Zurich American Insurance Company v. Fluor Corporation et al

Filing 322

MEMORANDUM AND ORDER (See Full Order) IT IS HEREBY ORDERED that Fluor Corporation's Motion to Dismiss the First, Second, and Third Causes of Action in Zurich's Complaint insofar as they seek a declaration that Zurich's Policies do not provide indemnity coverage [ECF No. 218 ] is GRANTED. Zurich's First, Second, and Third Causes of Action will be DISMISSED with regard to the extent that they seek a declaration regarding indemnity coverage. IT IS FURTHER ORDERED that Zu rich American Insurance Company's Motion for Partial Summary Judgment against Fluor Corporation with respect to Zurich's First Cause of Action [ECF No. 192 ] is DENIED as moot. IT IS FURTHER ORDERED that Fluor Corporation's Motion f or Partial Summary Judgment [ECF No. 220 ] against Zurich with respect to Zurich's Affirmative Defenses 1, 6, 7, and 18 to Fluor's Second Cause of Action for bad faith failure to settle is GRANTED. IT IS FURTHER ORDERED that Zurich American Insurance Company's Motion to Supplement the Parties Oral Arguments [ECF No. 283 ] is DENIED as moot. Signed by District Judge E. Richard Webber on 9/30/19. (EAB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
ZURICH AMERICAN INSURANCE
COMPANY,
Plaintiff,
v.
FLUOR CORPORATION, et al.,
Defendants.

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No. 4:16CV00429 ERW

MEMORANDUM AND ORDER
This matter comes before the Court on Plaintiff/Counter-Defendant Zurich American
Insurance Company’s Motion for Partial Summary Judgment against Defendant/CounterClaimant Fluor Corporation with respect to Zurich’s claim in its First Cause of Action [192];
Fluor’s Motion to Dismiss Zurich’s First, Second and Third Causes of Action [218]; and Fluor’s
Motion for Partial Summary Judgment against Zurich [220] with respect to Zurich’s Affirmative
Defenses 1, 6, 7, and 18 to Fluor’s Second Cause of Action for bad faith failure to settle
(“BFFS”).
BACKGROUND
Zurich issued general liability policies at certain periods from December 31, 1958, to
June 1, 1985 (the "Zurich Policies"), to a company called St. Joseph Lead, which later became
St. Joe Minerals. ECF No. 1 at ¶ 12. From 1981 to 1994, Fluor Corporation owned St. Joe
Minerals, (“St. Joe”), which operated a lead smelter facility in Herculaneum, Missouri. Id. at ¶ ¶
7, 12. In 1994, Fluor sold its interest in St. Joe to the Renco Group, Inc., which renamed the
company The Doe Run Resources (“Doe Run”). Id. at ¶ 7.
Each of the Zurich Policies provide in relevant part, that Zurich:
1

shall have the right and duty to defend any suit against the insured seeking damages on
account of such bodily injury or property damage, even if any of the allegations of the
suit are groundless, false, or fraudulent, and may make such investigation and settlement
of any claim or suit as it deems expedient.
Fluor’s Statement of Uncontroverted Material Facts in Support of its Motion for Partial
Summary Judgment (“FSUMF”), ECF No. 221-1 at ¶ 2. The Zurich Policies also provide that the
insured “shall not, except at his own cost, voluntarily make any payment, assume any obligation
or incur any expense.” Id. at ¶ 3. The Zurich Policies state that Zurich:
will pay on behalf of the insured all sums which the insured shall
become legally obligated to pay as damages because of
A. bodily injury or
B. property damage
to which this insurance applies, caused by an occurrence[.]
Id. at ¶ 4.
Commencing in 1995, various parties, including Fluor and Doe Run, were sued for bodily
injury and property damage claims arising from St. Joe’s lead smelter facility in Herculaneum,
Missouri (hereafter referred to as the “Herculaneum Claims”). ECF No. 1 at ¶¶ 22-23. In 2005,
certain residents of Herculaneum filed claims against Fluor, Doe Run, and others in the Missouri
Circuit Court, Twenty-Second Judicial Circuit in the City of St. Louis, Missouri, for alleged
injuries arising from the operation of the smelter, including the period 1981 through 1994. Id. at
¶ 23. On September 5, 2005, Fluor tendered seven lawsuits (the “Herculaneum Lawsuits”),
including Alexander, et al. v. Fluor Corporation, et al., Heilig, et al. v. Fluor Corporation, et al.,
Pedersen, et al. v. Fluor Corporation, et al. (the “Alexander/Pedersen/Heilig Litigation) to
Zurich for a “full and complete defense” under each of the Zurich Policies. FSUMF, ECF No.
221-1 at ¶ ¶ 5-11. 1 On December 14, 2005, Zurich agreed to defend Fluor in these lawsuits

