Opinion
NO. 3:00-CV-0250-P
March 27, 2002
MEMORANDUM OPINION AND ORDER
Now before the Court are:
1. Plaintiff International Insurance Company's (hereinafter "International") Motion for Summary Judgment Regarding Coverage for EPA Claim Relating to Operable Unit 1, filed August 31, 2001, Defendants' Response, and Plaintiff's Reply;
2. Defendants' Motion for Partial Summary Judgment on the West Dallas Site, filed August 31, 2001, Plaintiff's Response, and Defendants' Reply;
3. Plaintiff International's Objections to Defendants' Evidence Submitted in Opposition to Motion for Summary Judgment Regarding Coverage for EPA OU 1 Claim, filed October 10, 2001, Plaintiff International's Objections to Defendants' Evidence Submitted in Opposition to Motion for Summary Judgment Regarding Coverage for EPA OU 1 Claim, filed October 17, 2001, and Defendants' Response, filed November 2, 2001;
4. Plaintiff International's Rule 54(b) Motion to Certify Interlocutory Summary Judgment as Final, filed March 4, 2002, Defendants' Response, Plaintiff's Reply.
After considering the parties briefing and arguments, and the applicable law, the Court GRANTS Plaintiff's Motion for Summary Judgment, DENIES Defendants' Motion for Partial Summary Judgment, DENIES AS MOOT Plaintiff's Objections, and DENIES AS MOOT Plaintiff's Rule 54(b) Motion to Certify Interlocutory Summary Judgment as Final.
I. Background and Procedural History
This breach of contract case was first filed on February 2, 2000. Plaintiff sought a declaratory judgment regarding its liability pursuant to several insurance policies. The insurance policies covered two RSR facilities: the West Dallas smelting facility and the Harbor Island facility in Seattle, Washington. Prior to trial, Plaintiff International moved for summary judgment. The Court granted in part and denied in part Plaintiff's motion as to Plaintiff's claim for coverage of the West Dallas site. The Court denied Plaintiff's motion for coverage regarding the Harbor Island facility. A trial was held and a jury considered the liability issues surrounding the Harbor Island facility and returned a verdict on August 27, 2001 finding that International was liable to indemnify RSR for the clean-up costs of the Harbor Island site. The Court entered judgment that was "final with respect to all of the claims between RSR and International involving the Harbor Island site" on October 25, 2001.
The Court recounts the facts in dispute, relying primarily upon the parties' submissions in their Joint Pretrial Order, submitted on July 24, 2001. In 1981, North River Insurance Co. ("North River"), through its managing general agent L.W. Biegler ("Biegler"), issued four insurance policies to RSR and various related entities. The four policies provided successive layers of environmental impairment liability ("ER") coverage and were designated, respectively, as policy nos. JU 3004, JU 3005, JU 3006, and JU 3007. The declaration pages of the policies provide limits of liability that add up to an aggregate of $60 million with a per claim limit adding to $30 million per claim subject to the terms and conditions of the policies. Each of the four policies had a policy period of September 4, 1981 to November 4, 1982, with an extended reporting period until November 4, 1983, as described in Insuring Agreement 5 and Endorsement 7 of policy JU 3004 and Endorsement 4 of policies JU 3005, JU 3006, and JU 3007.
In 1993, International Insurance Company ("International") succeeded to the interest of North River in the insurance policies at issue. RSR agreed to the transfer of the policies from North River to International.
Within a few months after the inception of the policies, RSR received notice of a lawsuit for personal injuries and property damage associated with lead exposure at the West Dallas Smelter. In 1983, there were a number of lawsuits against RSR arising from the West Dallas facility. In addition to personal injury and property damage lawsuits, various governmental authorities filed suit against RSR for environmental pollution attributed to the release of lead particles from the West Dallas smelter.
RSR notified North River of the various personal injury and property damage claims and the suits related to the West Dallas Smelter during the policy period and extended reporting period of the North River Policy. RSR eventually requested North River's consent to various settlements of pending claims against RSR. North River consented to and funded the settlements. In 1984 and 1985, RSR cleaned up residential contamination near the West Dallas Smelter using $3.8 million funded by the North River insurance policies. In 1984 and 1985, North River also funded the settlement of the bulk of the personal injury and property damage claims. By the end of 1987, North River had paid approximately $24,112,603.85 in settlements and defense costs.
