# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

__ __ __ __ __ __ __ __ __ __ __ __ __ _

No. 1 2- 17 52

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Lan d O' Lak es , Inc

.

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Em pl oyers In su ran ce Co m

pa ny of Waus au , for m erl y kn own as Em

pl oyers M ut ua l
Liab il it y Ins ur an ce Co m

pa ny of Wisco ns in an d Em pl oyers In su ran ce o f W au sa u A

Mu tu al Co m

pa ny; an d Th e Trav el ers Ind em ni ty Com pa ny

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el le es

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of M in ne so ta - Mi nn eap ol is

__ __ __ __ __ __

Su bm it te d: Feb ru ary 14 , 20 13
Fil ed : Au gu st 29 , 20 13

__ __ __ __ __ __

Befo re SM ITH, MELLOY, an d B ENTON, Ci rcu it Ju dg es

.

__ __ __ __ __ __

SMI TH, Circ ui t J ud ge

.Lan d O' Lak es , In c. ("Lan d O' Lak es ") su ed two of it s in su rers , Em pl o y ers

M u t ua l Liab il it y In su ran ce Co m pa ny of W au sa u ("Waus au ") an d The Trav el ers 1

In de m ni ty Co m

pa ny ("Tra ve le rs "), se ek in g pa y m en t of de fen se co st s an d

in de m ni fic at io n un de r co m

m erci al ge ne ral li ab il it y (CGL) po li ci es th at W au sa u an d

Trav el ers (co ll ect iv el y , "t he In su rers " ) i s s u e d in co nn ect io n wit h an act io n th at th e

Env iro nm e n t a l P r o te ct io n Age nc y (EPA) br ou gh t ag ai ns t Lan d O' Lak es un de r th e

Co m pr eh en si ve Env iro nm en ta l Res po ns e, Co m pe ns at io n, an d Liab il it y Act of 19 80

, 42 U.S.C. § 96 01 et se q

. (CERC LA). The di st ric t co ur t gr an te d su m m ary jud gm en t 2

to th e In su rers , co nc l u d i n g t h a t (1 ) Mi nn es ot a's si x- y ear st at ut e of li m it at io ns on

co nt ract act io ns ba rred Lan d O' Lak es 's cl ai m th at th e In su rers br each ed th ei r du ty to

de fen d an d (2 ) th e own e d

- p r o p e rty ex cl us io n in th e CGL po li ci es th at th e In su rers
is su ed rel ie ve d th em of an y du ty to in de m ni fy Lan d O' Lak es fo r th e co s t s o f th e

EPA-m an da te d c le an up . La nd O' La ke s ap pe al s, an d we affi rm th e jud gm en t of th e
di st ric t co ur t.

I. Bac kg ro un d

Lan d O' Lak es , a m em be r-o w ne d ag ric ul tu ral co op erat iv e, m erg ed wit h

Mi dl an d Co op erat iv es , I nc ., (" Mi dl an d" ) in Ja nu ary 1 98 2. M i d l a n d op erat ed an oi l

refi ne ry in Cu sh in g, Okla ho m a, fro m 19 43 un ti l 19 77

, whe n th e faci li ty was so ld to

H u d s o n Oil Refi ne ry Co m pa ny ("Hu ds on Oil "). Hud so n Oil

, Mi dl an d's su cces so r , ab an do ne d th e refi ne ry in 19 82 an d wen t ba nk ru pt in 19 84

. Lan d O' Lak es acq ui red

Mi dl an d in 19 82

, in cl ud in g th e no w do rm an t refi ne ry

. The EPA ev en tu al ly ta rg et ed

Hu d s o n O i l i n a cl ean up act io n at th e refi ne ry si te

. In ad di ti on , th e Okl ah om a Dep art m en t of Env iro nm en ta l Qua li ty (ODEQ) su bjec te d th e si t e to on go in g

Em pl oyers In su ran ce Co m

pa ny of W au sa u was fo rm erl y kn own as Em pl oyers 1

Mu tu al Liab il it y In su ran ce Co m pa ny of W is co ns in an d Emp l o ye r s In su ran ce of

W au sa u A Mu tu al Co m

pa ny.

The Hon or ab le Pat ric k J. Sch il tz

, Uni te d St at es Dis tri ct Ju dg e fo r th e Dis tri ct 2

of Mi nn es ot a.

-2

-m on it or in g. Hud so n Oil cl ean ed up th e refi ne ry si te fo r te n y ears , bu t ceas ed aft er

ex ha us ti ng it s fu nd s, an d in 19 94

, th e EPA rel eas ed Hud so n Oil fro m fu rth er cl ean up
ob li ga ti on s at th e ref

in ery si te

.

In 19 98 , th e EPA an d th e ODEQ co nd uc te d a joi nt in sp ect io n of th e refi ne ry
si te an d de te ct ed a nu m

be r of se rio us pr ob le m s in vo lv in g th e rel eas e of ha zard ou s

m at eri al s. To ad dr es s th es e im m ed ia te th reat s to hu m an he al th an d th e en vi ro nm en t,

EPA co nt ract or s be ga n an em erg en cy rem ov al act io n in la te 19 98

, an d in Ju ly 19 99

, th e EPA pl aced th e refi ne ry si te on th e Nati on al Pri or it ie s List

, th us de si gn at in g th e
refi ne ry as a Su pe rfu nd si te un de r CERCLA. Fro m 20 01 to 20 03

, th e EPA co nd uc te d

a se co nd

, no n- ti m e-cr it ic al rem ov al act io n to cl ean up ad di ti on al po ll ut io n on th e si te

.

