Gahagen Iron & Metal Co. v. Transportation Insurance Co.

No. 91-F-1984 (D. Colo. November 9, 1992)

The court holds that an insurer had a duty under Colorado law to defend and indemnify a company that sold recycled wet-cell batteries for defense costs and attorneys fees in an action arising out of a lawsuit brought against the company under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court first holds that the insurer had a duty to defend the company in the underlying CERCLA suit, because the incidences were unexpected and unintended from the standpoint of the insured, there being no evidence that the insured knew that environmental damage would result from its sale of the batteries, and an "occurrence" exists within the meaning of the comprehensive general liability (CGL) policies issued by the insurer to the insured. Moreover, CERCLA "response costs" are "damages" under the CGL policies as the latter term would be defined by the Colorado Supreme Court, such that the insured incurred damages as that term is defined in the policies when it was sued for CERCLA response costs. Also, the pollution exclusion clause in each of the policies does not provide a basis for the insurer to avoid its duty to defend, because the pollution was "sudden and accidental" from the perspective of the insured. The court holds that the insurer must indemnify the insured because the insured's settlement of its CERCLA liability for less than one percent of its $ 6 million joint and several liability exposure was reasonable. Although the insured has not fully established that the environmental injury occurred during the policies' periods, the court finds that public policy and practicality require the conclusion that the insurer forfeited its right to establish that the underlying claims were outside the policies' coverage when it failed to comply properly with its duty to defend. The court also holds that the insured can recover the costs and attorneys fees in bringing this lawsuit, because the insurer's failure to comply properly with its duties requires that it reimburse the insured for these expenses. Finally, the court holds that the insurer failed to submit evidence that there exist genuine issues of material facts regarding the validity and supportability of the numerous defenses it raised.

[A prior decision in this litigation is published at 23 ELR 21091.]

Counsel for Plaintiff
Edward J. McGrath, William D. Watson, Robert Tuchman
Holme, Roberts & Owen
1700 Lincoln St., Ste. 4100, Denver CO 80003
(303) 861-7000

Counsel for Defendant
Thomas L. Roberts, John L. Wheeler, Susan Speichinger
Pryor, Carney & Johnson
6200 S. Syracuse La., Ste. 400, Englewood CO 80111
(303) 771-6200

[23 ELR 21135]

Finesilver, J.:

Second Order Regarding Motions for Summary Judgment

This case involves Plaintiff's claims for indemnification, costs of defense and costs and attorney's fees in this action arising out of a lawsuit brought against Plaintiff in Nebraska under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"). Jurisdiction is based on 28 U.S.C.A. § 1332 (West 1966 & Supp. 1992). This matter comes before the Court on Plaintiff's Motion for Partial Summary Judgment, Defendant's Motion for Summary Judgment (and Defendant's Supplement to its Memorandum of Law and Appendices in Support of Defendant's Motion for Summary Judgment), Defendant's Motion for Summary Judgment on the Occurrence Issue, and Plaintiff's Second Motion for Partial Summary Judgment. We address these motions under Fed. R. Civ. P. 56. The issues have been fully briefed by the litigants. For the reasons stated below, Plaintiff's Motion for Partial Summary Judgment is GRANTED, Defendant's Motion for Summary Judgment (and Defendant's Supplement to its Memorandum of Law and Appendices in Support of Defendant's Motion for Summary Judgment) is DENIED, Defendant's Motion for Summary Judgment on the Occurrence Issue is DENIED, and Plaintiff's Second Motion for Partial Summary Judgment is GRANTED.

I. Background

In June 1990, Douglas County, Nebraska initiated a civil action in the United States District Court for the District of Nebraska (Civil Action No. 90-0395) against Plaintiff Gahagen Iron and Metal Co: ("Gahagen") and others alleging that Gahagen's sale of recycled wet-cell batteries made defendants liable for property damage under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"). On August 7, 1990, Gahagen gave notice to its insurer, Defendant Transportation Insurance Co. ("Transportation"), and demanded defense and indemnity pursuant to Comprehensive General Liability ("CGL") policies. On March 13, 1991, Transportation disclaimed coverage under the CGL policies and refused to defend or indemnify Gahagen.

