United States v. Conservation Chemical Co.

ORDER

SCOTT O. WRIGHT, Chief Judge.

On June 27, 1985, the Special Master filed a report issuing recommendations concerning the appropriate disposition of twenty-two motions and cross-motions for summary judgment and partial summary judgment. As required, the Court has independently reviewed the record regarding the issues relating to the Master’s report, including the relevant motions and responses thereto, and the objections filed to the report.

See United States v. Louisiana,

470 U.S. 93 , 105 S.Ct. 1074,1080 , 84 L.Ed.2d 73 (1985). Accordingly, the Court vacates its Order of July 10, 1986 and enters the following rulings

nunc pro tunc

*

in summary form and, with respect to those recommendations approved by the Court, the Court adopts the reasoning stated in the Master’s report in support of those recommendations. Recommendations of the Master not adopted by the Court will be so designated.

1. CHOICE OF LAW—

a. Contracts — substantive law of Missouri will apply to all questions involving formation, construction or interpretation of the insurance policies, except for those policies which contain a choice of law provision. There the law of the state chosen will control.

b. Torts — substantive law of Missouri will apply to any claims sounding in tort.

c. Generally — where Missouri has not established, by statute or decision, a particular issue, general principles of insurance law will be applied.

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2. AFTER LITIGATION INSURANCE—

As a matter of law, no “occurrence” took place after September 29, 1980 — the date the government instituted suit.

Accordingly, summary judgment is

(a) Granted in favor of Centaur Insurance Co. on the claims of CCC, CCCI, Hjersted, Armco, AT & T-TI, FMC, IBM, Sperry and Murray-Ohio

1

on each of the three policies issued by Centaur after September 29, 1980;

(b) Granted in favor of Central National on the claims of CCC, CCCI, Hjersted, Armco, AT & T-TI, FMC, and IBM;

(c) Granted in favor of each third-party defendant insurer issuing a policy to CCC, CCCI and/or Hjersted after September 29, 1980.

2

3. CLAIMS MADE POLICIES—

As a matter of law, claim must be made within the policy period of the relevant “claims-made” policy for coverage to be afforded.

Accordingly, summary judgment is

(a) Denied as to Lincoln Insurance Co.’s motion on the basis of the “claims-made” policy provision;

(b) Granted as to Evanston’s 1985 policy, but denied on the basis of the claims-made policy provision;

(c) Denied as to Mutual Fire’s motion on the basis of the claims-made policy provision.

4. FAILURE TO SETTLE—

There is no issue as to any material fact existing with respect to the claim for bad faith refusal to settle pleaded in Count III of the OGD’s third-amended third-party complaint.

Accordingly, summary judgment is granted in favor of each of the 16 Third-party Defendant Insurers on Count III of the OGD’s Third Amended Third-Party Complaint.

5. ISSUANCE DELIVERY AND PAYMENT—

(a) As to the Original Generator Defendants, partial summary judgment is

(1) Granted on the issues of issuance, delivery and payment of insurance policies against Central National, Home, American Fidelity, and Continental;

(ii) Granted on the single issue of issuance of insurance policies against Centaur, Evanston, Mutual Fire, Foremost, and Lincoln.

(iii) Over the recommendation of the Special Master, summary judgment is additionally granted on issues of delivery and payment regarding the policies against the same companies as listed in (ii) above.

(b) As to the Site Operator Defendants, partial summary judgment is

(i) Granted on the issues of issuance, delivery and payment as to CCCI and Hjerst-ed over the recommendation of the Special Master;

(ii) Granted on the issues of issuance, delivery and payment by CCC with respect to Central National, Home, American Fidelity, and Continental;

(iii) Over the recommendation of the Special Master, summary judgment is additionally granted as to the issues of delivery and payment by CCC regarding Centaur, Evanston, Mutual Fire, Foremost, and Lincoln.

6. “PROPERTY DAMAGE” UNDER CGL POLICIES—

As to the Original Generator Defendants, partial summary judgment is granted on the specific issues that:

(a) Environmental harm associated with the CCC site constitutes “property damage” as such term is used and defined in

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the CGL insurance policies issued and delivered to CCC;

(b) Cleanup costs arising out of the environmental harm caused by the discharge, dispersal, release or escape of toxic chemicals and waste material constitutes “damage” as that term is used in the CGL policies issued and delivered to, CCC;

(c) Alleged economic losses in the form of response and cleanup costs sought by the United States constituid damage caused by or arising out of the environmental harm for purposes of the CGL insurance policies issued and delivered to CCC.

7. OCCURRENCES—

A question of fact remains as to when disposal of waste materials first commenced, when leaking first occurred, or when damage to the environment was first discovered. A further question remains as to the Site Operators’ objective or subjective knowledge

3

that there was a substantial probability that environmental harm would result from their activities.

Accordingly, summary judgment is denied as to the various insurers’ motions on the issue that CCC expected and intended harm to result from its operations.

8. OWNED PROPERTY EXCLUSION—

While the “owned property exclusion” cannot apply to percolating ground water under the CCC site, there remains a question of fact as to what portion of the remedy relates solely to damage to the CCC site itself.

Accordingly, summary judgment is denied as to the motion of Armco, AT & T-TI and FMC on the issue that the owned property defenses are inadequate as a matter of law to bar coverage for remedial measures being undertaken at the CCC site.

9. THE POLLUTION EXCLUSION—

Questions of fact remain concerning the ambiguity of this exclusion clause. Further questions remain as to whether the pollution was sudden and accidental, and whether Hjersted had intent to cause harm.

Accordingly, summary judgment is denied on the basis of the pollution exclusion clause.

However, the exception is for damage occurring

after

the initiation of this action. Therefore, as pertains to Central National’s January 1983 policy, summary judgment is granted.

10. DUTY TO DEFEND—

Both the Original Generator Defendants and the Site Operator Defendants move for summary judgment on the issue of the Insurance Companies’ obligation to defend CCC, CCCI and Hjersted against all claims asserted by the United States and “other parties.” There is no issue as to material facts with respect to the duty to defend CCC. Over the recommendation of the Special Master, the Court additionally finds there is no question of fact as to the duty to defend Hjersted and as to the duty of two companies to defend CCCI.

Accordingly, summary judgment is

(a) Granted against those primary insurance carriers who issued and delivered standard-form CGL policies (“accident” or “occurrence”) prior to September 29, 1980 to CCC, and for which CCC paid the applicable premium;

(b) Granted against Foremost and Mutual Fire as to their duty to defend CCCI;

4

(c) Granted against the same insurance carriers as in (a) above, as to Hjersted;

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(d) Denied as to any “excess” insurer on the duty to defend.

11. THIRD-PARTY BENEFI-

CIARIES—

Questions of fact remain with respect to the intention and motive of the parties to confer a benefit on a third party.

Accordingly, summary judgment is denied on the motions filed by Foremost, ACIC and Centaur on the issue of third-party beneficiaries.

12. INDIVIDUAL INSURER’S MOTIONS FOR SUMMARY JUDGMENT

The conclusions and recommendations of the Special Master concerning the following nine Insurance Companies' motions for summary judgment are adopted in their entirety:

(a) Evanston

(b) Mutual Fire

(c) Lincoln

(d) Centaur

(e) Foremost

(f) Continental Casualty

(g) Home

(h) Central National

(i) American Centennial

13. MOTIONS OF MURRAY OHIO AND SPERRY CORPORATION—

As there are questions of fact regarding the identical motions of Murray Ohio Manufacturing Company and the Sperry Corporation for judgments on their cross-claims against CCC for indemnification for all obligations imposed on them as a result of the present litigation, summary judgment is denied.

At this time no action will be taken on the motion of Sperry and Murray Ohio against Illinois Employers Insurance of Wausau.

14. CONTRACTUAL INDEMNITY—

The Original Generator Defendants’ separate motions for summary judgment against CCC on the issue of indemnification

must be denied pending development of those factors which would enable a determination of the state possessing the most significant relationship to the parties and indemnity.

Accordingly, subject only to the expressed exceptions contained above, it is

ORDERED that the Special Master’s Report of June 27, 1986 is adopted. It is further

ORDERED that, subject to the exceptions contained above, the pending motions for summary judgment are ruled in accordance with the Master’s Report.

ON REQUEST FOR CLARIFICATION

Upon the request of Illinois Employers Insurance Company of Wausau for clarification of this Court’s September 2, 1986, Summary Judgment Order, it is hereby ordered:

1. Claims brought by Murray Ohio and Sperry against Illinois Employers of Wau-sau were dismissed by this Court’s Order of July 18, 1986. Accordingly, no motions between Sperry and Murray Ohio and Illinois Employers Insurance of Wausau remain before the Court for consideration.

2. This Court’s Summary Judgment Order of September 2,1986, does not apply to Illinois Employers Insurance of Wausau because Illinois Employers Insurance of Wausau, having settled with third-party plaintiffs, was not a party to the summary judgment motions addressed in the Court’s ruling.

SPECIAL MASTER’S RECOMMENDATIONS ON MOTIONS FOR SUMMARY JUDGMENT REGARDING INSURANCE AND INDEMNIFICATION

TABLE OF CONTENTS

Page

A. INTRODUCTION AND BACKGROUND .... 162

B. SUMMARY JUDGMENT STANDARDS.....170

C. UNCONTROVERTED FACTS.............. 172

D. CHOICE OF LAW......................... 176

E. PRELIMINARY MATTERS................ 178

1. After Litigation Insurance............. 178

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2. Claims Made Policies.................. 181

3. Failure to Settle...................... 184

F. ISSUANCE, DELIVERY AND PAYMENT... 185

G. “PROPERTY DAMAGE” UNDER CGL POLICIES ....................................187

H. OCCURRENCES...........................194

I. OWNED PROPERTY EXCLUSION.........199

J. THE POLLUTION EXCLUSION...........201

K. DUTY TO DEFEND.......................204

L. THIRD-PARTY BENEFICIARIES..........208

M. INDIVIDUAL INSURER’S MOTIONS FOR SUMMARY JUDGMENT..................213

1. Maryland Casualty....................213

2. Commercial Union.....................216

3. Evanston.............................219

4. Mutual Fire...........................220

5. Lincoln............................... 220

6. Centaur............................... 222

7. Foremost............................. 225

8. Continental Casualty .................. 226

9. Home................................. 227

10. Central National...................... 227

11. American Centennial .................. 227

12. Great American....................... 228

N. MOTIONS OF MURRAY OHIO AND SPERRY CORPORATION..................... 231

1. Sperry................................ 231

2. Murray Ohio.......................... 234

O. CONTRACTUAL INDEMNITY............. 235

A." INTRODUCTION " AND BACKGROUND

From 1960 until the present, defendant Conservation Chemical Company (“CCC”) has owned and operated an industrial chemical waste disposal facility located at 8900 Front Street, Kansas City, Missouri (the “Site,” the “CCC Site” or the “K.C. Site”). The approximately six-acre site is located on the Missouri River floodplain, between East Bottoms Levy and the Missouri River, just upstream of the confluence of the Missouri and Blue Rivers.

See, United States v. Conservation Chem. Co.,

619 F.Supp. 162, 182-84 (W.D.Mo.1985).

On September 29, 1980, the United States of America (“United States” or “Plaintiff”) filed suit, pursuant to 42 U.S.C. § 6973 , Section 7003 of the Resource Conservation and Recovery Act (“RCRA”) in the United States District Court for the Western District of Missouri against CCC, Kansas City Power

&

Light Company (KCP & L) and Mobay Chemical Company (“Mo-bay”). The Complaint alleged that hazardous wastes which had been disposed of and which were stored at the CCC Site were migrating from the site and posed a danger to public health and the environment. The United States sought reimbursement of expenses and injunctive relief to compel cleanup of the site.

On September 3,1981, an Amended Complaint was filed by the United States against CCC, KCP & L and Mobay. Pursuant to Section 7003 of RCRA, the United States sought injunctive relief to compel implementation of plans to clean-up the Site and for recovery of costs and expenses expended to determine the nature and extent of contamination.

On November 22,1982, the United States filed the present action, Civil Action No. 82-0983-CV-W-5, against CCC, Conservation Chemical Company of Illinois (“CCCI”), Norman B. Hjersted (“Hjerst-ed”), FMC Corporation (“FMC”), International Business Machines Corporation (“IBM”), Armco, Inc. (“Armco”) and AT & T Technologies, Inc. (“AT & T-TI”).. CCCI is a domestic corporation which owned a similar site in Gary, Indiana. Both CCC and CCCI were owned by Norman Hjersted who also acted as President and Chief Executive Officer of the two corporations. The four other defendants were “deep pockets” selected by the Government out of over 150 waste generators who supplied waste to CCC and/or CCCI for disposal at the site. The other generators were subsequently brought into the suit by impleader by the four generator defendants.

The factual averments contained in the 1980 and 1981 suits were essentially real-leged. The Complaint asserts claims pursuant to 42 U.S.C. § 6973 , Section 7003 of RCRA and 42 U.S.C. §§ 9604 , 9606, and 9607(a), of the Comprehensive Environmental Response Compensation and Liability Act of 1980 (hereinafter “CERCLA”). (On December 9, 1982, the Court issued an Order requiring the United States “to show cause ... why Case Number 80-0883-CV-W-5 should not be dismissed with prejudice and why Case Number 82-0983-CV-W-5 should not be the only case to proceed.”

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On March 31, 1983, a Stipulation for Dismissal was filed with respect to Case No. 80-0883-CV-W-5). In very general terms, the United States seeks reimbursement for response costs incurred by the Government in connection with the CCC Site as well as an injunction requiring defendants to remedy environmental endangerment at the Site due to the handling, disposal and discharge of various industrial waste materials. It is alleged that from the early 1960’s until 1979, large quantities of solid or hazardous waste, hazardous substances and/or pollutants or contaminants were deposited at the Site which present an imminent and substantial danger to the public health or welfare. It is further alleged that as a consequence of the activities of defendants at the CCC Site that such hazardous wastes were and are being released into the environment and/or have seeped or migrated from the site as leachate.

In letters dated October 13, 1983 and December 13, 1983, CCC, CCCI and Hjerst-ed requested that nine (9) insurance companies which had issued primary liability insurance policies to CCC assume the defense of CCC, CCCI and Hjersted against the claims asserted by the United States. The letter requests were made to the following primary insurers: (1) American Fidelity Fire Insurance Company (policy period 3/22/71 to 3/22/72); (2) Centaur Insurance Company (policy period 12/14/81 to 12/14/83); (3) Commercial Union Insurance Company (policy period 9/7/60 to 9/7/66); (4) Evanston Insurance Company (policy period 12/14/80 to 12/14/81); (5) Foremost Insurance Company (policy period 3/22/72 to 12/1/76); (6) Great American Insurance Company (policy period 9/7/66 to 9/7/68); (7) Lincoln Insurance Company (policy period 12/14/78 to 12/14/79); (8) Maryland Casualty Company (policy period 9/7/68 to 2/26/71); and (9) Mutual Fire, Marine and Inland Insurance Company (policy period 12/14/79 to 12/14/80). Each of the companies had issued one or more primary liability insurance policies to CCC, CCCI and/or Norman Hjersted during the period of 1960 through 1983. (Commercial Union Insurance Company, Centaur Insurance Company, Evanston Insurance Company, Foremost Insurance Company, Great American Insurance Company, Lincoln Insurance Company, Maryland Casualty Company, and Mutual, Fire, Marine and Inland Insurance Company issued more than one policy).

Each of the insurance companies refused to defend CCC, CCCI and Hjersted, except for Commercial Union Insurance Co., Foremost Insurance Co. and Great American Insurance Co. which agreed to assume the defense of CCC and Hjersted subject to a full reservation of rights. The remainder of the primary insurers disclaimed any obligation to defend or indemnify CCC, CCCI and/or Hjersted against the claims asserted by the United States or claims made by other parties to the action.

The primary insurers relied upon a number of exclusions and conditions in their respective policies in refusing to defend CCC, CCCI and Hjersted. Their contentions can be summarized as follows: (1) the Government’s Complaint fails to allege the happening of an “occurrence” or “accident” as those terms are defined in the policies; (2) the Government’s Complaint contains no allegation of “property damage” within the meaning of the policies; (3) the “pollution exclusion” clause precludes coverage for claims asserted by the United States; and (4) the policies do not provide coverage for claims seeking injunctive or other equitable relief.

In a letter dated April 13, 1984, CCC, CCCI and Hjersted renewed their demand for defense and indemnification. The primary carriers once again declined to defend CCC, CCCI and Hjersted.

Thereafter, on June 19, 1984, CCC, CCCI and Hjersted filed a Third-Party Complaint against eleven (11) primary insurance carriers (American Fidelity Fire Insurance Co., Centaur Insurance Co., Commercial Union Insurance Co., Evanston Insurance Co., Foremost Insurance Co., Great American Insurance Co., Lincoln Insurance Co., Maryland Casualty Co., Mutual Fire, Marine and Inland Insurance Co., Hartford

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Accident & Indemnity Co., and Illinois Employers Insurance Co. of Wausau) and five (5) excess carriers (Continental Casualty Co., American Centennial Insurance Co., The Home Insurance Co., Great Southwest Fire Insurance Co., and Central National Insurance Co. of Omaha) seeking a declaration of the insurers’ obligation to defend and indemnify CCC, CCCI and Hjersted against and for the claims asserted by the United States as well as the claims made by other parties on the numerous cross-claims and counterclaims seeking contribution and indemnity from CCC, CCCI and Hjersted.

