RSR Corp et. al. v. International Insurance Co.
(United States Court of Appeals, Fifth Circuit, July 26, 2010)
This complex insurance coverage matter arises from a CERCLA cost recovery action stemming from a lead smelter operation on Harbor Island, near Seattle Washingtonoperated by plaintiff-insured RSR Corp. The insurer sued RSR Corp. and its subsidiaries seeking a declaration that International had no obligation to RSR Corp. under four Environmental Impairment Liability policies. RSR also purchased many (at least 53) Comprehensive General Liability policies from many other insurance companies covering multiple sites, including the Harbor Island site. Some of those policies contained exclusions for environmental claims, with exceptions for “sudden and accidental” events. Other CGL policies excluded environmental claims, that had exceptions to those exclusions for hostile fires; and still others did not exclude environmental claims, but only covered accidents and occurrences. Over a ten-year period RSR entered into 36 separate settlement agreements with its CGL carriers from which it received an aggregate payment of $76 million.
In the present action, International claimed that Condition 8 of its environmental policies regarding “other insurance” precluded coverage of RSR’s Harbor Island claims because RSR had already been fully compensated for this liability through its settlements with the CGL insurers and that no recovery was available on the Harbor Island claim due to the Texas common law “one satisfaction” rule. The district held that the terms of Condition 8 of the environmental polices prevented RSR from recovering because it had already recovered fully for the cleanup costs of the Harbor Island site from its settlements with its CGL insurers. The Court of Appeals affirmed the lower court decision finding that the Supreme Court of Texas would apply the presumption that settling plaintiffs were in a better position than nonsettling defendants to insure that the settlement award was allocated between actual and punitive damages and that the nonsettling parties should not have been penalized for events over which they had no control to the corporation's settlements with its CGL insurers. The CGL settlements yielded over $ 76 million in proceeds, all of which had to be allocated to the Harbor Island liabilities before the corporation could collect on its environmental policies. Because the Harbor Island alleged liabilities only totaled $ 13.1 million, the corporation could take nothing under the environmental policies. Thus, the district court did not err in finding that Condition 8 barred all recovery on the environmental policies.
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Paul Steck and Tom Segalla