Minnesota Mining & Manufacturing Co. v. Travelers Indemnity Co.

MINING AND MANUFAC- MINNESOTA COMPANY, Plaintiff,

TURING INDEMNITY TRAVELERS COMPA-

NY, Compa- Insurance Great American

ny, Anchor in interest successor Paul,

Casualty Company Minne- of St.

sota, Insurance Commercial Union

Company, interest as successor Corpo-

Employers Assurance

ration, Company of North Insurance

America, Inc., National Northwestern Company, Defendants.

Insurance CORPORATION, Plaintiff,

JOSLYN INSURANCE

LIBERTY MUTUAL

COMPANY, Defendant, Minnesota, Through its At-

The State

torney and its Pollution General Agency, Intervenor-Plaintiff.

Control CASUALTY

BITUMINOUS

CORPORATION, Plaintiff, CORPORATION, Defendant

TONKA Counterclaimant, Company, Riv- North

Travelers Insurance Company, In-

er Insurance Industrial

demnity Company and United States Company, Ameri-

Fire Insurance Great Company, Insur-

can Insurance Zurich Company, Fireman’s Fund Insur-

ance Company, Insur- Mission National

ance City Company, Twin Fire Insur-

ance Company, Defendants Additional

on Counterclaim. C4-88-1931,

Nos. C9-88-2296

and C1-88-2244.

Supreme of Minnesota. Court 8, 1990.

June Herr, Gilmore, Maslon,

David H. F. John Edelman, Borman, Brand, Minneapolis, & Corp. for Tonká Neimann, Barnett, Paul G. Moss & Min- neapolis, for Ins. Co. Travelers Erstad, Chadwick, Leon R. Johnson & Condon, P.A., Minneapolis, for North River Ins. et al. Maun, Green, Mulrooney,

Garrett E. Simon, Brehl, Hayes, & St. Johanneson Barrett, Whitehead, Thomas J. G. Marc Paul, Bates, Jr., Phelan, and Robert J. Mielenhausen, Haik, Popham, Thomas C. Ill., Pope John, Chicago, & for Zurich Ins. Kaufman, Ltd., Minneapolis, Schnobrich & Co. LaTorre, Heintz, Washing- John E. Lisa I. Urness, Gay Neary, B. Miller & Minne- ton, D.C., Mfg. Min. for Minnesota Co. Savino, apolis, Gary M. D. William Plant, Coyne, Gray, Mooty, David M. Centola, Rivkin, Radler, Eagle, Alan C. Bennett, P.A., Minneapolis, for Mooty & Uniondale, N.Y., Bayth, Dunne & for Fire- Corp. Joslyn man’s Fund Ins. Co. Gen., III, Humphrey, Atty. Hubert H. McGuire, Burke, A. Robert J. Barbara Shea, Gen., Sp. Atty. Asst. St. Ann M. McGuire, Cousineau, Shaughnessy & Paul, intervenor-plaintiff, for State Anderson, Minneapolis, for Mission Nat. Minn., et al. Ins. Co. Peterson, Hunt, Kay Nord Thomas E. Gillen, Hade, Jardine, Charles E. Sean E. Searls, Lommen, Nelson, & James C. Cole Paul, Logan O’Brien, City & St. for Twin P.A., Stageberg, Minneapolis, Bitumi- for Fire Ins. Co. nous Cas. Bassford, Heckt, Lundberg, Charles E. Peters, Keppel, Scott H. William J. Dor- Lockhart, P.A., Briggs, Truesdell & Minne- sey Whitney, Minneapolis, & for Travelers Brunner, M. apolis, and Thomas W. James Indem. Co. Johnstone, Lawrence, Wiley, R. Robert Q. McShane, Kull, Marcia John M. Bow- D.C., Fielding, Washington, amicus Rein & Brooke, Minneapolis, man & and Jerome C. curiae, Litigation for Ins. Environment Lane, Randolph, Keating, Donald A. Ass’n. Cincinnati, Ohio, Meuthing Klekamp, & Leonard, Lillehaug, L. Street & David Great American Ins. et al. Deinard, (Joanne Minneapolis, and B. Martin, Gislason, T. Martin & Grossman, Bosset, James Covington Eric C. & Varpness, Minneapolis, D.C., counsel), for CommercialUn- Burling, Washington, ion Ins. et al. curiae, Institute, amici American Petroleum et al. Neimann, Shroyer, Paul J. G. Thomas Barnett, Minneapolis, III, Gen., Dennis Humphrey, Atty.

Moss & Hubert H. Blackmer, Wilmer, Shakman, Shea, Flannery, M. W. Scott Ann Sp. Steven M. Asst. D.C., Pickering, Washington, Gen., Paul, curiae, for Attys. Cutler & amici St. America, Inc., Minn., of North et al. Co. State of et al. Burke, Nygaard, Richard J. Patricia Ann Bennett,

Rider, Arundel, Egan Minne- &

apolis, for Northwestern Nat. Ins. Co. KEITH, Justice. Bartz, Stich, Angelí, Terry F. J.