On April 16, 1993, RSR notified North River that it had received a notice of potential liability from EPA regarding the West Dallas Smelter (the "EPA West Dallas Claim"). The site that is the subject of the EPA West Dallas Claim involving the West Dallas Smelter consists of several blocks of West Dallas bounded by the Trinity River on the north and east, Fort Worth Avenue on the south and Loop 12 (Walton Walker) in the west. The EPA administratively divided the West Dallas Site into five "operable units" (denoted OU 1 through OU 5). OU 1 encompasses a private residential area consisting of approximately 6,800 homes.
The EPA alleges that the RSR West Dallas Site was contaminated as the result of secondary lead smelting operations conducted from the 1930s until 1984 at a smelting facility located near the center of the site. RSR Corporation acquired the lead smelting operation in 1971. A battery wrecking facility was located on the RSR West Dallas Site, across Westmoreland Road from the smelting facility. The facility was operated by RSR Corporation's operating subsidiary, Murph Metals. While it operated, the battery wrecking facility processed approximately 10,000 batteries per day.
At the battery wrecking facility, automobile batteries were received from common carriers, were shredded at the facility and were then placed into a separator where the plastic or rubber components were separated from the lead paste. The plastic and rubber components were then stockpiled on-site until removal. In the years when battery casings were made of rubber, before casings began to be made of plastic, the rubber chips were not recycled and instead ended up as fill material in multiple locations around West Dallas. The contamination at the RSR West Dallas Site resulted in part from the use of lead and battery chips by residents as fill material in residential driveways and yards and from the disposal of smelter wastes in several disposal areas. In 1983, RSR was required as the result of a court order to take corrective measures at the smelter and to fund a cleanup of the residential community surrounding the smelter facility. RSR funded the court-ordered cleanup of the site from 1984 to 1985.
In 1991, the Texas Natural Resources Conservation Commission ("TNRCC"), formerly called the Texas Water Commission, began receiving complaints from area residents about residual slag piles and battery chips originating from the RSR facility. When it investigated, the TNRCC discovered lead slag and battery chips originating from the RSR smelting facility that had been either disposed of improperly or used as "fill" material.
The TNRCC asked the EPA to reevaluate the cleanup activities that had been performed in the mid-1980s. The EPA's investigation revealed that areas originally cleaned in the 1980s had not been recontaminated "but that contamination existed in other areas near the smelter and in areas where battery chips were used as fill." (Int.2d App. at 0091). In 1992, the EPA administratively divided the RSR West Dallas Site into five "operable units" denoted as OU 1 through OU 5.
The area designated as OU 1 consists of a private residential area with approximately 6, 800 homes, as well as several schools, churches, parks, recreation facilities, and day care centers. The EPA determined that the soil in OU 1 had been contaminated in part from the use of battery chips as fill material in the residential areas. The EPA reported finding elevated levels of arsenic, cadmium, and lead where slag and battery chips from the RSR facility had been used by area residents as fill material. The EPA initiated a "Phase I" removal action in 1991 to address contamination at the two elementary schools, two church play areas, two community parks, a children's recreation facility and 211 residential properties located in OU 1.
Based on the reports of slag and battery chip materials observed within OU 1, the TNRCC initiated a house-to-house survey of 6,800 properties in July 1992. The TNRCC survey was completed in February 1993, and identified the properties with contamination resulting primarily from the use of battery chip materials as fill in driveways. The EPA noted that contamination in such "battery chip areas" usually extended deeper than 6 inches due to the way in which battery chips had been used for fill. In June 1993, the EPA's Emergency Response Branch commenced a "Phase II" removal action in OU 1, resulting in the cleanup of 202 residential properties. The EPA described its cleanup as follows:
In the air deposition area, all homes were sampled, and those that exceeded the removal action cleanup levels were cleaned. In the rest of west Dallas, the cleanup was based on homes that had used battery chip materials as fill for driveways and exceeded the cleanup levels. The battery chip locations were scattered throughout west Dallas and appeared random. This is due to the fact that only some of the homeowners in the area used these materials for fill purposes.
Int.2d App. at 0123 (emphasis added).
Based on the completion of these removal actions at OU 1, the EPA issued its Record of Decision (ROD) on May 9, 1995, documenting its decision to take no further action at OU 1. The ROD stated that the EPA's objectives in conducting the emergency removal action from 1991 through June 1994 had included the removal of battery chips. In its ROD, the EPA indicated that the costs of its removal action were approximately $12 million. In addition, the EPA indicated that it spent approximately $4 million in studies. The properties cleaned by the EPA in the 1990s were not the same as the ones cleaned in the 1980s.
