Nucor Corp. v. Employers Insurance
296 P.3d 74
Ariz. Ct. App.2012Background
- TCE contamination detected in Phoenix wells in 1982; ADEQ identifies Nucor as a potentially responsible party and directs remedial action in 1989.
- Nucor settles the ADEQ claim for $1,275,000.
- Nucor and co-defendants are sued in Baker v. Motorola and Lofgren v. Motorola; class actions are consolidated into three classes (medical monitoring, stigma, and personal injury).
- Nucor settles the class claims for over $21,000,000.
- Phase II determined defense cost allocations; court later issued final amended judgment in January 2010, with rulings on coverage and defense costs subject to Rule 54(b).
- This appeal involves whether stigma damages are covered, whether ADEQ PRP action is a covered “suit,” and how defense costs should be allocated among insurers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether stigma-damages portion is covered by Wausau policies | Nucor argues stigma damages arose from property damage and are covered | Wausau contends stigma damages are not tied to property damage and not covered | Stigma damages are not covered under Wausau policies |
| Whether the ADEQ PRP letter constitutes a “suit” triggering defense duty | Nucor contends PRP letter is a covered suit or equivalent | Wausau argues PRP letters are not suits and do not trigger defense | ADEQ PRP letter triggers defense under Wausau policies |
| Equitable contribution among insurers for defense costs | Nucor asserts proportional contribution from all insurers for defense costs | Wausau asserts right to contribution and that costs should be allocated by policy limits | Wausau entitled to equitable contribution; method of allocation affirmed with adjustments for insolvency and interim agreements |
| Nucor’s 5% share of defense costs allocated to American Mutual (insolvent) | Nucor must bear proportional costs due to shared risk; American Mutual insolvent | Allocation should not penalize Nucor for insurer insolvency | Reversed the 5% allocation to Nucor for American Mutual; remand for recalculation consistent with opinion |
Key Cases Cited
- State Farm Mut. Auto. Ins. Co. v. Connolly ex rel. Connolly, 212 Ariz. 417 (App. 2006) (interprets policy language and coverage; underlying action matters for indemnity)
- Desert Mountain Props. Ltd. P’ship v. Liberty Mut. Fire Ins. Co., 225 Ariz. 194 (App. 2010) (ambiguous policy language and reasonable expectations doctrine)
- Adams v. Star Enterprise, 51 F.3d 417 (4th Cir. 1995) (damages from proximity to an environmental plume may be considered property damage)
- Pintlar Corp. v. Indus. Crankshaft & Eng’g Co., 948 F.2d 1516 (7th Cir. 1991) (PRP letters may be treated as a suit for defense obligations)
- Johnson Controls, Inc. v. Employers Ins. of Wausau, 264 N.W.2d 257 (Wis. 2003) (PRP letters can trigger defense duties under CGL policies)
- Aetna Cas. & Sur. Co. v. Commonwealth, 179 S.W.3d 830 (Ky. 2005) (PRP letters as suits under reasonable expectations doctrine)
- Regal Homes, Inc. v. CNA Insurance, 217 Ariz. 159 (2007) (duty to defend entire underlying action when multiple policies apply)
- Boston Gas Co. v. Century Indem. Co., 454 Mass. 337 (2009) (allocation of defense costs when insured self-insures periods)
- Desert Mountain, supra, see above (—) (foundational for interpretation of damages and coverage)