United States Fire Insurance Company v. Estate of James Campbell et al
Filing
145
ORDER GRANTING IN PART AND DENYING IN PART THE ESTATE OF JAMES CAMPBELL'S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING POLICY TERMS "SUIT," "DAMAGES," AND "PROPERTY DAMAGE" 65 ; DENYING THE ESTATE OF JAMES CAMPBEL L'S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING QUALIFIED POLLUTION EXCLUSION AND OCCURRENCE DEFENSES 70 ; AND DENYING UNITED STATES FIRE INSURANCE COMPANY'S COUNTER-MOTION FOR PARTIAL SUMMARY JUDGMENT RE: NO DUTY TO INDEMNIFY ESTATE OF JAMES CAMPBELL BECAUSE NO "SUIT" AND NO "DAMAGES" 120 . Signed by JUDGE LESLIE E. KOBAYASHI on 12/29/2011. ORDER follows hearing held 12/5/2011; minutes: doc no. 143 . (afc)< center>CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
UNITED STATES FIRE INSURANCE
COMPANY,
)
)
)
)
Plaintiff,
)
vs.
)
)
ESTATE OF JAMES CAMPBELL, ET )
)
AL.,
)
)
Defendants.
_____________________________ )
CIVIL NO. 11-00006 LEK-KSC
ORDER GRANTING IN PART AND DENYING IN PART THE
ESTATE OF JAMES CAMPBELL’S MOTION FOR PARTIAL SUMMARY JUDGMENT
REGARDING POLICY TERMS “SUIT,” “DAMAGES,” AND “PROPERTY DAMAGE”;
DENYING THE ESTATE OF JAMES CAMPBELL’S MOTION FOR
PARTIAL SUMMARY JUDGMENT REGARDING QUALIFIED POLLUTION EXCLUSION
AND OCCURRENCE DEFENSES; AND DENYING UNITED STATES FIRE
INSURANCE COMPANY’S COUNTER-MOTION FOR PARTIAL
SUMMARY JUDGMENT RE: NO DUTY TO INDEMNIFY
ESTATE OF JAMES CAMPBELL BECAUSE NO “SUIT” AND NO “DAMAGES”
Before the Court are: 1) Defendant Estate of
James Campbell’s (“Campbell Estate”) Motion for Partial Summary
Judgment Regarding Policy Terms “Suit,” “Damages,” and “Property
Damage” (“Suit Motion”), filed on June 6, 2011; [dkt. no. 65;] 2)
Campbell Estate’s Motion for Partial Summary Judgment Regarding
Qualified Pollution Exclusion and Occurrence Defenses
(“Occurrence Motion”), filed on June 6, 2011; [dkt. no. 70;] and
3) Plaintiff United States Fire Insurance Company’s (“U.S. Fire”)
Counter-Motion for Partial Summary Judgment Re: No Duty to
Indemnify Estate of James Campbell Because No “Suit” and No
“Damages” (“Counter-Motion”), filed on November 14, 2011 [dkt.
no. 120].
U.S. Fire filed its memorandum in opposition to the
Occurrence Motion on November 14, 2011.1
[Dkt. no. 116.]
On
November 21, 2011, Campbell Estate filed its memorandum in
opposition to the Counter-Motion and its reply in support of the
Occurrence Motion.
[Dkt. nos. 127, 130.]
U.S. Fire filed its
reply in support of the Counter-Motion on November 28, 2011.
[Dkt. no. 134.]
These matters came on for hearing on December 5, 2011.
Appearing on behalf of Campbell Estate were Patricia McHenry,
Esq., and Amanda Jones, Esq., and appearing on behalf of U.S.
Fire were Jennifer Kokes, Esq., and Patricia Wall, Esq.
Also
present were Wesley Ching, Esq., on behalf of Sentinel Insurance
Company, Ltd. and Pacific Insurance Co. Ltd., and Kenneth Sumner,
Esq., by telephone, and Tracie Kobayashi, Esq., on behalf of
American Home Assurance Company.
After careful consideration of
the motions, supporting and opposing memoranda, and the arguments
of counsel, the Court rules as follows for the reasons set forth
below: Campbell Estate’s Suit Motion is HEREBY GRANTED IN PART
AND DENIED IN PART; Campbell Estate’s Occurrence Motion is
DENIED; and U.S. Fire’s Counter-Motion is DENIED.
1
The memorandum in support of the Counter-Motion is also
U.S. Fire’s opposition to Campbell Estate’s Suit Motion.
2
BACKGROUND
I.
Factual Background
In December 1973, Campbell Estate leased the property
in question, 91-476 Komohana Street in Campbell Industrial Park
(“the Site”), to Griffin Forest Industries, Inc. (“Griffin”).
Griffin subleased and later assigned the lease to Chem-Wood
Treatment Company (“Chem-Wood”).2
Chem-Wood operated a wood
treatment business on the Site from 1973 through October 1988.
As part of its operations, Chem-Wood used copper chromated
arsenic and pentachlorophenol, as well as other chemicals.
[Campbell Estate Suit CSOF Nos. 1-3; U.S. Fire’s Response to
Campbell Estate Suit CSOF, filed 11/14/11 (dkt. no. 122) (“U.S.
Fire Responsive Suit CSOF”), at ¶ 1 (admitting, inter alia,
Campbell Estate Suit CSOF Nos. 1-3).]
Campbell Estate asserts
that, as a result of Chem-Wood’s waste management practices,
accidental spills, and drippage from wet, treated wood, these
chemicals were released onto the Site and contaminated the Site’s
soil and groundwater, as well as surrounding properties.
[Campbell Estate Suit CSOF Nos. 4-5.]
2
According to Campbell Estate, in December 1989, Campbell
Estate sold the Site to Chem-Wood via a 1031 Exchange. [Campbell
Estate’s Separate & Concise Statement of Material Facts in Supp.
of Suit Motion, filed 6/6/11 (dkt. no. 66) (“Campbell Estate Suit
CSOF”), Decl. of Carol Quesinberry (“Quesinberry Decl.”), at ¶¶
2-3, 5.]
3
In a letter dated November 24, 2008, the United States
Environmental Protection Agency (“EPA”) notified Campbell Estate
that, pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”), as a previous owner
and/or operator of the Site, Campbell Estate was a potentially
responsible party (“PRP”) required to perform clean-up actions
and/or to pay costs that the EPA incurred in cleaning up
contamination at the Site (“PRP Letter”).3
[Campbell Estate Suit
CSOF Nos. 6-7; U.S. Fire Responsive Suit CSOF at ¶ 1 (admitting,
inter alia, Campbell Estate Suit CSOF Nos. 6-9).]
The EPA directed Campbell Estate to undertake clean-up
operations to address Site contamination that occurred during
Chem-Wood’s operations.
The EPA’s clean-up requirements are set
forth in its December 2009 Final Remedy Decision (“FRD”).4
The
FRD required, inter alia: clean-up of soil contamination at the
Site and at surrounding properties; testing, analysis, and
monitoring of groundwater at and around the Site; removal of
contaminants from the groundwater; and implementation of land use
controls.
[Campbell Estate Suit CSOF Nos. 8-9; U.S. Fire
Responsive Suit CSOF at ¶ 1.]
In August 2010, Campbell Estate,
3
The PRP Letter is attached to the Campbell Estate CSOF as
Exhibit F to the Quesinberry Declaration. [Dkt. no. 66-19.]
4
The FRD is attached to the Campbell Estate Suit CSOF as
Exhibit J to the Declaration of David Franzel (“Franzel
Declaration”). [Dkt. nos. 69-2 to 69-5.]
4
Weston Solutions, Inc. (the current owner of the Site), and the
EPA entered into an Administrative Order on Consent for Final
Corrective Measures (“AOC”), which implemented the remedies
ordered in the FRD.5
[Campbell Estate Suit CSOF No. 10; U.S.