John Muth, P.A., Angelí, present Minne- These three cases certified Kreidler & III, Whitters, questions from district court in apolis, and James P. Lee H. the federal Boston, Glickenhaus, Snow, requiring us to decide Gaston & Minnesota Mass., is- Liberty complying Mut. Ins. the costs of with directives Co. penses state federal environmental associated with sued effort. agencies agencies up groundwater exchange, to clean contam- released 3M pollution liability pollu- un- under state and ination caused federal covered statutes, comprehensive general including der the insureds’ Minnesota Envi- Response Liability (“MER- ronmental Act LA”), 115B, ch. Minn.Stat. and from all present similar factual back- common law liabilities. (“Tonka”), Corporation grounds. Tonka Tonka, Corporation (“Joslyn”) Joslyn and In the Joslyn Minneso- cases and the Manufacturing Mining Company pursuant and MPCA to MERLA ta issued a Re- (“3M”) by quest Response (“RFRA”) the Action have been insured various which companies involved these directed the insureds insurance conduct an investi- gation groundwater comprehensive general liability soil and cases under the contam- (“CGL”) dating ination at and policies prepare insurance back sev- their sites then to implement response plan policies The each instance and a eral decades. by nearly language the contamination. The

contain identical which RFRA also ad- company vised the that their particular the insurance involved insureds failure to take pay requested the the agreed “to insured all action would result on behalf undertaking legal- cleanup, the shall become MPCA the after sums which insured obligated because of which it ly would seek recover its costs * * * insureds, property damage to this insur- from the or it could which seek a court by compel order to them to applies, caused an occurrence.”1 clean the site ance years impose penalties. and During policies the were ef- civil The insureds fect, cases also the insureds in these were en- were advised could be liable manufacturing operations permanent damages gaged in which caused to the natu- state, chemical wastes. Like ral resources of the and that produced hazardous time, many at the the MPCA would seek reimbursement of its other manufacturers expenses. Joslyn con- disposed of these wastes un- own entered into a insureds settling sent order the MPCA in it derground burial or the use with agreed investigate suspected pools. years Over the the chemical contamina- wastes tion, soil, implement cleanup plan, escaped contaminating develop and have into expenses. The and the MPCA for its groundwaters. the soil and Minne- reimburse return, (“MPCA”) agreed that Agency In it not sota Pollution Control MPCA pursue any statutory or common law investigating soil of its has become involved Joslyn. groundwater against remedies Tonka has and contamination at order, complied disposal by the in entered consent but has sites used insureds waste taking requested cases. with RFRA actions. by 3M, disposal In the used site spent has requested Each of insureds considera- participate that 3M in a

MPCA investigating the financed amounts extent hydrogeologic study. 3M much ble ap- complying study contamination and and later commissioned surface consent plicable orders. cleanup deteriorating drums the site. RFRAs brought in federal separately consent insureds suit In 3M entered a order with companies court who MPCA and the United States Environ- (“EPA”) policies during the agree- sold the Agency CGL mental Protection groundwater years groundwater contamination ing to the soil companies occurring. The insurance sites and to reimburse was contamination at the summary brought motions in each agencies past for the and future ex- case an "accident.” Gordon slight rence” rather than variations in 1. Westendorf, Liability Coverage analysis. Toxic policies specific not affect our do Tort, Disposal Pollu- provided indemnity and Other policies Waste issued before 1966 Hazardous (1988- Exposures, bodily L.Rev. tion 89). 25 Idaho analy- change policies our also affect In 1966 the This an "accident.” changed provide sis. for an “occur- essence, they arguing are that claims seeking declarations judgment policies mandated “damages” costs as used in the CGL for environmental are not covered injunctive the MPCA a distinction between embodies policies. of the CGL relief, within the equitable or other forms of these costs the issue of whether each case damages. They argue that monetary of the insur- under the terms are covered in these the MPCA the actions taken court certified to this has been relief, including resti- equitable seek applicable Minnesota for resolution tutionary relief and therefore are not cov- law.2 ered under companies argue that the The insurance authority for their The insurers cite as only indemnify the insureds v. Northeast position Continental Ins. Co. legally obligated when the Co., & Chem. ern Pharmaceutical party. They “damages” to a third (8th Cir.) (en banc) sub nom. F.2d 977 term should be assert that the denied, Ins., cert. Missouri v. Continental policies to con- interpreted in the insurance 102 L.Ed.2d 43 488 U.S. S.Ct. paid monetary as com- template amounts (1988) That “NEPACCO”]. [hereinafter parties, and injuries to third pensation for by action case arose from an earlier comply paid amounts should not cover seeking against EPA NEPACCO abate com- injunctive orders. The insurance with response ment and costs for EPA’s “clean and panies argue that the consent orders site. EPA’s up” of the contaminated waste issued the MPCA which the RFRAs Comprehen part based in on the action was insureds in these cases require that Compensa Response, sive Environmental up the contaminated undertake to clean (“CERCLA”), Liability tion and Act of 1980 injunctive They are akin to orders.3 sites 9604, 9606, 9607, an act sim U.S.C. §§ they indemnify policy- assert that must MERLA, Minnesota statute at ilar to against against action taken them holders in The court in issue these cases. NEPAC- only the MPCA is by the MPCA when cleaning up soil held that the costs of CO monetary val- seeking compensation for the groundwater compli contamination and permanent damage to the natural ue of not constitute the EPA action did state, with permitted resources of the meaning 115B.04, 1(c) (1988). of identical In within subd. Minn.Stat. § law, Whether, following under Minnesota the costs in- certified to this 2. The issues were following pur- up cases: court in the 3M to clean contamination curred agreement the State of suant a consent with v. Tonka Bituminous law, expended Under Minnesota by are amounts United States are "dam- Minnesota and the complying Corporation with the Tonka ages" comprehen- within Investigation Request and Re- for Remedial (CGL) general liability policies issued sive Response quest Action issued defendants? Agency pursuant Control Minnesota Pollution "damages” seq., 115B et §§ to Minn.Stat. 115B.04, 1(a) (b) subd. and of MERLA 3. Section gener- comprehensive that term is used corporation person who caused the holds the Corpora- liability policies issued to Tonka al tion “response" pollution liable for and “removal” plaintiff coun- and the additional costs, i.e., costs. MPCA first seeks to ter-claim defendants? get responsible party contam- to restore the Joslyn Liberty Corp. v. Mutual Ins. Co. groundwater. request A inated soil and law, expended are amounts Under Minnesota by Joslyn (RFRA) respon- response action is issued. investigation remedia- for the and party cooperates the re- sible then either with pursu- contamination tion of environmental refuses, quest point uses at which the MPCA in settlement of ant to a consent order entered Superfund the site them- monies to clean brought pursuant an administrative action 115B.17, 1(a) (1988), Minn.Stat. subd. § selves. Response and the Minnesota Environmental 115B.20, 2(b), (d) (1988). MPCA can subds. Act, 115B.01- §§ [Minn.Stat.] expenditures from the then seek to recover its 115B.37, "damages” is used in as that term 115B.17, party. responsible subd. § Minn.Stat. pol- comprehensive general (1988). bring MPCA can also an action to by Liberty Mutual Insurance icies issued Company compliance compel the RFRA. Minn.Stat. Joslyn? 115B.18, Mining Mfg. Travelers Ins. Minnesota Co. v. subd. Co. policies. require 985-86. which be giv- Id. at undefined terms CGL ordinary and law, “plain, popular en their reasoned Missouri mean- The court under ing.” Marine, Paul Fire & 353 N.W.2d St. 132. at technical accepted context has the “legal damages” does not include holding in City Our River Falls of Thief Thus, monetary equitable relief. claims v. United Fire & Cas. 336 N.W.2d 274 seeking any equitable form of relief were (Minn.1983) compel recog- us to seeking “damages” and were not claims unambiguous nize an technical distinction Id. not covered equitable between “damages.” term In that case we held contracts under interpreting insurance required provide that an insurer was not law, give we must effect Minnesota city a defense for the insured in an action parties appears as it intentions of the against seeking a writ of mandamus Dairyland the terms used the contract. city. Id. at 275-76. We found that there Implement Dealers Ins.

