COA differs on why no insurer duty to defend

A panel of Indiana Court of Appeals judges agreed that two insurance companies are entitled to summary judgment, but the judges disagreed as to why the insurers owed no duty to defend.

In P.R. Mallory & Co. Inc., et al. v. American Casualty Co. of Reading, PA., et al., No. 54A01-0903-CV-142, P.R. Mallory and other companies affiliated with Radio Materials Corp. sued American Casualty Co. and Continental Casualty Co. in 2000 for breach of contract regarding the insurers' duty to defend relating to environmental contaminations caused by Radio Materials. Radio Materials operated a manufacturing plant of television parts in Attica in which it had two open, unlined pits from 1950 to the 1980s that contained various contaminants and other hazardous wastes.

CCC issued a commercial casualty policy to Radio Materials in 1981; ACC issued three commercial casualty policies for the years 1982-1984.

Beginning in the 1960s, Radio Materials became aware of contaminants from its site leaking and entering neighboring properties. It attempted to remove most of the contaminated soil in the 1990s. In March 1999, the Environmental Protection Agency entered a consent order for Radio Materials in which the agency found a release of hazardous waste into the environment and Radio Materials had to undertake all the actions required by the order.

The trial court granted ACC and CCC's motion for summary judgment based on late notice.

Judges Elaine Brown and L. Mark Bailey agreed with the trial court's reasoning for entering summary judgment for the insurers. The plaintiffs argued that Radio Materials' duty to provide notice didn't arise until the company subjectively became aware of the property damage happening during the 1980 to 1984 time period. But the designated evidence showed that beginning the 1960s, Radio Materials was aware of contamination seeping out to nearby properties. In the 1980s the company sent notice to Kraft Foods Corp., which through a merger had interest in Radio Materials' assets, regarding potential environmental pollution problems.

The plaintiffs had knowledge of an occurrence before they notified the insurers and the plaintiffs' delay in notifying ACC and CCC of the occurrence constituted unreasonably late notice, wrote Judge Brown. P.R. Mallory and the other companies failed to rebut the presumption of prejudice as a matter of law.

In his separate opinion in which he concurred in result, Judge Edward Najam wrote the case turned on whether there was an "occurrence" during the policy period, not whether Radio Materials satisfied the notice requirement. Radio Materials showed no evidence of property damage to non-owned property during the policy period of 1980 to 1984, so no occurrence took place that could suggest coverage, he wrote.

"In a coverage case, it is incumbent on the insured to present facts that indicate coverage," he wrote. "As we have held, where the facts alleged by an insured (and summary judgment nonmovant) reveal no circumstances that would indicate coverage, the insurer can 'not be held to have been required to defend' the insured from third-party actions."