On October 29, 1991, Gahagen filed a complaint against Transportation in the District Court of Adams County, Colorado (Civil Action No. 91-CV-2150). Gahagen's complaint sought the following relief: (1) a declaratory judgment that the CGL policies required Transportation to defend and indemnify Gahagen in the Nebraska case, (2) damages for defense costs incurred by Gahagen, (3) damages for alleged bad faith breach of the CGL policies by Transportation, (4) and award for costs, disbursements and attorney's fees incurred herein, and (5) legal interest on those amounts. On November 13, 1991, Transportation filed a Petition for Removal of Civil Action on Diversity of Citizenship Grounds. Gahagen is a Colorado citizen for diversity purposes. Transportation is an Illinois citizen for diversity purposes.

Because resolution of the instant action turned on the outcome of the Nebraska state court case and the evaluation of any subsequent settlement prospects, the Court deemed the above-captioned action closed on May 7, 1992. On April 15, 1992, Gahagen settled the Nebraska state court action for $ 47,058.83. On August 14, 1992, the Court reopened this action per Plaintiff's motion. In its motions for summary judgment, Gahagen seeks indemnification and its defense costs relating to the Nebraska action, and interest from April 15, 1992 until the date of payment, attorney fees and costs. Defendant seeks summary judgment that it has no contractual duty to defend or indemnify Gahagen.

The Court has addressed the conflict of laws issue presented in the parties' initial motions for summary judgment. On September 30, 1992, this Court issued its order that Colorado law would be applied in this case. Therefore, we will address here the issues of whether Transportation had a duty to defend and indemnify Gahagen and whether Gahagen is entitled to the costs associated with bringing this action against Transportation.

II. Standard for Summary Judgment

Granting summary judgment is appropriate when 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); Ash Creek Mining Co. v. Lujan, 934 F.2d 240, 242 (10th Cir. 1991); Metz v. United States, 933 F.2d 802, [23 ELR 21136] 804 (10th Cir. 1991), cert. denied, 112 S. Ct. 416 (1991); Continental Casualty Co. v. P.D.C., Inc., 931 F.2d 1429, 1430 (10th Cir. 1991). A genuine issue of material fact exists only where "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Merrick v. Northern Natural Gas Co., 911 F.2d 426, 429 (10th Cir. 1990). Only disputes over facts that might affect the outcome of the case will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Allen v. Dayco Prods., Inc., 758 F. Supp. 630, 631 (D. Colo. 1990).

In reviewing a motion for summary judgment, the court must view the evidence in the light most favorable to the party opposing the motion. Newport Steel Corp. v. Thompson, 757 F. Supp. 1152, 1155 (D. Colo. 1990). All doubts must be resolved in favor of the existence of triable issues of fact. Boren v. Southwestern Bell Tel. Co., 933 F.2d 891, 892 (10th Cir. 1991); Mountain Fuel Supply v. Reliance Ins. Co., 933 F.2d 882, 889 (10th Cir. 1991).

In a motion for summary judgment, the moving party's initial burden is slight. In Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986), the Supreme Court held that the language of rule 56(c) does not require the moving party to show an absence of issues of material fact in order to be awarded summary judgment. Rule 56 does not require the movant to negate the opponent's claim. Id. at 323. The moving party must allege an absence of evidence to support the opposing party's case and identify supporting portions of the record. Id.

Once the movant has made an initial showing, the burden of proof shifts to the opposing party. The nonmovant must establish that there are issues of material fact to be determined. Id. at 322-23. The nonmovant must go beyond the pleadings and designate specific facts showing genuine issues for trial on every element challenged by the motion. Tillett v. Lujan, 931 F.2d 636, 639 (10th Cir. 1991). Conclusory allegations will not establish issue of fact sufficient to defeat summary judgment. McVay v. Western Plains Serv. Corp., 823 F.2d 1395, 1398 (10th Cir. 1987).

