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Aluminum Co. of Am. v. Accident & Casualty Ins. Co.

ELR Citation: 30 ELR 20536
Nos. No. 67340-3, 998 P.2d 856/(Wash., 05/04/2000)

The court affirms a trial court's holdings regarding insurance coverage for an aluminurn producing company for environmental damage under comprehensive general liability (CGL) policies and for property damage under differences in conditions (DIC) policies, but reverses the court's treatment of the issues of fortuity, the contractual limitations period, and the allocation of damages. While CGL policies protect the policyholder for liability it incurs to someone else, DIC policies protect the policyholder for losses to the policyholder's own property. The court first holds that the aluminum company had an insurable interest in groundwater at Washington State and New York sites under its DIC policies. The company had permits to withdraw the groundwater, and under Pennsylvania law, the definition of insurance interest in property includes more than mere title to property.

The court next holds that there was sufficient evidence before the jury to sustain its verdict that the company omitted material facts in its application for DIC insurance and, therefore, upholds the trial court's decision denying the insurers' motion for a judgment notwithstanding the verdict. Although the aluminum company failed to report existing pollution on its property at the time it obtained the DIC policies, pollution damage was not considered to be covered by the policies and, therefore, was not material to the decision to issue insurance. Additionally, the court holds that the trial court did not abuse its discretion in denying the insurers' motion for a new trial based on the alleged misconduct of the aluminum company's counsel in closing statements to the jury. Similarly, although the trial focused on three test sites rather than all 35 sites at issue, the trial court did not err in ruling that the jury's finding of no misrepresentation for the three sites applies to all the sites. The court also holds that the trial court correctly dismissed the aluminum company's claims against the CGL insurers for 33 of the 35 sites because the applicable policies contained pollution exclusion clauses. Contrary to the company's assertion, the Pennsylvania insurance agency did not rely on alleged misrepresentations of the insurers in allowing the pollution exclusion clauses to be used.

The court then holds that the trial court did not err in holding that the company's brokers were agents for the delivery of insurance documents containing suit limitation clauses and that the documents were part of the DIC policies. However, the trial court improperly determined when the suit limitation clauses contained in the DIC policies commenced under Pennsylvania and Massachusetts law. In Pennsylvania, the suit limitations clause runs from the inception of the environmental damage, whereas under Massachusetts law, the suit limitations provision runs when the insured's cause of action against the insurer ripens, i.e., when the insurer denies coverage. The court further holds that the trial court incorrectly placed the burden of showing fortuity on the aluminum company. The burden of proof of lack of fortuity lies with the DIC insurers. While an insured has the burden of proving that its claim falls within the policy's affirmative grant of coverage, the burden of proving the applicability of any exclusions or limitations on coverage lies with the insurer, and fortuity is, in effect, an exclusion. Last, the court holds that the trial court erred in its decision to prorate coverage according to the years the various DIC policies were in force. The policies cover all physical loss or damage to the company's property and do not provide for any limitations to the scope of damage.

The full text of this opinion is available from ELR (33 pp., ELR Order No. L-214).

Counsel for Appellants
Steven S. Anderson
Heller, Ehrman, White & McAuliffe
6100 Columbia Center
701 5th Ave., Seattle WA 98104
(206) 447-0900

Counsel for Appellees
John E. Hanson
Hanson, Zwink, Baker & Ludlow
300 Surrey Bldg.
10777 Main St., Bellevue WA 98004
(425) 454-3374