At issue in this case are a total of twenty-six (26) primary policies underwritten by nine (9) insurance companies. The primary policies include:

(1) Six of the policies were written by Commercial Union Insurance Co. (“Commercial Union”) and its predecessor in interest, Central Surety and Insurance Corp. (“Central Surety”), with successive yearly policies covering the period September 7, 1960 through September 7, 1966.

(2) Two policies were issued by Great American Insurance Company (“Great American”) with policy periods from September 7, 1966 through September 7, 1968.

(3) Three policies were written by The Maryland Casualty Company (“Maryland Casualty”) with annual policy periods from September 7, 1968 through September 7, 1971.

(4) One policy with a policy period from March 22, 1971 through March 22, 1972 was issued by American Fidelity Fire Insurance Co. (“American Fire”).

(5) Five policies were written by Foremost Insurance Company (“Foremost”) with annual policy periods from March 22, 1972 through March 22, 1976.

(6) Two policies were issued by Lincoln Insurance Company (“Lincoln”) with policy periods from December 14, 1977 through December 14, 1979.

(7) Two policies were written by Mutual Fire, Marine and Inland Insurance Company (“Mutual Fire”) covering the period of December 14, 1979 through December 14, 1980.

(8) Two policies were issued by Evanston Insurance Company (“Evanston”) for the period December 14, 1980 through December 14,1981. (One of the Evanston policies was a “Products and Completed Operations” policy while the other was a Comprehensive General Liability policy).

(9) Three policies were issued by Centaur Insurance Company (“Centaur") with policy periods from December 14, 1981 until January 1, 1985.

Also at issue are 13 excess policies underwritten by five (5) insurance companies:

(1) Three excess policies written by Continental Casualty Co. (“Continental Casualty”) for the period September 19, 1960 to September 7, 1963.

(2) Seven excess policies issued by The Home Insurance Company (“Home”) with effective dates from March 3,1966 through March 22, 1977.

(3) One excess policy written by Great Southwest Fire Insurance Company (“Great Southwest”) with a policy period of December 14, 1976 to December 14, 1977.

(4) One excess policy issued by American Centennial Insurance Co. (“ACIC”) with a policy period of December 14,1981 to January 1, 1983.

(5) One excess policy with a policy period of January 1, 1983 to January 1, 1984 issued by Central National Insurance Co. of Omaha (“Central National”).

On or about December 26, 1985, CCC, CCCI and Hjersted (“the Site Operator Defendants” or “Third-Party Plaintiff Operators”) filed a First Amended Third-Party Complaint naming seventeen insurance companies as third-party defendants. In fifty numbered paragraphs, the Third-Party Complaint alleges that each of the seventeen insurers is liable for the claims asserted by the United States because each issued one or more policies to CCC, with Hjersted being a “Person Insured” by definition under each of the policies issued by the third-party defendant insurers by vir

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tue of his capacity as an officer, director, stockholder and/or employee of CCC, acting within the scope of his duties as such. CCCI is a named insured under the policies issued by third-party defendants Great American, Home, Foremost, Illinois Employers Insurance of Wausau (“Wausau”), Great Southwest, Lincoln, Mutual Fire, Ev-anston, Centaur, ACIC, and Central National. The policies of insurance referred to have individual policy periods, as set forth in each policy, covering a total aggregate period of time from 1960 through and including 1983. It is alleged that Third-Party Plaintiff Operators have complied with all conditions under the policies, including payment of the policy premiums. The Third-Party Complaint states that under the terms and provisions of the policies enumerated, which are incorporated by reference, the respective third-party defendants are obligated to defend and pay any judgments recovered by the United States, or by any cross-claiming or counterclaiming party, against CCC and Hjersted in this action. The named insurers of CCCI are alleged to have similar obligations to defend and pay any judgments recovered by the United States or by any cross-claiming or counterclaiming party, against CCCI. The First Amended Third-Party Complaint further alleges that the third-party defendant insurers, although requested to do so, have refused to defend the action and have declared that they would not pay any judgment rendered against defendants CCC, CCCI and Hjersted in the action or have reserved the right to do so. The Third-Party Plaintiff Operators pray for judgment against the insurance companies in such sums, if any, as may be awarded as a judgment against CCC, CCCI and Hjersted under the Complaint filed by the United States, or any other claim, counterclaim or cross-claim asserted; for reasonable fees and expenses of defendants, and for interest and costs of this action.

On January 3, 1986, FMC, IBM, Armco and AT & T-TI (collectively referred to as “Original Generator Defendants,” “OGDs” or “Third-Party Plaintiff Generators”) filed a Third Amended Third-Party Complaint against sixteen insurance companies (Commercial Union was alleged to be successor in interest to Central Surety, named in CCC, CCCI and Hjersted’s Third-Party Complaint).

Briefly, the Third Amended Third-Party Complaint alleges that each of the insurance companies issued one or more policies of insurance to CCC for its operations at the Kansas City Site. Under the terms of various contracts, purchase orders, or service agreements, CCC was obligated to acquire insurance that would indemnify and hold harmless the Third-Party Plaintiff Generators. It is alleged that CCC entered into insurance contracts issued by the Third-Party Defendant Insurers in order to satisfy obligations to the Third-Party Plaintiff Generators. The Third-Party Plaintiff Generators allege that they are intended and/or creditor beneficiaries of the contracts between CCC and Third-Party Defendant Insurers and/or are additional insureds under certain of the insurance contracts. Based upon the finding of the Court that CCC is liable as a matter of law under § 7003 of RCRA and § 106 and § 107 of CERCLA, and based upon the policies issued by Third-Party Defendant Insurers, the course of dealing and the respective contracts and agreements between CCC and Third-Party Plaintiff Generators referred to in the Third Amended Third-Party Complaint, it is alleged that Third-Party Defendant Insurers are obligated to indemnify and hold harmless Third-Party Plaintiff Generators for all damages, costs and fees incurred, or to be incurred. It is further alleged that the refusal to pay defense costs constitutes a continuing violation of contractual obligations, and that the Third-Party Defendant Insurers have raised numerous unsupported defenses to contractual liability and that they have acted in concert to frustrate and reject any and all efforts to achieve a comprehensive settlement in conscious disregard of the Third-Party Plaintiff Generators’ financial interests. This failure is also alleged to be a breach of the implied covenant to deal fairly and in good faith.

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The relief requested in the Third Amended Third-Party Complaint is a declaration that each Third-Party Defendant Insurer has a duty to pay and is jointly and severally liable for all damages, costs, and fees incurred by third-party defendant insurers, including without limitation, response costs, attorney’s fees and legal expenses, and sums expended pursuant to the preliminary agreement of settlement reached by defendant generators with the U.S. Government for the remediation of the site.

During a hearing before the Special Master on August 12, 1985, a number of the Third-Party Defendant Insurers requested the opportunity to file motions seeking dismissal or judgment on the pleadings with regard to the Third-Party Complaints of thé Site Operator Defendants (CCC, CCCI and Hjersted) and Original Generator Defendants (Armco, AT & T-TI, FMC and IBM) primarily on the grounds that the decision of Judge Russell Clark in

Continental Ins. Cos. v. Northeastern Pkarm. & Chem. Co.,

No. 84-5034-CV-S-4 (W.D.Mo. June 25, 1985), [Available on WESTLAW, DCTU database],

appeal pending sub. nom, Continental Ins. Cos. v. State of Missouri,

No. 85-1940WM (8th Cir.), (hereinafter

“NEPPACO

”), had enunciated a rule of law limiting liability of insurance carriers only to those periods after the United States had incurred response costs. The request was opposed by the Original Generator Defendants primarily on the grounds that the motions under Rule 12, Fed.R.Civ.P., would be inappropriate in light of the complex legal and factual issues existing with respect to insurance coverage. In an effort to resolve matters of a purely legal nature and to consider and take under advisement the

NEPACCO

decision (albeit on appeal), the Special Master agreed to the request.

Thereafter all of the insurers filed motions for dismissal or for judgment on the pleadings under Rules 12(b)(6) and 12(c), Fed.R.Civ.P.

With a few exceptions, the Special Master recommended that the motions be denied, primarily for lack of an appropriate factual basis. (Special Master’s Report and Recommendation Regarding Rule 12 Motions on Insurance Issues, Nov. 1, 1985, approved by Order, December 18, 1985). The parties were invited to provide certain facts and to submit motions under Rule 56.

Now pending before the Court, pursuant to Rule 56 of the Federal Rules of Civil Procedure, are twenty-two (22) motions and cross-motions for summary judgment and partial summary judgment. The motions, briefs in support and opposition, and exhibits comprise over 3,000 pages and well over 500 cases are cited.

1. Both CCC and the OGDs have filed motions for partial summary judgment against each Third-Party Defendant Insurer on the issues of issuance, delivery and payment of premium, the three prerequisites of an insurance coverage claim. The OGDs contend that the insurers have either admitted these issues or admitted they have no evidence with which to contest these issues.

2. Both CCC and the OGDs have filed motions for partial summary judgment against certain defendant insurance companies on the issue of the duty to defend. CCC seeks a partial summary judgment declaring that the third-party American Fidelity, Centaur, Evanston, Lincoln, Maryland, and Mutual Fire have a joint and several obligation to defend CCC, CCCI and Hjersted against all claims asserted by the United States and the other parties to this action. The OGDs seek a similar declaration establishing that each of the insurance companies which issued primary liability insurance policiés to defendant and third-party plaintiff Conservation Chemical Company between 1960 and 1984 are jointly and severally obligated under the terms of their respective policies to defend CCC, CCCI and Hjersted against all claims asserted by the United States. It is asserted that American Fidelity, Evanston, Foremost, Great American, Lincoln, Maryland, and Mutual Fire issued primary liability policies to CCC and Hjersted during that period. It is further alleged that Centaur, Evanston, Foremost, Great American and Mutual Fire

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issued policies to CCCI during the identified 24-year period.

3. The OGDs also have filed a motion for partial summary judgment against the Third-Party Defendant Insurers on the issue that the escape of environmental contaminants from the CCC site constitutes “property damage” under the insurance policies and that the site investigation and cleanup costs are the proper measure of damage. This motion includes the assertion that the “owned property” exclusion does not preclude coverage since percolating waters permeating a site are subject to the reasonable use doctrine, and cannot be owned absolutely. It is also contended that remediation work performed on the site is within the coverage because it is designed to prevent damage to off-site third parties, particularly to prevent further damage and cost.

4. Armco, AT & T-TI and PMC (but not IBM) have moved for partial summary judgment on the issue of the inapplicability of the “owned property” defense raised by the Third-Party Defendant Insurers. The identified generators assert that the owned property/care, custody or control exclusion does not preclude coverage from remedial actions being taken in this case for contamination that has occurred or will occur because CCC does not control ground water beneath its site or the Missouri River into which the ground water flows. It is argued that the measure of damages includes abatement costs and that the remedy here is to prevent further contamination and migration. It is stated that neither the property damage nor the remedial activities are confined to property owned by CCC, and that a substantial number of activities to remedy migration will be undertaken beyond the property lines of the CCC site.

5. The Third-Party Defendant Insurers have filed individual motions for summary judgment. All of the individual motions refer to the applicable portions of the “Insurers’ Memorandum in Support of Individual Insurers’ Motion for Summary Judgment.” The individual motions use various theories to assert that the policies issued do not provide coverage to CCC, CCCI and Hjersted or to the third-party plaintiff generators.

6. Great American and Continental assert as grounds for the denial of coverage: the failure by CCC to provide the notice required under the policies; that the statute under which liability was found was passed twelve to fourteen years after the effective policy period which precludes a finding of exposure during the policy period; that the Complaint does not allege property damage as defined in the policies; that no insurance coverage exists for equitable relief; that the environmental effects at the site resulting in environmental harm were expected or intended by the site operators, and thus do not constitute an occurrence under the policies; and that coverage under the policies is excluded for damage to CCC’s premises or property in its control.

7. Maryland Casualty seeks summary judgment on theories that: no property damage is alleged; that equitable relief is sought; that no occurrence can be established; and finally non-compliance with the notice provision. In addition, Maryland Casualty asserts that

if

property damage exists, it occurred after their last policy period; that no major generators or third-party defendant generators are named or constitute additional insureds under Maryland Casualty’s policies with CCC; that contractual liability insurance existed for designated contracts only; and that no insurance coverage theory exists that would hold Maryland liable to the generators having no relationship to the CCC site prior to the expiration of the Maryland Casualty policies.

8. Commercial Union has filed two separate motions for summary judgment. One is against CCC and Hjersted, and one is against the Third-Party Plaintiff Generators/Original Generator Defendants. Against CCC and Hjersted, Commercial Union asserts that there is no allegation of property damage during the policy period, that there is no coverage for CERCLA cost recovery, that the results were intended or

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expected, that non-compliance with notice provisions forecloses coverage, and that a policy term provides for no action being maintained by the insured against the insurer on the policy until the insured’s obligation to pay has been finally determined by judgment or settlement. Against the OGDS, Commercial Union contends that since the claims are based on the parties being insureds or third-party beneficiaries under CCC’s policies, the same defenses and exclusions are available to Commercial Union. Commercial Union also asserts that the Third-Party Plaintiff Generators are not named insureds under the policy definition, that the action is premature since no insured has become obligated to pay damages for property destruction, and that to be a third-party beneficiary on the insurance contract, the party must be listed in accord with the policy. Commercial Union raises RSMo § 379.200, which entitles judgment creditors to bring a direct action for insurance proceeds only after a final judgment against the insured has been entered. Commercial Union points out that although written agreements and contracts existed between the Original Generator Defendants and CCC, there is evidence that only FMC deposited waste material at the site during the policy period.

9. Foremost’s motion for summary judgment is against CCC, CCCI, Hjersted, the OGDS as well as cross-claimants, Sperry Corporation (“Sperry”) and Murray. Ohio Manufacturing Company (“Murray”). Foremost contends that there is no occurrence under the policy since the government incurred no response costs until two years after the last Foremost policy was cancelled, that the claim of the United States is not for property damage but for a new statutory liability. Foremost argues that coverage is precluded by the “pollution exclusion” clause since leaching contaminants cannot be considered sudden or unexpected and the leaching was a direct result of Hjersted’s intent, design and expectation. Foremost argues in the alternative that remedial costs are barred by the clause excluding damages to insured’s property. Foremost asserts that any liability obligation is precluded by CCC’s failure to mitigate damages or minimize avoidable consequences by accepting materials after the site reached capacity in 1971 and after warnings of leaching in 1972. CCC is stated to have breached the insurance contract by failing to provide notice of investigations, claims and lawsuits by state and federal agencies. It is asserted that retroactive RCRA and CERCLA liability should not be imposed on Foremost because there was no contractual intent to provide coverage for such liability and because it would frustrate the statutory policy of having the chemical industry pay for cleanup. Alleging that actions for breach arising from a contractual duty to indemnify are only for the named insured, Foremost states that the Third-Party Plaintiff Generators do not have standing to bring the action, and that the included contractual liability does not cover the generators.

10. Lincoln asserts that no compensable property damage is alleged, that the “Pollution Exclusion” would exclude coverage, and that they did not receive timely notice. Lincoln also contends that material misrepresentations in procuring its coverage preclude application of its coverage. Lincoln notes that under its “claims-made” policies, claims must be made during the policy period, and that there is no evidence that any claim was made during that period. It is also stated that Lincoln’s policies contain exclusions for mishandled materials and design deficiencies.

11. Home asserts that its excess liability policies do not provide coverage because the harm was expected or intended; there was not an occurrence under the policies; coverage is excluded by the pollution exclusion clause; and that response costs constitute equitable relief, and not property damage, and were incurred after the expiration of Home’s last policy. Alternatively, Home seeks an order pursuant to 56(d), Fed.R. Civ.P., deeming the material facts forming the bases for their motion to be material facts without substantial controversy.

12. Evanston and Mutual Fire argue that no claims were made within the policy

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periods of its claims-made policies, and that therefore, there is no duty to defend or to indemnify, and that all of their policies incorporate a pollution exclusion which precludes claims when claims arise from gradual and intended pollution. Evanston and Mutual Fire also assert that they did not contract to bear the cost of a known and present danger at the time the policy was issued.

13. Central National seeks summary judgment because their policy cannot provide coverage for relief sought before the policy was purchased and the effective date of coverage. Central National contends that to meet the “occurrence” requirement, the “property damage” for which liability is asserted must occur unexpectedly during the policy period, and that continuing damages cannot act as the basis for coverage under a policy taking effect after litigation is commenced. Central National argues that releases after January, 1983 could not be considered sudden and accidental under the exception to the pollution exclusion clause. Central National asserts that CCC did not reference the K.C. Site, CCC’s waste disposal activities, or the present lawsuit in the application form, and furthermore that CCC’s application affirmatively represents that CCC knows of no other facts that would significantly affect underwriting judgment. These items are alleged to constitute misrepresentations which void coverage.