Ins. Co. v. duty no defend because the action 236, 244-45, 199 294 Minn. N.W.2d for a not an writ mandamus was action terms an insurance If the “damages.” seeking Id. 276. Thief defined, specifically must be controlling River Falls is not these ordinary popular given plain, cases, presented we are with dif- meaning. Paul & Ma Smith St. Fire types ferent of claims asserted (Minn. rine N.W.2d expectations different sets of 1984). Ambiguous in an insurance terms by the insurers and the insureds. Unlike insur policy are to resolved Falls, River has Thief and in the reasonable er accordance with given cases which has occurred expectations of the insured. Columbia against rise to claims the insureds that Motors, Heights Inc. v. Allstate Ins. require pay them to amounts to reimburse (Minn.1979) (citations 275 N.W.2d out-of-pocket the MPCA and to make ex- omitted). Ambiguity if exists the pay penditures to contractors or their own policy reasonably subject of the is to more pre- to its employees to restore interpretation. than one Id. at 34. Falls, In polluted condition. River Thief companies required only The insurance assert that against the the insured claim “damages” city the term as used in the CGL insured commence condemna- Moreover, if proceedings. even policies unambiguously embodies a distinc tion required pay money city eventually legal equitable tion between remedies. award, of a form condemnation argument unpersuasive. is This Minnesota money merely exchange an of places antiquated law little value on distinc equal property of value and was made legal equitable tions between injury claimant for compensate persisted sep from the historic which have property. chancery. Eq of aration of courts law and uity chancery jurisdiction abol were context, present ished, equity and actions in law and “damages” ambiguous as it is the term is the Territorial combined an act of As susceptible than to more one reasonable sembly March ch. in 1853. Act of interpretation. policy language, “all 19-33, 480-82. 1849-1858 Pub.Stat. legal- the insured shall become §§ sums which “damages” hold as used We ly obligated pay damage,” reasonably in the CGL can be inter- unambiguous have an technical preted cover claim asserted industry arising insurance which draws dis out of dam- the insured seeking purely age, requires expenditure tinction between actions which monetary seeking money, regardless forms whether the claim can relief and actions equitable in urged equitable position relief. characterized as be supported by interpretation companies contrary is to our This is nature. “damages” dictionary definition interpretation contract rules dam- an insured reimbursement makes no distinction between which equity. ages actions See expenses at law and associated with inves- own International Dictio- Third New tigation Webster’s of a contaminated site. (1961) (“damages” nary Unabridged 571 115B.17, subd. 6. The See Minn.Stat. § money reparation in are “the estimated compel insured to claim seeks to compensa- injury sustained: detriment compensate agency for money to imposed by for a or satisfaction law the contam- amounts it has lost because of of a wrong violation interpret ination. It is reasonable to NEPACCO, case legal right.”) Even provide insurers, con- upon by the the court relied However, claim for reim- such a claim. “damages” that the term was am- cluded expenses also can be charac- bursement lay biguous standpoint equitable an claim for restitution terized as NEPACCO, 842 F.2d at 985. The insured. money damages. rather than a claim for “damages” could “reason- court stated that Massachusetts, e.g., 487 U.S. Bowen claims, monetary ably include all whether 891-903, 2722, 2731-36, 108 S.Ct. damages, ex- such claims described L.Ed.2d 749 On the other penses, costs or losses.” Id. ambiguity in the term inherent hand, interpretation a “technical” “damages” as used in this context is fur- “damages,” a distinction term which draws exemplified by sharp ther division equity, between actions at law and authority jurisdictions from other case understanding of individuals within have ruled on costs associ- which supported This trained the law. view is groundwater cleanup ated with mandated reasoning adopted in NEPACCO under the federal statute CERCLA are cov- that the term is intended as a jur- limitation of the term “all sums.” Accord- ered under similar CGL Some view, ing interpretation this interpreted broad the term “dam- isdictions have render that costs, term would in- ages” to not cover clean but surplusage, as the insurer then term apply only to claims asserted at stead obligated “all sums which the judg- against the insured seek a law legally obligated to insured shall become awarding monetary compensation to ment Thus, pay.” at 986.4 the term “dam- Id. number, greater A injured party.5 an third ages” ambiguous used in this con- when however, interpreted the term “dam- have text. ages” involving brought in cases expend- any to include sum ambiguity especially apparent The is in CERCLA Thus, in this instances where the MPCA asserts a claim ed under sanction law.6 958, F.Supp. disagree Eighth Corp., Resources & Chem. 709 4. We with the Circuit in NEPAC- Gulf Verlan, (D.Idaho 1989); interpretation CO that a broad of the term v. John L. 961-62 Ltd. "damages" surplusage. Co., 950, (N.D. This Armitage F.Supp. renders that term & 695 954-55 argument ignores “damages" for which Ill.1988) law); that (applying Hayes W.C. v. Illinois coverage provide 1513, insurer must is limited Co., (N.D. F.Supp. Maryland Cas. 1515 688 property damage.” the clause 'because of law); Fla.1988) (applying Florida Travelers Ins. whole, policy, when read as a Wash., Inc., F.Supp. Co. v. Ross Electric 685 becomes indicates that sums which legally obligated insured 742, (W.D.Wash.1988) (applying Wash 744-45 pay are not covered unless law); ington Mut. Ins. Co. v. Patrons Oxford damage "property related to an occur- Marois, 16, (Maine 1990); A.2d 18-20 AIU 573 rence.” Ct., Cty Super. Clara 213 Cal. Ins. Co. v. Santa 1219, 1231-1235, 182, Cal.Rptr. App.3d 262 189- Co., e.g., Ins. v. Milliken & 5. Cincinnati Co. (distinguishing Aerojet Corp. General v. San 191 979, Cir.1988) (4th (applying South 857 F.2d 981 Ct., 216, Cal.App.3d Cty. Super. Mateo 211 257 law); Carolina Continental Co. v. Northeast Ins. 621, legal Cal.Rptr. on basis of facts and reason 977, Co., ern Pharm. & Chem. (8th Cir.) 842 F.2d 985-87 354, (in bank), ing), granted Cal.Rptr. 264 rev. denied, law), (applying Missouri cert. 782 P.2d 595 Co., sub nom. Missouri v. Continental Ins. 488 821, 66, (1988); U.S. S.Ct. 102 L.Ed.2d 43 109 Indus., 6. See, Armco, Inc., 1348, e.g., Inc. v. Travelers Maryland Avondale Cas. Co. v. 822 F.2d 1200, 1206-07 Co., (2d Cir.1989) (4th Cir.1987) law), (applying Maryland Indem. 