1

In 2009, 2010, and 2014, three other lawsuits were filed against Fluor and tendered to Zurich
for a “full and complete defense” under the Zurich Policies. FSUMF, ECF No. 221-1 at ¶¶ 122

pursuant to a reservation of rights. Id. at ¶¶ 15-21. Among the rights Zurich reserved in
connection with each of the Herculaneum Lawsuits, Zurich asserted that coverage was “not
available if and to the extent that any insured has failed to satisfy any of the conditions precedent
to coverage set forth in the Zurich/St. Joe policies,” including “the duty to refrain from making
voluntary payments or voluntarily assuming obligations (except at its own expense).” Id. at ¶ 25.
On November 18, 2010, a mediation of the Herculaneum Lawsuits involving
representatives from Fluor, Doe Run, Zurich, and the underlying plaintiffs was conducted in
Clayton, Missouri. Id. at ¶ 28. After this mediation, on December 13, 2010, Doe Run reached a
settlement with plaintiffs in the remaining Herculaneum Claims, including the plaintiffs in the
Alexander/Pedersen/Heilig Litigation (“Doe Run Settlement”). ECF No. 1 at ¶ 24. Fluor was
not included in the Doe Run Settlement. Id. at ¶ 25. Fluor never requested Zurich fund any
settlement on its behalf at that mediation nor at any subsequent mediation of the
Alexander/Pedersen/Heilig litigation. Id. The claims against Fluor in the
Alexander/Pedersen/Heilig Litigation proceeded to trial and resulted in a judgment against Fluor
for $38,527,186 in compensatory damages, and $320 million in punitive damages. Id. at ¶ 26. In
October 2014, Fluor entered into a settlement with plaintiffs from the Herculaneum Lawsuits
(that had settled with Doe Run in December 2010) for approximately $300 million (the “Fluor
Global Settlement”). FSUMF, ECF No. 221-1 at ¶ 32. 2

14. Zurich also agreed to defend Fluor in these suits pursuant to a reservation of rights. Id. at
¶¶22-24. These lawsuits are considered part of the “Herculaneum Lawsuits” referenced above
for purposes of this Memorandum.
2
Zurich disputes this fact only in that it contends Fluor reached the Fluor Global Settlement to
resolve the Herculaneum Lawsuits and an additional suit. Zurich also discusses conditions of
the Fluor Global Settlement irrelevant to the Motions at issue here. See ECF No. 244 at ¶ 4.
3

In March 2012, Zurich made payments to Doe Run through a settlement (the "ZurichDoe Run Global Settlement") to resolve disputes with regard to coverage for the Doe Run
Settlement. ECF No. 1. at ¶ 29. Zurich alleges the Global Settlement payments exhausted the
Zurich Policies for the Herculaneum Claims. Id. at ¶ 30.
On March 29, 2016, Zurich filed suit in this Court, asserting five separate claims in its
Complaint. Zurich’s first three Causes of Action seek declaratory judgments stating the Zurich
Policies do not provide coverage for the defense or indemnity of Fluor’s litigation. Fluor filed a
counterclaim against Zurich asserting three Causes of Action. At issue in the Motions
considered here is Fluor’s Second Cause of Action in its counterclaim for bad faith failure to
settle in the Underlying Actions. 3
Zurich has filed a Motion for Partial Summary Judgment against Fluor with respect to
Zurich’s claim in its First Cause of Action seeking a Declaratory Judgment that Zurich has no
duty to indemnify Fluor for any liability it incurred in connection with certain Herculaneum
Claims−the Bronson/Smoger lawsuits. 4 Pursuant to Federal Rule of Civil Procedure 12(b)(1),
Fluor has filed a Motion to Dismiss Zurich’s First, Second, and Third Causes of Action to the
extent they seek a declaration regarding Zurich’s contractual duty to indemnify. Fluor has also
filed a Motion for Partial Summary Judgment against Zurich with respect to Zurich’s

3

Fluor lists in detail the “Underlying Actions” that are the basis of its counterclaim. These
actions include lawsuits brought by plaintiffs represented by Newman, Bronson & Willis, The
Smoger Law Firm, and the Law Offices of James R. Dowd (collectively, the “Bronson/Smoger
Lawsuits”). The Alexander/Pedersen/Heilig litigation is part of the Bronson-Smoger Lawsuits.
The “Underlying Actions” also include the “Gray Ritter Graham Lawsuits,” brought by
plaintiffs represented by Gray, Ritter & Graham, P.C. Cases are listed individually by Fluor in
its Counterclaim at ECF No. 42 at ¶ 15.
4
As noted in the previous footnote, the Bronson/Smoger lawsuits consist of suits brought by
Herculaneum plaintiffs represented by Newman, Bronson & Willis, The Smoger Law Firm, and
the Law Offices of James R. Dowd.
4

Affirmative Defenses 1, 6, 7, and 18 (collectively, “Indemnity Defenses”) to Fluor’s Second
Cause of Action for bad faith failure to settle (“BFFS”). The Court will first address Fluor’s
Motion to Dismiss Zurich’s First, Second, and Third Causes of Action.
I.

