under 42 U.S.C. § 9607(a). See e.g., Redwing Carriers, Inc., v. Saraland
Apartments, 94 F.3d 1489, 1496–97 (11th Cir.1996). 42 U.S.C. § 9607(a) defines
11

In its reply, the plaintiff argues that this language somehow supports its argument that the
covered injury occurred in the 1960s and 1970s. See plaintiff’s reply (doc. 182) at 2-3 and n.1.
16

four categories of “covered persons” who may be liable under CERCLA: (1) current
owners and operators of the facility; (2) past owners or operators of the facility when
disposal of hazardous substances occurred; (3) arrangers for disposal of hazardous
substances; and (4) transporters of hazardous substances. Id., See also Redwing
Carriers, 94 F.3d at 1496. The only category into which plaintiff falls is the second,
“past owners ... of the facility when disposal of hazardous substances occurred....”
Plaintiff ceased ownership in 1949. Of course, while the pre-1949 activities were the
cause of future exposure to injurious substances beginning in 1971, the injury to the
land was already present. The plaintiff confuses the fact that the injury to land was
not causing harm to humans prior to 1971, with the actual injury to land itself.
Furthermore, there was certainly no injury or liability to the plaintiff at that time.12
The court must give the terms in the policy before it their plain meanings. The
policy requires, “in the absence “ of an accident, “a continuous or repeated exposure
during the policy period to conditions which unexpectedly and unintentionally causes
... injury to ... tangible property.... When any one such exposure exists prior to or
after, as well as during the policy period, causing continuous or repeated injury or
destruction, this policy shall apply only to the portion of each injury or destruction

12

If the plaintiff had been sued by a resident of Searcy Housing for injuries resulting from
exposure to hazardous materials during the 1967 to 1983 policy periods, the plaintiff’s analysis
would be correct.
17

caused during the policy period.” Doc. 130-19, at 4. On its face, the policy requires
examination of the time of the injury to determine coverage.

While there was

“continuous ... exposure during the policy period,” the relevant question is whether
that exposure caused a continuous or repeated injury...” during the same. Thus, the
policies, on their face, apply only to injuries which occurred from 1967 to 1983,
regardless of when those injuries became known. The court finds this interpretation
to be in line with Alabama law which defines an “occurrence” for purposes of
indemnity as “the time the complaining party was actually damaged.” See e.g., State
Farm Fire & Cas. Co. v. Gwin, 658 So.2d 426, 428 (Ala.1995).
Courts around the country have formulated various tests for determining when,
in the context of claims for indemnification for costs of environmental clean-up, an
“occurrence” has taken place within the meaning of a liability insurance policy,
including (1) the “exposure” trigger, (2) the “actual injury” or “injury-in-fact” trigger;
(3) the “manifestation” or “discovery” trigger, and (4) the “continuous” trigger.
Quaker State Minit-Lube, Inc. v. Fireman’s Fund Ins. Co., 868 F.Supp. 1278, 1299
(D.Utah.1994); citing Dow Chem. Co. v. Associated Indem. Corp., 724 F.Supp. 474,
478 (E.D.Mich.1989). See also Martin J. McMahon, Annotation, Event Triggering
Liability Insurance Coverage as Occurring Within Period of Time Covered by
Liability Insurance Policy Where Injury or Damage Is Delayed-Modern Cases, 14
18