887 F.2d 1352 law); denied, 1008, 703, (applying New York Jones Truck Lines v. cert. U.S. 108 S.Ct. 98 484 10, (1988); (E.D.Pa. May Transport L.Ed.2d 654 Aetna Cas. & Sur. Co. v. Ins. No. 88-5723 181 liability” context, ambiguous general policies expecting sive coverage ambiguity legal must re- and therefore most liabilities in accordance with the reasonable solved which could arise out of their acts or own insured. Columbia omissions, expectations including liabilities which were Motors, Heights 275 at 36. N.W.2d unknown at the time. The lan- standard in guage policy used is broad. The It ex is consistent with the reasonable agreed that insurers “will on be- poli pectations of insureds under these half of the insured all sums which the cies that the clean costs be covered. legally obligated insured shall become court, reaching the same conclu Another bodily injury because of sion, come an noted that “[i]t to which this insurance incomprehensible, if shock unexpected, applies caused an occurrence.” discover that their the insureds to insur utility policy seriously would be coverage being denied because coverage into if question permitted called complaint in plaintiff chose to frame his hinge Aerojet-Gen such on a fortuitous event as in equity rather than law.” Ct., Super. bringing Corp. Cty. plaintiff eral Mateo an action San 229, 621, the insured has framed his com- 216, Cal.Rptr. Cal.App.3d 257 denied, plaint equity Clearly rev. rather than 628, 216, law. Cal.App.3d narrow, the insureds under these contem- If Cal.Rptr. 684 technical greater plated certainty they pur- when in definition of the term They the policies. reasonably chased could companies, it was tended expect provide coverage duty to make that intention clear. purchased outlay compelled by “comprehen- economic law to 5, 1986) 1989) (E.D.Pa. F.Supp., (unpublished (unpublished F.Supp., at June but available 49517; 2699) 6547) (applying (applying but available at 1986 WL Penn WL 57 U.S.L.W. law), (3rd Cir.1988); aff’d, finding sylvania law 8th Circuit’s deci 853 F.2d 917 Missouri 5, Northeastern, supra Spangler C.D. Constr. Co. v. n. favor of Industrial Crank sion 133, -, Eng’g on & 326 N.C. 388 S.E.2d insurer was "not based Missouri caselaw shaft 557, (1990) (discussing applicable under Missouri 565-69 four theories oth rules construction (1989 coverage, controlling jurisdictions er have used to find then law” and therefore was not 20)); resting holding Chesapeake at Utils. on basis that WL 49517 Co.,- legal "damages” F.Supp. was not used in its Assur. term American Home 558-61, (D.Del.1989) policies); Boeing (applying Maryland technical sense in Co. Armco, finding Aetna & 113 Wash.2d circuit in Sur. law and 4th 877-85, (1990) (holding supra Maryland law and that 784 P.2d 511-515 n. misstated distinguish "damages” growing body case has in CGL “sizeable and rejected law equitable reasoning” (Chesapeake awarded on Armco's at between sums 560); declining noting judges applying across the coun law and basis also Delaware County, try agree "damages” clean/up includes its decision in New Castle overturn costs); infra)-, Aerojet-General Corp. Cty. v. San Mateo Motorists Co. v. Levelor American 216, 225-29, 232-37, Ct., Lorentzen, (D.N.J. Cal.App.3d Super. No. Oct. Inc. 88-1994 621, 626-28, (noting 1988) Cal.Rptr. (unpublished F.Supp., but available 257 greater weight 112142; 2270) authority response holds (applying of WL 57 U.S.L.W. 1988 “damages law); Corp. are be v. & costs incurred CERCLA N.Y. Intel Accident Hartford ** * denied, Co., 1171, damage"), (N.D.Cal. rev. F.Supp. cause of 692 1186-93 Indem. 216, (1989); law); Cal.Rptr. 1988) Cal.App.3d 684 (applying States 211 258 California United Co., Fidelity Specialty v. Fidelity 683 & Guar. Coat & v. Thomas Solvent United States Guar. Co. 378, 390-95, Co., (W.D.Mich.1988) ings 306, 314-317, Ill.App.3d (applying 129 Ill.Dec. F.Supp. Michi 180 1139 1071, (1989); law); gan 535 N.E.2d Ins. 1079-82 Centennial Co. Lumbermens Co., Co., 342, (E.D.Pa. F.Supp. Travelers Ins. 125 349-50 United States Aviex Co. v. Mut. Cos. 677 586, 579, 838, (1983); law); 1987) Mich.App. Pennsylvania N.W.2d 843 (applying Castle 336 New Co., Servs., Realty Fidelity Inc. v. & Cas. County Indem. 673 Broadwell Accident & Hartford 516, 525-30, 1359, (D.Del.1987) Y., N.J.Super. 528 A.2d F.Supp. (applying Co. N. 76, 218 1365-66 law); (1987); Maryland Township Portland v. Water 81-83 Port Delaware cf. 1188, Co., F.Supp. Quality Syndicate, F.2d Maryland Ins. 796 1193-94 Gloucester 668 Cir.1986) (D.N.J.1987) (9th Oregon holding Jersey (applying (applying law and New "discharge law); pollution dam into water causes Fund Ins. Co. v. Ex-Cell-O Fireman’s (E.D.Mich.1987) (ap age tangible property and Corp., F.Supp. hence 75 law); property damage Michigan a plying are recoverable under Consolidated Rail costs clause”). Lloyds, v. Certain Underwriters No. 84-2609 rectify damage mitigate proprietary or caused citizens has a interest insured’s or acts omissions. See United natural resources of Minnesota. Minn. States Thomas Fidelity 105.38, & Guar. Co. v. Stat. 105.41. MPCA as an §§ (W.D. F.Supp. 1139, Solvent agency the state named is the trustee of Mich.1988)(“the ought insured be able the waters of the state. Minn.Stat. rely expectation on the common sense 115B.17, 7; (1988). Thus, subd. 115.03 §§ property damage within the purposes analysis, for the of this the state of the a claim results includes which injured party asserting is the third in causing money him to sums of be- against the insureds. or cause his acts omissions affected ad- injury Compensation for to the water versely rights parties.”) of third resources Minnesota has been and will ordinary understanding paid be to the state. The consent orders “damages” upon which the could insureds entered these cases RFRAs is expectation base a reasonable require sued MPCA the insureds to reparation money is “the estimated money directly to the state. remainder compensa injury detriment or sustained: compensation paid of the will be in kind. imposed by tion or satisfaction law conducting Instead the state the cleanup wrong caused of a violation groundwater, the contaminated the in legal right.” Damages at 571. Webster’s perform themselves, will sureds the work typically regarded are as the sum awarded or, accurately, pay employees more will person compensation a third for loss up contractors to clean the contaminated injury. Perl v. St. Paul Fire Marine & groundwater, thereby incurring direct out- (Minn.1984). 345 N.W.2d of-pocket expenses. The fact that the in up The costs cleaning associated with rather perform sureds than the state aptly contamination more are characterized work has no effect on amounts consequential damages flowing from the expended by the constitute com damage direct caused to the environment. pensation paid to the for its injury. state Damages causally are related to cov comply If the insured fails to with MPCA’s damage” “property ered also should request up contamination, to clean then policy. covered under the empowered MPCA to conduct the clean Federated Mutual Ins. Co. v. Concrete itself, then recover costs from Units, Inc., (Minn. 363 N.W.2d 115B.17, insured. Minn.Stat. subd. 6. § 1985). The nature claims asserted Therefore, fact that costs were by the MPCA and EPA performing incurred the insured damages, insureds amount a claim for work themselves should not affect insur a reasonable interpret insured would coverage of these costs. See Chemi term, reasonably insured as the could Applications cal Co. v. Home Indem. expect coverage. F.Supp. (D.Mass.1977). It is All of the elements of a claim for dam obviously the public policy better to encour ages present in the agencies’ claims age responsible parties take immediate insureds, i.e., the insureds are mitigate action themselves legal obligation provide compen under a groundwater rather contamination than sation injured party. to an third The in operated state await a effort at a sureds in these cases have the con later date. groundwater tamination of beneath disposal companies argue waste sites. The insurance Pollution groundwater public policies provide coverage only property. when 229, Aerojet, Cal.App.3d plaintiff brings 211 at 257 party Cal. third a traditional Rptr. at against 629.7 state on of its seeking behalf civil lawsuit the insured also, Portland, law); Broadwell, e.g., 527-28, 7. N.J.Super. See Port F.2d at 796 nia 218 of pollution (holding Oregon (similar 1193-94 oil waters Jersey 528 A.2d at 82 New under law injury tangible property); owned state is to doctrine). using patriae parens Intel, (similar F.Supp. at 692 1185 Califor- under