In reviewing the evidence submitted, the court should grant summary judgment only when there is clearly no issue of material fact remaining. In Anderson, 477 U.S. at 249-50, the Court held that summary judgment should be granted if the pretrial evidence is merely colorable or is not significantly probative. In Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986), the Court held that summary judgment is appropriate when the trial judge can conclude that no reasonable trier of fact could find for the nonmovant on the basis of evidence presented in the motion and the response. Id. at 587.

III. Analysis

The duty to defend and the duty to indemnify are independent. Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1086 n.5 (Colo. 1991) ("Hecla") (citing City of Johnstown v. Bankers Standard Ins. Co., 877 F.2d 1146, 1148 [19 ELR 21132] (2d Cir. 1989)). Each will be separately discussed.

A. Duty to Defend

According to Colorado law, an insurance company has a duty to defend its insured "when the underlying complaint against the insure[d] [sic] alleges any facts that might fall within coverage of the policy." Hecla, 811 P.2d at 1089 (citing City of Johnstown, 877 F.2d at 1149); Sims v. Sperry, 835 P.2d 565, 568 (Colo. App. 1992). "[T]he obligation to defend arises from allegations in the complaint, which if sustained, would impose a liability covered by the policy." Hecla, 811 P.2d 1089. The "actual liability" of the insured in the underlying action is irrelevant to the determination of whether the insurer had a duty to defend. Id. In any event, an insurer has a substantial burden to establish that it has no duty to defend. Id.

Gahagen argues that Transportation was required to defend it in the underlying Nebraska suit. Transportation, on the other hand, argues that no duty to defend existed because the environmental harm did not constitute an "occurrence" and Gahagen was not sued for "damages," but only "response costs." We agree with Gahagen and hold that Transportation had a duty to defend Gahagen in the underlying suit.

The CGL policies issued by Transportation to Gahagen in this case provide that

[t]he 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 or property damage, even if any of the allegations of the suit are groundless, false or fraudulent. . . .

1. Occurrence

"Occurrence" is defined in the policies as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." The Colorado Supreme Court recently interpreted this identical definition of "occurrence." Hecla, 881 P.2d at 1086. In Hecla, the insured was sued under CERCLA for its mining discharges which allegedly contaminated water running through the Yak Tunnel. The Hecla Court adopted the interpretation of the Second Circuit and held that the phrase "neither expected nor intended" excludes only "those damages that the insured knew would flow directly and immediately from its intentional act." Id. at 1088. See Broderick Investment Co. v. Hartford Accident and Indemnity Co., 954 F.2d 601, 606 [22 ELR 20768] (10th Cir. 1992), cert. denied, 1992 WL 172026 (U.S. Oct. 5, 1992). Because the insured merely intended to conduct mining operations and there was no proof that the insured expected or intended environmental damage to occur as the result of those operations, the incident was deemed an occurrence. Hecla, 881 P.2d at 1086.

In the case at bar, the facts even more clearly establish that on "occurrence" existed within the meaning of the CGL policies issued by Transportation to Gahagen. The only intentional act by Gahagen was the sale of wet-celled batteries to a Nebraska company. Gahagen did not process those batteries in Nebraska. Gahagen merely delivered the batteries to its buyers in that state. Like in Hecla, there is absolutely no evidence that Gahagen knew that environmental damage would result from its sale of batteries. Therefore, the incidents were unexpected and unintended from the standpoint of Gahagen and an "occurrence" exists.

2. Damages

Transportation next argues that the money paid by Gahagen was not "damages" as defined by the CGL policies. For the purposes of this determination we will accept Transportation's contention and assume without deciding that Gahagen was sued solely for "response costs." This, however, does not relieve Transportation of its duty to defend because we believe "response costs" are "damages" under the CGL policies as that term would be defined by the Colorado Supreme.

