# Fluor Corporation v. Zurich American Insurance Company

> District Court, E.D. Missouri · March 27, 2025

URL: https://www.frixlaw.com/law-library/cases/10834995

## Case

- **Court:** District Court, E.D. Missouri
- **Decided:** March 27, 2025
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10834995

## How later opinions describe it (automated extraction)

- 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

## Opinion text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10834995. Public record. Not legal advice.