14. ACIC’s motion for summary judgment contends that as an excess carrier, no duty to defend arises until notice is received that either no defense is being provided by the underlying insurers or that the underlying insurance is exhausted, neither of which has occurred here. ACIC argues that the Government’s Complaint does not allege “property damage,” that the acts alleged were not an “occurrence” under the policy because they were intended or the result of reckless indifference; that if an “occurrence” is found, it is a repeated exposure of the same general conditions existing prior to the ACIC policy; and that the pollution exclusion precludes coverage of a discharge in the regular course of business. ACIC asserts that if there was an intent to procure coverage against the allegations of the Complaint, the insureds intentionally withheld material information which would have prevented the issuance of coverage or limited the risk, and that therefore, the policy is void

ab initio.

ACIC is the only insurer to raise the doctrine of

uberrimae fidei,

or absolute and perfect candor, a violation of which is alleged to make an insurance contract voidable. Other arguments raised by ACIC are that there is no contractual liability to the Third-Party Plaintiff Generators either as insureds or third-party beneficiaries since no claim was made, the policy excludes it, and there is no evidence of an intent to procure such coverage. It is also noted that coverage is vitiated by the failure of CCC or Hjersted to provide notice.

15. Centaur’s motion raises the issue that there is a public policy against coverage of pre-existing claims. They assert that contractual coverage is excluded under their first policy, and exists only for designated contracts under the second and third policies. Centaur contends that to find third-party creditor beneficiary status requires the intent of both CCC and Centaur. They also contend that under Missouri law, one cannot act against another party’s insurer until there is a recovery of a final judgment against the insured. Centaur notes that their policies contain a total pollution exclusion and that the policies are void

ab initio

for either false warranties or material misrepresentations in applying for the insurance.

16. Great Southwest adopts the Insurer’s Joint Memorandum in Support Of the Individual Motions and seeks summary judgment on those grounds.

17. Sperry and Murray (third-party defendant generators) have filed motions for summary judgment on their cross-claims against CCC and two of CCC’s insurers, Foremost and Home, on the issues of their right to indemnification by CCC for all obligations imposed as a result of this litigation, and their right to reimbursement by

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CCC’s insurers. These two movants contend that as an inducement to enter into business with CCC that CCC explicitly indemnified them against all loss, cost, expense or liability occasioned by CCC’s disposition of their waste, and that their liability in this litigation arises solely out of its dealings with CCC and CCC’s disposal activities. They contend further that CCC’s insurers are responsible for CCC’s liability based on contractual liability insurance covering such contracts; Foremost’s policy is the underlying insurance for Home’s excess coverage. Sperry and Murray also argue that they have an implied right of indemnity even absent an explicit contract based on Missouri law which allows non-contractual indemnity where one party creates a condition which causes injury and another party does not join therein, but is exposed to liability on account of it. Sperry and Murray assert that they are creditor beneficiaries under Missouri law, a party for whom the performance of a contract will satisfy an actual, supposed, or asserted duty of the promise of the contract to the beneficiary, and as such may maintain a direct action against Foremost and Home to obtain reimbursement. The movants also contend that since CCC’s liability has been determined by the Court upon summary judgment, they have become judgment creditors of CCC and have an immediate and direct action against CCC’s liability insurers pursuant to RSMo § 379.200 for all damages, expenses and other costs of the litigation.

18. Third-party defendant insurer Wau-sau has filed a separate motion for summary judgment against the third-party defendants and cross-claimants Sperry and Murray. In its motion, Wausau points out that they have settled with CCC, and CCCI, and with other third-party plaintiffs (FMC, IBM, Armco, and AT & T-TI). Checks have been issued to the Settlement Fund for Wausau’s total aggregate policy limit for property damage. Wausau asserts that there is no basis for the claims of Sperry or Murray; they are neither named insureds nor do they fit within the definition of insureds, the policy’s contractual liability exclusion is not modified by any endorsement, and there is no evidence that Wau-sau, CCC or CCCI intended that Murray or Sperry would be beneficiaries under the Wausau policy.

It should be noted that application of the rules for summary judgment precludes approval of a sizeable number of the motions that have been filed. Of the motions that should be denied on that basis, most present a straightforward question of fact or mixed fact and law. Time and space prevent a discussion of the facts of all the motions. Therefore, motions which cannot be granted because there are material facts in dispute are, for the most part, dealt with in a summary manner unless an important or novel question of law is also raised. However, the fact that a particular party’s motion is dealt with without full discussion does not mean that the motion was not given full and careful consideration. On the contrary, every motion was reviewed very carefully. Moreover, the fact that a particular motion is dealt with without full discussion or in a footnote is not a reflection of its relative merit.

B. SUMMARY JUDGMENT STANDARDS

Summary Judgment, pursuant to the Federal Rules of Civil Procedure, Rule 56(c) “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Utilization of the summary judgment procedure is encouraged to promote judicial economy.

Butler v. MFA Life Ins.,

591 F.2d 448, 451 (8th Cir.1979). An essential purpose of summary judgment is to determine “whether the parties can provide evidentiary support for their version of the facts.”

Perma Research & Development Co. v. Singer Co.,

410 F.2d 572, 573 (2nd Cir.1969).

As the Special Master has previously noted, summary judgment is a drastic and extreme remedy, not to be granted if there

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is even the slightest doubt as to a factual dispute on any genuine issue of material fact.

Clausen & Sons, Inc. v. Theo. Hamm Brewing Co.,

395 F.2d 388, 389 (8th Cir.1968). Judicial reluctance to grant summary judgment is common, and prompted one court to comment:

Summary judgment, with ever-lerking issues of fact, is always a treacherous shortcut and, in cases like these, too fragile a foundation for so heavy a load. Such relief is always discretionary, and in cases posing complex issues of fact and unsettled questions of law, sound judicial administration dictates that the court withhold judgment until the whole factual structure stands upon a solid foundation of a plenary trial where the proof can be fully developed, questions answered, issues clearly focused and facts definitively found.

Petition of Bloomfield Steamship Co.,

298 F.Supp. 1239, 1242 (S.D.N.Y.1969).

Summary judgment is authorized under the rule only “where it is quite clear what the truth is, * * * [and where] no genuine issue remains for trial * * * [for] the purpose of the rule is not to cut litigants off from their right of trial by jury if they really have issues to try.”

Poller v. Columbia Broadcasting System, Inc.,

368 U.S. 464, 467 , 82 S.Ct. 486, 488 , 7 L.Ed.2d 458 (1962) (quoting

Sartor v. Arkansas Nat. Gas Corp.,

321 U.S. 620, 627 , 64 S.Ct. 724, 728 , 88 L.Ed. 967 (1944)).

In assessing the propriety of a motion under Rule 56, Fed.R.Civ.P., the court must scrutinize the evidence to determine whether the movant has met the heavy burden of proving an absence of any material fact,

Adickes v. S.H. Kress & Co.,

398 U.S. 144, 158 , 90 S.Ct. 1598, 1608 , 26 L.Ed.2d 142 (1970). The evidence is viewed in the light most favorable to the non-moving party,

Vette Co. v. Aetna Cas. & Sur. Co.,

612 F.2d 1076,1077 (8th Cir.1980), and the non-moving party is to be accorded the benefit of every reasonable factual inference.

Buller v. Buechler,

706 F.2d 844 (8th Cir. 1983). All doubts as to the facts or the existence of any material fact are resolved against the moving party.

United States v. Diebold, Inc.,

369 U.S. 654, 655 , 82 S.Ct. 993, 994 , 8 L.Ed.2d 176 (1962).

The party seeking judgment has the burden of establishing the right to a judgment with such clarity as to leave no room for any doubt or controversy,

Westborough Mall, Inc. v. City of Cape Girardeau, Mo.,

693 F.2d 733, 737 (8th Cir.1982),

cert, denied sub nom. Drury v. Westborough Mall, Inc.,

461 U.S. 945 , 103 S.Ct. 2122 , 77 L.Ed.2d 1303 (1983);

Jewson v. Mayo Clinic,

691 F.2d 405, 408 (8th Cir.1982);

Snell v. United States,

680 F.2d 545, 547 (8th Cir.),

cert, denied,

459 U.S. 989 , 103 S.Ct. 344 , 74 L.Ed.2d 384 (1982), and to prove that the non-moving party is not entitled to recover under any discernable circumstances.

McGee v. Hester,

724 F.2d 89, 91 (8th Cir.1983);

Camfield Tires, Inc. v. Michelin Tire Corp.,

719 F.2d 1361, 1363-64 (8th Cir.1983).

Factual allegations underlying a motion for summary judgment must be established by sworn testimony of a competent witness, and only admissible evidence may be considered by the trial court. Fed.R.Civ.P. 56(e);

Security Nat’l Bk. v. Belleville Livestock Comm’n Co., Inc.,

619 F.2d 840 (10th Cir.1980);

Hollingsworth Solderless Term. Co. v. Turley,

622 F.2d 1324 (9th Cir.1980). Evidence that is presented to support or oppose the motion that is subject to conflicting interpretations, or is such that reasonable men might differ as to its significance, makes summary judgment improper.

Snyder v. United States,

717 F.2d 1193, 1195 (8th Cir.1983). This is also true where the affidavits or other sworn statements require an evaluative judgment between rationally possible conclusions.

Minnis v. U.A.W.,

531 F.2d 850, 854 (8th Cir.1975).

In considering specific evidence submitted to support motions for summary judgment, courts have held that statements of counsel made at oral argument or in legal memoranda may not be used to establish facts.

See, Transurface Carriers, Inc. v. Ford Motor Co.,

738 F.2d 42, 46 (1st Cir.1984);

Watts v. United States,

703 F.2d

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346, 353 (9th Cir.1983);

British Airways Bd. v. Boeing Co.,

585 F.2d 946, 952 (9th Cir.1978),

cert, denied,

440 U.S. 981 , 99 S.Ct. 1790 , 60 L.Ed.2d 241 (1979). Statements of opinion, belief and hearsay which would be inadmissible in evidence and which are contained in affidavits must similarly be disregarded.

Neff v. World Publishing Co.,

349 F.2d 235, 253 (8th Cir. 1965). Furthermore, the affiant must be qualified to render opinions on the issues or subjects,

National Souvenir Center v. Historic Figures, Inc.,

728 F.2d 503 , 512 n. 5 (D.C.Cir.)

cert, denied,

469 U.S. 825 , 105 S.Ct. 103 , 83 L.Ed.2d 48 (1984);

Union Ins. Society of Canton, Ltd. v. William Glue-kin & Co.,

353 F.2d 946, 952 (2d Cir.1965), and speculative assertions which involve issues of subjective knowledge, intent and state of mind are particularly unsuited for summary disposition by affidavit.

Hanke v. Global Van Lines, Inc.,

533 F.2d 396, 398 (8th Cir.1976);

McSpadden v. Mullins,

456 F.2d 428, 430 (8th Cir.1972). Issues of corporate knowledge or understanding are similarly unsuited for resolution by affidavit.

Hanke, supra.

Documents offered in support of motions for summary judgment must be authenticated through sworn testimony as to their connection, authenticity, and completeness before they will be considered.

E.g., Havo-co of America, Ltd. v. Hollobow,

702 F.2d 643 , 646 n. 2 (7th Cir.1983);

Hamilton v. Keystone Tankship Corp.,

539 F.2d 684, 686 (9th Cir.1970);

Goldman v. Summer-field,

214 F.2d 858, 859 (D.C.Cir.1954);

Midland Engineering Co. v. John A. Hall Const. Co.,

398 F.Supp. 981, 990 (N.D.Ind. 1975).

The same rules apply to testimony given at deposition which is offered in support of a motion for summary judgment. Deposition testimony must be based on personal knowledge, must not contain hearsay, may contain only conclusions the deponent/witness is qualified to make, and must be otherwise unobjectionable under the Federal Rules of Evidence to support a motion for summary judgment.

Nadler v. Bay-bank Merrimack Valley,

733 F.2d 182, 184 (1st Cir.1984);

Sires v. Luke,

544 F.Supp. 1155, 1160 (S.D.Ga.1982);

Liberty Leasing Co., Inc. v. Hillsum Sales Corp.,

380 F.2d 1013, 1015 (5th Cir.1967);

Standard Rolling Mills, Inc. v. National Mineral Co.,

2 F.R.D. 236, 237 (E.D.N.Y.1942).

A party opposing summary judgment need not respond or file counter-affidavits or other evidentiary materials under Rule 56 if the affidavits and other evidence of the moving party are intrinsically insufficient to establish its entitlement to summary judgment.

Securities & Exchange Comm’n v. Spence & Green Chem. Co.,

612 F.2d 896 (5th Cir.)

cert, denied,

449 U.S. 1082 , 101 S.Ct. 866 , 66 L.Ed.2d 806 (1981);

Sheet Metal Workers’ Int’l Ass’n Local No. 355 v. NLRB,

716 F.2d 1249 , 1254 (9th Cir.1983);

Security National Bank v. Belleville Livestock Comm’n Co.,

619 F.2d 840 , 848 (10th Cir.1980);

John v. Louisiana Bd. of Trustees for State Colleges and Univs.,

757 F.2d 698 (5th Cir. 1985);

Hamilton v. Keystone Tankship Corp.,

539 F.2d 684, 686 (9th Cir.1976).

C. UNCONTROVERTED FACTS

During the course of this litigation, the Court has issued several Memorandum Opinions and Orders containing specific findings of fact and conclusions of law which relate to a number of the allegations in the United States' Complaint.

From the Order of the Court adopting the Special Master’s Recommendation on summary judgment concerning statutory liability,

United States v. Conservation Chem. Co.,

619 F.Supp. 162 (W.D.Mo.1985), are the following uncontroverted facts:

From 1960 until the present, defendant CCC has owned and operated an industrial chemicals waste disposal facility located at 8900 Front Street, Kansas City, Missouri. The approximately six (6) acre site is located on the Missouri River floodplain, between the East Bottoms Levy and the Missouri River, just upstream of the confluence of the Missouri and Blue Rivers.

CCC purchased the KC Site in 1959. By early 1963, CCC had constructed a shop and office building, installed various stor

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age tanks and reaction vessels, and constructed six basins at the Site. Basins 1 through 5 were constructed by excavating soils. Basin 6 was constructed by excavating soil and constructing walls.

CCC stored, treated and disposed of various chemical wastes in Basins 1 through 6. In addition, CCC operated one or more incinerators at the Site for the destruction of chemical waste from the early 1960s until approximately 1971. CCC also buried various chemical wastes on the Site.

Over 50 million gallons of waste materials were transported to the Site during its period of operations. The type of waste which CCC treated, stored or disposed of at the KC Site included: (1) liquid acidic metal finishing wastes, such as spent steel pickling solutions containing sulfuric acid or hydrochloric acid, spent electroplating solutions, and bright dipping solutions; (2) liquid alkaline metal finishing wastes, including wastes containing cyanide; (3) solid cyanide wastes; (4) laboratory wastes; (5) non-pourable organic chemicals; (6) sludge containing arsenic sulfide and elemental phosphorous; (7) filter cake containing arsenic sulfide; and (8) solid cyanides.

As a consequence of CCC’s activities, each of the waste disposal basins at the KC Site contains at least the following hazardous substances: methylene chloride; tetrachloroethylene; trichloroethylene; toluene; 1,1,1-trichloroethane; phenol; 2,3,7,8-tet-rachlorodibenzo-P-dioxin; arsenic; beryllium; cadmium; chromium; copper; lead; mercury; nickel; selenium; zinc; and cya-nides.

The surface soil at the CCC Site contains at least the following hazardous substances: methylene chloride; tetrachloroe-thyene; tricholoreothylene; bis (2-ethyl-hexyl) phthalate; PCB-1254; arsenic; beryllium; cadmium; chromium; copper; lead; nickel; selenium; zinc; and cyanides.

The groundwater beneath the CCC Site contains at least the following hazardous substances: benzene; chloroform; ethyl-benzene; methylene chloride; tetrachloroe-thylene; toluene; 1,1,1-trichloroethane; trichloroethylene; vinyl chloride; phenol; arsenic; cadmium; chromium; copper; nickel; selenium; zinc; and cyanides.

The subsurface soil at the CCC Site contains at least the following hazardous substances: methylene chloride; tetrachloroe-thylene; toluene; trichloroethylene; phenol; bis (2-ethylhexyl); phthalate; arsenic; beryllium; cadmium; chromium; copper; lead; nickel; selenium; zinc; and cyanides.

Some of these hazardous substances are being released into the environment into areas likely to be directly encountered by humans or other living organisms. The “Remedial Investigation Report” states that hazardous substances are being and may be released from the CCC Site in several ways:

Waste materials from the site have the potential for migration via groundwater, surface water or air. Migration to groundwater can occur through leaching or by direct infiltration. These materials can also enter the atmosphere through volatilization or particulate transport while migration to surface water can occur by way of overland flow and flood inundation. Wastes which enter the aquifer beneath the site can be transported by groundwater flow to discharge points along the Blue River and Missouri River. The surface water flow can, in turn, transport these materials to receptors along the Missouri River.