In J a n ua ry 20 01

, th e EPA se nt Lan d O' Lak es a Sp eci al Not ic e Lett er ("t he

20 01 PRP Lett er" ), in fo rm in g Lan d O' Lak es th at ba se d on Mi dl an d's pa st own ers hi p

of th e refi ne ry si te an d Lan d O' Lak es ' s l a t er acq ui si ti on of Mi dl an d, th e EPA

co ns id ered Lan d O' Lak es a Po te nt ia ll y Res po ns ib le Part y (PRP ) un de r CERCLA an d

th us po te nt ia ll y li ab le fo r cl ean up co st s at th e refi ne ry si te

. Se e 42 U.S.C. § 96 07 (a);

40 C.F.R. § 30 4.1 2( m ) (d efi ni ng "p ot en ti al ly res po ns ib le pa rty"). Und er CERCLA,

a PRP m ay

be req ui red to pa y

th e co st s o f cl ean in g u p a Su pe rfu nd si te th at it or i ts

pr ed eces so rs pre vi ou sl y

own ed . 42 U.S.C. § 96 07 (a). The 20 01 PRP Let te r, am on g

ot he r th in gs , (1 ) de m an de d th at Lan d O' Lak es pa y th e ro ug hl y $8 .9 m il li on in co st s

al read y in cu rred by th e EPA in cl ean in g u p t he refi ne ry si te in th e em erg en cy an d

no n- ti m e-cr it ic al act io ns ; (2 ) in vi te d Lan d O' Lak es to en te r in to ne go ti at io ns wit h 3

th e EPA f

o r th e pe rfo rm an ce of a Rem ed ia l In ve st ig at io n an d Feas ib il it y St ud y (RI/ FS) at th e refi ne ry si te ; an d (3 ) pr ov id ed ge ne ral an d refi ne ry

- s i t e

- sp eci fic

in fo rm at io n fo r pu rp os es of ne go ti at io ns wit h t h e a g e n cy

. The EPA se nt a dr aft

The pa rti es ag ree th at th e $8 .9 m il li on in rem ov al co st s a t t r i b ut ab le to th e 3

EPA's em erg en cy an d no n- ti m e-cr it ic al rem ov al actions is not co ve red un de r th e CGL

po li ci es th at th e In su rers is su ed

.

-3

-A d mi n i s t r a ti ve Ord er on Co ns en t (AOC) fo r co nd uc ti ng th e RI/ FS al on g wit h th e

20 01 PRP Let te r.

In Mar ch 20 01

, Lan d O' Lak es res po nd ed to th e 20 01 PRP Lett er by as se rti ng

th at Hud so n Oil

, no t Mi dl a n d

, c a u s e d an y co nt am in at io n at th e refi ne ry si te

. Thu s,

Lan d O' La ke s as se rte d th at it bo re no res po ns ib il it y fo r th e cl e a n u p co st s. Lan d O'

Lak es al so refu se d to pa y th e $8 .9 m il li on in pa st cl ean up co st s th at th e EPA in cu rred

an d t o p art ic ip at e in or p ay for an RI/ FS.

Des pi te Lan d O' Lak es 's de ni al of res po ns ib il it y fo r cl ean up at th e refi ne ry si te

, Lan d O' Lak es no ti fie d th e In su rers of th e EPA's cl ai m s an d s o u g h t a de fen se an d

in de m ni fic at io n un de r va rio us CGL po li ci es th at th e In su rers is su ed to Lan d O' Lak es

an d Mi dl an d. In Nov em be r 2 0 0 1

, Wa us au de cl in ed to de fen d Lan d O' Lak es ,

co nc lu di ng th at th e 20 01 PRP Lett er was no t a co ve red "s ui t" un de r th e CGL po li ci es

. Lan d O' Lak es c h a l l e n g e d th is de te rm in at io n by le tt er in Ja nu ary 20 02

, no ti ng th at

m os t co ur ts co ns id eri ng th e is su e ha d ru le d "t ha t th e du ty to de fen d is tri gg ered by

an EPA de m an d le tt er." Lan d O' Lak es co nt en de d th at W au sa u's act io ns am ou nt ed to

"a dec li na ti on of cov erag e an d a br each of [Waus au 's] du ty to de fen d." Fo r th e ne xt

si x y ears , ho wev er, Lan d O' Lak es to ok no fu rth er act io n to ch al le ng e W au sa u's

de ni al of d efen se an d i nd em ni fic at io n o bl ig at io ns un de r th e p ol ic ie s.

Trav el ers als o d ecl in ed to de fen d Land O' Lakes aft er re cei vi ng no ti ce o f th e

20 01 PRP Lett er. Trav el ers co nc lu de d th at

, be cau se it s CGL po li ci es ha d be en is su ed

to Lan d O' La ke s pr io r to Lan d O' La ke s's acq ui si ti on of Mi d l a n d i n J a nu ary 1 98 2,

th os e CGL po li ci es wou ld no t pr ov id e an y co ve rag e to Mi dl an d be fo re Lan d O' Lak es

acq ui red Mi dl an d. Fo r th e ne xt se ve n y ears , Lan d O' Lak es to ok no fu rth er act io n to

ch al l en ge Trav el ers 's de ni al of de fen se an d in de m ni fic at io n ob li ga ti on s un de r th e

po li ci es

.

-4

-Mea nwh il e, wit ho ut Lan d O' Lak es 's pa rti ci pa ti on , th e EPA co nt in ue d it s

cl ean up act iv it ie s at th e refi ne ry si te

, co m pl et in g it s no n- ti m e-cr it ic al rem ov al act io n

in Ju ne 20 03

. Fro m 20 04 to 20 07

, th e O DEQ, on be ha lf of th e EPA, co m pl et ed an
RI/ FS th at ou tl in ed th e co nt am in at io n on th e si te an d pr op os ed al te rn at iv es to fin al ly

co m pl et e th e cl ean up

. In Nov em be r 20 07

, th e EP A i ss ue d a Rec or d of Deci si on (ROD) in whi ch it se le ct ed an ap pr oa ch to co m pl et in g th e cl ean up of th e si te

. The

ROD de sc rib ed th e hi st or y of act iv it ie s on th e si te

, ev al ua te d th e co nt am in at io n fo un d

at th e si te

, li st ed an d co m pa red th e al te rn a t iv e ap pr oa ch es fo r rem ed y in g th e

co nt am in at ion, an d ult im at el y se le ct ed a rem ed y to "t reat [] an d/ or rem ov e[] th e so ur ce

m at eri al s co ns t i t u t in g pr in ci pa l th reat s at th e si te ." The ROD es ti m at ed th at th e

se le ct ed rem ed y

wou ld co st $9 .65 m il li on

.

