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Cotter Corp. v. Am. Empire Surplus Lines Ins. Co.

Cotter Corp. v. Am. Empire Surplus Lines Ins. Co.

Supreme Court of Colorado

May 17, 2004, Decided

Case No. 02SC707

Opinion

 [*818]  EN BANC

JUSTICE MARTINEZ delivered the Opinion of the Court. This case arose from a declaratory judgment action initiated by petitioner Cotter Corporation ("Cotter"), a uranium mill operator, against its insurance providers. Cotter seeks a determination that the various insurance policies issued by the respondent insurers required them [**4]  to both defend Cotter in two tort actions and indemnify Cotter for resulting liability. In response, the insurers contend that the qualified pollution exclusion clauses contained in the policies precluded coverage. In Cotter Corp. v. American Empire Surplus Lines Insurance Co., the court of appeals affirmed the district court's grant of summary judgment in favor of the insurers. 64 P.3d 886 (Colo. App. 2002). The court of appeals held that the pollution exclusion clauses did not require the primary insurers to defend Cotter or any of the insurers to indemnify Cotter. Additionally, the court of appeals held that the excess insurance policies did not require the excess insurers to defend Cotter.

We granted certiorari to review the decision of the court of appeals affirming the trial court's grant of summary judgment in favor of the insurers. We specifically examine the court of appeals' interpretation of the qualified pollution exclusion clauses contained in Cotter's policies and its conclusion that the insurers owed no duties to defend or indemnify Cotter. 1 We first conclude that the court of appeals applied the incorrect standard to determine that the qualified [**5]  pollution exclusion clauses did not require the primary insurers to defend, or any of the insurers to indemnify, Cotter. Contrary to the court of appeals' reasoning, qualified pollution exclusion clauses do not automatically exclude coverage if the insured expected seepage from unlined tailings ponds. We hold that coverage exists if Cotter did not expect and intend contaminants to migrate either off its property or into the groundwater. We conclude that the court of appeals incorrectly affirmed the trial court's grant of summary judgment in favor of the primary insurers with respect to their duty to defend Cotter and in favor of all the insurers with respect to their duty to indemnify Cotter.

 [**6]  Next, we examine the court of appeals' determination that, by the terms of their policies, the excess insurers had no duty to defend Cotter. We hold that the court of appeals' correctly reached this conclusion. Therefore, we affirm the court of appeals' grant of summary judgment in favor of First State Insurance Company and American Empire Surplus Lines Insurance Company on this issue.

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90 P.3d 814 *; 2004 Colo. LEXIS 402 **

Petitioner: COTTER CORPORATION, v. Respondents: AMERICAN EMPIRE SURPLUS LINES INSURANCE COMPANY; GREAT AMERICAN INSURANCE COMPANY; AMERICAN NATIONAL FIRE INSURANCE COMPANY; AMERICAN EMPLOYERS' INSURANCE COMPANY; LEXINGTON INSURANCE COMPANY; GRANITE STATE INSURANCE COMPANY; and FIRST STATE INSURANCE COMPANY.

Subsequent History:  [**1]  Opinion Modified, and as Modified, Petition For Rehearing Denied June 7, 2004.

Modified and rehearing denied by Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 2004 Colo. LEXIS 477 (Colo., June 7, 2004)

Prior History: Certiorari to the Colorado Court of Appeals. Court of Appeals Case No. 01CA1791.

Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 64 P.3d 886, 2002 Colo. App. LEXIS 1536 (Colo. Ct. App., 2002)

Disposition: Judgment of Court of Appeals affirmed in part and reversed in part; remanded with directions.

CORE TERMS

insurers, clauses, contaminants, court of appeals, pollution exclusion, coverage, polluting, duty to defend, ponds, migration, groundwater, unintended, unexpected, seepage, summary judgment, containment, unlined, tailings, policies, restore, primary insurer, indemnify, refuse to defend, defense costs, landfills, discharges, wastes, duty to indemnify, disposal, terms

Civil Procedure, Appeals, Standards of Review, De Novo Review, Summary Judgment Review, General Overview, Standards of Review, Summary Judgment, Supporting Materials, Entitlement as Matter of Law, Materiality of Facts, Contracts Law, Defenses, Ambiguities & Mistakes, Insurance Law, Policy Interpretation, Reasonable Expectations, Contract Interpretation, Intent, Claim, Contract & Practice Issues, Ambiguous Terms, Construction Against Insurers, Coverage Favored, Exclusions, Ordinary & Usual Meanings, Plain Language, Commercial General Liability Insurance, Exclusions, Pollution, Pollution, Settlements, Releases From Liability, Interpretation of Releases, Accidental & Sudden Exception, Liability & Performance Standards, Good Faith & Fair Dealing, Duty to Defend, Premiums, Business Insurance, Declaratory Judgments, State Declaratory Judgments, Remedies, Reservation of Rights, Costs & Attorney Fees, Failure to Defend, Contract Conditions & Provisions, Multiple Insurers, Relationship Between Clauses, Types of Insurance, Excess Insurance, Apportionment of Liability, Property Insurance, Business & Corporate Compliance, Contracts Law, Standards of Performance, Creditors & Debtors, Assignments, Third Parties, Subrogation, Subrogation, Equitable Subrogation, Unjust Enrichment Doctrine, Obligations, Subrogation Distinguished, Unambiguous Terms