Fluor Corporation v. Zurich American Insurance Company

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

FLUOR CORPORATION, )

)

Plaintiff, )

)

vs. ) Case No. 4:16CV429HEA

)

ZURICH AMERICAN INSURANCE )

COMPANY, et al., )

)

Defendants. )

OPINION, MEMORANDUM AND ORDER

This matter is before the Court on Defendant Zurich’s Motion to Determine

the Applicable Policy Limits as a Matter of Law, [Doc. No. 798]. The parties have

submitted memoranda in support of their respective positions. For the reasons set

forth below, Defendant’s Motion will be denied.

Facts and Procedural Background

The sole remaining claim in this case is Plaintiff’s bad faith refusal to settle

within the policy limits of insurance policies issued by Zurich. This motion arises

because on April 13, 2023, the Eighth Circuit Court of Appeals entered its Opinion

reversing Judge Webber’s ruling that Zurich’s insurance policies were limited on a

per-occurrence basis. When analyzed on a per-occurrence basis, there is no

question the limits of liability have been exhausted by initial settlement payments.

The Appellate Court remanded the case for further proceedings consistent with the

views set forth in the Court’s Opinion.

The factual background has been extensively set out throughout this

proceeding. In his July 25, 2021 Memorandum and Order, Judge Webber detailed

the underlying facts giving rise to this declaratory judgment action:

Beginning in the 1990s, residents of Herculaneum, Missouri started bringing

lawsuits against Doe Run, Fluor, and other defendants. The plaintiffs in

those cases claimed they had suffered bodily injury caused by the

Herculaneum lead smelter. From 2002-2011, attorneys Mark

Bronson and Gerson Smoger filed a number of these lawsuits (the

“Bronson/Smoger lawsuits”) on behalf of plaintiffs alleging liability against

Doe Run and Fluor based upon claims of bodily injury caused by exposure

to lead, metals and other toxic substances from the smelter.

Fluor owned the smelter from 1981 to 1994. Between February 4, 1981, and

June 1, 1985, Zurich issued four commercial general liability insurance

policies to St. Joe Minerals Fluor owned as its sole stockholder). During the

relevant years of the Policies the Herculaneum lead smelter operated

continually, emitting lead into the air and environment which settled on the

soil of the nearby community. The lead was present in residential yards,

church property, public parks, ball fields, streets, ambient air and soil in and

around Herculaneum. The Bronson/Smoger plaintiffs’ continuous or

repeated exposure to this lead caused bodily injury damages.

In their complaints, the Bronson-Smoger Plaintiffs generally made the

following allegations:

• At all relevant times, Plaintiffs are either residents or former

residents of Herculaneum, Missouri, who were exposed to lead,

metals, and other toxic substances released from and/or originating in

the Doe Run Smelter . . . located in Herculaneum, Missouri.

• During the course of its operations, and at all times relevant hereto,

the Doe Run Smelter mined, smelted, generated, released, dumped,

deposited, and placed into the air, the environment, and onto and in

and beyond the plant boundaries, including the air, land, soil, streets,

property and environment of Herculaneum and surrounding

communities, lead, and other toxic metals and substances.

• The Missouri Department of Health declared Herculaneum’s lead

contamination caused by the Doe Run Smelter to be a clear and

present and imminent and substantial endangerment to the citizens of

Herculaneum, especially young children and pregnant women, citing

the recent discovery of extremely elevated levels of lead

contamination on some streets, yards, and play areas in Herculaneum.

• Results of soil and environmental lead tests demonstrated high,

dangerous and hazardous lead levels in residential yards, public

properties, inside residential homes including the bedrooms of

children, and other areas in and around Herculaneum.

• Human exposure to lead, metals, and other toxic substances released

into the environment by The Doe Run Smelter, and the Doe Run

defendants, and each of them, causes lead poisoning which can cause

physical and personal injuries, including, but not limited to,

permanent brain damage and neurological abnormalities, learning

disability, loss of memory, headache, insomnia, weight loss, hyper-

irritability, muscle weakness and paralysis, joint pain, metallic taste,

nervous system disturbances, aphasia, anemia, trembling,

degenerative disease of the brain, kidney damage, peripheral

neuropathy, convulsions, coma, cancer of the respiratory tract,

reproductive dysfunction, and death.

• As a direct and proximate result of the wrongful acts and conduct of

the defendants, and each of them, hereinafter alleged, each of the

plaintiffs herein have had, and/or have, elevated levels of lead in their

body, and each of the plaintiffs herein have suffered, continue to

suffer, and will in the future suffer, from lead poisoning and from

exposure to the lead, metals and other hazardous and toxic substances

described herein.

In his September 21, 2020 Memorandum and Order, Judge Webber further

found the following facts.

Zurich issued a series of comprehensive general liability policies that cover

periods from March 15, 1981, through June 1, 1985 (collectively, the “Zurich

Policies”). ECF No. 381 at ¶ 1; ECF No. 396 at ¶ 1; ECF No. 395. The Zurich

Policies were issued to St. Joe Minerals Corp. (“St. Joe”). Each of the Zurich

Policies provide that a “stockholder” of St. Joe is a “Person Insured” under the

policy. Fluor owned St. Joe during the policy periods from 1981-1985. In 1994,

Fluor sold its interest in St. Joe to the Renco Group, Inc., which renamed the

company The Doe Run Resources Corporation (“Doe Run”). ECF No. 1 at ¶ 7;

ECF No. 42 at ¶ 8.

Each of the Zurich Policies provide in relevant part, that Zurich:

shall have the right and duty to defend any suit against the insured seeking

damages on account of such bodily injury or property damage, even if any of

the allegations of the suit are groundless, false, or fraudulent, and may make

such investigation and settlement of any claim or suit as it deems expedient.

ECF No. 381 at ¶ 2. The Zurich Policies also provide that the insured “shall not,

except at his own cost, voluntarily make any payment, assume any obligation or

incur any expense.” Id. at ¶ 3.1 The Policies state that Zurich:

will pay on behalf of the insured all sums which the insured shall become

legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence[.]