We must interpret the term "damages" as we believe the Colorado Supreme Court would had it faced this issue. Broderick, 954 F.2d at 606. In the absence of a direct interpretation by the Colorado Supreme Court, we are bound by decisions of the Colorado Courts of Appeals, and guided by general policies and associated "doctrinal trends." Weiss v. United States, 787 F.2d 518, 525 (10th Cir. 1986). See also Commissioner v. Estate of Bosch, 387 U.S. 456, 465 (1967); Diatom, Inc. v. Pennwalt Corp., 741 F.2d 1569, 1574 (10th Cir. 1984). Colorado courts interpret insurance contracts according to their plain and ordinary meaning whenever possible, unless such meaning is inconsistent with the parties' clearly expressed intent. Broderick, 954 F.2d at 606 (citing Chacon v. American Family Mutual Ins. Co., 788 P.2d 748, 750 (Colo. 1990); Northern Ins. Co. v. Elkstrom, 784 P.2d 320, 322 (Colo. 1989). Although the Colorado Supreme Court has not explicitly interpreted the term "damages" as used in CGL policies, the Colorado Court of Appeals and other courts who follow the "plain meaning rule" have. West Am. Ins. Co. v. Baumgartner, Case No. 89CA1751 (Colo. Ct. App. August 8, 1991) ("Baumgartner"). See. e.g., Independent Petrochemical Corp. v. Aetna Casualty and Surety Co., 944 F.2d 940, 946 [21 ELR 21483] (D.C. Cir. 1991), and cases cited therein.

The Colorado Court of Appeals recently addressed a case involving a suit against the insured solely for CERCLA "response costs." Baumgartner, Case No. 89CA1751 at 1. The court applied Hecla and concluded that the insurer in that case was required to defend and "otherwise provide coverage under the [CGL] policy," even though [23 ELR 21137] the state only sought CERCLA "response costs."¹ Id. at 3. We are required to follow the Baumgartner court's interpretation. Weiss, 787 F.2d at 525.

Furthermore, according to the jurisdictions giving effect to the plain and ordinary meaning of CGL insurance contract provisions, "damages" include CERCLA "response costs." Id. Contra Grisham v. Commercial Union Ins. Co., 951 F.2d 872, 875 [22 ELR 20655] (8th Cir. 1991) (interpreting Arkansas law and concluding that "damages" do not include "response costs"); Continental Ins. v. Northeastern Pharmaceutical & Chemical Co., Inc., 842 F.2d 977, 985 [18 ELR 20819] (8th Cir. 1988) (interpreting Missouri law and concluding that "damages" do not include "response costs"), cert. denied, 488 U.S. 821.

We believe that the Colorado Supreme Court would adopt the interpretation that "damages" under CGL insurance contracts include CERCLA "response costs." Therefore, even if Gahagen was only sued for "response costs" under CERCLA, it incurred "damages" as that term is defined in its insurance contracts with Transportation.²

3. Pollution Exclusion Clause

The pollution exclusion clause found in each of the policies does not provide a basis for Transportation to avoid its duty to defend. That clause provides that

the insurance does not apply to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge dispersal, release or escape is sudden and accidental.

Gahagen maintains that pollution occurred as that term is defined in the exclusionary clause, it was not sudden and accidental. Given the Colorado Supreme Court's interpretation of "sudden and accidental" in Hecla, resolution of this defense is clear cut. In Hecla, the Court held that because the phrase "sudden and accidental" was ambiguous and therefore must be interpreted against the insurer. Hecla, 811 F.2d at 1092. Consequently, "sudden and accidental" is defined to mean unexpected and unintended in Colorado. Id. See also Broderick, 954 F.2d at 608.