By defendants’ own estimates, more than 22,000 pounds of hazardous substances are being discharged into the Missouri River and Blue River each year. Such discharges include the following hazardous substances: benzene; carbon tetrachloride; chloroform; 1,1-dichloroethane; 1,2-dichlo-roethane; 1,1-dichloroethane; ethylben-zene; methylene chloride; tetrachloroe-thyelene; toluene; 1,2-trans-dichloroethy-lene; 1,1,1-trichloroethane; 1,1,2-tricholo-roethane; tricholoroethylene; trichlorofluo-romethane; vinyl chloride; 2,3-dichlorophe-nol; 2,4-dimethyIphenoI; phenol; 2,4,6-tri-chlorophenol; arsenic; cadmium; chromium; copper; nickel, selenium; thallium; zinc; and cyanides. These substances ab

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sent remediation will continue to be discharged for many years.

Of the substances listed in the preceding paragraphs, at least the following are known or suspected carcinogens for which the recommended exposure level is zero: benzene; carbon tetrachloride; chloroform; 1,2-dichloroethane; 1,1-dichloroethylene; tetrachloroethylene; 1,1,2-trichloroethane; trichloroethylene; polychlorinated biphe-nyls (PCBs); vinyl chloride; trichlorophe-nol; arsenic; and beryllium. There is potential for exposure of humans to these substances. The site is surrounded by Kansas City, Missouri and its suburbs. A farmer cultivates soybeans on the land immediately adjacent to the Site on the southeast side. Mobay Chemical Corporation (“Mobay”) operates a manufacturing facility which is located one-quarter mile south of the site. A Kansas City Power & Light Company (“KCP & L”) plant is located approximately one-quarter mile west-northwest of the site. Residential and other industrial areas are as close as 1.3 miles from the site.

Mobay operates several wells on its property that may draw groundwater from beneath the CCC Site. The Missouri Water Company draws water for public water supplies from several wells located on the same side of the river as the site about five miles downstream of the site. Those wells are recharged, at least in part, by water from the river. The City of Lexington, located 40 miles downstream from the CCC Site, draws water directly from the Missouri River for public use. In addition, other living organisms, including frogs, toads, turtles, lizards, snakes, birds, mammals and fish, are likely to inhabit the area of the CCC Site.

United States v. Conservation Chem. Co.,

619 F.Supp. 162 at 182-186 .

In the same Order approving the Special Master’s Recommendation, the Court further found:

CCC is a corporation organized under the laws of the State of Missouri. CCC owned the KC Site since 1959, and operated the site as a disposal facility from 1960 until CCC stopped accepting waste in late 1979 or early 1980. During that period, CCC stored, treated and disposed of various chemical wastes in Basins 1 through 6. CCC also operated one or more incinerators at the site to destroy chemical waste. Among the wastes that were being disposed at the site while it was being operated by CCC were: (1) sludges containing arsenic sulfide and elemental phosphorous; (2) filter cake containing arsenic sulfide; and (3) solid cyanides. All of these substances are “hazardous substances” within the meaning of CERCLA.

As indicated previously, among the “covered persons” who are liable for response costs under Section 107 are the owner and operator of the facility, Section 107(a)(1), and any person who at the time of disposal of any hazardous substance owned or operated the facility at which such hazardous substance was disposed of, Section 107(a)(2). 42 U.S.C. § 9607 (a)(l)-(2). Clearly, CCC is liable under both subsections (a)(1) and (a)(2) of Section 107 since it is both the current owner of the CCC Site and was the owner and operator of the site when hazardous substances were disposed of at the site.

Norman Hjersted founded CCC in 1960, and has been its President since its incep-' ' tion. He has also owned at least 93% of CCC’s stock since 1960.

Initially, Hjersted was CCC’s sole technical person. “Plant Managers” were subsequently hired, but they reported directly to Hjersted. He controlled the company’s fiscal matters and made decisions about the types of projects and business ventures CCC would undertake. He was primarily responsible for environmental controls at CCC and also acted as a chemical engineer. Even when he resided in Gary, Indiana, (from approximately 1968 to 1974), Hjerst-ed personally visited the KC Site several times a month. After he returned to Kansas City in 1975, he was much more closely involved with the day-to-day operations of the KC Site. In short, Hjersted “[is] the boss of CCC operations and ha[s] been all along.”

United States v. Conservation

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Chem. Co.,

619 F.Supp. at 186-187 . With respect to CCCI, the Court found:

CCCI is a corporation organized under the laws of the State of Illinois. By contract, agreement or otherwise, CCCI arranged with CCC for the disposal of waste containing cyanide possessed by CCCI at the KC Site. By contract, agreement or otherwise, CCCI also arranged with a transporter to transport for disposal or treatment of cyanide-bearing waste owned or possessed by CCCI at the KC Site. In addition, CCCI accepted cyanide-bearing waste for transport to CCC-KC for treatment and disposal with CCCI selecting the KC Site as the disposal site. At least some of the cyanide-bearing wastes actually were disposed of at the KC Site.

CCCI is liable as a waste generator under Section 107(a)(3) of CERCLA, 42 U.S.C. § 9607 (a)(3).

United States v. Conservation Chem. Co.,

619 F.Supp. at 190 .

The Court has already found that “as a consequence” of the treatment, storage, handling and disposal of waste materials at the CCC Site, the surface and sub-surface soil at the site and groundwater beneath the site contained large quantities of hazardous substances.

United States v. Conservation Chem. Co.,

619 F.Supp. 162, 182-183 (W.D.Mo.1985). The Court has also determined that at least some of the hazardous chemical constituents are being released into the surrounding environment, and has specifically found that more than 22,000 pounds of hazardous materials continue to be discharged from the site into the groundwater and the Missouri and Blue Rivers each year.

Id.

at, 183.

In its recent Order approving the proposed remedial action plan for the CCC Site, the Court made the following specific findings and conclusions:

The evidence establishes the existence of hazardous substances in the soil at the CCC site and in the groundwater and aquifer underlying the CCC site, and the hazardous substances were being released and discharged into the Missouri River. Furthermore, the Focus Feasibility Study suggests that the possibility exists that aqueous or non-aqueous contaminants are being passed under the Missouri River and possibly contaminating the aquifer on the north side of the river. The certainty of that risk is unknown due to the fact that hydrogrologic modeling is incomplete at this time. In any event, it is clear that there is a serious environmental risk posed by the CCC site.

United States v. Conservation Chem. Co.,

628 F.Supp. 391, 402 (W.D.Mo.1985).

Finally, this Court has previously concluded as a matter of law that the ongoing releases of hazardous substances from the CCC Site constitute an “imminent and substantial endangerment to the public or welfare of the environment,” within the meaning of Section 106 of CERCLA,

United States v. Conservation Chem. Co.,

619 F.Supp. at 191-197 . Moreover, the Court has found that CCC and CCCI are liable under Sections 106 and 107 of CERCLA and has concluded that Norman Hjersted is a liable party under Section 107.

Id.

at 175, 184-187, 190-191, 202 ;

see also, United States v. Conservation Chem. Co.,

628 F.Supp. at 416-420 . CCC, CCCI and Hjersted are therefore legally obligated to reimburse the United States for its recoverable response costs. In addition, both CCC and CCCI have been held legally obligated to remedy environmental damage in the vicinity of the CCC Site.

With respect to the insurance policies at issue and for purposes of the motions for summary judgment, the identity, validity and authenticity of the policies is not at issue. There is, likewise, no dispute that the policies were issued by Central National, Home, American Fidelity, Continental Casualty, Great American, Great Southwest, Centaur, Evanston, Mutual Fire, Commercial Union, Foremost, Lincoln and Maryland and delivered to CCC by Central National, Home, American Fidelity, Continental Casualty, Great American and Great Southwest, and that all applicable premiums were paid by CCC for such policies with respect to policies issued and delivered by Central National, Home, American Fi

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delity, Continental Casualty, Great American and Great Southwest. There is a dispute regarding issues of delivery and payment with respect to the policies issued by Centaur, Evanston, Mutual Fire, Commercial Union, Foremost, Lincoln and Maryland.

It is undisputed that CCC is the named insured under each of the twenty-six policies at issue, and that CCCI is a named insured under, certain primary policies issued by Centaur, Evanston, Foremost, Great American and Mutual Fire. Finally, it is beyond dispute that the insurers, and not CCC, CCCI or Hjersted, drafted the policies and the operative language of the policies consist of standard-form provisions commonly utilized in comprehensive general liability (“CGL”) and other primary policies throughout the insurance industry.

D. CHOICE OF LAW

As the Special Master previously recognized, and as all parties now apparently agree, federal courts must apply the choice of law rule of the forum state to resolve conflict of law questions.

Klaxon Co. v. Stentor Elec. Mfg. Co.,

313 U.S. 487, 496 , 61 S.Ct.. 1020, 1021, 85 L.Ed. 1477 (1941);

Manchester Premium v. Manchester Ins. & Indem. Co.,

612 F.2d 389 , 391 n. 8 (8th Cir.1980).

1.

Contracts.

With respect to contracts, including insurance liability contracts, Missouri courts follow the Restatement (Second) of Conflict of Laws.

Havenfield Corp. v. H & R Block,

509 F.2d 1263, 1267 (8th Cir.1975);

Ryder Truck Rental v. Fid. & Guar. Co.,

527 F.Supp. 666, 670-71 (E.D.Mo.1981);

Young v. Fulton Iron Works Co.,

709 S.W.2d 927 (Mo.App.1986);

Starch & Chem. Corp. v. Newman,

577 S.W.2d 99, 102 (Mo.App.1978).

Section 187 of the Restatement provides:

§ 187. Law of the State Chosen by the Parties

(1) The Law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.

(2) The Law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

(3) In the absence of a contrary indication of intention, the reference is to the local law of the state of the chosen law.

Missouri follows the general Restatement rule and will apply the law chosen by the parties if there is a logical basis for applying such law.

See, e.g., National Union Fire Ins. Co. of Pittsburgh, Pa. v. D & L Const. Co.,

353 F.2d 169,172 (8th Cir.1965);

Zamecke v. Blue Line Chem. Co.,

54 S.W.2d 772 (Mo.App.1933). For those insurance policies which contain choice of law provisions, the law of the state chosen by the parties should be applied. The Special Master so recommends.

Insurance policies which do not contain provisions as to applicable law are addressed by § 193 of the Restatement. It states:

§ 193. Contracts of Fire, Surety or Casualty Insurance.

The validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local

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law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied. The principle stated in Restatement, § 6 which may be used to analyze the question of whether some other state has a more significant relationship than the state in which the insured risk is principally located and thus require the application of the law of another state include:

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interest of those states in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be applied.

Restatement (Second) Conflict of Laws § 6(2).

Missouri was the state of incorporation for CCC and Hjersted’s residence. Missouri is the state where CCC maintained its principal place of business at 8900 Front Street, Kansas City, Jackson County, Missouri. It is the place where the risk was located as well as the state from where contacts seeking insurance were made. Missouri has the strongest regulatory interest in the CCC Site and regulatory interest of the activities conducted at the CCC Site. It is the state where the alleged injury and damage took place or is taking place, and the place where the United States filed suit alleging that damages have occurred and/or is injuring the public health, welfare and environment.

No state has been identified with a relationship to, or an interest in the issues that approaches Missouri’s. Utilization of Missouri law will ease the determination and application of the law to be applied, and will tend to produce certain, predictable and uniform results.

Even under the more general principles of § 188 of the Restatement, the result is the same as to the question of which state’s law to apply. Section 188 states: § 188. Law Governing in Absence of Effective Choice by the Parties.

(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.

(2) In the absence of an effective choice of law by the parties (see § 187), the contracts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil residence, nationality, place of incorporation and place of business of the parties.

These contracts are to be evaluated according to their relative importance with respect to the particular issue.

(3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189-199 and 203.

The policies were placed through and negotiated by Missouri brokers. Section 188 refers to § 6 of the Restatement. Pursuant to § 6(2)(g), the fact that the insurers are scattered throughout the United States is of diminished significance for the pur

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pose of determining the applicable law. Under these principles, the law of Missouri should be applied.

For all the above reasons, the Special Master finds and recommends that except for those policies which contain a choice of law provision, the substantive law of Missouri will be applied to all questions involving formation, construction or interpretation of the insurance policies. Law of the state selected by the parties should control for those policies where a choice was made.

2.

Torts.

The Special Master interprets Count III of the OGDs’ Third Amended Third-Party Complaint as attempting to state a claim in tort for the insurers’ bad faith refusal to settle. This requires an analysis of choice of laws for tort actions.

In

Kennedy v. Dixon,

439 S.W.2d 173, 184 (Mo. banc 1969), Missouri adopted the “most significant relationship” test for torts.

Young v. Fulton Iron Works Co.,

709 S.W.2d 927 (Mo.App.1986). Specifically, Missouri follows the Restatement of Conflict of Laws approach and will apply the law of the state which has the most significant relationship to the parties and events.

See, e.g., Hicks v. Graves Truck Lines, Inc.,

707 S.W.2d 439 (Mo.App.1986);

Moss v. National Life & Acc. Co.,

385 F.Supp. 1291, 1297 (W.D.Mo.1974).

Restatement § 145 provides:

§ 145 The General Principle

(1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6.

(2) contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place where the injury occurred,

(b) the place where the conduct causing the injury occurred,

(c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and

(d) the place where the relationship, if any, between the parties is centered.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

For the reasons stated in the preceding section regarding choice of law for actions sounding in contract, the Special Master finds that Missouri has the most significant relationship to the parties and events, and therefore recommends that the substantive law of Missouri be applied to any claims sounding in tort under the third-party complaints of the Third-Party Plaintiff Operators and Original Generator Defendants.

3.

General Principles of Law.

The OGDs invite application of general insurance law to various issues and to several questions. To the extent that Missouri has not established, by statute or decision, a particular issue, the Special Master will apply general principles of insurance law where such do not rely upon principles in conflict with established Missouri law. Where Missouri law is established and settled, it will be followed and applied.

E. PRELIMINARY MATTERS

1.

After Litigation Insurance.

At least two of the insurers (Centaur and Central National) have asked the Court to find as a matter of law that their policies afford no coverage to or for CCC, CCCI, Hjersted or the “other insured(s)” (AT & T-TI, Armeo, FMC and IBM) for claims actually and unequivocally asserted by the United States against CCC, CCCI and Hjersted prior to the issuance and delivery of their policies. (Suggs, of Centaur at 4-19; Brief of Central National at Point A).

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a.

Centaur.

Centaur issued three insurance policies to CCC. Centaur’s first policy of insurance (PL 01191) was issued December 14, 1981, and had a policy period of December 14, 1981 through January 1, 1983; the second Centaur policy, PL 04726, was issued January 1,1983 and was effective until January 1, 1984; and the third Centaur policy, GL 10 02 500, was issued January 1, 1984 with a policy period until January 1, 1985. Thus, all three of Centaur’s policies were issued to CCC after the commencement of the action by the United States against CCC (September 29, 1980). Centaur alleges that the present action (No. 82-0983-CV-W-5) is virtually identical and directly connected to the 1980 lawsuit as shown by paragraph numbered 5 of the 1982 Complaint. Under these facts, Centaur claims that it is entitled to judgment on all claims because as a matter of law and public policy, no coverage is afforded for claims asserted prior to the purchase of the policies. “Simply stated, insurance purchased after the litigation is filed cannot and does not cover the claims asserted in the litigation.” (Suggs, of Centaur at 2).

In order to support its motion for summary judgment, Centaur says that all factual disputes may be resolved by judicial notice of the pleadings filed to date. Rule 201, Fed.R.Evid.,

Pennsylvania v. Brown,

373 F.2d 771 (3rd Cir.1967); and

Peabody Coal Co. v. Barnes,

308 F.Supp. 902 (E.D. Mo.1969). The Special Master agrees that the Court may take judicial notice of the pleadings and records in this case.

Thus, by way of judicial notice, having established that the original action by the United States against CCC was filed September 29, 1980, and the present action was commenced on November 22, 1982, Centaur argues that as a matter of public policy, Missouri recognizes that the contract of insurance issued to cover a prior loss is generally invalid.

Presley v. National Flood Insurers Ass’n,

399 F.Supp. 1242, 1244 (E.D.Mo.1975). These holdings are based upon public policy and the definition of “occurrence”; it being a basic tenet of insurance law that one cannot insure a certainty.

To support its entitlement to judgment as a matter of law, Centaur cites

Bartholomew v. Appalachian Ins. Co.,

502 F.Supp. 246 (D.R.I.1980),

affd,

655 F.2d 27 (1st Cir.1981). In

Bartholomew,

Robo-Wash sold defective car wash equipment to plaintiffs. Robo received numerous complaints from plaintiffs and sought to remedy the defects, but was unsuccessful. In February, 1984, plaintiffs sued Robo. In June, 1974, Robo purchased primary and excess comprehensive general liability insurance from Appalachian Insurance Co. and Affiliated Insurance Co. respectively. Plaintiffs continued to operate the car wash and suffered damages until September, 1974. An amended complaint was filed after September, 1974, emphasizing different facts, but making the same essential claim.

