Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Olin Corp. v. OneBeacon America Insurance Co.

United States Court of Appeals, Second Circuit

July 18, 2017

Olin Corporation, Plaintiff-Counter-Defendant-Appellee-Cross-Appellant,
v.
OneBeacon America Insurance Company, referred to in this litigation as Commercial Union Insurance Company, Defendant-Appellant-Cross-Appellee, Insurance Company of North America, Hanover Insurance Company, as successor to Massachusetts Bonding and Insurance Company, American ReInsurance Company, Certain Underwriters at Lloyds London and London Market Insurance Companies, London Market Insurance Companies, Commercial Union Insurance Company, as successor to Employers Liability Assurance Corporation Ltd. and Employers Commercial Union Insurance Company America, Continental Casualty Company, C.E. Health Compensation & Liability Insurance Co., as successor to Falcon Insurance Company, successor to Employers Surplus Lines Insurance Company, Federal Insurance Company, Fireman's Fund Insurance Company, Great American Insurance Company, Lexington Insurance Company, London & Edinburgh Insurance Company Limited, Capital Markets Assurance Corp., as successor to National American Insurance Company of New York, successor to Stuyvesant Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pennsylvania, North River Insurance Company, Allstate Insurance Company a/s/o Marco Del Gado, as successor to Northbrook Excess and Surplus Insurance Company, Employers Insurance Company of Wausau, OneBeacon America Insurance Company, formerly referred to in this litigation as Commercial Union Insurance Company, Aetna Casualty & Surety Company, General Reinsurance Corporation, Government Employees Insurance Company, Granite State Insurance Company, Home Insurance Company, Indemnity Insurance Company of North America, Integrity Insurance Company, Greenwich Insurance Company, as successor to Harbor Insurance Company, National Casualty Company, Transit Casualty Company, AIU Insurance Company, Continental Corporation, Government Employees Insurance Company, Granite State Insurance Company, Harbor Insurance Company, National American Insurance Company of California, as successor to Stuyvesant Insurance Company, National Casualty Company, New York Property/Casualty Insurance Security Fund, American Home Assurance Company, Century Indemnity Company, Defendants, Olin-Hunt Specialty Products Incorporated, Third-Party-Defendant.

          Argued: January 12, 2017

         Defendant-Appellant-Cross-Appellee OneBeacon American Insurance Company ("OneBeacon") appeals from two final judgments entered in favor of Plaintiff-Counter-Defendant-Appellee-Cross-Appellant Olin Corporation ("Olin") in the United States District Court for the Southern District of New York (Griesa, J.). Olin cross-appeals from a grant of summary judgment in favor of OneBeacon on Olin's bad faith claim brought under Massachusetts law. Olin pursued this insurance-coverage action against its insurers, including OneBeacon, concerning environmental contamination at Olin manufacturing sites throughout the United States. This appeal arises from proceedings related to five particular manufacturing sites, and requires us to determine, inter alia, the proper method for allocating loss at each site and decide whether OneBeacon may reduce the limits of its liability by those of any prior insurance policies within the same layer of coverage.

         Affirmed in part, Vacated in part, and Remanded.

          Craig C. Martin (Mathew E. Price, Brian S. Scar-brough, and Matthew J. Thomas, on the brief), Jen-ner & Block LLP, Chicago, Illinois, for Plaintiff-Counter-Defendant-Appellee-Cross-Appellant.

          Bryce L. Friedman (Summer Craig, on the brief), Simpson Thacher & Bartlett LLP, New York, New York, for Defendant-Appellant-Cross-Appellee.

          Before: Hall, Livingston, and Droney, Circuit Judges.

          Hall, Circuit Judge.

         In this consolidated appeal, Defendant-Appellant-Cross-Appellee OneBeacon American Insurance Company ("OneBeacon") appeals from two judgments entered pursuant to Federal Rule of Civil Procedure 54(b) in favor of Plaintiff-Counter-Defendant-Appellee-Cross-Appellant Olin Corporation ("Olin") in the United States District Court for the Southern District of New York (Griesa, J.), awarding Olin over $80 million in indemnification costs. OneBeacon appeals the district court's denials of its motions for summary judgment and the district court's ruling adopting particular special verdict interrogatories. Olin cross-appeals from a grant of summary judgment in favor of OneBeacon on Olin's bad faith claim brought pursuant Massachusetts General Laws Chapter 93A, Mass. Gen. Laws ch. 93A, § 2(a) ("Chapter 93A").