Id. at ¶ 4.

From 2002-2011, various lawsuits were filed by attorneys Mark Bronson

and Gerson Smoger on behalf of plaintiffs (“Bronson/Smoger lawsuits”) and

alleged liability against defendants, including Fluor and Doe Run, based on claims

of bodily injury to various residents and children of Herculaneum, Missouri,

caused by exposure to lead, metals and other toxic substances from the Doe Run

Smelter, located in Herculaneum, Missouri. ECF No. 388 at ¶¶ 1-6; ECF No. 396

at 5-22.2 During 2002 and 2003, Fluor tendered the Bronson/Smoger lawsuits

captioned Warden, et al. v. Fluor Corporation, et al., Browning, et al. v. Fluor

Corporation, et al., and Johnson, et al. v. Fluor Corporation, et al., to Zurich for a

“full and complete defense” under each of the Zurich Policies. ECF No. 396 at ¶¶

8-10. On September 5, 2005, Fluor and Doe Run tendered eight lawsuits, including

Alexander, et al. v. Fluor Corporation, et al., Heilig, et al. v. Fluor Corporation, et

al., Pedersen, et al. v. Fluor Corporation, et al. (the “Alexander/Pedersen/Heilig

Litigation”) to Zurich for a “full and complete defense” under the Zurich Policies.

ECF No. 396 at ¶¶ 11-18. In 2009, 2010, and 2011, three additional Bronson/

Smoger lawsuits (James, et al. v. Fluor Corporation, et al., Reece, et al. v. Fluor

Corporation, et al., and Faulkner, et al. v. Fluor Corporation, et al.) were tendered

by Fluor to Zurich for a “full and complete defense” under the Zurich Policies.

ECF No. 381 at ¶¶ 12-14; ECF No. 396 at ¶¶ 19-22. In the tender letters sent to

Zurich on behalf of Fluor for the Bronson/Smoger Lawsuits, Fluor designated

Armstrong Teasdale as its independent defense counsel. ECF No. 388 at ¶ 7. Doe

Run also tendered the Bronson/Smoger suits to Zurich, and designated Lewis Rice

as its independent defense counsel. Id. at ¶ 8.

Zurich agreed to defend Fluor and Doe Run in the Bronson/Smoger suits

pursuant to a reservation of rights. ECF No. 381 at ¶¶15-24; ECF No. 388 at ¶ 9.

Zurich reserved its right to disclaim coverage by way of certain enumerated

exclusions. See ECF No. 388 at ¶¶ 10-19. For example, Zurich expressly

disclaimed its defense and indemnity obligations under any Zurich Policy for the

claims asserted by any named plaintiff not born or otherwise exposed to any

alleged contaminants before February 4, 1985. Id. at ¶ 13.

In addition, among the rights Zurich reserved in connection with the

Bronson/Smoger lawsuits, Zurich asserted that coverage was “not available if and

to the extent that any insured has failed to satisfy any of the conditions precedent to

coverage set forth in the Zurich/St. Joe policies,” including “the duty to refrain

from making voluntary payments or voluntarily assuming obligations (except at its

own expense).” ECF No. 381 at ¶ 25. The Bronson/Smoger reservation of rights

letters further stated that “Zurich reserves the right to withdraw from its agreement

to defend Fluor and/or to seek to extinguish any alleged defense obligation if it

becomes apparent that there is no potential for coverage of any of the claims

asserted . . . .” See ECF No. 395, Exhs. 72-73, 91-103.

Through November 2010, the pattern and practice for settlements of

Bronson/Smoger lawsuits was that Doe Run, with contribution from Zurich, would

settle the cases and secure releases from the settling plaintiffs on behalf of Doe

Run and Fluor. ECF No. 388 at ¶ 61. Doe Run’s independent defense counsel,

Andrew Rothschild at Lewis Rice, took the lead on negotiating settlements with

the Bronson/Smoger plaintiffs. ECF No. 388 at ¶ 30. Zurich did not communicate

directly with Doe Run or Fluor (or their independent defense counsel). ECF No.

388 at ¶ 24; ECF No. 426 at ¶ 24. Instead, communications took place through

each insured’s coverage counsel. Id. Nor did Zurich’s representatives

communicate directly with the Bronson/Smoger plaintiffs’ counsel. ECF No. 388

at ¶ 66.

In prior mediated Bronson/Smoger settlements, at Doe Run’s request, Zurich

would agree to fund those plaintiffs who alleged exposure during the Zurich policy

periods. ECF No. 388 at ¶ 62. Doe Run funded the remaining plaintiffs’

settlements. Id. Fluor did not contribute to the settlements of the Bronson/Smoger

Lawsuits. Id. at ¶ 40. Fluor’s position was that it was not required to contribute as

it was either indemnified by Doe Run or covered by insurance. Id. at ¶ 40; ECF

No. 426 at ¶ 40.

In 2009, Doe Run challenged Fluor’s position of non-payment. During the

2009 mediation, which resulted in settlement of the Bronson/Smoger cases referred

to as the Browning/Dawson cases, Doe Run demanded Fluor contribute to Doe

Run’s settlement offer, or risk being carved out. ECF No. 388 at ¶ 49. Although

Fluor refused to contribute, Zurich contributed funding and Doe Run included

Fluor in the 2009 Browning/Dawson settlement. Id. at ¶¶ 50, 51.

In 2010, Doe Run again sought contribution from Fluor in order to globally

settle the remaining Bronson/Smoger lawsuits. ECF No. 388 at ¶ 38. Doe Run

informed Fluor of the plaintiffs’ global settlement demand of $60 million, Doe

Run’s global settlement offer of $42 million (and, later, Doe Run’s increased offer

of $44 million). ECF No. 388 at ¶¶ 96, 97; ECF No. 392-1, Ex. 7, 90: 2-9. On

October 18, 2010, Andy Rothschild, Doe Run’s independent defense counsel at

Lewis Rice, called Jack Quinn, Fluor’s independent defense counsel at Armstrong

Teasdale, to inform him November 18, 2010, was the scheduled date for the

Bronson/Smoger mediation. ECF No. 408-27 at 7. Mr. Rothschild again requested

contribution from Fluor to any settlement that might be reached. ECF No. 408 at ¶

98; ECF No. 408-27 at 7.