FLUOR’S MOTION TO DISMISS

Fluor requests that the Court dismiss the First, Second, and Third Causes of Action in
Zurich’s Complaint insofar as they seek a declaration that Zurich’s Policies “do not provide
coverage for the . . . indemnity of the Alexander/Pedersen/Heilig litigation” or the broader set of
“Herculaneum Claims.” ECF No. 218 at 5. Fluor argues dismissal is required as there is no ripe
dispute between the parties concerning Zurich’s contractual duty to indemnify Fluor under the
comprehensive general liability policies at issue in this case.
Legal Standard – Motion to Dismiss
Fluor’s Motion to Dismiss [218] is brought pursuant to Federal Rule of Civil Procedure
12(b)(1). See Wax’n Works v. City of St. Paul, 213 F.3d 1016, 1020 (8th Cir. 2000) (indicating
that whether a claim is ripe for adjudication goes to a court’s subject matter jurisdiction under the
case or controversy clause of Article III of the federal Constitution). “A district court has the
authority to dismiss an action for lack of subject matter jurisdiction on any one of three separate
bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in
the record; or (3) the complaint supplemented by undisputed facts plus the court’s resolution of
disputed facts.” Johnson v. United States, 534 F.3d 958, 962 (8th Cir. 2008) (internal
punctuation and quoted case omitted).
Discussion
Zurich’s complaint seeks relief under the Declaratory Judgment Act, 28 U.S.C. § 2201,
which provides that federal courts can grant declaratory relief in “a case of actual controversy.”

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The controversy requirement of the Declaratory Judgment Act is synonymous with that of
Article III of the Constitution.” Carson v. Pierce, 719 F.2d 931, 933 (8th Cir. 1983) (citing Aetna
Life Ins. Co. v. Haworth, 300 U.S. 227, 239–40, 57 S.Ct. 461, 81 L.Ed. 617 (1974)).
In the declaratory judgment context, Article III requires a plaintiff to allege facts that,
“under all the circumstances, show that there is a substantial controversy, between parties having
adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quoting
Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941)). “The Supreme
Court has emphasized that the ‘case of actual controversy’ language limits federal court action to
justiciable cases.” Public Water Supply Dist. No. 10 of Cass County, Mo. v. City of Peculiar,
Mo., 345 F.3d 570, 572–73 (8th Cir. 2003) (citing Haworth, 300 U.S. at 239–40). To resolve the
instant motion, the Court must determine whether Zurich’s request for declaratory relief meets
the traditional justiciability requirement of ripeness.
“The ripeness doctrine flows both from the Article III ‘cases’ and ‘controversies’
limitations and also from prudential considerations for refusing to exercise jurisdiction.”
Nebraska Pub. Power Dist. v. MidAmerican Energy Co., 234 F.3d 1032, 1037 (8th Cir. 2000).
The intent of the ripeness doctrine is to “prevent the courts, through avoidance of premature
adjudication, from entangling themselves in abstract disagreements.” Abbott Labs. v. Gardner,
387 U.S. 136, 148, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). The ripeness inquiry requires a court
to examine both “the fitness of the issues for judicial decision and the hardship to the parties of
withholding court consideration.” Abbott Labs., 387 U.S. at 149, 87 S.Ct. 1507. This is a twopronged test, and “[a] party seeking judicial relief must necessarily satisfy both prongs to at least
a minimal degree.” Nebraska Pub. Power, 234 F.3d at 1039.

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The fitness prong of the test requires examination of the definiteness or certainty of a
claim, to “safeguard[ ] against judicial review of hypothetical or speculative disagreements.” Id.
at 1038. “Whether a case is ‘fit’ depends on whether it would benefit from further factual
development.” Public Water Supply, 345 F.3d at 573. “The case is more likely to be ripe if it
poses a purely legal question and is not contingent on future possibilities.” Id. “Whether the
factual basis of a declaratory judgment action is hypothetical−or more aptly, too hypothetical−for
purposes of the ripeness doctrine (and concomitantly Article III) is a question of degree.” Public
Water Supply Dist. No. 8 of Clay County, Mo. v. City of Kearney, Mo., 401 F.3d 930 (8th Cir.
2005) (citing Nebraska Pub. Power, 234 F.3d at 1037–38).
The hardship prong recognizes that a party need not wait until a threatened injury actually
occurs, but the immediacy and extent of the alleged threatened harm must be significant.
Nebraska Pub. Power, 234 F.3d at 1038. “Abstract injury is not enough. It must be alleged that
the plaintiff has sustained or is immediately in danger of sustaining some direct injury . . . .”
O'Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974) (internal quotations
and citations omitted). “The threatened “injury must be ‘certainly impending.’” Paraquad, Inc. v.
St. Louis Hous. Auth., 259 F.3d 956, 958–59 (8th Cir. 2001) (quoting Babbitt v. United Farm
Workers Nat’l Union, 442 U.S. 289, 298, 99 S.Ct. 2301, 60 L.Ed.2d 895 (1979)). In evaluating
the hardship requirement, courts ask whether delaying review will cause injury to the parties.
Nebraska Pub. Power, 234 F.3d at 1038.
Fluor contends Zurich’s claims for declaratory relief are not ripe for judicial
determination as Zurich has failed to allege any dispute with Fluor regarding its indemnity rights
under the Zurich Policies. Fluor points out that although it settled the Herculaneum Lawsuits
five years ago, it has not sought indemnification from Zurich for the approximately $300 million