         Olin, a large chemical manufacturing company, brought this coverage action against its insurers, including OneBeacon, seeking indemnification for environmental contamination at Olin manufacturing sites throughout the United States. This case requires us to resolve, among other issues, the proper method for allocating loss at each site when damage continues across a number of years and to decide whether OneBeacon may reduce the limits of its liability by those of any other prior insurance policies within the same layer of coverage.

         For the reasons set forth below, the judgments of the district court are Affirmed in part, Vacated in part, and Remanded for further proceedings.[1]

         I. BACKGROUND

         This appeal presents yet another round in a protracted insurance-coverage dispute between the Olin Corporation ("Olin") and its insurers, including OneBea-con American Insurance Company ("OneBeacon"),[2] for numerous environmental insurance claims. Olin first filed an insurance-coverage action in 1983 in the District Court for the District of Columbia seeking indemnification for environmental damage at Olin manufacturing sites throughout the United States, and the action was transferred to the Southern District of New York. Because of the volume of claims and locations involved, the district court chose to address coverage on a site-by-site basis. This appeal arises out of the most recent of these site-specific proceedings, concerning contamination at five Olin manufacturing sites: (1) McIntosh, Alabama ("McIntosh"); (2) Fields Brook/Ashtabula, Ohio ("Fields Brook"); (3) Augusta, Georgia ("Augusta"); (4) Rochester, New York ("Rochester"); and (5) Bridgeport Rental & Oil Services in Bridgeport, New Jersey ("BROS").

         A. The Manufacturing Sites

         The McIntosh site is an Alabama property that was added to the National Priority List ("NPL") pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. ("CERCLA"), in 1984. The NPL identifies polluted or potentially polluted sites for purposes of CERCLA enforcement by the United States Environmental Protection Agency ("EPA"). The EPA divided the McIntosh site into two "operable units" relevant to this appeal: Operable Unit 1 ("OU1") and Operable Unit 2 ("OU2").[3] OU1 contains Olin manufacturing plants producing chlorine, caustic soda, and crop chemicals. OU2 encompasses a 65-acre natural basin adjacent to the plant, into which wastewater from the plant was regularly discharged. Olin's third-amended complaint, the operative complaint here, relates exclusively to OU2. At trial, the parties stipulated that Olin incurred $15,656,076.07 in cleanup and remediation costs for OU2 through December 31, 2014.

         The Fields Brooks site is located in Ohio and houses a plant that once produced the chemical "TDI." Property damage at Fields Brook began in 1964 due to the discharge of contaminated wastewater into a brook running through the property, which in turn contaminated the brook's sediments. [4] The parties stipulated that Olin incurred $5,105,238.27 in costs through December 31, 2014.

         The Augusta site holds a Georgia chlor-alkali plant that produced chlorine and caustic soda. The operations at this site led to the continuous mercury contamination of the surrounding groundwater and the ecosystem around the plant's intake canal. The parties stipulated that Olin incurred $13,754,618.69 in costs for the groundwater contamination and an additional $2,964,074.78 for cleanup of the intake canal through December 31, 2014.

         The Rochester site housed a plant that produced specialty organic chemicals. Operations resulted in the continuous and repeated exposure of groundwater to chemical contaminants. The parties stipulated that Olin incurred $16,418,746.53 in relevant costs at this site through December 31, 2014.

         The BROS site involves a New Jersey property where Olin stored spent sulfuric acid between 1968 and 1974.[5] Olin and OneBeacon stipulated that Olin incurred $300,000 in costs through December 31, 2014.