He also informed Mr. Quinn that Zurich was not an impediment to Fluor

making a contribution because Zurich had denied coverage for 38 of the 58

plaintiffs. ECF No. 408 at ¶ 98; ECF No. 408-27 at 7. Although Doe Run

continued to seek Fluor’s contribution, three days prior to the scheduled mediation,

Flour told Doe Run that it should “not expect financial participation from Fluor” at

the upcoming mediation. ECF No. 388 at ¶ 99; ECF No. 392-1, Ex. 656; ECF No.

392- 1, Ex. 660.

Doe Run also informed Zurich of the scheduled November 18, 2010

mediation and plaintiffs’ $60 million demand. ECF No. 381 at ¶¶ 35, 36. In

response to Doe Run’s notification, Zurich requested information from Doe Run

relating to the Bronson/Smoger plaintiffs to determine the reasonable settlement

value for those plaintiffs potentially covered under the Policies. ECF No. 388 at ¶¶

113-16.

In October 2010, Doe Run’s coverage counsel, Marc Halpern, proposed a

funding mechanism for the global settlement of the Bronson-Smoger Lawsuits to

Zurich that would include a release for both Fluor and Doe Run. ECF No. 381 at ¶

39. Under Doe Run’s proposal, Zurich would front 50% of any settlement that may

be negotiated in connection with the upcoming mediation, while reserving the right

to seek reimbursement for any contributions that did not fall within Zurich’s

indemnity obligation. Id.

Prior to mediation, on November 7, 2010, Randy Sinnott, Zurich’s coverage

counsel (in an email to various individuals at Zurich), addressed Doe Run’s

funding proposal. ECF No. 381 at ¶ 40; ECF No. 382-67. Coverage counsel

concluded 21 of the 58 Bronson-Smoger plaintiffs were covered plaintiffs. ECF

No. 382-67 at 5. And for these 21 plaintiffs, coverage counsel determined

$19,913,791 was a “reasonable settlement value.” Id. at 7-8. Coverage counsel

further stated Zurich’s available policy limits were $45 million. Id. at 7. Zurich’s

coverage counsel recommended Zurich accept Doe Run’s funding proposal, and

noted it was unlikely Doe Run could fund a global settlement on its own. ECF No.

381 at ¶ 40; ECF No. 382-67 at 11.

On November 10, 2010, Zurich responded to Doe Run’s funding proposal by

informing Doe Run that Zurich could not commit to any specific indemnity

amount, “either as to plaintiff, dollar amount or percentage,” but that Zurich

planned to “attend and participate with Doe Run in the mediation.” ECF No. 388 at

¶ 118; ECF No. 390-1, Ex. 570.

On November 12, 2010, Marc Halpern, Doe Run’s coverage counsel

emailed Zurich, requesting Zurich’s consent to Doe Run’s $44 million counteroffer

to the Bronson/Smoger plaintiffs, and Zurich’s funding of 50% of the global

settlement. ECF No. 390-1, Ex. 571.

On November 15, 2010, Zurich responded it had no objection to Doe Run’s

counteroffer, but again declined to contribute to settlement in terms of a specific

percentage or dollar amount. Id.

Approximately an hour later, Doe Run sought clarification as to whether

Zurich would fund any portion of the $44 million counteroffer. Id. Zurich

reiterated to Doe Run it would not commit at that time to fund any portion of the

$44 million. ECF No. 381 at ¶¶ 42,43; ECF No 390-1, Ex. 571; ECF No. 382-70 at

3-4; ECF No 388 at ¶118. Doe Run then communicated the following to Zurich:

“The defense is conducted by Lewis Rice . . . . The defense is not conducted by

Zurich. Zurich’s obligation in this instance is, per its contract obligations, to head

[sic] the request of defense counsel and to confirm funding.” ECF No 390-1, Ex.

571.

Heading into mediation, Zurich’s claims analyst, Bradley Rausa, conceded

in his claims diary his biggest concern was that Zurich did not have the authority to

commit to funding and could not get it. ECF No. 382-73 at 28. Earlier in 2010,

Zurich’s coverage counsel had recommended a reserve increase for the

Bronson/Smoger litigation, but Zurich did not increase the reserves until 2011.

ECF No. 381 at ¶¶ 32-34, 54; ECF No. 382-43 at 5. Eight days before mediation,

Mr. Rausa acknowledged Zurich would not “be in any position to pay money or

agree to pay money at the mediation.” ECF No. 381 at ¶ 41; ECF No. 382-72 at 2.

Mr. Rausa’s claim notes further acknowledge Zurich was aware of the possibility

of Doe Run settling without Fluor if Fluor failed to contribute. ECF No. 430-9, Ex.

89, at 6.

On November 18, 2010, the mediation of the Bronson/Smoger Lawsuits was

conducted and representatives from Fluor, Doe Run, Zurich, and the underlying

plaintiffs attended. ECF No. 381 at ¶ 45. Counsel for the Bronson/Smoger

plaintiffs only communicated with the mediator or with Doe Run regarding

settlement. ECF No. 388 at ¶ 140. Fluor’s representatives kept to themselves at

mediation to avoid demands for Fluor’s contribution. ECF No. 408-30. Zurich told

the mediator it did not have authority to commit any money toward settlement.

ECF No. 381 at ¶ 46.

During the mediation, Zurich was advised that if plaintiffs’ $60 million

global demand to settle with all defendants (including Fluor) was not met, the

plaintiffs would settle separately with Doe Run and “make up the difference” from

Fluor. Id. at ¶ 47. Plaintiffs later made a separate offer of $53 million to Doe Run.