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in damages it suffered. Moreover, Fluor maintains because no demand has been made for
indemnification, no immediate or threatened harm will result if Zurich’s declaratory claims are
not litigated. Fluor contends the parties’ dispute centers not on contractual indemnity, but
instead on tort damages for Zurich’s bad faith failure to settle the Herculaneum Claims when a
reasonable opportunity arose in late 2010.
Zurich responds that its claims are ripe for declaratory judgment because the question of
Zurich’s duty to indemnify Fluor under the Zurich Policies is directly disputed by the parties.
Zurich contends, citing to Aetna Casualty & Surety Co. v. General Dynamics Corp., 968 F.2d at
711, that a live justiciable controversy was created when Zurich agreed to defend pursuant to a
reservation of rights after Fluor tendered its claims. Zurich alternately argues its declaratory
judgment claims are ripe because Fluor’s counterclaim against Zurich for bad faith failure to
settle (“BFFS”) requires Fluor to establish Zurich’s duty to indemnify.
Fluor replies that Zurich’s attempts to assert the parties were in dispute fail because
without a demand for contractual indemnification, a dispute over indemnification is purely
hypothetical. Fluor points out that Zurich concedes in its Complaint that Fluor has not sought
indemnity. Fluor further notes that for the reasons discussed in detail in Fluor’s Motion for
Partial Summary Judgment, Zurich’s duty to indemnify Fluor under the Zurich Policies is
irrelevant to Fluor’s BFFS claim.
The Court finds Zurich fails to meet its burden under both prongs of the ripeness inquiry.
First, Zurich has alleged only a hypothetical or speculative indemnity dispute−not a dispute fit
for judicial determination. A coverage dispute can form the basis for a declaratory judgment
action when the insured has made a clear demand for defense, indemnity, or other payment under
a policy. See Century Indem. Co. v. Anheuser-Busch, Inc., No. 4:11-CV-1097 CEJ, , at *3 (E.D.

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Mo. Mar. 19, 2012) (citing Federal Ins. Co. v. Sammons Financial Group, Inc., 595 F.Supp.2d
962, 972 (S.D. Iowa 2009)). Here, however, Zurich’s Complaint does not contain an allegation
that Fluor has demanded payment or sought indemnification against Zurich under the Zurich
Policies. Under a 12(b)(1) motion to dismiss based upon subject matter jurisdiction, the Court
may consider the undisputed facts evidenced in the record or resolve disputed facts to
supplement the Complaint. However, the Court finds no evidence of record that Fluor requested
contractual indemnification at any point, including after it settled the Alexander/Pedersen/Heilig
litigation and other Herculaneum Lawsuits in October 2014. 5 Moreover, Zurich acknowledges
in its Complaint that “Fluor and its other related entities never requested that Zurich fund any
settlement on its behalf at [the mediation that led to the Doe Run Settlement] nor at any
subsequent mediation of the Alexander/Pedersen/Heilig litigation . . . .” ECF No. 1 at ¶ 25. The
possibility that Fluor may demand indemnity from Zurich at some point in the future falls short
of establishing an actual controversy. See Century Indem. Co. v. Anheuser-Busch, Inc., No.
4:11-CV-1097 CEJ, 2012 WL 919008, at *3 (E.D. Mo. Mar. 19, 2012) (stating that the allegation
that a defendant “has or may” assert a claim for coverage is ambiguous with regards to
jurisdiction and is insufficient to nudge the claims across the line from conceivable to plausible).
As noted above, Zurich contends a live controversy regarding indemnity exists.
Specifically, Zurich alleges Fluor’s tendering of the Herculaneum Lawsuits and Zurich’s
agreement to defend under a reservation of rights constituted a ripe “dispute” sufficient to

