Doe v. Am. Guarantee & Liab. Ins. & Lexington Ins. Co.

THE DOE RUN RESOURCES CORPORATION, Respondent, v. AMERICAN GUARANTEE & LIABILITY INSURANCEand LEXINGTON INSURANCE COMPANY, Defendants,ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Appellant.

No. ED103026

Missouri Court of Appeals Eastern District DIVISION THREE

September 27, 2016

Appeal from the Circuit Court of St. Louis County

10SL-CC01716

Honorable Thomas J. Prebil

OPINION

This is an insurance coverage case. St. Paul Fire and Marine Insurance Company ("St. Paul") appeals the trial court's judgment which found that St. Paul has the duty to defend the Doe Run Resources Corporation ("Doe Run") in the toxic-tort lawsuits that underlie this litigation, and which ordered St. Paul to reimburse Doe Run for its defense costs and to pay prejudgment interest on those damages. St. Paul contends that the trial court erred (1) because the "pollution exclusion" in Doe Run's Commercial General Liability policy ("CGL policy") bars coverage for the bodily injuries alleged in the underlying lawsuits; (2) because under the circumstances Doe Run's CGL policy constitutes "excess insurance" and another insurer has the duty to defend Doe Run; (3) because even if St. Paul had the duty to defend, St. Paul still should not be obligated to reimburse Doe Run for its defense costs incurred prior to March 16, 2012, since according to St. Paul, Doe Run did not until then demand coverage in the underlying lawsuits under the CGL policy; and (4) because the award to Doe Run of prejudgment interest on the damages awarded was improper, since the damages were not liquidated until just before the trial. We affirm the judgment of the trial court as to Points I and II. However, as to Points III and IV, we reverse and remand to the trial court for further proceedings consistent with this opinion.

Factual and Procedural Background

Doe Run is a Missouri corporation that mines, mills, smelts, and fabricates lead ore and other metallic ores to produce lead and lead concentrates, and other metals and metal concentrates. Although Doe Run has operated primarily in Missouri since the mid-nineteenth century, this case and the toxic-tort lawsuits that underlie it concern Doe Run's mining and other operations at its metallurgical industrial complex in La Oroya, Peru. The La Oroya complex became the subject of Missouri toxic-tort litigation in October 2007, when Doe Run and others were sued in a class action lawsuit filed on behalf of Peruvian citizens living in the vicinity of the complex. Like the underlying lawsuits here, the 2007 lawsuit alleged that the plaintiffs suffered bodily harm as a result of toxic releases from the complex. On August 6, 2008, however, the 2007 lawsuit was voluntarily dismissed.

The next day, Doe Run and others were sued in two of the underlying lawsuits here—which eventually have come to number more than 20—filed on behalf of minor plaintiffs living in the vicinity of the La Oroya complex. Litigation of these suits is ongoing. Each of the lawsuits presents the same set of allegations against Doe Run and six of its officers, including causes ofaction for negligence, civil conspiracy, absolute or strict liability, and contribution, for the harmful release of toxic substances from the La Oroya complex.

In April 2010, Doe Run filed this insurance coverage case against four insurance companies, at the time not including St. Paul, seeking reimbursement for defense costs that Doe Run had incurred and has continued to incur in defense of the underlying ongoing La Oroya complex lawsuits. The insurance companies sued by Doe Run included National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union"), which issued Doe Run a Directors and Officers ("D&O") liability policy, and American Guarantee & Liability Insurance Company ("AGLIC"), which issued Doe Run a global general commercial liability policy covering a period earlier than that of the St. Paul policy. Like St. Paul here, National Union contended that it was not obligated to reimburse Doe Run's defense costs because coverage for the underlying lawsuits is excluded by the pollution exclusion provision in its policy. The trial court rejected National Union's argument and found in its judgment entered on November 7, 2011, that National Union had a duty to defend Doe Run, with whom the insurer eventually settled, making a lump-sum payment for past defense costs and agreeing to pay a portion of such costs on an ongoing basis. Doe Run also settled with AGLIC, which made a lump-sum payment for past defense costs. The claims against the other two insurers were dismissed.