ECF No. 388 at ¶ 156. The mediator informed Doe Run the global settlement

amount of $53 million was to be kept confidential from Fluor as an express

condition made by plaintiffs’ counsel. Id. at ¶ 156-57.5 Doe Run conveyed the

confidential settlement amounts negotiated to Zurich and stated the amounts could

not be divulged to Fluor. Id. at ¶ 167. The mediator informed Fluor that Doe Run

had reached an agreement in principle to settle with the plaintiffs. Id. at ¶ 164.

Despite this tentative agreement, the Bronson/Smoger plaintiffs’ $60 million

global demand was not withdrawn until plaintiffs and Doe Run finalized settlement

on December 13, 2010. ECF No. 430-43, Ex. 123, 105:2-106:11. Given that Fluor

and Doe Run’s interests had diverged, Zurich assigned Catherine Tetzlaff as

Fluor’s new claims adjuster. ECF No. 436-4, Exhibit 264.

After mediation concluded, Zurich did not inform Fluor of the amount of the

separate settlement offer of $53 million, or the $7 million delta (to meet plaintiffs’

still pending $60 million demand). ECF No. 381 at ¶ 49. However, on December 7,

2010, Edward Dowd, counsel for one of the Doe Run entities, contacted Fluor’s

independent defense counsel, Jack Quinn. ECF No. 388 at ¶ 187. Mr. Dowd

discussed Fluor’s settlement opportunity with Mr. Quinn. Mr. Dowd informed Mr.

Quinn Fluor could settle “pretty cheaply” for “a few million dollars.” ECF No. 388

at ¶ 188. ECF No. 393-3, Ex. 13, Dowd Tr., 86:14-87:13, 101:2, 103:8-12. Mr.

Dowd did not convey the specific number of plaintiffs’ $53 million offer, but he

indicated to Mr. Quinn the gap to settle was very small. ECF No. 448-5, Ex. E,

Dowd Supp. Tr. 140:18-141:19. Mr. Dowd warned Mr. Quinn “about the threat of

punitive damages in the City of St. Louis representing a lead smelter against a

bunch of kids . . . .” ECF No. 388 at ¶ 189; ECF No. 393-3, Ex. 13, Dowd Tr.

87:23-88:14. Mr. Quinn’s response to this overture was: “everybody’s not as

worried about lead as [Doe Run is].” ECF No. 388 at ¶ 190; ECF No. 393-3, Ex.

13, Dowd Tr. 88:8-14.

After talking with Mr. Dowd, Fluor’s defense counsel, Mr. Quinn,

summarized their phone conversation in an email to Fluor. ECF No. 392-1, Ex. 7,

Ex. 672. Mr. Quinn stated he informed Mr. Dowd it would not do plaintiffs any

good to contact Fluor about settlement because the cases were defensible, and

Fluor had insurance for some of the cases as well as indemnification rights against

Doe Run. Id. Mr. Quinn also told Mr. Dowd that “Fluor [was] not paying either

plaintiffs or [Doe Run] and [was] willing to go to trial.” Id.

It is undisputed Fluor never contributed funds to achieve a global settlement.

In this same time frame after mediation, on November 22, 2010, Doe Run’s

coverage counsel contacted Zurich and demanded Zurich commit to funding $26.5

million towards Doe Run’s separate settlement of $53 million. ECF No. 388 at ¶

181. On December 1, 2010, Zurich responded to Doe Run’s request. ECF No 390-

1, Ex. 573. Zurich did not commit to funding and told Doe Run that Fluor could

not agree to any settlement favoring one of its insureds over the other. Id. On

December 2, 2010, Doe Run contacted Zurich and demanded Zurich commit to

funding for the 20 Bronson/Smoger plaintiffs Zurich conceded alleged exposure

during the Policy periods. Id. In response, Zurich maintained it was entitled to fully

investigate the claims and indicated it would respond to Doe Run when it

completed its evaluation. Id.

A week later, on December 9, 2010, Zurich provided Doe Run with Zurich’s

evaluation of potential liability for the plaintiffs who were exposed to lead during

the period of the Zurich policies. ECF No. 388-2, Ex. 2, Halpern Tr. 165:3-13, Ex.

17. Zurich clarified the numbers did not constitute an offer from Zurich and stated

any resolution of the claims had to include Fluor. Id. On December 10, 2010,

Zurich emailed Doe Run, invoking the cooperation and voluntary payments clauses

within the Policies. ECF No. 388-2, Ex. 21. In response, Doe Run requested Zurich

withdraw its reservation of rights pertaining to the Bronson/Smoger cases. ECF

No. 388-2, Ex. 563.

On December 13, 2010, Doe Run finalized its separate settlement agreement

for $53 million with the Bronson/Smoger plaintiffs. ECF No. 388 at ¶¶ 211, 212.

Fluor was not included in that settlement. Id. at ¶ 211. The claims against Fluor in

a portion of the Bronson/Smoger litigation−the Alexander/Pedersen/Heilig

lawsuits−proceeded to trial and resulted in a judgment against Fluor and its related

entities for $38,527,186 in compensatory damages, and $320 million in punitive

damages. ECF No. 388 at ¶¶ 232-33. Fluor appealed the verdict and judgment

entered by the trial court, resulting in the appellate court decision styled Blanks v.

Fluor Corporation. Id. at 234. In October 2014, Fluor globally settled with the

Bronson/Smoger plaintiffs for approximately $300 million. ECF No. at ¶ 247. The

few remaining other Herculaneum Claims were resolved prior to the initiation of

this lawsuit. ECF No. 396 at ¶ 43; ECF No. 421 at ¶ 43. Prior to the resolution of

the Herculaneum Claims at issue in this action, Zurich never filed an action

seeking a court order determining coverage or terminating its duty to defend Fluor

in the lawsuits. ECF No. 396 at ¶ 44.