Like in Hecla, the CERCLA complaint in this case did not allege and there is no evidence that Gahagen intended or knew that the sale of batteries to a Nebraska company would result in environmental harm. Instead, Gahagen was merely sued under CERCLA as a "generator" for having sold wet-celled batteries to Nebraska companies. Therefore, the pollution was "sudden and accidental" from Gahagen's perspective and the exclusionary clause is inapplicable.

Reading the complaint in the underlying CERCLA action alone, Gahagen may have been sued for acts falling within the CGL policies' coverage. The CERCLA complaint was related to an incident giving rise to an "occurrence" subjecting Gahagen to "damages." The pollution exclusion clause is inapplicable. Transportation has failed to satisfy its substantial burden of proving that no duty to defend existed. Consequently, Transportation must reimburse Gahagen for its costs and attorney's fees in defending against the underlying Nebraska lawsuit.

B. Duty to Indemnify

Gahagen claims that Transportation should indemnify it in the amount of $ 47,058.83, the amount which Gahagen settled the Nebraska suit, plus interest.³ When an insurer breaches its duty to defend, as Transportation has, the insured need not proceed to trial, but may settle the underlying dispute. Luria Bros. & Co. v. Alliance Assurance Co., Ltd., 780 F.2d 1082, 1091 (2d Cir. 1986). The insured may recover the amount of the settlement from the insurer if the facts then available to the insured established possible liability and the resulting settlement amount was reasonable in light of the ultimate potential liability and the likelihood of the underlying plaintiff's success against the insured. Id. Gahagen has clearly satisfied this burden. Other than asserting that no "occurrence" or "damages" existed, Transportation has not disputed or addressed its duty to indemnify Gahagen.

Gahagen settled its CERCLA liability for $ 47,058.83, less than one percent of the $ 6 million joint and several liability exposure it had. Based upon the CERCLA complaint and the facts alleged in the pleadings and motions in this case, it appears that at the time Gahagen settled the Nebraska case, it had a reasonable basis to believe that it was likely subject to substantial liability and that the plaintiff would succeed in proving that liability. Therefore, Gahagen's settlement of the Nebraska suit was reasonable. Transportation is bound by that settlement and must indemnify Gahagen.

Transportation argues that it is still not obligated to indemnify Gahagen because Gahagen has not proven that property damage occurred during the relevant policy periods. We disagree. Although Gahagen has not fully established that the environmental injury occurred during the policies' periods,⁴ this is not fatal to its recovery on summary judgment. Based on sound principles of public policy and practicability, we believe that Transportation forfeited its right to establish that the underlying claims were outside the policies' coverage when it failed to properly comply with its duty to defend Gahagen.

As Plaintiff accurately points out, "[w]hen the underlying case terminates as a result of settlement, rather than final judgment, the record in the underlying case will often be insufficient to conclusively determine whether an insurer has a duty to indemnify." Plaintiff's Response in Opposition to Defendant's Motion for Summary Judgment on the "Occurrence" Issue at 5. If Transportation had come forward and properly defended Gahagen, it could have litigated, rather than settled, the case and discovered further information to clearly determine whether the incidents occurred during the policies' periods. Transportation failed to defend and Gahagen reasonably saw fit to settle the case. Transportation cannot now complain that Gahagen has not adequately proved that each incident of environmental harm occurred during the policies' periods. We agree with the rationale stated by Judge Weinstein in Uniroyal Inc. v. Home Ins. Co., 707 F. Supp. 1368, 1378 (E.D.N.Y. 1988), that adopting Transportation's view in this case "would place [insureds] in the hopelessly untenable position of having to refute liability in the underlying action until the moment of settlement, and then of turning about face to prove liability in the insurance action." Therefore, Transportation is not relieved of its obligation to indemnify Gahagen.

C. Attorney's Fees and Costs in This Suit

In addition to seeking reimbursement for the costs and attorney's fees in the underlying lawsuit and indemnification for the settlement amount, Gahagen seeks to recover from Transportation its costs and attorney's fees in bringing this lawsuit. We agree that these amounts are recoverable.