183 prop- groundwater imposed early as 1895 monetary compensation for to of erty. Berger Minneapolis Gaslight construction v. 60 This 296, 298, 300, The issue of cover- 336, is too narrow. 62 Minn. N.W. 336-37 merely age depend on the form (1895). prohibited pollution The state has Surely against taken the insured. action including drinking supplies, water legal proceedings commenced the groundwater, since 1885. See Act of equally coer- against the insureds MPCA 7, 1885, 225, March ch. 1885 Minn.Gen. in- judgment the cive as a civil (codified 6 Laws 296 at Minn.Stat. ch. 99a § MERLA, Because of the insureds sured. 2)). (1879-1888 Supp.Vol. This act also em- obligation expend to legal a are under agency, among powered a state other remedy the injuries to to state’s amounts compel things, party responsible to for fact the resources. The natural drinking pollution supplies the water form of a consent order obligation the “remedy pollution, puri- or to cleanse or by a RFRA rather than or is mandated Id.; fy polluting see also substances.” change the nature judgment does not civil (1905). 2147 Minnesota Revised Laws § merely the obligation. These are Thus, parties in were aware compel forms used MPCA potential liability groundwater for up site. The consent of a contaminated contamination at the time entered legal obligation on the impose a orders at issue these cases. v. Jostens Inc. CNA insureds. See The advent of MERLA and other environ- Co., 403 N.W.2d Ins./Continental changed merely mental statutes have (settlement 625, (Minn.1987) agreement 631 liability groundwater pollu- form of the insured). legal obligation on imposed liability. In- tion, not the of that nature availability by the The RFRAs are backed deed, conceded that insurers have the insureds judgment of a civil asserted the MPCA under MER- compel to conduct the clean the insureds damages resources of LA for natural compel reimbursement MPCA’s under the state covered cleaning up the contamination expenses (1988). 115B.04, 1(c) subd. Minn.Stat. See § 2; 115B.18, Minn.Stat. subd. itself. §§ merely update remedies MERLA 115B.17, e.g., Intel subd. 6. liabilities, statutory common old law Co., 692 & Indent. Accident Hartford. for the proved to be ill-suited which have 1171, 1190, (N.D.Cal. 3 F.Supp. n. 1190 injuries. tort prompt toxic resolution 1988); v. Lumber Ins. Co. Centennial Co. v. Continental See CPS Chem. 342, 349- F.Supp. 677 Cos. mens Mut. 811, 175, 189, N.J.Super. 536 A.2d 222 (E.D.Pa.1987); 23 Fireman’s 350 n. (1988). Corp., Ins. Co. v. Ex-Cell-O Fund (E.D.Mich.1987); F.Supp. Broadwell remedy imposed by MERLA Finally, the Servs., Fidelity & Cas. Co. Realty Inc responsible party clean requiring 516, 527, N.Y., N.J.Super. 528 A.2d nov- contaminated to the insured or el or unforeseeable companies. This has ex- groundwater contamination moreover, and, prior statutes isted many recognized in Minnesota has been origi- restoring its property to the costs of one of the first years. Minnesota was long-recognized nal condition has been adopt the strict jurisdictions American pollu- law damages common measure Rylands, 1 liability rule Fletcher Minneapolis, St. Heath v. cases. See (1865, 1866) (imposing Exch.L.R. 470, 475, 148 Co., 126 Minn. P. & S.S.M.R. any liability for strict the com- Under N.W. thing on kept one’s law, typically this kind are mon escaped), aff'd, naturally if it cause harm diminution value limited Fletcher, (1868) 3 H.L. 330 L.R. Rylands v. restoring if the cost of 292, damaged property Eastman, (cited Minn. Cahill v. original condition would 293-94, 306, (1872)). Strict Dobbs, Id.; D. Hand- value. exceed that contamination specifically * * * Remedies, 146, sources, book the Law “damages are because of up requirement MERLA clean property damage” the meaning within expand did not the common law comprehensive general liability insur- pollution an so that order to policies issued these defendants. the contamination would not be questions The certified are affirmatively expectation within the reasonable answered. insured. policy language We conclude that KELLEY, SIMONETT, COYNE and * * * “damages because of dam- JJ., opinions. dissent with age” ambiguous regard is to the costs KELLEY, (dissenting). Justice cleanup. of the MPCA-mandated The am- biguity in this context must be construed respectfully I comprehen- dissent. The give the insurers to effect to the sive involved in expectations of reasonable the insureds. substantially these cases contain identical door,” “opening We are not as the language obligating the insurer involved assert, insurers to insurance pay “to on behalf of the insured all sums expenses all business mandated which the legally insured shall become obli- * * * government, such as the cost of gated pay damages as because of complying regulations safety with OSHA property damage to which the insurance or an order a fire marshall to make applies, (Em- an occurrence.” owned the insured safer phasis added). The construction of that against the risk of types fire. These insuring agreement adopted by majori- costs are not poli- covered ty completely ignores the as damages simply cies no property damage because phrase and changes the whole meaning of has occurred. The only provide insuring agreement from one in which coverage for sums which the insured be- the insurer pay assumes the risk to dam- legally obligated comes pay because of ages obligating to one it to all sums property damage. Purely preventative or otherwise. To afford measures are not covered the absence of the word employed property damage. insuring agreement literally the broad and

