Land O’ Lakes, Inc. v. Employers Mutual Liability Ins. Co., Case No. 09-CV-0693, 2010 U.S. Dist. LEXIS 124817 (D. Minn., Nov. 24, 2010).
The U.S. District Court for the District of Minnesota recently ruled that a CGL policy issued to a named insured more than a decade before the named insured merged with another entity provided coverage for environmental cleanup costs of the non-named entity for contamination that occurred during the policy period. Travelers insured Land O’ Lakes from 1964 through 1982 under successive CGL policies. Land O’Lakes merged with Midland Cooperative in 1982. Under the terms of the merger, Land O’ Lakes became responsible for all of Midland’s liabilities. Midland had operated an oil refinery from the 1940’s to the 1970’s but sold the refinery to a third party several years prior to the merger. Midland’s operation of the refinery caused contamination that resulted in an enforcement action by the USEPA against Land O’ Lakes sometime after the merger. Land O’ Lakes sought coverage from Travelers under its multiple CGL policies.
It was undisputed that the cleanup costs were amounts that Land O’ Lakes was legally obligated to pay as damages for an accident or occurrence that took place during the policy period. The central question instead was whether the policies issued to Land O’ Lakes before it merged with Midland provided coverage for contamination caused by operation of the refinery even though Land O’ Lakes never owned or operated the refinery. The court focused on the named insured provisions of each of the policies. A 1964 policy identified four specific named insureds and provided no coverage. Policies issued between 1974 and 1981 identified specific named insureds and included entities acquired during the policy period and which were owned or controlled by Land O’ Lakes. These policies provided no coverage. Policies issued between 1971 and 1981 included similar language which the court could not reasonably construe as providing coverage for these liabilities. However, the court found that certain policies issued between 1965 and 1970 provided coverage because the named insured provision included entities controlled or owned by Land O’ Lakes “now and hereafter” without a time limitation on the acquisition. The court explained that Travelers knew how to write policies with a time limitation, as evidenced by the language in the 1974 to 1981 policies, but that it hadn’t done so, at its own risk. Thus, the court concluded Travelers was obligated to provide coverage under five of the policies at issue.
For a copy of the decision click here
Patrick Omilian and Tom Segalla