Fire Responsive Suit CSOF at ¶ 3 (admitting portions of Campbell
Estate Suit CSOF No. 10).]
Industrial Indemnity Company and Industrial Insurance
of Hawaii, Ltd. (collectively “Industrial Indemnity”) issued
several insurance policies to Campbell Estate covering the period
from May 1979 to April 1987 (“the Policies”).
successor by novation to the Policies.
U.S. Fire is the
[Campbell Estate Suit
CSOF Nos. 11-12; U.S. Fire Responsive Suit CSOF at ¶ 1
(admitting, inter alia, Campbell Estate Suit CSOF Nos. 11-12).]
Campbell Estate states that it tendered the defense of the EPA
Actions6 to U.S. Fire under the Policies.
[Campbell Estate Suit
CSOF No. 17; U.S. Fire Responsive Suit CSOF at ¶ 4 (admitting
certain facts in Campbell Estate Suit CSOF No. 17).]
U.S. Fire
“agree[d] to participate in the defense of the Estate under
Policy Nos. LV806-9513, LV812-0551, MP817-7108 and SV859-2335,
subject to a complete reservation of all rights and defenses[.]”
5
The AOC is attached to the Campbell Estate Suit CSOF as
Exhibit H to the Franzel Declaration. [Dkt. nos. 68-4 to 68-7.]
6
Campbell Estate refers to the PRP Letter, the FRD and the
AOC collectively as “the EPA Actions”. [Mem. in Supp. of Suit
Motion at 9.]
5
[Campbell Estate Suit CSOF, Decl. of Patricia J. McHenry
(“McHenry Suit Decl.”), Exh. K (letter dated 10/13/09 to Campbell
Estate’s counsel from U.S. Fire’s counsel, Latent/CD Claims
Unit).]
U.S. Fire also denied the request for a defense: under
“alleged Policy No. LC806-9720” because U.S. Fire could not
locate any evidence of that alleged policy, and Campbell Estate
did not provide any evidence or information about it; under
Policy No. SV877-2416 pursuant to that policy’s total pollution
exclusion; and under Policy Nos. LC812-0429 and LC817-7271
because those were umbrella policies where U.S. Fire would
provide a defense under primary polices.
[Id.]
U.S. Fire filed the instant action on January 4, 2011,
primarily seeking a declaratory judgment that it has no duty to
defend or indemnify Campbell Estate for the costs related to the
environmental contamination at the Site.
The principle arguments
U.S. Fire presents in support of its position that there is no
duty to defend or indemnify in this matter (“the coverage
defenses”) are set forth in paragraphs 30.(a) through (h) of the
Complaint.
[Complaint at pgs. 9-10.]
If the Court ultimately
determines that U.S. Fire is liable to Campbell Estate for any
amount, U.S. Fire seeks contribution from Campbell Estate’s other
insurers, which U.S. Fire has named as co-defendants.
Jurisdiction in this case is based on diversity.
6
[Id. at ¶ 2.]
Campbell Estate’s Suit Motion addresses the following
coverage defenses:
(a) The costs incurred and paid or to be
incurred by [Campbell] Estate do not constitute
“sums which the Insured shall become legally
obligated to pay as damages . . . .”;
(b) The costs incurred and paid or to be
incurred by [Campbell] Estate do not constitute
“damages because of bodily injury or property
damage”;
. . . .
(f) The costs incurred and paid or to be
incurred by [Campbell] Estate do not result from
or involve a “suit against the insured[.]”
[Complaint at ¶ 30.]
The Counter-Motion seeks a finding in favor
of U.S. Fire on those coverage defenses.
[Counter-Motion at 2.]
It seeks “summary judgment that it owes no duty to indemnify
Campbell [Estate] for the clean-up costs paid pursuant to the EPA
Orders because no ‘suit’ was filed and/or there are no ‘damages’
that Campbell was ‘legally obligated to pay’ because of ‘property
damage.’”
[Id. at 12.]
Campbell Estate’s Occurrence Motion addresses coverage
defense (c) - “The costs incurred and paid or to be incurred by
[Campbell] Estate were not caused by an ‘occurrence’ within the
meaning of The U.S. Fire Policies;” - and defense (d) - “The
costs incurred and paid or to be incurred by [Campbell] Estate
were not caused by an ‘occurrence’ taking place during the policy
periods of The U.S. Fire Policies[.]”
[Complaint at ¶ 30.]
Occurrence Motion also seeks a finding regarding U.S. Fire’s
7
The
claim that the qualified pollution exclusion negates coverage.7
[Mem. in Supp. of Occurrence Motion at 9.]
Campbell Estate notes
that U.S. Fire contends that the Policies contain an absolute or
total pollution exclusion, but the Occurrence Motion does not
seek a finding on the absolute or total pollution exclusion.
[Id. at 11 n.3.]
DISCUSSION
I.
Applicable Law Regarding Insurance Contract Interpretation
Federal jurisdiction in this case is based on
diversity.
[Complaint at ¶ 2.]
This district court has
recognized that:
Federal courts sitting in diversity apply
state substantive law and federal procedural law.
See Mason & Dixon Intermodal, Inc. v. Lapmaster
Int’l LLC, 632 F.3d 1056, 1060 (9th Cir. 2011)
(“When a district court sits in diversity, or
hears state law claims based on supplemental
jurisdiction, the court applies state substantive
law to the state law claims.”); Zamani v. Carnes,
491 F.3d 990, 995 (9th Cir. 2007) (“Federal courts
sitting in diversity jurisdiction apply state
substantive law and federal procedural law.”
(quotations omitted)). When interpreting state
law, a federal court is bound by the decisions of
a state’s highest court. Trishan Air, Inc. v.
Fed. Ins. Co., 635 F.3d 422, 427 (9th Cir. 2011).
In the absence of a governing state decision, a
federal court attempts to predict how the highest
state court would decide the issue, using
intermediate appellate court decisions, decisions
from other jurisdictions, statutes, treatises, and
7
Paragraph 30.(g) of the Complaint alleges: “The costs
incurred and paid or to be incurred by [Campbell] Estate are
excluded from coverage by The U.S. Fire Policies’ applicable
pollution exclusions[.]”
8
restatements as guidance. Id.; see also
Burlington Ins. Co. v. Oceanic Design & Constr.,
Inc., 383 F.3d 940, 944 (9th Cir. 2004) (“To the
extent this case raises issues of first
impression, our court, sitting in diversity, must
use its best judgment to predict how the Hawaii
Supreme Court would decide the issue.” (quotation
and brackets omitted)).
Estate of Rogers v. Am. Reliable Ins. Co., Civil No. 10–00482
SOM/RLP, 2011 WL 2693355, at *3 (D. Hawai`i July 8, 2011).
This
Court therefore looks to Hawai`i state law for the applicable
principles of insurance contract interpretation.
A.
General Principles under Hawai`i Law
The Hawai`i Supreme Court has set forth the following
principles applicable in the interpretation of insurance
contracts:
[I]nsurers have the same rights as
individuals to limit their liability and to impose
whatever conditions they please on their
obligation, provided they are not in contravention
of statutory inhibitions or public policy. As
such, insurance policies are subject to the
general rules of contract construction; the terms
of the policy should be interpreted according to
their plain, ordinary, and accepted sense in
common speech unless it appears from the policy
that a different meaning is intended. Moreover,
every insurance contract shall be construed
according to the entirety of its terms and
conditions as set forth in the policy.
Nevertheless, adherence to the plain language
and literal meaning of insurance contract
provisions is not without limitation. We have
acknowledged that because insurance policies are
contracts of adhesion and are premised on standard
forms prepared by the insurer’s attorneys, we have
long subscribed to the principle that they must be
construed liberally in favor of the insured and
any ambiguities must be resolved against the
9
insurer. Put another way, the rule is that
policies are to be construed in accord with the
reasonable expectations of a layperson.