The EPA se nt Lan d O' Lak es a se co nd Sp eci al Not ic e Lett er in Feb ru ary 20 08
("t he 20 08 PRP Lett er" ), in vi ti ng Lan d O' Lak es to en te r ne go ti at io ns reg ard in g th e

co nt in ue d cl ean up act iv it ie s at th e refi ne ry si te . Th e EPA a ls o de m an de d th at Lan d

O' Lak es rei m

bu rs e it fo r ap pr ox im at el y $2 1 m il li on in pr io r cl ean up ex pe nd it ur es at

th e si te

. In cl ud ed wit h th e 2 0 0 8 P R P Le t te r was a dr aft co ns en t de cree an d a dr aft

Rem ed ia l Des ig n/ Rem ed ia l Acti on pl an (RD/ RA) fo r im pl em e n t i n g th e cl ean up

rem ed y th e EPA ha d e arl ie r se le ct ed in th e ROD.

In May 20 08

, Lan d O' Lak es res po nd ed to th e EPA by rei te rat in g it s e a r l ie r
de ni al . It co nt en de d t ha t M id la nd ha d cau se d an y co nt am in at io n at th e si te , refu se d

to rei m bu rs e th e EPA fo r pa st cl ean up co st s, an d de cl in ed to pa rti ci pa te in or pa y fo r

a n y f u t ur e cl ean up act iv it ie s. Lan d O' Lak es no ti fie d th e In su rers of th e 20 0 8 P R P

Lett er, an d it ag ai n as ke d fo r a de fen se an d in de m ni fi c a t i o n

. The In su rers ag ai n
de ni ed th at th ey ha d an y ob li ga ti on t o d e fen d or in de m ni fy Lan d O' Lak es in

co nn ect io n wi th th e cl ean up of t he refi ne ry si te

.

In Ja nu ary 20 09

, th e EPA reject ed Lan d O' Lak es 's de ni al of res po ns ib il it y fo r

rem ed ia ti on at th e refi ne ry si te an d is su ed a Uni la te ral Adm in is tra ti ve Ord er (UAO),

-5 -di rect in g Lan d O' La ke s to im pl em en t th e cl ean u p r e med y th e EPA h ad se le ct ed in

th e ROD. The UAO or de red Lan d O' Lak e s t o "p erfo rm a rem ed ia l de si gn fo r th e

re med y d e s c rib ed in th e [ROD]" an d to "i m pl em en t th e de si gn by pe rfo rm in g a

rem ed ia l act io n." In Feb ru ary 20 09

, sh or tl y aft er rece iv in g th e UAO, Lan d O' Lak es

i n f or m ed th e EPA th at it wou ld co m pl y wit h th e ag en cy 's di rect iv es reg ard i n g t h e
refi ne r y s i te

. Alt ho ug h Lan d O' Lak es ob jecte d to se ve ral de ta il s, it in it ia te d th e
cl ean up act iv it ie s di ct at ed in th e UAO. Lan d O' Lak es hi red co nt ract or s to im pl em en t

th e se le ct ed rem ed y , an d in Nov em be r 20 10

, th e EPA is su ed a rep or t in di cat in g th at

th e si te ha d be en cl ean ed up in acco rd an ce wit h th e ROD. At pr es en t, th e rem ed ia ti on
is la rg el y co m

pl et e. The si te wil l, ho wev er, rem ai n su bjec t to pe rio di c in sp ect io ns by

th e EPA or th e ODEQ.

Afte r in it ia ti ng it s cl ean up effo rts

, Lan d O' Lak es fil ed a br each -o f-co nt ract

act io n ag ai ns t th e In su rers

. Lan d O' Lak es de m an de d rei m bu rs em en t of th e co st s it

ha d in cu rred in de fen di ng th e EPA act io n an d a de cl arat io n t h a t t h e In su rers were

req ui red to in de m

ni fy Lan d O' Lak es fo r it s co st s in cl ean in g up th e refi ne ry si te

. The

In su rers m ov ed fo r su m

m ary jud gm en t, whi ch th e di st ric t co ur t gr an te d. W it h res pe ct

to Lan d O' Lak es 's du ty-to -d efen d cl ai m , th e co ur t co nc lu de d th at (1 ) th e EPA's 20 01

PRP Lett er was a su it fo r arg ua bl y -co ve red da m ag es un de r th e rel ev an t CGL po li ci es ; (2 ) th e In su rers ' refu sa l in 20 01 to de fen d ag ai ns t th e EPA's su it co ns ti tu te d a br each

of th ei r du ty t o de fen d un d e r t h e res pe ct iv e CGL po li ci es ; (3 ) th is br each tri gg ered

th e si x- y ear li m it at io ns pe rio d on co nt ra c t a c ti on s un de r Mi nn es ot a la w; an d (4 ) 4

be cau se La n d O' Lak es di d no t fil e it s la wsu it ag ai ns t th e In su rers un ti l 20 09

, th e
du ty-to -d efen d cl ai m was un ti m el y

. W it h res pe ct to Lan d O' Lak es 's d u t y- t o

in de m ni fy cl ai m , th e co ur t co nc lu de d th at th e own ed -p ro pe rty ex cl us io n in th e CGL

Non e of th e pa rti es ch al le ng e th e di st ric t c ou rt' s de te rm in at io n th at 4

Mi nn es ot a's si x- y ear st at ut e of li m it at io ns ap pl ie s t o Lan d O' Lak es 's c la im th at th e In su rers br each ed th ei r du ty to de fen d. Se e M i n n. St at

. § 54 1.0 5, su bd

. 1( 1) (es ta bl is hi ng a si x- y ear l im it at io ns pe rio d fo r co nt ract act io ns ).

-6 -po li ci es at is s u e p r e c lu de d co ve rag e fo r Lan d O' Lak es 's co st s to co m pl y wit h th e

EPA-m an da te d c le an up

.

II. Dis cu ss io n

In th is ap pe al

, Lan d O' Lak es arg ue s th at th e 2 0 08 PRP Lett er co ns ti tu te s a

"s ui t," bu t th e 20 01 PRP Lett er was no t a "s ui t" —an d, th us , th e Mi nn es ot a st at ut e of

li m it at io ns do es no t ba r it s cl ai m s. It co nt en ds th at th e 20 01 an d 2 0 0 8 le tt ers were
di st in ct cl ai m s an d ha ve se pa rat e accr ua l da te s as it rel a t e s t o t he st at ut e of

li m it at io ns

. Lan d O' Lak es al so arg ue s t h a t t he own ed pr op ert y ex cl us io ns to it s

in su ran ce po li c i es are in ap pl ic ab le be cau se th e refi ne ry cl ean up was co nd uc te d to

ad dr es s an ex is ti ng th reat

. W e rev ie w de no vo a di st ric t co ur t's in te rp ret at io n of an

i ns ur an ce co nt ract an d it s de ci si on to gr an t su m m ary jud gm en t. Fac e, Fe s t i v a l s &

Co nc er t Eve nt

s, In c. v. Sc ot ts da le Ins . Co. , 63 2 F .3d 41 7, 4 19 (8t h C ir. 2 01 1)

.