A.L.R.5th 695, 1993 WL 837774 (2006). Courts are split as to which trigger to apply,
and it is often dependent on the specific policy language at issue. Id. The court
considers each “trigger” and its applicability here.
Under the “exposure” trigger, liability under a CGL policy is triggered at the
time that the property is exposed to the hazardous substance. See e.g., Continental
Ins. Cos. v. Northeastern Pharmaceutical & Chem. Co., 811 F.2d 1180, 1190 (8th
Cir.1987), aff'd in part, rev'd in part on other grounds en banc, 842 F.2d 977, 984 (8th
Cir.), cert. denied, 488 U.S. 821, 109 S.Ct. 66, 102 L.Ed.2d 43 (1988). See also
Travelers Casualty and Surety Co. v. Providence Washington Ins. Co., 685 F.3d 22,
32-33 (1st Cir.2012) (a “continuous trigger” coverage standard “charges a loss to
policies in effect from the time of exposure to manifestation, and, thus, presumes
injury from the time of exposure through manifestation.”) Adoption of this theory
would require the court to ignore the plain language of the insurance policies and
Alabama law.
The “actual injury” or “injury-in-fact” trigger invokes coverage at the point
when actual injury or damage to the person or property occurs. “Under this theory,
an actual injury must occur during the time the policy is in effect in order to be
indemnifiable.” F. Powell, Insuring Environmental Cleanups; Triggering Coverage
for Environmental Property Damage under the Terms of a Comprehensive General
19

Liability Insurance Policy, 71 NEB.L.REV. 1194 (1992). The “actual injury” or
“injury-in-fact” trigger is premised upon the literal language of the standard CGL
policy's definition of “occurrence.” See e.g., Abex Corp. v. Maryland Casualty Co.,
790 F.2d 119, 127 (D.C.Cir.1986); accord, Detrex Chem. Indus. v. Employers Ins.
Co., 746 F.Supp. 1310, 1323 (N.D.Ohio 1990) (“an actual injury must occur during
the time the policy is in effect in order to be indemnifiable or compensable”);
Triangle Publications, Inc. v. Liberty Mutual Ins. Co., 703 F.Supp. 367, 370
(E.D.Pa.1989) (“the plain language of the CGL contract supports only one
construction: the injury-in-fact analysis”). See also Aetna Cas. & Sur. Co. v. Dow
Chemical Co., 10 F.Supp.2d 771 (E.D.Mich.1998) (holding indemnification coverage
under policy period is triggered if party could show that the relevant property
damage; i.e., soil or groundwater contamination, occurred during the policy period);
Browder v. United States Fidelity & Guaranty Co., 893 P.2d 132, 134 (Colo.1995)
(noting “basic tenet of liability insurance that a third party must suffer actual damage
within the policy period to recover under a liability policy.”); Kirkham, Michael &
Assoc., Inc. v. Travelers Indem. Co., 493 F.2d 475, 476 (8th Cir.1974) (applying South
Dakota law, holding no coverage for accident occurring after policy period but caused
by negligent design and supervision of water treatment plant during policy because

20

“[i]t is the damage incurred by ‘accident’ that triggers the policies' coverage, not the
preceding wrongful acts.”).
Applying this line of reasoning to the facts before this court, the injury to the
land occurred prior to 1949. The injury to the plaintiff occurred no earlier that
2008.13 The facts do not support a finding that the removal of structures from the land
and the construction of housing thereon caused any new injury to the land, the
hazardous substances were already present. The plaintiff argues that “it would be
virtually impossible to tear out multiple ancient industrial structures over the course
of two decades, plow up paved roads, and re-grade a former industrial site for a
housing development, all without causing some amount of redistribution of hazardous
substances.” Plaintiff’s response (doc. 165), at 4. However, even if the plaintiff
could prove a theoretical redistribution of hazardous substances, there is no allegation
that the plaintiff is liable for damages resulting from the redistribution of the same
between 1967 and 1983, and there is no evidence that additional hazardous
substances were added by plaintiff during this time. More importantly, plaintiff did
not undertake the activities in question and did not own the property during the