St. Paul was added to this case along with AGLIC, in Doe Run's amended petition for declaratory relief, breach of contract, and unreasonable refusal to pay, filed on May 17, 2012. Doe Run asserted (1) that St. Paul has the duty to defend it in the underlying lawsuits; (2) that St. Paul's breach of its duty to defend Doe Run has resulted in damages to Doe Run; and (3) that St. Paul has unreasonably and in bad faith refused to pay the losses for which it insures Doe Run, and thus mustpay an additional amount in damages pursuant to § 375.420¹ sanctioning vexatious refusals to pay. Following a period of discovery, both parties moved for summary judgment.

St. Paul's first motion for summary judgment asserted that it is not obligated to defend Doe Run in the underlying lawsuits because coverage is excluded by the pollution exclusion in the CGL policy. Doe Run filed a cross-motion for partial summary judgment, arguing that St. Paul has a duty to defend it in the underlying lawsuits because the pollution exclusion is ambiguous and thus must be construed in favor of coverage for the insured, and because the "other insurance" provision in the CGL policy did not exclude coverage. Because Doe Run's cross-motion addressed both the pollution exclusion and "other insurance" provisions, St. Paul filed a second motion for summary judgment addressing the "other insurance" provision and asserting that under the terms of the CGL policy, St. Paul has no duty to defend Doe Run here because in these circumstances the CGL policy constitutes "excess insurance" and National Union has the duty to defend Doe Run.

The trial court denied St. Paul's motions and granted Doe Run's, finding that St. Paul has the duty to defend Doe Run in the underlying lawsuits. Trial on the extent of St. Paul's obligation to reimburse Doe Run for past defense costs was scheduled for December 8, 2014. On November 12, 2014, St. Paul filed a motion in limine seeking to preclude Doe Run from recovering defense costs incurred before it demanded coverage from St. Paul, which St. Paul alleged Doe Run failed to do until March 16, 2012.

At the outset of the trial on damages, the court heard argument on St. Paul's motion in limine and took it under advisement. The trial lasted two days, during which the parties presented evidence in support of their positions on the amount of past defense costs owed by St. Paul. At the close of Doe Run's case, St. Paul filed a motion for judgment pursuant to Missouri SupremeCourt Rule 73.01(b), arguing that even if St. Paul were found to have the duty to defend, St. Paul still should not be obligated to reimburse Doe Run for its defense costs incurred prior to March 16, 2012, since according to St. Paul, Doe Run did not until then demand coverage in the underlying lawsuits under the CGL policy.

On February 18, 2015, the trial court rejected St. Paul's arguments in the motion in limine and motion for judgment and ordered that St. Paul reimburse Doe Run for all its unrecovered fees and costs incurred in defense of the underlying lawsuits. While the court did find that St. Paul's refusal to pay was not vexatious and recalcitrant—and accordingly dismissed that part of the case with prejudice—pursuant to § 408.020, the court awarded Doe Run prejudgment interest on all damages from the date incurred.

Then, on April 23, 2015, the trial court entered its final judgment in this case, restating the integral findings of its prior judgments as to St. Paul's liability and providing the final calculations of damages owed, including prejudgment interest. The trial court found St. Paul liable to Doe Run for a total of $2,108,535.44 in damages made up of three sub-totals: $1,676,147.24 in defense costs presented at trial; $129,624.11 in additional defense invoices not presented at trial; and $302,764.09 in prejudgment interest on those defense costs. St. Paul now appeals the final judgment of the trial court as to whether it has a duty to defend Doe Run, and as to whether it owes any damages in this case—and if so, how much.

Standards of Review

We review de novo the trial court's ruling on cross-motions for summary judgment. Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 826 (Mo.banc 2014). Summary judgment is appropriate if no genuine issues of material fact exist and the movant is entitled to judgment as a matter of law. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d371, 376 (Mo.banc 1993). We review the record in the light most favorable to the party against whom judgment was entered. Id.

Like the propriety of summary judgment, the interpretation of an insurance policy is a question of law that we review de novo. Dutton v. Am. Fam. Mut. Ins. Co., 454 S.W.3d 319, 321 (Mo.banc 2015). The rules of contract construction apply to the construction of insurance policies. Naeger v. Farmers Ins. Co., Inc., 436 S.W.3d 654, 659 (Mo.App.E.D. 2014). Where a policy is open to the reasonable interpretation that it provides coverage for a particular loss, we will find that it does so; in construing the terms of an insurance policy, we apply the meaning an ordinary person of average understanding would attach if purchasing the policy and resolve in favor of the insured any ambiguities about whether there is coverage under the policy. Dutton, 454 S.W.3d at 322. An ambiguity exists when there is duplicity, indistinctness, or...