A. Eff ect of 20 01 PRP Lett er

Lan d O' Lak es fir st arg ue s th at th e di st ric t co ur t erre d in ho ld in g th at th e 20 01

PRP Let te r tri gg ered th e In su rers ' du ty to de fen d and th us th at Mi nn es ot a's si x- y ear

st at ut e of li m it at io ns on co nt ract act io ns ba rred Lan d O' Lak es 's cl ai m s. An in su rer's

du ty to de fen d i s g e n eral ly de te rm in ed ba se d on th e al le ga ti on s in th e un de rlyin g

co m pl ai nt

, an d th e du ty ex te nd s to ev ery cl ai m th at arg ua bl y fal ls wit hi n th e sc op e of

co ve rag e pr ov id ed un de r th e rel e v a n t i n s ur an ce po li cy

. W oo dd al e Bui ld er

s, In c. v.
Md. Ca s. Co

. , 72 2 N.W .2d 28 3, 30 2 (Mi nn

. 20 06 ). Thi s is tru e reg a r dl es s of th e

m eri ts of th e cl ai m s as se rte d. Id

. Lan d O' Lak es arg ue s th at th e 20 01 PRP Lett er di d

no t tri gg er th e In su rers ' du ty to de fen d be cau se th e 20 01 PRP Lett er was no t a "'s ui t'

se ek in g da m ag es be cau se of 'pr op ert y da m ag e,'" as th e CGL po li ci es de fin e th os e

te rm s. In ot he r wor ds

, acco rd in g to Lan d O' Lak es , th e 20 01 PRP Lett er was no t a su it

fo r arg ua bl y -co ve red da m ag es

. Rat he r, acco rd in g to Lan d O' Lak es , th e 20 01 PRP

Lett er was no th in g m or e th an an "i nv it at io n to p a r t ic ip at e in an in ve st ig at io n" in to

whe th er re m ed ia ti on wou ld be ne ces sa ry at t he refi ne ry

si te . W e d is ag ree.

-7 -The di st ric t co ur t ap pl ie d Mi nn es ot a ch oi ce of la w ru le s to de te rm in e whe th er

Mi nn es ot a or Okl ah om a la w go ve rn ed th e in su ran ce co nt ract

. The co ur t de te rm in ed

th at Mi nn es ot a la w ap pl ie d to th e Trav el er s In sur an ce po li cy be cau se Trav el ers is su ed

th e po l i c y b e f

or e Lan d O' Lak es acq ui red th e Okl ah om a refi ne ry

. Als o, th e co ur t

de te rm in ed th at Okl ah om a la w ap pl ie d to th e W au sa u po li cy be cau se W au sa u is su ed

it sp eci fic al ly to co ve r th e refi ne ry

. The Mi nn es ot a Su pr em e Co ur t ha s co nc lu de d th at

a PRP le tt er is a "s ui t" as th at te rm is us ed in va rio us CGL po li ci es

. Se e SC SC Co rp

.

v. All ie d Mut

. In s. Co

. , 53 6 N.W .2d 30 5, 31 5 ( M i n n

. 1 9 95 ), ov er ru le d on ot he r

gr ou nd s by Bah r v. Boi se Ca sc ad e Co rp

. , 76 6 N.W.2d 9 10 , 91 9 (M in n. 1 99 5) . Th e
Okl ah om a Su pr em e Co ur t h as no t y et ad dr es se d th e is su e. Bas ed on it s ass es sm en t,

th e di st ric t co ur t de te rm in ed th at th e Okl ah om a Su pr em e Co ur t wou ld ru le co ns is te nt

wit h Mi nn es ot a. La nd O' La kes

, I n c

. v

. Em p ' rs Mut

. Li ab

. In s. Co

. of W is

. , 84 6 F.

Su pp

. 2d 1 0 0 7

, 10 19 –2 2 (D. Mi nn

. 20 12 ). Neit he r Lan d O' Lak es no r th e In su rers

co nt es t th is de te rm in at io n on ap pe al

, an d we th ere f o r e a d o p t th e di st ric t co ur t's

co nc lu si on

. Se e Hal lq ui st v. Uni te d Home Lo an s, In c. , 71 5 F.3 d 10 40

, 10 46 (8 th Ci r.

20 13 ) ("C la im s no t rai se d in an op en in g br ie f are de em ed waiv ed ." (Qu ot at io ns an d

ci ta ti on s o m it te d) ).

Lan d O' Lak es ta ke s is su e wit h th e di st ric t co ur t's co nc lu si on th at th e 20 01 PRP

Lett er was a "s ui t" fo r arg ua bl y -co ve red da m ag es for pu rp os es of t he CGL po li ci es

th at th e In su rers is su ed

. Bu t co nt rary to Lan d O' Lak es 's ch arac te riz at io n of th e 20 01

PRP Lett er, it was no t si m pl y an in vi ta ti on to pa rti ci pa te in an in ve st ig at io n. The 20 01

PRP Lett er m ark ed th e be gi nn in g of an ad ve rs ari al ad m in is tra ti ve pr o c e s s t h at

ul ti m at el y so ug ht t o im

po se li ab il it y up on Lan d O' Lak es fo r rem ed ia ti on co st s

as so ci at ed wit h th e refi ne ry si te

. The 20 01 PRP Lett er se rv ed pu rp os es in ad di ti on to

req ue st in g Lan d O' Lak es 's vo lu nt ary pa rti ci pa ti on

. Sp eci fic al ly, th e 20 01 PRP le tt er: (1 ) no ti fie d Lan d O' Lak es of it s "p ot en ti al li ab il it y un de r CERCLA