On May 21, 2001, the EPA filed suit against RSR in United States of America and the State of Texas v. Quemetco Metals Limited, Inc., Quemetco, Inc., and RSR Corporation, Case No. 3:01-CV-0924-D, in the United States District Court for the Northern District of Texas, Dallas Division. The EPA's Dallas suit seeks recovery under CERCLA for recovery of response costs relating to the West Dallas smelter facility site and throughout OU 1. The EPA alleges in the suit that, "battery chips contaminated with lead, cadmium, and arsenic and other waste materials from smelter operations contaminated with lead cadmium and arsenic were used as fill material in residential areas and were disposed of in other areas of the Site." Int.2d App. at 0571.
The remaining dispute concerns International's request for declaratory judgment relating to coverage under policy no. JU 3007 for the EPA's claim arising from OU I of the West Dallas Site.
II. Summary Judgment Standard
Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). All evidence and the reasonable inferences to be drawn therefrom must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). The moving party bears the burden of informing the district court of the basis for its belief that there is an absence of a genuine issue for trial, and of identifying those portions of the record that demonstrate such an absence. Celotex, 477 U.S. at 323.
Once the moving party has made an initial showing, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The party defending against the motion for summary judgment cannot defeat the motion unless he provides specific facts that show the case presents a genuine issue of material fact, such that a reasonable jury might return a verdict in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Mere assertions of a factual dispute unsupported by probative evidence will not prevent summary judgment. Id. at 248-50; Abbot v. Equity Group, Inc., 2 F.3d 613, 619 (5th Cir. 1993). In other words, conclusory statements, speculation and unsubstantiated assertions will not suffice to defeat a motion for summary judgment. Douglass v. United Serv's. Auto. Ass'n, 79 F.3d 1415, 1429 (5th Cir. 1996) (en banc). If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to is case, and on which he bears the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.
Finally, the Court has no duty to search the record for triable issues. Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). "The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which the evidence supports his or her claim." Id. A party may not rely upon "unsubstantiated assertions" as competent summary judgment evidence. Id.
III. Cross-Motions for Summary Judgment
The parties have both moved for summary judgment. Plaintiff International argues that two exclusions in the insurance policy preclude their liability for RSR's claim for coverage. RSR seeks a declaratory judgment that it is indeed entitled to coverage.
As a preliminary matter, RSR argues that Plaintiff is precluded from bringing its motion for summary judgment because Plaintiff failed to properly preserve the issue. Defendant argues that exclusions 7(a) and 12(c), upon which International relied on in its instant motion, were not raised in International's first motion for summary judgment or the Joint Pretrial Order. However, International advised the Court of the remaining issue at the pretrial conference and the Court ordered further briefing on this issue. Therefore, the Court considers whether the exclusions are applicable and considers the issue as still properly before the Court.
A. Exclusion 7(a)
The insurance policy in question here includes the following exclusion. Exclusion 7(a) provides that the policy does not apply to or include:
Liability for Environmental Impairment arising from:
(a) Any commodity, article or thing supplied, repaired, altered or treated by the insured and happening elsewhere than at the insured's premises after the insured has ceased to own or exercise physical control over that commodity, article or thing supplied, repaired, altered, or treated.
Int.2d App. at 0004-0005. Plaintiff International argues that the battery chips that were used as fill in residents' driveways and yards should be considered a "commodity, article or thing" such that exclusion 7(a) applies and precludes International's liability for the costs of their clean-up.
The threshold issue this Court must decide is whether this exclusion is ambiguous and, if it is ambiguous, if the Court should consider extrinsic evidence to determine the parties' intent. In construing a contract, it is the court's task to seek the intention of the parties as that intention is expressed in the written document. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983); Sun Oil Co v. Madeley, 626 S.W.2d 726, 727-28 (Tex. 1981).
Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered. Id. at 394. If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law. Coker 650 S.W.2d at 393; Sun Oil, 626 S.W.2d at 732; R P Enters. v. LaGuarta, Gavrel Kirk, Inc., 596 S.W.2d 517, 519 (Tex. 1980). When the terms of a contract are plain and unambiguous, extrinsic evidence is not admissible to show the parties' intent at the time of the making of the contract. R P Enters., 596 S.W.2d at 519, Maxwell v. Lake, 674 S.W.2d 795, 801 (Tex.App.-Dallas 1984, no writ). We construe unambiguous contracts by giving the language in the contract its plain grammatical meaning. Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 529 (Tex. 1987).
