Title: State v. CNA Insurance Companies

State: vermont

Issuer: Vermont Supreme Court

Document:

State v. CNA Insurance Companies (99-276); 172 Vt. 318; 779 A.2d 662

[Filed 20-Jul-2001]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal  revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of  Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any  errors in order that corrections may be made before this opinion goes
  to press.

                                 No. 99-276

State of Vermont	                         Supreme Court

                                                 On Appeal from
     v.	                                         Washington Superior Court

CNA Insurance Companies,	June Term, 2000
Continental Insurance Company and
Glens Falls Insurance Company

Matthew I. Katz, J.

William H. Sorrell, Attorney General, and William E. Griffin, Chief Assistant 
  Attorney General, Montpelier, for Plaintiff-Appellant.

James E. Preston of Pierson Wadhams Quinn & Yates, Kevin J. Coyle of McNeil 
  Leddy & Sheahan, Burlington, and Robert M. Kaplan of Robson Ferber Frost 
  Chan & Essner, LLP, New York, New York, for Defendants-Appellees.

PRESENT:  Dooley, Morse, and Johnson, JJ., and Toor, Supr. J., and 
          Gibson, J. (Ret.), Specially Assigned

       JOHNSON, J.  Plaintiff State of Vermont appeals and defendants CNA
  Insurance,  Continental Insurance and Glens Falls Insurance cross-appeal
  from an order of the superior court  granting in part and denying in part
  the parties' motions for summary judgment.  The State initiated a 
  declaratory judgment action to determine insurance coverage for potential
  liability arising from the  contamination of the state prison site in
  Windsor.  The trial court held that there was coverage for 

 

  a civil suit, but no coverage for a state administrative proceeding.  We
  affirm in part, reverse in part  and remand for further proceedings.

       The State of Vermont operated a state prison on a parcel of land that
  it owned in the town of  Windsor until 1971.  Between 1954 and 1958 the
  state Department of Corrections (DOC) operated a  wood treatment facility
  on the property.  Treatment of the wood involved the use of kerosene and 
  pentachlorophenol by state prisoners.  In 1976, DOC conveyed part of the
  property, including the  portion on which the wood treatment facility was
  located, to the Windsor School District.

       In 1995, the district filed a complaint with the Vermont Agency of
  Natural Resources (ANR),  asking that the agency hold DOC responsible for
  environmental contamination at the site of the  former Windsor Prison.  At
  the same time, the district submitted a complaint directly with DOC  asking
  that the department share the costs of testing the site and any clean-up
  costs.  Subsequently,  the district filed a civil action in federal
  district court against DOC, alleging that it had released  hazardous
  substances from its wood treatment facility to the soil and groundwater;
  the district sought  an order requiring the department to rehabilitate the
  site.  This suit was later dismissed without  prejudice.  The district also
  filed a civil action against DOC in Washington Superior Court alleging 
  substantially the same claims as in the federal action.  During this
  period, ANR proceeded against  DOC, in part directing DOC to retain a
  consultant to investigate the extent of contamination and  possible methods
  of remediation.

       The State of Vermont purchased comprehensive general liability (CGL)
  insurance from the  Glens Falls Insurance Company.  Glens Falls is now
  owned by Continental Insurance Company and  both are CNA affiliated
  companies.  Policies were written for three-year periods for at least most
  of  the years 1963 to 1990.  The parties dispute whether there was a policy
  for the period 1969-1972.

 

       The policies bound the insurer to pay "all sums which the insured
  shall become legally  obligated to pay as damages because of . . . property
  damage to which this insurance applies, caused  by an occurrence, and the
  [insurer] shall have the right and duty to defend any suit against the
  insured  seeking damages on account of such . . . property damage" (quoting
  from policy 1981-1984).   Starting in 1984, the policies included a
  pollution exclusion, and the State represents that it has not  claimed
  coverage for any period after 1984.

       The State brought a declaratory judgment action to determine
  defendants' obligation to  defend and indemnify the State in both the civil
  action in Washington Superior Court and the ANR  proceedings.  Both sides
  moved for summary judgment.  The trial court awarded partial summary 
  judgment to the State on the "issues of coverage" raised by the district's
  civil suit, and awarded  partial summary judgment to defendants on the
  "issue of indemnity for expenses arising out of the  administrative [ANR]
  proceedings."  The court found that because ANR is part of the same branch
  of  government as the agency under investigation, both of which are
  ultimately responsible to the  governor, the proceedings are the equivalent
  of the same entity suing itself.

       The State appeals, arguing that defendants are obligated to defend and
  indemnify the State in  the ANR proceeding because the proceeding is a suit
  and DOC would be legally obligated to pay any  damages assessed by ANR. 
  Defendants cross-appeal claiming there is no coverage for the civil suit 
  because the contamination is not an "occurrence" under the policy, and that
  there was no proof of  property damage during the policy periods. 
  Defendants also raise a number of issues that challenge  the extent of
  their liability for either proceeding.  Defendants point to a pollution
  exclusion clause in  the 1981 policy and "owned" and "alienated" clauses in
  the 1981 and 1963 policies, which they  believe limits coverage for the
  contamination on the prison site.  Finally, defendants raise the 

 

  issues of whether CNA and Continental are proper defendants, and whether
  the trial court's  disposition was final for the purpose of review on
  appeal.

                            I.	Jurisdiction

       Defendants argue that because the trial court failed to address a
  number of the issues they  raised on summary judgment, the court's judgment
  is not final and thus not ripe for appeal.  It is  elementary that "a final
  judgment is a prerequisite to appellate jurisdiction."  Hospitality Inns v. 
  South Burlington R.I., 149 Vt. 653, 656,