. . . wit h res pe ct

to " th e refi ne ry si te ; (2 ) in fo rm e d La n d O ' Lak es th at a "6 0- da y fo rm al ne go ti at io n

pe rio d" wou ld co m

m en ce up on Lan d O' Lak es 's rece ip t of th e Lett er; (3 ) as ke d Lan d

O' Lak es "t o pa rti ci pa te in fo rm al ne go ti at io ns " to ward a se tt le m en t an d fu tu re

-8 -res po ns e act io ns at th e refi ne ry si te

, in cl ud in g an RI/F S to de te rm in e th e na tu re an d

e x t e n t o f th e co nt am in at io n an d an RD/R A to de si gn an d im pl em en t th e EPA's

se le ct ed rem ed y ; (4 ) ad vi se d Lan d O' Lak es th at it was "p ot en ti al ly li ab le f o r " t h e

pa y m en t of ne ces sa ry fu tu re in ve st ig at io n, rem ed ia ti on , an d m ai nt en an ce co st s; an d
(5 ) warn ed Lan d O' Lak es th at if it di d no t ag ree to pe rfo rm or fin an ce th e ne ces sa ry

act io ns aft er go od -fai th ne go ti at io ns , th e EPA wou ld co m m en ce cl ean up an d is su e an
ad m in is tra ti ve or de r or pu rs ue ci vi l li ti ga ti on fo r reim bu rs em en t of it s co st s. The 20 01

PRP Lett er al so cau ti on ed th at fai lu re to co m pl y co ul d res ul t in fin es un de r CERCLA

of up to $2 7,5 00 pe r da y or tre bl e da m ag es

. In cl ud ed wit h th e 20 01 PRP Lett er was

th e dr aft AOC, whi ch al le ge d th at co nt am in at io n or ig in at in g at th e refi ne ry si te ha d

al read y da m ag ed of

f-s it e pr op ert y an d m ig ht co nt in ue to do so

. As the di st ric t cou rt

no te d, th e 20 01 PRP Lett er was " n o t a p o l i t e in vi ta ti on fro m th e EPA to en ga ge in

co n v e r s a t i on ." Emp'r

s Mut

. Li ab

. , 84 6 F. Su pp

. 2d at 10 20

. Tak en as a who le

, th e

in fo rm at io n r e l a ye d i n t h e 20 01 PRP Lett er al ert ed Lan d O' Lak es th at a su it fo r

arg ua bl y -co ve red da m ag es ha d c om m en ced

.

I n f a c t

, Lan d O' Lak es or ig in al ly to ok th e po si ti on th at it no w at te m pt s t o
di sa vo w, na m el y , th at th e 20 01 PRP Lett er wa s a su it fo r arg ua bl y -co ve red da m ag es

. Sp eci fic al ly, Lan d O' Lak es ad vi se d i n a Nov em be r 20 01 le tt er to W au sa u t ha t " th e

m ajor it y ru le is th at th e du ty to de fen d is tri gg e r e d b y a n EPA de m an d le tt er" an d

fu rth er st at ed th at Lan d O' Lak es co ns id ered W au sa u's de te rm in at io n to th e co nt rary

"a de cl in at io n of co ve rag e an d a br each of [Waus au 's] du ty to de fen d." It is ap pa ren t

th at Lan d O' Lak es it se lf co ns id ered th e 20 01 PRP Lett er a su it fo r arg ua bl y -co ve red

da m ag es an d t he Ins ur ers ' refu sa l t o d efen d a bre ach of t he ir d ut y

.

Alt ern at iv el y , Lan d O' Lak es co nt en ds th at ev en if th e 2 0 0 1 P RP Lett er

c o n s t i t ut ed a su it , n o cl ai m fo r arg ua bl y -co ve red da m ag es was m ad e un ti l th e EP A

se nt th e 20 08 PRP Lett er. It was th at le tt er, acco rd in g to Lan d O' Lak es , th at req ui red

im pl em en ta ti on of th e rem ed y se le ct ed in th e ROD an d pr ov id ed an es ti m at io n of th e
cl ean up co st s th at m ark ed th e p o i n t at whi ch co ve rag e be cam e en fo rcea bl e. Thi s

-9 -arg um en t is un av ai li ng

. W e ag ree wit h th e di st ric t co ur t th at th e 20 08 PRP Lett er was

"s im pl y a co nt in ua ti on of th e cl ai m s m ad e by th e EPA in th e 2 0 0 1 P R P [L]ette r."
Emp'r s Mu t. Li ab

. , 84 6 F. Su pp

. 2d at 10 26 . The 2 00 8 P RP Let te r was no t, as Land

O ' L akes ur ge s, th e co m

m en cem en t of an en ti rel y ne w an d di st in ct en fo rcem en t action

th at in it ia ll y

tri gg ered th e In su rers ' du ty t o de fen d. Rat he r, it was an ot he r st ep "i n a
si ng le

, co nt in uo us pr oc es s of EPA en fo rcem en t" rel at ed to th e refi ne ry si te

. Id

. Lan d

O' Lake s re co gn iz ed as m uc h a t t he ti m e.

In su m , th e 20 01 PRP Lett er pu t Lan d O' Lak es on no t i c e t ha t ad di ti on al

in ve st ig at io n t h a t th e Lett er m an da te d m ig ht rev eal in jury to pr op ert y th at wou ld

arg ua bl y be co ve red by th e CGL p o l ic ie s th at th e In su rers is su ed

. It di d no t m at te r

th at

, in 20 01

, no on e kn ew th e f u l l n a tu re an d ex te nt of th e co nt am in at io n at th e
refi ne ry si te

. In ot he r wor ds

, th e EPA's all eg at io ns arg ua bl y fel l wit hi n th e sc op e of

co ve rag e pr ov id ed un de r th e CGL po li ci es an d th us tri gg ered th e In su rers ' du ty to

de fen d. W

oo dd al e Bui ld er s, In c. , 72 2 N.W .2d at 30 2 (h ol di ng th at th e du ty to de fen d

ex te nd s to ev ery cl ai m t h a t arg ua bl y fal ls wit hi n th e sc op e of co ve rag e). W e ag ree
wit h th e di st ric t co ur t th at th e In su rers br each ed th ei r du ty to de fen d in 20 01 be cau se

th e 20 01 PRP Lett er was a "s ui t" fo r arg ua bl y -co ve red da m ag e s a s co nt em pl at ed

un de r th e p e r t i n e nt CGL po li ci es an d th at th e 20 08 PRP Lett er was no t th e

co m m en cem en t of an en ti rel y ne w en fo rcem en t act io n. W e, th eref or e, ho ld th at Lan d