5

Zurich does allege in its Response in Opposition to Fluor’s Motion to Dismiss that Fluor
tendered the Herculaneum Lawsuits to Zurich for “defense and indemnity.” However, in support
of this statement, Zurich cites to Fluor’s Statement of Undisputed Material Facts which states
only that Fluor tendered claims to Zurich for a “full and complete defense.” (See ECF No. 241 at
3 and FSUMF, ECF No. 221-1 at ¶ ¶ 5-11) (emphasis added). Thus, the Court finds Zurich’s
allegation to be unsupported by the record and the Court will consider it no further.
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provide jurisdiction here for a declaratory judgment claim regarding Zurich’s duty to indemnify.
Zurich relies on Aetna Casualty & Surety Co. v. General Dynamics Corp., 968 F.2d 707 (8th Cir.
1992). Aetna, however, is distinguishable from the circumstances here. In Aetna, the insured,
General Dynamic, demanded the insurer, Aetna, provide a defense and indemnify General
Dynamics for any sums paid to resolve lawsuits concerning environmental contamination and
letters from environmental protection agencies demanding the clean-up of certain sites. Id. at
709. Aetna initially agreed to defend General Dynamic under a reservation of rights, but then
withdrew its defense commitment and filed an action for declaratory judgment. Id. The Court in
Aetna found a justiciable controversy existed between the insurer and insured as General
Dynamics had made a clear demand for the payment of defense and indemnity costs which
Aetna had disputed while the claims at issue in Aetna were being litigated. Id. at 711.
This case is factually distinguishable as neither Zurich’s Complaint, nor the undisputed
facts allege Fluor demanded indemnification. Zurich provides no other authority for its
proposition that tendering a claim to an insurer who agrees to defend under a reservation of
rights is sufficient to create a justiciable dispute years after the litigation has reached settlement
where no demand for indemnity has been sought. The Court therefore declines to find a ripe
dispute here based on Zurich’s reasoning under Aetna. 6

6

Zurich also argues its claims are ripe and justiciable because, in Fluor’s Answer, Fluor 1)
admits jurisdiction is proper and 2) denies Zurich’s allegation set forth in its Complaint that
Zurich has no indemnity obligation under the policies. Zurich does not support its
contention−that an admission of subject matter jurisdiction in an answer constitutes waiver−with
citation to any authority. Zurich’s contention fails as subject matter jurisdiction cannot be waived
by the parties or conferred by consent. United States v. Redstone, 488 F.2d 300, 301 (8th Cir.
1973). Zurich also fails to provide case law in support its other argument−that the mere denial of
an allegation in a Complaint satisfies the ripeness requirement−and the Court accordingly
declines to consider it.
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Having considered the fitness prong, the Court turns to the Court hardship prong of the
ripeness test and similarly concludes Zurich fails to satisfy its burden. The Complaint does not
allege, as it must, Zurich has sustained or is immediately in danger of sustaining some direct
injury related to its duty to indemnify Fluor under the Policies. See O’Shea v. Littleton, 414 U.S.
at 494 (internal quotations and citations omitted). Because Fluor has not demanded indemnity
from Zurich, Zurich cannot establish an injury that is “certainly impending.” Paraquad, 259 F.3d
at 958–59. The possibility of injury here is attenuated and can only result if, at some future date,
Fluor demands indemnification from Zurich. The Eighth Circuit has “repeatedly stated that a
case is not ripe if the plaintiff makes no showing that the injury is direct, immediate or certain to
occur.” Public Water Supply, 345 F.3d at 573 (citing Paraquad, 259 F.3d at 959–60).
Finally, Zurich also asserts the question of indemnity is ripe for adjudication as Zurich’s
duty to indemnify Fluor must be proved by Fluor as a prerequisite to its Second Cause of Action
for bad faith failure to settle. However, in addressing Fluor’s Partial Motion for Summary
Judgment below, the Court concludes Fluor’s counterclaim against Zurich for BFFS does not
require Fluor to establish a right to indemnity coverage. The Court, therefore, rejects Zurich’s
current argument that a ripe controversy regarding indemnity is created by virtue of the Fluor’s
assertion of a BFFS counterclaim.
Accordingly, the Court will dismiss Zurich’s First, Second and Third Causes of Action
insofar as they seek a declaration that Zurich’s Policies do not provide coverage for the
indemnity of the Herculaneum Lawsuits. Fluor has not sought dismissal of, and the Court does
not dismiss the portions of Zurich’s First, Second and Third Causes of Action that seek a
declaration with regard to Zurich’s defense of Fluor. Furthermore, because the Court will
dismiss Zurich’s First Cause of Action seeking a declaration with respect to its duty to indemnify

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Fluor, it will deny as moot Zurich’s Motion seeking Partial Summary Judgment against Fluor on
Zurich’s First Cause of Action that it has no duty to indemnify Fluor for any liability incurred by
Fluor in connection with the Bronson/Smoger Lawsuits. 7
II.

FLUOR’S MOTION FOR PARTIAL SUMMARY JUDGMENT

Pursuant to Federal Rule of Civil Procedure 56, Fluor moves for partial summary
judgment against Zurich with respect to Zurich’s Affirmative Defenses 1, 6, 7, and 18
(collectively the “Indemnity Defenses”) 8 to Fluor’s Second Cause of Action for bad faith failure
to settle (“BFFS”). Fluor argues indemnity coverage is irrelevant to whether Zurich committed
the BFFS tort at the time of the November 18, 2010 mediation aimed at reaching a global
settlement of the Herculaneum Lawsuits. Thus, Fluor contends Zurich’s Indemnity Defenses fail
as a matter of law to state legally viable defenses to Fluor’s second cause of action for BFFS.
Legal Standard −Motion For Summary Judgment