A contract is ambiguous when its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Donahue v. Bowles, Troy, Donahue, Johnson, Inc., 949 S.W.2d 746, 753 (Tex. App— Dallas 1997, writ denied); Reilly, 727 S.W.2d at 529; Coker, 650 S.W.2d at 394; Sun Oil, 626 S.W.2d at 732. However, the parties' conflicting interpretations of a contract do not create an ambiguity. Forbau v. Aetna Life Inc. Co., 876 S.W.2d 132, 134 (Tex. 1994); Sun Oil, 626 S.W.2d at 727.
Only when a written instrument is reasonably susceptible to more than one meaning is extraneous evidence admissible to determine the true meaning of the instrument. R P Enters., 596 S.W.2d at 519. When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue. Coker 650 S.W.2d at 394. When a court makes the determination that the contract cannot be given a certain and definite legal meaning, and is therefore ambiguous, the meaning of the contract and the issue of the parties' intent are questions of fact that may be submitted to a jury. Gaulden v. Johnson, 801 S.W.2d 561 (Tex.App.-Dallas 1990, writ denied). Coker, 650 S.W.2d at 393-94; Yancey v. Floyd West Co., 755 S.W.2d 914, 917 (Tex.App.-Fort Worth 1988, writ denied).
1. Exclusion 7(a) and the Monsanto Litigation
The parties here dispute the meaning of litigation involving International and an identical EIL policy which included an identical exclusion 7(a). The Delaware courts considered whether exclusion 7(a) was ambiguous, and the propriety of admitting extrinsic evidence to determine the meaning of the exclusion in Monsanto Co. v. Aetna Casualty and Surety Company, No. 88C-JA-118, 1994 WL 161961 (Del.Sup.Ct. April 15, 1994) (" Monsanto I"), rev'd by 652 A.2d 36 (Del. 1994) (" Monsanto II"). The parties dispute the holdings of the Delaware courts, the reasoning for the Delaware Supreme Court's reversal of the Superior Court, and the decisions' application in the instant case.
International issued an EIL policy to Monsanto that included an identical exclusion, also labeled 7(a). See Monsanto I, 1994 WL 161961, at *2. Monsanto, though its manufacturing operations, had created toxic byproducts that were stored and disposed at dump sites. Id. at * 1. The site at issue in Monsanto I was the "Brio site." At the Brio site, byproducts sold by Monsanto were reprocessed or dumped. Id. at *1-2. One such byproduct, styrene tar, was dumped in the quantity of millions of gallons into disposal pits. Id. at *2. The EPA and other parties sued Monsanto for injuries caused by the chemicals. Id. International, in the Monsanto case, argued that exclusion 7(a) precluded coverage of the EIL. Monsanto attempted to introduce evidence of a statement made by an International representative to show that the parties intended to exclude such claims from the ER policy.
The Delaware Superior Court applied the substantive law of Missouri in determining whether such evidence could be admitted to defeat International's argument. That court, though, framed the issue this way: "whether the liability incurred by Monsanto is excluded from an environmental impairment policy because the impairment occurs off the insured's premises and out of the insured' control." Id. at *4 The Superior Court first set out its plain reading of exclusion 7(a). The Delaware court held that "the plain language precludes coverage from environmental impairment resulting from: (1) any commodity, article or thing; (2) supplied, repaired, altered or treated by the Insured; (3) happening elsewhere than at the Insured's premises; (4) after the Insured has ceased to own and exercise physical control over the commodity, article or thing. If these four requirements are satisfied, Monsanto cannot claim coverage under the IIC-EIL policy." Id.
After setting out its plain reading of the exclusion, the Delaware court went on to determine that the additional evidence of the parties' intent was inadmissible because, under Missouri law, extrinsic evidence is not admissible unless the terms of a contract are ambiguous. Id. at *6. The Superior Court found that Monsanto had failed to demonstrate that exclusion 7(a) was ambiguous, either patently or latently. Id. at *6-7. Once the court determined that the contract was not ambiguous, the court found that exclusion 7(a) was applicable to that case. Specifically, the court held that the chemical byproducts at the Brio site were indeed a "commodity, article or thing supplied, repaired, altered or treated" by Monsanto. Id. at *8. Therefore, the Superior Court found that International was not liable for Monsanto's loss caused by the chemical byproducts deposited at the Brio site.