O' Lak es 's 20 09 du ty-to -d efen d cl a im s were ba rred by th e Mi nn es ot a st at ut e of

li m it at io ns

. 5

B. Owne d- Pro pe rt y Excl us io n

Lan d O' Lak es n e x t a r g u e s th at th e di st ric t co ur t erre d in ho ld in g th at th e

own ed -p ro pe rty ex cl us io n in th e CGL po li ci es rel ie ve d th e In su rers fro m an y du ty to

Bec au se we affi rm th e di st ric t co ur t's ho ld in g th at Lan d O' Lak es 's du ty- t o

5

de fen d clai m ag ai ns t Travel ers was ba rred by th e st at ut e of li m it at io ns , we ne ed no t ad dr es s Trave le rs 's argu m en t th at th e di st ric t cou rt erre d in ru li ng th at Mi dl an d was
a "n am ed in su red " u nd er t he 19 65 –1 97 0 Tra ve le rs po li ci es

.

-1 0 -in de m

ni fy Lan d O' Lak es fo r th e cl ean up co st s. The co ur t ba se d it s co nc lu si on on th e

fact th at th e co st s to co m pl y wit h th e EPA-m an da te d cl ean up rel at e so le ly to

r e med ia ti on on Lan d O' Lak es 's pr op ert y an d no t to rem ed ia ti on on pr op er t y t h a t

ot he rs own ed

. Alt ho ug h clai m s th at are eve n ar gu ab ly co ve red un de r a CGL po li cy gi ve ris e to th e du ty to d e f e n d

, o nl y cl ai m s th at are ac tu al ly co ve red un de r a CGL

po li cy gi v e r i s e to th e du ty to in de m ni fy

. Se e Remod el in g Dimen si on s, In c. v.

In te gr it y Mu t. In s. Co

. , 81 9 N.W.2d 6 02 , 61 6– 17 (Mi nn . 20 12 ).

The CGL po li ci es pr ov id e, in ge ne ral

, th at th e In su rers wil l pa y "o n beh al f of
[Lan d O' Lak es ] al l su m s whi ch [Lan d O' Lak es be co m es ] le ga ll y ob li ga te d to pa y as
da m ag es be ca us e of

. . . p r o p e r t y da m ag e" to th ird -p art y pr op ert y on acco un t of a

co ve red oc cu rren ce. The Mi nn es ot a Su pr em e Co ur t ha s in te rp ret ed th is la ng ua ge to

m ean th at a cau sa l rel at io ns hi p m us t ex is t be twee n th e da m ag es fo r whi ch

in de m ni fic at io n is so ug ht an d a co ve red oc cu rren ce th at in jure d th ird -p art y pr op ert y

. SC SC Co rp

. , 53 6 N.W .2d at 31 1– 12 ; Min n. Min in g an d Mfg

. Co

. v. Tr av el er s In de m.

Co

. , 45 7 N.W .2d 17 5, 18 2, 18 4 (Mi nn

. 19 90 ) (" 3M ") (h ol di ng th at cl ean up co st s m ay
be "d am ag es " un de r an in su ran ce po li cy if th e da m ag es "ar e cau sa ll y r e l a t e d to

co ve red 'pr op ert y

da m ag e'")

.

The CGL po li ci es al so pr ov id e th at th e In su rers wil l no t pa y f o r d a mag es to

Lan d O' Lak es 's ow n pr op ert y —t he so -cal le d own ed -p ro pe rty ex cl us io n. U n d er

Mi nn es ot a la w, th e own ed -p ro pe rty ex cl us io n pr ecl ud es co ve rag e fo r co st s in cu rred
by an in su red to rem ed ia te co nt am in at io n t ha t i s "co nf in ed to th e in su red 's pro pe rty

an d un rel at ed to pr ev en ti ng of f-s it e co nt am in at io n." Domt ar In c. v. Ni ag ra Fir e In s.

Co

. , 56 3 N.W .2 d 72 4, 73 4 (Mi nn

. 19 97 ). If co nt am in at io n on an in su red 's own

pr op ert y ha s al read y da m ag ed th ird -p art y pr op ert y , ho wev er, go ve rn m en t-mand at ed
"[c ]ost s an d ex pe ns es fo r th e cl ean up of " th e co nt am in at io n on bo th th e in su red 's own

pr op ert y an d th ird -p art y pr op ert y m ay be co ve red

. N. St at es Pow er Co

. v. Fid

. & Ca s.

Co

. of N.Y

. , 5 0 4 N

. W .2d 24 0, 24 5 (Mi nn

. Ct

. App

. 19 93 ), af f'd as mod if

ie d

, 52 3

N.W .2d 65 7 (Mi nn

. 19 94 ). Bu t co s ts an d ex pe ns es to cl ean up th e in su red 's own

-1 1 -pr op ert y in or de r "t o pr ev en t fu tu re po ll ut io n of a type whi ch ha s y et to oc cu r or fro m

a so ur ce whi ch ha s y et to cau se po ll ut io n

. . . are no t co ve red be cau se th es e co st s are

no t ca us al ly re la te d to th e [th ird -p art y ] pr op ert y da m ag e." Id

. (em ph as is ad de d) ; se e
al so 3M

, 45 7 N.W .2d at 18 4 (n ot in g th at th e co st s of "[p ]urel y pr ev en ta ti ve m eas ur es

are no t co ve red in th e ab se nc e of pr op ert y da m ag e")

. The Mi nn es ot a Su pr em e Co ur t

he ld in Domt ar th at "i f th ere is act ua l in jury an d an ex is ti ng th r e a t to th ird -p art y

pr op ert y (wh et he r pr iv at e or pu bl ic ), th en cl ean -u p on th e in su red 's own pr op ert y th at

is de si gn ed to pr ot ect th ird -p art y pr op ert y" may b e co ve red de sp it e an own ed

pr op ert y ex cl us io n. 5 63 N.W .2d at 7 34

.