7

The Court notes that although Zurich’s Partial Motion for Summary Judgment on its First
Cause of Action seeks relief with regard to the Bronson/Smoger Lawsuits, Zurich’s First Cause
of Action in the Complaint instead asks for a declaration pertaining to the
Alexander/Pedersen/Heilig litigation. This discrepancy is irrelevant here as the
Alexander/Pedersen/Heilig litigation is part of the Bronson/Smoger Lawsuits and the Court’s
instant ruling on Fluor’s Motion to Dismiss encompasses the Bronson/Smoger Lawsuits as it is
directed at the even broader group of plaintiffs in the Herculaneum Lawsuits.
8
See ECF No. 46, Aff. Def. 1 (“Coverage is barred under the Zurich Policies to the extent that
recovery is sought for claims which do not involve an occurrence of bodily injury during the
policy periods”); Aff. Def. 6 (“Coverage is barred under the Zurich Policies to the extent that
recovery is sought for ‘damages’ that are not attributable to ‘bodily injury’ or ‘property
damage’”); and Aff. Def. 7 (“Coverage is unavailable under the Zurich Policies for any liability
any insured might incur as a result of its involvement with the Doe Run Company Partnership,
Doe Run Investment Holdings or the Homestake Lead Company of Missouri because that
involvement commenced after the last of the Zurich Policies expired on June 1, 1985.”); Aff.
Def. 18 (“Coverage is unavailable under certain of the Zurich Policies to the extent that any
alleged ‘bodily injury’ or ‘property damage’ arose from releases of pollutants that were not
‘sudden or accidental’ within the meaning of the Zurich Policies”).
12

“Rule 8(c) of the Federal Rules of Civil Procedures governs affirmative defenses. The
term ‘affirmative defense’ is defined as ‘[a] defendant's assertion raising new facts and
arguments that, if true, will defeat the plaintiff's ... claim, even if all allegations in the complaint
are true.’” PNC Bank, Nat. Ass'n v. El Tovar, Inc., No. 4:13–CV–1073 CAS, 2014 WL 538810,
at *7–8 (E.D. Mo. Feb. 11, 2014) (quoting Black's Law Dictionary 430 (7th ed.1999)).
“Affirmative defenses, if accepted by the court, will defeat an otherwise legitimate claim for
relief.” Id. (quoting 2 James Wm. Moore, et al., Moore's Federal Practice § 8.08[1] (3d ed.
2013).
As with any motion for summary judgment, a movant seeking summary judgment on an
affirmative defense must first “inform [ ] the district court of the basis for its motion and
identify[ ] those portions of the record which show a lack of a genuine issue.” Hartnagel v.
Norman, 953 F.2d 394, 395 (8th Cir. 1992) (citing Celotex v. Catrett, 477 U.S. 317, 323 (1986)).
There is no requirement that the movant support its motion with materials negating the
affirmative defense. Id. (citing Celotex, 477 U.S. at 323). Rather, the party with “the burden of
proof on an issue ... must present evidence sufficient to create a genuine issue of material fact to
survive a properly supported summary judgment motion.” Crotty v. Dakotacare Admin. Servs.,
Inc., 455 F.3d 828, 831 (8th Cir. 2006). Thus, if a defendant fails to make a showing sufficient to
establish an essential element of a defense on which it will bear the burden of proof at trial, Rule
56(c) mandates the entry of summary judgment against it. See Celotex, 477 U.S. at 322.
Discussion
‘“The duty to defend arises whenever there is a potential or possible liability to pay based
on the facts at the outset of the case and is not dependent on the probable liability to pay based
on the facts ascertained through trial.’” Freeman v. Leader Nat. Ins. Co., 58 S.W.3d 590, 597

13

(Mo. Ct. App. 2001) (quoting McCormack Baron Management Serv., Inc. v. Am. Guarantee and
Liab. Ins. Co., 989 S.W.2d 168, 170 (Mo. banc 1999)). This duty to defend potentially insured
claims arises “even though claims beyond coverage may also be present.” Truck Ins. Exch. v.
Prairie Framing, LLC, 162 S.W.3d 64, 79 (Mo. App. 2005). “An insurer’s right to control
settlement and litigation under a liability insurance policy creates a fiduciary relationship
between insurer and insured.” Freeman, 58 S.W.3d at 598. “Thus, an insurer owes a duty to
exercise good faith in evaluating and negotiating third-party claims against its insured, and the
insurer may be held liable in tort for a third-party judgment in excess of policy limits if it fails to
perform its fiduciary obligation in good faith.” Id. “It is the existence of this fiduciary
relationship between insurer and insured, aside from insurer's subsisting implied covenant of
good faith and fair dealing under the insurance policy, that exposes an insurer to tort liability for
failing to exercise good faith in evaluating and negotiating third-party claims against an insured.”
Id.
“BFFS is a tort action based on the insurer’s failure to protect the interests of its insured,
not an action on the insurance contract.” Shobe v. Kelly, 279 S.W.3d 203, 212 (Mo. App. W.D.
2009). A bad faith refusal to settle action arises from an insurer's breach of its duty to settle
third-party claims in good faith. Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 828
(Mo. 2014) (citing Shobe, 279 S.W.3d at 209). “An insurer ‘may be liable over and above its
policy limits if it acts in bad faith ... in refusing to settle the claim against its insured within its
policy limits when it has a chance to do so.” Id. at 828 (quoting Landie v. Century Indem. Co.,
390 S.W.2d 558, 563 (Mo. App. 1965). 360 Mo. 362, 228 S.W.2d 750, 753 (1950). A bad faith
refusal to settle action will lie when a liability insurer: (1) reserves the exclusive right to contest
or settle any claim; (2) prohibits the insured from voluntarily assuming any liability or settling