Because of the limited factual record be- boundless connotation that the majority us, fore it, we cannot undertake to give words, used, decide the would become scope coverage provided exact by the surplusage mere obligation policies. We leave to the federal district would be covered no matter how it court determining task of precisely arose or what it was intended to cover. which costs associated with the clean Maryland Armco, Casualty Inc., Co. v. 1348, contaminated sites will (4th Cir.1987), be covered. We 822 F.2d cert. presented questions denied, 1008, with certified 484 U.S. 108 S.Ct. asking broadly whether any of the clean L.Ed.2d agree I with the hold up costs are poli- ing covered under the Continental v.Co. Northeast cies. expenditures We hold that mandated ern Pharmaceutical & Chem. by the Minnesota Agency (8th Cir.) (en banc), Pollution Control denied, F.2d 977 cert. pursuant to the Minnesota Environmental 488 U.S. 109 S.Ct. 102 L.Ed.2d 43 Response Act, Liability (1988) Minn.Stat. ch. ], NEPACCO as well as [hereinafter 115B, necessary which are to effectuate with the near holdings unanimous of contamination which has several United States Courts of Appeal already occurred to the issue,1 state’s water re- which have considered the that even out, majority opinion points 1. As the holding by Eighth our state tion to the Circuit in after, and, patterned NEPACCO, is statute insofar as this the Fourth Circuit in Cincinnati Ins. concerned, substantially issue (4th identical to Co. v. Milliken & 857 F.2d 979 Cir. Comprehensive 1988); Armco, Inc., the federal Maryland Re- Casualty Environmental Co. v. sponse, Compensation (4th Cir.1987), denied, Act of 1980 822 F.2d 1348 cert. ("CERCLA”) (1988); 42 U.S.C. §§ 9601-9615. In addi- U.S. 108 S.Ct. 98 L.Ed.2d 654

