Environmental: Contamination-Bad Faith Failure to Settle-Insurer’s Coverage Obligation

Plaintiff appealed the district court’s grant of summary judgment to defendant. Defendant insured St. Joe Minerals Corporation and plaintiff, St. Joe’s sole shareholder. Plaintiff and St. Joe’s were sued for environmental contamination arising from its lead smelting plant. Zurich paid nearly $10 million on behalf of both companies in four settlements and over $25 million in a settlement between St. Joe’s and the remaining injured parties. Defendant filed a declaratory judgment action to determine its coverage obligation, while plaintiff counterclaimed for bad faith failure to settle. The district court granted summary judgment for defendant, ruling that defendant’s coverage obligation was a per-occurrence basis. Plaintiff appealed, arguing that coverage was on a per-claim basis and that the policy limits do not foreclose its claim.

Where the parties executed an endorsement that amended the coverage declarations to extend liability coverage to a per-claim basis, the district court erred in granting summary judgment for defendant.

Colloton, J., dissenting: “Perhaps no interpretive fault is more common than the failure to follow the whole text canon, which calls on the judicial interpreter to consider the entire text, in view of its structure and of the physical and logical relation of its many parts.” Scalia & Garner, supra, at 167. Fluor’s proposed interpretation of the disputed policy unfortunately suffers from this fault. Fluor focuses on Endorsement #7 in isolation, invokes canons of construction that are unpersuasive even as to the endorsement standing alone, and ignores broader context that convincingly demonstrates the limited scope of Endorsement #7. The district court correctly determined that the policies at issue establish coverage for bodily injury that is subject to an “each occurrence” limit of liability as set forth on the Declarations page. Fluor’s argument for recovery of an additional $20 million based on supposed “each claim” limits of liability should be rejected.”

Judgment is reversed and remanded.

Fluor Corporation v. Zurich American Insurance Company (MLW No. 79732/Case No. 22-3389 – 18 pages) (U.S. Court of Appeals, 8th Circuit, Wollman, J.) Appealed from U.S. District Court, Eastern District of Missouri, Webber, J. (Roman Martinez, of Washington, D.C. for appellant; Richard P. Bress, of Washington, D.C.; Genevieve Patricia Hoffman, of Washington, D.C.; Samir Deger-Sen, of New York, NY; John Ryan, of San Diego, CA; Brook B. Roberts, of San Diego, CA; Steven Lesan, of San Diego, CA; Steven M. Bauer, of San Francisco, CA; Grant Strother, of San Francisco, CA; and Kirsten C. Jackson, of Los Angeles, CA on the brief) (Ronald S. Safer, of Chicago, IL for appellee; David McCourt, of Chicago, IL; Joseph Michael Morris, of St. Louis, MO; Sarah Lynn Baltzell, of Kansas City, MO; Lauren Suzanne Kuley, of Cincinnati, OH; Harnaik Singh Kahlon, of Chicago, IL; Jaymeson Pegue, of Santa Fe, NM; and Lucas T. Rael, of Chicago, IL on the brief)