Guajardo v. AIG Hawai`i Ins. Co., Inc., 118 Hawai`i 196, 201-02,
187 P.3d 580, 585-86 (2008) (alteration in Guajardo) (quoting
Dairy Rd. Partners v. Island Ins. Co., 92 Hawai`i 398, 411–12,
992 P.2d 93, 106–07 (2000)).
The Hawai`i Supreme Court has also
stated: “[t]he objectively reasonable expectations of
[policyholders] and intended beneficiaries regarding the terms of
insurance contracts will be honored even though painstaking study
of the policy provisions would have negated those expectations.
These ‘reasonable expectations’ are derived from the insurance
policy itself . . . .”
Del Monte Fresh Produce (Hawaii), Inc. v.
Fireman’s Fund Ins. Co., 117 Hawai`i 357, 368, 183 P.3d 734, 745
(2007) (citations and some quotation marks omitted) (some
alterations in original).
Under the principles of general contract
interpretation, “[a] contract is ambiguous when the terms of the
contract are reasonably susceptible to more than one meaning.”
Airgo, Inc. v. Horizon Cargo Transport Inc., 66 Haw. 590, 594,
670 P.2d 1277, 1280 (1983).
It is well settled that courts should not draw
inferences from a contract regarding the parties’
intent when the contract is definite and
unambiguous. In fact, contractual terms should be
interpreted according to their plain, ordinary
meaning and accepted use in common speech. The
court should look no further than the four corners
of the document to determine whether an ambiguity
10
exists. Consequently, the parties’ disagreement
as to the meaning of a contract or its terms does
not render clear language ambiguous.
State Farm Fire & Cas. Co. v. Pac. Rent–All, Inc., 90 Hawai`i
315, 324, 978 P.2d 753, 762 (1999) (citations omitted).
B.
Duty to Defend & Duty to Indemnify
This district court has summarized the following
relevant aspects of Hawai`i law regarding the duty to defend and
the duty to indemnify.
The burden is on the insured to establish
coverage under an insurance policy. See Sentinel
Ins. Co. v. First Ins. Co. of Haw., 76 Haw. 277,
291 n.13, 875 P.2d 894, 909 n.13 (1994) (as
amended on grant of reconsideration); Crawley v.
State Farm Mut. Auto. Ins. Co., 90 Haw. 478, 483,
979 P.2d 74, 79 (App. 1999). The insurer has the
burden of establishing the applicability of an
exclusion. See Sentinel, 76 Haw. at 297, 875 P.2d
at 914.
The duty to indemnify is owed “for any loss
or injury which comes within the coverage
provisions of the policy, provided it is not
removed from coverage by a policy exclusion.”
Dairy Road Partners v. Island Ins., 92 Haw. 398,
413, 922 P.2d 93, 108 (2000). The obligation to
defend an insured is broader than the duty to
indemnify. The duty to defend arises when there
is any potential or possibility for coverage.
Sentinel, 76 Haw. at 287, 875 P.2d at 904; accord
Haole v. State, 111 Haw. 144, 151, 140 P.3d 377,
384 (2006) (“if there is no potential for
indemnification, then no duty to defend will
arise”). However, when the pleadings fail to
allege any basis for recovery under an insurance
policy, the insurer has no duty to defend.
Pancakes of Hawaii, Inc. v. Pomare Props. Corp.,
85 Haw. 286, 291, 994 P.2d 83, 88 (Haw. Ct. App.
1997)). In other words, for [the insurer] to have
no duty to defend, it must prove that it would be
impossible for a claim in the underlying lawsuit
to be covered by the policy. See Tri–S Corp. v.
11
W. World Ins. Co., 110 Haw. 473, 488, 135 P.3d 82,
97 (2006).
Estate of Rogers, 2011 WL 2693355, at *4.
The Hawai`i Supreme
Court has emphasized that the duty to defend applies even if the
possibility of coverage is “remote”.
Tri-S Corp. v. W. World
Ins. Co., 110 Hawai`i 473, 488, 135 P.3d 82, 97 (2006).
Further,
“[a]ll doubts as to whether a duty to defend exists are resolved
against the insurer and in favor of the insured.”
Id.
“[T]he duties to defend and indemnify arise under the
terms of the insurance policy, and it is through an
interpretation of the terms of the policy that such duties are
deemed to be owed.”
Del Monte, 117 Hawai`i at 369-70, 183 P.3d
at 746-47 (citation omitted).
II.
Relevant Provisions of the Policies
At the outset, the Court must address U.S. Fire’s
argument that the Court should deny Campbell Estate’s Suit Motion
and Occurrence Motion because Campbell Estate failed to submit
copies of the Policies with their concise statements of fact.
Instead, Campbell Estate submitted a letter dated
October 13, 2009 to Campbell Estate’s counsel from Janet Malay,
who is with U.S. Fire’s counsel - Crum & Forster, informing
Campbell Estate of U.S. Fire’s response to the tender of the
defense in the EPA Actions (“Coverage Letter”).
[McHenry Suit
Decl., Exh. K; Campbell Estate’s Separate and Concise Statement
of Material Facts in Supp. of Occurrence Motion, filed 6/6/11
12
(dkt. no. 71) (“Campbell Estate Occurrence CSOF”), Decl. of
Patricia J. McHenry (“McHenry Occurrence Decl.”), Exh. K.]
U.S.
Fire contends that Campbell Estate cannot carry its burden on its
summary judgment motions because of its failure to submit copies
of the Policies themselves.
This Court, however, notes that U.S.
Fire does not contest the authenticity of the Coverage Letter,
nor does it dispute the accuracy of the Coverage Letter’s
discussion of the Policies at issue.
Further, U.S. Fire has
submitted copies of the Policies as exhibits in support of its
Counter-Motion, and Ms. Malay submitted a declaration
authenticating the copies of the Policies.
In light of the
importance of the issues raised in Campbell Estate’s motions and
the fact that there is no evidence that Campbell Estate acted in
bad faith or intended to delay the proceedings by submitting the
letter in lieu of copies of the Policies themselves, this Court
would have given Campbell Estate notice and time to correct the
problem before denying the motions for failure to submit copies
of the Policies.
Such a procedure, however, would have been
futile in the instant case because copies of the Policies at
issue are already in the record.
The Court therefore rejects
U.S. Fire’s argument that the Court should deny Campbell Estate’s
motions based on Campbell Estate’s failure to submit copies of
the Policies at issue.
The Court now turns to the relevant
provisions of the Policies.
13
Policy Numbers LV806-9513, LV812-0551, MP 817-7108,
SV877-2416, and the primary portion of Policy No. SV859-2335
(“the Primary Policies”) have the same insuring agreement:
The Company will pay on behalf of the insured all
sums which the insured shall become legally
obligated to pay as damages because of
Coverage A - bodily injury, or
Coverage B - property damage
to which this insurance applies, caused by an
occurrence, and the Company shall have the right
and duty to defend any suit against the injured
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 . . . .
[Decl. of Janet Malay in Supp. of Counter-Motion, filed 11/14/11
(dkt. no. 123) (“Malay Counter-Motion Decl.”), Exh. 1 (Liability
Policy No. LV806-9513) at 11 (emphases omitted); U.S. Fire
Concise Statement of Material Facts in Supp. of Counter-Motion,
filed 11/14/11 (dkt. no. 120-1) (“U.S. Fire Counter-Motion
CSOF”), No. 5 (stating that the Primary Policies have the same
insuring agreement); Campbell Estate’s (1) Response to U.S.