The Delaware Supreme Court reversed the Superior Court and determined that the lower court had incorrectly applied Missouri law; "the Superior Court misinterpreted Missouri law with regard to consideration of parol evidence in this insurance contract setting." Monsanto II, 652 A.2d at 37. The Supreme Court held that Missouri law allowed for the introduction of extrinsic evidence in a wider variety of situations than the Superior Court had found. "Under Missouri law, courts may consider extrinsic evidence that interprets all or a portion of the relevant contract. This rule stands even if the contract was unambiguous." Id. at 39. However, a "court may not consider . . . extrinsic evidence that serves to vary, alter or contradict the contract, unless the party offering the extrinsic evidence can show that the contract was either: (a) unintegrated, or (b) ambiguous." Id. (citing Peters v. Employers Mut. Casualty Co., Mo. Supr., 853 S.W.2d 300, 302 (1993)). Applying Missouri law, the Supreme Court held that the extrinsic statements should have been admitted to aid in the interpretation of the contract. Id. In a footnote, the court stated that "Monsanto has not demonstrated that the clause is either patently ambiguous or latently ambiguous." Id. at 30, n. 6.
2. Implications of Monsanto in this Case
The parties dispute the meaning of the Monsanto litigation and the effect of any holding in this court. While it is true that the Delaware courts were construing an identical exclusion in an identical policy, the Delaware decisions provide, at best, persuasive authority to this Court. Further, the decisions did indeed turn on the application of Missouri law. Under Texas law, extrinsic evidence is never admissible until a court makes a finding that a contract is ambiguous. Nat'l Union Fire Ins. Co. of Pittsburgh v. CBI Indust., Inc., 907 S.W.2d 517, 520 (Tex. 1995). Only when such ambiguity is present might the court consider extrinsic evidence for the purpose of interpreting the contract. Id. at 521. Therefore, the Court considers the Delaware courts finding on what is here the threshold issue: both of the Delaware courts which considered exclusion 7(a) found it to be neither patently nor latently ambiguous.
3. Is Exclusion 7(a) Ambiguous?
The Court then turns to this same question and determines that the meaning of exclusion 7(a) can be determined by its plain language. In Texas, this determination is a question of law, decided by looking at the contract as whole, in light of the circumstances present when the contract was entered. See Coker, 650 S.W.2d at 394.
The Court looks first at the plain terms in the exclusion. In construing these terms, the Court shall presume that they have their plain, ordinary, and generally accepted meanings, unless the instruments themselves show the terms were used in a technical or different sense. Gamer v. Corpus Christi Nat'l Bank, 944 S.W.2d 469, 475 (Tex.App.-Corpus Christi 1997, writ denied). The words used in exclusion 7(a) were not defined elsewhere in the insurance policy, so the Court first looks to the words themselves.
Plaintiff argues that the language of the exclusion is clear and that the battery parts are clearly a "commodity, article or thing supplied, altered, treated or repaired" by RSR. Defendant RSR argues that exclusion 7(a) is a "products hazard" exclusion that is meant only to preclude liability for claims of products liability. RSR argues that the language of exclusion 7(a) is a specific kind of exclusion that is used generally in insurance contracts and should be construed in this way in the instant case. However, the plain language of exclusion 7(a) sets it apart from this "products hazard" exclusion. RSR points to the testimony of the drafter of the policy to establish that this exception is a "products hazard" exclusion. However, such extrinsic evidence is not admissible under Texas law unless the Court determines first that the language of the policy is ambiguous.
RSR cites to a treatise to generally define a "products hazard" exclusion: "`Products hazard' provisions, whether defining the scope of coverage or an exclusion from coverage, thus delineate an insurer s liability for bodily injury and property damage that arises from the insured's products and that occurs away from the insured's premises after the insured has relinquished possession of its products." Barry R. Ostrager and Thomas R. Newman, Handbook on Insurance Coverage Disputes § 7.02[c][1], p. 322 (10th ed. 2000). RSR cites to cases construing such products hazard exclusions for the proposition that any coverage is limited to products liability claims. However, exclusion 7(a) is different in several key ways. First, the exclusion is not limited to "bodily injury" or "property damage," but instead excludes "liability for environmental impairment." Second, the language of exclusion 7(a) is much broader than that of the products hazard exclusions that RSR cites in its brief. The International Policy does not use the word "product," instead, its exclusion appears to be much broader, applying to "any commodity, article or thing." Although the word "commodity" has a commercial aspect to its definition, "an economic good as . . . an article of commerce esp. when delivered for shipment," Merriam-Webster's Collegiate Dictionary (10th ed. 1999), at 231, the words "article" and "thing" used are much broader in definition and these terms are not equivalent to "product" as used in the products hazard clauses.