185 may inappropriate reference was though the abstract be con- the term, ambiguous questioned of phrase to be an when struction the in the considered comprehensive No policies. poli- is inserted in a evidence exists that the word the on a liability policy in context of cies were issued “take it or it” leave scope the basis. From the limited sentence which defines evidence surround- ing policies, the liability “to all sums execution of these as one it clear- insurer’s legally ly appears to me insured shall obli- that it is much more which the become ** * policies in damages probable question of gated were * * * ” damage longer negotiated large corporations, it is no between sophisticated the term each of had ambiguous. plain of which access legal damages, departments insurance and or employed so refers advice. equitable-like remediation dam- I submit such circumstances the invoca- and not to respectfully majority I of ages. Accordingly, dissent. the construction precept sometimes referred to as contra comprehensive gen- holding By that preferentem, ambiguous language that pro- policies here involved eral against the construed insurer in accordance coverage corporate pollu- to reimburse vide expectations the reasonable of in- costs, of response clean-up some ters sureds, inapt. The fact of the is matter voluntarily they more or less as- negotiated that when these by agreement with the state without sumed ago party decades neither had idea upon consent of the concerned insurers legislation superfund similar reimbursement, they whom now call for impose laws unlimited such liabilities opinion, me, majority seems to dis- it polluters clean-up on for remediation or long policy regards established insurance costs; contemplated risk neither rules. These rules construction assumption by nor was its the insurers prohibit reading ambiguity into courts from bargained premium set. when the plain language policy simply superfund Long provide coverage. e.g., Far before advent order laws, owners had tort Accident & Indem. kas Hartford 24 con- Minn. others activities 173 N.W.2d Motors, property. (1969), Heights on their The insurance Inc. ducted Columbia (Minn. clearly con- involved these cases Allstate Ins. N.W.2d 1979). templated shifting doing, majority am- owners’ In so finds insur- biguity, type the term risk for that to the not with reference how ers, issue in these three employed in context of and were that the cases, unanimity I am sure would dictate language, but rather in reliance paying those insurers bore the risk on definitions of the term “dam- abstract damages. federal and types A Both the ages” found standard dictionaries. superfund provisions laws contain al- state argument could be advanced valid lowing damage, recovery type for that might this such reference be relevant 9607(a)(4)(C) Minn.Stat. had insureds in these U.S.C. construction issue see § 115B.17, (1988), differ- lay unsophisticated in and both persons, subd. cases been § damage and type such acquisition liability insurance cover- entiate between cleanup Compare, e.g., liability remediation costs. age, they and had been afforded 115B.17, 9606(a) coverage and Minn.Stat. more or less on a “take it leave U.S.C. § § resulting in But in these cases none subd. 6 it” basis circumstances seeking indemnity cov- plaintiffs are might to be a contract what be considered however, damages. view, erage type such Rather my of adhesion. cases, slightly my more state census reveals that Universal Ins. 804 F.2d Canadian Mraz (4th Cir.1986); the Fifth Circuit con- than of the state courts have likewise half Hanna, Casualty Surety "damages” Co. v. Aetna & “response with- costs" are not cluded Cir.1955), (5th many have state courts F.2d 499 compre- cited clause Although I am not likewise addressed the issue. general liability insurance hensive my all of the certain that research has included remediation response insuring agree- seek that a construction of the upper limit of costs which have “no liabili- ments at issue would not afford Brett, ty.” Insuring Against the Innova- unilaterally for remedial measures under- by industry tive Liabilities and Remedies Created taken with neither notice to nor Superfund, Pol’y 6 U.C.L.A. J. Envtl. L. & participation by insurers, respectfully I (1986). 1, 53 As Professor Kenneth S. dissent. Abraham, wrote: insuring agreement compre- in the impose liability cleanup expenses [T]o general liability hensive insurance issued before enact- obligates in these involved insurers that ment of the statutes created such pay on behalf of the insured all sums “[t]o ignore liability is to the calculations that legally which the insured shall become obli- pricing policies, entered into the of those gated damages bodily to as thereby ignore underlying and to property damage to which the purpose provisions of the whose applies,” an “occur- is at issue. The result twofold: or, in policies, by rence” the older an “acci- insureds, windfall who receive bene- added). (Emphasis agree dent.” I they paid, fits for which never and still Kelley majori- view Justice regarding another set of uncertainties ty’s insuring agree- construction of those magnitude liability of the an insurer completely ignores ments damages the as providing environmental cover- phrase and alters the entire of the age may face. insuring agreed agreement. The insurers