Fire’s Responsive Suit CSOF and (2) Response to U.S. Fire’s
Counter-Motion CSOF, filed 11/21/11 (dkt. no. 128) (“Campbell
Estate Reply/Counter-Motion CSOF”), at ¶ 1 (admitting, inter
alia, U.S. Fire Counter-Motion CSOF No. 5).]
Similarly, Policy Numbers SV859-2335, 812-0429, and
LC817-7271 (“the Umbrella Policies”) state, in pertinent part:
With respect to any occurrence covered by the
terms and conditions of this policy, but not
14
covered, as warranted, by the underlying
policies . . . or not covered by any other
underlying insurance collectible by the insured,
the Company shall:
(a) defend any suit against the insured
alleging such injury or destruction and seeking
damages on account thereof, even if such suit is
groundless, false or fraudulent[.]
[Malay Counter-Motion Decl., Exh. 4 (Policy No. SV859-2335) at
137; U.S. Fire Counter-Motion CSOF No. 8 (stating that insuring
agreements in the Umbrella Policies have the same duty to
defend); Campbell Estate Reply/Counter-Motion CSOF at ¶ 1
(admitting, inter alia, U.S. Fire Counter-Motion CSOF No. 8).]
The Primary Policies and the Umbrella Policies have the
same definition of “property damage”, which
means (1) physical injury to or destruction of
tangible property which occurs during the policy
period, including the loss of use thereof at any
time resulting therefrom or (2) loss of use of
tangible property which has not been physically
injured or destroyed provided such loss of use is
caused by an occurrence during the policy period.
[Malay Counter-Motion Decl., Exh. 1 (Liability Policy No. LV8069513) at 8 (emphases omitted); U.S. Fire Counter-Motion CSOF No.
7 (stating that the Primary Policies and the Umbrella Policies
have the same definition of property damage); Campbell Estate
Reply/Counter-Motion CSOF at ¶ 1 (admitting, inter alia, U.S.
Fire Counter-Motion CSOF No. 7).]
Neither the term “suit” nor the term “damages” is
defined in the definitions sections of the Primary Policies or
the Umbrella Policies.
[Malay Counter-Motion Decl., Exh. 1
15
(Liability Policy No. LV806-9513) at 7-8, Exh. 2 (Liability
Policy No. LV812-0551) at 49-50, Exh. 3 (Commercial Package
Policy No. MP817-7108) at 69, Exh. 4 at 137-39 (Policy No. SV8592355, Commercial Umbrella Policy part), Exh. 5 (Liability Policy
No. SV877-2416) at 185-86, Exh. 6 (Comprehensive Catastrophe
Policy No. LC812-0429) at 291-92, Exh. 7 (Commercial Umbrella
Policy No. LC817-7271) at 311-12.]
Policy Number LV806-9513 states that an “‘occurrence’
means an accident, including continuous or repeated exposure to
conditions, which results in bodily injury or property damage
neither expected nor intended from the standpoint of the
insured[.]”
[Id., Exh. 1 at 7 (emphases omitted).]
Policy
Numbers LV812-0551, MP817-7108, SV859-2355 (both primary, general
liability part and umbrella coverage part), and SV877-2416 have
the same or a substantially similar definition.
[Id., Exh. 2 at
49, Exh. 3 at 69, Exh. 4 at 124 & 139, Exh. 5 at 185.]
The
Contamination and Pollution endorsement for Comprehensive
Catastrophe Policy No. LC812-0429 states, in pertinent part, “for
the purpose of this endorsement ‘Occurrence’ means a continuous
or repeated exposure to conditions which unexpectedly and
unintentionally causes injury to persons or tangible property
during the policy period.”
[Id., Exh. 6 at 294.]
16
Policy Number LV806-9513 contains the following
exclusion, which the parties refer to as the “qualified pollution
exclusion”:
This insurance does not apply:
. . . .
(f) to bodily injury or property damage arising
out of the discharge, dispersal, release or
escape of smoke, vapors, soot, fumes, acids,
alkalis, toxic chemicals, liquids or gases,
waste materials or other irritants,
contaminants or pollutants into or upon land,
the atmosphere or any water course or body of
water; but this exclusion does not apply if
such discharge, dispersal, release or escape
is sudden and accidental[.]
[Malay Counter-Motion Decl., Exh. 1 at 11 (emphases omitted).]
Policy Numbers LV812-0551, MP817-7108, SV859-2355 (primary,
general liability), SV877-2416, and LC817-7271 contain the same
or a substantially similar exclusion.
[Id., Exh. 2 at 53, Exh. 3
at 70, Exh. 4 at 127 & 139, Exh. 5 at 189, Exh. 7 at 312.]
policies do not define the term “sudden”.
These
[Id., Exh. 1 at 7-8,
Exh. 2 at 49-50, Exh. 3 at 69, Exh. 4 at 137-39, Exh. 5 at 18586, Exh. 7 at 311-12.]
III. Occurrence Motion
The Hawai`i Supreme Court has recognized that, in
general,
An “occurrence policy” provides coverage if the
event insured against (the “occurrence”) takes
place during the policy period, irrespective of
when a claim is presented. Annotation, Event as
Occurring Within Period of Coverage of
“Occurrence” And “Discovery” Or “Claims Made”
Liability Policies, 37 A.L.R. 4th 382, 390 (1985).
17
Under a “claims made” or “discovery” policy,
coverage is triggered by the presentation of a
claim during the policy term regardless of when
the event insured against took place. Id.; see
also Trizec [Props., Inc. v. Biltmore Constr.
Co.], 767 F.2d [810,] 812 n.3 [(11th Cir. 1985)].
The parties agree that, under an occurrence
policy, the event that triggers potential coverage
is the sustaining of actual damage by the
complaining party and not the date of the act or
omission that caused the damage. Trizec, 767 F.2d
at 812; 11 Couch on Insurance 2d, § 44:8 at 194
(Rev. ed. 1982). Simply stated, the relevant
focus under an occurrence policy is on the effect,
not the cause.
Sentinel Ins. Co. v. First Ins. Co. of Hawai`i, 76 Hawai`i 277,
288, 875 P.2d 894, 905 (1994).
A.
Qualified Pollution Exclusion
In the Occurrence Motion, Campbell Estate asserts that
the applicability of the “qualified pollution exclusion” is U.S.
Fire’s “primary defense”.
21.]
[Mem. in Supp. of Occurrence Motion at
Campbell Estate argues that the “qualified pollution
exclusion” became standard in comprehensive general liability
(“CGL”) policies in 1973, and some members of the insurance
industry represented to state insurance regulators at the time
that the exclusion did not limit coverage under “occurrence”
based policies, but merely clarified that pollution was covered
as long as it was not intentional.
[Id. at 15-16 (some citations
omitted) (citing Queen City Farms, Inc. v. Central Nat’l Ins. Co.
of Omaha, 882 P.2d 703, 721-22 (Wash. 1995); Joy Technologies,
Inc. v. Liberty Mut. Ins. Co., 421 S.E.2d 493, 499 (W. Va.
18
1992)).]
Campbell Estate also contends that courts have held
that property damage results from an “occurrence” as long as the
insured did not intentionally damage the property.
[Id. at 17-18
(some citations omitted) (citing Hecla Mining Co. v. New
Hampshire Ins. Co., 811 P.2d 1083, 1088 (Colo. 1991); MAPCO
Alaska Petroleum, Inc. v. Central Nat’l Ins. Co. of Omaha, 795 F.
Supp. 941, 947-48 & n.2 (D. Alaska 1991)).]
Campbell Estate
contends that, while Chem-Wood’s practices were apparently
“sloppy”, there is no evidence that the environmental
contamination was intentional.
Moreover, the issue is whether
Campbell Estate intended to damage the Site, and it clearly did
not intend to do so because it was not aware of Chem-Wood’s
conduct which caused the contamination.