For example, in Colony Ins. Co. v. H.R.K, Inc., the disputed policy language was: "`Products hazard' includes bodily injury and property damage arising out of the named insured's products or reliance upon a representation or warranty made at any time with respect thereto, but only if the bodily injury or property damage occurs away from the premises owned or rented to the named insured and after physical possession of such products have been relinquished to others." 728 S.W.2d 848, 851 (Tex.App.-Dallas 1987, no writ). In another case, the Tenth Circuit considered a "products-completed operations hazard" exclusion. The Court of Appeals quoted the policy description of coverage:
"All `bodily injury' and `property damage' occurring away from premises you own or rent and arising out of `your product' or `your work' except: (1) Products that are still in your physical possession; or
(2) Work that has not yet been completed or abandoned." Bituminous Casually Corp. v. St. Clair Lime Co., 69 F.3d 547 (10th Cir. 1995) (unpublished op.). The Court went on to stated that "[c]ourts have traditionally defined `products' in this context as the `goods or services which the insured deals in as his stock or trade'." Id.
The Court finds that the plain language of exclusion 7(a) is clear and that the clean-up costs of OU 1 are excluded from the policy's coverage. Despite RSR's insistence that exclusion 7(a) is a "products hazard" exception, the words of the exclusion are not ambiguous. Exclusion 7(a) applies to "any commodity, article or thing." These words are easily defined, and although "commodity" does have a more commercial meaning, the breadth of the words and their combination indicate that the exclusion is meant to be broad. Its application is not limited to products. It appears as though the insurer was trying to exclude coverage of any "commodity, article or thing" that created environmental impairment off the insured premises. Therefore, the first phrase of exclusion 7(a) is satisfied. The battery chips fall within the defined phrase "commodity, article or thing." Puffing aside any use or commercial value, the word "thing" is sufficiently encompassing: "a separate and distinct individual quality, fact, idea, or usu. entity . . . an inammate object distinguished from a living being." Merriam-Webster's Collegiate Dictionary at 1225. Given the breadth of the first phrase, "any commodity, article or thing," the Court concludes that the battery chips which necessitated the clean-up are things.
A more difficult question is whether the second phrase of exclusion 7(a) has been satisfied. RSR argues that the Delaware court concluded that exclusion 7(a) applied in the Monsanto decisions because Monsanto had sold the chemical byproducts to another party. However, the Delaware decisions regarding the second phrase of exclusion 7(a) are irrelevant because this Court can determine the meaning of the phrase by examining the plain meaning of the words used in the policy. The exclusion applies to "any commodity, article or thing supplied, repaired, altered or treated by the insured." RSR argues that this phrase is meant to apply only to the commercial sale of any commodity, article or thing that may cause environmental impairment.
As noted above, the parties stipulate that the contamination in OU 1 was caused by battery chips that originated from the West Dallas site. The dispute that remains is whether the way the battery chips became fill is covered by the language of exclusion 7(a) so as to preclude International's liability. The Court looks at the plain meaning of the phrase "supplied, repaired, altered or treated" to make this determination.
The common definition of "supply" is "to add as a supplement, to provide for, to make available for use, to satisfy the needs or wishes of . . ." Merriam-Webster's Collegiate Dictionary at 1184. The evidence indicates that after the batteries were taken apart, the rubber chips that were later used as fill were stockpiled on the smelter premises. Although the precise method of distribution is unclear, it is undisputed that the battery chips were found in fill throughout OU I over a large geographical area. The Court concludes that this distribution satisfies the second phrase of exclusion 7(a). RSR did "supply" the battery chips because they were "made available" and were used throughout OU 1 as fill. The stockpiling of the battery chips made them available to the residents of the surrounding neighborhood.