14

any claims without consent; and (3) is guilty of fraud or bad faith in refusing to settle a claim
within the limits of the policy. Scottsdale, 448 S.W.3d at 827 (citing Zumwalt v. Utilities Ins.
Co., 360 Mo. 362, 228 S.W.2d 750, 753 (1950). Circumstances that indicate an insurer's bad
faith in refusing to settle include the insurer's not fully investigating and evaluating a claim, not
recognizing the severity of a third-party claimant's injuries and the probability that a verdict
would exceed policy limits, and refusing to consider a settlement offer. Johnson v. Allstate Ins.
Co., 262 S.W.3d 655, 662 (Mo. App. W.D. 2008). Other circumstances indicating an insurer's
bad faith include not advising an insured of the existence of settlement offers. Id.
The question before the Court is whether Zurich’s affirmative defenses asserting a lack of
coverage under the Zurich Policies fail as a matter of law in light of the undisputed facts. Fluor
argues indemnity coverage is irrelevant to whether Zurich committed the BFFS tort at the time of
the settlement opportunity in 2010. Fluor claims the undisputed facts show Zurich reserved the
exclusive right to settle and prohibited Fluor from voluntarily assuming liability−which gave rise
to Zurich’s duty to act in good faith in settling the Herculaneum Lawsuits. Fluor contends a
determination of coverage now cannot immunize Zurich for its conduct in 2010 and therefore,
the Indemnity Defenses fail as a matter of law. Zurich responds that under Missouri law, where
there is no coverage, an insured has no claim for bad faith. Zurich argues the Court should deny
summary judgment on its Indemnity Defenses as proof of lack of coverage will defeat Fluor’s
BFFS claim.
Under the undisputed language of the Zurich Policies, Zurich had the “right and duty to
defend any suit against the insured seeking damages . . . [and to] investigat[e] and settle[…] any
claim or suit as it deems expedient.” FSUMF, ECF No. 221-1 at ¶ 2. The Zurich Policies also
provided the insured “shall not, except at his own cost, voluntarily make any payment, assume

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any obligation or incur any expense.” Id. at ¶ 3. It is uncontested that: Fluor tendered the
Herculaneum Lawsuits to Zurich for a “full and complete defense;” Zurich agreed to defend the
claims pursuant to a reservation of rights; and, the reservation of rights reaffirmed Fluor’s “duty
to refrain from making voluntary payments or voluntarily assuming obligations.” FSUMF, ECF
No. 221-1 at ¶¶ 5-11, 15-21, 25.
Thus, at the outset, when Fluor tendered the lawsuits to Zurich and Zurich agreed to
defend under a reservation of rights, the potential for coverage existed, giving rise to Zurich’s
duty to defend Fluor. The policies’ language vests Zurich with the right to control litigation and
settlement, giving rise to a fiduciary relationship between the parties, exposing Zurich to tort
liability if it failed to evaluate and negotiate third-party claims in good faith. Moreover, based
upon the language of the policies and Zurich’s reservation of rights affirming Fluor’s duty to
refrain from voluntarily assuming obligations, Zurich had a duty to act in good faith with regard
to the 2010 settlement opportunity.
Zurich’s Indemnity Defenses relate to whether indemnity coverage is “barred” or
otherwise “unavailable” under the Zurich Policies. A proper affirmative defense “if true, will
defeat the plaintiff's ... claim, even if all allegations in the complaint are true.’” PNC Bank, 2014
WL 538810, at *7. Zurich argues a determination of no coverage will bar Fluor’s BFFS claim
under Missouri law. Zurich cites to several cases in support of its contention, all of which are
inapposite to the circumstances here and do not support the contention that an indemnity
obligation must be proven as a threshold to establishing a BFFS claim. For example, three of
cases cited by Zurich 9 are factually distinguishable, as in each case, the insured tendered claims

Elec. Power Sys. Int’l, Inc. v. Zurich Am. Ins. Co., No. 4:15-CV-1171 CDP, 2016 WL 4990498,
(W.D. Mo. Sept. 19, 2016); Spirtas Co. v. Fed. Ins. Co., 481 F. Supp. 2d 993 (E.D. Mo.
9