When an insurer fails to properly defend its insured, the insurer implicitly forces the insured to bear expenses it otherwise should not have. Wheeler v. Reese, No. 90CA1170, 1992 WL 45957 at *4. (Colo. Ct. App. Mar 12, 1992) (citing Hedgecock v. Stewart Title Guaranty Co., 676 P.2d 1208, 1211 (Colo. Ct. App. 1983). See also Sims v. Sperry, No. 90CA1064, 1992 WL 45930 (Colo. Ct. App. Mar. 12, 1992), cert. denied (Colo. Aug. 31, 1992). The additional expenses [23 ELR 21138] incurred by the insured are a direct consequence of the insurer's failure to properly comply with its duties. Id. Therefore, the insurer should be forced to reimburse the insured for these expenses. Id. We believe that these are sound principles of consequential damages.

As discussed above, Transportation was obligated to defend Gahagen in the Nebraska suit. Transportation failed to perform this obligation. As a result, Gahagen was required to bring this lawsuit to enforce its rights. Transportation is thus required to reimburse Gahagen for its reasonable attorney's fees and costs in bringing this suit.

D. Transportation's Defenses

In Plaintiff's Second Motion for Summary Judgment, we are requested to determine whether there is any genuine issue of material fact, and if not, the resulting legal implications regarding Defendant's defenses numbered 3, 4, 5, 7, 8, 9, 10, 11, 14, 15, 17, 18, 19, and 21 in its Answer to Plaintiff's Complaint.

At the outset, we note that Defendant has plead numerous defenses which appear groundless.⁵ We are skeptical of these Defenses in light of Defendant's answers to Plaintiff's Interrogatories regarding these defenses. In its responses, Defendant almost uniformly states that

Transportation objects to this Interrogatory on the basis that it calls for a legal conclusion, and on the basis that this Interrogatory is a contention interrogatory and is premature in light of the fact that Transportation has not yet propounded discovery. Subject to and without waiver of this objection, Transportation states that it will continue to make reasonable inquiry into the basis of this defense and will supplement its response to this Interrogatory pursuant to Fed. R. Civ. P. 26.

Defendant has asserted numerous defenses which have questionable basis. If Defendant was uncertain whether certain defenses were meritorious, it should have waited for discovery and then amended its answer.

Transportation claims that it recently received the answers to its discovery which should permit it to allege the specific factual basis for each of these defenses. This argument is inconsistent with the facts alleged in Transportation's own pleadings. Transportation admits that it received Gahagen's answers to discovery on September 28, 1992, two days before the discovery cut-off.⁶ Transportation filed its Response to Plaintiff's Second Motion for Summary Judgment on October 30, 1992, a full month after it received discovery answers from Gahagen. Nevertheless, Transportation does not allege that it has supplemented its answers to interrogatories which allege facts supporting its numerous defenses. Transportation has furthermore failed to allege facts in its response to Plaintiff's Second Motion for Summary Judgment which establish that there exist genuine issues of material facts regarding each of these defenses as required in a response to a motion for summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Tillett v. Lujan, 931 F.2d 636, 639 (10th Cir. 1991) (explaining that once the movant has made an initial showing, the nonmovant must go beyond the pleadings and designate specific facts showing genuine issues for trial on every element challenged by the motion). Transportation has failed to submit any evidence, by affidavit or otherwise, that there exist genuine issues of materials facts regarding the validity and supportability of its defenses numbered 5, 7, 8, 9, 10, 11, 14, 15, 17, 18, 19, and 21. Therefore, these defenses may be stricken.

We have above addressed defense numbers 3 and 4 that Plaintiff's claims do not state an "occurrence" and are not for "damages."

