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Certain Underwriters At Lloyds, London v. Hartford Accident and Indemnity Co.

United States District Court, D. Colorado

August 5, 2019




         This matter is before the Court on Plaintiffs Certain Underwriters (“Underwriters”[1]) at Lloyd's, London's Motion for Summary Judgment. (Doc. # 73.) Pursuant to the briefing procedure established by Magistrate Judge Nina Y. Wang (Doc. # 60), Defendants Hartford Accident and Indemnity Company (“Hartford”), Travelers Casualty and Surety Company (“Travelers”), and Holcim (US) Inc. (“Holcim”) filed combined Responses to Underwriters' Motion and Cross Motions for Summary Judgment. (Doc. ## 81, 82, 84.) Underwriters' Motion and Defendants' Cross Motions have been fully briefed in accordance with the procedure that Magistrate Judge Wang established for this case. (Doc. ## 89, 95, 97, 100, 102, 104, 106, 108.) Having thoroughly reviewed the underlying briefing, pertinent record, and applicable law, the Court denies Underwriters' Motion, grants Holcim's Cross Motion, and grants in part and denies in part Hartford and Travelers' Cross Motions.

         I. BACKGROUND

         This case involves an insurance coverage dispute. In 1967, Holcim's predecessor entity-Ideal Cement Company (“Ideal Cement”)-built a cement manufacturing plant in Seattle, Washington, which later became implicated in state and federal regulatory actions arising out of alleged environmental contamination. See (Doc. # 73 at 2; Doc. # 81 at 3 n.1). From 1958 to 1987, Ideal Cement and/or Holcim were insured by three different insurance companies. Specifically:

Underwriters issued policies[2] that were in effect from 1958 to 1970;
Hartford issued policies that were in effect from 1973 to 1979; and
Travelers issued policies that were in effect from 1979 to 1987.

(Doc. # 73 at 4-8; Doc. # 81 at 6.)

         In April 2009, the Environmental Protection Agency sent Holcim a Request for Information pursuant to § 104(e) of the Comprehensive Environmental Response, Compensation, and Liability Act, which sought information regarding a particular site related to the environmental contamination allegations-the Lower Duwamish Site (the “LDW Site”). (Doc. # 81 at 3-4); see 42 U.S.C. § 9604(e). Subsequently, in May 2009, Holcim requested a defense and indemnification from Underwriters for the LDW Site. (Doc. # 81 at 3.) In February 2010, Underwriters confirmed receipt of the LDW Site claim, and they requested further information about the Site, but Underwriters did not indicate whether they would provide a defense for Holcim. (Doc. # 81-1 at 27-31.)

         In November 2012, the EPA sent Holcim a letter informing Holcim that the EPA considered it a Potentially Responsible Party (“PRP”) for either the cleanup of the LDW Site or the costs the EPA incurred in cleaning up the Site. (Id. at 32-33.) Notably, the PRP letter did not specify an exact date or range of dates on which the alleged environmental contamination took place.[3] See (id.). Rather, the letter indicated only that “the EPA has reason to believe that hazardous substances have been or are being released from the facility(ies) located in Seattle, Washington, as identified in the 104(e) Information Request response.” (Id. at 32) (emphasis added). Holcim forwarded the PRP letter to Underwriters, Hartford, and Travelers. Based on the PRP letter, Hartford and Travelers agreed to participate in Holcim's defense under reservations of rights, but Underwriters did not respond to the letter.

         State and federal regulatory proceedings regarding the LDW Site have been ongoing. See (Doc. # 73 at 2). From 2014 to 2018, Hartford and Travelers sent Underwriters multiple requests for Underwriters to participate in Holcim's defense. However, Underwriters did not begin to participate until June 2018. At that time, Underwriters agreed to defend Holcim, subject to a reservation of rights, under the policies that were issued from 1964-1970. Additionally, Underwriters disclaimed any defense obligation for the time period of 1961-1964, but they did not address the time period prior to 1961. (Doc. # 81-1 at 81.)

         Thereafter, Underwriters initiated the instant case seeking a declaratory judgment regarding the existence and extent of Underwriters' duty to defend Holcim based on the policies that Underwriters issued to Ideal Cement. Specifically, Underwriters request this Court to order that:

• By operation of the “other insurance” provision in the Underwriters Policy, Underwriters' duty to defend Holcim . . . operates excess of Hartford's and Travelers' duties to defend Holcim . . ., and Underwriters defense obligation is not implicated until the limits of liability in the Hartford and Travelers policies have been exhausted;
• By operation of the “other insurance” provision . . ., Underwriters have no legal or equitable obligation to share in or contribute to any defense provided to or on behalf of Holcim . . . by Hartford or Travelers . . .; and
• Underwriters defense obligation to Holcim . . . is further contingent on Holcim's full satisfaction of its annual $25, 000 self-insurance obligation . . .

(Doc. # 73 at 20-21).

         In its Cross Motion for Summary Judgment, Holcim seeks an order from this Court that:

• Underwriters, Travelers[, ] and Hartford each has a current, joint-and-several duty to Holcim to provide a full and complete defense, and . . .
• Underwriters breached [the duty to defend] when they denied all defense costs before June 8, 2018.

(Doc. # 81 at 20.)