In February, 1975, Robo notified Appalachian and Affiliated of the lawsuit, and both denied coverage. Robo contested the no coverage determination pointing out that plaintiffs’ alleged damages were continuing in nature and would have occurred, at least in part, in the period after June 1, 1974.

Trial commenced on July 21, 1975, and shortly thereafter, plaintiffs reached a settlement with Robo and a consent judgment in the amount of $300,000.00 was entered in favor of plaintiffs. Concurrently, Robo assigned to plaintiffs its rights against its insurance carriers. Plaintiffs settled with Robo’s carriers whose policy dates predated and overlapped the filing of the February, 1974 lawsuit and proceeded against Appalachian and Affiliated whose policies were not issued until after the suit was on file.

The Court granted the insurers’ motions for summary judgment holding that coverage was not provided under the policies as a matter of law. The grant of summary judgment was affirmed and the First Circuit held:

The concept of insurance is that the parties, in effect, wager against the occurrence or nonoccurrence of a specified

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event; the carrier insures against a risk, not a certainty. Thus a homeowner could not insure his house against flood damage when the rising waters were already in his front yard.

655 F.2d at 28-29 . (Citations omitted).

In

Appalachian Ins. Co. v. Liberty Mutual Ins. Co.,

676 F.2d 56 (3rd Cir.1982), the Court rejected coverage for an incident occurring prior to the acquisition of the policy.

Liberty Mutual had adopted employment practice policies for its claims department in 1965. Several employees filed discrimination charges against Liberty Mutual with the EEOC in May of 1971. The employment practices were claimed to be discriminatory and continuous until after the Appalachian policy went into effect.

Liberty Mutual settled the case and sought reimbursement from Appalachian under a policy that took effect on August 1, 1971. Some of the employees who participated in the settlement had not begun their employment until after August 1, 1971, and some of the injurious effects of the employment practices were found to have extended into the period of Appalachian coverage. The Court found that this “continuing damage” did not trigger the Appalachian policy:

Since the injuries to Liberty’s employees occurred immediately upon the promulgation of Liberty’s discriminatory policies, the occurrence took place for purposes of coverage before August 1, 1971. Appalachian need not indemnify Liberty because the occurrence preceded the effective date of the insurance policy. A contrary result in this case would contravene the rule that an insured cannot insure against something. that has already begun. (Case citations omitted). The rule is based on the realization that the purchase of insurance is to protect insureds against unknown risk. When the Appalachian policy became effective, however, the risk of liability was no longer unknown because the injuries resulted immediately upon Liberty’s promulgation of its discriminatory policies. Also, the complaint to the EEOC preceded the effective date of the Appalachian policy.

676 F.2d at 63 . In support of the general proposition that no coverage is afforded for claims asserted prior to the purchase of insurance policies, Centaur cites

Presley v. National Flood Insurers Ass’n,

399 F.Supp 1242 (E.D.Mo.1975);

City of Carter Lake v. Aetna,

604 F.2d 1052 (8th Cir. 1979);

Summers v. Harris,

573 F.2d 869 (5th Cir.1978);

Drewett v. Aetna Cas. & Sur. Co.,

539 F.2d 496 (5th Cir.1976); and

United States Fid. & Guar. v. Bonitz Insulation Co.,

424 So.2d 569 (Ala.1982).

While the cases cited by Centaur seemingly foreclose coverage under any of its policies because each of the policies was obviously purchased after the institution of the original suit by the United States against CCC, the result urged by Centaur would require a holding as a matter of law that no occurrence took place after the filing of the Government’s original suit. Pointed out in

Bartholomew v. Appalachian Ins. Co.:

Strictly, the act for which a manufacturer is liable is the initial supplying of defective equipment. However, the cause of action is held to arise when the defect takes effect or is discovered ... Thus, when a plaintiff, sometime after having purchased a ladder fell therefrom and was injured, thereby discovering an alleged defect, it was the manufacturer’s insurer at that date, if any, that was responsible, and not the insurer at the date of sale. [Citations omitted.] This is not to say, however, that if the plaintiff had continued to use the ladder and was injured again at a later date when there was a third insurer, that company would be liable.

655 F.2d at 28-29 . Therefore, it is necessary to establish that no accident causing property damage occurred during the policy periods of the various Centaur policies.

In another section of this Recommendation, the Special Master discusses several possibilities of when an “occurrence” could have taken place under various applicable trigger theories. The Special Master con-

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eludes that insufficient facts have been presented to enable a determination in this regard as a matter of law. Thus, although the Special Master believes it is impossible to state with certainty when the first “occurrence” took place or whether the case presents a series of “occurrences” or one continuous “occurrence” starting at some point, this does not necessarily prevent a finding of the last possible date for “an accident, including continuous or repeated exposure to conditions, which resulted in property damage.”

The Special Master believes that from 1960 until late 1979 or early 1980, the “property damage” existing at the CCC Site resulted from or was caused by exposure to conditions which were substantially dissimilar from day to day. That is, the environmental injury varied depending upon the quantity and type of the waste materials received by CCC. However, once the site was closed in late 1979 or early 1980, any injury was a continuation of the one which had already begun and represented exposure to substantially the same conditions. The exact date when the CCC Site was closed is not known. It was, however, apparently closed prior to the institution of the Government’s suit on September 29, 1980. For purposes of the present motion, the Special Master believes that no “occurrence” took place after September 29, 1980 as a matter of law.

But even in the absence of a determination of the last possible date for an “occurrence,” the Special Master believes that public policy should and does bar coverage for litigation already commenced when the policy was acquired and became effective. Thus, in this context, CCC could not insure itself against claims of damage to the environment when those very claims had already been asserted and were already being litigated. And, as a matter of public policy, believes that insurance companies are not obligated to defend or indemnify an insured for pre-existing claims or litigation in the absence of a clear and unequivocal understanding that such claims were being covered.

Therefore, the Special Master finds that as a matter of law and public policy, no coverage is afforded for identical or virtually identical claims asserted prior to the purchase of insurance policies.

The Special Master therefore recommends that

summary judgment be granted

in favor of Centaur Insurance Company on the claims of CCC, CCCI, Hjersted, Armco, AT & T-TI, FMC and IBM on each of the three policies issued by Centaur after September 29, 1980.

b.

Central National.

For the reasons stated with respect to the motion of Centaur for summary judgment, the Special Master recommends that

summary judgment be granted

in favor of Central National on the Third-Party Complaints of CCC, CCCI, Hjersted, Armco, AT & T-TI, FMC and IBM for the reason that as a matter of law, no insurance coverage is provided for pre-existing claims and the liability is not “on account of” any property damage occurring after September 29, 1980.

c.

Other Insurance Companies

For the reasons stated with respect to Centaur and Central National, the Special Master believes that each Third-Party Defendant Insurer issuing a policy of insurance to CCC, CCCI and/or Hjersted after December 28, 1980 is entitled to the entry of summary judgment in its favor for the reason that no coverage is afforded for “occurrences” taking place prior to the issuance of the policy, and because no “occurrence” took place after December 28, 1980. In this regard, the Special Master believes that Third-Party Defendant Insurers ACIC, Evanston and Mutual Fire are entitled to summary judgment on the Third-Party Complaints of CCC, CCCI, Hjersted, Armco, AT & T-TI, FMC and IBM.

2.

Claims Made Policies.

Lincoln Insurance Company argues that a “claims-made” provision of its completed operations policies should result in a find

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ing of no coverage and a granting of summary judgment in its favor. The policies provide that:

The coverage provided by this form is limited to liability for those CLAIMS THAT ARE FIRST MADE AGAINST THE INSURED WHILE THE POLICY IS IN FORCE except as otherwise provided herein. (Emphasis in original.)

A “claim” is defined as:

A demand received by the Insured for money, goods, or services, and shall include the service of suit or institution of arbitration proceedings against the Insured.

Lincoln submits that there is no evidence that any claims by the United States or any of the entities asserting third-party claims were made against the insured CCC during the period their policies were in force, December 14, 1977 to December 14, 1979. Lincoln’s coverage is averred to be expressly limited to liability claims made against the insured during that period.

The earliest suit initiated by any of the claimants to this action dates from 1980, the year following Lincoln’s policy periods,

United States v. Conservation Chemical Co., Kansas City Power & Light, and Mo-bay Chemical Corp.,

No. 80-0883-CV-W-5.

A number of courts have decided that under a “claims-made” policy, even where the alleged negligence occurred within the policy period, where a claim is not asserted until after expiration of the policy, there is no coverage.

Samuel N. Zarpas, Inc. v. Morrow,

215 F.Supp. 887, 889 (D.N.J.1963);

Detroit Automobile Inter-Ins. Exchange v. Leonard Underwriters, Inc.,

117 Mich. App. 300 , 323 N.W.2d 679 (1982);

Eotwein v. General Accident Group,

103 N.J.Super. 406 , 247 A.2d 370 (1968);

Brander v. Nabors,

443 F.Supp. 764 (N.D.Miss.1978),

affd per curiam,

579 F.2d 888 (5th Cir. 1978);

Hoyt v. St. Paul Fire & Marine Ins. Co.,

607 F.2d 864 (9th Cir.1979);

James J. Brogger & Assoc, v. American Motorist Ins. Co.,

42 Colo.App. 464 , 595 P.2d 1063 (1979);

James & Hackworth v. Continental Cas. Co.,

522 F.Supp. 785 (N.D.Ala.1980);

Breaux v. St. Paul Fire & Marine Ins. Co.,

326 So.2d 391 (La.App. 1976);

Gereboff v. Home Indem. Co.,

119 R.I. 814 , 383 A.2d 1024 (1978);

Graman v. Continental Cas. Co.,

87 Ill.App.3d 896 , 42 Ill.Dec. 772 , 409 N.E.2d 387 (1980);

Mission Ins. Co. v. Nethers,

119 Ariz. 405 , 581 P.2d 250 (App.1978);

Gulf Ins. Co. v. Do-lan, Fertig and Curtis,

433 So.2d 512 (Fla. 1983).

Lincoln contends that the policy language is unambiguous, and that there is no reason to apply rules of construction favoring the insured. They state further that the “claims-made” provision is clear and unequivocal, and is not rendered ambiguous by the operation of any other policy provisions, including the notice provision. The notice provision and the claims-made provision are said to function independently of each other, each operating as a separate condition to coverage.

Evanston provided Specified Products and Completed Operations coverage on a claims-made basis for the period December 14, 1980 through December 14, 1981, and for the period January 1, 1985 through January 1, 1986 (this policy was cancelled by the insurer as of July 5, 1985). The 1980 policy has a retroactive date of December 14, 1977. Evanston also issued a Commercial Umbrella Liability policy with the excess products and completed operations part of the policy on a claims-made basis for the period December 2, 1980 through December 14, 1981. It also includes the December 14, 1977 retroactive date.

Although the language of the provision differs somewhat from the Lincoln provision, and “claim” is defined as notice received by the insured of an intention to hold the insured responsible, it is similarly argued that there must be a claim made within the policy period, and that has not occurred here. Evanston dates the Government’s claim as of December 22, 1982.

Evanston cites

Samuel N. Zarpas, Inc. v. Morrow,

215 F.Supp. 887, 889 , (D.N.J. 1963);

Detroit Automobile Inter-Ins. Ex

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change v. Leonard Underwriters, Inc.,

117 Mich.App. 300 , 323 N.W.2d 679 (1982); and

Zuckerman v. National Union Fire Ins. Co.,

100 N.J. 304 , 495 A.2d 395 (1985) for the proposition that where a claim is not asserted against an insured within the period of the policy, there is no coverage.

Mutual Fire provided Specified Products and Completed Operations coverage on a claims-made basis for the period December 14, 1979 through December 14, 1980. In a separate endorsement, the retroactive date is amended to read December 14, 1977. The policy language is the same as that in Evanston’s policies, and its argument is the same. Based on a November 22,1982 date of suit that is identified, Mutual Fire argues that no claim was made during its policy period as was required under the claims-made policy provision.

The OGDs respond that summary judgment is not appropriate for any claims-made policies stating that claims were made during the policy periods or that the policies must be construed as occurrence policies. The OGDs find it significant that the insurers at issue differ as to when a claim occurs.

As to Lincoln’s argument that the earliest suit dates from 1980, the OGDs note that the State of Missouri filed suit in July, 1979, and that federal and state authorities began a series of administrative proceedings in 1976 that continued in conjunction with the actual lawsuits.

As to Mutual Fire, the OGDs assert that the (September 29) 1980 suit clearly constitutes a claim within the policy period.

As to Evanston, the OGDs assert that claims were continuing to be made pursuant to the 1979 and 1980 actions. They further assert that the present action constitutes continuing claims under the 1985 policy.

The OGDs’ second argument is that the policies must be construed as occurrence policies. For the Lincoln policy, for instance, they contend that a separate endorsement deletes a standard limits of liability provision and in so doing, removes claims-made limitations contained elsewhere, and thereby shows Lincoln’s intent to provide occurrence coverage. They argue that at the very least, there is sufficient ambiguity to require construction in favor of the insured.

In this regard, the OGDs cite

Sparks v. St. Paul Ins. Co.,

100 N.J. 325 , 495 A.2d 406 (1985) (companion case to

Zuckerman,

495 A.2d 395 ), for the proposition that a claims-made policy that does not conform to the objectively reasonable expectations of the insured with respect to the scope of coverage is violative of public policy. The Special Master agrees that the OGDs have preserved a triable issue of fact with regard to the expectations of the insured.

The Special Master finds that as a matter of law, a claim must be made within the policy period of the relevant “claims-made” policy for coverage to be afforded. The Special Master is not persuaded that the “claims-made” policy of Lincoln Insurance Company cannot be found to provide coverage in the instant case. During the Lincoln policy period, a triable issue exists as to whether a claim as defined in the policy (a demand for money) was received by the insured. The actions filed by the State of Missouri prior to the September, 1980 complaint by the United States while technically did not involve a demand for money, did involve an equitable action for the site. Such a suit necessarily involves a demand upon the site operator insured for a large expenditure of funds for remediation and for investigative response costs. Whether such a suit constituted a claim made under the policy must be resolved at trial. Therefore, the Special Master recommends that Lincoln Insurance Company’s motion for summary judgment on the basis of the “claims-made” policy provision be

denied.

The Special Master finds that there has been no claim against the 1985 policy of Evanston. It is therefore entitled to summary judgment as to that policy. The Special Master found in Section E that there was no coverage afforded by Evanston’s policy issued after December 28, 1980 for

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the reason that no new occurrence has taken place after that date.

The Special Master is not persuaded by Mutual Fire’s motion for summary judgment on this basis. Mutual Fire’s assertion regarding the action commencing in November, 1982, ignores the action filed in September, 1980. The September, 1980 action clearly constitutes an action within the December, 1979 to December, 1980 claims-made policy period. The Special Master must therefore recommend the

denial

of Mutual Fire’s motion for summary judgment on the basis of the claims-made policy provision.

Evanston’s motion for summary judgment on the basis of the claims-made policy provision is also inappropriate. While Evanston’s listed policy period was from December 2, 1980 through December 14, 1981 on the “Commercial Umbrella Liability” policy, and from December 14, 1980 through December 14, 1981 on the Completed Operations Liability policy, both policies include a December 14, 1977 retroactive date. This opens the coverage to a period which includes the September 29, 1980 action by the United States. As such, the Special Master recommends the

denial

of Evanston’s motion for summary judgment on the basis of the claims-made policy provision.

3.

Failure to Settle.

Count III of the ODGs’ Third-Party Complaint alleges an action in tort for bad faith refusal to settle within applicable coverages allegedly afforded by the separate policies of insurance. In the Report and Recommendation Regarding Rule 12 Motions on Insurance Issues, the Special Master found that Missouri recognizes an insured’s recovery in tort for an insurance company’s bad faith refusal to settle suits brought against the insured.

Zumwalt v. Utilities Ins. Co.,

360 Mo. 362 , 228 S.W.2d 750 (1950);

Craig v. Iowa Kemper Mut. Ins. Co.,

565 S.W.2d 716 (Mo.App.1978);

H&S Motor Freight v. Truck Insurance Exchange,

540 F.Supp. 766 (W.D.Mo.1982).

The rationale for imposing liability for bad-faith refusal to settle is “that the reservation of the exclusive right to contest or negotiate the claim against the insured imposes a fiduciary duty on the carrier.”

Young v. United States Fid. & Guar. Co.,

588 S.W.2d 46, 47 (Mo.App.1979). The tort is only available for bad faith refusal to settle a claim made by a third party against the insured and is not available for first-person coverages.

Rossman v. G.F.C. Corp. of Missouri,

596 S.W.2d 469, 471 . (Mo.App.1980);

Scullin Steel Co. v. National Ry. Utilization Corp.,

520 F.Supp. 383, 388 (E.D.Mo.1981). Similarly, it has been held that an injured party as a judgment creditor cannot in an equitable garnishment action brought against a defendant’s insurer make a claim based on bad faith for any excess of the limits designated in the liability policy.

Linder v. Hawk-eye-Security Ins. Co.,

472 S.W.2d 412 (Mo. banc. 1971).

At Pages 32 and 33 of the Report and Recommendation on Rule 12 motions, the Special Master indicated that application of Missouri law to Count III would require dismissal. The OGDs’ objected to the Special Master’s statement and requested that the Court not adopt that part of the Special Master’s Recommendation. Over the OGDs’ objections, the Court did adopt the Special Master’s Report and Recommendation, including that part indicating that if Missouri law were applied to Count III, such would require dismissal.

