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Emerson Electric Co. v. Aetna Casualty and Surety Co.8/30/2004
. 88C-JA-118 (Del. Super. December 9, 1993) (purporting to apply Missouri law).
In Monsanto, the insurers agreed to indemnify the policyholder against "loss," "excess net loss," or "ultimate net loss" arising out of the hazards covered in the policy, such loss being defined in relevant part as "sums paid in settlement of losses for which the insured is liable." Monsanto, slip op. at ___. The court found that, "as dictated by the policies themselves, it is not the physical damage to person or property which triggers the policies' coverage; what triggers the coverage is the settlement reached or judgment rendered which imposes upon Monsanto the obligation to pay for that harm." (Emphasis in original.) Monsanto, slip op. at ___.
The court reasoned that due to a crucial difference between first-and third-party insurance contracts-namely, that in the case of first-party insurance, the insurer is to pay money due under the policy upon the happening of physical harm or property damage to the insured, whereas when one purchases third-party insurance (which is what CGL policies usually provide) one insures against the possibility of legal liability due to damages sustained by a third party-the reasoning and holding of the Presley line of cases, which involved first-party insurance only, does not apply with the same force to third-party insurance contracts. Monsanto, slip op. at ___. In the absence of Missouri authority applying the "know loss" doctrine to a third-party insurance policy, the court in Monsanto relied on Montrose Chemical Corp. of California v. Admiral Insurance Co., 35 Cal. App. 4th 335, 5 Cal. Rptr. 2d 358 (1992), and In re MGM Grand Hotel Fire Litigation, 570 F. Supp. 913 (D. Nev. 1983), and agreed with those cases:
" n occurrence which may give rise to coverage may already exist while the insurable loss is still undetermined and thus, unknown. Therefore, as long as all the material facts are not concealed and the extent of legal liability is yet to be determined, the issuance of insurance to cover the liability resulting from a known occurrence is not violative of public policy. Granted, in such instances, the insurer may find the risk of liability too great, or the insured may find the cost of such insurance exorbitant, and so a policy may never materialize. But these are decisions for underwriters and consumers to make as a result of arms-length negotiations." (Emphasis in original.) Monsanto, slip op. at ___.
The court, therefore, held that if the insured's legal liability was known in advance of coverage, then a "known loss" existed, and coverage is thereby precluded as a matter of Missouri public policy. Monsanto, slip op. at ___.
Similar to the policies in Monsanto, the 1983-84 policy here requires Republic to "indemnify the Insured for all sums which the Insured shall be obligated to pay by reason of the liability imposed upon him by law or liability assumed by him under contract or agreement." The policy further defines "ultimate loss" to mean "the total sum which the Insured * becomes legally obligated to pay as damages * either through adjudication or compromise."
Plaintiffs thus contend that the "known loss" doctrine does not preclude coverage in the instant case because although the occurrence giving rise to liability may have transpired, plaintiffs' legal liability was yet to be determined when the policy incepted. In other words, plaintiffs argue that the "known loss" doctrine does not preclude coverage even if the trial court was correct in concluding that plaintiffs knew of property damage at the two waste disposal sites prior to the inception of the 1983-84 policy because plaintiffs were not legally liable for the
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