         Finally, in their Cross Motions for Summary Judgment, Hartford and Travelers request for the Court to enter an order finding that:

• Underwriters must contribute to Holcim's past and future defense costs; and
• Holcim's defense costs incurred in connection with the PRP Letter should be apportioned among the three insurers based on a “time on the risk” (“TOR”) allocation.

See (Doc. # 82 at 20; Doc. # 84 at 20).



         Under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, the Court may enter a judgment declaring “the rights and other legal relations of any interested party seeking such declaration. . . .” 28 U.S.C. § 2201. Such a judgment or decree is reviewable as a final judgment. Id. In the instant case, the parties do not dispute that the issues can be resolved as a matter of law through a declaratory judgment.

         Summary judgment is warranted when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” if it is essential to the proper disposition of the claim under the relevant substantive law. Wright v. Abbot Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). A dispute is “genuine” if the evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party. Allen v. Muskogee, Okl., 118 F.3d 837, 839 (10th Cir. 1997).

         When reviewing motions for summary judgment, a court may not resolve issues of credibility, and must view the evidence in the light most favorable to the nonmoving party-including all reasonable inferences from that evidence. Id. However, conclusory statements based merely on conjecture, speculation, or subjective belief do not constitute competent summary judgment evidence. Bones v. Honeywell Int'l, Inc., 366 F.3d 869, 875 (10th Cir. 2004).


         Under Colorado law, [4] terms of an insurance policy are construed according to the principles of contract interpretation. Thompson v. Md. Cas. Co., 84 P.3d 496, 501 (Colo. 2004). In interpreting a contract, courts seek to “give effect to the intent and reasonable expectations of the parties.” Id. (citation omitted). Therefore, courts assign terms in an insurance policy their plain and ordinary meaning, unless it is evident that the parties intend otherwise. Id. (citing Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 613 (Colo. 1999)); see, e.g., Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1090-92 (Colo. 1991) (analyzing case law and dictionary definitions to clarify the undefined term, “sudden and unexpected”); Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294, 304-06 (Colo. 2003) (analyzing case law and dictionary definition to explain the ambiguous term, “property damage”).

         Courts also “recognize that unlike a negotiated contract, an insurance policy is often imposed on a ‘take-it-or-leave-it' basis” and, therefore, courts “assume a ‘heightened responsibility' in reviewing insurance policy terms to ensure that they comply with ‘public policy and principles of fairness.'” Id. (citations omitted). As a result, ambiguous terms in an insurance policy are construed against the insurer. Id. (citing State Farm Mut. Auto. Ins. Co. v. Nissen, 851 P.2d 165, 166 (Colo. 1993)).

         With regard to the duty to defend in particular, the Colorado Supreme Court has explained that the duty “provides notice to an insurer so that it can adequately defend against third party claims.” Id. (citation omitted). The source of the duty to defend is contractual, and it derives from the insurance policy itself. Id. (citation omitted). To analyze an insurer's duty to defend, courts consider whether the factual allegations in the underlying complaint trigger coverage under an insurance policy's terms. Id. (citing Cyprus, 74 P.3d at 299 (citing Hecla, 811 P.2d at 1089)).

         An insurer has a duty to defend where a complaint against its insured “alleges any facts that might fall within the coverage of the policy, ” even if allegations only “potentially or arguably” fall within the policy's coverage. Id. (footnote omitted) (quoting Hecla, 811 P.2d at 1089). The duty to defend is “designed to cast a broad net in favor of coverage, ” and it must be construed “liberally with a view toward affording the greatest possible protection to the insured.” Id. (quoting Cyprus, 74 P.3d at 297). It follows that an insurer seeking to avoid its duty to defend bears a “heavy burden.” Id. (quoting Hecla, 811 P.2d at 1089). The weight of the insurer's burden “comports with the insured's legitimate expectation of a defense, and prevents the insurer from evading coverage by filing a declaratory judgment action.” Id. (quoting Hecla, 811 P.2d at 1090). Once the duty to defend has been established, then the insurer must defend its insured unless an exclusion in the insurance policy precludes coverage. Id. (quoting Hecla, 811 P.2d at 1090).


         In accordance with the case plan approved by Magistrate Judge Wang, this Order is limited to analyzing central policy construction issues regarding Underwriters' potential duty to defend and the related issue of the insurers' contribution in connection with the LDW Site. See (Doc. # 52) (adopting the parties' proposed scheduling order). The Court will also address Holcim's argument that the insurers are jointly and severally liable for its defense. Therefore, the Court will first consider the meaning and effect of the Underwriters' “other insurance” and self-insurance provisions in order to determine whether Underwriters have breached their duty to defend Holcim. The Court will subsequently consider the issue of joint and several liability as well as the proper method of allocating Holcim's defense costs among the insurers.


         In the Underwriters policies at issue, the following provisions are relevant to Underwriters' duty to defend an insured:

COVERAGE. From and against all loss which the Assured may sustain or incur by reason of or in consequence of:
(a) Any and all liability imposed by law against the Assured for loss of or damage to or destruction of property of others (including but not limited to, damage resulting from loss of use of property damaged or destroyed and all other indirect and consequential damage for which legal liability exists in connection with such damage to or destruction of property of others) sustained or alleged to have been sustained during the currency of this Certificate and arising from any cause whatsoever out of the operations, activities, work and/or business of the Assured in the United ...

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