The elements of the tort of bad faith refusal to settle are: (1) assumption by the insured of control over negotiation, settlement and legal proceedings brought against the insured; . (2) demand by the insured that the claim be settled; (3) refusal by the insurer to settle the claim within the limits of coverage; and (4) the insurer has acted in bad faith in refusing to settle.

Dyer v. General American Life Ins. Co.,

541 S.W.2d 702, 704 (Mo.App.1976). It is obvious under Count III and the facts established to date that all sixteen insurance companies, with the exception of Commercial Union, Foremost and Great American, have denied assumption and exercise no

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control over negotiation, settlement and legal proceedings brought against CCC, CCCI and/or Hjersted. Similarly, neither Count III nor the uncontroverted facts support a finding that a judgment in excess of policy limits has been entered or exists. Finally, there exists no relationship between the OGDs and the insurance companies which would give rise to a duty by the insurance companies to deal in good faith on behalf of AT & T-TI, FMC and IBM. The insurance companies owe a duty of good faith to their insureds, CCC and/or CCCI and/or Hjersted, none of whom have made a claim for bad faith refusal to settle.

In an effort to avoid summary judgment on Count III, the OGDs contend that the insurers’ arguments must fail because they are based upon the erroneous assumption that the OGDs are neither insureds nor third-party beneficiaries of the insurance policies. The OGDs’ argument is contrary to the allegations contained in the pleadings where it is alleged that only Armco is an additional insured. No evidence to date has suggested or proven that either AT & T-TI, FMC and/or IBM is an insured under any of the policies. Likewise, even if it is true that the OGDs are third-party beneficiaries to the insurance policies, the Special Master does not believe that such fact is sufficient as a matter of law to establish the necessary fiduciary relationship upon which the tort of bad faith refusal to settle is premised.

The OGDs further argue that the motions “seem premised upon the misapprehension of Missouri law by the suggestion that the good faith duty to settle is somehow dependent upon an insurer’s assumption of the third-party plaintiffs’ defense.” The OGDs go on to argue that the duty to settle is independent of any duty to defend. (OGDs’ Response to Insurers’ Motions for Summary Judgment at 179-180).

The Special Master believes that Missouri law, which must be applied to the present case, clearly and unequivocally requires the assumption by the insurer of control over negotiation, settlement and legal proceedings brought against the insured as a condition precedent to the maintenance of an action for the tort of bad faith refusal to settle.

Young v. United States Fid. & Guar. Co.,

588 S.W.2d 46 (Mo.App.1979);

Dyerv. General American Life Ins. Co.,

541 S.W.2d 702 (Mo.App. 1976).

For the above-stated reasons, the Special Master finds that no issue as to any material fact exists with respect to the claim for bad faith refusal to settle pleaded in Count III of the OGDs’ Third Amended Third-Party Complaint against the sixteen insurance companies. The Special Master further finds that each of the sixteen insurance companies is entitled to judgment as a matter of law on Count III of the OGDs’ Third Amended Third-Party Complaint. Therefore, the Special Master recommends that

summary judgment be granted

in favor of each of the sixteen Third-Party Defendant Insurers on Count III of the Third Amended Third-Party Complaint of the ODGs.

F. ISSUANCE, DELIVERY AND PAYMENT

1.

Original Generator Defendants.

The OGDs have moved for partial summary judgment against thirteen (13) insurance companies on three separate but related issues: (1)

Issuance

of insurance policies to CCC or Hjersted; (2)

Delivery

of insurance policies to CCC or Hjersted; and (3)

Payment

of premium for insurance policies. (Motion of OGDs at 1).

To support their motions on these three issues against the thirteen (13) insurance companies, the OGDs claim that Central National, Home, Centaur, American Fidelity, Continental, Great American and Great Southwest have admitted that they issued and delivered policies of insurance to CCC or Hjersted, and that CCC or Hjersted paid the appropriate premiums. (Motion of OGDs at 2). With regard to Evanston, Mutual Fire, Commercial Union, Foremost, Lincoln and Maryland, the OGDs argue that each has admitted issuing policies of insurance to CCC or Hjersted. On the issues of delivery and payment against

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such companies, the OGDs offer no proof, but nevertheless claim they are entitled to summary judgment because “none of the ... third-party defendant insurers have any credible evidence to create any genuine issue as to a material fact regarding delivery of their policies to CCC or Norman B. Hjersted, and premium payment by CCC or Hjersted ...” (Motion of OGDs at 2).

The Special Master has carefully examined the pleadings, depositions, answers to interrogatories and admissions on file and believes that they clearly establish that no genuine issue as to any material fact exists with respect to the issues of issuance and delivery of insurance policies to CCC and payment by CCC of premiums applicable to such policies concerning Central National, Home, American Fidelity, Continental, Great American and Great Southwest. That is to say, the Special Master is convinced that the OGDs have established that Central National, Home, American Fidelity, Continental, Great American and Great Southwest issued and delivered policies of insurance to CCC. Furthermore, no genuine issue exists as to

issuance

of insurance policies by Centaur, Evanston, Mutual Fire, Commercial Union, Foremost, Lincoln and Maryland. The OGDs, however, have wholly failed to establish the issues of

delivery

and

payment

regarding Centaur, Mutual Fire, Commercial Union, Foremost, Lincoln and Maryland. Therefore, summary judgment cannot be granted as to such insurers on either delivery or payment or both.

The Special Master therefore recommends that the motion of the OGDs for Partial Summary Judgment be

granted on the issues of issuance, delivery and payment

of insurance policies against Central National, Home, American Fidelity, Continental, Great American and Great Southwest; and should be

granted on the single issue of issuance

of insurance policies against Centaur, Evanston, Mutual Fire, Commercial Union, Foremost, Lincoln and Maryland. The OGDs’ Motion for Partial Summary Judgment should

be denied on the issues of delivery and payment

regarding the policies issued by Centaur, Ev-anston, Mutual Fire, Commercial Union, Foremost, Lincoln and Maryland.

2.

Site Operator Defendants.

CCC, CCCI and Hjersted seek partial summary judgment against each third-party defendant insurer on the issues of issuance and delivery of their policies to CCC and “the other insureds” as well as the appropriate payment of required premium by CCC and “the other insureds” under the policies.

In support of such motion,' CCC, CCCI and Hjersted state that there is no genuine issue as to any material fact regarding the issues of issuance, delivery and payment of premium, and that CCC, CCCI and Hjerst-ed are entitled to judgment as a matter of law on these issues. For support of their motion, CCC, CCCI and Hjersted refer the Court to the arguments and authorities cited by the Original Generator Defendants in support of their motion for partial summary judgment on the issues of issuance, delivery and payment. (Motion of CCC, CCCI and Hjersted at 1-2).

The motion of the OGDs referenced by CCC, CCCI and Hjersted does not seek summary judgment regarding CCCI or on the issues of issuance, delivery and payment as such relate to CCCI. The OGDs’ motion is confined to CCC or Hjersted, and therefore, the OGDs’ motion offers no support for partial summary judgment in favor of CCCI or “the other insureds.” There being no proof that CCCI or “the other insureds” is entitled to judgment as a matter of law, or any showing that there are no genuine issues as to any material fact regarding issuance and delivery of any policy to CCCI or “the other insureds” or payment for any such policies of insurance by CCCI or the “other insureds”, the motion should be denied as to CCCI. Likewise, for the reasons set forth above, the Special Master believes that no genuine issue as to any material fact exists with respect to the issues of issuance and delivery of insurance policies to CCC and the payment by CCC of premiums applicable to

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such policies for Central National, Home, American Fidelity, Continental, Great American and Great Southwest. And, although no issue exists as to the issuance of insurance policies, CCC has failed to establish the issues of delivery and payment regarding Centaur, Evanston, Mutual Fire, Commercial Union, Foremost, Lincoln and Maryland.

On the bases stated above, the Special Master recommends that CCC, CCCI and Hjersted’s motion for partial summary judgment on the issues of issuance, delivery and payment be

overruled

in its entirety as to CCCI and Hjersted. The Special Master further recommends that the Court

grant

the motion for summary judgment on the issues of issuance, delivery and payment by CCC with respect to Central National, Home, American Fidelity, Continent tal, Great American and Great Southwest; but

deny

such as to the issues of delivery and payment regarding Centaur, Evanston, Mutual Fire, Commercial Union, Foremost, Lincoln and Maryland.

G. “PROPERTY DAMAGE” UNDER CGL POLICIES

The OGDs have moved for an order determining that the escape of environmental contaminants from the CCC site constitutes “property damage” as that term is defined in the CGL insurance policies issued to CCC. The OGDs also ask for an order establishing that the proper measure of damages under the insurance policies is the cost of investigation and cleanup incurred by the United States. (Suggs, in Support at 2). Although, as the OGDs concede, “a number of factual issues exist for trial with regard to coverage under these insurance policies”, the OGDs nevertheless argue “that it is clear, as a matter of law, (1) that the escape of environmental contaminants from the [CCC] Site constitutes ‘property damage’ under the policies at issue here; (2) that the escape of contaminants constitutes ‘property damage’ which is not limited to property owned by CCC and/or Norman Hjersted; and (3) that the appropriate measure of ‘property damage’ is the cost of investigation and of the Remedial Action approved by the Court.” (Suggs, in Support at 2). The OGDs further argue that partial summary judgment can and should be entered in their favor on each of the three issues because “no factual development is necessary ..., and only issues of law are presented ...” (Suggs, in Support at 2).

To support their motion, the OGDs insist that the Court has already determined that contaminants from the CCC site have been and are escaping from the site into the surrounding ground water and surface water.

See, United States v. Conservation Chemical Co.,

628 F.Supp 391, 395-399 (W.D.Mo.1985). The Court’s Findings of Fact are supported by the voluminous technical record compiled to date in this case, and no testimony whatsoever was offered at the October 21, 1985 hearing to indicate that contaminants have not been and are not escaping from the CCC site into underlying ground water and surrounding surface water, including the Missouri River. (Suggs, in Support at 3-6). The OGDs maintain that the Court’s determination conclusively establishes the first prerequisite needed for a determination that the escape of contaminants constitute property damage.

To support the second prerequisite, the OGDs point to decisions of several courts holding that environmental contamination of property which moves into surrounding ground water, surface water or soil constitutes “property damage” for the purposes of insurance coverage. In particular, the OGDs direct attention to

Lansco, Inc. v. Department of Environmental Protection,

138 NJ.Super. 275, 350 A.2d 520 , 88 A.L.R.3d 172 (Ch.Div.1975),

affd,

145 N.J. Super. 433 , 368 A.2d 363 (App.Div.1976),

cert, denied,

73 N.J. 57 , 372 A.2d 322 (1977).

On the two related issues, applicability of the “Owned Property” exclusion and the appropriate measure of the “property damage,” the OGDs argue first that the “Owned Property” exclusion does not apply as a matter of law because surface and

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sub-surface water on CCC’s property is not property owned by CCC for purposes of determining coverage (Suggs, in Support at 9-16), and secondly, that the costs of investigation and Remedial Action approved by the Court is the appropriate measure of damage as a matter of law under

Lansco, Inc. v. Department of Environmental Protection, supra; Kutsher’s Country Club Corp. v. Lincoln, Ins.,

119 Misc.2d 889 , 465 N.Y.S.2d 136 (1983);

United States Aviex Co. v. Travelers Ins. Co.,

125 Mich.App. 579 , 336 N.W.2d 838 (1983);

Port of Portland v. Water Quality Ins. Syndicate,

549 F.Supp. 233 (D.Ore.1982); and

Chemical Applications Co., Inc. v. The Home Indem. Co.,

425 F.Supp. 777 (D.Mass.1977).

In opposition to the OGDs’ motion, third-party defendant insurers (“insurers”) argue that while “there is no doubt that hazardous wastes are escaping into the environment from the Kansas City site,” the action brought by the United States is premised upon endangerment and seeks restitution of response costs incurred by the Government at the CCC site. “The United States did not demand damages for injury to, destruction of, or loss of natural resources pursuant to CERCLA, Section 107(a)(C), 42 U.S.C. § 9607 (a)(C), however, choosing instead to pursue only reimbursement of economic loss.” (Joint Memo, in Opp. at 2). Since the “injury” for which relief is sought is “purely economic,” the insurers contend that “there is no demand for ‘property damage’ within the meaning of the policies at issue.” (Joint Memo, in Opp. at 2).

See also,

Memo, in Support of Individual Insurers’ Motions for Summary Judgment at 30-32. Thus, although not explicitly stated in the Joint Memorandum in Opposition, it is apparently the insurers’ position that the escape of contaminants from the CCC Site cannot, as a matter of law, constitute “property damage” under CGL insurance policies because the Government did not seek compensation for damage caused by destruction or loss of natural resources under Section 107(a)(C).

In addition to the Insurers’ Joint Memorandum, third-party defendant Home filed a separate memorandum in opposition to the OGDs’ motion. Home opposes the motion because: (1) there is no “property damage” at issue in this action; and (2) even if there were, the costs of site investigation and cleanup would not be the proper measure of an insurer’s liability to an insured. (Opp. of Home at 1). Home acknowledges that “property damage” as used in Home’s insurance policy “took place at the CCC Kansas City site” and that “the presence of contaminants in off-site ground water and surface water in concentrations constituting damages” is not disputed by Home for purposes of the OGDs’ motion. But Home argues that either “contention” is irrelevant to the question of insurance coverage for the non-property damage relief sought by the United States. (Opp. of Home at 1-2). Thus, reduced to its essentials, Home first contends that whether or not actual property damage (loss of or direct damage or destruction of tangible property) exists in the present situation is irrelevant to the question of coverage because the United States has sought injunctive relief and response costs under §§ 104 and 107(a)(A) and not damages for environmental injury under § 107(a)(C). (Opp. of Home at 2-3). It is the claim in the underlying action which determines questions of coverage and here the United States does not allege property damage, thus precluding coverage under Home’s policy. (Opp. of Home at 3-6). Home next contends that damages recoverable under § 107(a)(A) claims are not, and clearly were not intended by Congress to be, the measure of damage to natural resources. In cost-recovery actions like the present one, Congress set the measure of recovery as the economic losses incurred in the cleanup and removal of hazardous substances or the amount necessary “to prevent or minimize the release of hazardous substances so they do not migrate or cause substantial danger to present or future public health or welfare or the environment.” 42 U.S.C. § 9601 (24). Thus, the costs of investigation and Remedial Action are not appropriate measures of damage in cost-recovery actions, but even

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if they are, such are not “damages” as that term is used in the Home policies, and thus, no coverage exists. (Opp. of Home at 8-12).

In the Order approving the Special Master’s Recommendation concerning disposition of the motions to dismiss or for summary judgment,

United States v. Conservation Chem. Co.,

619 F.Supp. 162, 182-184 (W.D.Mo.1985), and more fully in the Memorandum Order of December 12, 1985,

United States v. Conservation Chem. Co.,

628 F.Supp. 391, 395-399 (W.D.Mo.1985), this Court determined that chemicals deposited in lagoons at the CCC site during the 20-year period (1960-1980) that the site was in operation have been and are migrating from the CCC Site into the Missouri River and have contaminated the aquifer beneath and adjacent to the CCC Site. Specifically, the Court found:

[T]he CCC site contains ... six basins (presently covered) that were used for storage, treatment, and disposal of a variety of chemicals, liquid waste, and sludges. The dimensions and exact locations of the lagoons migrated over the site during the 20-year (1960-1980) period that the site was in operation.

* * * * * *

The exact nature and quantities of chemicals and waste handled during the site’s active operating period are unknown ... It is estimated that at least 28 million gallons of various types of waste were accepted between 1970 and 1980. The facility handled liquids, sludges, and solids.

* * * * * *

Hazardous substances have been and are being released from the site and migrating toward the east and toward the Missouri River. It is estimated that the annual rate of discharge of hazardous materials from the site into the ground water is in excess of 22,000 pounds, and that the likelihood of a significant rate of discharge continuing in the future is high. It is also opined that the likelihood of some or all of the hazardous substances being directly encountered by aquatic organisms or other living creatures in the course of their migration was fairly high in that a number of substances are located at the surface and that a number of different mammals and birds and amphibious life frequent the area.

628 F.Supp. at 395, 396, 398 .

The Special Master believes that the facts found by the Court regarding the release of contaminants and pollutants from the CCC site and the migration of such contaminants into ground water and the Missouri River clearly indicate harm to property. The deposit of hazardous substances into the CCC Site has caused injury to the site itself, and the release and migration of the contaminants has damaged and continues to damage surrounding ground water, surface water and soil. At this point, none of the parties disputes the obvious physical harm resulting from the movement of hazardous materials into water and soil from the CCC Site or the damage to CCC’s property caused by the storage, treatment and disposal of a variety of chemicals, liquid waste and sludges. In any event, the facts established by the December 12, 1985 Order are the law of the case.