13

The plaintiff applies a “slipped on a banana peel” analogy to its theory of harm. See e.g.,
plaintiff’s response (doc. 165), at 9. Using the plaintiff’s analogy, its activities on the land prior to
1949 left the banana peel on the ground. The plaintiff had no injury from slipping on that peel until
2008. More importantly, the fact that others may have slipped on that peel in the intervening years
caused no harm to the plaintiff.
21

activities in question. Rather, all of its liability arises from its activities prior to the
1949 sale of the land.
As to the injury to land, when faced with a similar issue, the Eighth Circuit
Court of Appeals commented that “the crucial events-the improper disposal of the
hazardous wastes (wrongful act), the release of hazardous wastes into the
environment (exposure), the contamination of the environment (injury-in-fact),-all
happened virtually simultaneously,” and thus whether to apply the “exposure” trigger
or the “injury in fact” trigger made little difference. Continental Ins. Companies v.
Northeastern Pharmaceutical & Chemical Co., Inc.,

842 F.2d 977, 984 (8th

Cir.1988).
Moving on to the two remaining theories, the court again finds neither of them
applicable to the facts before this court. The “manifestation” trigger invokes
coverage when, for example, in an asbestos contamination case, an asbestos-related
disease becomes “reasonably capable of medical diagnosis” during the policy
period.14 See, e.g., Eagle–Picher Indus., Inc. v. Liberty Mutual Ins. Co., 523 F.Supp.

14

Plaintiff argues that defendants advocate for adoption of the manifestation theory.
Plaintiff’s response (doc. 165), at 1. The court disagrees, finding no support in defendants’ brief for
adoption of such a trigger. Plaintiff also asserts that defendants failed to comply with “section D.2.a
of the Local Rules Appendix II, Summary Judgment Requirements...” Id., at 3. The undersigned
notes that the “Local Rules” contain no requirements for summary judgment. Rather, the “Uniform
Initial Order” contains “Appendix II, Summary Judgment Requirements.” The same is not used by
the undersigned, and certainly was never entered in this case. See e.g., Order of October 21, 2010
(doc. 46) (“The parties shall not comply with the Uniform Initial Order.”).
22

110 (D.Mass.1981), modified, 682 F.2d 12, 17 (1st Cir.1982), cert. denied, 460 U.S.
1028, 103 S.Ct. 1279, 75 L.Ed.2d 500 (1983). See also Griffin v. Unocal Corp., 990
So.2d 291 (Ala.2008) (a cause of action accrues only when there is a manifest,
present injury); Mraz v. Canadian Universal Ins. Co., 804 F.2d 1325, 1328 (4th
Cir.1986) (“we believe that the better rule is that the occurrence is deemed to take
place when the injuries first manifest themselves”). Clearly, application of a
manifestation trigger is of no benefit to the plaintiffs, because the contamination at
issue here caused no injury for which the plaintiff is responsible until the AOC in
2009.15
The “continuous” trigger applies a theory that coverage is continuously
triggered from the moment of exposure to hazardous materials through the time when
the injury manifests itself. See, e.g., F. Powell, Insuring Environmental Cleanup:
Triggering Coverage for Environmental Property Damage Under the Terms of a
Comprehensive General Liability Insurance Policy, 71 Neb.L.Rev. 1194 (1992)
(citing New Castle County v. Continental Casualty Co. (CNA), 725 F. Supp. 800
(D.Del. 1989)). See also Travelers Cas. and Sur. Co. v. Providence Washington Ins.
Co., Inc., 685 F.3d 22, 29-30 (1st Cir.2012) (finding trigger for coverage as time when

15

The court has no knowledge of whether any resident of Searcy Homes ever experienced
any injury from the contamination, and the same would not be relevant to the issues before this
court.
23

insured had some reason to test for contamination and could have actually discovered
the same with reasonable diligence).
Applying the reasoning of the foregoing to the facts before this court, in light
of Alabama law and the relevant policy language, the court finds Alabama applies an
injury in fact requirement for indemnity under a policy of insurance. As previously
stated, any injury to land occurred prior to 1949. The fact that the landscape was
altered approximately twenty years later does not change this finding. Similarly, the
fact that people moved onto the land, and that the risk of exposure to those
individuals triggered the EPA’s clean up directives, and that those directives in turn
triggered plaintiff becoming a PRP and entering an AOC, does not change the finding
either.16
The court therefore finds that there is no indemnity coverage based on the 1967
policy of insurance which is in evidence before this court. Based on the foregoing,
the court shall rule by separate Order that the plaintiff’s motion for partial summary
judgment on the issue of indemnity is DENIED. The court shall further rule that the
defendant’s motion for summary judgment on the trigger of coverage is GRANTED.