Lan d O' Lak es fir s t a s s e r t s th at th e di st ric t co ur t erre d in co nc lu di ng th at it

fai le d to sh ow th at th ird -p art y pr op ert y ha d be en da m ag ed by co nt am in at io n fro m th e
refi ne ry si te —t he "ac tu al in jury" co m

po ne nt of th e Domt ar te st

. Acco rd in g to Lan d

O' Lak es , an y co nt am in at io n of th ird -p art y pr op e rty at tri bu ta bl e to th e refi ne ry si te

is su ffi ci en t to sa ti sf

y th e act ua l-i nju ry req ui rem en t. Bec au se th e EP A-o rd ered

cl ean up di d no t in vo lv e an y of f-s it e co nt am in ation tha

t w ou ld sa ti sf

y th e act ua l-i nju ry

req ui rem en t, Lan d O' Lak es po in ts to of f-s it e co nt am in at io n th at oc cu rred du rin g

Mi dl an d's 19 53 –1 97 7 op erat io n o f th e refi ne ry to sh ow th e req ui si te th ird -p art y

pr op ert y da m ag e. Acco rd in g to Lan d O' La k e s , co nt am in an ts rel eas ed fro m th e
refi ne ry da m ag ed Sk ul l Cree k an d Ci m arro n Ri ve r in th e 19 70 s. The se wate rway s
be lo ng ed to th ird pa rti es an d th us sat is fie d t he act ua l-i nju ry -to -th ird -p art y -p ro pe rty

req ui rem en t. Lan d O' Lak es av e r s , t h e r e fo re, th at al l th e co st s it m us t no w in cu r to

cl ean up t h e r e fin ery si te in or de r to pr ev en t an y fu tu re da m ag e to an y th ird -p art y

p ro pe rty fal l ou ts id e th e ex cl us io n— it is irr el ev an t th at th e th ird -p art y pr o p e r t y

act ua ll y in

jure d in 19 70 is di ffer en t fro m th e th ird -p art y pr op ert y s u bjec t to an

ex is ti ng th reat th at th e cu rren t cl ean up is de si gn ed to pr ot ect ag ai ns t in th e fu tu re. Se e

Domt ar , 56 3 N.W.2d a t 7 34

.

The di st ric t co ur t pr ov id ed th e fo ll owi ng he lp fu l ex am pl e to il lu st rat e Lan d O'

Lak es 's arg um en t. The o w n e d -p ro pe rty ex cl us io n wou ld de ny co ve rag e to a

-1 2 -hypo th et ic al in su red who in cu rs co st s to co m pl y w i t h a 2 0 13 or de r by th e EPA to

rep ai r a co rro de d st or ag e ta nk th at co ul d le ak ch em ic al s on to an d da m ag e ad joi ni ng

th ird -p art y Pro pe rty X at so m e po in t in th e fu tu re. The in su red 's co st s to rep ai r th e

ta nk wou ld no t be co ve red be c a us e th ere ha d be en no pr io r co nt am in at io n of th e

in su red 's own pr op ert y

. Thi s is tru e ev en if th e pu rp os e of th e 20 13 rep ai r is to pr ot ect

th ird -p art y Pro pe rty X fro m fu tu re da m ag e cau se d by an ex is ti ng th reat

. Ass um in g th e

sa m e se t of fact s, as su m e fu rth er th at in 19 50

, a pi pe on th e in su re d ' s pr op ert y ha d

le ak ed a sm al l amo u n t o f oi l on to th e in su red 's pr op ert y th at se ep ed on to ad joi ni ng

th ird -p art y Pro pe rty Y. Und er Lan d O' Lak es 's th eo ry , th e co st of rep la c in g th e
ch em ic al -s to rag e ta nk th at th reat en s Pro pe rty X i n 2 0 1 3 m us t no w be bo rn e by th e

in su rer be cau se of an act ua l i nju ry to th ird -p art y Pro pe rty Y in 19 50 —ev en th ou gh

th e 19 50 oi l-p ip e le ak on to Pro pe rty Y is co m pl et el y un rel at ed to th e t h r e a t en ed

ch em ic al -s to rag e-t an k l eak on to Pro pe rty X in 2 01 3. Se e Emp'r s Mu t. Li ab

. , 84 6 F

. Su pp . 2d at 1 03 2.

As th e di st ric t co ur t ob se rv ed

, "[t ]his is a faci al ly ab su rd res ul t" th at di sr eg ard s

th e req ui rem en t un de r Mi nn es ot a la w an d th e CGL po li ci es th at a cau sa l rel at io ns hi p

ex is t be twee n th e cl ean up act iv it ie s an d th e in jury to th i r d

- pa rty pr op ert y

. Id

. Mo reo ve r, it im

pe rm is si bl y br oa de ns th e sc op e of co ve rag e pr ov id ed un de r th e CGL

po li ci es

. Bas ed on th e fo reg oi ng , w e co nc lu de th at Lan d O' Lak es ha s fai le d to

es ta bl is h a n " act ua l i nju ry " t o t hi rd -p art y pro pe rty.

Lan d O' Lak es ne xt arg ue s th at th e di st ric t co ur t erre d in ho ld in g th at it can no t

sa ti sf y Domt ar 's ex is ti ng -th reat -to -th ird -p art y -p ro pe rty re qui re m en t w ith ev ide nc e of

"a th reat to th e ge ne ral en vi ro nm en t." As e x p l a i n e d ab ov e, Domt ar req ui res bo th

act ua l in jury to th ird -p art y pr op ert y an d a n ex is ti ng th reat to th e sa m e th ird -p art y

pr op ert y th at th e cu rren t cl ean up is de si gn ed to pr ot ect

. Bec au se we ha ve al read y

co nc lu de d th at Lan d O' Lak es ha s fai le d to es ta b li sh an act ua l in jury to th ird -p art y

pr op ert y as req ui red un de r Domt ar , we ne ed no t add res s Land O' Lak es 's ass ert io ns

of erro r in th e di st ric t co ur t's de te rm in at i o n t h a t Lan d O' Lak es fai le d to sh ow an

-1 3 -ex is ti ng th reat to th ird -p art y pro pe rty. In an y

ev en t, we ag ree with th e d is tri ct co ur t

t h a t La n d O' Lak es can no t es ta bl is h an ex is ti ng th reat to th ird -p art y pr op ert y

su ffi ci en t to ov erco m e th e ap pl ic at io n of th e own ed

- p r op ert y ex cl us io n by m erel y
ad du ci ng ev id en ce o f a t hr eat to th e en vi ro nm en t i n g en eral

.