[Id. at 18-19.]
The applicability of the qualified pollution exclusion
turns on the interpretation of the word “sudden”.
Campbell
Estate argues that “sudden” has multiple meanings, the most
common meaning being “unexpected”, but the term can also have a
temporal meaning - immediate or abrupt.
[Id. at 21.]
Campbell
Estate therefore argues that the term is ambiguous and must be
interpreted in favor of the insured under Hawai`i principles of
insurance contract interpretation.
[Id. at 22.]
Campbell Estate
cites a number of cases stating that the term “sudden” is
ambiguous.
[Id. at 25-27 (some citations omitted) (citing In re
Tutu Water Wells Contamination Litig., 78 F. Supp. 2d 456, 466
19
(D.V.I. 1999); Public Service Co. of Colorado v. Wallis and
Companies, 986 P.2d 921, 933 (Colo. 1999); St. Paul Fire & Marine
Ins. Co. v. McCormick & Baxter Creosoting Co., 923 P.2d 1200,
1218 (Or. 1996); Queen City Farms, Inc. v. Central Nat’l Ins. Co.
of Omaha, 882 P.2d 703, 721 (Wash. 1994)).]
Campbell Estate
emphasizes that, at the time the qualified pollution exclusions
in the relevant Policies were drafted, the phrase “sudden and
accidental” was understood to mean “unexpected and unintended.”
[Id. at 28-29 (citing Alabama Plating Co. v. United States Fid. &
Guar. Co., 690 So. 2d 331, 336 (Ala. 1997); St. Paul Fire &
Marine Ins. Co. v. McCormick & Baxter Creosoting Co., 923 P.2d
1200, 1218 (Or. 1996)).]
Campbell Estate also argues that the Policies are
ambiguous in that they do not state from whose perspective the
incidents must have been “sudden and accidental”.
Campbell
Estate argues that “Hawaii law dictates that the perspective of
the insured must govern the determination of whether coverage
exists.”
[Id. at 32 (emphasis in original) (citing AIG Hawaii
Ins. Co. v. Estate of Caraang, 74 Haw. 620, 636, 851 P.2d 321,
329 (1993)).]
Campbell Estate emphasizes that the Hawai`i
Supreme Court has applied this rule to CGL policies.
[Id. at 34
(citing Hawaiian Holiday Macadamia Nut Co. v. Industrial Indem.
Co., 76 Hawai`i 166, 170, 872 P.2d 230, 234 (1994)).]
Thus,
Campbell Estate argues that, because Campbell Estate did not
20
expect or intend the releases of pollutants on the Site, U.S.
Fire cannot carry its burden of proving that the qualified
pollution exclusion precludes coverage.
[Id. at 37-38.]
U.S. Fire emphasizes that the term “occurrence” is
expressly defined in each policy.
Although the Policies have
slightly different wording, “they all require either an
‘accident’ or an ‘accident or event’ which results in property
damage ‘neither expected nor intended from the standpoint of the
insured.’”
[Mem. in Opp. to Occurrence Motion at 11 (citing
McHenry Decl., Ex. K, pp. 4, 6-7).]
U.S. Fire argues that both
the Hawai`i Supreme Court and the Ninth Circuit have held that
such provisions are unambiguous and enforceable, precluding the
duty to defend and/or the duty to indemnify.
Thus, the Court
must ignore the treatises and out-of-state authorities that
Campbell Estate cited in support of its position.
[Id. (citing
Burlington Ins. Co. v. Oceanic Design & Constr., Inc., 383 F.3d
940, 947 (9th Cir. 2004) (“In Hawaii, an occurrence ‘cannot be
the expected or reasonably foreseeable result of the insured’s
own intentional acts or omissions.” (quoting Hawaiian Holiday
Macadamia Nut Co. v. Indus. Indem. Co., 76 Haw. 166, 170, 872
P.2d 230, 234 (1994)); Hawaiian Ins. & Guar. Co., Ltd. v. Blanco,
72 Haw. 9, 804 P.2d 876 (1990), (overruled on other grounds); AIG
Haw. Ins. Co. v. Caraang, 74 Haw. 620, 636, 851 P.2d 321, 329,
(1993)).]
21
U.S. Fire argues that the qualified pollution exclusion
is unambiguous and requires an abrupt and unexpected release.
Thus, no extrinsic evidence may be considered to create an
ambiguity in the policy terms.
[Id. at 17-18.]
Second, there is
no evidence that U.S. Fire was among the insurers who represented
to state insurance regulators that the term “sudden” had a
special meaning.
[Id. at 18 (citing ACL Technologies. Inc. v.
Northbrook Property and Cas. Ins. Co., 17 Cal. App. 4th 1773,
1792 (Cal. Ct. App. 1993) (rejecting evidence of drafting history
because, among other reasons, “there was no evidence that this
insurance company . . . ever represented to this
policyholder . . . that despite what the ordinary person might
think about the relationship between gradual and sudden, in this
particular policy the word ‘sudden’ would have some special
meaning in contradiction to that relationship.”) (emphasis in
original)).]
Third, the Ninth Circuit, interpreting California
law and Arizona law, has rejected Campbell Estate’s proposed
interpretation of “sudden.”
[Id. 18-19 (citing Smith v. Hughes
Aircraft Co., 22 F.3d 1432 (9th Cir. 1993)).]
U.S. Fire argues
that the “majority” of federal courts addressing this issue have
reached the same conclusion.
[Id. at 21-22 (citing SnyderGeneral
Corp. v. Century Indem. Co., 907 F. Supp. 991, 996-997 & fn.7
(N.D. Tex. 1995) (listing the federal “majority of cases” holding
that the term “sudden” contains a temporal component)).]
22
In
addition, other courts have recognized that “sudden” is
unambiguous and has a temporal meaning.
[Id. at 22 & n.9 (citing
cases).]
As previously noted, this Court is sitting in diversity
and is bound by the decisions of the Hawai`i Supreme Court.
The
Hawai`i Supreme Court has not addressed the meaning of the term
“sudden” as used in qualified pollution exclusions such as those
at issue in this case.
Although the Hawai`i courts have been
confronted with other insurance policy exclusions that also used
the phrase “sudden and accidental”, those decisions have not
addressed the meaning of the term “sudden”.
See, e.g., Hurtig v.
Terminix Wood Treating & Contracting Co., 5 Haw. App. 247, 249,
685 P.2d 799, 801 (Ct. App. 1984); Sturla, Inc. v. Fireman’s Fund
Ins. Co., 67 Haw. 203, 208-09, 684 P.2d 960, 963 (1984).
The
Hawai`i Supreme Court, however, has addressed the meaning of the
term “accidental” in the context of the definition of
“occurrence” in a CGL policy.
The question of what is an “accident” must be
determined by addressing the question from the
viewpoint of the insured. This court has
addressed this question previously in AIG Hawaii
Insurance Co., Inc. v. Caraang:
“[I]f the insured did something or . . .
failed to do something, and the insured’s
expected result of the act of omission was
the injury, then the injury was not caused by
an accident and therefore not . . . within
the coverage of the policy . . .” [Hawaiian
Ins. & Guar. Co. v.] Blanco, 72 Haw. [9] at
16, 804 P.2d [876] at 880 [(1990)] (insured
fired rifle in victim’s direction, intending
23
to frighten but instead injuring him; injury
held to be reasonably foreseeable and
therefore not accidental from insured’s
viewpoint; consequently, insurer had no duty
to defend); see also [Hawaiian Ins. & Guar.
Co. v.] Brooks, 67 Haw. [285] at 292, 686
P.2d [23] at 27-28 [(1984)] (from perspective
of insured truck driver, sexual assault of
hitchhiker in rear section of vehicle by
insured’s co-worker not accidental where
insured aware of attack but chose not to do
anything to prevent or mitigate harm to
victim, thereby facilitating commission of
act; insurer held to have no duty to defend
or indemnify).