16

Even if the court could somehow find the construction and occupation of Searcy Homes
triggered coverage, there is no evidence that the plaintiff could not have discovered the
contamination to the land at that time. Hence, such a finding of a trigger of coverage would require
the court to now find this action barred by the relevant statutes of limitations.
24

D. Other Policies of Insurance
The plaintiff makes passing references to the existence of other policies of
insurance. For example, the plaintiff asserts that
Travelers insured Alagasco from 1947 until 198417 through several
policies, including St. Paul Fire and Marine Insurance Company policy
number 501JB1000, which had a policy period from June 10, 1967, to
July 10, 1983 (St. Paul Policy 501 JB1000 (attached as Exhibit M)
(identified as Ex. 33 to the Deposition of Robert Harris, Aug. 24, 2011);
see also Mem. Op. 4, Dec. 7, 2011 (sic) (Doc. 51); Mem.Op. and Order
2-3, Feb. 2, 2011 (Doc. 66).
Plaintiff’s brief in support (doc. 130) at 4-5.
As stated above, the court has determined that the one policy on which plaintiff
relies does not provide coverage. The defendant, however, continues on to discuss
umbrella policies issued by defendants’ entities to plaintiff. Defendants’ brief in
support (doc. 133), at 13; defendants’ brief in opposition (doc. 163), at 16. That
policy was first issued on July 10, 1977, and renewed yearly through July 10, 1981.
See defendant exhibit 13 (doc. 133-15). The court notes both that this policy does not
cover a relevant time period, and that the plaintiff has not argued that this policy
provides indemnity coverage to it for the AOC. Rather, the plaintiff specifically
argues that

17

Although Alagasco asserts it had insurance policies with defendants from 1947 through
1984, as the court has repeatedly noted, at this point only the 1967 policy, which the parties agree
was renewed until 1983, not 1984, is before the court.
25

the continuous exposure of resident individuals to hazardous substances
from the former MPG that commenced in 1971, constitute occurrences
falling within the grant of coverage under Travelers 1967 to 1983
insurance policy.
Plaintiff’s brief in support (doc. 130, at 20).
The court declines to guess at the content and existence of policies not offered,
relied on, or discussed by the plaintiff.
The plaintiff also argues that construction of the housing project on the land
was an “accident” for purposes of the policy. Plaintiff’s response (doc. 165) at 11.
Even if the court could find that the release of the hazardous substances were
themselves “accidents,” those “accidents” happened long before the policy of
insurance was entered or the housing was constructed. Although harm from building
housing on a contaminated piece of property could be construes as accidental, that
harm was not to plaintiff, and plaintiff is not liable for the harm caused by
construction of Searcy Housing. Rather, as the court has already stated, plaintiff’s
liability is as a former owner/operator of the site.18 Whether any residents of Searcy
Homes ever suffered concrete injuries from construction of the homes on

18

Plaintiff recognizes this, stating “Alagasco had no involvement in, or even knowledge of,
the decision to convert the property to residential use... Similarly, Alagaso had no involvement in or
knowledge of the demolition of the remaining structures from the former MGP, the removal of old
roads, the re-grading of the property, or the construction of the housing project.” Plaintiff’s
opposition (doc. 165) at 16.
26

contaminated land, and who could be held liable for those injuries, is not before this
court.
Hence, for the reasons set forth herein, the court shall grant the defendants’
motion for summary judgment (doc. 132) and deny the plaintiff’s motion (doc. 128).
DONE and ORDERED this the 16th day of July, 2013.

INGE PRYTZ JOHNSON
SENIOR U.S. DISTRICT JUDGE

27