But the Court’s determination of physical harm does not necessarily compel a finding that such harm is “property damage” as that term is defined and used in the various insurance policies issued to CCC. In order to resolve the question of whether the harm found by the Court is “property damage” for purposes of insurance coverage, it is necessary to review the definitions of “property damage” in the various policies. The typical policy issued to CCC reads as follows:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ...

property damage

to which this insurance applies, caused by an occurrence ... [T]he company shall have the right and duty to defend any suit against the insured seeking damages on account of ...

property damage,

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even if the allegations of the suit are groundless, false or fraudulent. (Emphasis added).

The typical policy defines “property damage” as “injury to or destruction of tangible property.” Another policy defines “property damage” as “physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or loss of use of tangible property which has not been physically injured or destroyed, provided such loss of use is caused by an occurrence during the policy period.” Yet another policy says that “Property Damage means loss of or direct damage to or destruction of tangible property (other than property owned by the Named Insured), which occurs during the policy period, including loss of use thereof at any time resulting therefrom.” Thus, for the release and migration of contaminants and pollutants to constitute “property damage” as that term is used in the insurance policies, the harm must at a minimum be “physical injury or destruction of tangible property.” The Special Master believes that it is.

In

Lansco, Inc. v. Department of Environmental Protection,

138 NJ.Super, 275, 350 A.2d 520 , 88 A.L.R.4th 172 (Ch.Div. 1975),

affd,

145 NJ.Super. 433, 368 A.2d 363 (App.Div.1976),

cert, denied,

73 NJ. 57, 372 A.2d 322 (1977), the Court rejected the insurer’s argument that the cost of statutorily imposed cleanup of a “sudden and accidental” oil spill was not cognizable under a comprehensive general liability insurance policy. Also rejected was the insurer’s arguments that the “sudden and accidental” pollution was not “property damage.”

Royal urges, however, that coverage under the policy does not include damages recoverable by the State from Lansco in the State’s sovereign capacity or under the public trust doctrine; in other words, the term ‘property damage’ must be read as meaning measurable damage to identifiable physical property. This argument is without merit.

* * * * * *

The policy in suit provides for comprehensive general liability insurance. Numerous decisions of our courts have held that an insured should receive what he generally may be understood to have contracted for. As has so frequently been said, an insurance contract is essentially one of indemnification, and Lansco could have reasonably expected to be indemnified for any liability arising out of the operation of its business which was not specifically excluded. Lansco is engaged in a business which entails the storage of oil on property adjacent to the Hackensack River. The specific policy provision in question affords coverage for property damage arising out of a sudden and accidental discharge of oil into a body of water. This should have alerted the insurer to potential legal liability of its insured under state anti-pollution statutes which directly affected and regulated its business operations.

350 A.2d at 524-525 . (Citations omitted.)

In

Kutsher’s Country Club Corp. v. Lincoln Ins. Co.,

119 Misc.2d 889 , 465 N.Y. S.2d 136 (1983), Kutsher’s filed an action seeking a declaration that Lincoln was responsible to indemnify it for any cleanup costs in connection with an oil spill resulting from a ruptured nipple on an oil storage tank located on the insured’s property. Stipulated facts showed that on January 25, 1981, an oil spill occurred on Kutsher’s premises. On April 27, 1981, an engineer from the New York State Department of Environmental Conservation (DEC) discovered fuel oil in a swamp located near plaintiff’s premises but not owned by it. The DEC advised Kutsher’s that the area in question constituted a declared fresh water wetland, and pursuant to New York law, plaintiff was strictly liable to clean up the oil spill and subject to fines up to $25,000 per day. Plaintiff immediately notified its insurance agent and the agent in turn notified Lincoln. On June 8, 1981, Lincoln’s adjusters notified Kutsher’s that it would

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conduct an investigation of the claim, but reserved all rights concerning timeliness of notice of the claim. On September 4, 1981, Lincoln notified plaintiff that it was denying the claim on the ground that the cost of cleanup of the oil spill was not “property damage,” and therefore not an item entitled to insurance coverage. Thereafter, the State of New York commenced an action seeking $289,945.44 in cleanup costs plus statutory penalties. Plaintiff then filed the declaratory judgment action. Plaintiff moved for summary judgment on the issue of coverage, and for purposes of the motion, defendant Lincoln stipulated that the oil spill was an “occurrence” within the meaning of the policy. Lincoln also withdrew all defenses except as to the timeliness of notice and whether or not the cost of cleanup of the oil spill constituted “property damage” within the meaning of the insurance policy.

In granting summary judgment in favor of Kutsher’s and against Lincoln upon the disputed facts, the Court labeled as “preposterous” Lincoln’s assertion that plaintiff had failed to establish that the petroleum discharge had resulted in injury to tangible property. In this regard, the Court said:

The Court agrees with plaintiff’s assertions that the New Jersey’s Superior Court case of

Lansco, Inc. v. Department of Environmental Protection,

138 NJ.Super. 275, 350 A.2d 520 (1975) should control in this matter. That case recognized the principle that ‘the sovereign’s interest and the preservation of public resources and environment enable it to maintain an action to prevent injury thereto.’ [Cites omitted.]

(Lansco, supra,

350 A.2d at p. 524 ).

******

In view of the above, the Court agrees with plaintiff that Lincoln’s assertions that plaintiff has not shown that the petroleum discharge resulted in injury to tangible property is preposterous. Further, Lincoln urges that

Lansco

should not be controlling as it is a case from a different jurisdiction. The Court disagrees ... Contrary to defendant Lincoln’s assertions, the Court does not find that imposing the cost of cleanup by statute is punitive in nature but is clearly reflective of the state’s power to establish damages with respect tc legislation designed to preserve the sovereign state’s interest in the preservation of public resources

(Lansco, supra.).

465 N.Y.S.2d at 139 .

So, too, in

Port of Portland v. Water Quality Ins. Syndicate,

549 F.Supp. 233 (D.Ore.1982) (applying Oregon law), the Court held that a CGL policy covered the cleanup costs in connection with oil which had escaped from a barge, into a river, and rejected the insurer’s contention that the cost of cleanup did not constitute “property damage.” The Court said:

The insurer argues that the damage to the Willamett River was not ‘injury to or destruction of tangible property’ but this interpretation is untenable. The language of Exclusion K itself disallows coverage for certain ‘property damage’ resulting from discharge into navigable waters. Further, Oregon law establishes that the state’s interest in its water resources is sufficient to support an action for damages caused by pollution, see,

Askew v. American Waterways Operators,

411 U.S. 325, 331-32 , 93 S.Ct. 1590, 1595 , 36 L.Ed.2d 280 (1973); ORS 468.-805. The court in

Lansco, Inc. v. Environmental Protection,

138 NJ.Super. 275, 350 A.2d 520 (1975),

affd per cu-riam,

145 NJ.Super. 433, 368 A.2d 363 (App.Div.1976), interpreting policy provisions identical to those in the St. Paul policy on closely analogous facts, rejected the insurer’s arguments that the ‘sudden and accidental’ pollution was not ‘property damage,’ and I adopt this rationale as the ‘reasonable, enlightened view’ which the Oregon Supreme Court would adopt, see

Ins. Co. of North America v. Howard, supra,

[ 679 F.2d 147 ] at 149 [9th Cir.1982],

Id.

at 235. Thus, it appears that at least three courts have explicitly concluded that, where property of third parties is involved, cleanup costs incurred by, or to be charged

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against, an insured constitute “property damage” within the meaning of the term as used in a CGL insurance policy.

CGL policies have also been held to cover diminution in value of a third-party’s property.

See, e.g., Aetna Cas. & Sur. Co. v. PPG Indus., Inc.,

554 F.Supp. 290 (D.Ariz. 1983);

Hogan v. Midland Nat. Ins. Co.,

3 Cal.3d 553 , 91 Cal.Rptr. 153 , 476 P.2d 825 (1970);

Geddes & Smith, Inc. v. St. Paul-Mercury Idem. Co.,

51 Cal.2d 558 , 334 P.2d 881 (1959);

Hauenstein v. St. Paul-Mercury Idem. Co.,

242 Minn. 354 , 65 N.W.2d 122 (1954);

Marine Midland Serv. Corp. v. Samuel Kosoff & Sons, Inc.,

60 A.D.2d 767 , 400 N.Y.S.2d 959 (1977). Other policies do not provide coverage for diminution in value.

See, e.g., Miller’s Mut. Fire Ins. Co. of Tex. v. Ed Bailey, Inc.,

103 Idaho 377 , 647 P.2d 1249 (1982).

The insurers argue that the OGDs’ reliance on

Lansco, Inc., Kutsher’s Country Club Corp.,

and

Port of Portland

is. misplaced because each is distinguishable and therefore unpersuasive as to whether cleanup costs constitute “property damage” under a standard form CGL insurance policy. According to the insurers, the distinguishing factor is that each dealt with a state’s interest in preserving and protecting public resources and the environment. And, say the insurers, a state’s proprietary interest in protecting its resources is “irrelevant insofar as establishing that an equitable action by the United States for restitution of costs expended constitutes ‘property damage’ as that term is defined in CCC’s insurance policies.” (Joint Memo, in Opp. at 3).

While it is true that

Lansco

and

Port of Portland

involve application of separate state laws which render persons responsible for the release of hazardous substances strictly liable for the cost of responding to those releases, such fact does not make the holding irrelevant to the present case. In both

Lansco

and

Port of Portland ,

the state statute mandated response in the form of either direct government action to remedy the environmental hazard followed by a demand to recover cleanup costs or an order to the liable party to conduct a cleanup at its own expense. In both cases, the cleanup was ordered by the state and undertaken by the owner of the property from which the pollutants came. In

Kutsher’s Country Club Corp.,

remedial action was initially undertaken by the property owner, but later abandoned leaving the cleanup to the state. The Court found the state’s claim for reimbursement to be “property damage” under the terms of the CGL insurance policy at issue. It appears that the “property damage” claim in

Kutsher’s Country Club Corp.

is similar to the claim asserted by the United States in the present case. The Special Master finds the insurers’ attempt to distinguish

Lansco, Kutsher’s Country Club Corp.,

and

Port of Portland

on the basis of a state’s proprietary interest to be unpersuasive in light of the obvious federal proprietary interest in the navigable waters of the United States.

United States v. Willow River Power Co.,

324 U.S. 499 , 65 S.Ct. 761 , 89 L.Ed. 1101 (1945);

Kaiser-Aet-na v. United States,

444 U.S. 164 , 100 S.Ct. 383 , 62 L.Ed.2d 332 (1979);

U.S. v. Bay-view Riverside Homes,

474 U.S. 121 , 106 S.Ct. 455 , 88 L.Ed.2d 419 (1985). It further appears that state statutes in

Lansco, Kutsher’s Country Club

and

Port of Portland

appear to be analogous to the statutory scheme under RCRA and CERCLA.

As a second prong to their argument, the insurers contend that the holdings in

Lan-sco, Inc., Kutsher’s Country Club Corp.,

and

Port of Portland

are inapplicable because those “property damage” claims involved states’ proprietary interests in their natural resources as contrasted with the equitable cost-recovery action instituted by the United States pursuant to RCRA, § 7003 and CERCLA, § 107(a)(A). (Joint Memo, in Opp. at 4).

Cases arising under CERCLA and RCRA in other contexts have indicated that cleanup claims are not legal actions, but rather are equitable actions in the nature of restitution.

See,

Special Master’s Recommendation Regarding General Dynamics Corporation’s Demand for a Jury Trial (April 29, 1985), approved by Order, May 14, 1985;

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United States v. Price,

688 F.2d 204 , 210-14 (3rd Cir.1982);

United States v. Geor-geoff

No. C83-1656-A (N.D.Ohio, August 2, 1984);

United States v. Northeastern Pharm. & Ckem. Co.,

579 F.Supp. 823 (W.D.Mo.1983).

The great weight of authority equate “equitable” response or cleanup costs with property damage.

Reihl v. Travelers Ins. Co.,

No. 83-0085, 22 Envt.Rptr.Cas. 1544 (W.D.Pa. August 7, 1984),

rev’d on other grounds,

772 F.2d 19 (3rd Cir.1985);

United States Aviex Co. v. Travelers Ins. Co.,

125 Mich.App. 579 , 336 N.W.2d 838 (1983);

Kutsher’s Country Club Corp. v. Lincoln Ins. Co.,

119 Misc.2d 889 , 465 N.Y.S.2d 136 (1983);

Port of Portland v. Water Quality Ins. Syndicate,

549 F.Supp. 233 (D.Ore. 1982);

Chemical Applications Co., Inc. v. The Home Idem. Co.,

425 F.Supp. 777 (D.Mass.1977);

Lansco, Inc. v. Department of Environmental Protection,

138 NJ.Super. 275, 350 A.2d 520 , 88 A.L.R.3d 172 (Ch.Div.1975),

affd,

145 N.J.Super. 433 , 368 A.2d 363 (App.Div.1976),

cert, denied,

73 N.J. 57 , 372 A.2d 322 (1977). Other courts have held or assumed, without extensive discussion, that cleanup costs constitute “property damage” for purposes of insurance coverage.

See, e.g., Independent Petrochemical Corp. v. Aetna Cas. & Sur. Co.,

Civ. No. 83-3347 (D.D.C. May 2, 1986) (sums denominated as “cleanup” costs constitute damages for purposes of liability insurance coverage);

Payne v. Fid. & Guar. Co.,

625 F.Supp. 1189 (S.D.Fla.1985);

Buckeye Union Ins. Co. v. Liberty Solvents & Chems.,

17 Ohio App.3rd 127, 477 N.E.2d 1227 (1984);

Evans v. Aetna Cas. & Sur. Co.,

107 Misc.2d 710 , 435 N.Y.S.2d 933 (1981).

See also, Mraz v. American Univ. Ins. Co.,

616 F.Supp. 1173 (D.Mdl985) (holding after trial that cleanup costs constitute property damage).

But see, West Waterway Lumber Co. v. Aetna Ins. Co.,

14 Wash.App. 833 , 545 P.2d 564 (1976) (injury to navigable waters caused by an oil spill was not property damage within the meaning of CGL policy).

The Special Master believes, and the cited cases support the conclusion, that actions seeking recovery of cleanup costs, such as the present one, are equivalent to actions seeking recovery of damages to natural resources.

Lansco, Inc. v. Department of Environmental Protection, supra; Kutsher’s Country Club Corp. v. Lincoln Ins. Co., supra; Port of Portland v. Water Quality Ins. Syndicate, supra.

The Special Master does not, however, read the above cases as broadly as the OGDs. In particular, it does not appear that the cases explicitly hold that

environmental harm or contamination

constitutes “property damage”; rather, the cases may only stand for the proposition that

cleanup costs

constitute “property damage.” Thus, for example, in

Kutsher’s Country Club Corp.,

the court framed the first question to be “whether or not the cost of the cleanup constitutes ‘property damage’ within the meaning of the insurance policy with the plaintiff.” 465 N.Y.S.2d at 138 .

See also, Independent Petrochemical Corp. v. Aet-na Cas. & Sur. Co.,

Civ. No. 83-3347 (D.D.C. May 2, 1986) (“Courts have held that sums denominated as ‘cleanup’ costs constitute damages for purposes of liability insurance coverage” citing

Kutsher’s Country Club Corp.

and Lansco).

The Special Master, however, believes that the language of the CGL insurance policies establishes that the discharge, dispersal, release or escape of toxic chemicals, waste materials or other irritants, contaminates or pollutants into or upon land, the atmosphere or any water course or body of water is “property damage” for purposes of coverage. Each of the CGL policies at issue here attempts to limit coverage for pollution. The exclusion generally takes a form substantially similar to the following:

It is agreed that the insurance does not apply to bodily injury or

property damage arising out of

the discharge, dispersal, release or escape of ... toxic chemicals ... waste material or other irritants, contaminants or pollutants into or upon land, the atmosphere or an [sic] water course or body of water ...

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Insurers’ Joint Memo, at 57. The quoted exclusion explicitly recognizes and acknowledges that “property damage” can and does result from environmental pollution, i.e., “the insurance does not apply to ... property damage arising out of the discharge ... of ... toxic chemicals ...” Indeed, the insurers must and do concede that pollution resulting from a “sudden and accidental” discharge, dispersal, release or escape of toxic chemicals is covered by a standard form CGL policy.

See,

Insurers' Joint Memo, at 67-68; Suggs, of ACIC at 99; Suggs, of Foremost at 6; Brief of Home at 38; Brief of Central National, Point C. Because coverage under the CGL policies would exist for “sudden and accidental” pollution, it necessarily follows that the harm arising out of such release or escape of toxic chemicals would constitute “property damage” just as “property damage” results from “nonsudden and nonacci-dental” releases of toxic chemicals or waste material. The fact that the so-called “pollution exclusion” seeks to limit coverage for property damage to “sudden and accidental” dispersals does not mean that damage or destruction to tangible property has not resulted from other escapes of contaminants.

The Special Master is persuaded that actions seeking recovery of cleanup costs and imposing a duty of cleanup, such as the present one, are equivalent to actions for recovery of damages to natural resources, and thus, constitute actions for injury to or destruction of tangible property. Furthermore, although the United States’ claim is for injunctive relief and response costs, and thus is equitable in nature rather than one strictly for damages, the Special Master believes that the distinction does not prevent a holding that the claim in the present case is one for injury to or destruction of tangible property. This is so because a failure to undertake a remedy of the environmental contamination and damage would certainly have lead to a cleanup by the United States Government followed by an action seeking recovery of the cleanup costs.