* * * * * *
The teaching of Blanco and Brooks, however,
is that, in order for the insurer to owe a
duty to defend or indemnify, the injury
cannot be the expected or reasonably
foreseeable result of the insured’s own
intentional acts or omissions.
74 Haw. 620, 635-636, 851 P.2d 321, 329 (1993).
Hawaiian Holiday Macadamia Nut Co., Inc. v. Industrial Indem.
Co., 76 Hawai`i 166, 170, 872 P.2d 230, 234 (1994) (alterations
in Hawaiian Holiday).
U.S. Fire contends that, because the Hawai`i Supreme
Court has held that “accidental” means unexpected and unintended,
“sudden” cannot also mean unexpected and unintended.
The Hawai`i
Supreme Court has stated:
We have long expressed our disapproval of
interpreting a contract such that any provision be
rendered meaningless. See Reed & Martin, Inc. v.
City & County of Honolulu, 50 Haw. 347, 349, 440
P.2d 526, 528 (1968) (interpreting contract so as
not to render a clause of the contract
meaningless); Richards v. Ontai, 19 Haw. 451,
453–54 (1909) (construing terms of lease so as not
to render a clause of the lease meaningless). See
also Restatement (Second) of Contracts § 203
24
(“[A]n interpretation which gives a reasonable,
lawful, and effective meaning to all the terms is
preferred to an interpretation which leaves a part
unreasonable, unlawful, or of no effect[.]”);
Candlelight Props., LLC v. MHC Operating Ltd.
P’ship, 750 N.E.2d 1, 17 (Ind. Ct. App. 2001)
(explaining that in interpreting the rights and
duties under a promissory note and a mortgage, the
court “make[s] all attempts to construe the
language in a contract so as not to render any
words, phrases, or terms ineffective or
meaningless”). While SCD’s interpretation would
render either the word “claim” or the word “right”
superfluous, UH/HL’s interpretation would give
effect to both words. Thus, the circuit court did
not err in ruling that the Agreement encompasses
“claims” asserted by SCD and not merely “claims of
offset.”
Stanford Carr Dev. Corp. v. Unity House, Inc., 111 Hawai`i 286,
297-98, 141 P.3d 459, 470-71 (2006) (alterations in Stanford
Carr).
Arguably, pursuant to the general rules of contract
construction, “sudden” cannot mean unexpected and unintended as
the insured - Campbell Estate - advocates because applying that
definition would render the term “accidental” superfluous or
meaningless.
In contrast, applying the time-based definition of
“sudden” that the insurer - U.S. Fire - advocates would give
effect to both words.8
The Hawai`i Supreme Court, however, has
stated “adherence to the plain language and literal meaning of
insurance contract provisions is not without limitation.”
8
For example, Merriam Webster’s Collegiate Dictionary 1248
(11th ed. 2005) defines “sudden” as abrupt or “brought about in a
short time”.
25
Guajardo v. AIG Hawai`i Ins. Co., Inc., 118 Hawai`i 196, 202, 187
P.3d 580, 586 (2008) (citation and block quote format omitted).
Because insurance contracts are contracts of adhesion based on
form contracts that the insurers’ attorneys prepare, the Hawai`i
Supreme Court construes insurance contracts liberally in favor of
the insureds and will resolve any ambiguities against the
insurer.
Id.
The Hawai`i Supreme Court will honor the insureds’
objectively reasonable expectations even if “painstaking study of
the policy provisions would have negated those expectations.”
Del Monte Fresh Produce (Hawaii), Inc. v. Fireman’s Fund Ins.
Co., 117 Hawai`i 357, 368, 183 P.3d 734, 745 (2007).
This Court therefore predicts that, if the Hawai`i
Supreme Court determined that the “unexpected and unintended”
definition of “sudden” was in accord with Campbell Estate’s
reasonable expectations, the supreme court would hold that the
term is ambiguous and construe it against U.S. Fire.
Thus, the
supreme court would apply that definition even though it arguably
renders the term “accidental” superfluous, contrary to the
general rules of contract interpretation.
Such a ruling would be
consistent with the decidedly pro-insured principles set forth in
Hawai`i case law.
At the current stage of the litigation,
however, this Court cannot determine whether the “unexpected and
unintended” definition of “sudden” was an objectively reasonable
expectation for Campbell Estate because there are genuine of
26
issues of material fact as to what Campbell Estate expected based
on the terms of the Policies in question and the known use of the
Site that the Policies insured.
See Fed. R. Civ. P. 56(a).
There is also a genuine issue of material fact as to whether
Campbell Estate’s expectations were consistent with what a
layperson would have reasonably expected.
Hawai`i at 202, 187 P.3d at 586.
See Guajardo, 118
The Court also emphasizes that,
even if this Court could find at this time that “sudden” means
unexpected and unintended, this Court would not grant summary
judgment in favor of Campbell Estate because there are genuine
issues of material fact as to whether the discharges, dispersals,
releases, or escapes of hazardous chemicals on the Site was in
fact unexpected and unintended.
In particular, this Court is
concerned with the issue whether, in light of Chem-Wood’s known
use of the Site and Campbell Estate’s rights and obligations
under the lease, Campbell Estate knew or should have known about
Chem-Wood’s actions and omissions that allegedly caused the
contamination at issue.
The Occurrence Motion seeks a ruling on summary
judgment that the qualified pollution exclusions in the relevant
Policies do not preclude coverage.
Campbell Estate, however, has
not carried its burden of proof on this issue.
27
B.
Occurrence
Similarly, the relevant Policies define an “occurrence”
in terms of what was expected or intended.
See, e.g., Malay
Counter-Motion Decl., Exh. 1 at 7 (“‘occurrence’ means an
accident, including continuous or repeated exposure to
conditions, which results in bodily injury or property damage
neither expected nor intended from the standpoint of the insured”
(emphases omitted)).
Insofar as there are genuine issues of
material fact as to whether Campbell Estate expected or intended
the contamination that resulted from Chem-Wood’s operations,
Campbell Estate has not carried its burden on summary judgment of
establishing that the spills and releases that occurred on the
Site during Chem-Wood’s operations constitute “occurrences” for
purposes of the Policies at issue in this case.
Campbell Estate’s Occurrence Motion is therefore DENIED
WITHOUT PREJUDICE.
IV.
Campbell Estate’s Suit Motion and U.S. Fire’s Counter-Motion
In the Suit Motion, Campbell Estate seeks rulings that
the following U.S. Fire coverage defenses do not preclude
coverage under the relevant Policies: the costs incurred or to be
incurred by Campbell Estate as a result of the EPA Actions do not
result from or involve a “suit against the insured”; the costs
incurred or to be incurred by Campbell Estate as a result of the
EPA Actions are not “sums which the insured shall become legally
28
obligated to pay as damages”; and the costs incurred or to be
incurred by Campbell Estate as a result of the EPA Actions do not
constitute “damages because of . . . property damage”.
Supp. of Suit Motion at 22, 25, 28.]
[Mem. in
In the Counter-Motion, U.S.
Fire seeks rulings on summary judgment that those provisions
preclude any duty to indemnify Campbell Estate for the costs
associated with the EPA Actions.
A.
Suit
Campbell Estate recognizes that no party has filed a
judicial complaint regarding the Site contamination, but Campbell
Estate argues that the EPA Actions constitute a “suit” under the
relevant Policies because the EPA Actions are the functional
equivalent of a lawsuit.
U.S. Fire argues that the primary
definition of the term “suit” is a civil action, and U.S. Fire
emphasizes that the Policies do not refer to “the functional
equivalent of a suit”.