On March 29, 2016, Zurich filed suit in this Court, asserting five separate

claims in its Complaint. Zurich’s first three Causes of Action seek declaratory

judgments stating the Zurich Policies do not provide coverage for the defense or

indemnity of Fluor’s litigation. Zurich’s Fourth Cause of Action sought a

declaration that the Zurich Policies were exhausted. Zurich’s Fifth Cause of Action

sought indemnity or contribution from Fluor for defense fees paid by Zurich. Fluor

filed a Counterclaim against Zurich asserting three Causes of Action: 1) Breach of

the Duty to Defend; 2) Breach of the Covenant of Good Faith and Fair Dealing−

Bad Faith Failure to Settle and Defend; and 3) Unreasonable Refusal to Pay.

On September 30, 2019, this Court dismissed the portions of Zurich’s First,

Second, and Third Causes of Action seeking a declaration that Zurich’s Policies do

not provide indemnity coverage.

Fluor filed a motion before Judge Webber for a determination of bodily

injury liability under the Policies. Zurich argued the policies were limited to $3.5

million on a per-occurrence basis. Judge Webber so found in his July 25, 2021

Memorandum. Fluor appealed.

The Eighth Circuit reversed the policy limits determination and remanded

for further proceedings. The Court held:

An insurance policy is interpreted according to the plain and ordinary

meaning of its terms, “or the meaning that would be attached by an ordinary

purchaser of insurance.” Seaton v. Shelter Mut. Ins. Co., 574 S.W.3d 245,

247 (Mo. 2019) (quoting Doe Run Res. Corp. v. Am. Guar. & Liab. Ins.,

531 S.W.3d 508, 511 (Mo. 2017)). Courts should evaluate policies as a

whole when interpreting policy provisions. Ritchie v. Allied Prop. & Cas.

Ins. Co., 307 S.W.3d 132, 135 (Mo. 2009). When an endorsement conflicts

with the policy's terms, the endorsement prevails. Merlyn Vandervort Invs.,

LLC v. Essex Ins. Co., Inc., 309 S.W.3d 333, 338 (Mo. Ct. App. 2010)

(citing Abco Tank & Mfg. Co. v. Fed. Ins. Co., 550 S.W.2d 193, 198 (Mo.

1977)). Moreover, the last antecedent rule provides that a limiting clause

“should ordinarily be read as modifying only the noun or phrase that it

immediately follows.” Paroline v. United States, 572 U.S. 434, 447, 134

S.Ct. 1710, 188 L.Ed.2d 714 (2014) (quoting Barnhart v. Thomas, 540 U.S.

20, 26, 124 S.Ct. 376, 157 L.Ed.2d 333 (2003)). The last antecedent rule is

not absolute, however, and can “be overcome by other indicia of meaning.”

Id. (quoting Barnhart, 540 U.S. at 26, 124 S.Ct. 376). Finally, the scope of

subparts canon recognizes that “[m]aterial within an indented subpart relates

only to that subpart.” Antonin Scalia & Bryan A. Garner, Reading Law: The

Interpretation of Legal Texts 156 (2012).

The Declarations in the policies at issue here set forth the limits for

comprehensive general liability, which included bodily injury liability. The

Declarations limited Zurich's liability on an “each occurrence” basis.

Endorsement 7 amended the Declarations, however, stating:

It is agreed that with respect to limits of liability for comprehensive

general liability as designated under Item 3 of the policy declarations

is amended to read:

500,000 each claim

500,000 each aggregate as respects incidental professional liability

endorsement.

Fluor argues that Endorsement 7 amended the Declarations’ limitations in a

manner that limited comprehensive general liability—which, again, includes

bodily injury liability—to a per-claim basis. The plain language of

Endorsement 7's introductory clause, “limits of liability for comprehensive

general liability,” supports Fluor's reading. By contrast, Endorsement 7's

limiting language, “as respects incidental professional liability

endorsement,” was placed in an indented subpart. Applying the last

antecedent rule, Endorsement 7's limiting clause applied only to the

immediately preceding phrase, “500,000 each aggregate.” The scope of

subparts canon leads to the same conclusion.

Zurich argues that the last antecedent rule should not apply here, because

there were other indicia that the policy intended to apply a per-occurrence

limit to Zurich's comprehensive general liability. Zurich contends that

Endorsement 7 provided the limits of liability for incidental professional

liability coverage, which it asserts were not set forth elsewhere in the policy.

But Endorsement 11, which set forth the terms for incidental professional

liability, provided those precise limits:

The total liability of the company for all damages, including

damages for care and loss of services, because of bodily injury

sustained by one or more persons as the result of any one occurrence

shall not exceed the limit of bodily injury liability stated in the

Declarations as applicable to “each occurrence”.

(emphasis added). Accordingly, the Declarations provided the limits of

liability for incidental professional liability coverage.

Zurich also argues that reading Endorsement 7 as amending the

comprehensive general liability limits is contrary to a holistic reading of the

policy because it contradicts other important terms. When a contradiction

arises, however, we enforce the policy “as altered by the endorsement.”

Merlyn Vandervort Investments, LLC, 309 S.W.3d at 338 (quoting Abco

Tank & Mfg. Co., 550 S.W.2d at 198). Because it as a whole may be given

effect with per-claim limits on Zurich's liability, we will enforce the policy

as so amended by Endorsement 7.

We conclude that Endorsement 7 modified the limits of liability for

comprehensive general liability, including bodily injury liability, to be on a

per-claim basis. The district court thus erred by determining that the policy

was limited on a per-occurrence basis.

Fluor Corp. v. Zurich Am. Ins. Co., 65 F.4th 387, 389–90 (8th Cir. 2023)(italicized

emphasis added).

Discussion

The parties agree that the only remaining issue is Fluor’s bad faith failure to

settle. They disagree, however as to whether the policies’ limits have been

exhausted.

Per-claim application to limits of liability

Zurich argues its total liability for the first two policy years is $1.5 million

dollars. This is the position it held in the appeal. Conversely, Fluor argues the $1.5

million limitation is no longer applicable by reason of Endorsement 7.