         Beginning in 1984, Olin sent formal notices to OneBeacon and its other insurers identifying government orders requiring investigation and cleanup at various Olin sites, including Fields Brook, Augusta, and McIntosh. In 1986, Olin sent One-Beacon and other insurers a supplemental notice of claims concerning additional sites, including the BROS and Rochester sites. The notices detailed Olin's damages at each site and described Olin's remediation measures. The notices also invited insurers, including OneBeacon, to investigate Olin's claims. Olin regularly supplemented these notices with updated information about damages, costs, and remedial measures at each site. Between February 1984 and January 1992, Olin sent One-Beacon fifteen claims notices that related to, at least in part, one or more of the five sites.

         According to Olin, OneBeacon never responded. It was not until Olin amended its complaint in 1993, adding coverage claims against OneBeacon for the five sites, that OneBeacon acknowledged receipt of Olin's claims notices. In its answer to this complaint, OneBeacon asserted various defenses denying coverage. Discovery later requested by Olin revealed that OneBeacon had neglected to conduct any investigation into Olin's coverage claims. Discovery also exposed that OneBeacon lacked factual support for numerous affirmative defenses and had delegated its claims handling responsibilities to one of its reinsurers. Last, through discovery in a related case, Olin learned that OneBeacon imposed "dollar targets" on its claims adjusters and would seek to litigate, rather than pay, claims because it was "cheaper" to do so.

         B. The OneBeacon Policies

         OneBeacon issued Olin three excess umbrella insurance policies for the period of 1970 through 1972. Because the OneBeacon policies are "excess" policies, each policy provides coverage only where the underlying insurance policies have been "exhausted" or have had their limits per occurrence paid out. The OneBeacon policies "attach" at various points above an underlying "primary" commercial general liability policy issued by the Insurance Company of North America ("INA"), which covered the first $300,000 of loss attributable to property damage at the manufacturing sites. The first OneBeacon policy attaches at $300,000 and has a per occurrence limit of $1 million. The next OneBeacon policy attaches at $1.3 million and has a $4 million per occurrence limit. Finally, the third OneBeacon policy attaches at $5.3 million and provides $15 million in coverage. In short, OneBeacon's policies provide up to $20 million in coverage, in excess of $300,000, per occurrence. Effective January 1, 1971, OneBeacon's three excess policies included a pollution exclusion.[6] Accordingly, for the purposes of this appeal, the policy period for Olin's coverage under the three OneBeacon excess policies is January 1, 1970 through December 31, 1970.

         The OneBeacon policies provide coverage for "all sums which the Insured shall be obligated to pay by reason of the liability . . . imposed upon the Insured by law . . . for damages, direct or consequential and expenses . . . on account of . . . Property Damage . . . caused by or arising out of each occurrence . . . ."[7]App'x at 2131. An "occurrence" is defined as "an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally result[s] in . . . property damage . . . during the policy period." See, e.g., App'x at 2134. Each OneBeacon policy also contains a condition on coverage known as a "prior insurance" provision (or "noncumulation" clause) and a "continuing coverage" clause. Both clauses are found in Condition C of the policies.

         Condition C specifically provides:

It is agreed that if any loss covered hereunder is also covered in whole or in part under any other excess policy issued to the Insured prior to the inception date hereof, the limit of liability hereon . . . shall be reduced by any amounts due to the Insured on account of such loss under such prior insurance.
Subject to the foregoing paragraph and to all other terms and conditions of this Policy in the event that personal injury or property damage arising out of an occurrence covered hereunder is continuing at the time of termination of this Policy, [OneBeacon] will continue to protect the Insured for liability in respect of such personal injury or property damage without payment of additional premium.

App'x at 2138. The first paragraph constitutes the prior insurance provision and the second is the continuing coverage clause.

         Finally, the "loss payable" provision (Condition J) governs when the OneBea-con policies are triggered. "Liability under this Policy with respect to any occurrence shall not attach unless and until the Insured, or the Insured's Underlying Insurer, shall have paid the amount of the Underlying Limits on account of such occurrence." App'x at 2140. In other words, under Condition J, the OneBeacon excess policies will not attach until the $300,000 primary INA layer is exhausted.