There existing no genuine issue of material fact regarding any of the issues presented on the several motions for summary judgment, under Fed. R. Civ. P. 56, determination is appropriate at this stage of the litigation. Judgment on the above issues: Plaintiff's First, Second, and Third Claims for relief, may be entered in Plaintiff's favor as a matter of law.

We were not requested to decide on summary judgment whether Transportation acted in bad faith, Plaintiff's Fourth and final, Claim for Relief. Therefore, this issue remains. In light of the Court's ruling on the motions for summary judgment, Gahagen may wish to consider whether it desires to continue to pursue its claim of bad faith. Gahagen is DIRECTED to notify this Court no later than Friday, November 27, 1992, whether it will maintain its claim that Transportation acted in bad faith.

IV. Order

ACCORDINGLY, it is ordered that:

1) Plaintiff's Motion for Partial Summary Judgment, filed August 13, 1992, is GRANTED;

2) Defendant's Motion for Summary Judgment filed August 31, 1992, is DENIED;

3) Defendant's Motion for Summary Judgment on the Occurrence Issue filed October 15, 1992, is DENIED;

4) Plaintiff's Second Motion for Partial Summary Judgment filed October 15, 1992, is GRANTED;

5) The Clerk is DIRECTED to enter judgment for Plaintiff and against Defendant on Plaintiff's First, Second, and Third Claims for Relief in Plaintiff's Complaint;

6) Plaintiff is granted judgment against Defendant in the amount of $ 47,058.83 plus legal interest from April 15, 1992;

7) Plaintiff is DIRECTED to file with the Court affidavits setting forth its reasonable attorney's fees and costs in defending against the Nebraska lawsuit and in bringing this lawsuit; Defendant shall have ten (10) days after Plaintiff files its affidavits in which to file any objections thereto;

8) Upon the Court's receipt of the above affidavits, an appropriate judgment will enter against Defendant and in favor of Plaintiff awarding Plaintiff its reasonable attorney's fees and costs in the Nebraska lawsuit and in this lawsuit;

9) Plaintiff is DIRECTED to notify the Court no later than Monday, November 23, 1992, whether it will maintain its claim that Transportation acted in bad faith.

1. Defendant argues that Hecla is not determinative of this issue because in that case the complaint stated claims for CERCLA "response costs" and "other damages." Although it is unclear, in Hecla, the Colorado Supreme Court apparently based its finding that the insurance company had a duty to defend based solely on the insured's alleged liability for CERCLA "response costs." Hecla, 811 P.2d at 1088.

2. Transportation has conceded that

[i]f this Court holds that Colorado law governs and interprets Hecla to hold that duty to defend is triggered by a claim for response costs alone, then [Transportation] acknowledges its duty to defend Gahagen in the underlying [Nebraska suit] and to pay reasonable amounts incurred in defense of that matter.

Defendant's Response to Plaintiff's Motion for Partial Summary Judgment and Appendices at 10.

3. Transportation does not contest or discuss its potential liability for the settlement amount in its motions or responsive briefs. Although it is unclear, Transportation may be conceding its obligation to indemnify Gahagen because it has been determined that it breached its duty to defend. We nevertheless analyze this issue and conclude that Transportation must indemnify Gahagen for the amount which Gahagen settled the underlying dispute plus interest thereon.

4. Gahagen has established and it is undisputed that all of its shipments to the Nebraska companies occurred while its insurance policies were in force. We do not here decide whether this is sufficient to prove that the property damage occurred during the policies' periods.

5. For example, in its Seventh Defense, Transportation contends that "Plaintiff's claims are barred by doctrines of estoppel, laches, unclean hands, ratifications, consent, election, waiver and by reason of public policy." After the numerous pleadings, motions, briefs and supporting documents, the Court is not been made aware of any facts to support this defense.

6. However, the deadline for discovery was September 30, 1992. This date was set by the Court in its Order and Notice of Settings as amended on March 27, 1992. Therefore, Transportation has long had notice of when discovery would be completed and could have propounded its discovery requests sooner.