Barrett Paving Company (Barrett) was sued by Citizen’s Manufactured Gas. The latter company, which was, in turn, being sued by a city for polluting an adjacent river, alleged that Barrett (along with other companies which are not discussed here) was a chief polluter and should be held financially responsible for payment and/or remediation.
Barrett was insured by Continental, Michigan Mutual and First State Insurance Companies. Continental provided three CGL policies that were in effect during the time that Barrett was alleged to be a polluter. First State provided an excess (umbrella) policy that was written over a primary CGL policy issued by an insurer that, at the time of the suit against Barrett, was insolvent. Barrett requested coverage and legal defense from its insurers and the company sued all three after its request was denied.
Editor’s Note: A separate bench trial was held regarding Barrett and Michigan Mutual. The case document only mentions that a final decision was rendered and no other mention was made regarding this insurer.
In response to Barrett’s action, First State and Continental filed counter actions. Barrett alleged that, Continental was obligated to provide a legal defense under its CGL policies even though Barrett did not dispute that the pollution charge against it did not meet the policies’ definition of an “occurrence” (sudden and accidental). Barrett alleged that First state had an obligation to protect and defend it against the Citizens’ suit because coverage from the insolvent primary carrier was not available.
The insurers filed for summary judgment to find that they did not owe either coverage or a legal defense to Barrett. The initial court granted summary judgment in favor of Barrett’s action regarding Continental, in favor of First State against Barrett. Continental was ordered to pay Barrett more than $160,000 in defense costs and attorney fees. Barrett and Continental appealed.
The higher court reviewed the matter. Continental raised the point that they should have no obligation to respond to the claim or to defend it since their policy excludes coverage for non-accidental events. Therefore, the insurer sought a reversal to relieve it of having to pay the legal costs and fees assigned by the lower court. Barrett pointed out that the pollution lawsuit only charged Barrett with being responsible for polluting the environment; but did not specify exactly how the pollution occurred. The company reasoned that, since the cause of pollution was in question, that they were owed a legal defense until a conclusion could be made regarding the allegation. The higher court agreed that, since the underlying suit against Barrett contained the possibility of the company being found liable for accidental pollution; Continental bore an obligation to provide a legal defense under its policy.
The court then focused upon Barrett’s appeal of the First State decision. Barrett presented a couple of points. It indicated that they had no copy of the underlying policy they had received from the, now, insolvent carrier. Barrett also mentioned that the schedule that formed a part of the First State excess policy only had spaces for listing broad policy titles and did not require a specific policy description. In light of this, the paving company argued that it had no way of knowing that the missing policy included an exclusion for non-accidental pollution events and that, since the particular policy was not listed, First State could not rely on the primary carrier’s policy wording on the pollution exclusion.
The court read things differently. In its opinion, the schedule reasonably inferred treating the underlying policy, referred to by its mention of a CGL policy, as though it were specifically listed. In that case, First State could rely on the primary policy wording and Barrett then had the task of proving that the primary policy would respond to the underlying suit. Since, again in the court’s opinion, Barrett did not meet that obligation; First State acted within its rights to deny coverage as well as to deny a legal defense.
The lower court’s action, granting First State’s and Barrett’s (regarding Continental) motions and denying Continental’s and Barrett’s (regarding First State) were affirmed.
Barrett Paving Materials , Inc., Plaintiff-Appellee, Cross-Appellant v. Continental Insurance Company, Defendant, Appellant, First State Insurance Company, Defendant, Cross-Appellee, and Michigan Mutual Insurance Company, Defendant. USCTAP, 1st Cir. No. 06-1951, 06-2017. Filed May 30, 2007. http://laws[dot]findlaw.com/1st/061951[dot]html (downloaded June 4, 2007)