Abraham, Environmental paying damages to undertake the risk of Insurance, 88 the Limits Col.L.Rev. legally obligated which the insured is to pay, not to assume a broad and indefinable submit,

Finally, majority holding I sums, obligation pay any to and all whether public policy contravenes state to damages characterized as or otherwise. responsible polluters obligation hold to the By refusing apply insuring agree- to damages to clean the environmental according terms, majority ment to its “ * * * activities, have caused limitations, ignor- has exceeded definitional contrary public policy it is to allow a ing plain, ordinary traditionally ac- responsible party pass on the cost of cepted meaning of the term * * * carrier, to its insurance “only payments persons to third when thereby having retain the benefit anoth- persons those have a claim for dam- * * perform public duty having er without ages Casualty *.” Aetna & Sur. Co. Brett, paid Insuring Against for it.” Hanna, (5th Cir.1955). 224 F.2d by Super- Innovative Remedies Created important recognize although It is fund, Pol’y 6 U.C.L.A. J. Envtl. L. & 52 both state and federal statutes differenti- corporate polluters As between damages, ate between costs and stockholders, policyhold- and their and the sought neither the MPCA nor the EPA comprehensive general ers of Mining from Minnesota & Manu- policies, public policy it seems to me the facturing Company any of the other place this state should the onus of remedia- respondents here. important This factor is upon corporate polluters have who parties’ obligations because the are con- indemnification, paid not rather than trolled of the insurance upon pre- insurers who have not received contract is here written terms of mium cover its cost. sought, the relief terms of the form reasons, For these I would each answer Maryland cause of action. See questions negative. of the certified Armco, Inc., Co. v. 822 F.2d (4th Cir.1987). simply, More the contract

COYNE, (dissenting). Justice specifically refers which the I, too, expressed Because am of required the view insured is and not to other majority imposed by gov- of federal circuit courts liabilities on the insured agencies during the course of ronmental harm from these activi- business emmental any contemplation protecting negotiated remedial efforts. I share the ties or in- dustry it of the fourth circuit when rea- costs associated with them. wariness significantly, accept More it is difficult to soned follows: sophisticated parties claim assuming the costs [E]ven they “reasonably expected” coverage and regardless of defendant are the same delayed then period for a from four to government for restitu- whether the sues eight informing years in their insurers of damages, tion or for thus some sense ongoing investigations nego- either the govern- rendering the decision tiations with the state or elimi- regarding ment dam- sue nate environmental harm occasioned fortuity,” “mere it ages or restitution a compli- their or their unilateral activities one, dangerous great step, is a governmental cleanup ance with directives. begin to construe insurance courts matter, As a practical the actions of the encompass compliance policies to costs of wholly are their insureds inconsistent with injunctive and reimbursement relief. coverage contemplated. claim that Therefore, I find Id. at 1353. while no “legal” summary, by major- I am critical distinction between the as troubled “equitable” proceed- ity’s efforts to cost opposed to nature shift considerable industry ings, scrutiny I am that careful burden from the intentional convinced whose agreement requires insuring a focus activities have sullied the environment to guise sought. of a on the nature of the relief insurer under claimed insuring ambiguity of the opinion remediation I am of the or agreements. I majority further caution cleanup properly costs are more character- on the cases are before this court governmental obligations imposed ized as questions certified the federal court and mitigate pollu- prevent environmental limited to an our consideration should be industry either as tion and incurred are inquiry of whether costs “dam- doing business or as an economic cost ages” compre- within activity. loss associated with the business general policy. We are not hensive pro- here directed take are questions asked to and cannot address such any pol- phylactic measures to assure that damage property there is whether (often specified infecting lution applies, it policy which the own) escape not be allowed or an “accident” an “occurrence” bodily or dam- the confines to cause any policy of the within the age to If of others. those applicable relating to statutes matters inadequate bodily injury measures notice provision or the limitation occurs, to the others response to the insured to the insurer. coverage language policy may questions certified is but one of series applicable any legal well re- questions, the accumulated threshold persons; it to me awarded third seems sponses lead to the ultimate to which will only fitting applicable coverage is avail- determination whether previously not have exhausted ex- been incomplete able our record a risk pending it on outside cov- these other matters. erage. analysis in Finally, majority casts its SIMONETT, (dissenting). Justice expectations” terms the “reasonable Kelley join I Justice dissents of designed apparently parties, inquiry an Coyne. and Justice agreements yesterday’s and in- to construe analysis by today’s tentions events. First, important respects.

flawed two executed, agreements

the time these perhaps little or no under-

there was

standing potential substantial envi-

Case Details

Case Name: Minnesota Mining & Manufacturing Co. v. Travelers Indemnity Co.

Court Name: Supreme Court of Minnesota

Date Published: Jun 8, 1990

Citation: 457 N.W.2d 175

Docket Number: C4-88-1931, C9-88-2296 and C1-88-2244

Court Abbreviation: Minn.