Lan d O' Lak es arg ue s th at th e di st ric t co ur t's ru li ng can no t be reco nc il ed wit h

th is co ur t's op in io n in Co nt in en t a l I ns ur an ce Co mpa ni es v. No rt he as te rn

. Pha rma ceu ti ca l & Ch emic al Co mpa ny , 81 1 F.2 d 11 80 (8 th Ci r. 19 87 ). Lan d O' 6

Lak es co nt en ds th at Co nt in en ta l st an ds fo r th e pr op os i t i o n th at be cau se a st at e or
fed eral go ve rn m en t su ffer s act ua l "p ro pe rty da m ag e" whe n th e la nd

, wate r, or ai r in

i t s p a rti cu la r juri sd ic ti on is co nt am in at ed

, da m ag e to th e en vi ro nm en t in ge ne ra l i s "p ro pe rty da m ag e" to th ird -p art y pr op ert y

. It fo ll ows , acco rd in g to Lan d O' La k e s , th at "i f act ua l da m ag e to th e ge ne ral en vi r o n men t co ns ti tu te s 'pr op ert y da m ag e'" to

th ird -p art y pr op ert y , "t he n a th reat [o f da m ag e] to th e ge ne ral en vi ro nm en t" m us t al so

co ns ti tu te a th reat of da m ag e to th ird -p art y pr op ert y

. Ass um in g fo r th e sa ke of

arg um en t th at Co nt 'l Ins

. Co s. , whi ch ap pl ie d Mis so ur i law, ha s any be ari ng on th is

cas e, Lan d O' La k es 's in te rp ret at io n of Co nt 'l In s. Co s. ov ers ta te s th e sc op e of th e
de ci si on . I n Co nt 'l In s. Co s. , t he co ur t co ns id ered whe th er "t he im pr op er rel eas e of

t ox ic was te s m ay cau se pr op ert y da m ag e no t on ly to th e act ua l own er o f t h e l a n d

,
wate r, or ai r, bu t al so to st at e an d fed eral go ve r n ment s be cau se of th ei r in te res t

in de pe nd en t of an d be hi nd th e ti tl es of it s ci ti zen s in al l th e eart h an d ai r wit hi n th ei r
do m ai n." Co nt 'l In s. Co s. , 81 1 F.2 d at 11 8 7 ( q u o ta ti on s, al te rat io n, an d ci ta ti on

om it te d)

. Ju st be cau se a st at e or th e fed eral go ve rn m en t m ay po ss es s so m e th eo ret ic al

W e no te th at th e pa ne l op in io n up on whi ch Lan d O' Lak es rel ie s was va cat ed 6 by ou r co ur t en ba nc

. Se e Co nt in en ta l In su ra nc e Co mpa ni es v. No rt he as te rn Pha rma ceu ti ca l & Ch emic al Co mpa ny
, In c., et

. al

., 84 2 F.2d 97 7 (19 88 ) (en ba nc ).
Su bs eq ue nt ly, th e Mi ss ou ri Su pr em e Co ur t ex pr es sl y rep ud ia te d a po rti on of ou r en ba nc co ur t's st at em en t of Mi ss ou ri la w co nc lu di ng th at ou r de ci si on " m is co ns tru es

an d ci rcu m

ve nt s Mi ss ou ri la w" wit h res pe ct t o de fin in g da m ag es

. Se e Far mla nd

In du s. v. Rep ub li c In s. Co

. , 94 1 S .W . 2d 50 5, 5 10 ( Mo . 19 97 ) (en ba nc ).

-1 4 -in te res t in an in su red 's pr op ert y do es no t m ean th at th e pr op ert y is no t own ed by th e

in su red fo r pu rp os es of in su ran ce co nt ract in te rp ret at io n. As th e di st ric t co ur t no te d,

if th ird -p art y pr op ert y un de r th e CGL po li ci es in cl ud ed th e "en vi ro nm en t" in ge ne ral

, th e own ed -p ro pe rty ex cl us io n wou ld be "v it ia te [d ]

. . . be cau se ev ery bl ad e of gr as s

on ev ery pl ot of la nd is bo th th e pr op ert y of th e la nd 's own er an d a pa rt of th e

'en vi r o n men t

. ' " Emp'r

s Mut

. Li ab

. , 84 6 F. Su pp

. 2d at 10 35

. Lan d O' Lak es can no t

sa ti sf y Domt ar 's ex is ti ng -th reat -to -th ird-pa rt y -p ro pe rt y re quirem en t wit h ev id en ce of

da m ag e on ly to th e ge ne ral e n v i r o n men t, an d th e di st ric t co ur t di d no t err in so
ho ld in g.

W e ag ree wit h th e di s t r i c t co ur t's co nc lu si on th at Lan d O' Lak es 's co st s to

rem ed ia te th e refi ne ry si te fal l wit hi n th e own ed -p ro pe rty ex cl us io n be cau se Lan d O'

La k e s h as no t es ta bl is he d th at (1 ) th ird -p art y pr op ert y ha d be en co nt am in at ed by

ha zard ou s m at eri al s fro m th e refi ne ry si te ; (2 ) th at sa m e thi rd -p ar

ty pr op ert y rem ai ne d

co nt am in at ed at th e ti m e th e EPA or de red Lan d O' Lak es to cl ean up th e refi ne ry si te ; (3 ) t h e h a z a r d ou s m at eri al s fro m th e refi ne ry si te po se d a co nt in ui ng th reat of

co nt am in at io n to th at sa m e th ird -p art y pr op ert y ; an d (4 ) th e EPA-m an da te d cl ean up

of th e refi ne ry s it e was de si gn ed to pr ot ect th at sa m e pi ece of th ird -p art y pr op ert y
fro m fur th er co nt am in at io n b y ha zard ou s m at eri al s fr om th e ref in ery si te

.

III. Co nc lu si on

Fo r th e fo reg oi ng reas on s, we af fir m th e jud gm en t o f th e d is tri ct co ur t.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

-1 5 -