Initially, the Eighth Circuit’s Opinion clearly reversed Judge Webber’s

finding that the policies limited coverage on a per-occurrence basis. Rather, the

Court concluded “that Endorsement 7 modified the limits of liability for

comprehensive general liability, including bodily injury liability, to be on a per-

claim basis.” Fluor, 65 F.4th at 390.

Zurich argues the question now becomes what are the total limits under the

policies for all claims. It urges that the total liability remains $1.5 million. In

attempting to reconcile the per-claim declaration with Section 3’s limits of

liability, Zurich argues that the total limit applies regardless of the number of

persons who sustain bodily injury or claims made; “the upshot is no matter how

many claims are asserted, if there is only one occurrence, the total limit of liability

for all claims is the same as the limit for one claim. Such an interpretation is not

tenable under the Eighth Circuit Opinion.

“On remand, a district court is bound to obey strictly an appellate mandate.”

Bethea v. Levi Strauss & Co., 916 F.2d 453, 456 (8th Cir. 1990), citing In

re Sanford Fork & Tool Co., 160 U.S. 247, 255, 16 S.Ct. 291, 40 L.Ed. 414

(1895). “If the district court fails to comply with an appellate mandate, the

appellate court has authority to review the district court's actions and order it

to comply with the original mandate.” Id., citing Houghton v. McDonnell

Douglas Corp., 716 F.2d 526, 527-28 (8th Cir. 1983). Absent “explicit or

implicit instructions to hold further proceedings, a district court has no

authority to re-examine an issue settled by a higher court.” Id., citing Nelson

v. All American Life & Fin. Corp., 889 F.2d 141, 152 (8th Cir. 1989).

“Every question decided by the appellate court, whether expressly or by

necessary implication, is finally settled and determined.” Thompson v.

Commissioner, 821 F.3d 1008, 1011 (8th Cir. 2016).

Bader Farms, Inc. v. Monsanto Co., 100 F.4th 944, 947–48 (8th Cir. 2024), cert.

denied sub nom. Basf Corp. v. Bader Farms, Inc., No. 24-318, 2025 WL 76444

(U.S. Jan. 13, 2025).

In this case, the Appellate Court ordered this Court to hold further

proceedings. Consistent with the Court’s Opinion, the effect of Declaration 7 is

that the limits of liability under the applicable policies are modified requiring

assessment based on the claims filed; it is not merely substituting per-occurrence to

per-claim and having the same bottom-line limit for one occurrence,

When a contradiction arises, however, we enforce the policy “as altered by

the endorsement.” Merlyn Vandervort Investments, LLC, 309 S.W.3d at 338

(quoting Abco Tank & Mfg. Co., 550 S.W.2d at 198). Because it as a whole

may be given effect with per-claim limits on Zurich's liability, we will

enforce the policy as so amended by Endorsement 7.

Fluor Corp, 65 F.4th at 390.

Zurich’s interpretation would effectively render the Eighth Circuit’s Opinion

futile. The substitution of the per-claim for per-occurrence limit only to continue to

tie the total liability to the occurrence, regardless of the number of claims, would

erase any further analysis this Court is required to perform. Zurich fails to explain

how its interpretation is any different from the policy before Declaration 7. Indeed,

there is no difference. When read together, however, Section 3’s occurrence

limitation of liability now conflicts with Endorsement 7, requiring the Court to

interpret the policy in accordance with the language and intent of the Endorsement.

As such, the limit of liability is $500,000 per claim for, as Judge Webber found,

one occurrence. Under the 1981 and 1982 policies, therefore, the limit of liability

for the 15 potentially covered Plaintiffs is 21.5 million, as argued before the Eighth

Circuit. See ECF # 814, Exhibit 145, (detailing the potential plaintiffs and the time

the plaintiffs would be covered under the 1981 and 1982 policies).

Issue Preclusion, Judicial Estoppel, and Evidentiary Admissions

Zurich alternatively argues the available policy limits are zero for the

independent reason that Fluor cannot prove any of the Bronson-Smoger plaintiffs

claims against Fluor triggered any of the policies because it is estopped based on

issue preclusion, judicial estoppel, and evidentiary admissions. Although Zurich

contends Fluor has conceded this argument by not addressing it in its opposition to

the Motion, Fluor has indeed addressed the argument, albeit it did not specifically

use Zurich’s characterization of the argument.

“The interpretation of an insurance policy is a question of law.” Hartford

Ins. Co. of the Midwest v. Wyllie, 396 F.Supp.2d 1033, 1038 (E.D. Mo. 2005)

(citing McCormack Baron Mgmt. Servs., Inc. v. Am. Guarantee & Liability Ins.

Co., 989 S.W.2d 168, 171 (Mo. 1999)). “An insurance company has a duty to

defend whenever the insured is exposed to potential liability, ‘no matter how

unlikely it is that the insured will be found liable and whether or not the insured is

ultimately found liable.’ ” Hartford, 396 F. Supp. 2d at 1037-38 (citing Truck Ins.

Exchange v. Prairie Framing, LLC, 162 S.W.3d 64, 79 (Mo. Ct. App. 2005))

(quoting John Alan Appleman, 7C Insurance Law and Practice § 4684.01 (Walter

F. Berdal, ed.1979)); “The duty to defend is determined by comparing the language

of the coverage afforded in the policy with the allegations in the pleadings.”

Hartford, 396 F. Supp. 2d at 1038 (citing McCormack, 989 S.W.2d at 170; . Am.

Fam. Mut. Ins. Co., S.I. v. Coyne, 635 F.Supp.3d 759, 762 (E.D. Mo. 2022).

Zurich argues Judge Webber’s September 30, 2019 Memorandum and Order

is inapplicable to whether the bad faith failure to settle claim is viable because the

Memorandum and Order dealt with the dismissal of Zurich’s indemnification

affirmative defenses, and did not find it owed a duty to defend. Further, because

Fluor must prove its own claim of bad faith. Zurich argues Fluor is estopped from

pursuing its bad faith failure to settle claim because it took the position that it was

not responsible for the plaintiffs’ injuries since they occurred after the expiration of

the policies.