The rest of exclusion 7(a) is satisfied. The environmental impairment occurred "elsewhere than at the insured's premises" because the contamination at issue occurred in OU 1, outside of the West Dallas smelter which was the premises covered by the insurance policy. Once the battery chips were made available and taken for use as fill, the "insured ha[d] ceased to own and exercise physical control over that commodity, article or thing supplied, repaired, altered or treated."
The Court finds that exclusion 7(a) is satisfied by the facts and through an interpretation of the plain language of the exclusion. The language of exclusion 7(a) does not create a "products hazard" exception that limits RSR's coverage to products liability claims only. Rather, the language of the exclusion makes it clear that a broader exclusion was being carved out. There is no reference to products, and the language of the exclusion does not require that the cause of environmental impairment be sold commercially. It was enough that the battery chips were made available to the public; because RSR effectively "supplied" these "commodit[ies], article[s] or thing[s]," exclusion 7(a) has been satisfied and International is not liable for the costs of the EPA clean-up of OU 1.
Therefore, the Court GRANTS Plaintiff International's Motion for Summary Judgment regarding OU 1 because the environmental impairment of OU I was created by a "commodity, article or thing supplied" by RSR. For the same reasons, the Court DENIES Defendants' Motion for Partial Summary Judgment. Defendants argue that International must cover the contested costs unless Plaintiff can show a valid exclusion to the policy. Plaintiff has shown such a valid exclusion.
B. Exclusion 12(c)
Exclusion 12(c) provides that the policy does not apply to or include liability for or costs or expenses of or in connection with:
(c) upgrading, monitoring, neutralizing, restoring, landfilling, cleaning-up or inactivating any waste disposal sites used directly or indirectly by the Insured or for which they may otherwise be responsible.
Int.2d App. at 0005.
International argues that this exclusion also applies, precluding them from liability for the costs of the clean-up of OU 1. RSR argues that this exclusion applies only to "waste disposal sites" and OU 1 does not fall within any definition of such a site. The Court finds that exclusion 12(c) is inapplicable to liability for the contamination of OU I.
International does not provide any case law to support the contention that an undisputedly residential area is a "waste disposal site." Instead, International relies upon the allegations of the EPA suit against RSR. However, even the EPA's allegations never describe OU 1 as a waste disposal site. The EPA materials cited by International simply state that the battery chips were improperly disposed of, and that the battery chips were waste material.
RSR argues that the policy itself supports the distinction between liability for cleaning up impaired lands and cleaning up waste disposal sites. The language of exclusion 12 does make this distinction: "PROVIDED ALWAYS that notwithstanding these exclusions the cover provided by this insurance shall apply, subject to the terms and condition of the Policy, to Environmental Impairment Liability arising away from any such premises or outside of any such disposal sites." Int.2d App. at 0005 (EIL Policy § II.12). International's interpretation would make this additional language superfluous because from International's premise, it would follow that anywhere waste is found is a waste disposal site.
It is undisputed that OU 1 is an area that consists of a private residential area with approximately 6, 800 homes, as well as several schools, churches, parks, recreation facilities, and day care centers. International has not shown that OU 1 is a "waste disposal site." Therefore, exclusion 12(c) is inapplicable in the instant case.
C. Plaintiffs Objections to Defendants' Evidence Submitted in Opposition to Plaintiffs Motion for Summary Judgment
Plaintiff objects to evidence submitted by Defendant. This evidence comes from the Monsanto litigation discussed above. However, all of the evidence Plaintiff objects to is extrinsic evidence that the Court does not consider because it has found that the policy can be interpreted according to the plain language of the policy. Therefore, Plaintiffs objections are DENIED AS MOOT.
IV. Rule 54(b) Motion to Certify Interlocutory Summary Judgment as Final
International brings a motion to certify the October 11, 2001 Memorandum Opinion and Order as final because an ongoing state action continues in Harrison County, Texas. However, because the Court now resolves all of the outstanding issues of liability in this case, a final judgment will be entered concurrently with this order. Such a final judgment makes Plaintiff's request moot. Therefore, the Court DENIES AS MOOT Plaintiff's Motion. Although pending motions remain in this case, the Court has determined finally all of the outstanding issues of liability.
Conclusion
For the foregoing reasons, the Court GRANTS Plaintiff's Motion for Summary Judgment, DENIES Defendants' Motion for Partial Summary Judgment, DENIES AS MOOT Plaintiffs Objections to Defendants' Evidence, and DENIES AS MOOT Plaintiffs Rule 54(b) Motion to Certify Interlocutory Summary Judgment as Final.