There is no dispute that: the EPA issued the PRP Letter
and the FRD; Campbell Estate, the EPA, and the current owner of
the Site entered into the AOC; and Campbell Estate incurred costs
as a result of the PRP Letter, the FRD, and the AOC.
Thus, the
parties agree that the interpretation of the term “suit”, as used
in the Policies, is a legal issue that is appropriate for summary
judgment.
They also agree that there is no controlling Hawai`i
29
case law and that the jurisdictions which have addressed this
issue are split.
In addressing whether, under Idaho law, an EPA PRP
notice triggered the duty to defend, the Ninth Circuit stated:
Unlike the garden variety demand letter,
which only exposes one to a potential threat of
future litigation, a PRP notice carries with it
immediate and severe implications. Generally, a
party asserting a claim can do nothing between the
occurrence of the tort and the filing of the
complaint that can adversely affect the insureds’
rights. However, in a CERCLA case, the PRP’s
substantive rights and ultimate liability are
affected from the start of the administrative
process. Avoidable Industries, Inc. v. Travelers
Indem. Co., 697 F. Supp. 1314, 1321 (S.D.N.Y.
1988) (“Adverse consequences can befall an insured
during the administrative pollution cleanup
process.”), aff’d, 887 F.2d 1200 (2d Cir. 1989).
The extent of CERCLA liability is
far-reaching. The ability to choose the response
action greatly empowers the government. In order
to influence the nature and costs of the
environmental studies and cleanup measures, the
PRP must get involved from the outset. In many
instances, it is more prudent for the PRP to
undertake the environmental studies and cleanup
measures itself than to await the EPA’s subsequent
suit in a cost recovery action.
There are many incentives to cooperate with
the EPA. For instance, pursuant to 42 U.S.C. §
9607(c)(3), if a person who is liable for a
release or threat of release of a hazardous
substance fails to “properly provide removal or
remedial action upon order of the President,
pursuant to section 9604 or 9606 of this title,”
the EPA can choose to proceed with a
Superfund-financed cleanup, and then seek punitive
damages. Lack of cooperation may expose the
insured, and potentially its insurers, to much
greater liability, including the EPA’s litigation
costs.
As a result, an “ordinary person” would
believe that the receipt of a PRP notice is the
30
effective commencement of a “suit” necessitating a
legal defense. The PRP letter forced [the
insured] to hire technical experts and lawyers to
protect its interests in connection with EPA’s
actions. Moreover, if the receipt of a PRP notice
is held not to trigger the duty to defend under
CGL policies, then insureds might be inhibited
from cooperation with the EPA in order to invite
the filing of a formal complaint.
. . . .
We hold that the EPA’s administrative claims
against the insureds triggered insurers’ duty to
defend. Coverage should not depend on whether the
EPA may choose to proceed with its administrative
remedies or go directly to litigation. A
fundamental goal of CERCLA is to encourage and
facilitate voluntary settlements. Interim
Guidance on Notice Letters, Negotiations, and
Information Exchange, EPA Memorandum, 53 Fed. Reg.
5298 (1988). It is in the nation’s best interests
to have hazardous waste cleaned up effectively and
efficiently. But the insured is not required to
submit to, and may in fact wish to oppose the
threat. In either event, the insurer’s duty to
defend may well be triggered.
Further, we do not agree with insurers’
complaints of obliteration of a bright-line test.
The rationale behind defending insureds when a
complaint has been filed is that, traditionally,
that is when the jeopardy to the insureds’ rights
can be adversely affected. The focus should be on
the underlying rationale and not on the
formalistic rituals. If the threat is clear then
coverage should be provided. The filing of an
administrative claim is a clear signal that legal
action is at hand.
Aetna Cas. & Sur. Co. v. Pintlar Corp., 948 F.2d 1507, 1516-18
(9th Cir. 1991).
In addition, this district court has previously
rejected a defendant’s argument that a State of Hawai`i
Department of Health proceeding regarding environmental pollution
was not a “suit” for purposes of the insurer’s duty to defend.
Pac. Emp’rs Ins. Co. v. Servco Pac., Inc., 273 F. Supp. 2d 1149,
31
1156-57 (D. Hawai`i 2003).
The district court stated that it was
“convinced that Hawaii courts would adopt the majority rule as
followed in Pintlar, 948 F.2d at 1516-17.”
Id. at 1156 (citing
cases following the majority rule).
U.S. Fire argues that Pacific Employers is not
persuasive because: the district court merely adopted the
“majority” rule without analyzing the policy language, which is
inconsistent with Hawai`i law regarding the interpretation of
insurance policies; the case only addressed the issue in the
context of the duty to defend, not the duty to indemnify; the
case relied on Pintlar, which is based on Idaho law; and this
district court reached the opposite result in CIM Insurance Corp.
v. Masamitsu, 74 F. Supp. 2d 975 (D. Hawai`i 1999).
[Mem. in
Supp. of Counter-Motion at 15 & n.4.]
U.S. Fire also argues that the term “suit” is not
ambiguous, and California courts have recognized that an EPA
claim is not a suit triggering the duty to defend or indemnify.
U.S. Fire contends that “California contract interpretation law
is strikingly similar to Hawaii law.”
[Id. at 16 (discussing
Foster-Gardner, Inc. v. Nat’l Union Fire Ins. Co., 18 Cal. 4th
857 (Cal. Sup. Ct. 1998)).]
U.S. Fire argues that the Policies
at issue in the instant case “make the same intentional
distinctions” as the policies at issue in Foster-Gardner.
at 18.]
[Id.
U.S. Fire also rebuts Campbell Estate’s assertion that
32
the majority rule is that EPA claims are suits.
U.S. Fire argues
that, in most states, there is no settled law on the issue, and
many states which have contract interpretation rules identical to
Hawaii’s have held that PRP letters or other similar letters from
state agencies are not suits.
[Id. at 19-20 (some citations
omitted) (citing Patrons Oxford Mut. Ins. Co. v Marois, 573 A.2d
16, 20 (Me. 1990); Aetna Cas. & Sur. Co. v. General Dynamics
Corp., 968 F.2d 707, 713-714 (8th Cir. 1992) (applying Missouri
law); Joslyn Manufacturing Co. v. Liberty Mut. Ins. Co., 836 F.
Supp. 1273 (W.D. La. 1993)).]
First, the Court rejects U.S. Fire’s argument that
Pintlar is inapplicable because it addressed the meaning of the
term “suit” in the context of the duty to defend and not the duty
to indemnify.
U.S. Fire does not explain how or why, based on
the language of the relevant insuring agreements in the instant
Policies, the term “suit” would have a different meaning in the
context of the duty to defend than it has in the context of the
duty to indemnify.
Further, Pacific Employers is not
inconsistent with CIM Insurance.
The district court in CIM
Insurance ruled that a demand letter threatening to file suit did
not trigger a duty to defend.
74 F. Supp. 2d at 986.
This Court
also notes that the policy in CIM Insurance contained an express
definition of “suit”.
Id. (“‘Suit’ means a civil proceeding in
which damages because of ‘bodily injury’ of [sic, or] ‘property
33
damages’ to which this insurance applies are alleged.
‘Suit’
includes an arbitration proceeding alleging such damages to which
you must submit or submit with our consent.” (alteration in CIM
Ins.) (block quote format omitted)).
The policy at issue in
Pacific Employers, like the Policies at issue in the instant
case, did not contain a definition of “suit”.
1157.
273 F. Supp. 2d at
Pacific Employers expressly distinguished CIM Insurance on
those grounds and concluded that CIM Insurance did not apply.
Id.
The district court in Pacific Employers also declined to
apply Foster-Gardner, which was cited in CIM Insurance.
Id. at
1156-57.
Finally, the Court need not address which rule is the
majority rule and which rule is the minority rule.