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to its insurer, the insurer denied coverage and refused to defend the insured. Moreover, in all
three cases, the insurers determined coverage was lacking at the very outset of the case, and the
dispute over coverage was therefore essential to the resolution of any contractual or tort claim by
the insureds against the insurers. Here, in contrast Zurich did not deny coverage and refuse to
defend Fluor at the outset of the case. Another case relied upon by Zurich, Arch Ins. Co. v.
Sunset Fin. Servs. Co., is likewise inapposite as the insured did not even assert a BFFS claim.
475 S.W.3d 730 (Mo. App. W.D. 2015). As such, the Court finds Zurich has not established a
determination of no coverage will bar a BFFS claim. Accordingly, Zurich has not met its burden
to show indemnity constitutes an affirmative defense to BFFS.
The Court further concludes that a determination on coverage here, after Zurich’s alleged
bad faith conduct occurred, is irrelevant to and cannot defeat Fluor’s BFFS claim. See Advantage
Bldgs. & Exteriors, Inc. v. Mid-Continent Cas. Co., 449 S.W.3d 16, 28 (Mo. App. W.D. 2014)
(concluding that because the trial court’s coverage ruling came after the insurer had already
refused to settle, the court did not abuse its discretion in excluding evidence of that ruling on the
basis that it was irrelevant, confusing, and prejudicial). From a common-sense standpoint,
Zurich’s proposal would allow insurers to undertake the defense of a claim, bar the insured from
voluntarily making payment on the claim, fail to act in good faith with regard to settlement
opportunities, and later evade BFFS liability for this conduct by procuring a determination at
trial or otherwise that coverage was non-existent−a fact that was not established at the time of the
alleged bad-faith conduct.

2007), aff'd, 521 F.3d 833 (8th Cir. 2008); Stone v. Farm Bureau Town & Country Ins. Co. of
Mo., 203 S.W.3d 736 (Mo. App. S.D. 2006).
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Thus, under the undisputed facts here, the Court does not find Zurich’s Indemnity
Defenses constitute cognizable affirmative defenses to Fluor’s BFFS claim. 10
Therefore, Zurich’s Indemnity Defenses (Affirmative Defenses 1, 6, 7, and 18) fail as a
matter of law with respect to Fluor’s BFFS claim. Accordingly, the court will grant partial
summary judgment against Zurich with respect to Zurich’s Affirmative Defenses 1, 6, 7, and 18
to Fluor’s Second Cause of Action for BFFS. As noted above, Fluor only moves the Court to
grant partial summary judgment with regard to Zurich’s Indemnity Defenses to Fluor’s bad faith
failure to settle claim in its Second Cause of Action−not the separate claim in Fluor’s Second
Cause of Action for bad faith failure to defend. As such, the Court confines its grant of summary
judgment to BFFS only.
Finally, the Court notes both Zurich and Fluor requested the Court take Judicial Notice of
certain court filings in other cases. See ECF Nos. 195, 223. The Court declines to address these
requests as the rulings contained herein did not rely on any of the filings. Zurich also filed a
Motion for Leave to Supplement the Parties Oral Arguments, which the Court will deny as moot
because the Court finds it unnecessary to the resolution of the parties dispositive Motions.
Accordingly,
IT IS HEREBY ORDERED that Fluor Corporation’s Motion to Dismiss the First,
Second, and Third Causes of Action in Zurich’s Complaint insofar as they seek a declaration that
Zurich’s Policies do not provide indemnity coverage [ECF No. 218] is GRANTED. Zurich’s

10

Zurich also argues Fluor’s BFFS claim fails as Zurich never controlled Fluor’s defense or
settlement negotiations. However, the issue in this Motion is whether Zurich may assert certain
affirmative defenses to Fluor’s BFFS claim, not whether Fluor has sufficiently established BFFS.
See Perrin v. Papa John's Int'l, Inc., 114 F. Supp. 3d 707, 722 (E.D. Mo. 2015) (noting a defense
which points out a defect in the plaintiff's prima facie case is not an affirmative defense).
Moreover, the conduct of both parties relevant to the control of Fluor’s defense and settlement
opportunities clearly constitutes disputed facts for trial.
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First, Second, and Third Causes of Action will be DISMISSED with regard to the extent that
they seek a declaration regarding indemnity coverage.
IT IS FURTHER ORDERED that Zurich American Insurance Company’s Motion for
Partial Summary Judgment against Fluor Corporation with respect to Zurich’s First Cause of
Action [ECF No. 192] is DENIED as moot.
IT IS FURTHER ORDERED that Fluor Corporation’s Motion for Partial Summary
Judgment [ECF No. 220] against Zurich with respect to Zurich’s Affirmative Defenses 1, 6, 7,
and 18 to Fluor’s Second Cause of Action for bad faith failure to settle is GRANTED.
IT IS FURTHER ORDERED that Zurich American Insurance Company’s Motion to
Supplement the Parties Oral Arguments [ECF No. 283] is DENIED as moot.
Dated this 30th Day of September, 2019.

E. RICHARD WEBBER
SENIOR UNITED STATES DISTRICT JUDGE

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