Zurich’s argument is misplaced. The Memorandum and Order articulates the

law regarding the duty to defend:

The question before the Court is whether Zurich’s affirmative defenses

asserting a lack of coverage under the Zurich Policies fail as a matter of law

in light of the undisputed facts. Fluor argues indemnity coverage is

irrelevant to whether Zurich committed the BFFS tort at the time of the

settlement opportunity in 2010. Fluor claims the undisputed facts show

Zurich reserved the exclusive right to settle and prohibited Fluor from

voluntarily assuming liability−which gave rise to Zurich’s duty to act in

good faith in settling the Herculaneum Lawsuits. Fluor contends a

determination of coverage now cannot immunize Zurich for its conduct in

2010 and therefore, the Indemnity Defenses fail as a matter of law. Zurich

responds that under Missouri law, where there is no coverage, an insured has

no claim for bad faith. Zurich argues the Court should deny summary

judgment on its Indemnity Defenses as proof of lack of coverage will defeat

Fluor’s BFFS claim.

Under the undisputed language of the Zurich Policies, Zurich had the “right

and duty to defend any suit against the insured seeking damages . . . [and to]

investigat[e] and settle[…] any claim or suit as it deems expedient.”

FSUMF, ECF No. 221-1 at ¶ 2. The Zurich Policies also provided the

insured “shall not, except at his own cost, voluntarily make any payment,

assume any obligation or incur any expense.” Id. at ¶ 3. It is uncontested

that: Fluor tendered the Herculaneum Lawsuits to Zurich for a “full and

complete defense;” Zurich agreed to defend the claims pursuant to a

reservation of rights; and, the reservation of rights reaffirmed Fluor’s “duty

to refrain from making voluntary payments or voluntarily assuming

obligations.” FSUMF, ECF No. 221-1 at ¶¶ 5-11, 15-21, 25.

Thus, at the outset, when Fluor tendered the lawsuits to Zurich and Zurich

agreed to defend under a reservation of rights, the potential for coverage

existed, giving rise to Zurich’s duty to defend Fluor. The policies’ language

vests Zurich with the right to control litigation and settlement, giving rise to

a fiduciary relationship between the parties, exposing Zurich to tort

liability if it failed to evaluate and negotiate third-party claims in good faith.

Moreover, based upon the language of the policies and Zurich’s reservation

of rights affirming Fluor’s duty to refrain from voluntarily assuming

obligations, Zurich had a duty to act in good faith with regard to the 2010

settlement opportunity.

Zurich’s Indemnity Defenses relate to whether indemnity coverage is

“barred” or otherwise “unavailable” under the Zurich Policies. A proper

affirmative defense “if true, will defeat the plaintiff's ... claim, even if all

allegations in the complaint are true.’” PNC Bank [v. Tovar, Incorporated],

2014 WL 538810, at *7 [E.D. MO Feb. 11, 2014]. Zurich argues a

determination of no coverage will bar Fluor’s BFFS claim under Missouri

law. Zurich cites to several cases in support of its contention, all of which

are inapposite to the circumstances here and do not support the contention

that an indemnity obligation must be proven as a threshold to establishing a

BFFS claim.

* * * * * *

The Court further concludes that a determination on coverage here, after

Zurich’s alleged bad faith conduct occurred, is irrelevant to and cannot

defeat Fluor’s BFFS claim. See Advantage Bldgs. & Exteriors, Inc. v. Mid-

Continent Cas. Co., 449 S.W.3d 16, 28 (Mo. App. W.D. 2014)(concluding

that because the trial court’s coverage ruling came after the insurer had

already refused to settle, the court did not abuse its discretion in excluding

evidence of that ruling on the basis that it was irrelevant, confusing, and

prejudicial). From a common-sense standpoint, Zurich’s proposal would

allow insurers to undertake the defense of a claim, bar the insured from

voluntarily making payment on the claim, fail to act in good faith with

regard to settlement opportunities, and later evade BFFS liability for this

conduct by procuring a determination at trial or otherwise that coverage was

non-existent−a fact that was not established at the time of the alleged bad-

faith conduct.

ECF Doc. No. 322, 15-17. There can be no bar based on estoppel. The relevant

inquiry regarding the bad faith failure to settle claim arose when Fluor tendered the

defense to Zurich. Fluor’s subsequent representations regarding its liability based

on the expiration of the policies is not relevant to the claim, and thus cannot bar the

claim. Fluor is not seeking indemnification from Zurich which likely is barred by

the estoppel theories.

Indeed, Judge Webber once again reiterated Zurich’s duty was not

extinguished by Fluor’s later contentions that the claims arose after the expiration

of the policies.

‘“The duty to defend is broader than the duty to indemnify.’” McCormack

Baron Mgmt. Servs., Inc. v. Am. Guarantee & Liab. Ins. Co., 989 S.W.2d

168, 170 (Mo. 1999) (quoting Butters v. City of Indep., 513 S.W.2d 418, 424

(Mo. banc 1974)). “To suggest that the insured must prove the insurer’s

obligation to pay before the insurer is required to provide a defense would

make [the duty to defend] provision a hollow promise . . . .” McCormack,

989 S.W.2d at 170. “The duty to defend arises whenever there is a potential

or possible liability to pay based on the facts at the outset of the case and is

not dependant [sic] on the probable liability to pay based on the facts

ascertained through trial.” Id. The duty to defend potentially insured claims

arises “even though claims beyond coverage may also be present.”

Advantage, 449 S.W.3d at 22 (citing Truck Ins. Exch., 162 S.W.3d at 79).