The Special Master therefore recommends that partial summary judgment be

granted

in favor of the Original Generator Defendants on the specific issues that: (1) environmental harm associated with the CCC Site constitutes “property damage” as such term is used and defined in the CGL insurance policies issued and delivered to CCC; (2) cleanup costs arising out of the environmental harm caused by the discharge, dispersal, release or escape of toxic chemicals and waste material constitutes “damage” as that term is used in the CGL policies issued and delivered to CCC; and (3) alleged economic losses in the form of response and cleanup costs sought by the United States constitute damages caused by or arising out of the environmental harm for purposes the CGL insurance policies issued and delivered to CCC.

H. OCCURRENCES

Each of the CGL policies at issue in the present case contains provisions substantially similar to this:

The Company 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 the Company shall have the right and duty to defend any suit against the Insured seeking damages on account of such bodily injury injury or property damage ...

Similarly, the typical policy at issue here defines occurrence as:

“Occurrence” means an accident, including continuous or repeated exposure to conditions, injury or property damage neither expected nor intended from the standpoint of the Insured.

In one form or another, with the exception of the “claims made” policies discussed earlier in the report, the policies generally contain a clause which provides:

This policy applies only to bodily injury or property damage which occurs during the policy period.

Thus, for coverage to exist under the typical CGL policy, it is necessary to establish

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the existence of either bodily injury or property damage which is caused by an occurrence within the period of the policy.

It is fairly well settled in Missouri that the time of an “occurrence” within the meaning of an indemnity policy is the time the damage was sustained and not the time when the negligent or wrongful act was committed.

Hawkeye-Security Ins. Co. v. Iowa Nat’l Mut. Ins. Co.,

567 S.W.2d 719, 720 (Mo.App.1978);

Kirchner v. Hartford Acc. & Indem. Co.,

440 S.W.2d 751, 756 (Mo.App.1969). Consequently, it is necessary to analyze the facts to determine the time that damage was sustained and whether the facts indicate a single or a number of “occurrences”. The Special Master finds that he is unable to determine at this point the applicability of the definition of an “occurrence” as applied to the facts of this case or the number of occurrences involved. In other words, when the event causing the property damage is not immediately discoverable and progresses through more than one policy period, different approaches must be utilized to fix coverage responsibility.

The Site Operator Defendants and OGDs argue that the initial acts and all damage occurred within the policies’ periods beginning in 1960 and ending in 1984. On the other hand, the Insurers argue that in this case, coverage will only be triggered if the claimed injury or damage occurred during the specific time period of specific policies. The Insurers argue that the date of damage or injury is properly measured by determining the date the damage became manifest or ascertainable. As noted above, the general rule in Missouri, relative to bodily injury and property damage, is that the time of damage and not the time of the wrongful or negligent act or the manifestation of the injury determines the time in which the occurrence was occasioned. The Site Operator Defendants and the OGDs argue that the policies are vague and ambiguous as applied to toxic waste litigation, and that liability should attach from the time of the wrongful act (disposal) to the time of discovery or manifestation of the ultimate damage.

Numerous courts have analyzed these questions and the situation most analogous to the case at bar are those dealing with asbestos-related diseases.

See, e.g., Riehl v. Travelers Ins. Co.,

772 F.2d 19 (3d Cir. 1985). The ultimate question in those cases concerned the time that an injury, sickness or disease occurs as defined by insurance policies. The holdings of these courts can be classified in three categories: (1) the “exposure” theory; (2) the “manifestation” theory; and (3) the “injury in fact” theory.

First, under the exposure theory, exposure to asbestos resulting in asbestosis is defined as a continuing tort, and all insurance companies which provided coverage from the time of the injured’s initial exposure to the time of the manifestation of the disease are jointly and severally liable to defend and to indemnify the defendant, if liability is found. Several courts relying on the exposure theory have construed CGL policy terms to provide coverage for the progressive and long-term illness of asbestosis. The exposure theory has apparently been adopted by the Fifth, Sixth, and the District of Columbia Circuits. In doing so, the courts have found the term “bodily injury and occurrence” inherently ambiguous as applied to progressive diseases such as asbestosis. Those courts have theorized that the exposure theory tends to more, closely approximate the reasonable expectations of the manufacturer and the insurer at the time the contract was entered into.

See, Ducre v. Executive Officers of Halter Marine, Inc.,

752 F.2d 976 (5th Cir.1985);

Porter v. American Optical Corp.,

641 F.2d 1128 (5th Cir.1981);

Insurance Co. of North America v. Forty-Eight Insula-tions, Inc.,

633 F.2d 1212 (6th Cir.1980);

Keene Corp. v. Insurance Co. of North America,

667 F.2d 1034 (D.C.Cir.1981),

cert, denied,

456 U.S. 951 , 102 S.Ct. 2023 , 72 L.Ed.2d 476 (1982);

Owens-Illinois, Inc. v. Aetna Cas. & Sur. Co.,

597 F.Supp 1515 (D.D.C.1984).

The second approach, the manifestation theory, holds that only those insurance companies providing coverage at the time

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the injuries manifest themselves or become reasonably ascertainable are liable for damages or bodily injury. These courts have rejected the exposure theory and have found that the CGL provisions actually support a manifestation theory.

Eagle-Picher Industries, Inc. v. Liberty Mut. Ins. Co.,

523 F.Supp. 110 (D.Mass.1982),

modified,

682 F.2d 12 (1st Cir.1982),

cert, denied,

460 U.S. 1028 , 103 S.Ct. 1279 , 75 L.Ed.2d 500 (1983). The manifestation theory is also apparently followed by the Third Circuit in

Appalachian Ins. Co. v. Liberty Mut. Ins. Co.,

676 F.2d 56 (3rd Cir.1982) when dealing with sex discrimination, but the Court carefully distinguished that case from the various asbestos cases.

See also, United States Fid. & Guar. Co. v. American Ins. Co.,

169 Ind.App. 1 , 345 N.E.2d 267 (1976).

Third, the injury in fact theory rejects both the exposure and manifestation theories, instead, holding that the insured must prove injury in fact during the policy period in order to apply for coverage. The most thorough examination of the various theories is provided by the district court in

American Home Products v. Liberty Mut. Ins. Co.,

565 F.Supp 1485 (S.D.N.Y.1983),

affd as modified,

748 F.2d 760 (2nd Cir. 1984) (an “occurrence” of personal injury means “any point in time at which the finder of fact determines that the effects of exposure to a drug actually resulted in a diagnosable and compensable injury”). The appellate court agreed with the injury in fact theory, but felt that the lower court’s requirement that the injury in fact be “diagnosable” or “compensable” during the policy period was unwarranted. In quoting the district court, the Second Circuit stated: “[A] real but undiscovered injury, proved in retrospect to have existed at the relevant time, would establish coverage, irrespective of the time the injury became diagnosable.” 748 F.2d at 766 ,

quoting

the district court at 565 F.Supp. at 1497. Although this is an issue of first impression in the Eighth Circuit, it does appear that the Eighth Circuit has agreed in principle that the terms “bodily injury” and “property damage” contained within CGL policies are inherently ambiguous as applied to progressive diseases. This conclusion was reached in

Hon v. Director, Office of Workers Compensation Programs,

699 F.2d 441 (3th Cir.1983). In making such a determination, the Eight Circuit noted a split among the various other circuits, adopting either the exposure or manifestation theories. This was particularly important when the case involved cumulative illnesses such as black lung disease considered in

Hon .

Though not extensive, there is some Missouri case law discussion concerning the appropriate trigger of coverage for delayed-manifestation injuries. In

Standard Asbestos Mfg. & Insulating Co. v. Royal Indem. Ins. Co.,

CV80-14909 (Mo.Cir.Ct., Jackson County, April 3, 1986) (O’Leary, J.), the insured sought a declaratory judgment in favor of

Keene

insurance coverage for asbestos bodily injury claims. In construing the CGL policies, Judge O'Leary applied Missouri law and found that:

The policies require a showing of actual injury, sickness or disease occurring during the policy period based upon the facts proved in each particular case. This means that an occurrence of “personal injury, sickness, or disease” is determined to be any point in time at which the finder of fact determines that exposure to asbestos fibers resulted in a diagnosable and compensable injury ... An exposure that does not result in injury during coverage does not satisfy the policy’s terms. On the other hand, a real but undiscovered injury proved in retrospect to have existed at a relevant time, would establish coverage, irrespective of the time the injury became manifest.

Id.

at 17-19. This holding is in accord with the much earlier decision by the Missouri Supreme Court in

Tomnitz v. Employers’ Liab. Assur. Corp.,

343 Mo. 321 , 121 S.W.2d 745 (1938). In that case, the court said if a jury concluded that silicosis injury actually happened during the policy period, then the insurance policy was triggered. Therefore, the Special Master does not interpret Missouri law as accepting the

Keene

doctrine. Indeed, Judge Clark recently declined to accept a multiple trigger

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approach absent a more developed factual record.

Continental Ins. Cos. v. Northeastern Pharm. & Chem. Co.,

No. 84-5034-CV-S-4 (W.D.Mo. June 25, 1985) [Available on WESTLAW, DCTU database],

appeal pending sub nom, Continental Ins. Cos. v. State of Missouri,

No. 85-1940WM (8th Cir.). Missouri therefore appears to be in line with the legal position adopted by the Second Circuit in

American Home Products v. Liberty Mut. Ins. Co.,

565 F.Supp. 1485 (S.D.N.Y.1983),

affd. as modified,

748 F.2d 760 (2nd Cir.1984).

Consequently, the Special Master finds that the Third-Party Defendant Insurers’ policies require the insurers to defend CCC, CCCI and/or Hjersted within the terms of their policies for “occurrences” of injury defined as follows. At any time a finder of fact determines that the effects of exposure to waste or hazardous materials released by the Site Operator Defendants actually resulted in damage to the off-site environment, if the Third-Party Defendant Insurers’ insurance policies were in effect at such time, then those insurers and only those insurers’ duty to indemnify the Site Operator Defendants for the underlying claim of the United States is triggered. Depending upon the facts of each case, the chemical involved, the period and intensity of exposure, and the property affected, an injury may occur in this sense upon exposure, at some point in time after exposure but before manifestation of the injury, or at manifestation. In addition, it is necessary to calculate whether multiple occurrences were occasioned due to the continuous deposit of additional waste material at the CCC Site until its closure in late 1979 or early 1980.

For the foregoing reasons, the Special Master finds that Missouri tends to follow the injury in fact analysis to actually determine or discover when an injury occurred. But there may be circumstances where the Missouri courts will look to the exposure and manifestation theories to determine when the injury occurred. For the foregoing reasons, the Special Master finds that he is unable to determine on the present record when disposal of waste materials first commenced, when leaching first occurred, or when damage to the environment was first discovered. As a matter of law, therefore, it cannot be decided whether this case presents only one “occurrence” which caused damage to the environment, groundwater and surface water, or whether there was a series of events constituting “occurrences” taking place beginning at various discrete and ascertainable times. Under any legal theory, one of these events during the policy period is necessary to trigger liability insurance coverage, yet, as noted, it cannot be determined when any of these events occurred.

Third-Party Defendant Insurers, both collectively and individually, have filed motions for summary judgment seeking to avoid any obligation to provide insurance coverage for property damage allegedly resulting from the handling of hazardous substances by CCC, CCCI and Hjersted. In support of their motions for summary judgment, various Third-Party Defendant Insurers contend that insurance coverage is non-existent because the harm was expected or intended by CCC, and therefore, was not caused by a “accident” or by an “occurrence” as required by the policy terms. (Suggs, of ACIC at 70-79; Memo, of Commercial Union at 8-13; Memo, of Continental Casualty at 7-9; Memo, of Foremost at 26-30; Memo, of Great American at 7-8; Memo, of Lincoln at 16-17; Memo, of Home at 15-37; Memo, of Central National; and Joint Memo, of Third-Party Defendant Insurers at 47-56).

The OGDs contend that under Missouri law, damages are “expected or intended” from the standpoint of the insured, if and only if such damages are intentionally caused by the insured. The OGDs say that it is well settled in Missouri that damages are “caused by accident” if the insured “did not intend that the damage resulting from his acts although the act itself was intentional.”

Fidelity & Cas. Co. of New York v. Wrather,

652 S.W.2d 245, 249 (Mo. App.1983);

White v. Smith,

440 S.W.2d 497, 507 (Mo.App.1969). It is also well settled that injury or damage is intentional

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“if the insured acts with specific intent to cause harm or if the insured’s intent to harm is inferred as a matter of law from the nature or character of the act.”

Travelers Ins. Co. v. Cole,

631 S.W.2d 661, 664 (Mo.App.1982). Intent to harm is inferred as a matter of law only “if the natural and probable consequences of the act are to produce harm.”

Id.; Subscribers at Automobile Club Inter-Insurance Exchange v. Kennison,

549 S.W.2d 587 (Mo.App.1977). In summary, therefore, it is the OGDs’ position that the Court cannot decide in a context of a summary judgment motion whether CCC “expected or intended” harm of the kind that resulted at the 8900 Front Street Site. Their argument is that such a determination under Missouri law turns on Hjersted’s subjective intent, which can only be decided by the trier of fact.

In opposition to the OGDs’ position, the insurers contend that the determination does not require proof of subjective intent. The insurers suggest that harm is expected and intended when the insured “knew or should have known” that there was a substantial probability that harm would result.

City of Carter Lake v. Aetna Cas. & Sur. Co.,

604 F.2d 1052, 1058-59 (8th Cir.1979);

Auto-Owners Ins. Co. v. Jensen,

667 F.2d 714 , 719-20 (8th Cir.1981). Furthermore, the insurers allege that the cases cited by the OGDs indicate that intent to harm can be deduced from an insured’s conduct, and thus the OGDs’ own cases establish the falsity of their position.

The Special Master believes that the objective test is the operative rule under Missouri law. In other words, for purposes of determining whether an act falls within the definition of either “occurrence” or “accident,” the harm is expected and intended if the insured knew or should have known that there was a substantial probability that harm would result. But finding that the objective test applies does not compel a holding as a matter of law that CCC, CCCI and/or Hjersted “expected and intended” environmental pollution and environmental harm to result from their actions at all times during the operation of the CCC Site.

The Special Master believes that the facts indicate that Hjersted may have intended certain materials to leach from the site into adjacent ground and surface water. This does not necessarily mean that Hjersted intended that harm should result from such leaching or that he knew that environmental harm would or could result from such activities. It is certainly not established as a matter of law that any of the Site Operator Defendants actually intended or expected harm to result from the operation of the CCC Site, or even that CCC, CCCI and/or Hjersted “knew or should have known” that environmental harm and damage could, would or might result from the storage and disposal of hazardous waste materials. But if the converse is true, it is not clear at what point CCC, CCCI or Hjersted knew or should have known that environmental harm would be occasioned.

In this regard, the testimony of CCC’s President, Norman Hjersted, suggests that CCC did not actually intend to damage the environment, and that the natural and probable consequences of CCC’s action was not to cause injury or property damage. Hjersted testified that CCC was formed to treat and neutralize industrial waste using a modified waste-plus-waste method originally developed by the United States Bureau of Mines. Hjersted considered his operation to be “state of the art” or ahead of the state of the art, and consulted with the Bureau of Mines in order to develop methods for the handling of waste materials. (Hjersted Depo. Vol. VIII, p. 65). Hjersted attended a number of seminars and conducted fairly extensive research at the Linda Hall Library of Science and Technology in developing his plans for setting up CCC. (Hjersted Depo. Vol. Ill, p. 40). According to Hjersted, the entire purpose of CCC was to avoid the release of

any

hazardous substances into the environment. (Hjersted Depo. Vol. VIII, p. 63). CCC did not dump materials directly into the Missouri River, nor did it place materials in sewer systems, streams or on any unapproved or unlicensed landfills. According to Hjersted’s sworn testimony,

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CCC never intended that toxic materials would be released into the environment.

(Id.

at pp. 66-67). Hjersted’s plans for recycling, destroying or neutralizing waste materials presaged many methods that have become state of the art today. He incinerated flammable waste, using three incinerators during the history of the site. He built a stripper tower at the site in 1963 to strip hydrogen cyanide and constructed a device to strip hydrogen cyanide using natural gas, and to destroy it by flaring. He neutralized acid waste and alkaline waste by mixing them together in the “waste-plus-waste” process (Hjersted Depo. Vol. XIII, pp. 85-88; Hjersted Depo. Vol. XI, pp. 63-65) licensed from the Bureau of Mines. CCC chose its KC Site not to permit gradual release of waste into the Missouri River, but because it was close to Standard Oil and Sheffield Steel and was removed from commercial and residential areas. In fact, CCC did not even consider the hydrology of the site because Hjersted had no background in either geology or hydrology. (Hjersted Depo. Vol. Ill, pp. 6-64). The philosophy of handling waste materials changed in the first half of the 1970s. Nevertheless, CCC maintained a large research

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