Although this
Court acknowledges that Pintlar is not directly on point because
it applies Idaho law, this Court agrees with the district court
in Pacific Employers that the Hawai`i Supreme Court would adopt
the rule followed in Pintlar.
In Pintlar, the Ninth Circuit
noted that “an ‘ordinary person’ would believe that the receipt
of a PRP notice is the effective commencement of a ‘suit’
necessitating a legal defense.”
948 F.2d at 1517.
As noted
previously, the Hawai`i Supreme Court will honor an insured’s
objectively reasonable expectations even if “painstaking study of
the policy provisions would have negated those expectations.”
Del Monte, 117 Hawai`i at 368, 183 P.3d at 745.
34
This Court therefore CONCLUDES that the Hawai`i Supreme
Court would hold that the EPA Actions in the instant case
constitute “suits” for purposes of the Policies at issue in this
case.
Campbell Estate’s Suit Motion is GRANTED and U.S. Fire’s
Counter-Motion is DENIED to the extent that this Court rules that
U.S. Fire cannot deny coverage on the ground that the EPA Actions
are not “suits” for purposes of the relevant Policies.9
B.
Damages
Pintlar also held that CERCLA response or clean-up
costs were “damages” under the insurance policies at issue.
F.2d at 1513.
948
Campbell Estate argues that this is the majority
rule and urges the Court to follow this rule.
Suit Motion at 23-24 (citing cases).]
[Mem. in Supp. of
U.S. Fire argues that
Hawai`i law on this issue is unsettled.
[Mem. in Supp. of
Counter-Motion at 21 (citing Pacific Employers Ins. Co. v. Servco
Pacific Industries, 273 F. Supp. 2d at 1149).]
U.S. Fire urges
the Court to look to California law, under which environmental
clean-up costs to comply with an agency order do not constitute
“damages”.
[Id. (citing Certain Underwriters at Lloyd’s of
London v. Sup. Ct. (Powerine Oil Co. Inc.), 24 Cal. 4th 945 (Cal.
Sup. Ct. 2001) (“Damages” is limited to money ordered by the
9
The Court emphasizes that its ruling is limited to the
legal definition of the term “suit” as used in the Policies, and
the Court expresses no opinion as to the implications that this
conclusion will have on the factual issues in this case.
35
court.)).]
the same.
U.S. Fire emphasizes that other states have also held
[Id. at 22 (some citations omitted) (citing Zurich
Ins. Co. v. Cams Corp., 293 Ill. App. 3d 906, 908-910 (Ill. Ct.
App. 1997); Cincinnati Ins. Co. v. Milliken & Co., 857 F.2d 979
(4th Cir. 1988) (applying South Carolina law); Continental Ins.
Co. v. Northeastern Pharmaceutical & Chem. Co., 842 F.2d 977 (8th
Cir. 1988) (en banc) (Missouri law)).]
For the same reasons discussed supra regarding the
definition of “suit”, this Court CONCLUDES that the Hawai`i
Supreme Court would follow the rule stated in Pintlar and would
hold that the costs that Campbell Estate has incurred, or will
incur, as a result of the EPA Actions constitute “damages” for
purposes of the Policies at issue in this case.
Campbell
Estate’s Suit Motion is GRANTED and U.S. Fire’s Counter-Motion is
DENIED to the extent that this Court rules that U.S. Fire cannot
deny coverage on the ground that the costs incurred, or that will
be incurred, by Campbell Estate as a result of the EPA Actions
are not “damages” under the relevant Policies.10
C.
Property Damage
Campbell Estate’s Suit Motion asserts that the clean-up
costs it incurred, and will incur, as a result of the EPA Actions
10
The Court emphasizes that its ruling is limited to the
legal definition of the term “damages” as used in the Policies,
and the Court expresses no opinion as to the implications that
this conclusion will have on the factual issues in this case.
36
constitute damages because of “property damage”.
The term
“property damage” is expressly defined in the Policies, and the
parties apparently agree that environmental pollution constitutes
“property damage” as defined in the Policies.
In the Counter-
Motion, U.S. Fire argues that Campbell Estate is not entitled to
summary judgment regarding U.S. Fire’s coverage defense
addressing “property damage” because, at a minimum, there are
genuine issues of material fact regarding whether the property
damage occurred during the periods covered by the Policies.
This
Court agrees with U.S. Fire that: the EPA Orders only establish
that the Site is contaminated, they do not constitute proof that
the contamination occurred during the periods covered by the
Policies; and there are genuine issues of material fact regarding
the reports that Campbell Estate submitted as evidence of when
and how the contamination to the Site occurred, see Campbell
Estate Suit CSOF, Decl. of Christopher Vais, Exhs. A & B;
Quesinberry Decl, Exh. G.
Summary judgment, in favor of either
party, is therefore not appropriate at this time.11
Campbell Estate’s Suit Motion and U.S. Fire’s CounterMotion are DENIED WITHOUT PREJUDICE as to the issue whether the
11
Although it is not clear from the Counter-Motion, which
also constitutes U.S. Fire’s opposition to the Suit Motion,
whether U.S. Fire seeks a ruling that the property damage did not
occur during the period covered by the Policies, to the extent
that the Counter-Motion does seek such relief, U.S. Fire has not
met its burden of proof on summary judgment.
37
property damage to the Site occurred during the periods covered
by the relevant Policies.
CONCLUSION
On the basis of the foregoing, the Court HEREBY rules
as follows: Campbell Estate’s Motion for Partial Summary Judgment
Regarding Policy Terms “Suit,” “Damages,” and “Property Damage”,
filed June 6, 2011, is HEREBY GRANTED IN PART AND DENIED IN PART;
Campbell Estate’s Motion for Partial Summary Judgment Regarding
Qualified Pollution Exclusion and Occurrence Defenses, filed
June 6, 2011, is HEREBY DENIED WITHOUT PREJUDICE; and U.S. Fire’s
Counter-Motion for Partial Summary Judgment Re: No Duty to
Indemnify Estate of James Campbell Because No “Suit” and No
“Damages”, filed November 14, 2011, is HEREBY DENIED.
Campbell Estate’s Suit Motion is GRANTED and U.S.
Fire’s Counter-Motion is DENIED to the extent that this Court
rules that U.S. Fire cannot deny coverage on the following
grounds: the EPA Actions are not “suits” for purposes of the
relevant Policies; and the costs incurred, or that will be
incurred, by Campbell Estate as a result of the EPA Actions are
not “damages” under the relevant Policies.
Campbell Estate’s
Suit Motion and U.S. Fire’s Counter-Motion are DENIED WITHOUT
38
PREJUDICE as to the issue whether the property damage to the Site
occurred during the periods covered by the relevant Policies.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, December 29, 2011.
/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
UNITED STATES FIRE INSURANCE COMPANY V. ESTATE OF JAMES CAMPBELL,
ET AL.; CIVIL NO. 11-00006 LEK-KSC; ORDER GRANTING IN PART AND
DENYING IN PART THE ESTATE OF JAMES CAMPBELL’S MOTION FOR PARTIAL
SUMMARY JUDGMENT REGARDING POLICY TERMS “SUIT,” “DAMAGES,” AND
“PROPERTY DAMAGE”; DENYING THE ESTATE OF JAMES CAMPBELL’S MOTION
FOR PARTIAL SUMMARY JUDGMENT REGARDING QUALIFIED POLLUTION
EXCLUSION AND OCCURRENCE DEFENSES; AND DENYING UNITED STATES FIRE
INSURANCE COMPANY’S COUNTER-MOTION FOR PARTIAL SUMMARY JUDGMENT
RE: NO DUTY TO INDEMNIFY ESTATE OF JAMES CAMPBELL BECAUSE NO
“SUIT” AND NO “DAMAGES”
39
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?