The duty to defend is determined at the outset by comparing the language of

the insurance policy with the allegations in the complaint. McCormack, 989

S.W.2d at 170; see Butters, 513 S.W.2d at 424; Zipkin v. Freeman, 436

S.W.2d 753, 754 (Mo. banc 1968). If the complaint merely alleges facts that

give rise to a claim potentially within the policy’s coverage, the insurer has a

duty to defend. McCormack, 989 S.W.2d at 170-71; see Butters, 513 S.W.2d

at 424; Zipkin, 436 S.W.2d at 754. Any uncertainty as to the policy’s

coverage should be decided in favor of the insured. Liberty Mut. Ins. Co. v.

FAG Bearings Corp., 153 F.3d 919, 924 (8th Cir. 1998) (citing Reliance Ins.

Co. v. Shenandoah South, Inc., 81 F.3d 789, 791–92 (8th Cir. 1996)).

If there is any possibility of coverage-no matter how unlikely that possibility

may be-the duty to defend persists. Charter Oak Fire Ins. Co. v. Nelson, No.

13-6085-CV-SJ-ODS, 2014 WL 5107025, at *5 (W.D. Mo. Oct. 10, 2014).

“To extricate itself from a duty to defend the insured, the insurance company

must prove that there is no possibility of coverage.” Kirk v. Cont’l W. Ins.

Co., 123 S.W.3d 259, 264 (Mo. Ct. App. 2003) (citing McCormack, 989

S.W.2d at 170); see also Zurich Am. Ins. Co. v. U.S. Eng’g. Co., No. 18-cv-

00933, 2012 WL 13028219, at *4 (W.D. Mo. May 30, 2012) (“[O]nce it is

determined that an insurance policy does not provide coverage for a claim,

an insurer’s duty to defend expires.”).

In addition, a court’s declaratory judgment ruling that a claim is not covered

only relieves the defending insurer of its duty to defend the case going

forward, it does not nullify the initial determination that the claim was

potentially covered. Liberty Mut. Ins. Co., 153 F.3d at 923−24.

Thus, when a defending insurer obtains a court’s declaration a claim is not

covered under a policy, the insurer is only relieved of its duty to defend from

the date of the court’s order, not retroactively.

As noted above, the duty to defend arises whenever there is a potential

liability to pay based on the facts at the outset of the case and is determined

by comparing the language of the insurance policy with the allegations in the

complaint. The determination is made by the insurer when the claim is

tendered by the insured.

Here, Fluor tendered the Herculaneum claims at issue in this matter to

Zurich. Zurich, faced with uncertainty about coverage, activated its right to

defend under the Policies, and reserved its right to seek a declaration that it

had no duty to defend. In agreeing to defend Fluor, Zurich issued reservation

of rights letters which acknowledged the allegations of the Herculaneum

complaints. The letters stated the complaints alleged liability against Fluor

and Doe Run, based on claims of bodily-injury to various residents and

children of Herculaneum, Missouri, caused by exposure to lead, metals and

other toxic substances from the Doe Run Smelter. The reservation of rights

letters also acknowledge the Zurich Policies:

generally provide that Zurich will pay on behalf of the insured all

sums which the insured shall become legally obligated to pay as

damages because of:

A. bodily injury or

B. property damage

to which this insurance applies, caused by an occurrence, and [Zurich]

shall have the right and duty to defend any suit against the insured

seeking damages on account of such bodily injury or property damage

. . . .

See ECF No. 395, Exhibits 72-73, 88-103.Comparing the allegations of the

complaints to the language of the Policies, Zurich’s duty to defend was

triggered when it was faced with what Zurich itself characterized in its

reservation of rights letters as “potentially implicated claims.” Further, the

record reflects that in defending Fluor, Zurich considered a portion of the

plaintiffs in the Herculaneum claims as potentially covered under its Policies

when evaluating its contribution to settlements.

The reservation of rights letters also permitted Zurich “the right to withdraw

from its agreement to defend Fluor and/or to seek to extinguish any alleged

defense obligation if it becomes apparent that there is no potential for

coverage of any of the claims asserted . . . .” See ECF No. 395, Exs. 72-73,

91-103. It is undisputed, however, Zurich did not exercise its “right to

withdraw” from defending Fluor or “seek to extinguish” its defense

obligation by obtaining a judicial declaration before the Herculaneum claims

at issue here were resolved. Because the possibility of coverage arose when

the Herculaneum Claims were tendered, and persisted until the Claims were

resolved, the Court finds Zurich’s duty to defend Fluor continued until the

resolution of the lawsuits.

When a defending insurer seeks a declaratory judgment regarding coverage

under the policy, the court’s role is to eliminate uncertainty prospectively as

to the insurer’s continuing obligation to provide a defense. See Liberty Mut.

Ins. Co., 153 F.3d at 923- 924. Any resolution of the question of coverage

will not retroactively eliminate the insurer’s duty to defend the insured. Id.

Zurich is no longer under a continuing obligation to defend the Herculaneum

Claims, which were resolved prior to the filing of this suit. Therefore, based

on the facts, the Court cannot provide prospective relief as to Zurich’s duty

to defend, and in accordance with Missouri law, the Court may not provide

retrospective relief and nullify the consequences of Zurich’s initial

determination that the claims may have been potentially covered. Therefore,

the Court will grant summary judgment against Zurich with respect to

Zurich’s First, Second, and Third Causes of Action in its Complaint.

Conclusion

As discussed herein, Endorsement 7 modified the Zurich policies to change

the limits of liability under the 1981 and 1982 policies to $500,000 per claim. As

such, the total limit of liability under these policies is $21.5 million. Fluor’s

subsequent position that the claims arose after the Zurich policies expired does not

bar its bad faith failure to settle claim. Ergo, Zurich’s argument that the limit of its

liability is $3.5 million is without merit. Likewise, Zurich’s argument that its limit

of liability 1s zero lacks merit.

Accordingly,

IT IS HEREBY ORDERED that Motion to Determine the Applicable

Policy Limits as a Matter of Law, [Doc. No. 798], is denied.

Dated this 27" day of March, 2025.

UNITED STATES DISTRICT JUDGE429