         C. The Prior Excess Policies

         Each of the OneBeacon policies at issue is preceded in time by prior insurance in the same layer of coverage (the "Prior Excess Policies"). The Prior Excess Policies include policies issued by certain underwriters at Lloyd's, London (the "London Market Insurers"). The first two layers of the OneBeacon policies, for example, are preceded in the same layer by excess policies issued by the London Market Insurers dating from the 1950s through 1969. The Prior Excess Policies provide substantially the same coverage as that provided by the OneBeacon policies for the sites at issue. Like the OneBeacon policies, the Prior Excess Policies generally provide coverage for all sums Olin becomes legally obligated to pay for property damage during the policy period caused by an occurrence

         D. Our Court's Prior Olin Decisions

         There have been a number of related appeals concerning Olin's environmental insurance claims stemming from other contaminated sites, which implicated other insurers and policies. Several of those decisions set the stage for this appeal. First, in Olin Corp. v. Insurance Co. of North America ("Olin I"), 221 F.3d 307 (2d Cir. 2000), we addressed Olin's claim for coverage from its primary insurer (INA) for soil and groundwater contamination that occurred over a 35-year period at a pesticide manufacturing plant in North Carolina. There, we determined that the appropriate method for "allocating" responsibility for "on-going and progressive injury that spans many years" is to do so "pro rata." Id. at 322–24. Under this pro rata method, the total property damage is divided into equal annual shares for each year in which such damage took place. This annual share is then treated as the total property damage attributable to that occurrence for that year, and the insurer providing coverage for that year is responsible for indemnifying an insured only to the extent of its contractual liability for such deemed property damage.

         In Olin Corp. v. Certain Underwriters at Lloyd's London ("Olin II"), 468 F.3d 120 (2d Cir. 2006), we decided a claim seeking coverage from an excess insurer for soil and groundwater contamination resulting from operations at a chemical manufacturing plant in upstate New York. The principal issue on appeal was how to identify the policies triggered as a result of the continuing environmental harm. In rejecting Olin's proposed model, we concluded that "property damage occurs as long as contamination continues to increase or spread," and includes not only "contamination . . . based on active pollution" but also "the passive migration of contamination into the soil and groundwater." Id. at 131. We further clarified that, under the pro rata approach, in the absence of specific evidence to the contrary, the default is to allocate loss equally across the years during which "continuous" property damage was sustained. Id. at 127. We explained, however, that "if it could be determined exactly how much property damage occurred in each year, then the indemnifiable remediation costs could be allocated" to the specific years in which the damage occurred, rather than equally across all years in which the progressive environmental harm was continuing. Id.

         Last, in Olin Corp. v. American Home Assurance Co. ("Olin III"), 704 F.3d 89 (2d Cir. 2012), we addressed the application of a similar prior insurance provision to that implicated here. Olin III concerned Olin's coverage-claim against American Home Assurance Company ("American Home") for its Morgan Hill, California manufacturing site, which had become contaminated as a result of Olin's discharge of chemicals into soil and groundwater over a period of 31 years. 704 F.3d at 93. At issue were two consecutive American Home excess policies covering periods from 1966 through 1968 and 1969 through 1971, attaching at $30.3 million. Both policies included a provision identical in all material ways to the version of Condition C included in the OneBeacon policies implicated here. Id. at 94.

         We concluded that while our prior decisions require the pro rata allocation of damages in cases involving long-tail claims, the continuing coverage clause of Condition C must still be given effect. Id. at 101. Accordingly, we held that, pursuant to the continuing coverage clause, American Home would still be liable for damage continuing after the termination of its policy. Id. at 102. At the same time, however, we also held that the prior insurance provision reduceed the per occurrence limit on American Home's later-issued policy by the amount paid out under American Home's prior policy (at the same level of excess coverage), to the extent that both policies were triggered by the same loss. Id. at 104. We explained that this approach was consistent with "Condition C's apparent purpose of sweeping a continuing loss into the earliest triggered policy, with that policy then fully indemnifying the insured for that loss." Id. However, bound by our earlier decision in Olin I, we also held that the pro rata approach, rather than the all sums (or joint and several liability) approach, continued to govern the allocation of loss across a damage period. Id. at 102-03. Condition C obligated an insurer "to indemnify Olin up to the limits of its policies for all property damage ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.